Greetings, and welcome to the Wolverine Worldwide Fourth Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Wiseman, Vice President of Finance. You may begin. Good morning.

Welcome to our fourth quarter fiscal 2024 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer, and Taryn Miller, Chief Financial Officer. This morning, we issued a press release announcing our financial results for the fourth quarter and full year 2024, and guidance for fiscal year 2025. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our Investor Relations page on our website wolverineworldwide.com. I'd also like to remind you that statements describing the company's expectations, plans, predictions, and projections such as those regarding the company's outlook for fiscal year 2025, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under US securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. With that, I'll now turn the call over to Chris Hufnagel.

Thanks, Alex. Good morning. Thanks to everyone joining us on this morning's call. In the final quarter of 2024, our company inflected the top line growth with Merrell, Saucony, when adjusted for business model changes, Wolverine, and three of our four global regions all posting revenue increases compared to the prior year. Gross margin expanded by more than 600 basis points compared to last year, achieving a new fourth quarter record. The end result was earnings that exceeded our expectations. It was a good quarter by almost any measure, a fitting conclusion to what was a pivotal year for Wolverine Worldwide. Last year on this call, we shared an update on our ambitious plan to turn around the company and provided our corresponding financial expectations for fiscal 2024. Today, I'm pleased to report that our team delivered. We successfully completed the stabilization of the company and strengthened our balance sheet, finishing with our lowest debt level since the second quarter of 2021, and the cleanest inventory position we've had since the pandemic. We also meaningfully improved the business' profitability, achieving record full-year gross margin and delivering earnings per share nearly six times greater than last year. And finally, as we guided last February, the company inflected a growth finish the year. In addition to solidifying our foundation, delivering improved financial results for our shareholders, we made good progress in transforming Wolverine Worldwide for the future. We reshaped and simplified our portfolio of brands to better align with long-term macro consumer trends and we developed stronger capabilities to underpin our new brand-building model. Focused on building awesome products, telling amazing stories, driving the business. We started with the consumer and established the collective to bolster consumer and trend insights. We complemented our already strong product design and development capabilities by adding…

Thank you, Chris. Welcome, everyone. As we reflect on 2024, I am pleased to share that we successfully delivered the first phase of our strategic turnaround feeding our initial expectations across all key financial metrics. Our efforts to optimize the portfolio, revitalize our brands, and enhance our operations have improved our performance. In addition, our strategic actions have strengthened the balance sheet, resulting in improved cash flow and a meaningful reduction in debt. As we move forward, we remain committed to building on these achievements to ensure sustainable growth and long-term value creation for our shareholders. Fiscal 2024 revenue for our ongoing business of $1.75 billion represents a decline of 12.1% versus the prior year. Primarily driven by discrete items in 2023 related to end-of-life inventory liquidation, business model changes, and a timing shift of international distributor shipments that did not recur in 2024. Performance strengthened throughout 2024 with an inflection to growth in the fourth quarter. Demonstrating the success of our strategic initiatives and the dedicated execution of our team. Full-year 2024 adjusted gross margin of 44.6% increased 470 basis points versus last year. This improvement is a result of actions taken over the past year to transform the company and reduce costs. These measures encompass supply chain and product cost savings, healthier inventory levels, improved mix of full-price sales, and actions to protect our brands. Adjusted operating margin of 7.5% increased 360 basis points compared to 2023. Lower adjusted selling, general and administrative expenses included restructuring savings partially offset by incremental investment in the business normalized incentive compensation, and inflation. We made strategic investments in our brand-building model including modernizing product line management tools, sponsoring the London 10K with Saucony to elevate brand awareness, strengthening our first innovation hub in Boston, and building additional talent and capabilities. Full-year…

