June 4th, 2026

The call reflects a mixed but deteriorating near-term outlook: meaningful operational positives (rapid product cadence improvements, strong China growth, digital strength, inventory units down, community activations and buybacks) are outweighed by immediate demand softness in North America, negative brand/headline impacts, margin compression from tariffs and markdowns, higher SG&A and lowered EPS/revenue guidance. Management is executing remediation actions (marketing, faster chase, SKU rationalization, enterprise efficiencies), but the current guidance and Q1 results indicate notable near-term challenges.

Company Guidance

Management updated Q2 and full‑year 2026 guidance: Q2 revenue is expected to be $2.45–2.475B (down 2–3% YoY) with North America down low‑double digits (U.S. similar), China Mainland up mid‑ to high‑teens and Rest of World up high‑single to low‑double digits; Q2 gross margin is expected to decrease ~410 bps (tariffs ~+150 bps with ~100 bps offsets; markdowns ~+50 bps), SG&A to deleverage ~500 bps, operating margin ~11.6% (vs 20.7% prior), EPS $1.76–1.81 (vs $3.10 prior) and an effective tax rate ~30%; the company plans ~13 net new company‑operated stores and ~13 optimizations in Q2. For fiscal 2026 management now guides revenue $11.0–11.15B (flat to -1% YoY), North America down high‑single digits, China ~+20%, Rest of World mid‑teens, net new stores toward the low end of the prior 40–45 target with ~35 optimizations and low‑double‑digit square footage growth; full‑year gross margin down ~90 bps, markdowns flat to slightly improved, tariffs ~30 bps (largely offset), SG&A deleverage ~290 bps, operating margin down ~380 bps, EPS $10.95–11.15 (vs $13.26 in 2025), capex $700–720M, inventory dollar growth low‑ to mid‑single digits (units slightly down), and roughly $1B remaining on the share repurchase program.