- Record Q4 2025 Performance: Net sales rose 5% to $1.67 billion, with operating margin at 14.1% and EPS of $3.68 (up 3% YoY).
- Full-Year 2025 Growth: Net sales reached $5.3 billion, a 6% increase, with operating margin of 13.3% and EPS of $10.46.
- 2026 Guidance: Net sales expected to grow 3-5%, with operating margin of 12-12.5% and EPS of $10.20-$11.00, alongside $200-225 million in capital expenditures and 125 new stores.
- Q1 2026 Challenges: Tariffs to drive 290 bps margin decline ($30M net impact), offset by 160 bps freight tailwind, with operating margin projected at 7%.
- Strategic Shifts in APAC: Exploring partnerships, franchising, and licensing to optimize capital, alongside new store openings (55 net stores in 2026) and $450 million share repurchase target.
Guidance and Outlook
Looking forward to 2026, the company expects net sales growth of 3-5%, with full-year net sales growth expected across brands, and operating margin in the range of 12-12.5%. Earnings per share are expected to be $10.20-$11.00, with capital expenditures of $200-225 million, and around 125 new store experiences. Analysts estimate next year's revenue growth at 4.2%, indicating a positive outlook for the company's continued expansion.
Strategic Alternatives and Expansion
The company is reviewing strategic alternatives for the APAC region, including partnerships, franchising, and licensing, to enhance profitability and optimize capital deployment. They expect to be net store openers in 2026 with 55 new stores outpacing around 25 anticipated closures, with net store openings relatively balanced across brands but tilted to the Americas. The company is also exploring wholesale opportunities to build their brand regionally alongside their own efforts.
Valuation Metrics
With a P/E Ratio of 8.62 and an EV/EBITDA of 8.23, the company's valuation appears reasonable, considering its strong financial performance and growth prospects. Additionally, the company's ROE of 38.98% and ROIC of 12.56% indicate a high level of profitability and efficient use of capital. The P/S Ratio of 0.85 also suggests that the company's stock may be undervalued relative to its sales growth.
Challenges and Opportunities
The company faces challenges such as tariffs, which are expected to have a 290 basis points impact on operating margin in Q1 2026. However, they aim to offset this impact through freight tailwinds and slight AUR expansion. The company is also assessing their go-to-market strategy in APAC and exploring concepts like licensing, wholesaling, and franchising to diversify their operating model. With a strong sourcing network and team, they are confident in their ability to maintain healthy earnings growth in the long term.