울버린 월드와이드 2026 회계연도 2분기 실적 발표: 머렐과 써코니 성장에 힘입어 전망치 상향

울버린 월드와이드(NYSE: WWW)는 머렐과 써코니의 호조에 힘입어 2026 회계연도 2분기 매출 5억 600만 달러를 기록했다고 발표했다. 관세 및 운임 부담에도 불구하고 조정 영업이익률이 확대되었으며, 경영진은 연간 매출, 이익률, 이익 및 현금흐름 전망치를 모두 상향 조정했다.

핵심 요약

• 매출은 전년 동기 대비 7% 증가한 5억 600만 달러를 기록했으며, 고정환율 기준으로는 6% 증가해 회사 전망치의 상단을 상회했다.
• 조정 희소 EPS는 $0.35에서 $0.40로 14% 증가했으며, 조정 영업이익률은 80베이시스포인트(bp) 확대된 10.0%를 기록했다.
• 고정환율 기준 머렐 매출은 10%, 써코니 매출은 9% 성장했다. 두 브랜드는 회사 전체 비즈니스의 약 3분의 2를 차지한다.
• 총이익률은 상쇄되지 않은 관세 악재 약 310bp와 유가 상승에 따른 완만한 운임 영향을 포함해 전년 동기 대비 70bp 하락한 46.5%를 기록했다.
• 경영진은 2026 회계연도 매출 전망치를 19억 8,000만 달러~20억 달러로, 조정 희소 EPS 가이던스를 $1.55~$1.65로 상향 조정했다.
• 순부채는 전년 동기 대비 1억 2,500만 달러 감소한 4억 4,300만 달러를 기록했다. 분기 말 재고는 약 17% 감소했으나, 경영진은 현재 재고와 입고 예정 물량으로 상향된 매출 전망을 충분히 지원할 수 있다고 밝혔다.

주요 재무 데이터

사업 및 영업 실적

아래의 모든 브랜드 및 부문 성장률은 고정환율 기준임.

액티브 그룹 매출은 8% 증가했다. 머렐과 써코니가 부문 실적을 견인했으며, 해외 도매 호조와 미국 내 지속적인 성장이 뒷받침했다.

머렐 매출은 10% 성장했다. 모압 3 및 모압 스피드 2 프랜차이즈가 두 자릿수의 높은 성장을 이끌었다. 머렐은 또한 미국 하이킹 카테고리에서 점유율을 세 자릿수 베이시스포인트(bp) 확대하며 해당 카테고리 상위 10개 스타일 중 3개를 차지했다. 이번 분기에는 특히 퍼포먼스 제품군이 강세를 보였다.

머렐의 DTC 매출은 회사가 마케팅 지출을 상위 퍼널 브랜드 구축 활동으로 의도적으로 전환함에 따라 감소했다. 경영진은 2026 회계연도에도 해당 브랜드가 한 자릿수 중반의 매출 성장을 기록할 것으로 계속 전망하고 있다. 현재 라이프스타일은 머렐 비즈니스의 4분의 1 미만을 차지하고 있으며, 경영진은 트레일 영역을 넘어선 확장(특히 여성 소비자층)을 장기적인 기회로 보고 있다.

써코니 매출은 전년 동기 40% 성장한 데 이어 9% 증가했다. 성장은 퍼포먼스와 라이프스타일 제품군 모두, 그리고 도매와 DTC 채널 전반에서 이루어졌다. 이 브랜드는 미국 러닝 전문점 채널에서 시장 점유율을 확대하며 1분기 대비 개선된 모습을 보였다.

해외 모멘텀은 유럽에서 가장 강했으며, 써코니의 핵심 도시(Key City) 전략은 런던에서 파리와 베를린으로 확장되었다. 경영진은 광범위한 수요, 하반기 기저효과, 지속적인 제품 혁신을 이유로 들며 써코니의 연간 성장률 전망치를 10%대 중반으로 상향 조정했다. 미국 라이프스타일 매장 수는 상반기 대비 거의 보합세를 유지할 것으로 예상되지만, 채널 재고가 소진됨에 따라 기존 매장의 생산성은 높아지고 있다.

스웨티 베티 매출은 3% 감소했다. 이는 미국 사업의 계획된 재정비 영향이다. 경영진은 이러한 재정비를 제외하면 브랜드가 약 3% 성장했다고 밝혔다. 영국 DTC 매출은 한 자릿수 중반 비율로 증가한 반면, 유럽 및 아시아 태평양 지역의 도매 및 유통업체 매출은 높은 두 자릿수 성장을 기록했다.

워크 그룹 매출은 2% 감소했다. 해당 부문 내에서 울버린 브랜드 매출은 한 자릿수 후반 비율로 증가하며 3분기 연속 시장 점유율을 확대했다. 경영진은 시장 재조정 및 재고 관련 조치로 인해 단기적으로 변동성이 이어질 수 있다고 경고했다. 회사는 2026 회계연도 워크 그룹 매출이 거의 보합세를 유지할 것으로 여전히 전망하고 있다.

경영진 가이던스

울버린 월드와이드는 상반기 실적과 포트폴리오 전반에 걸친 지속적인 실행력을 바탕으로 2026 회계연도 전망치를 상향 조정했다.

경영진은 이제 액티브 그룹 매출이 이전의 한 자릿수 중반 성장 전망과 달리 한 자릿수 후반 비율로 증가할 것으로 예상하고 있다. 브랜드별 가이던스는 머렐의 한 자릿수 중반 성장, 스웨티 베티의 한 자릿수 초반 감소, 울버린의 보합세 매출로 유지된다.

