Amer Sports (AS) Q2 2026 earnings call transcript

I will now hand the conference over to Omar Saad head of investor relations and capital markets. Please go ahead. Welcome everyone. Thanks for joining Amher Sports earning call for the second quarter of fiscal year 2026. Earlier this morning we announced our financial results for the quarter end of June 30th 2026 and the release can be found on our IR website investors. amhersports. com. A quick reminder to everyone that today's call will contain certain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only. They are subject to certain risks and uncertainties that could cause actual results different materially. Please see the safe harbor statement in our earnings release and SEC filings.

We will also discuss certain non-IFRS financial measures. Please refer to our earnings release for important information regarding such non-IFRS financial measures including reconciliation to the most comparable IFRS financial measures. We'll begin with prepared remarks from our CEO, James Zhang and CFO Andrew Page followed by a Q&A session until 9 a. m. Eastern. James will cover key operational and brand highlights then Andrew will provide a financial review at both the group and segment level and also walk through our updated guidance. Our Tarek CEO, Stuart Hazleton and Solomon CEO, Yom Bizank will join for the Q&A session.

With that, I'll turn the call over to James.

Thanks Oma. Our global momentum continued in the second quarter with over 30% revenue growth and strong operating margin expansion. All segments, geographies, and channels achieved strong double-digit growth led by another exceptional quarter from Solomon's soft goods, a strong actor's army club, and a Werson 10-360 acceleration. We manage our portfolio sports and outdoor brands that's very unique in the marketplace. And all three of our primary growth engines, Kerik's, Solomon soft goods, and Werson 10-360 are still relatively small, with significant room to grow.

First, I will recap key highlights from our three segments. Starting with technical apparel, Kerik's delivered another great quarter with broad-based strengths across regions, channels, and the categories, including another exceptional performance in women's. Strong DTC momentum also continued, driven by a 17% technical apparel omenicam. We believe Kerik's is a truly global brand with significant runway in all major markets, and are encouraged by the strong double-digit growth across all four regions in Q2.

The brand also resonates strongly across categories and the consumer segments. I want to highlight our momentum in women's, which grows faster than any other category for a Kerik's. Our confidence in the size and the scale of our women's opportunity is very large.

Brand awareness and affinity with women is arising significantly as we improve fit, style, and function, and also build expanded assumptions. Redesigning our core ABCD models for working. Plus, expanding feminine color patterns is driving higher female traffic and conversion.

In Q2, units and seasonal colorways generate over 60% of women's sales. Stand-out new franchises include the Zinsura and Oreo lightweight hiking styles, and also the Sony utility vest and jacket. Our remarkable success in women's bottoms, with franchises like the Clark Air, Blue Tear, and the Near Pants, is helping us unlock the female consumer from head to toe, driving higher overall span, turning to footwear, which had another great color, including strong double-digit growth across regions, led by both existing and new styles.

Popular existing styles included Northern early four trail shoes, which continues to be our biggest volume driver, followed by the Council tracking shoes. In March, we launched the latest version of our technical trail raising shoe, the Silent 2, performing very well so far. And we are excited to have eight Kerik's trail-run assets competing in the UTMB race in Champagne next week.

Looking forward, we are confident that Kerik's has an exciting pipeline of shoe releases for the upcoming years. Turning to our valence sub-brand, which had a solid growth in Q2 on our small base, we continue to focus on investing in the US, first developing our collections and expanding distributions, all of which is creating engagement and awareness in the marketplace, turning to security and the river, which continue to be at the heart of Octaries. In Q2, we added five new river centers, bringing us to 47 total.

Later this month, we will unveil an important new innovation, which combines our passion for security with uncompromised technical performance. A mountain, our renowned Chambney Appen Academy was again a great success in dry, with over 15,000 visitors in the village over the weekend and more than 1,000 attendees in clinics. Our mountain academies are the worst premium mountain education events and the space for mountain enthusiasts of all levels to advance their skills and the knowledge through clinics on the mountain. We are especially proud that women now account for half of the academy participants.

Turning to peak performance, which delivers solid growth in Q2, the brand continues to reduce its Nordic dependency and is rationalizing its footprint in the region, while seeing hercy growth in other parts of email. For both peak performance and our winter sports equipment brands, we are excited that free ride ski will become an Olympic sport at the 2030 Games. Peak performance sponsored the free ride water and our ski equipment brands sponsor many of the professional free ride skier.

Now, turning to the outdoor performance segment, which was led by another outstanding quarter from Solomon's soft goods. The investments we are making to grow Solomon brand awareness and the distribution footprint are paying off, driving strong footwear momentum across regions, channels, and for both sports style and performance products. I'd like to highlight a few factors that give us confidence that Solomon is well positioned to achieve its long-term potential.

