On Tuesday, Amer Sports (NYSE:AS) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Amer Sports reported a robust Q2 2026 with over 30% revenue growth and significant operating margin expansion, driven by strong performances across all segments and geographies.
Key growth drivers include Arc'teryx, Salomon Soft Goods, and Wilson Tennis 360, each achieving over 20% growth, bolstered by a 40% increase in D2C sales, which now represent 55% of total revenue.
The company raised its full-year revenue growth guidance to approximately 24% and adjusted gross margin guidance to 60.5% to 61%, citing continued investments in brand development and market expansion.
Arc'teryx saw strong growth across regions, particularly in Women's categories, and is expanding its store footprint in Greater China and North America, while Salomon is executing an epicenter strategy to boost brand presence in key global cities.
Management highlighted strategic investments in marketing, retail expansion, and IT infrastructure as key to sustaining long-term growth, while remaining committed to delivering strong bottom-line performance.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us and welcome to the Amer Sports second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again. I will now hand the conference over to Omar Saad, Head of Investor Relations and Capital Markets. Please go ahead.
Omar Saad, Head of Investor Relations and Capital Markets
Welcome everyone. Thanks for joining Amer Sports earnings call for the second quarter of fiscal year 2026. Earlier this morning we announced our financial results for the quarter ended June 30, 2026 and the release can be found on our IR website, investors.amersports.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 to differ 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 reconciliations 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. Arc'teryx CEO Stuart Hazelden and Salomon CEO Guillaume Bezenk will join for the Q&A session. With that, I'll turn the call over to James.
James Zhang, CEO
Thanks, Omar. 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 Salomon Soft Goods, a strong Arc'teryx omnichannel, and a Wilson Tennis 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, Arc'teryx, Salomon Soft Goods and the Wilson Tennis 360, are still relatively small with significant room to grow.
First I will recap key highlights from our three segments starting with technical apparel. Arc'teryx delivered another great quarter with broad-based strength across regions, channels and categories including another exceptional performance in Women's. Strong DTC momentum also continued driven by a 17% technical apparel omnichannel. We believe Arc'teryx 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 consumer segments. I want to highlight our momentum in Women's which grew faster than any other category for Arc'teryx. Our confidence in the size and scale of our Women's opportunity is very large. Brand awareness and affinity with women is rising significantly as we improve fit, style and function and also build expanded assortments. Redesigning our core ABCG models for her plus expanding feminine color palettes is driving higher female traffic and conversion in Q2.
Units and seasonal colorways generate over 60% of women's sales. Standout new franchises include the Singsora and Ori lightweight hiking styles and also the Sony utility vest and jacket. Our remarkable success in women's bottoms with franchises like the Crackhair Blue Chair and Nier Pants is helping us unlock the female consumer from head to toe, driving higher overall spend. Turning to footwear which had another great quarter including strong double-digit growth across regions led by both existing and new styles.
Popular existing styles included Norvan LD4 trail shoe which continues to be our biggest volume driver followed by the concierge trekking shoes. In March we launched the latest version of our technical trail racing shoe, the Silent 2, performing very well so far and we are excited to have 8 Achilles trail run athletes competing in the UTMB race in Chamonix next week. Looking forward, we are confident that Arc'teryx has an exciting pipeline of shoe releases for the upcoming years.
Turning to our Veilance sub-brand which had solid growth in Q2 on a small base, we continue to focus on investing newness, further developing our collections and expanding distributions, all of which is creating engagement and awareness in the marketplace. Turning to sustainability and the ReBird which continue to be at the heart of Arc'teryx. In Q2 we added five new ReBird Centers bringing us to 47 total. Later this month we will unveil an important new innovation which combines our passion for sustainability with uncompromised technical performance on mountain.
Our renowned Chamonix Alpine Academy was again a great success in July with over 15,000 visitors in the village over the weekend and more than 1,000 attendees in clinics. Our Mountain Academies are the world's premium mountain education events and the space for mountain enthusiasts of all levels to advance their skills and 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 delivered solid growth in Q2. The brand continues to reduce its Nordic dependency and is rationalizing its footprint in the region while seeing healthy growth in other parts of EMEA. For both Peak Performance and our winter sports equipment brands, we are excited that Freeride Ski will become an Olympic sport at the 2030 Games. Peak Performance sponsors the Freeride World Tour and our ski equipment brands sponsor many of the professional freeride skiers.