3분기 경영진 전망치:

• 매출 4억 9,500만 달러~5억 달러 (각각의 중간값 기준 보고 성장률 약 5.8%, 고정환율 기준 성장률 6.5%에 해당)
• 총이익률 약 47.4% (전년 동기 대비 10bp 하락)
• 조정 영업이익률 약 10.4% (130bp 상승)
• 조정 희소 EPS $0.42~$0.45 (전년 동기 $0.36 대비 상승)

리스크 및 관전 포인트

• 2분기 총이익률에는 상쇄되지 않은 관세 악재 약 310bp가 포함되었다. 3분기 전망치에는 약 180bp의 관세 영향이 반영되어 있다.
• 연간 가이던스는 2026 회계연도 잔여 기간 동안 기존 관세율이 유지된다고 가정한다. 예상 상쇄 불가 관세 영향액은 회사의 이전 추정치인 약 5,000만 달러에서 약 200만 달러가량 개선되었다.
• 가이던스에는 회사가 계속 추진 중인 이전에 납부한 3,600만 달러 규모의 IEPA 관세 환급 가능성은 제외되어 있다.
• 유가 상승은 소폭의 운임 비용 악재를 초래했다. 경영진은 이 영향이 3분기보다는 4분기에 다소 더 클 것으로 예상하지만 여전히 미미한 수준에 그칠 것으로 보고 있다.
• DTC 매출은 전반적으로 보합세를 나타냈다. 머렐의 DTC 감소는 상위 퍼널 마케팅으로의 전환을 반영한 것이며, 스웨티 베티는 미국 사업 재정비의 여파를 계속 흡수하고 있다.
• 경영진은 회사가 유통, 제품 구성 및 채널 재고를 조정함에 따라 울버린 및 워크 그룹 전반의 진전 상황이 고르지 않게 유지될 것으로 예상한다.

애널리스트 Q&A 하이라이트

이익률 개선은 관세 효과보다는 주로 구조적인 요인에 기인했다. 타린 밀러 CFO는 총이익률과 영업이익률 전망치가 높아진 것은 주로 매출 호조, 건강해진 재고 수준, 정상가 판매 증가, 제품 디자인 최적화, 공급망 효율성 덕분이라고 설명했다. 개선된 관세 가정의 기여액은 약 200만 달러에 불과했다.

써코니의 성장은 다각화되어 있다. 경영진은 성장 모멘텀이 퍼포먼스와 라이프스타일, 도매와 DTC, 그리고 여러 지역에 걸쳐 나타나고 있다고 강조했다. 유럽은 도시 단위의 마케팅 활동과 절제된 유통 전략에 힘입어 눈에 띄는 시장으로 꼽혔다.

머렐의 핵심 퍼포먼스 사업은 2분기에도 여전히 주요 동력이었다. 경영진은 라이프스타일 부문이 상당한 성장 기회를 제공하지만, 이번 분기에는 모압 3과 모압 스피드 2를 포함한 퍼포먼스 제품이 특히 강세를 보였다고 평가했다.

재고 감소가 상향된 전망을 제약해서는 안 된다. 재고는 입고 시점 조정과 운전자본 관리 강화로 인해 약 17% 감소했다. 경영진은 기존 재고와 하반기 입고 예정 물량이 써코니의 상향 조정된 전망을 포함하여 예상 수요를 충당하기에 충분하다고 언급했다.

DTC는 여전히 핵심 운영 과제이다. 경영진은 자체 채널 전반에서 프로모션을 줄이고 정상가 판매 비율을 높이며 스토리텔링을 강화하기 위해 노력하고 있다. 써코니 DTC는 성장하고 있는 반면, 스웨티 베티는 곧 미국 사업 재정비의 기저효과를 받기 시작할 것이며 머렐은 장기적인 브랜드 인지도 제고에 우선순위를 두고 있다.

써코니는 신발을 넘어선 잠재력을 보유하고 있다. 회사는 2027년 초 온·오프라인 매장 출시를 목표로 스웨티 베티의 제품 팀과 함께 여성용 어패럴 캡슐 컬렉션을 개발 중이다. 경영진은 이번 프로젝트를 써코니가 머리부터 발끝까지 아우르는 러닝 라이프스타일 브랜드로 도약할 수 있는 잠재력을 시험하는 계기라고 설명했다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Greetings and welcome to the Wolverine World Wide Second Quarter Fiscal 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jared Filippone, Head of Investor Relations. You may begin.

Jared Filippone

Good morning and welcome to our second quarter fiscal 2026 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer, and Taryn Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the second quarter of 2026 and guidance for fiscal year 2026. The press release is available on many news sites and can be viewed on our investor relations website at investors.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 and constant currency revenue growth rates, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our investor relations website.

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 2026, growth opportunities, and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. 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 the forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. With that, I will now turn the call over to Chris Hufnagel.

Christopher Hufnagel

Thanks, Jared. Good morning, everyone. Thanks for joining us on today's call. In the second quarter, our business results continue to track ahead of our expectations, driven by the team's strong execution of our global brand building model. We delivered better than anticipated revenue, growing 6% against double-digit growth last year, with adjusted earnings per share growing 14%, reflecting healthy SG&A leverage, while at the same time investing in our strategic priorities and key growth drivers. Merrell and Saucony, representing approximately 2/3 of our business, continued to lead the way with revenue up 10% and 9% in the quarter, respectively. We continue to make progress in building better brands, delivering compelling products, investing more in demand creation and telling better stories, managing the marketplace more effectively, all leading to elevating our brand's positions in their respective markets.