Thanks, Taryn. We're focused on making people's lives better. Healthier, happier, and more productive. Our brands are originals and leaders in attractive markets that we believe are aligned with where consumers are. And importantly, where we believe they will be tomorrow. We believe the potential of our brands is significant, and we're now seeing our efforts begin to deliver better results. Giving us confidence in our direction and brand-building investment strategies. In 2025, we're taking a thoughtful approach prioritizing those initiatives focused on our biggest growth opportunities that we believe will be the most cool. Most noteworthy, Saucony. Given tailwinds and consumer trends combined with brand momentum, we plan to accelerate Saucony's lifestyle expansion and traction performance with investments in trade marketing, event activations, brand media collaborations, and key city executions. Including the brand's first new brick-and-mortar concepts in London and Tokyo. As a company, we plan to continue to strengthen our product and merchandising capabilities with improved tools and new talent. Further elevating innovation and trend-right design. In addition, we plan to update the systems needed to drive the business. Notably our e-commerce platform to enhance consumers' digital experiences with our brands. With the close of the stabilization chapter, we're planning a more balanced approach to managing the business moving forward. Further expanding profitability, while at the same time investing in building our brands and platforms to drive long-term sustainable growth. All of the focus on maximizing returns and value to our shareholders. I'd like to close my prepared remarks by expressing my sincere gratitude to our team. Thanks to their hard work, Wolverine Worldwide is a much different company today. With a stronger financial footing, more agile organization with improved brand-building capabilities, and a new emerging culture of working and winning together. As one Wolverine. I know I speak for our global team when I say we're proud of the work we've done, and the early proof points of validating our direction. But we aren't satisfied. We're internally focused on making every day better moving forward. With that, thank you for taking the time to be with us this morning. And we're happy to take your questions. Operator?

Thank you. We will now be conducting a question and answer session. You may press star two to remove yourself from the queue. And one follow-up before rejoining the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. First question comes from Anna Andreeva with Piper Sandler. Okay. Go ahead.

Great. Thanks so much. Good morning, and congrats. Really nice end to the year. Two quick ones from us. Great to hear on Saucony. Growing double digits in 2025. And you talked about at least 900 new doors for the brand this year. Are any of these slated for the first quarter, or is that something that gonna bill throughout the year? And then just a similar question on Merrell. Not sure if you've shared, you know, how many new doors we should expect. For the brand this year, but, period, how has been reception to the brand and some of the more female leveraged specialty retail accounts that you guys open. Thanks so much.

Thanks, Anna. Good morning. Appreciate the comments. Saucony doors. Yeah. I mean, I think we're very pleased with the progress we've made in Saucony. In a very short period of time. And as the heat for that brand has grown, the product pipeline has gotten stronger, both in the performance piece and the lifestyle piece, we're responsibly growing door count. We mentioned last time expecting a 900 incremental doors this year. A lot of those are online. We did test with retailers in the middle part of last year. And have expanded beyond that. So more will open up but we certainly do expect to benefit from that door expansion and now we're obviously intently focused on driving self-through in that business. But very encouraged by the progress in Saucony. And the demand that we're seeing at the same time we're in this for the long haul. We're gonna work to responsibly grow that business over time. Same story for Merrell. We worked hard to really work to reposition that business and our team has done a great job, I think, sort of resetting the US wholesale landscape both engaging with sort of long-term various success partners and how Merrell shows up each and every day on the sales floor, at the same time, opening up new distribution and taking the broader outdoor lifestyle opportunity and not just so focused on the trail. So opening up new doors is there as well. Not quite at the pace at which Saucony has opened, but pleased with the early returns, and especially for her. Merrell is underpenetrated for the female consumer. We work hard to really work and evolve that product line. We've got a new chief product officer. She brings a great track record of working for some great brands. But we're very focused on her and the broader opportunity. So I'm glad you brought those two brands up. Very encouraged by the progress we made in 2024. And excited for what those brands are gonna do in 2025.

That's awesome. Thank you so much, Chris. Can I just follow-up to Taryn? A really strong gross margin? Can you guys talk about what inning are you in in terms of the product savings? And I think you're now roughly at the low end of that 45 to 47% long-term goal. On gross margins. Do you think reaching above that range is a possibility? For the business over time? And thanks again.