Now turning to the outdoor performance segment which was led by another outstanding quarter from Salomon Soft Goods. The investments we are making to grow Salomon brand awareness and 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 Salomon is well positioned to achieve its long term potential.
One. Global sports style momentum continues. Sports style is critical to developing Salomon's position as the modern outdoor sneak brand. The XT-6 and XD Whisper franchises are resonating with the younger and more diverse audience from technical sports in the mountains to culture and community in the cities. We were excited to announce that Ji Shi, the global superstar, singer and actress, will be Salomon'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 Grival franchise is helping to unlock the run category for Salomon like never before. Salomon is gaining traction in the run specialty channels in North America and EMEA. In July we launched the Aero Blaze 4 with a re-engineering upper using new mesh technology. We also recently launched the second generation of Genesis, a highly technical trail shoe. Salomon athletes were winning races in Q2 including Courtney DeWaters earning her fourth Hardrock 100 title, validating Salomon's technical merits on the hardest trails.
Third, Salomon continued to have excellent brand heat in Greater China and Asia where we believe we operate the most productive and profitable sneaker shops in the industry. We in China continued to deliver very strong double-digit growth in Q2 driven by strength across sports styles, performance and apparel. Our local for local apparel and accessories lines in China with technical products inspired by outdoor and trail runnings has also been gaining traction the past few quarters.
Beyond China, Salomon is also experiencing surging demands in Korea and Japan, very important markets given their influence on global sneaker culture. Fourth, our epicenter strategy is working. Focusing on key global metro markets is allowing us to build up Salomon's reach and presence in the right way. Our Tier one global epicenter, Paris, London, Shanghai, Beijing, Tokyo, New York and 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 the 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 reorders, preorders and sell-through. Sports style continues to be the biggest growth driver but Gribo is also inflecting in Europe supported by marketing campaigns, in-store events and the running event activations. Also we are seeing high e-com 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 Lanza, sponsoring music festivals and artist collaborations and most recently we began a unique partnership with the National Opera House of Paris to outfit their dancers. Lastly, I will mention the U.S., which is the largest single sneak market in the world but still a small business for us. We know there is a strong demand for Salomon 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 distribution with both new and existing wholesale partners as well as our own stores and e-commerce.
In Q2 we opened our first North America flagship stores on 5th Avenue and in the Flatiron 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 Nordstrom, JD Sports and Foot Locker. Lastly, before I switch to ball and racket, although Q2 is a very small quarter for our winter sports equipment franchise, Salomon, Atomic and Armada, we are pleased that our brands continue taking share despite challenging conditions in certain markets.
Moving to ball and racket highlights, ball and racket sales grew 24% in Q2 driven by continued strength in Tennis 360, both soft goods and rackets, as well as improved growth in baseball, golf and inflatables. Our Tennis 360 strategy continues to resonate very well with consumers from unique lines of tennis apparel and footwear to high performance rackets. Wilson had a couple very big racket launches this spring including the Q1 rollout of our iconic raid franchise version 10.
This has been one of the strongest launches in our history and also the racket for world number one Arena Sabrina. We also recently launched a completely new racket line called D5. This is our first ever Power Spin record which has been a growing segment of the racket market. Early results from the Defy are even exceeding the raid V10 launch I just mentioned. We continue to invest in new tour players, recently signing former world top five players Holger Rome and the 17-year-old rising star Moyes Cormier, both playing the defined ranking.
Marta Kostyuk, one of our highest profile head-to-toe athletes, has been creating great buzz for the brand with her unique Wilson tennis outfits, reaching the semifinals at both Roland Garros and Wimbledon. Wilson Soft Goods continues its exceptional trajectory with very strong growth across all four major regions. Also, baseball, golf and inflatables saw improved growth in the quarter. Before turning over to Andrew, I'd like to conclude by saying that given the broad-based momentum across our portfolio, the healthy and growing premium sports and outdoor markets, and the world-class teams we have in place around the world, I'm very confident in the future outlook for Amer Sports.
Andrew Page, CFO
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: Arc'teryx, Salomon Softgoods, and Wilson Tennis 360. In Q2, Amer Sports grew sales 32% on a reported basis, or 30% ex-currency. Our three growth engines all eclipsed 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 Arc'teryx and Salomon. 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 EMEA grew 20%. Turning to profitability, adjusted gross 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 SG&A expenses as a percentage of revenues increased 20 basis points and represented 54.9% of revenues in Q2. SG&A leverage in both Technical Apparel and Outdoor Performance was offset by deleverage at Ball and Racket due to investments in Wilson Tennis 360, as well as higher Amer 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 ROU depreciation.