As a result, we're seeing the cumulative, tangible effects of our consistent efforts. Across our portfolio, our brand generated increases in consumer interest and took market share in their key categories. And these gains in consumer demand are creating more consistent growth in the business, with the company having now delivered 7 consecutive quarters of year-over-year growth. Given the strengthening of our brands, the solid results we drove in the first half, and the continued momentum we're seeing in the business, today we're raising our guidance for the year, which Taryn will walk you through in a few minutes. But before handing the call over to her, I'd like to share more on our brands, including the continued growth of Merrell and Saucony, as well as the progress we're making in applying our playbook to set Sweaty Betty and Wolverine on a path to more consistent growth.

I'll start with Merrell. Merrell remains focused on modernizing the outside with faster, lighter, more versatile product design and elevated brand relevance. The brand's consistent execution of its strategy has resulted in sustained meaningful growth and market share gains. And these trends continued in the second quarter. The brand delivered a double-digit increase in revenue with growth in all regions and outsized increases internationally, where its key city strategy has helped amplify the brand's momentum. Globally, Merrell's "It Starts Outside" marketing platform, launched earlier this year, is creating brand consistency and lifting purchase intent with our consumers. To extend the platform, the team executed a host of community activations as part of its "Outside in the City" series, redefining the outdoors in several key global cities, including London, Paris, and New York, with more cities planned in the coming weeks.

Merrell once again had triple-digit basis point market share gains in the U.S. Hike category, now with 3 in the top 10 styles. The brand's key franchises, the Moab 3 and Moab Speed 2, are exceptionally healthy, each driving significant double-digit growth in the second quarter. The iconic Moab 3 is respected on the trail and remains relevant with collaborations and rematerializations like the sought after and sold out Khakis collab and the recently dropped Jolly Pack. In Trail Run, Merrell continued to entrench its position with its title sponsorship of the Skyrunner World Series, composed of elite trail running races around the globe in locations such as China, Japan, France, Italy, Spain, Chile, Argentina, and right here in the U.S. Merrell's sponsored athletes currently claim 7 spots in the top 15 men's and women's standings, including the top 4 ranked men in the series. In the marketplace, the brand's premier franchise, the Agility Peak 6, continued to gain traction, up double digits globally, versus the previous model's comparable first season.

On the Lifestyle side of the business, the Wrap franchise continued to grow with additional silhouettes, more than doubling year-over-year at U.S. retail. The brand also continues to enhance its lifestyle offering with trend-right styles like the Moab 2 Woven Slide, the low-profile Relay, and hybrid Mary Janes and performance platforms, including the Moab Speed 2 and SpeedArc, all of which are selling well. In June, the brand engaged influential partners at Paris Fashion Week as it continues to elevate its Lifestyle profile globally and look to accelerate this side of the business in 2027. Merrell is performing well, and the brand remains on track to deliver mid-single-digit growth this year.

Shifting to Saucony. We continue to believe that Saucony is uniquely positioned as a disruptive challenger brand at the intersection of 2 of the fastest growing categories in the market, performance and Lifestyle running. In the second quarter, the brand drove solid growth in both categories around the world, on top of 40% overall growth last year. Saucony's key city focus, which started in London a few years ago, continued to help fuel strong brand heat, consumer demand, and revenue growth, particularly in Europe. In London, the brand held one of its own Maze Run Club races earlier this year, once again sponsored the London 10K last month, and plans to sponsor the Run Shoreditch Half Marathon this fall. In addition, Saucony has expanded its key city strategy to Berlin with sponsorship of the Berlin 10K a couple of months ago and a broader activation plan underway, and then to Paris with a Maze race back in February and plans for a host of activations, a new pioneer store, and title sponsorship of the Eiffel Tower 10K.

Creating tentpole moments by sponsoring race events that each reach a broad running audience, flanked by a series of community activations, often in partnership with run clubs and key retail partners, has proven to be an effective strategy. Saucony's brand search interest was up meaningfully year-over-year in the first quarter globally, with even faster growth in the UK. This past quarter, the search interest growth rate accelerated by almost 2x globally and more than tripled in the UK, and France grew at an even significantly faster pace. Sell-through trends in the EMEA region are also very strong, creating a healthy pull dynamic, which we are actively managing to cultivate sustainable growth, focusing on disciplined distribution and segmentation strategies. Because of these positive results, our Key City playbook is now being adopted by some of our distribution partners around the world. Our latest Saucony store opened in Hong Kong in the second quarter, and there are already plans to activate in Istanbul and Bangkok this year with race sponsorship and Maze events, a store opening, and community activations on tap.

In the Performance running category, Saucony gained market share at U.S. run specialty in the quarter and showed well in major marathons this spring, ranking in the top 5 most worn brands at Boston and London, notably second among women at the Boston Marathon. With the brand's Endorphin collection, its pinnacle offering for elite runners, Saucony launched a new version of its most innovative shoe, the Endorphin Elite 3, and plans to launch an all-new Endorphin model in 2027 that we believe will further elevate innovation performance for serious runners. In Saucony's Core 4 franchises, which are targeted towards a more casual runner, the brand introduced the new Triumph 24 and Hurricane 26 in the last couple of months, and they are driving franchise growth on saucony.com in early selling with positive feedback from our wholesale partners.

Saucony also continues to fuel brand heat in its Lifestyle business with compelling styles and thoughtfully selected collaborators who are helping develop the brand's relevance on several different dimensions. In the second quarter, the brand dropped collaborations with Estudio Niksen, Greyson, 2 with Engineered Garments, and Minted New York, the last of which was launched in an event hosted at our Covent Garden Pioneer Store in London, generating exceptional brand energy. Earlier this month the brand plans to drop a highly anticipated collaboration with Westside Gunn, building on a partnership that continues to strengthen the brand's credibility in streetwear and culture. In June, Saucony launched the Ride 1 as part of its extensive Paris Fashion Week presence, including a host of activations with influential collaborators, retailers, and consumers. The brand also introduced the Kinvara 1 and ProGrid Paramount in top of the pyramid distribution, while the ProGrid Omni 9 continued to drive growth globally.