Yeah. Thanks for the question. On gross margin, where we're at, I think we are pleased with the progress we've made the last two years in terms of expanding our gross margin. And sorry, not past two years. When you look at 2024, the results as well as for 2025, the guide that we're giving with incremental expansion in gross margin. So pleased with the performance the results that we're getting both in terms of the cost savings as well as in the less promotional, healthier inventory, more full price, from our businesses. I think in 2025, what we're looking at there and beyond when you'd say it's reached the 47% aspirational goal, we need to continue to work with the work we've done. We continue to see more opportunity. Both in terms of the sourcing part of the business, in terms of our product costs. So we're continuing to look for opportunities and get those in our results as well as in terms of our SG&A savings. And we have both of those plans in 2025. That's part of how we're fueling the investments for the growth in 2025.

Alright. Thank you so much.

Thanks, Anna.

Next question, Laurent Vasilescu with BNP Paribas Asset Management. Please go ahead.

Hey. Good morning. Thanks very much for taking my question. Chris, wanted to follow-up on the slides from this morning, it's very intriguing to see the slide number five in terms of your long-term aspirations as the business inflects, where you're calling for mid to high single-digit top-line growth, 45 to 47% gross margin, but the operating margin of mid-teens percent. First, if you could maybe parse out, like, what kind of time frame you're looking at? Is it over the next three years? And then to get to that operating margin, is there part of the business that's underperforming from an operating margin perspective that you wanna potentially divest? Or is it really around leveraging the SG&A cost base that you currently have? Thank you.

Yeah. I'll let Taryn begin and then I'll add to that.

Thanks for the question. It's too early to provide a date on the mid-teen profit margin aspiration that we set for our objectives. We are encouraged as I shared about the progress in 2024 up 360 basis points. And in 2025, the guide would have another 80. So 440 basis points in two years. And that includes Laurent. For 2025, that includes close to a 900 basis point headwind from currency. So know, that's why we say we're pleased with the performance that we're seeing in the two years and the plans for 2025. That path to mid-teens really is to continue to make thoughtful brand-building investments to grow the top line and optimize the cost that I spoke to just a few minutes ago.

I think as we think about, you know, 2025 specifically, you know, we've obviously done a lot of work to stabilize the organization. We've highlighted that we're largely, you know, begin finishing talking about turnaround in now we can focus on the next chapter which is growth. Think historically, we just haven't invested enough in our brands and our platforms. And this year, we're doing a step up in those investments leading with investments behind Saucony, because we think that is the brand with certainly the most momentum. We certainly are seeing tailwinds within that category. And I think, you know, Saucony has some of the great potential in the portfolio. At the same time, we've got tools and platforms that we need to invest in as well as an organization. So we're stepping up those investments this year. We think it is the right thing to do to drive long-term sustainable growth for the organization. We think it's in the best interest of our brands and certainly at the end of the day for our shareholders.

Very clear. Thank you very much both for that. And then some modeling. I think you mentioned there was a shift from 4Q to 1Q into 4Q for revenues, and in works. Maybe can you quantify that number? Are there any shifts further that we should consider for 1Q? And entering at on the gross margin, how does the gross margin evolve to get to a roughly up a hundred basis points? And lastly, what's the interest expense line for this year in terms of guidance? Thank you.

