Good morning, and welcome to day two of our Global Retail and Consumer Conference at Goldman Sachs. My name is Brooke Roach, and I cover the apparel brands and softlines sector here at GS. I am thrilled to introduce our next session with Urban Outfitters. Here with me today is Frank Conforti, Co-President and COO, Melanie Marein-Efron, CFO, and Dave Hayne, CTO and President of Nuuly. Welcome, Frank, Dave, and Mel. Thank you very much for having us, Brooke, Goldman. Thank you all for being here. I missed my morning workout this morning. I am sorry. I talk fast normally already, and I am probably going to be a little sped up, even more so than normal. Opening remarks, it was just another incredible second quarter and quarterly performance for us, 10% top-line growth to $1.7 billion. All retail segment brands comp positive again, both channels comp positive. Free People clicking on all cylinders at 10%. Urban Outfitters just continuing their turn and their momentum here in North America. Global, the brand comp was 8%, and Anthropologie at 3%, which I think is something almost like five years of positive comps now for Anthropologie. Nuuly, another just impressive quarter at 29% of top-line growth and driving that type of growth while increasing profitability, dollars, and rates, and wholesale was up 19%. It was our most profitable operating profit quarter ever. We grew year over year quarter by 11%, so just a fantastic performance. As proud as we are, honestly, of all the brands, I think the one thing that I want to continually stress, and I think that maybe can be a little underappreciated for us right now, is the strength of the collective. I think we've now had eight straight quarters of record sales and record operating profits. I sit here, and I start to reflect at now being here 20 years. I'm not quite the tenure Danny's got in the front row, but there's the bald spots growing for sure. I think about 20 years ago, we really had two significant brands with Urban Outfitters and Anthropologie. When both were clicking at the same time, it was great. Then when one would stub its toe a little bit, it definitely caused some inconsistency in our performance. Now we've got three meaningful brands with the size of Free People, between Urban, Anthropologie, and Free People. I think we've got two of the best growth stories in the industry with Nuuly and FP Movement. The power of the collective is just incredible. If you think about a few years ago, you had Urban Outfitters that we were going through a leadership transition, and the business wasn't performing up to expectations. We had a startup that was just starting to find its way in operating profit, but we were still delivering top-line growth and bottom-line growth on the backs of Free People and Anthropologie. Right now, there's a lot of conversation about Anthropologie being a little bit off of the bullseye, but you've got Free People clicking on all cylinders, you've got Nuuly delivering robust growth, and you've got the Urban Outfitters turnaround. I think that the strength of the collective is honestly the thing that we're the most proud of right now. The quarterly results and the individual pieces, we're certainly very proud of the brands and our leaders, but I think the strength of the collective is really something meaningful right now that is a strong differentiator for us and something that we're very excited about going forward. Just that diversification in the model. If you think about the age demographic from Urban to Free People to Anthropologie, you think about the channels from stores to digital to wholesale to subscription rental. There's just a lot of ways and a lot of levers that we can win sort of quarter after quarter. Great to hear. Thanks for those thoughts, Frank. Maybe we can dig in to Anthropologie, given that it is one of the most discussed topics by investors. For sure. What gives you confidence that the encouraging fall rates and positive regular price trends that you saw in July can translate into stronger performance for the balance of the year? How are you thinking about the cadence and timeline to return the brand to mid-single digit comps? Great. We choreographed a little bit. I am going to hand this one to Melanie, so she is not just sitting down there. Melanie, you want to talk to Anthropologie, please? Absolutely. Thank you, Frank, and thanks again, Brooke, for having us. We are very optimistic that, as Frank said, they are slightly off the bullseye and that they will return to mid-single digit comp growth at some point. The confidence we have in it is really based on the leadership and team that they have. I am sorry echo. I apologize. Tricia Smith joined the group over five years ago, and they have had 22 quarters of positive comp growth, and I think it is almost four years of double-digit operating profit rate. So they have had strong results, and it is really driven by the team that she has brought around her and the strategies that they have put in place. Modernizing the product, bringing in new consumers into the brand without losing any of the diehard Anthropologie fans, and modernizing the selling environment. The team is agile and kind of following the reads that they got this summer, and they are confident that the business will improve. I think for Anthropologie right now, we are in still such a strong fashion cycle and such a strong bottom cycle remains. They have gotten really strong reads with the early promotional events that they ran, I think it was in the end of July. Then we are just so excited about where the fashion is going and excited about the reads that they felt like some of the things