Adjusted net finance cost in the quarter was $21 million, 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 last year.
Net tariff refunds benefited Q2 EPS by approximately $0.08 per share. Now turning to segment results, Technical Apparel revenues increased 32% to $674 million, led by Arc'teryx. Growth was fueled by 34% DTC expansion, including a 17% omni-comp. Technical Apparel wholesale revenues grew 27% in Q2. We opened net 8 new Arc'teryx stores globally, and we continue to plan 30 to 35 net new Arc'teryx stores for the full year of 2026 across all markets and regions.
The Technical Apparel growth rate was led by Asia Pacific, followed by accelerating growth in EMEA and the Americas, followed by Greater China. All regions continue to grow strong double digits. Not only is the brand seeing a nice acceleration in North America and EMEA, 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 Arc'teryx stores in Greater China between owned and franchised and believe 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 Chengdu flagship store, which spans over 7,000 square feet and two levels, featuring a distinctive Cliff House design. Arc'teryx growth continued to accelerate in North America in 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 Oakridge 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're expanding into a new partnership with Dick's Sporting Goods, where we will be entering 15 hand-selected premium House of Sport locations for Fall/Winter 2026.
Our products will be showcased in elevated and experiential shop-in-shop formats, with a particular emphasis on the core outerwear offerings and including footwear. This is still in the test-and-learn stage but has the potential to expand further over time. EMEA remains Arc'teryx's most underpenetrated 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 EMEA, 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 SG&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 Salomon footwear and apparel. By channel, Outdoor Performance D2C grew 52%, led by new doors and higher productivity across markets, especially Greater China, APAC, and the Americas.
Outdoor Performance achieved a 28% omni-comp with strength in both stores and e-commerce. E-commerce is continuing to grow across regions, driven by sportstyle momentum and higher traffic, especially in the Americas and APAC. Wholesale grew 25%, driven by strong sell-through and reorders for sportstyle, as well as door count expansion. Regionally, the Outdoor Performance growth rate was led by APAC, Greater China, and accelerating growth in the Americas, followed by EMEA.
The popularity of Salomon 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 Salomon, led by our highly productive Salomon shops. We opened 13 net new Salomon 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 in the highest-traffic shopping centers and space to incorporate footwear and apparel. For example, we recently upgraded the best-performing Salomon store in China, Shenyang MixC. The new shop performed very well in its first month, demonstrating that even high-productivity doors can benefit from an upgrade.
In APAC, another region where Salomon is experiencing explosive growth, we opened net 7 new stores in Q2 across Japan, Korea, and Australia. Salomon's overall brand awareness and desirability continues to grow very rapidly in Asia for both sportstyle and performance. In the Americas, as James mentioned, Salomon footwear is continuing to see a material growth acceleration. The brand is seeing great DTC demand in stores and e-commerce in both sportstyle and performance.
We are pleased to see traffic is up very strongly in e-commerce, 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, Salomon has begun to expand into a small number of key wholesale doors with important U.S. sneaker retailers such as Nordstrom, Foot Locker, and JD Sports. It is still in the early stages, but these channels are performing very well in terms of preorders, sell-through, and reorders.
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 Salomon 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 seven to 10 new Salomon shops in the Americas this year. In EMEA, key epicenters 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-piste market is healthy despite inconsistent snow conditions, as most top ski resorts now have excellent snowmaking 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 gross margin expansion due to mix shift benefits and SG&A leverage on strong sales. Moving to Ball and Racket, where revenue increased 24% to $390 million driven by softgoods and racket sports, we continue to see very strong momentum in Tennis 360 globally.
By category, the growth was led by softgoods, up very strong double digits, with continued momentum in all regions. Rackets growth was also strong across the board, driven by China, APAC, and EMEA. Performance rackets grew more than 50% driven by the very strong Blade V10 launch. We're also seeing padel 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 solid growth in the quarter. All regions generated double-digit growth for Ball and Racket, led by Greater China, APAC, and EMEA, 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 partner doors.
APAC continues to drive meaningful Wilson growth, driven by softgoods in Korea and rackets 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 Sport, 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 product launches and related sell-in, and we do not expect this level of growth on an ongoing basis.