Great. Yeah. So for I think there's three questions in there to make sure I get them all. For work group, that is the one that we would highlight in terms of the shift that we saw. As Chris shared in his opening remarks, while the fourth-quarter revenue trends were encouraging for the work group, would say the results remain inconsistent based on three factors. One is the order patterns. The second is the supply chain timing, and the third is the overall performance of our brands in the market. The first-quarter revenue in the materials we provided, you'll see we expect work group to decline low double digits, constant currency. About half of this decline is a result. So approximately around $7 million, about half of that decline is a result of a timing shift between the fourth and the first quarter. So I think in the and I think while this is a slow start to the year for the work group, we do expect the performance to improve meaningfully as starting the second quarter. As our new products go into market and we replenish inventory on our key products across the brands. That's on work group. In terms of gross margin, it really is what I've shared previously, it really is continued benefit that we started in 2024 from the cost savings initiatives as well as on the better you know, more full-price product that we're seeing in market. As the innovation is going in and we have the cleaner inventories to get that full price through and the marketing performing. So those are really the continued benefit in gross margin. As it relates to interest expense, your question specifically on that remind me.

Just the line item. How much should we assume for this year?

Okay. Yeah. So we expect net interest in other expenses to be around $25 to $30 million in 2025. This is down from $39 million in 2024. And really a result of the reductions that we've driven in net debt.

Very clear. Thank you very much for all the color. Best of luck.

Thanks a lot.

Yeah. And I do want to clarify a point I said earlier on FX. I was talking to when I talked about the headwind in terms of the FX the I was quoting in terms of EPS impact. It's really a 300 basis point impact on operating margin. To clarify.

Next question. Sam Poser with Williams Trading. Please go ahead.

Good morning. Thanks for taking my question. I have a handful here. One, you said you mentioned that least. You identified specialty independent retailers as a positive growth vehicle for Merrell. If you could tell me know, some example of the type of retailer you're speaking of, and then I wondered what the value of week fifty-three was and were you up were you up for the quarter without week fifty-three? And the split between Men's and women's as a percentage for Saucony. And where do you see that going?

Thanks for the question, Sam. I'll start with the fifty-third week. The fifty-third week will be in 2025, so it was not in 2024. We'll see it in 2025. The fifty-third week we expect it to provide approximately fifty basis points of growth. So it's the last week of the year is not a big trading period for us given the holiday. Shipments and the timing of it. It's fifty basis points in terms of the full-year growth for 2025. And the profit, I would say, is minimal. Given that it is a small revenue week and as we have our full cost you know, SG&A going through it.

And the first part, you know, we're Sam, appreciate the question. We are certainly encouraged by the progress we have seen in Merrell. Both in the performance piece and the lifestyle speed piece. And you know as well as anyone, there have been, you know, really significant headwinds in an outdoor space and Merrell's gaining share at the fastest rates since we've been tracking with which we're encouraged by. Especially doors, obviously, that there there's a there's a lot of sort of one-off specialty outdoor accounts that we work hard with our team to sort of reengage the same time, we're opening up new lifestyle expansion. You're gonna begin to see and are seeing Merrell show up in a mall from a lifestyle perspective where just we haven't been for years. So really a reset of that US wholesale landscape, because I think the team has done a very good job. And both, you know, both resetting the business and then really engaging with them and really moving beyond the core product that Merrell has been known for for years. And dropping new products, whether it's the Moab Speed 2 or the Agility Peak 5. We're encouraged by. So nice steady on progress. Two consecutive quarters of growth for Merrell. And encouraging news in the wholesale channel for Merrell both here in the US as well as EMEA.

Thanks. And then lastly, on Sweaty Betty, how many stores are there currently? And do you have plans to add stores in the US?

Yeah. There's approximately a hundred stores today and we've got ten new stores planned for this year. We have two stores currently open in the US, one in Georgetown and one in Chicago. Really testing those markets. Early returns are a positive reception to those doors. We are seeing some sort of key metrics whether it's conversion or ASP. We're really checking with where the UK stores are. But that's the store fleet. No specific plans to open more doors in the US this year. The ten new stores are all UK-based.

Thanks very much, luck.

Thanks, Sam.

Next question. Mitch Kummetz with Seaport Global Securities. Please go ahead.

Yes. Thanks for taking my questions. I guess, the first one is a bit of a housekeeping. On the Q1 sales guidance, can you give us your expectations by your three main brands and the active groups Merrell Saucony and Sweaty Betty. I don't think that was in the presentation. I think you just gave an overall active number, but maybe I missed it.