that we are winning, they just needed to transition out of faster and pour into the new, which is the model. We always talk about the bullseye. They are not just throwing darts right now. They have got a strong amount of conviction as to where they are going, and where the business and what the assortment should look like. You are able to see it on digital first because it takes a little bit of time to transition and transition the penetration in stores. So you are able to see it on digital because we can merchandise digital a lot easier than you can the store. They are seeing that strength in digital, and then they are starting to see it in stores, as that new product assortment comes through. That being said, we talk about Anthropologie and just transitioning to what they are excited about. It was still a 3% comp with a low teens operating profit. So, as the business is transitioning to being slightly off the bullseye, it is still very stable and a pretty good place to be. You mentioned margins there. Let's talk a little bit more about Anthropologie margins. Yeah Which I think are on track to be low teens this year versus mid-teens last year. Is mid-teens still the right long-term range for the business? How should we be thinking about the building blocks to get back there? Yeah. Can that be achieved if you continue to comp in the low to mid rather than the mid-single digit range? Yeah, absolutely. The mid-teens is how we think about Anthropologie and Free People running on a normalized basis. We think about those brands and how we like to plan those brands as a mid-single digit comp and a mid-teens operating profit. When brands like Free People are clicking on all cylinders right now, they're going to deliver better than that from a top and bottom line perspective. When they're going through a little bit of a transition, they're going to deliver a little bit lower than that, but like I said, low teens isn't so bad. They don't need a mid-Anthropologie that is, they don't need a mid-single digit comp to get back to mid-teens. Most of their degradation right now is largely about markdowns. So once they're lapping and anniversarying, it's an opportunity actually for next year. Some of the higher markdowns that it is taking to transition out of the product that is not performing as well, they are able to recover those margins. In addition, when you think about the macro events, we are now starting to, and maybe, hopefully it will stay, it is starting to transition into a more favorable tariff environment for us on a year-over-year basis. That will be the case for the back half of the year and into the first half of next year. Of course, there is always something, right? We will see what happens with fuel and what those surcharges look like as those prices continue to rise. But at least from a tariff perspective, it is a favorable environment, and that should be able to help them and their margins as well. Dave, let us bring you into the conversation. Sure Talk a little bit about Nuuly. You just grew over 30% year-on-year, which is impressive given the scale of this business, where you briefly surpassed over 500,000 subscribers. A real achievement. What do you see as the U.S. subscriber TAM today? Where are you most penetrated, and where do you see the biggest opportunity? Yeah. Talking a little bit about Nuuly. Where we are now versus where we started, a little bit back over 500,000 subscribers now. When we started this in 2019, we did a fair amount of research upfront, and really wanted to understand the market potential of this idea before we got into it. One of the benefits we have is we can survey our existing customers across the brand, so we did a lot of that survey work. There are around 23 million or so women in the U.S. between the ages of 20 and 44. We surveyed a population of that group and found that roughly 70% of them responded favorably to the idea of rental, as a business model before we had even gotten live. We had a good sense that there's a population somewhere in the range of 15 million or so, just based on that survey response that we think is an addressable audience for this business model. I understand why this question gets asked of Nuuly because it's a new business model. It's not a business model that's very common here in the U.S. Everyone in the room probably is curious about what the potential is here. The interesting thing, though, we think that that market out there exists, and as you were saying earlier, right? You were wearing your Nuuly hat, and a lot of women had known about the brand, but they haven't tried it yet, right? The amazing thing that we see is that there's still so much awareness that is not. People might be slightly aware or might not be aware at all, and our job is to get that out to get them to be aware, right? Building awareness, growing the audience, growing the subscriber base is really what we think we have the potential to do. We are so untapped in terms of awareness across the country. We just think there's a ton of potential. Yeah, we think the market is quite big, and we think we still have a long way to go to really continue to capture it. I certainly remember a few years ago, sitting in front of investors and we'd said that we thought it could be a billion-dollar business and 10% operating profit. I think it was sort of like, [Poltergeist] watching the heads spin around a little bit, and knock on wood, Dave and team just have crushed it, and should be north of $700 million this year. With so much opportunity in front of you, I think we couldn't be more confident that this is north of a billion-dollar business, as well as the