Ball and Racket segment adjusted operating profit margin increased 1,300 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 softgoods, 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 disciplined 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 have been making in our brands are paying off in the form of exceptional trends across each of our three biggest opportunities: Arc'teryx, Salomon Softgoods, and Wilson Tennis 360. We will continue to reinvest behind these early-stage growth engines to ensure 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 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 59.5% 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 points of net tariff refund benefit from Q2.
For 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 for Ball and Racket, we are raising the adjusted operating margin from 4.7% to 5% to 6.7% to 7.2%, which includes approximately 250 basis points benefit from tariff refunds. We are assuming 2026 net finance cost of approximately $85 million, which is up from the previous $70 million guidance, mainly attributable 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 full year modeling items to consider: we're also assuming depreciation and amortization of approximately $450 million, including approximately $220 million of ROU depreciation. Capex is still expected to be approximately $400 million and 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 $0.31 to $0.33 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.
OPERATOR
Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality and if you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.
Your first question comes from the line of Matthew Boss from JP Morgan. Please go ahead. Apologies Matthew, your line is now open. Please go ahead.
Matthew Boss, Analyst at JPMorgan
Okay, great. Thanks, and congrats on a really nice quarter. So James, 32% revenue growth, sequential acceleration at all three brands in the second quarter. Can you elaborate on the strong top line momentum that you saw has continued into the third quarter? And Andrew, can you walk through top line and margin back half assumptions, or why not more top and bottom line upside given the revenue strength and margin flow-through rate that you saw in the front half of the year?
James Zhang, CEO
Good morning. Thank you for your questions. Okay, so we got the exceptional result in Q2. We feel very good about the foundation we built up, especially for the major three brands. They are on the right track to grow the market across the world. So for Q3, I think the momentum is still there and we already gave the 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 this year.
So I think based on our current projections, the whole year we will foresee 24% growth across the board for the company. So overall, I think the momentum still carries on, and the management team has very good confidence to continue to steer our business on a healthy track.
Andrew Page, CFO
Hey Matt, 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, we continue to always strive to provide ambitious and yet responsible guidance. As you think about the flow-through, just really think about the fact that we're going to deliver at the midpoint of our guidance well over 100 basis points of margin expansion. And we've done that consistently since the IPO.
We've delivered on average over 150 basis points a year. We have visibility to being in that 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'teryx and Tennis360. We're going to have a little bit more increase, as I talked about in my prepared remarks, in our net finance costs as we look at some of the hedging and FX 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.
Matthew Boss, Analyst at JPMorgan
Great. Best of luck.
OPERATOR
Your next question comes from the line of Laurent Vasiliksu from BNP Paribas.
Laurent Vasiliksu, Analyst at BNP Paribas
Thank you very much.
OPERATOR
Please go ahead.
Laurent Vasiliksu, Analyst at BNP Paribas
Good morning. Thank you very much for taking my questions. I wanted to ask first on Salomon with the recent rollout of Foot Locker and then also I think JD Sports a few quarters back. But curious to know how many doors are you currently at in these two key retailers and where do you think the opportunity lies going forward in terms of number of doors? Thank you so much. And then have a follow up on Ball and Racket.
Omar Saad, Head of Investor Relations and Capital Markets
Thanks for your question, Laurent. We're going to Guillaume, who's off-site and dialed in, for the Salomon question.
Guillaume Bezenk (Chief Executive Officer)
Hello, good morning everybody. First of all, we have this very diligent strategy developing the B2B doors in the US. One thing I want to highlight before we speak about how we develop is we are very much driven by consumer demand and we are also driven by our epicenter strategy, so that we are looking at the consumer not door by door and kind of numeric distribution, but where the door sits and how much we are able to drive demand across the market.
So today we have our longest partner is Nordstrom where we see a very strong performance. Then we have JD Sports 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 demand, on pre-order, sell-through and reorder. And now we are really planning to have these developments. This is very much handpicked locations. So we are looking for epicenters, starting from New York City of course, but LA, Chicago, San Francisco, 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 hundred of the best locations where we're going to have the best sell-through. But this is where we are driving today the demand and the success. And in parallel, these partners, they have also a very strong e-commerce platform which is also helping because this platform drives quite a lot of traffic also in North America.