No. You didn't miss it. In terms of we we're shifting the details on our external revenue guidance to line closer to our reporting segments, Mitch. This means we will continue to provide quarterly guidance by segments meaning active and work, but we're not providing them at the brand level. I believe I think we believe that it was important to provide that brand level a d for the full-year guidance for 2025, as we progress our transformation but not on a quarterly basis.

Okay. And then a couple other things. Chris, you talked about investment particularly in Saucony. I'm curious from a maybe from a marketing standpoint, know, what was your, what was your marketing rate in 2024, and where is that going in 2025?

Yeah. It'll be up in 2025 versus 2024. I think we finished 2024 at right around 8%. It'll be up again this year. And then even 2023, it was well below 8% of the company. So that is part of the investment strategy to invest behind our brands. We're leading with Saucony, again, because we think that brand has the momentum, the category tailwinds and I think a lot of good ideas investments for Saucony include new concept store in Covent Garden, which will open up in May. Activation around sponsorships. The London 10K will be back for a second year this year. We'll be sponsoring the Saucony Shoreditch 10K for the first time this year. Along with the Eiffel 10K in Paris this year as well. And bring those to life through run clubs and activations and all the things associated with that. I can't wait for those events. Also sort of doubling down our investments here in the US, in how we how our brands show up day in and day out, in run specialty, in sporting goods, investing in boots on the ground to help us win the war on the floor, against in a very competitive set. And then other investments in marketing as well, and then the company is gonna invest in our e-commerce which needs to be updated both to provide consumers a better branded experience, more frictionless experiences, and allow us to be more nimble on the back end. So we're excited about the investment strategy. It is needed. I'm glad that we have been able to get through all the work over the past eighteen months to give us the financial wherewithal to begin to invest meaningfully back in our brands. And I'm excited to, what that's gonna mean for our team, for our company, for our brands, and ultimately for our shareholders.

And then as a quick follow-up to that, can you say how much that rate is going up? Is it, like, you know, fifty basis points for the year? And then my final question, just I'm curious, a lot of the cold weather that we've seen early in 2025 are you seeing that having any impact on the business, maybe, you know, a bit of a tailwind on Wolverine boots or possibly even a headwind on the running business.

Yeah. No headwinds on the Saucony running business, I would say, winter seasonal styles and boots I would say there is a benefit. We are seeing some good at once orders as we turn to the new year. And we're obviously have a close eye on the order book. And, you know, obviously, every day we get our own e-commerce results. So I think the cold weather which looks like it's here to stay for a little bit, has certainly not hurt the organization. We're not giving specific guidance on marketing but it'll be up this year versus last year.

Great. Thanks a lot.

Thanks much.

Next question, Jim Duffy with Stifel. Please go ahead.

Oh, thank you. Couple questions for me. Chris, could you just speak about the state of the run specialty channel, the health of that category after a couple years of really strong growth. Are you seeing any moderation there? And then speak to Saucony's relative share within that category. Do are you indeed continuing to gain share?

Yeah. Thanks. Great question. You know, the US runs special channel is a really special and important channel in the US. And certainly important to the performance running brands. If you're right, running has been on a tear. And I'm pleased to report that Saucony is quickly catching up and beginning to gain share again after losing share for a number of years and that really is driven by product innovation. And I think a focus by the brand on both sort of our elite collections, you know, the endorphin, at the same time, a really strong focus on our core four. Ride Guide, Triumph, and Hurricane, and we're seeing really positive self-throughs. And like I mentioned, a good increase relative to market share. It is a very competitive channel, as you know. We're not seeing any sort of, significant weakening that that trend continues. Obviously, the data lags a little bit, but still appears to be healthy. And I think our focus this year, in some of the investments we're gonna make in Saucony, are gonna benefit that brand. In those doors as we invest in the team's ground game. So channel continues to appear to be healthy. Obviously, category is then one of the best performing categories. And we're pleased that Saucony has been able to really reset the business in 2024, and then the momentum we're seeing, really led by product innovation. And now we have to get the demand creation out there, which is why we're stepping up the marketing investment across the brand.