Looking ahead, the brand continues to develop its lifestyle strategy, leveraging its deep and diverse product archive, developing sharpness behind streetwear and fashion, and thoughtfully cultivating greater relevance with women as well as men. Finally, as we think about realizing Saucony's full potential, I believe that should include becoming a true head-to-toe run lifestyle brand. In close partnership with our Sweaty Betty product design and development team, we're developing a capsule apparel collection designed specifically for her that we plan to drop in our stores and online early next year. I'm excited for this test and leveraging the collective power of the company and what this opportunity could mean longer term for the Saucony brand. The brand's momentum remains strong and we're raising our outlook for the brand to mid-teens growth for the year. I continue to believe that Saucony is well positioned and that the opportunity for the brand remains significant.

I'd now like to provide an update on the progress of Sweaty Betty and Wolverine, brands that we're focused on returning to sustained healthy growth through disciplined execution of clear strategies and implementing our proven brand growth playbook. It's important to note that while we don't expect performance to be perfectly linear, we're encouraged by the recent progress we've made and the real results we've seen in the marketplace. Both brands are reestablishing their premium positions, driving meaningful increases in consumer interest and purchase intent, and beginning to deliver growth in key segments of their business.

Beginning with Sweaty Betty. Sweaty Betty is one of the original female activewear brands and focuses squarely on empowering women through fitness and beyond. Last year, we fully integrated this business into Wolverine World Wide and developed a new strategic growth plan. As part of this effort, and as noted previously, we initiated an intentional and strategic reset of the U.S. market in the third quarter of last year. As a result, the brand was down low single digits overall in the quarter, but encouragingly grew approximately 3% when excluding the impact of the market reset in the U.S. The areas of the business that we prioritized are responding positively and contributed growth in the quarter. The UK direct-to-consumer business grew mid-single digits, with continued increases in key categories like bottoms and outerwear. We're seeing our investment in the brand's new store design lift performance as well, with 4 refits completed so far this year. The expansion of wholesale and distribution partners in Europe and Asia Pacific also continues to advance, with revenue up strong double digits and discussions for new partnerships progressing well.

During the quarter, the brand executed several activations to continue to strengthen its bold, rebellious voice in the marketplace. This Born Sweaty, Go Shorty campaign increased purchase intent and helped drive strong revenue growth in the shorts category. The brand also effectively positioned itself relative to popular activities, including running with its Rule the Run event in April, and racket sports with its Power by London Padel event in June, and a Wimbledon event in July, all driving strong consumer engagement for the brand. Sweaty Betty brand is healthier today with a strong strategy in place and a determined team driving the business forward. We have more work to do, but I'm encouraged by our progress.

Finally, finishing with Wolverine. Wolverine is the #1 work boot brand in the U.S., and again added market share in the second quarter, its third consecutive quarter of gains. The brand grew revenue high single digits in the quarter, and we continue to make good progress driving towards more consistent, sustainable growth. Wolverine is focused on managing a cleaner, more disciplined marketplace and elevating its positioning with consumers. Behind these efforts and a stronger product line, the brand continues to lift average selling prices and drive double-digit growth in key franchises at retail, including the Trade Wedge and Loader II, and in western boots with the Rancher and Wheatland. Recalibration of the marketplace to optimize assortments and inventory at key retailers is still ongoing, resulting in some expected choppiness and near-term volatility at retail. But inventory is continuing to get cleaner and our new distribution and segmentation strategies, while nascent, are sharper.

In the quarter, Wolverine also continued to build brand relevance by engaging consumers with more purpose-led, differentiated marketing. The brand's collaboration with Metallica Scholars introduced a limited edition boot and workwear collection that benefits trades education and its American Dream contest launched a made in the USA Loader II DuraShocks boot and celebrated 50 tradespeople in our 50 states. These initiatives and previous upper funnel investments, like the brand's partnership with the Paramount+ series Landman, helped further accelerate growth of consumer interest in the quarter. Work remains to get us to where I believe we should be, but Wolverine's new product innovation and designs are performing. The brand's marketing is reaching more consumers and cultivating greater emotional resonance and the marketplace is responding. Importantly, we've added some new talent to the brand and prioritized its place in the Work Group portfolio. I continue to be enthusiastic about the brand's opportunity looking ahead and what a growing and more profitable Wolverine brand and Work Group can deliver for the company. Now I'd like to hand the call over to Taryn Miller, our Chief Financial Officer, to take you through our results for the quarter and our updated outlook for the year. Taryn?

Taryn Miller

Thank you, Chris, and welcome everyone. Our second quarter results exceeded expectations and reflect the continued progress we're making across the business. The operating model we've built, combined with continued investment in our brands and capabilities, is strengthening the portfolio, improving profitability, and reinforcing our confidence in the long-term earnings potential of the company. Merrell and Saucony drove the company's revenue growth in the quarter. Growth combined with disciplined cost management contributed to 80 basis points of adjusted operating margin expansion while further improving our balance sheet and financial flexibility. Given our strong first half performance and continued execution across the business, we are raising our full year 2026 outlook.

I'll now take you through the highlights from our second quarter. Revenue of $506 million exceeded the high end of our outlook, driven by better-than-expected performance in both the Active Group and Work Group. Reported revenue growth was 7% compared to the prior year, or 6% on a constant currency basis. The following channel, segment, and brand performance is provided on a constant currency basis. Wholesale revenue increased 8% compared to the prior year, reflecting strong international performance and continued growth in the U.S. DTC revenue was approximately flat versus the prior year. Active Group revenue increased 8% in the second quarter, with performance across the segment exceeding our expectations.