Number one, global sports style momentum continues. Sports style is critical to developing salabung position as the modern outdoor sneak brand. The XT6 and XT Whisper franchises are resonating with a younger and more diverse audience from technical sports in the mountains to culture and the community in the cities. We were excited to announce that GISU, the global superstar singer and actress, will be Solomon's new global ambassador. The news had amazing global coverage, reaching nearly a billion consumers across social platforms.

Second, our performance lines are also working well. We continue to believe our new global franchise is helping to unlock the run category for Solomon like never before. Solomon is gained traction in the run specialty channels in North America and the email. In July, we launched the Arrow Brace Fall with a re-engineering upper using new mesh technology.

We also recently launched the second generation ofogenesis, a highly technical treasure shoot. Solomon's athletes were winning race in Q2, including Courtney The Waters, earning her fourth hard-lock 400 title, validating Solomon's technical merits on the hardest trails.

Third, Solomon continued to have excellent brain heat in Great China and Asia. Where we believe we operate the most productive and profitable sneaker shops in the industry. Great China continued to deliver very strong double-digit growth in Q2, driven by strengths across sports styles, performance, and apparel.

Our local for local apparel and accessories lines in China with technical products inspired by outdoor and short runnings has also been gained traction in the past few quarters. Beyond China, Solomon is also experiencing surging demands in Korea and Japan. Very important markets, given their influence on global sneaker culture.

Fourth, our epicenter's strategy is working. Focusing on key global metro markets is allowing us to build up Solomon's rich and the presence in the right way. Our tier one global epicenter, Paris, London, Shanghai, Beijing, Tokyo, New York, and the Los Angeles are all driving very strong sales momentum, as well as rising brand awareness. We approach these markets by opening a handful of impactful brand stores in the most relevant locations, alongside hand-picked elevated wholesale doors.

In these markets, we also invest in event partnerships, community activations, and local media to build a strong and lasting connection with our consumers. We plan to adopt and expand this approach to several new major cities in the future, including Berlin, Seoul, Miami, San Francisco, Chicago, and Boston.

Fifth, is the strong demand we are experiencing in our home market Europe, driving strong re-orders, pre-orders, and sales rules. Sports style continues to be the biggest-growth driver, but the rival is also infecting in Europe, supported by marketing campaigns, in-stop events, and running event activations. Also, we are seeing high-income growth in Europe, even as we expand our premium DTC and wholesale footprint.

In markets, we have been very active, hosting a gravel-focused learning event called Gravel Lancer, sponsoring music festivals and artist collaborations. And most recently, we begin a unique partnership with the National Opera House of Paris to outfit which is the largest single in the markets in the world, but still a small business for us. We know there is a strong demand for Solomon here, but still very limited distribution for consumers to find us. Today, we are seeing a clear acceleration in North America as we leverage the rising brand awareness to expand its distribution with both new and existing wholesale partners, as well as our own stores and e-comm. In Q2, we opened our first North America flagship stores on Fifth Avenue in the Fred Island District of New York City, offering both footwear and apparel.

And we continue to carefully expand our footprint and shelf space in existing wholesale partners, including North Street, JD Sports, and the Foot Lock. Lastly, before I switch to Boa and the Record, although Q2 is a very small quarter for our Winter Sports equipment franchise, Solomon, Atomic, and Amana, we are pleased that our brands continue in taking share despite challenging conditions in certain markets.

Moving to Boa and the Record highlights, Boa and the Records sales growth, 24% in Q2, driven by continued strength in 10, 360, both soft goods and the records, as well as improve the growth in baseball, golf, and infridibles. Our 10, 360 strategy continues to resonate very well with consumers, from unique lines of tennis, apparel, and footwear to high performance markets. Worsen had a couple very big record launches this spring, including the Q1 of our iconic great franchise, Virgin 10. This has been one of the strongest launches in our history, and also the records for World No. 1 Arena Sabrina. We also recently launched a completely new record line called the DeFi. This is our first ever power-sping record, which has been a growing segment of the record market.

Early results from the DeFi are even exceeding the great D10 launch I just mentioned. We continue to invest in new tour prayers, recently signed informal World Pop 5 prayer, Ogre Room, and the 17-year-old Rising Star, Mois Cormier, both playing the DeFi ranking. Marta Kostjak, one of our highest profile head to toe athletes, has been creating great buzz for the brand with her unique Worsen Tennis Office, reaching the semifinals at both Roland Garros and the Wimbledon. Worsen's soft goods continue its exceptional trajectories, with very strong growth across all four major regions, also baseball, golf, and infridibles, so improve the growth in the color. Before turning over to Andrew, I'd like to conclude by saying that. Given the broad-based momentum across our portfolio, a hearsay and a growing premium sports and outdoor markets, and the world-class teams we have in place along the world, I'm very confident in the future outlook for AMRE sports.