Okay. Thanks for that. Then Taryn, I wanted to ask on the inventories. You guys have done a great job managing the inventories. They're super tight. Do you see this as a sustainable rate of inventory levels, or are there places where you're missing sales because the inventories are so tight, you need to make some investments back into that line item.

Thanks for the question, Jim. Yeah. As I had called in my prepared remarks, we've made meaningful reductions in inventory in the last two years. And in the cash guide that we provided, that assumes a modest investment in inventory. For 2025 as they've normalized. I would say overall, inventories, I would characterize as healthy and close to our target levels. We continue to chase opportunities more so, I'd say, in Saucony. But overall, it's healthy. But we are making a modest investment, a very thoughtful and disciplined investment in 2025 to be able to support the growth.

Thank you.

Thanks, Jim.

Next question, Mauricio Serna with UBS. Please go ahead.

Hi, good morning. Thanks for taking my question. Sorry if I missed this, but maybe could you elaborate a little bit more on what cost the decline in your DTC sales in Q4? Also, maybe you know, like, I think you talked about maybe too early to provide or, like, an update on cost savings. But how are you thinking about that in fiscal year 2025? And you know, how do you reconcile that with maybe, like, it seems like it the guidance implies some modest deleveraging, you know, in expenses. Could you, you know, just elaborate a little bit more on that? So much.

Yeah. I'll take the DTC question and I'll hand it over to Taryn on the cost piece. You know, I think in Q4, we really try to be less promotional. Obviously, we were promotional in 2023 as we're working through the inventory piece, we were working to do some inventory issues early in the year. And we really tried across the portfolio of brands to be less promotional. Which put pressure on the top line. Would certainly put pressure on the top line. There's no doubt. I think in total, our full-price penetration this year was 500 basis points higher in the quarter than it was last year. Which is an important metric that we were tracking. At the same time, you know, we I think we can do better in our direct-to-consumer channel. I think we have to do better consumer channel. We had some brands that overperformed our expectations, and we had some brands that didn't quite meet what we had expected to see. I would say, specifically, as it relates to the fourth quarter, our performance around the Black Friday cyber week was less than we expected. Encouragingly, the business did accelerate in the closing weeks of the year. Which we are positive about. But there certainly is more work to go do there. I do think in a couple of brands, we actually did have some inventory challenges. Saucony specifically. You know, I think Saucony could have had a stronger fourth quarter. But the demand was so great for the product. So I think as the company moves forward, you know, DTC is an important focus. Again, it's not necessarily all in on DTC, I do think the consumer wants to shop across wholesale and owned. And I think we have to responsibly manage our brands in our own channels and then thoughtfully manage distribution in our partner channel. So it's an important piece. It's where consumers come and learn about our products where they engage with the brands, where we can tell our own stories. And I think we have the opportunity to do better there. At the same time, I think the planned investments in our e-commerce platform will give consumers a better experience, you know. They'll be faster, they'll be easier to navigate, they'll be less friction. And we're excited about updating those tools to give the consumers a better-branded experience.

And as it relates to the operating margin, the point I think you had mentioned deleverage. We're actually getting leverage. Our operating margin is expanding. Both gross and operating margins are expanding. Eighty to ninety basis points at the midpoint of our guide relative to 2024. And this really is a result of the better top-line performance coming through. The cost savings that we are continuing to see in gross margins both from actions that we took in 2024 as well as incremental initiatives that we are taking in 2025. In the operating margin, SG&A line, it is a basically, as we are investing in the business, and we are taking thoughtful investments in the business, to build the brand-building model around the talent capabilities around our modernizing our tools as well as our marketing spend that Chris spoke to earlier. We're fueling those investments by further savings that we have line of sight to for 2025 as well as offsetting the inflation and normalized incentive compensation. So margins are expanding. We're benefiting from the carryover savings better healthier inventory, and we're using that to invest in the business.