Merrell revenue grew 10% in the quarter. Strong wholesale performance was driven by international markets and continued gains in the U.S. Ongoing strength in sell-through across core franchises and key accounts supported the brand's momentum. DTC revenue declined compared to the prior year, reflecting a deliberate shift in marketing investments towards upper funnel brand building activity. Saucony revenue increased 9% in the quarter, building on 40% growth in the same quarter last year, driven by growth in both wholesale and DTC. Wholesale growth was led by international markets with continued gains in the U.S. The brand continues to build momentum across both Performance and Lifestyle categories, supported by ongoing marketing investments and new products that are resonating with consumers.

Sweaty Betty revenue declined 3% in the quarter, reflecting the planned and ongoing reset of its U.S. business. The brand delivered another quarter of growth in UK DTC and international wholesale, reflecting encouraging consumer response to its broader product assortment. Work Group revenue declined 2% compared to the prior year, which was modestly ahead of expectations. Progress across the Work Group portfolio continues to vary by brand, but the actions underway to enhance product offerings and improve marketplace health are beginning to gain traction. While there's still more work to do, we are encouraged by the early results.

Consolidated gross margin was 46.5%, a decrease of 70 basis points from the prior year and 10 basis points above our expectations. Gross margin was pressured by an approximate 310 basis point unmitigated tariff headwind and a modest impact from elevated oil prices on freight costs, although mitigation actions offset most of the tariff impact. Adjusted operating margin was 10%, an increase of 80 basis points compared to the prior year and 50 basis points above our expectations. Tariff-related pressure on gross margin was more than offset by strong revenue growth and disciplined management of operating expenses. As a result, adjusted diluted earnings per share increased 14% year-over-year to $0.40, compared to $0.35 in the prior year and above our outlook of $0.35 to $0.38. Net debt was $443 million, down $125 million versus last year.

Turning to our outlook for 2026, we are raising our full year outlook and now expect revenue to be in the range of $1.98 billion to $2 billion, representing reported growth of approximately 6.2% at the midpoint. This compares to our prior outlook of $1.96 billion to $1.985 billion. Our foreign currency assumption is unchanged at an estimated $14 million benefit versus the prior year. As a reminder, the prior year included a 53rd week in the fourth quarter, which contributed approximately 70 basis points to full-year 2025 revenue growth, primarily within our DTC business. On a constant currency basis and excluding the 53rd week in 2025, we now expect revenue to increase approximately 6.1% at the midpoint.

The following segment and brand outlook is on a constant currency basis. Active Group revenue is now expected to increase high single digits, up from our prior outlook of mid-single-digit growth. We continue to expect Work Group revenue to be approximately flat compared to 2025. At the brand level, we're raising our outlook for Saucony to mid-teens growth, the high end of our prior low to mid-teens range, reflecting the first half performance and continued momentum across categories. The investments we're making to build consumer demand are strengthening the brand's market position and driving durable growth. Our outlook for the remaining brands is unchanged, with Merrell expected to grow mid-single digits, Sweaty Betty expected to decline low single digits, and Wolverine expected to be approximately flat compared to 2025.

Gross margin is now expected to be approximately 46.9% compared to our prior outlook of 46.4%. The improvement primarily reflects stronger marketplace execution, supply chain efficiencies, and modestly lower tariffs. With respect to tariffs, our updated guidance assumes existing tariff rates remain in place for the balance of 2026. This assumption reduces the estimated unmitigated tariff impact by approximately $2 million compared to our prior outlook. While we continue to believe rates may ultimately return to IEPA levels, the timing of any change remains uncertain. Our guidance excludes any potential refund related to the $36 million of IEPA tariffs previously paid, which we continue to actively pursue.

Adjusted operating margin is now expected to be approximately 9.9% compared to our prior outlook of 9.5%, reflecting the higher gross margin and meaningful operating leverage for the year, while also making strategic investments in our brands and key capabilities. Interest and other expense is projected to be approximately $23 million and the effective tax rate is projected to be approximately 18%, both unchanged from our prior outlook. As a result, adjusted diluted earnings per share is now expected to be in the range of $1.55 to $1.65 compared to our prior outlook of $1.43 to $1.58. We are increasing our operating free cash flow outlook to $115 million to $130 million from $105 million to $120 million previously. We continue to expect capital expenditures of approximately $20 million.

Moving to our third quarter outlook. Revenue is expected to be in the range of $495 million to $500 million, representing reported growth of approximately 5.8% at the midpoint compared to the prior year. On a constant currency basis, revenue is expected to increase 6.5% at the midpoint. Active Group revenue is expected to increase high single digits, while the Work Group is expected to be approximately flat to the prior year. Gross margin in the third quarter is expected to be approximately 47.4%, down 10 basis points compared to last year. This includes an approximate 180 basis point unmitigated tariff impact and a modest headwind from higher oil prices on freight costs, with mitigation actions and other business initiatives offsetting the majority of those impacts.

Adjusted operating margin is expected to be approximately 10.4%, an increase of 130 basis points compared to last year, with the improvement driven by revenue growth and disciplined cost management, which more than offset the impact of higher tariffs and elevated oil prices on gross margins. As a result, adjusted diluted earnings per share is expected to be in the range of $0.42 to $0.45 compared to $0.36 last year. To summarize, our second quarter results reflect continued progress across the business, led by the strong performance of Merrell and Saucony. We're improving profitability, strengthening our financial position and seeing encouraging traction across the portfolio. Our balance sheet is meaningfully stronger than it was 2 years ago and while the external environment remains uncertain, our confidence in the business continues to grow. Our increased outlook for 2026 reflects both the strength of our first half results and the progress we're making across the portfolio. With that, let me turn the call back to Chris before we open up for questions.