Andrew?

Thanks James. We had a great financial performance in Q2 across the P&L, with strong sales growth, margin expansion, and EPS growth. The investments we're making are paying off, driving strong momentum across each of our three biggest opportunities, are Terricks, Solomon's Soft Goods, and Wilson Tennis 360. In Q2, AMRE sports grew sales 32% on a reported basis, or 30% X currency. Our three growth engines all eclipse 20% growth, with technical apparel and outdoor performance growing more than 30%.

By channel, the group continues to be driven by D2C, which grew 40% led by all three big brands. At the group level, D2C represented approximately 55% of revenue in Q2, marking a record high.

Wholesale grew 24% led by Arcterics and Solomon. Growth was also very strong across all geographies led by Asia-Pacific, which increased 60%, and China, which grew 36%. The Americas accelerated to plus 26% and AMRE grew 20%.

Turning to profitability, adjusted growth margin increased 710 basis points to 65.8% in Q2, primarily driven by a one-time net tariff refund benefit of $64.3 million, or 390 basis points. Excluding this net tariff refund benefit, we generated more than 300 basis points of underlying gross margin expansion, driven by favorable pricing, product, channel, and geographic mix, as well as favorable transportation and duties costs.

The benefit from lower tariff rates versus our plan during Q2 was relatively immaterial. Adjusted SGNA expenses as a percentage of revenues increased 20 basis points and represented 54.9% of revenues in Q2. SGNA leverage in both technical apparel and outdoor performance was offset by deleveraged at Ball and Racket due to investments in Wilson Tennis 360, as well as higher AMRE corporate expenses. Led by strong gross margin expansion, we generated a 730 basis point increase in our adjusted operating margin from 5.5% last year to 12.8% in Q2. Excluding the above mentioned net tariff refund benefit, adjusted operating margin expanded 340 basis points. Corporate expenses were $68 million up from $45 million in Q2 of last year, mostly related to higher IT, personnel, and deferred compensation expense.

Depreciation and amortization was $113 million, which includes $55 million of above the $15 million guidance primarily due to higher cost of hedging and currency losses.

In the quarter, our adjusted income tax expense was $50 million, which equates to an adjusted effective tax rate of 27%. Adjusted net income in Q2 was $127 million, compared to $36 million in the prior year period. Adjusted diluted earnings per share was $0.22 compared to adjusted diluted earnings per share of $0.6 last year. Net tariff refunds benefited Q2 EPS by approximately $0.8 per share.

Now turning to segment results. Technical apparel revenues increased 32% to $674 million led by our tariffs. Growth was fueled by 34% DTC expansion, including a 17% omnicon. Technical apparel wholesale revenues grew 27%. In Q2, we open net eight new arcteric stores globally, and we continue to plan 30 to 35 net new arcteric stores for the full year of 2026 across all markets.

Regionally, the technical apparel growth rate was led by Asia Pacific, followed by accelerating growth in Amaya and Americas, followed by Greater China. All regions continue to grow strong double digits. Not only is the branch seeing a nice acceleration in North America and Amaya, the largest outdoor markets in the world, Greater China continued to deliver strong growth and maintain exceptional profitability in Q2. We finished Q2 with approximately 140 arcteric stores in Greater China between owned and franchised and believed this could be 200 long-term.

We are planning 10 to 12 net new store openings in Greater China for the full year of 2026, with openings weighted toward second half and Q4. We had one net China opening in Q2, the Chindu flagship store, which spans over 7,000 square feet and two levels, featuring a distinctive cliff house design. Arcteric's growth continued to accelerate in North America and Q2, and we delivered strong double-digit omni-comps in the U. S. We are seeing significant progress in U. S. brand awareness, rising by approximately 50% versus last fall, led by top of funnel marketing.

We also will focus on further leveraging brand experience and community to unlock higher conversions in the U. S. Q2 store openings in North America include Oak Ridge Park in Vancouver and Southdale in Minnesota, both very elevated presentations of the brand. We now have 75 stores in North America, which we believe could be 200 doors over time.

In the U. S. we are expanding into a new partnership with Dick's Sporting Goods, where we will be entering 15 hand-selected premium house of sports locations from fall to fall. This is still in the test and learn stage, but has the potential to expand further over time.

A mayor remains Arcteric's most under-penetrated market and we are continuing to open great locations, including Oslo and Copenhagen in Q2, both off to exceptional starts. We now have 19 stores across the mayor and we believe the market could support 75 plus over the long term.