So it's more quality over quantity today. And this is the way we would like to plan in order to really secure the brand's positioning, the brand equity and also continue to support the consumer demand behind Salomon.
Laurent Vasiliksu, Analyst at BNP Paribas
Wonderful. And then Andrew, under your leadership and now Terry's leadership, Ball and Racket has really taken off with this 24% growth. I know you mentioned that it should not grow at this rate over the next few quarters, but near term. I know you're not in the habit to give us color by segment, by quarter, but it does imply if we assume like low double digits for 3Q that it materially flows to mid-single digits for 4Q if we take the guide for the full year.
Is that the right way to think about it near term? And then for, you know, last year at the investor day you called out that it should be growing mid-single digits at top line overall over the next few years. Is that still the right way to think about it? Thank you so much.
Andrew Page, CFO
Yeah, so hi, this is Andrew. Thanks for the question. You know, very, very strong, as you talked about, very strong 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've really amped that up. So our key national accounts, providing them a more fulsome offering, we really amped that up. Wilson Tennis360, both soft goods and racquets, really had a strong second quarter led by our two racquet launches of Defyre and Blade V10 and our soft goods door expansion, and Dick's going from 250 to 450 doors.
If you think about all of those things that I just talked about — the two successful launches, the increased door count with Dick's, the revision of our go-to-market strategy and focus on our offerings 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, in our golf irons and our inflatables business. So we feel great about Ball and Racket's record quarter.
We would not expect such high growth rates to sustain given the new launches — so there were new launches and new sell-ins and revision of our go-to-market — so our updated guidance reflects the appropriate growth rate that we believe is appropriate for the second half.
Laurent Vasiliksu, Analyst at BNP Paribas
And longer term, should it grow mid-single digits as a segment,
Andrew Page, CFO
We updated 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.
Laurent Vasiliksu, Analyst at BNP Paribas
Okay, thank you very much and best of luck.
OPERATOR
Your next question comes from the line of Brooke Roach from Goldman Sachs. Your line is opening up. Please go ahead.
Brooke Roach, Analyst at Goldman Sachs
Good morning and thank you for taking our question. I was hoping you could elaborate on the growth investments in the business that you're making in the back half of the year. Is there any texture you can provide regarding the categorization of spend? Is this a step up in marketing spend as a percent of sales relative to your prior forecast, or are these more durable and permanent investments such as headcount? And how should we be thinking about the revenue and sales growth opportunity on the back of this? Thank you.
Andrew Page, CFO
Hi, this is Andrew. Let me kick off a little bit, amplifying some of the points I 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 and the capabilities 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 EBIT 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 bps on an annual margin expansion in our algorithm. So we believe we have three of the most unique brands in all of consumer discretionary and we're sitting in one of the healthiest and fastest growing segments, so making it well worth our investment on our sales and gross margin upside to ensure that we capitalize on these opportunities in the right way and still be able to deliver bottom line margin over time. So this means again attracting high quality talent, supporting our brands, best-in-class marketing, building premium owned stores and developing our IT digital platforms. So as you think about that, 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.
James Zhang, CEO
Yeah, I will add more color relating to the brand investment areas. So for Arc'teryx, we will continue to invest on our overall global brand awareness, through very strong global brand campaigns, and we will continue to leverage our store opening process and make sure we have a good level of penetration in the markets we'd like to move in. And obviously we will put a good level of investment on our products, especially on women, footwear and balance, where we really think it's a key growth engine for coming years.
So for Arc'teryx, obviously these are the major areas. For Salomon, I mean as Guillaume mentioned, the epicenter strategy is still on the way across the world, especially in Europe and North America. I think these are the areas we'd really like to put the resource behind, through the strong product and the brand campaigns, to leverage our overall brand awareness and equities. And also, 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'd really like to focus on. For Wilson, obviously Wilson Tennis360 is the most important growth engine for Wilson 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 the areas we'd really like to put a good level of investment behind to secure long-term, sustainable growth across the board for these three brands.
Brooke Roach, Analyst at Goldman Sachs
Great, thanks so much. I'll pass it on.
OPERATOR
Your next question comes from the line of Ike Burchow from Wells Fargo. Please go ahead.
Ike Burchow, Analyst
Hey, good morning everyone. I'll add my congrats. Two questions. One, and I don't know if it's for Andrew or James, but just commenting on the constant currency growth you saw in Europe or are seeing in Europe. Could you give us an update? There's been several brands, both footwear and apparel, that have kind of called out some recent slowdowns in the past couple months. Doesn't seem like you're seeing anything notable, but wanted you to comment on that.