profitability that the business is able to throw off. I think the one thing for me that excites me equally as sort of the TAM and the size of the top-line opportunity, is how sticky it's been. I think it's been stickier from a retention perspective than we ever really anticipated. Typically, when customers try a new business channel or a new concept, they can be in and out. We've seen from cohort to cohort, the retention's very, very similar. It's a concept that they do enjoy and they use in their lives. I think Dave was very smart about allowing the program to be flexible. You can pause anytime you want. If you want to buy an extra box for rush week and you're in a sorority, then maybe pause over the summer, or if you're traveling and you're not going to be home and you want to pause, that's okay. Just the stickiness of our active subscriber group has honestly been really impressive. When you think about the size of the opportunity, there's so many that just haven't tried it or are unaware of it as well. Dave, as President of Nuuly and CTO, can you talk a little bit about where you are seeing the biggest opportunities for technology, personalization, and AI to improve the customer experience and drive engagement? Yeah, look, we do a lot of listening to the customer and listening to our subscribers at Nuuly. I will answer this for Nuuly and URBN more broadly, but specifically for Nuuly, they want to know that they can order what they want to order, they can find and discover the items that they want for that event that they have or for dinner that they are going to. Discovery is incredibly important. The ability to get the items when they want them and make sure that they get them on time. We look at the entire customer journey and try and think of, all right, what are the pain points in that journey and where can we focus technology and innovation to make that pain point an easier experience? From a personalization standpoint, we are very focused on surfacing more intelligent products that are based on her previous history. So what has she rented in the past? What has she viewed in the past? What has she viewed in the past that she has skipped over and not decided to rent? Taking in all of those data points and then serving up the next best item. Our rental assortment right now is over 34,000 choices online. We do know that that can be a fairly broad and somewhat overwhelming experience if you do not have an easy way to discover merchandise. Personalization becomes a very important thing to surface the right item at the right time to the right subscriber. We spent a lot of time on improving the search capability, so we are not just now having our search solution return results based on just keywords. We are having them return results based on the semantic intent of what they are typing into the site. Those types of technology improvements are things that we are focused on. The other big pain point is that she orders six items from her Nuuly subscription a month. If three of those things do not fit the right way, that is a disappointing experience. So we spend a lot of time making sure that fit can be something that is more intelligently conveyed to her when she is deciding what she wants to rent. That is a lot of data that we are getting back from subscribers as they are browsing around, as they are giving us feedback based on what they have rented in the past. They're saying, "Did it fit right? Did it not?" We use all of that data to then say, "Okay, you look like this person here, based on all of the 500,000 subscribers that we have that have rented that thing or rented things like that, we can give you now a very strong fit recommendation that makes sure that you'll have the highest likelihood of being satisfied with what you're renting." So it's those kinds of experiences where we try and use the data that we're getting from the platform to make the most intelligent experience and most convenient experience for the customer. Those are just two examples of the ways that we're trying to apply technology and data to the experience, but it's based on listening to the customer and understanding what her pain points are and then trying to apply fixes. I'm going to sort of just harp on the benefit of the collective here. The amount of engagement that Nuuly has with their subscriber is incredible, and how rich the data is, honestly, it's stronger than any of our other brands, which obviously there's a connection with the brands, but if you think about the retail experience, it's fairly transactional. The amount of engagement with subscription is very different. Dave and team share that information back, right? So, 45%-50% of the assortment are Nuuly's sister brands at Urban Outfitters, Anthropologie, and Free People. So as the Nuuly platform receives feedback on fit and maybe this runs a little too small or it's a little too large, or I like this, or I like this fabric, all that information gets fed back to the sister brands and benefits the overall ecosystem of the entirety of URBN. It's just great to have that level of engagement and to be able to have that amount of data that we're able to share across the board within our business. Great. Let's shift to the URBN brand. You've had some incredible momentum there, but you're coming up against some tougher comps. Yeah. There's a lot of investors that are nervous about Europe, and what is happening there, given what we're hearing from other companies. What are you seeing? What gives you confidence? Frank, can you talk a little bit more about the profitability of the brand, of what it's on track to achieve this year? Sure. Let me start with Europe. I