Technical apparel adjusted operating margin expanded 470 basis points to 18.8%, including a 170 basis point benefit from net tariff refunds. Margin expansion was driven by both gross margin expansion and S. G. N. A. leverage on strong sales.

Moving to our outdoor performance segment, which saw revenues increase 37% to $569 million, driven by continued very strong performance in Solomon footwear and apparel. By channel, outdoor performance D2C grew 52% led by new doors and higher productivity across markets, especially Greater China, APEC and the Americas. Outdoor performance achieved a 28% omni-comp with strength in both stores and e-commerce.

E-comp is continuing to grow across regions driven by sport style momentum and higher traffic, especially in the Americas and APEC. Host sale grew 25% driven by strong sell-through and re-orders for sport style as well as door count expansion. Regionally, the outdoor performance growth rate was led by APEC, Greater China and accelerating growth in the Americas, followed by EMEA. The popularity of Solomon footwear continues to inflect globally and we are doing everything we can to ensure we are well positioned to fully develop this large opportunity in the right way over time and across markets. In Asia, D2C continues to be the critical growth channel for Solomon led by our highly productive Solomon shops. We open 13 net new Solomon shops in Greater China this quarter, including both owned stores and partner stores, bringing our total count at quarter end to 315 doors with the potential for 400 to 500 doors over time.

For the full year of 2026, we continue to expect to open 45 net new stores in Greater China. We are focused on both expanding and upgrading the fleet with larger format, more productive doors, and the highest traffic shopping centers and space to incorporate footwear and apparel. For example, we recently upgraded the best performing Solomon store in China, Shenyang McSee. The new shop performed very well in its first month demonstrating that even high productivity doors can benefit from an upgrade. In APEC, another region where Solomon has experienced an explosive growth, we opened net seven new stores in Q2 across Japan, Korea, and Australia. Solomon's overall brand awareness and desirability continues to grow very rapidly in Asia for both sports style and performance.

In the Americas, as James mentioned, Solomon footwear is continuing to see a material growth acceleration. The brand is seeing great D2C demand in stores and ecom in both sports style and performance. We are pleased to see traffic is up very strongly in ecom, which tracks our expanding geographic presence, distribution, and awareness across key cities. As we shared in our last call and aligning with our epicenter strategy, Solomon has begun to expand into a small number of key wholesale doors with important US sneaker retailers such as Nordstrom, Footlocker, and JD very well in terms of pre-orders, sell-through, and re-orders. We will continue to selectively expand with these retailers over the next couple of years. We are also expanding our own retail footprint in North America, including our first flagship store on Fifth Avenue in the Flatiron District of New York City.

The store is the first one in North America to carry a wide range of both footwear and apparel, and is off to a very strong start. And the new Solomon store in the upper west side of New York City also continues to perform very well.

Looking ahead, as we expand our Los Angeles epicenter, we are planning a Beverly Hills location for October. We will continue to focus on our epicenter strategy in 2026 and beyond, particularly New York, Los Angeles, Miami, and San Francisco. We continue to plan to open 7 to 10 new Solomon shops in the Americas this year. In Amaya, key epicenter Paris and London are seeing strong growth. We are also further developing other European markets, including a Barcelona shop that opened in July.

Lastly, while Q2 is by far the smallest quarter of the year for our winter sports equipment franchises, we are encouraged by the positive order book trends and continued market share gain, despite challenging weather and market conditions. The demand for ski vacations in the mountains remains high and consistent, and the core alpine on-piece market is healthy despite inconsistent snow conditions, as most top ski resorts now have excellent snow making capabilities. Outdoor performance adjusted operating profit margin expanded 800 basis points from last year to 14.6% in Q2, including a 270 basis point positive impact from net tariff refunds. This improvement was largely driven by growth margin expansion due to mixed shift benefits and SGNA leverage on strong sales.

Moving to ball and racket, we're revenue increased 24% to $390 million driven by soft goods and racket sports. We continue to see very strong momentum in tennis 360 globally. By category, the growth was led by soft goods up very strong double digits with continued momentum in all regions. Racket's growth was also strong across the board, driven by China, APAC, and Amaya. Performance Racket's grew more than 50%, driven by the very strong Blade V10 launch. We're also seeing Paddell gaining momentum and it has become one of the top five revenue drivers in Q2.

Beyond tennis, we saw a return to growth in baseball after slower sell-in last quarter. Golf and inflatables also saw a solid growth in the quarter. All regions generated double digit growth for ball and racket led by Greater China, APAC, and Amaya followed by the Americas. We opened 12 net new Wilson brand stores in Q2 with the majority split between Greater China and APAC. We have extensive store opening plans for China given the performance of existing Wilson Tennis 360 shops there. For the full year, we continue to plan to open approximately 40 net new Wilson Tennis 360 shops in China between owned and partnered doors. APAC continues to drive meaningful Wilson growth driven by soft goods in Korea and racket in Japan.

