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Overall Business Progress

• The company delivered seven consecutive quarters of YoY revenue growth, with Q2 2026 results exceeding management expectations, driven by strong execution of the global brand-building strategy. 6% constant currency revenue growth and 14% adjusted EPS growth were achieved, with healthy SG&A leverage alongside continued investment in strategic priorities.

Brand Strategy & Operational Highlights

• Merrill: Maintained its position as the U.S. hiking category leader, delivering triple-digit basis point market share gains in Q2, with three of the top 10 U.S. hiking styles. Core franchises (Moab 3, Moab Speed 2, Agility Peak 6) all delivered double-digit growth, while the lifestyle Wrapped franchise more than doubled YoY at U.S. retail. Management is focused on accelerating the lifestyle business in 2027, expanding trend-right silhouettes and elevating global lifestyle positioning via activations like Paris Fashion Week. Expected full-year 2026 growth remains mid-single digits.
• Saucony: A challenger brand at the intersection of fast-growing performance and lifestyle running, delivered accelerating global search interest growth, with particularly strong momentum in Europe following its key city strategy. Gained U.S. run specialty market share in Q2 (an improvement from Q1), ranked top 5 most worn brand at the Boston and London Marathons, and continued to drive brand heat via high-profile collaborations. Management is developing a women's apparel capsule collection in partnership with Sweaty Betty, planned for launch in early 2027. Full-year 2026 growth guidance raised to mid-teens.
• Sweaty Betty: Completed full integration into the Wolverine portfolio, with a strategic U.S. market reset ongoing. Encouraging progress is seen: UK DTC grew mid-single digits, international wholesale expansion in EMEA and APAC delivered strong double-digit revenue growth, and marketing activations have increased purchase intent. Full-year 2026 expected to decline low single digits.
• Wolverine: The #1 work boot brand in the U.S., gained market share for the third consecutive quarter, with growth driven by new product innovation, purpose-led marketing (including partnerships with Landman and Metallica Scholars), and improved average selling prices. Marketplace inventory recalibration is ongoing, leading to some expected near-term volatility. Full-year 2026 expected to be approximately flat YoY.

Financial Performance

• Consolidated gross margin was 46.5% (down 70 bps YoY, 10 bps above expectations), pressured by unmitigated tariffs and modestly higher freight costs from elevated oil prices. Adjusted operating margin was 10% (up 80 bps YoY, 50 bps above expectations), as strong revenue growth and disciplined cost management offset gross margin pressure. Adjusted diluted EPS was 40 cents (up 14% YoY, above the 35-38 cent outlook). Net debt declined $125 million YoY to $443 million, strengthening the balance sheet.

Management raised full-year fiscal 2026 guidance based on strong first-half performance and sustained business momentum:

• Full-year total revenue: Now expected $1.98 billion to $2 billion, up from the prior guidance of $1.96 billion to $1.985 billion. Midpoint represents ~6.2% reported YoY growth, or ~6.1% constant currency growth excluding the 53rd week in 2025.
• Segment/brand full-year guidance:
  • Active Group: Now expected high single-digit constant currency revenue growth, up from prior guidance of mid-single-digit growth.
  • Work Group: Remains expected to be approximately flat YoY (constant currency).
  • Saucony: Full-year growth guidance raised to mid-teens (the high end of the prior low-to-mid-teens range). Merrill guidance remains mid-single-digit growth; Sweaty Betty guidance remains low-single-digit decline; Wolverine guidance remains approximately flat YoY.
• Gross margin: Now expected ~46.9%, up from 46.4% prior, driven by stronger marketplace execution, supply chain efficiencies, and a $2 million reduction in estimated unmitigated tariff impact.
• Adjusted operating margin: Now expected ~9.9%, up from 9.5% prior, driven by higher gross margin and operating leverage, while continuing strategic brand investments.
• Adjusted diluted EPS: Now expected $1.55 to $1.65, up from $1.43 to $1.58 prior.
• Operating free cash flow: Now expected $115 million to $130 million, up from $105 million to $120 million prior; capital expenditures remain expected ~$20 million.
• Q3 2026 guidance:
  • Revenue: $495 million to $500 million, ~5.8% reported growth at midpoint, 6.5% constant currency growth at midpoint.
  • Active Group expected high single-digit growth; Work Group expected approximately flat YoY.
  • Gross margin expected ~47.4% (down 10 bps YoY); adjusted operating margin expected ~10.4% (up 130 bps YoY); adjusted diluted EPS expected 42-45 cents, up from 36 cents YoY.