Christopher Hufnagel

Thanks, Taryn. To close, I believe our brands are better positioned in the marketplace today, align well with consumer trends, and they are leaders and innovators in growing and attractive categories. And importantly, they continue to get stronger each quarter around the world, both those that are already performing like Merrell and Saucony and those that are not yet as consistent as we want them to be. Our team is better, our strategies are more sound, our execution is sharper, and our brands and company are healthier. As a result, our business is better than we anticipated entering the year, giving us confidence to raise our guidance for 2026. Another important chapter in our transformation story that has now become a growth story. While our progress is encouraging, we believe a bigger opportunity is still ahead of us for the company, our team, our brand, and our shareholders. And everyone at Wolverine World Wide remains focused to make every day better. With that, thank you for taking the time to be with us this morning, and we're happy to take your questions. Operator?.

Operator

[Operator Instructions] The first question is from the line of Jonathan Komp with Baird.

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Jonathan Komp

Could you maybe just share a little more insight what you're seeing in the running market in general from a standpoint of overall competitiveness and discounting? And when you look to the second half implied guidance for Saucony, what's given you confidence in the acceleration? Is it simply easier comparisons? Or are there other factors?

Christopher Hufnagel

Sure, thanks Jon. Yes, the run category is obviously a very attractive and growing category and we're thrilled that we have one of the original running brands in Saucony performing the way it has and the trajectory we see. But certainly fiercely competitive and we've got sort of great respect for the competition that's out there. At the same time, we think we've got a great team and in fielding, I think, one of the strongest product pipelines that we've had. And it's good to, I think we're in a good position. As it relates to the acceleration in the back half, I think you did point out, good 9% growth in the second quarter on top of 40% growth last year. And a little bit easier comparison going into the back half, but visibility remains good.

I think the important thing to note about Saucony is it really is a global growth story. It is not just a U.S. sector growth story. So really pleased by the progress we're seeing really around the world. The way our partners are leaning in and the receptance that we've seen to both Performance run and the Lifestyle. So we remain bullish on Saucony and I think the prospects for the brand remain bright.

Jonathan Komp

Yes, that's great to hear. Thanks, Chris. And then maybe, Taryn, just could you frame up how to think about the guidance rates for the year, the profit flow through looks very strong. How much of that is slightly better tariff assumptions versus underlying improvements in the profitability?

Taryn Miller

Yes, thanks for the question. Regarding our gross margin, operating margin, and higher expectations, there's been no meaningful change to the tariff impact we've previously discussed. We said that we had previously estimated around a headwind of around $50 million on the year, and that assumption is reduced by roughly $2 million, which really leans towards the -- what we're seeing in terms of the bigger raise that we're seeing in terms of gross margin and operating margin versus our previous expectation is the structural changes we're seeing in the business, really driven by the stronger revenue and seeing more full price sales from healthier inventories and the supply chain efficiencies driving structural improvements in the business.

Operator

Your next question is from the line of Mitch Kummetz with Seaport Research Partners.

Mitchel Kummetz

Chris, in your prepared remarks, you mentioned accelerating the Merrell lifestyle business in 2027. Can you just remind us what percent of Merrell is Lifestyle? And can you talk a little bit about what opportunities you see for Lifestyle, particularly going into next year?.

Christopher Hufnagel

Yes, it's a smaller portion of the performance sort of outdoor business for sure. But we certainly think about Merrell today as the broader outdoor lifestyle opportunity beyond the trail. And I think the team has worked really hard on that and I'm really pleased with the progress that we've seen. And I think you're sort of seeing some of that come through in our 1TRL efforts to sort of bridge that performance to lifestyle piece. And then certainly obviously legacy styles like the Jungle Moc, which continue to grow. But then importantly, the team being able to sort of tap into trend, seeing things like the Relay, the Wraps collection, and then taking sort of classic outdoor platforms like the Moab Speed and so forth and so on, and making them in more lifestyle styles, like our slides, or just rematerializing and make them for everyday wear. And I think you're seeing that show up importantly, I think, in our marketing as well, just how we're presenting the brand at merrell.com, how we show up on our social feeds. And I think the team's done a great job sort of bringing the outdoors to the city under the platform of "It Starts Outside".

So the bigger opportunity beyond outdoor is certainly outdoor lifestyle, and I think that is going to be a key unlock. And certainly as we think about Merrell's trajectory over the last handful of years, the market share gains, the consecutive quarters of growth and the outlook we have, I think that that's a piece to it. Importantly, we have to open up appropriate distribution. And I think our sales team has done a nice job opening up new doors for us to show up where that product is sold and specifically where it's sold to her. So really pleased the progress in total and I think the greater lifestyle opportunity beyond the trail for Merrell but I can't discount the fact that we still are the leader in trail. 3 of the top 10 styles for the first time in the last quarter came from Merrell and really extended our market share lead there by triple basis point gain again. So really pleased in total by the Merrell business and certainly the trajectory that we see.

Mitchel Kummetz

And then on Saucony, I think you said in your prepared remarks that you gained share in U.S. run. I believe that's an improvement over the last quarter. If it is, maybe if you could address that. And then as far as the back half outlook for Saucony, it sounds like you're very confident there and then you have good visibility. I think that on the lifestyle side your door count in the back of this is coming down so can you maybe kind of address that in the context of the overall Saucony growth projection for the back half?