In North America, we saw strong growth across channels as baseball and inflatables rebounded. We have also continued to expand our Tennis 360 offering into more Dick's sporting goods locations including House of Sports and are now in 450 Dick's doors with our full head to toe to hand offering.

Looking ahead to the rest of the year, please keep in mind that ball and racket's tremendous 24% growth in Q2 benefited from some big level of growth on an ongoing basis. Ball and racket segment adjusted operating profit margin increased 1300 basis points to 17.2%, including a 970 basis point benefit from net tariff refunds.

The underlying margin expansion was driven by favorable pricing, product, channel, and region mix. This was slightly offset by higher SG&A and our intentional decision to invest behind Wilson's soft goods including tennis tour pros.

Turning to the group balance sheet, we ended the quarter with $573 million of net cash and exited the quarter with inventories up 19% year over year, well below our 32% sales growth. We are very comfortable with the level and quality of our inventory and happy to see the inventory levels normalized versus revenues earlier than planned.

Driven by strong profit growth and discipline working capital management, we generated $339 million of operating cash flow in the first half of 2026 compared to $108 million last year. And for the full year of 2026, we continue to expect to generate solid operating cash flow growth versus 2025 levels.

Now moving to guidance, we had another great financial performance in the second quarter across the P&L with strong sales growth, margin expansion, and EPS growth. The investments we had been making in our brands are paying off in the form of exceptional trends across each of our three biggest opportunities, our Terricks, Solomon's Soft Goods, and Wilson Tennis 360. We will continue to reinvest behind these early stage growth engines to ensure a high quality, long duration growth, and strong brand equity over the long term. Our guidance assumes that the most recently announced Section 301 tariff rates remain in place for the remainder of 2026. We have already received the majority of our total tariff refund submission amount, and any remaining impacts will be negligible.

Let's begin with the updated full year 2026 outlook. We are raising 2026 revenue growth guidance from 20 to 22% to approximately 24%, which includes a 200 to 250 basis point currency benefit at current exchange rates.

By segment, we are raising our technical apparel 2026 revenue growth guidance from approximately 22 to 24% to 25 to 26%. We are also increasing our outdoor performance sales growth expectations from 22 to 24% to 27 to 28%. Our ball and racket sales growth guidance goes from 10 to 12% to approximately 14%.

Turning to margins, we are fortunate to have the revenue and gross margin momentum that allows us to reinvest behind our three growth engines to ensure a high quality growth and strong brand equity over the long term, while also expanding our operating margins over time.

For 2026, we are raising our full year adjusted gross margin guidance from 59 to 59 and a half percent to 60.5 to 61%, which includes the 80 basis point benefit from the Q2 net tariff refund. And we are raising our adjusted operating margin guidance from 13.4 to 13.7% to 14.2 to 14.5%.

By segment, we are raising technical apparel adjusted operating margin guidance from approximately 22% to approximately 22.5%, which includes approximately 30 basis point of net tariff refund benefit from Q2. Our outdoor performance, we are raising adjusted operating profit margin guidance from 15 to 15.5% to 16 to 16.5%, which includes approximately 50 basis points of tariff refund benefit. And from all in racket, we are raising the adjusted operating margin from 4.7 to 5% to 6.7 to 7.2%, which includes approximately 250 basis point benefit from tariff refunds.

We are assuming 2026 net finance costs of approximately $85 million, which is up from the previous $70 million guidance, mainly attributed to an increase in the cost of hedging, FX losses, as well as an increase in lease expense. We continue to assume an effective tax rate of 28%.

Other operating income should be approximately $43 million for the full year. Corporate expense is now expected to be $240 million versus $220 million previously, primarily due to higher IT investment spend and deferred compensation expense.

Net income attributable to non-controlling interest is expected to be approximately $30 million for the full year. We now expect adjusted diluted EPS of $1.27 to $1.30 versus our prior guidance of $1.18 to $1.23, which is based on approximately 585 million fully diluted shares.

Other four year modeling items to consider. We are also assuming depreciation and amortization of approximately $450 million, including approximately $220 million of ROU depreciation. CAPX is still expected to be approximately $400 million, primarily to support our retail expansion and IT infrastructure investments.

Now, turning to the third quarter guidance, we expect reported revenue growth for the group in the range of 18 to 20%, which assumes an approximate 50 basis point tailwind from favorable FX impact at current exchange rates. We expect adjusted gross margin to be approximately 59% in Q3 2026 and an adjusted operating profit margin of 13.5 to 14%. Keep in mind that last year's Q3 gross margin benefited by approximately 50 basis points from one-time inventory reserve adjustments. Net finance costs will be $15 to $20 million, and our effective tax rate will be approximately 28%.