Consolidated Q2 2026 revenue was $506 million, 7% reported growth year-over-year (YoY) and 6% constant currency growth. Wholesale revenue grew 8% YoY (constant currency), while DTC revenue was approximately flat YoY.

Active Group (the larger segment, ~67% of total business from Merrill and Saucony):

• Total Active Group revenue increased 8% YoY (constant currency).
  • Merrill: Revenue grew 10% YoY, with broad strength across international wholesale and U.S. markets; DTC revenue declined due to a deliberate shift in marketing spend to upper-funnel brand building.
  • Saucony: Revenue grew 9% YoY (building on 40% growth in Q2 2025), with growth across both wholesale (led by international markets) and DTC, and strength in both performance and lifestyle running categories.
  • Sweaty Betty: Revenue declined 3% YoY, reflecting the ongoing planned U.S. market reset; excluding the reset impact, revenue grew ~3% YoY. UK DTC grew mid-single digits, and international wholesale grew strong double digits.

Work Group:

• Total Work Group revenue declined 2% YoY (constant currency), which was modestly ahead of expectations.
  • Wolverine: Revenue grew high single digits YoY, and gained U.S. market share for the third consecutive quarter, with marketplace recalibration and inventory cleanup ongoing.

• The running and activewear categories are highly competitive, with aggressive competition from established and emerging challenger brands.
• Uncertainty around the timing of potential tariff rate reductions to IEPA levels, with guidance excluding any potential refunds for $36 million in previously paid IEPA tariffs.
• Ongoing marketplace recalibration and inventory optimization for Wolverine and the U.S. Sweaty Betty business is expected to create near-term operational volatility and choppy performance.
• The external macroeconomic and consumer demand environment remains uncertain.
• Elevated oil prices create ongoing modest headwinds for freight costs and gross margins.
• DTC performance across some brands remains below target, requiring continued strategic investment and operational adjustment, with near-term pressure on results expected during this transition.

Q: What is the competitive landscape for running, what is driving Saucony's accelerated back-half guidance, and how much of the raised profit guidance comes from better tariff assumptions versus underlying improvements?

A: Management confirms the running category is attractive and growing, but also fiercely competitive. Saucony's acceleration stems from both easier YoY comparisons in the back half and strong broad-based global momentum across performance and lifestyle running, with traction across regions globally. Only ~$2 million of the margin guidance increase comes from a reduced tariff impact; the vast majority comes from underlying operational improvements including stronger revenue, better full-price selling, and supply chain efficiencies.

Q: What share of Merrill is currently lifestyle, what growth opportunity exists for this segment, why wasn't Merrill's full-year guidance raised despite strong Q2 performance, and what does 'stronger marketplace execution' mean for margin?

A: Lifestyle currently makes up less than a quarter of Merrill's total business, and represents a key long-term growth opportunity to expand beyond core trail hiking, particularly with female consumers. Merrill delivered strong Q2 growth, with core performance hiking leading gains and the brand already on track to hit its prior mid-single-digit growth target, so no guidance adjustment was needed. Stronger marketplace execution refers to healthier inventory and stronger brand heat driving higher full-price sales, paired with product design and supply chain cost efficiencies across the business.

Q: What regions are driving Saucony's incremental international traction, and is current inventory sufficient to support the raised full-year revenue outlook?

A: Europe (EMA) is the standout region for incremental Saucony growth, driven by the rollout of the brand's successful key city activation strategy that launched in London and is now expanding to Paris, Berlin, and other markets. Total inventory was down 17% YoY at quarter-end, which reflects a combination of timing shifts for incoming shipments and ongoing working capital improvement initiatives. Management confirmed that current inventory levels plus planned second-half receipts are fully sufficient to support the increased 2026 revenue outlook.

Q: What long-term growth opportunities exist for Saucony, given its still small size relative to category peers?

A: Management agrees Saucony remains a small challenger brand with significant long-term runway. Opportunities include continued growth across both performance running and lifestyle/streetwear, geographic expansion across Europe, China, and other international markets, and category expansion into head-to-toe apparel (leveraging Sweaty Betty's product development expertise to launch a test women's apparel capsule in early 2027). The brand's authentic heritage in innovation and position at the intersection of performance and culture support this expansion.