don't think the market there is in as strong a position as we are here in the U.S. That being said, the Urban Outfitters brand is just operating on all cylinders. It is really performing exceptionally well. There is a strong fashion cycle, and typically those start in Europe, and it continues to be there. There's no question in our mind, whether it be in the U.K. as it exists today or in the European market, the EU, that we think we're gaining market share. You've got a really strong team there. You've got a really strong product creative and marketing team there that has great connection with their customers, and have really hit it out of the park with the bottom cycle and continue to feed newness and new silhouettes into the assortment. So we think we're gaining market share. Honestly, we've planned that business a little more conservative for the European market and in the mid-single digits, and they've made liars out of us the last few quarters. They're up against a multi-year comparison right now, and honestly have not shown signs of slowing down. So we're really excited about the continued growth. You're seeing it in stores as well as in digital, but really impressed with how the stores have performed. For North America, you're right. It's about comping the comp now. We turned the business comp positive last year, and now they're up against those results. We're confident that they can continue to deliver. I think the execution of the brand is absolutely on point, and it always starts with product. Reg price sales is what's driving the business now, but it's not just about the product. I think the whole engine has to work together. The marketing and creative is critically on point as well, and when you say what gives us confidence that we can continue to deliver, reg price sales, starting with product, is driving the business. Then you just look at the connection with their consumer. Urban Outfitters isn't a brand that's going to win on the lowest price on the street. It's always been a very competitive space. It's always been a consumer that can be fairly transient versus some of our other brands where the consumer can be very loyal. So it's really important that they show up where and how to what is relevant for their customer. They're driving double-digit customer growth on digital right now. And if you look at some of the collaborations that they've done, the launches, the university events, the artists that they're partnering with, they've gotten that it factor back. That cool factor, something I didn't really experience as much as a kid. They do, and they're relevant again. There was a point in time there where we weren't executing well, where I think they had lost a little bit of their relevancy, and they had lost a little bit of that cool factor, and they've gotten that back now. Product is always the most important, delivering the right assortment at the right price, at the right value. I think the marketing and connection of that brand is really critical as well, and being that cool brand that has that relevancy. We're seeing it right now, and I would tell you, Shea and team are not scared of having to comp the comp. They know that they owe some business back. They know the size of the opportunity that's there, and they're very excited about it. As it relates to profitability, we're still on path to hit low single-digit profit rate this year. That's really with improvement in North America. I think we think North America would likely still be at a bit of a loss and improve profit dollars and rate at the Urban Outfitters Europe business. Within North America, they're making really nice progress. I would tell you things like fuel surcharges, it hurts Urban more than our other brands. You just think about they have a lower AUR than Anthropologie and Free People. If there's a $1 surcharge on an outbound delivery truck, it hurts them as a rate more than it does the other brands. If you think about things like inbound freight, which is more expensive right now, it's hurting them in an IMU perspective. I think they could have recaptured even more if it wasn't for a bit of the macro. They're doing a great job in showing favorable markdowns on a quarter-over-quarter perspective, leveraging off on costs like store occupancy. You heard about us leverage store occupancy in the second quarter at the URBN level. That's driven from Urban Outfitters, and from their comp and them leveraging store occupancy. That's the biggest driver there and leveraging off on their fixed expenses. Even though they're connecting from a marketing and creative perspective and putting more out there, they're also seeing leverage and opportunities there. We still feel comfortable with how we plan the year, heading into the year, that they could hit low single-digit operating profit rate. As you look forward into the following years, obviously you've got the macro from a tariff, and eventually, hopefully, the surcharges will subside, which is opportunity for them. It's about continuing to comp the comp. They've shown really nice improvement in markdown rates. I wouldn't say that they're at their historical bests, but most of that meat is off the bone based on how they're operating. They definitely have an opportunity in IMU. Some of that's macro driven, some of that's execution driven as well, and then it's about delivering top-line comp. When we look at the customer growth and the strength of the customer growth and the connection of the brand, when we look at the strength of reg price sales within key categories like women's apparel and home and accessories and men coming along as well now, it leaves us confident