We expect adjusted diluted EPS of 31 to 33 cents in Q3. Lastly, should better than anticipated demand materialize, we believe we are well positioned to deliver financial performance ahead of our expectations.

With that, I'll turn it back to the operator for questions.

Good morning. Thank you for your questions. Okay, so we got the exceptional result in Q2. We feel very good about the foundation we build up, especially for the major three brands. They are on right track to grow the markets cross-boarding the work. So for Q3, I think the momentum's still there, and we already give a guidance. So we will grow our revenue top line from 18 to 20%. Okay, based on the much higher base of our business.

Okay, so Q3 is one of the largest quarters in cross-board this year. So I think based on our current projections, whole year, we will foresee 24% growth for the company. So overall, I think the momentum still carry on, and the management team got the very good confidence to continue to steal our business on PLC track.

Thanks, this is Andrew. And as you think about the flow through and the momentum coming out of Q2, we feel very good about our guidance going forward, as James said. I mean, we continue to always strive to provide ambitious and yet responsible guidance. As you think about the flow through, I mean, just really think about the fact that we're going to deliver, at the midpoint of our guidance, we're going to deliver well over 100 basis points of margin expansion. And we've done that consistently since the IPO, we've delivered over 150 basis points a year. We have visibility to be in and at ballpark as we go through this. And in the back half, there are going to be some continued investment into the growth in our business, especially as you look at the big opportunities we have in Salomon, Arc Terricks and Tennis 360.

We're going to have a little bit more increases. I talked about in my prepared remarks, increased, and our net finance costs as we look at some of the hedging and effects exposure that we have. And we did note the increase in our corporate expenses related to IT investments that we're making. But at the end of the day, we are still focused on delivering very strong bottom line expansion.

We're excited about where we're going. And we have the opportunity to continue to invest in our growth opportunities and responsibly provide guidance for the back half of the year.

Thanks for your question, Laurent.

We're going to go to Guillaume, who's off site and dialed in for the Salomon question. Hello. Good morning, everybody. First of all, we have this very diligent strategy developing the big leaders in the US. One thing I want to highlight before we speak about how we develop is we are very much driven by consumer demands and we are also driven by our epicenter strategy. So that we are looking at the consumer net, provider, and the kind of numerical solution, but we are going to sit and how much climate to drive demand across the market. So today we have our longest partner is Nordstrom, where we see a very Nordstrom, then we have GD Sport, and then we just started Foot Locker in July as maybe you have seen in our communication that we have been doing.

So we are very pleased about the results. We have very strong demands, easy to pay order, sell through, and pay order. And now we are planning to have these developments. This is very much hand-picked location, so we are looking for a peace center. So starting from New York City, of course, but LA, Chicago, so for Cisco, Miami, and others. And once again, we start from small, so you know that this type of partner, they have a very large fleet of doors, and today we just speak about a couple of the guys that we can have the very successful, but this is where we are driving today, the demand and the success. And in parallel, this partner, they have also a very strong econ platform, which is also helping, because this econ platform drive quite a lot of traffic, also in North America.

So we, it's more quality of our quantity today, and this is a way we would like to plan in order to really secure the brand's positioning, the brand equity, and also continue to support the cautionary demands behind Salomon.

So hi, this is Andrew. Thanks for the question. Very, very strong, as you talked about, very strong third quarter, second quarter for ball and racket. It was led by a couple of things. Our go-to-market strategy for our wholesale accounts in North America, we really amped that up. So our key national accounts, providing them a more fulsome offering, we really amped that up.

Wilson Tennis 360, both soft goods and rackets really had a strong second quarter, led by our two racket launches of Defire and Blade V10, and our soft goods, Door Expansion and Dix going from 250 to 450 doors. So if you think about all of those things that I just talked about, the two successful launches, the increased door count with Dix, the revision of our go-to-market strategy and focus on our friends to our key wholesale accounts, those were accelerators in the quarter and they drove that outsized performance. We also had solid performances in our baseball and our golf irons and our inflatables business. So we feel great about ball and rackets record quarter. We would not expect such high growth rates to sustain given the new launches.

So they are updating guidance reflects the appropriate growth rate that we believe is appropriate for the second half. And longer term, is should it grow mid-single digits as a segment? I'll update the algorithms on the 2Q call, Laurent. But yeah, it is a fair point that the soft goods business has become a lot larger and that business is growing faster.