And then this one I think is for Andrew, it's just simple math, but you have your algo 30 to 70 basis points on margin. By our math, you're getting the 80 bps of the refund in the guide this year. Should we assume, just to keep the models clean, that next year, year-over-year margin should net out that 80 basis points, which kind of gets you more flat to down margin as a starting point to your plan to adjust for the refund? Just kind of want to make sure the models kind of stay clean in the outlook.
Thanks, guys.
Omar Saad, Head of Investor Relations and Capital Markets
Okay, thanks, Ike. We're going to start with Guillaume, actually. He's 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.
Guillaume Bezenk (Chief Executive Officer)
So I think the European market is not a fast-growing market today, but there are still some segments where we can really play a big role and we see that we get some traction. One is running. I think that there is still upside and excitement for the consumer in running, especially when we are coming with very unique stories. Trail running is one for Salomon. What we are currently building with gravel running is also another one. It looks like a micro niche, but finally you are able to attract traffic and interest from the consumer and lead conversion.
The second one is this outdoor sneaker market, or modern outdoor sneaker market, where Salomon was definitely building this space in the market. It was a new space; it looks now obvious because we are driving big sales, as you can mention for this quarter result, and this segment still is a good place to be, a good place to shape for Salomon, driving excitement, bringing the modern mountain sport into the city and attracting new consumers. So in a nutshell, I think that the market is a challenging market overall, but still with some room to grow.
And I think Salomon is very well positioned with a very unique competitive edge in Europe.
Andrew Page, CFO
This is Andrew. Thanks for the question as well. So I'm not ready to provide margin guidance for next year. But I will acknowledge your point and I included it in my prepared remarks that the net tariff refund will be an 80 bps increment to our margin in the current year. Recall though, if you think about the two-year stack, we essentially handled the tariff challenge last year primarily through vendor sharing, 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 believe that our margin reflects a good two-year picture for us. But I do acknowledge 80 bps margin expansion this year, and that's why I called it out when you look at where we got in the beginning of the year and the one-time impact of the 80 bps.
Omar Saad, Head of Investor Relations and Capital Markets
Thanks, Andrew.
OPERATOR
Your next question comes from the line of Adrian Yee from Barclays. Your line is open. Please go ahead.
Adrian Yee, Analyst at Barclays
Great. Thank you very much and congratulations across the board on all the brands. James, there are two very different strategies between the two biggest brands. Wholesale drives brand awareness faster than DTC, but Arc'teryx is following a DTC strategy, maybe more brand premiumization and control, and then Salomon's driven by the wholesale. How do you think ultimately this pans out for the longer term in terms of channel mix and penetration? And then for both Stuart and Guillaume, my follow-up is Arc'teryx has been strong in China, Salomon's strong in Europe.
What elements of those successes in current regions accelerate the roadmap for penetration into the U.S. market? Thank you very much.
Omar Saad, Head of Investor Relations and Capital Markets
Thanks, Adrian. We're actually going to have Stuart and Guillaume answer your first question for Arc'teryx and Salomon, how they approach D2C versus wholesale and how that might shake out long term. And then we'll have James and Stuart answer your second question as well.
Stuart Hazelden (Chief Executive Officer)
Okay, thanks, Omar, and Adrian, thanks for your question. I'll try to be crisp here. Wholesale remains important for Arc'teryx. It helps ensure that our brand is showing up in the right points of sale and with the right comparisons with other great brands that helps elevate our own brand position. The D2C has been critical and a massive catalyst 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, Canada is our home market where we see highest brand awareness and it's enabled us to have a natural launching point into the U.S. The 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, Los Angeles, San Francisco, Chicago, 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 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 omnichannel approach where we're driving the brand position through our D2C channels, but also driving brand awareness, importantly with selected premium wholesale partners.
So I'll pause there and hand it over to Guillaume.
Guillaume Bezenk (Chief Executive Officer)
So thanks, Stuart. I think that first of all, globally, Salomon is still developing very fast in D2C. So I think that the perception of having Salomon relying only on B2B is a little bit an old position we had and a previous strategy we had. I think we are turning really into omnichannel. So at the global level, this is true that if we want to develop in the U.S., because of the scale of the market, we have to have this true omnichannel strategy.