that we can not only finish the year, but drive it into next year and really start to continue to see improvement in their overall global brands operating profit rate. There's a lot of margin drivers that we should start to dig into. One last question before we Yeah shift there. Let's talk a little bit about Free People Movement. Yeah. We're seeing some incredible results there, but the active category has really been an area of debate the last few quarters. What is driving and enabling the outperformance, and do you have that similar cautious view on active as a category in aggregate? All right, Melanie. I will take that. Thanks, Brooke. We are super excited by the growth of FP Group in general. They grew 15%, but FP Movement has really had incredible growth, and we still think it will go farther. I think they are uniquely positioned between technical performance and style, and that really has differentiated them in the market. They are relatively small. They are about 30% of FP Group sales, and we think there is lots of runway. There are approximately 100 stores in the U.S. We know there is opportunity for at least two to three times that just domestically, and that does not even touch international. We have just started to begin to distribute through direct-to-consumer channels for FP Movement, and also have some very strategic wholesale partnerships to start to drive that global or international awareness, and we think stores will follow for that one. I hear you on the industry in general, but FP Movement is really running well. Okay. I tell you, I totally understand where that space comes from, and it is exciting, and maybe the rising tide is not rising all boats. The fashion differentiation of FP Movement is so different than others that are out there. The breadth of their assortment is so different. Yes, they have technical performance. They have spent a lot of time, as examples, working on technical bras from a performance perspective, and they are honestly just doing incredibly well. That being said, when you go to the store, there is a baggy bottoms trend right now. FP Movement is doing it. It is not just about tight leggings. Their to-and-from, their outerwear, just the fashion element, the look, the embellishments, the fabric, everything that they have got going on, this is a very differentiated brand. As Melanie said, 30% of the total FP Group, they should eclipse over $500 million this year. This is a brand that we do not know where the ceiling is. It is well into the billions. It is our one brand that serves the broadest age and income demographic versus all of our brands. Their addressable market is much broader than any of our other brands. Their price point is much broader than any of our brands, and I think end use as well. I understand some of the challenges that are going on with some of the other players that are out there in the industry. It does not put caution to us based on our performance at all. We are not seeing it in our business, and we are seeing just really great customer growth and great customer connection, and you can see that in the top-line sales. You are also talking about a business that is close to Free People's profitability as well. Their store four walls are exceptional, and you are talking about a business that is running low double digits, sort of in that low teens to mid-teens operating profit already as it is in a growth stage. Let us talk about some topical things. Sure. First off, we're asking every company at our conference today their view on the health of the consumer. What is your expectations for the environment in the second half of 2026 relative to your recent results? Do you expect things to be the same, better, or worse? As a follow-up, do you expect the health of the consumer to be better, the same, or worse in 2027 versus 2026? Yeah. I think my answer for both is similar, and that's just based on what we see. I'm certainly not a consumer expert, nor an economics major to predict kind of the future on a broader perspective. What we see right now is there's really strong fashion. Employment is still in a good place. Wages are up. We're seeing a ton of engagement, and we're seeing zero price resistance. Free People, Anthropologie, Urban Outfitters, we're seeing zero price resistance in the business, and we're seeing the same level of engagement, activity, traffic conversion as we have been seeing for quite some time right now. So we haven't seen any change in the consumer behavior, nor have we seen sort of a slowdown for that appetite for fashion right now in our business. Until we do so, we're going to continue to support that consumer. Of course, we run a nimble model, and if we have to adjust, we will at some point in time, if that comes to fruition. But we're not seeing that in our business right now. We're seeing the consumer really healthy and engaging, and engaging at healthy price points, driving reg price sales. Great to hear. On pricing reg price sales, another question that we're asking all companies is, do you expect your prices and AUR to be higher, lower, or the same in the back half of the year versus the rate that you delivered in the first half? Yeah. I would say higher, but I'm going to caveat that. It's not about taking price on year-over-year items. It's purely about mix. We're in a very strong bottom cycle, as an example, and your bottoms to tops ratio is different than it used to be, whereas bottoms are driving more of the volume. And typically, a knit top or a soft woven top is less expensive than a bottoms. Because of that cycle, we're seeing that mix benefit and benefit our AUR, as well as we're seeing new