Christopher Hufnagel

So I'll answer the 2 specific questions that you have a good memory. The run specialty share we did gain in Q2, and that was an improvement over Q1, which we are encouraged by. We anticipate second half lifestyle doors to be approximately flat to first half, but no change from what we told you in February. And I certainly think the momentum we continue to see in Saucony is encouraging not just here in the U.S., but certainly around the world. And I think back to Jon's earlier question, like the running category, I think brands that innovate and bring fresh new product to market, I think those are the brands that are winning. And I think Saucony has done a great job, whether it's the Azura launch this year, which we anticipate to be the biggest single launch in the brand's history, to updating Core 4, the Triumph and the Hurricane. We've got a new Endorphin Elite out, and I think the best, fastest Endorphins are going to be coming out in '27. So brands that continue to innovate, I think we'll continue to win, and we certainly remain bullish on the Saucony product pipeline and the way that team is driving the business.

Operator

Your next question is from the line of Laurent Vasilescu with BNP.

Unknown Analyst

This is [ Lucas Cohen ] on for Laurent. Thanks for taking our question. Just wanted to see if you could elaborate more on the deliberate DTC pullback for Merrell in the quarter. I know you highlighted some DTC strength in prior quarters. So just wanted to get some more context there. And then did the mix of Merrell full price sales continue to improve in the quarter? And is Merrell continuing to gain share in Hike? I think you had mentioned last quarter they gained share 12 of the prior 13 quarters in Hike.

Christopher Hufnagel

Yes, I'll try to remember those questions and maybe I'll go in reverse order. Triple basis point -- triple-digit basis point gain for Merrell, again, the #1 leader in Hike with 3 of the top 10 styles in the U.S. today. And a lot of credit to that team on what they have done. As it relates to Merrell DTC, I would say at total across the portfolio, I think the underlying health of our brands and the performance globally continues to be strong. You're seeing that show up in brand health metrics, Google search interest, and in market share gains. And I think that is a credit to the work that the teams have done over the past couple of years. As it relates to DTC, I think the story is a little bit different by brand. And for Merrell specifically, we're consciously moving marketing dollars up the funnel to work on awareness for the brand.

That has always been sort of a lagging indicator for us, and I think our team in place is now more consistently moving those dollars up the funnel, which we think is in the long-term best interest of the brand globally. And I think you're seeing those things begin to take through in those brand health metrics, which we think will help both our wholesale business and our DTC business. But that conscious shift in marketing spend obviously puts some pressure on Merrell in the short term in direct-to-consumer. We think that will even out over time and we do think it is in the best long term interest. And I'm fortunate to be in a position where we can go do make these decisions about our investments across the portfolio as different things are working to best manage the brand -- best manage the company and our brands for long term sustainable growth that ties back to our value creation model. So we remain really optimistic about Merrell. We do know that the DTC business, we know that, that we need to improve that, but I do think we're taking the right steps today to show longer term improvement. So we remain bullish on Merrell's global opportunity, both here in the U.S. and around the world, as well as wholesale and our own channels. Thank you, Lucas.

Operator

Your next question is from the line of Peter McGoldrick with Stifel.

Peter McGoldrick

I wanted to ask on the Saucony brand, as we think about the upgraded outlook, you represented the global uptake of the brand. Can you point to the key regions of incremental international traction for Saucony?

Christopher Hufnagel

Yes, good question. We're really pleased by the progress in EMEA and give a lot of credit to that team over there. Take everyone back to sort of February of '24, that really was the start of our Key City strategy and the company's Key City efforts really started with Saucony in Europe, specifically in London. And we think 3 years, sort of moving 3 years past that, that really has helped elevate that brand and awareness and affinity in that market. And we're seeing a strong uptick there. We led with Performance run, both from a product standpoint and from an activation standpoint, you know, really sort of doubling down on London, sponsoring London 10K, investing in run clubs. And that decision to really distort investments to London has really paid off. And now we're beginning to take those learnings to other cities, Paris and Berlin and beyond.

And then we sort of followed run with lifestyle introduction. And we've learned from the U.S. on how to roll that out, how we can win as we roll that out. And we're applying those learnings to the rest of the world. But certainly if I think about regions that are, again, Saucony in total is performing very well, standout regions would certainly be Europe.

Peter McGoldrick

Excellent. And then on inventory, inventory dollars decrease meaningfully on the books year-over-year compared to the go forward revenue growth outlook in the back half. Can you help us think about the spread between inventory and the outlook and the quality of inventory on the books and ability to service the revenue that's in the back half outlook?

Taryn Miller

Yes. Thank you for the question, Peter. At the end of the second quarter, as you noted, the inventory was down around 17% from the prior year. Overall, our inventory is in a healthy position. The year-over-year decline is, that's really a combination of timing factors and timing of receipts, as well as the continued benefits that we're seeing from our efforts to improve. We've talked about before our efforts to improve our inventory management and our productivity across the portfolio. So the combination of timing, as well as those initiatives that we've been taking to be more disciplined with our working capital are what you're seeing. To be specific to your question and important, we are confident at the current inventory levels that we're at, together with the planned receipts in the second half, they'll fully support the increased revenue outlook for '26.

Operator

Your next question is from the line of Sam Poser with Williams Trading.

Christopher Hufnagel

Operator, we don't appear to have Sam.

Operator

Your next question is from Mauricio Serna with UBS.

Mauricio Serna Vega

Maybe I wanted to ask about Saucony. You raised the guidance towards the higher end. Could you break that down? How does that -- like where's the guidance increase coming from when you look at the Lifestyle versus Performance segment? Just high level, could you talk about what you're seeing in the U.S. in terms of like sell-through for both Performance and Lifestyle, and just in terms of like the full price selling and just also concerns on promotions. You've heard that it's been like relatively highly promotional in the space. So I just was wondering if you were hearing anything or sorry, not hearing, but seeing anything like that on your business.