Well, Brooke Hyde, this is Andrew. Let me kick off a little bit, you know, amplifying some of the points I've made earlier, philosophically. Because of the significant value creation potential for each of our three growth engines, we're going to invest behind the brands in the capability so we can deliver healthy, sustainable growth while also ensuring strong brand equity over the long term. As I noted, we've delivered a very large amount of margin expansion over a short period of time. And if you think about the midpoint of our 2026 guidance, we've averaged 150 basis points of annual even margin over the three years since the IPO.

From 9.8% in 2023 to 14.2 to 14.5% this year. This is well above our 30 to 70 basis points plus dips on an annual margin expansion in our algorithm. So we believe we have three of the most unique brands in all of consumer discretion there. And we're sitting in one of the healthiest and fastest growing segments. So making it well worth our investment on ourselves and growth margin upside to ensure that we capitalize on these opportunities in the right way and still be able to deliver bottom on margin over time. So this means again, attracting high quality talent supporting our brands, best in class marketing, building premium own stores and developing our IT digital platforms.

So as you think about that, you know, I'll hand it over to James, because I think it's important for you guys to really understand what are we investing in for our key big growth drivers. Yeah, I will add more courage relating to the brand investment areas. So for a character, we will continue to invest on our global or global brand awareness.

Okay, so through very strong global brand campaigns. And we will continue to damage our store opening process and make sure we have a good level of penetration in the markets we would like to moving. And obviously, we will put a good level investment on our products, especially on women footwear and the balance where we really think it's a key growth engine for coming years. So for actorics, obviously, so these are the major areas. For Salomon, I mean, as Guillaume mentions, epicenter strategy is still, I mean, on the Y, cross-board in the world, especially in Europe and North America. I think this is the areas we really like to put the resource behind that through the strong border and the brand campaigns to leverage our overall brand awareness and equities.

And also, I mean, we will continue to accelerate our own retail penetration in China, Asia Pacific, as well as in North America. So I think these are the areas we really like to focus on Salomon. But Werson, obviously, Werson 10 is 360 is the most important growth engine for Werson for coming years.

Okay, so we will continue to invest on our assets and also the overall store development in both Asia Pacific China and also North America. So these are kind of areas we really like to put a good level investment behind that to secure long-term sustainable growth for these three brands.

Thanks, Ike. We're going to start with Guillaume actually is going to talk about the market in Europe, the market trends in Europe, what we're seeing in the landscape. And then obviously Andrew will answer your margin question.

So I think the European market is not a fast growing market today, but there is still some segment where we can really play a big role and we see that we get some traction. One is running, so I think that we still have an excitement for the consumer and running. And especially when we are coming with very unique stories, so try running is one for Solomon. What we are currently building with gravel running is also another one. So it's looked like Nick Renish, but finally you're able to attract traffic and interest from the consumer and leading conversion. The second one is this outdoor outdoor speaker market or modern outdoor speaker market where Solomon was definitely building this space in the market.

So it was a new space. It looks like no abuse because we are driving big cells and as you can mention from his quarter result. And this segment still is a place, a good place to be a good place to shape for Solomon, driving excitement, bringing the modern mountain sport in the city and attracting new consumer.

So in a nutshell, I think that the market is a challenging market overall, but still with some room to grow. And I think Solomon is very well positioned with very unique competitive edge in Europe.

Hey, hi, it's Andrew. Thanks for the question as well. So I'm not ready to provide to give margin guidance for next year, but I will acknowledge to your point and included in my prepared remarks that we did the net tariff refund will be an 80-bips increment to our margin in the current year. Recall though, if you think about the two-year stack, our, we essentially handled the tariff challenge last year, primarily through industry which was netted out against this.

And we essentially absorbed most of the hit of the tariff impact. So if you look at 25 and 26 together, we have, you know, we believe that our margin reflects a good two-year picture for us, but I do acknowledge, you know, 80-bips margin expansion this year, and that's why I called it out to look at, you know, where we guided to begin the year and the one-time impact of the 80-bips.

Thanks, Adrian. We're actually going to have Stuart and Andrew, sorry, Stuart and Guillaume answer your first question for Arcterics and Solomon, how they approach DTC versus wholesale and how that might shake out long-term. And then we'll have James and Stuart and, you know, answer your second question as well.

Okay. Thanks, Omar. And Adrian, thanks for your question. I'll try to be crisp here. So wholesale remains important for Arcterics. It helps ensure that our brand is showing up and the right points of sale and with the right comparisons with other great brands that helps elevate our own brand position. The DTC has been critical and in massive catalysts for our growth around the world and has really unlocked the trajectory we've seen over the last five years. So both parts are important and play different roles for how we're driving growth and brand awareness.

