Release Date: March 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: Congrats on the results. I wanted to touch on Cloud 6. Martin, you mentioned it returning to being a significant contributor to growth in 2025. Could you maybe elaborate on that point a bit in terms of some of the segmentation work you've been doing there and the difference between the launch this year compared to the Cloud 5 launch in 2022? Thanks. A: Aubrey, this is David. I'm happy to take this question. So the Cloud has become an iconic staple that resonates across generations. And we've also seen that the Cloud is increasingly resonating with young consumers as a utilitarian part of their uniform. So it's back to that basic staple. And we're actually going to celebrate this in the Cloud 6 campaign that starts in the next weeks. So if you look back in shoe history, comfortable, easy slip-in shoes have a history of becoming eternal classics and that's what we're really focusing on. So we see incredible momentum right now, as Martin mentioned before, from our retailers and also, kind of, early signs before actually the launch in the next two days.
Q: My question is on the guidance, the full year guidance for sales. Can you give us an idea of how you're thinking about growth by region? And then just secondly, you mentioned you expect the first half of the year to be stronger than the second half. There's a lot of talk that the overall consumer environment in the US has been a little bit weaker since the end of 2024, since the end of the holiday season, maybe because of weather or whatnot. But have you seen that? And can you just talk about generally what you've seen in the US so far here in Q1? A: Thanks, Jay. So let me elaborate a little bit on the full year journey and then Marc will dive a bit into the region, including what we're currently seeing on the demand side. So as I pointed out in the remarks earlier, we come out of an incredible 2024. It's a lot of momentum, and we have already seen two very strong months across both channels. So we also said that we expect a slightly stronger growth rate in half year one compared to half year two. So based on the first two months and the strength that we have seen there, we expect our Q1 growth rate somewhere in the low to mid-30s, and we really expect that our D2C share remains at a similar level than in Q1 last year, which implies that our wholesale channel will grow very strong, which is driven by the launch volume of the Cloud 6 but also many other models. And we are seeing significant sell-in volumes there. And at the same time, we continue to see very strong demand in our D2C channels and so we also expect that D2C continues to grow strongly.
Q: Compliment to the team on the inventory and working capital management. We're very interested in the investments in consumer insights and some of the data you shared on uptake with younger consumers. The metric on increased uptake of running franchises from consumers under 35 is really encouraging. Can you speak to where you stand with respect to more useful penetration and distribution and marketing strategies in '25 and '26 to continue that development? A: Very happy to do that, Jim. So as you mentioned, we have seen a very very strong acceleration of brand love on a global level across 80 countries, and that has been especially true among Gen Z where the awareness actually doubled in the US and increased by more than 50% on a global level. So very strong momentum and followership in use and, of course, then as a result of that on social media as well. We credit that to our strength of blockbuster partnerships with Zendaya, FKA twigs, with Roger Federer and a whole roster of young tennis players, Ben Shelton, for example, and Joao Fonseca. But then also we feel that live sports moments, now you have seen at the Super Bowl. Elmo and Roger talked about On, the name of On across generations and the upcoming Clubhouse Night, Track Nights that are very much geared at the young community, a young athlete team of the On Athletic Club. So all these life moments which are also heavily discussed on social media play into that awareness.
Q: Congrats on another great quarter and year. I wanted to focus on a full year apparel hope. Great momentum in '24 out of that category, and I think that the assortment will be fully repositioned here in '25. So how should we think about that growth in '25? Is it distorted any geography? And then bigger picture, how do you think about apparel and what it can be as a percentage of total revenue over time and also on kind of point of differentiation in that category. A: Thank you, Alex. I think we're very proud that, for the first time, we've broken $100 million in apparel sales. At the same time, the growth potential is so big, so that number should be much much bigger in the future, and we communicated that in the long term or in the mid-term, we want to bring apparel to 10% of our revenues. So I think this is the journey that we're on. What you can expect to see on how to get there is basically regions that have a stronger own retail presence, will in percentage of overall revenue will potentially overperform on apparel because we see a very strong correlation between apparel and retail doors, so we often spoke about. Apparel share of above 20% in our own retails.
Q: Can I follow up on the outlook? I know you're building in planned efficiencies. Could you just talk about how you're planning the business and where you expect to see efficiencies that are helping to fuel the marketing plus margin expansion? And then maybe just a bigger picture question tied in with the payroll but some of your other initiatives, as you think about the long term objectives to reach 10% of revenue or more apparel, D2C, retail, China, how are you tracking overall to those longer-term objectives? A: Good. Hi, Jon. Let me start with the first part, Marc takes the second part. So in '25, we expect leverage in our G&A line which we currently see as the key driver to reach that range of 17% to 17.5% adjusted EBITDA margin. We spoke about our warehouse automation project in Atlanta, and we spoke about the headwind that we expect during the first month of operating that warehouse from the fact that we simply have a high fixed cost base and over time move volume into that warehouse. So depending on the scale-up of that solution, we will see benefits on the distribution side as well already in '25 compared to the full year '24 picture. Or that maybe comes in a little bit later into early '26, so that will be a key driver of where do we end up in the range of our profitability targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.