Sep 3, 2026 earnings call — Cut guidance after China and North America weakness
Updated full-year revenue guidance: $10.35 billion to $10.5 billion, down 5% to 7%.
Revenue $2.4B (est $2.5B) · EPS $2.92 (est $1.79) · Next-quarter revenue outlook $2.3B–$2.3B
Key quotes
"We're chasing approximately 20% more volume this year relative to last year."
"We are increasing our marketing investment in the back half of the year to drive improved brand heat, guest acquisition, traffic and overall top line performance."
"We're now planning approximately 35 net new store openings this year, down from our guidance of approximately 40 last quarter."
Analyst Q&A 9
store strategy and SKU cuts
Q (Alexandra Straton · Morgan Stanley): The analyst asked where the company is in its store strategy, SKU reductions, guest experience improvements, and whether it plans any fleet rationalization going forward.
A: They are scrutinizing every store deal and opening 35 net new stores this year, with about 10 net new in North America and 7 in Mexico. They cut SKUs by 15% and are rolling that out across the fleet, testing further SKU reductions and curated assortments in a subset of stores before scaling.
"It includes a less dense presentation, so we decreased SKUs by 15%, and now we are rolling it out in the rest of the fleet." — Andre Maestrini (CEO)
speed of cost adjustments
Q (Irwin Boruchow · Wells Fargo): The analyst asked how quickly the company can adjust its cost structure given weak sales, including actions on leases or store base and timing for changes.
A: They have been actively managing costs this year across supply chain, procurement, and technology and have taken near-term steps to cut discretionary expenses. They are taking a deeper look to rightsize the cost base to the current business while protecting long-term investment in product and brand, but it is too early to share actions beyond 2026 guidance.
"We have taken some near-term steps to manage discretionary expense." — Meghan Frank (CEO)
China softness and product issues
Q (Matthew Boss · JPMorgan): The analyst asked whether China and other international softness is driven by macro or product assortment, and for August trends and reasons to view Q3 as the trough. They also asked about any green shoots in August.
A: They attribute China softness mainly to brand noise and a softer 618 Tmall event, and they see newness not performing as expected across markets. Quarter-to-date trends support improvement later in the year, and they are seeing early product green shoots in away-from-body styles, reorders into strong silhouettes, and activations in China to restore brand momentum.
"So in terms of China, I would say we're really looking at primarily brand noise impacting brand sentiment as well as a softer 618 Tmall event that Andre mentioned." — Meghan Frank (CEO)
pausing store openings?
Q (Lorraine Maikis · BofA): The analyst asked if the company is pausing store openings in China or the U.S. until business stabilizes.
A: They are taking a measured approach. China is still viewed as a long-term opportunity but they are taking a hard look given current trends; North America openings this year are limited and half are pop-up conversions that showed productivity, and they will share 2027 square footage plans with March guidance.
"I would say we're taking a very measured approach to store expansion." — Meghan Frank (CEO)
markdown cadence and China promotions
Q (Michael Binetti · Evercore): The analyst asked how markdowns will progress by quarter and whether the company will refrain from promoting in China in future Tmall events if brand or macro issues persist.
A: They expect markdowns to moderate: up 70 basis points YoY in Q2, a 60 basis point increase in Q3, and approximately flat in Q4, for a 40 basis point increase for the year, driven by seasonal clearance. In China they are focused on regular price performance, using Tmall as a shop-in-shop and running full-price Super Brand Day events on icons like Wunder Puff, and they will participate in 11/11 as normal.
"We're expecting 60 basis point increase in Q3, so a slight moderation." — Meghan Frank (CEO)
traffic vs product problem
Q (Paul Lejuez · Citi): The analyst asked whether the issue is low traffic that marketing can fix or product issues that need time, and how that differs by region.
A: They see pressure mainly in traffic and some negative year-over-year conversion, so they are increasing marketing and community activations to restore brand heat while also reordering into product that converts. In China the priority is to restore brand consideration after events that hurt sentiment, which should bring back organic traffic; traffic is the biggest driver across regions.
"I would say, predominantly, we're seeing the pressure in traffic." — Meghan Frank (CEO)
customer feedback and product lead times
Q (Adrienne Yih-Tennant · Barclays): The analyst asked what customer research is showing about what customers want, and how the company is changing product development lead times and the innovation process.
A: Customer feedback shows demand for new, differentiated product and community engagement; examples this summer showed strong participation. They are improving go-to-market to reduce lead times, have increased reordering about 20% versus last year, and are using fast-track design to get product to market faster; marketing will focus on mid- and top-of-funnel community activations like SeaWheeze and marathon events.
"I would say what we're hearing is they're looking for new and differentiated product from us, innovation." — Meghan Frank (CEO)
category performance and channels
Q (Dana Telsey · Telsey Group): The analyst asked which men's and women's products are working or not, how leggings and bottoms trends look, whether pricing factored in, and whether store and online performance differ.
A: Away-from-body styles, Define, Scuba, some golf and ABC Pant items are working; other new products are not, so they are reordering what sells. Leggings declined more than expected and bottoms are down mid-single digits; traffic and conversion pressure are similar in stores and online, and they are improving store shopability and the e-commerce look and feel.
"We've really seen some positive response to that, and the shift has been happening over time but was a little more than we expected in Q2." — Meghan Frank (CEO)
Q4 margin bridge and tariff refund
Q (Mark Altschwager · Baird): The analyst asked why Q4 is modeled with less margin pressure than Q3 and asked the process and timing for the remaining tariff refunds and whether they expect to receive all of it.
A: For Q4 they expect about 250 basis points of operating margin pressure, moderated from Q3, with gross margin slightly ahead due to a higher revenue water line, tariff benefit, and accelerating mitigation actions leading to flat markdowns and less expense deleverage than Q3. On tariffs, they received $134 million back in Q2 but have not reflected the remaining $105 million in guidance due to uncertainty in the process they are actively participating in.
"We have not reflected the remaining $105 million in our forward guidance." — Meghan Frank (CEO)