Specific to the U. S. market, you know, Canada's our home market where we see highest brand awareness and it's enabled us to have a natural launching point into the U. S. U. S. is the largest global market and in many ways the most competitive. Our strategy is focused on what we call epicenters, focusing on major urban areas like New York, LA, San Francisco, Chicago, to where, you know, where the pools of demand are greatest to drive brand awareness.

And that's where we focus our store openings that have been very successful over the last several years. We complement this with what we call our mountain town strategy, which is focused on the place of practice, you know, where we see opportunities to stoke the brand identity in places like Aspen and Park City. So it's the combination of those factors that build the brand while also developing the economic opportunity and it really leverages an omni-channel approach where we're driving the brand position through our DTC channels but also driving brand awareness importantly with selected premium wholesale partners.

So I'll pause there and hand it over to Guillaume. So thanks, Stuart. I think that first of all, globally, Salomon is still developing very fast in DTC. So I think that the perception of adding Salomon relying on B2B is a little bit turning really into omni-channel. So at the global level, this is true that if we want to develop in US because of the scale of the markets, we have to have this true omni-channel strategy. So first step is moving to epicenter, opening some store, making sure that our income platform is also very one of the best experience we could have for Salomon. So best experience in our store, best experience on income. And of course, we want to rely and we will develop on B2B.

So it's an omni-channel. For the simple reason that traffic buying footwear is very much about traffic and B2B partner are the one, you know, owning the traffic and doing a very good job at distributing footwear in the market. So this is why we are looking at this B2B. But when we develop B2B and maybe for the one living in New York, you have been noticing that in July is we have a very close partnership with our partner. We want to have very strong and outstanding visual nationalizing so where you can notice the brands. We are also building activation to make sure that they are really activating the local community at every store in order to make sure that we position Salomon at the best level even on B2B.

So this is really the mindset for US is building retail on epicenter, leveraging with income and having this partnership and B2B because this is where you can leverage larger traffic. But keeping a very strong consistent approach to the consumer and focusing on demand, which is of course our priority number one. Your next question?

Yes, I'd like to add a bit of a carrot China. So Adrian, can you ask for a carrot China? So a carrot is already the largest premium out of range in China markets. So naturally, its close pattern will normalize versus the hyper-close levels during the past five years.

But a carrot China, I think will continue to deliver solid double digit close annually, especially given we only have 140 stores today and versus 200 potential for coming years. So the management team, we also got a very good level of the confidence. We are running exceptional work for a carrot in China markets and we will continue to drive our business and again market share in China markets. Okay.

Yeah. Yes. This is for me. So, Solomon has been is rooted by performance and there was one single thing is this idea of modern mountain sport driven by innovation, elevating the sport experience in the mountain and behind because of course now we concur to the city but still having this idea of modern mountain sport. This is where Solomon is coming from and this is first for footwear because this is where we have the biggest traction but we have the ambition to move forward in apparel.

To the apparel is pretty small but we have we start to see some traction and we are preparing you know the future pipeline of innovation as well in order to offer the full silhouette. So, this is this is a position. When we are coming and we are elevating that into culture, this is where sports style resonates to the consumer and this is why you see this momentum coming in the city with sports style. I think that Flatiron is a very good example of what Solomon wants to develop is it's not either or it's performance and still driven by innovation and culture. So, this piece of performance moving to culture into sports style and this is footwear because this is where we express to the best of our innovation, premiumness, quality of product but of course you know we are also working hard in order to develop that in apparel.

So, I think that your level of readiness into the store is the right one but keep in mind that we are coming, we are routed by performance and innovation and this is not either or but it's ants, it's performance and culture together.

Thank you.

We're going to actually have Stewart is also battling in remote talk about the margin for our parents, technical apparel.

Hey Jonathan it's Stewart so yeah we're we're pretty confident in the overall P&L outlook you know for the full year we're going to see a healthy expansion in gross margin we're going to see balanced SG&A leverage and we're going to see operating profit margins expand for the for the year. So you know it's the overall business momentum is is healthy you know as you heard from Andrew earlier on the call you know characterize how we provide guidance is being responsible yet there's nothing structural that would prevent us from delivering higher levels of pipeline as well as bottom line results should the should demand materialize. I think we've had a good track record of delivering on that on that approach to the business in prior quarters since coming public.

So so yeah we're going to have a what we would call a responsible posture for guidance but there's as I mentioned nothing structural that would prevent us from delivering higher levels of sales and profitability and we're quite bullish on the outlook for the balance of the year and beyond so hopefully that gives you some some color context on how we approach guidance.

Thanks everyone for joining and a quick reminder that Solomon on her sports investor days of temper 17. Look forward to seeing you there or online for the webcast. Have a great day.