items that we're putting into the assortment where we're putting some extra value, some quality, and some better fabric into the product, and we're seeing no resistance at all from the consumer. But it's not about sort of macro pressures, whether it be historical tariffs or fuel surcharges and us looking to raise the price on consistent items on a year-over-year basis. It's much more about mix and about where the fashion is right now. I think we've had our AURs as a total company has been up for the last several quarters, and I think that'll continue for a period of time just based on where the fashion is right now. You've brought up fuel surcharges several times. It is very much on investors' minds, especially with some of the fuel volatility that we've seen recently with oil. Can you talk a little bit more about the drivers of gross margin expansion in the back half while you navigate these fuel surcharges? What support that outlook? Where do you have the highest level of confidence? And to what degree can you pull levers to offset oil at a higher rate? Our guidance for Q3 is 25 to 50 basis points of gross margin improvement, and that is really being driven by an improvement in the tariff environment versus last year. If you think about last year, we started to see the highest tariffs in the third and the fourth quarter, and lapping a more favorable tariff environment would lead you to improved gross margin. That is being slightly offset by the fuel surcharges that we are experiencing now. I think we have talked about 70 basis points per quarter between inbound freight expense, and delivery. Those are the two drivers. The last driver of our gross margin improvement we had in the beginning of the year, too, which is occupancy leverage, which Frank mentioned. You are right, the teams are constantly working to do things like bringing in things in less expensive mode. That is really how we are guiding the Street and our forecast for the rest of the year. We still are maintaining our forecast of improving gross margin by 25 basis points for the year, despite the fact that the fuel surcharges have come into the world in the past six or so months. As it relates to next year, who knows what happens with fuel? The reality is, we will lap it. Let us just say the environment stays consistent. We will start to lap it in the second quarter. You have got a favorable tariff environment at least for the first half of the year, next year if things remain the same, and a little bit into the third quarter. As you mentioned earlier, Anthropologie, still low teens, but not how we would normally plan them to operate. They are going to have markdown opportunity as it relates to next year. You have got the Urban Outfitters turnaround continuing to grow their operating profit rate. You have got Nuuly continuing to grow and to grow their profit rate as well. So there is a lot of opportunities that we have over the long-term horizon to continue to add profit to the business. I would tell you, I think the networks have to be favorable. Personally, just from a, we probably will not plan Free People as high as they are from an operating profit perspective right now. I just think it is the prudent thing to do. But when you have got all the other opportunities, like the favorable tariffs, fuel, once it does eventually subside, you have got Urban Outfitters improvement, you have got Anthropologie improvement, you have got Nuuly improvement. Again, I am going to come back to the power of the collective and the power of the portfolio. You have got enough levers that are there that can drive long-term operating profit dollars and rate growth. To be clear, one question that we are asking all companies at the conference is whether or not they think that there is more margin headwinds or more margin tailwinds into 2027 versus 2026. You sound very optimistic in that last answer. Should we assume that that means that you see more tailwinds ahead? I think I am more optimistic about what is specific to us and to our company. I think from the macro environment, it certainly feels like oil and gas are going to be a thing for a period of time. I think that is going to be a headwind. Like I said, the tariffs are a tailwind. I think we are still excited about where the fashion is as well. That is always a healthy spot for our business to be. That still feels very comfortable for us, but I think it is much more specific to our internal opportunities. The Urban Outfitters turnaround, Nuuly's continued growth, FP Movement's continued growth and connection with the customer, Anthropologie getting closer into the bullseye. When we think about the internal things that we can control, we are very excited. Certainly, I would say we are in the early stages of technology, but we are excited about what technology can do and the amount of information that we can collect and that we can use to drive the business and some of the projects that we have going on. We are working on a product life cycle project where we can speed up our calendars. Last time we did that was 2016. It was really impactful to our business. We are now running several hundred basis points lower as an overall company's effective markdown rate 10 years later after doing it. You think about things like marketing and personalization that Dave mentioned earlier and the strength of what technology can do there as well. I think that is also going to be a driver, and I think it is going to be a driver for the next several years. That is great to hear. Sounds like a lot of tailwinds ahead. Yeah. Thanks, Frank. Thanks, all. Thank you, Brooke. Stay safe. Thank you, everyone. Thank you.