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SEC filingFiscal 2026 reflected a deliberate trade-off: sustained investment in direct-to-consumer infrastructure and geographic expansion contributed to revenue growth, while margin pressure and elevated operating costs meaningfully reduced profitability.
The decrease in gross margin was primarily attributable to higher freight and duty costs, driven by country mix—including a higher proportion of revenue in Asia Pacific—as well as the full year of elevated duty costs on imports to the United Kingdom in EMEA. Pricing and channel mix also contributed to the decline. An alternative explanation cited in management commentary points to product mix effects from the earlier launch of the Spring/Summer 2026 collection, reinforcing that timing and geographic factors—not just volume—shaped margin outcomes.
Our reliance on contract manufacturers provides critical flexibility, allowing us to scale production capacity up or down in response to shifting business needs while supporting more responsive inventory planning. Yet external pressures persist: geopolitical conflicts affecting energy infrastructure—including the ongoing Iran conflict—may intensify volatility in energy prices and availability. Such volatility could elevate production, transportation, and broader operating costs, compounding the financial implications of climate-related risks already embedded in our supply chain.