Right. And maybe if I may follow-up just on sales for the first quarter. Just wanna make sure I didn't miss this on the presentation. That you guys provided. You gave, like, an outlook for the first quarter by brand? Is there anything that you can tell us by brand from that perspective?

Yeah. As I shared, we are not providing brand guidance. On a quarterly basis, we're gonna we're moving to our segment reporting, which is active and work group. We're continuing to provide brand guidance on an annual basis so that you can see how we're growing the business and the trajectory over time, but not on a quarterly basis.

Understood. Thank you very much.

Yep.

Next question, Jonathan Komp with Baird. Please go ahead.

Yeah. Hi. Good morning. Maybe just a bigger picture, Chris, question as you step back and look at 2025, guiding to you know, mid-single-digit revenue growth, constant currency, just I'm curious. What are the main factors holding you back from achieving, you know, the long-term aspiration, more mid to high single-digit growth? Is it macro factors you're baking in? Is it maybe uncertainty on some of the new initiatives and the payoff just any broader perspective there?

Yeah. I mean, I appreciate the question, John. Obviously, you're looking at a total company growth and across the portfolio of brands, it's really hard to get every brand working equally well at the exactly same time. I'm very encouraged by the progress we've made in Saucony. And very encouraged by our outlook for what Saucony can deliver this year. The same can be said for Merrell and what continues to be a top category. So our two biggest brands, I think we've done tremendous work in a very short period of time to get those brands growing a meaningful way and importantly, at very good profit levels. Worked hard on the gross margin, worked to reset the business, thoughtfully expand distribution, probably could be growing faster at the same time we're trying to be responsible to drive sort of long-term sustainable growth. At the same time, we've been very open, you know, our work group we need to get better in our work group. And that really starts with compelling products. And then driving that business each and every day. And then as it relates to Sweaty Betty, know, sort of thoughtfully continuing to finalize the integration of Sweaty Betty into the portfolio. And then really working hard on the profitability of the business, which we're pleased by the results. So certainly at the headline at the corporate standpoint, you can draw that conclusion. At the same time, our biggest brands, I think are gonna well outpace their categories this year. And I think, you know, the line of sight we have to where they weren't where they are in their order book it gives us a lot of faith that we're gonna be able to deliver those numbers. So and that's why, you know, we're gonna continue to work to accelerate those fuel, those investments which we've talked about and then in places where we're not performing at pace, we're gonna work really hard this year to get those teams to perform better.

And, John, I would just to build on what Chris said, when you look at the revenue guide that we provided, that at the it's a range when you exclude you do constant currency and exclude the benefit of the fifty-third week. We are putting a guidance of 4.2 to 5.9%, which is really at the midpoint of those aspirational targets. What Chris laid out is how do we move to the high to the mid to the high as we look to continue to grow the businesses.

Okay. Thanks again.

Thanks, John.

Next question, Dana Telsey. With Telsey Advisory Group. Please go ahead.

Hi. Good morning, everyone, and nice to see the achievement of the targets in 2024. As you think about 2025 and the newness where, Chris, you've always talked about, you have to have exciting product to earn your place on the shelf. Are you thinking about newness and product particularly for Merrell and Saucony? And how you're thinking about the AU full price AUR this year compared to last year. Just lastly, I know mid-teens percent comes from China. Any change in that going forward? And any other big areas where you get the biggest percentage of your sourcing is manufacturing from. Thank you.