So first step is moving to epicenters, opening some stores, making sure that our e-commerce platform is also one of the best experiences you could have for Salomon. So best experience in our stores, best experience on e-commerce. And of course we want to rely on and we will develop B2B. It's an omnichannel for the simple reason that traffic—buying footwear is very much about traffic—and B2B partners are the ones owning the traffic and doing a very good job at distributing footwear in the market.
This is why we are looking at this B2B. But when we develop B2B, and maybe for the ones living in New York, you have been noticing that in July we have a very close partnership with our partner. We want to have very strong and outstanding visual merchandising so you can notice the brand. 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: building retail in epicenters, leveraging with e-commerce, and having this partnership in B2B because this is where you can leverage a larger traffic, but keeping a very strong, consistent approach toward the consumer and focusing on demand, which is of course our priority number one.
James Zhang, CEO
I'd like to add a bit of color on Arc'teryx China. So Adrian, okay, you asked for Arc'teryx China. Actually now Arc'teryx is already the largest premium outdoor brand in the China market. So naturally its growth pattern will normalize versus the hyper-growth levels during the past five years. But Arc'teryx China, I think, will continue to deliver solid double-digit growth annually, especially given we only have 140 stores today versus 200 potential for coming years.
So the management team also has a very good level of confidence. We are running very exceptional work for Arc'teryx in China market and we will continue to drive our business and gain market share in China market.
Adrian Yee, Analyst at Barclays
Thank you very much.
OPERATOR
Our final question comes from the line of Jonathan Comp from Baird. Please go ahead.
Jonathan Comp, Analyst at Baird
Yes, good morning. Thank you. If I could follow up on Salomon, I want to ask further: the new store opening in July in Flatiron, really telling the full story—footwear and apparel, performance and sportstyle—does that really represent where you see the brand heading as you continue to diversify toward a broader lifestyle-performance, lifestyle brand positioning?
Guillaume Bezenk (Chief Executive Officer)
Yes, this is for me. So Salomon is rooted by performance. And there is one simple thing: this idea of modern mountain sport driven by innovation, elevating the sport experience in the mountain and behind. Because of course now we can sell to the city, but still having this idea of modern mountain sport. This is where Salomon 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.
Today apparel is pretty small, but we start to see some traction and we are preparing the future pipeline of innovation as well in order to offer the full silhouette. So this is a position where we are coming and we are elevating that into culture. This is where sportstyle resonates to the consumer. And this is why you see this momentum coming in the city with sportstyle. I think that Flatiron is a very good example of what Salomon wants to develop.
It's not either/or, it's performance and still driven by innovation and culture. So this piece of performance product moving to culture, into sportstyle, and this is footwear because this is where we express today 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 in the store is the right one. But keep in mind that we are rooted by performance and innovation.
And this is not either/or, but it's and—it's performance and culture together.
Jonathan Comp, Analyst at Baird
That's very encouraging. And then Andrew, if I could just finish: technical apparel margin in the back half, segment operating margin implied down year over year. Is that reflective of incremental investment or some other factors, or conservatism? Just any more color there? Thank you.
Omar Saad, Head of Investor Relations and Capital Markets
We're going to actually have Stuart, who's also dialing in remote, talk about the margin for our Arc'teryx technical apparel.
James Zhang, CEO
Hey, Jonathan and Stuart. So yeah, we're pretty confident in the overall P&L outlook. You know, for the full year we're going to see healthy expansion in gross margin, we're going to see balanced SG&A leverage, and going to see operating profit margins expand for the full year. So, you know, the overall business momentum is healthy. You know, as you heard from Andrew earlier on the call, you know, characterize how we provide guidance as being responsible, yet there's nothing structural that would prevent us from delivering higher levels of top line as well as bottom line results should demand materialize.
I think we've had a good track record of delivering on that approach to the business in prior quarters since coming public. So yeah, we're going to have 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 color context on how we approach guidance.
Jonathan Comp, Analyst at Baird
That makes a lot of sense. Thanks again.
OPERATOR
Okay. At this time there are no further questions. I will now turn the call back to management for closing remarks.
Omar Saad, Head of Investor Relations and Capital Markets
Thanks everyone for joining. And a quick reminder, the Salomon Amer Sports Investor Day, September 17th. Look forward to seeing you there or online for the webcast. Have a great day.
OPERATOR
This concludes today's call. Thank you all for attending. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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