Good question, Dana. Thanks. I'll hit the sourcing question first. We'll continue to reduce China. It is mid-teens today. We'll reduce it further this year. You know, and we're obviously paying attention to the tariff situation and that seems to be volatile and changing daily. But right now, with the announced tariffs in China, February fourth announcement, we think we can navigate that within the current guide. And you're right. You know, in our business, it all begins with product. And product is the most important thing, and I think you know, I think coming out of the pandemic, you know, our innovation lapsed. We have had a lot of inventory that was not the right inventory. And we weren't bringing compelling products, and newness was going to win. And we suffered through that. And we took you know, took 2024 to really reset that business. And thoughtfully look to grow again. And I'm glad that we've closed that chapter in moving on. As it relates to newness, I think our product pipeline in Merrell and Saucony is as good as it's been. The focus on the core four, we just dropped the new riding guide eighteen. Triumph continues to check. Hurricane is the new entrance. I think we're gonna launch one of the best super shoes in the business here in the endorphin elite two in a couple of weeks, and I think that shoe is gonna be a game changer. I think on the lifestyle piece, I think Saucony has done a great job tapping into a century-old archive and making those styles relevant and they resonate with consumers along with partnering some of the best collaborators in the business that are drawing really record brand heat for the brand and then how we take that brand heat…

And regarding your question on the average selling prices, we expect to see continued declines year over year in the amount of promotional spend as well with cleaner inventories and a concentrated effort to taper back our promotional levels over time.

Thank you. Next question, Ashley Owens with KeyBanc Capital Markets. Please go ahead.

Great. Thanks so much. So quickly, I wanted to touch on the operating margin guidance for 1Q. I think it's a little bit lower than last year. Can you just provide a little more color on kind of the SG&A line and this is all stemming from increased marketing or what's driving the deleverage within that for 1Q and then just all margins scale through the year to get to that, you know, 8.3% items that you gave.

Yeah. Great. So for operating my original I'll start actually with the gross margin. So the Q1 guidance has a strong gross margin of 46.6%. And this reflects the actions that we have taken and continue to take to reduce supply chain costs and to improve the level and health of our inventory. As it relates to operating margin, this is more a reflection of operating leverage. The first-quarter revenue is and has historically been the lowest order of the year for revenue. And at this level, operating leverage is also lower than what we would expect to see when you look through Q2 and Q3 through Q4. So it's really more a reflection of operating the while the gross margin is strong, it is on operating margin level, it is more a leverage situation, which we anticipate as revenue will grow sequentially throughout the year. We will continue sequentially as well to see operating margin improvements as we did in 2024 as well. When think you were saying I do think the forex impact, which on the total year on the earnings per share line is around $8 million headwind to us on a full year, and that's probably about even I won't get into specifics, but it's not disproportionate, I would say, in any particular half of the year. So that full-year profit headwind on from currency is about an even spread.

Okay. Great. And then I just had one last one. So maybe a little bit of a state of the union on Sweaty Betty. And it wasn't softer, than expectations. So one, just additional color potentially as to what categories may have underperformed relative to your expectations and then additionally, you know, what you're doing from an innovation perspective this year in overall thoughts on the product broader athletic wear space, and how you can effectively introduce new products in a competitive market. Thank you.

Yeah. You know, at the print level, obviously, you know, a soft quarter for Sweaty Betty than we anticipated, but I think in total for the year, really pleased by the progress we've made there. And really pleased with where that team is. How we work to integrate that business, and then the outlook moving forward. So we've worked really hard on improving the profitability of that business. And really having that brand be part of the portfolio. So, you know, I think from a product standpoint, you know, continue to attack a very attractive category in a very premium way. With a very strong message around female empowerment. The new campaign, the don't sweat campaign, just debuted a week or so ago. And that is resonating with consumers, and we're gonna follow it up with the where the damn shorts campaign. So encouraged by that team. There's also a new chief product officer in place in Sweaty Betty as of the fourth quarter of last year. But, you know, as that group continues to move, again, encouraged by the progress I think the product pipeline is good. We've worked really hard to improve the profitability this year. And then we'll obviously look to grow that business moving forward.

Great. Appreciate the color. Thanks.

Thanks.

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