Christopher Hufnagel

Yes, certainly. Thanks, Mauricio. Yes, I think our raise in Saucony sort of reflects both the delivery that we've had and certainly our outlook for the second half. And I think it's important. It is sort of broad-based growth. It's run and it is Lifestyle. And we're seeing nice business, healthy business around the world. So we remain optimistic. With all of that said, it is a fiercely competitive space. We've got a tremendous number of great challengers, but I think brands that are bringing compelling, innovative product, packaging them with great stories, and then working hard on the ground game to win that battle on the floor, I think those brands will continue to win. And obviously the gain and the improvement in market share gains this quarter versus last quarter gives us encouragement. What we're seeing at saucony.com gives us encouragement. And then importantly, just the feedback from our partners and what they're seeing and hearing.

So, and again, I think it's important, I know we focus a lot on the U.S. business, but I think it's important to say that Saucony is a global growth story, which is why I'm glad I got the earlier question about Europe. The progress that we're seeing over there. So it is broad-based and I would say, point to the diversification of Saucony's growth beyond one category, beyond one channel, the fact that we can grow Performance run, the fact that we grow Lifestyle, the fact that we can grow globally, the fact that we grow DTC and wholesale. I think that diversification is part of the brand growth story beyond just a few styles in a specific channel. So we remain optimistic about the potential for Saucony. We think it remains great, and it's our job to go chase that growth responsibly.

Mauricio Serna Vega

All right, quick follow up just on Merrell, just given the strong performance in the second quarter, just wondering why there doesn't seem to be an increase in the revenue guide for that brand. And maybe could you unpack a little bit more, like how much of the growth in the quarter would you attribute to core Hike versus Lifestyle? And lastly, just quick question for Taryn on the description of the gross margin increase outlook. You mentioned reference stronger marketplace execution. Could you explain a little bit more? Like what does that mean?

Christopher Hufnagel

I'll talk about Merrell first and then Taryn can hit the second point. Yes, again, really encouraged by the progress that we have seen in Merrell. And again, it's important to note, it's sort of iconic pieces that we have breathed new life into, like the Moab 3 that continues to be just a dominant boot in the marketplace. It's the Moab Speed 2, which we introduced a few years ago, and how important franchise that, that has become, and then thoughtful sort of segmentation distribution strategies and really managing the marketplace well. And it's not just a U.S. story for Merrell. We're seeing good upticks in performance across Europe as well. And obviously we've got important businesses in Asia Pacific with our partner out of Japan and obviously Xtep in China.

And so I think both the Performance outdoor piece and the Lifestyle piece give us encouragement. And then I would really point to what we anticipate to be a record marketing investment in the brand this year around is too around the new "It Starts Outside" platform that the team has developed and seeing market share gains in Merrell continue, seeing very strong Google search interest globally for the Merrell brand, I think, gives us confidence. And it's important this is -- Merrell was the first brand to lead the company out of the turnaround in the back half of 2020, the first company to grow consecutive growth quarters and then a long string of market share gains actually accelerating to triple digits in the quarter. And I think it's also important to know domestically in the U.S. that Hike category had been under pressure for several years. And we're actually beginning to see Hike category. And I think all of those things bode well for the outlook for Merrell. So good first half, no change to the second half outlook. Now we're going to go execute.

Taryn Miller

And, Mauricio, building on Jon's earlier question, when I talked about the more significant part of our -- majority of our increase in our margin outlook was due to structural or marketplace execution. So to put more color on that, that's things like healthier inventories and brand heat that is driving more full price sales. Chris just talked to investing in marketing and brands and capabilities. That is part of that brand heat that enables us to drive more full price sales, as well as product design optimization. So working with our supply chain teams and working with brands in terms of how they're driving cost efficiencies, as well as in the supply chain team, they look at logistics and their sourcing in terms of how we're driving savings. So when I'm talking about structural or marketplace execution, it's really across the board in terms of getting those more full price sales with the investments we're making in our brands and our capabilities, the supply chain, working with the brands and with our teams in terms of driving efficiencies there as well.

Operator

Your next question is from the line of Sam Poser with Williams Trading.

Samuel Poser

Can you hear me this time? Hello? Can you hear me?

Christopher Hufnagel

We can hear your dog.

Samuel Poser

Yes, sorry about that. So the follow-up question on the inventory, was there a timing shift on the inventory delivery?

Taryn Miller

I think you said, was there a timing shift on inventory that was part of it?

Samuel Poser

I think it got shifted in the beginning of July instead of the end of June.

Christopher Hufnagel

Operator, I'm sorry, we can't hear Sam unfortunately.

Operator

Your next question is from the line of Ashley Owens with KeyBanc Capital Markets.

Ashley Owens

I know there's been a lot of talk on Merrell and Saucony. So maybe I'll focus on the other brands to start, but maybe just first on Work. Really encouraging to see the Wolverine brand return to growth in the quarter. I was just hoping if you could discuss some of the brand level improvements that really started to work in the quarter and then with the Work portfolio guided down for the balance of the year could you just help us break that down brand by brand? Are you assuming that Wolverine brand is able to sustain improvements and what's the biggest drag in that area of the portfolio today?

Christopher Hufnagel

Sure, thanks for the question. We are certainly encouraged by the progress we're seeing out of our Work Group and specifically Wolverine brand. I think a more thoughtful strategy, really focused on executing our global brand building model. Amazing products, great stories, and then driving the business. Encouraged by the results in 2Q for Wolverine brand. At the same time, we acknowledge that there's more work to go do, and we don't anticipate the results to be perfectly linear moving out from here. So there will be some choppiness, both as we get that brand up and running again, the product line hits, and importantly, we really address the channels and make sure that channels are clear and we've got the right product inside the right doors, and importantly, with the right activation. But if I think about the global brand building model, I think about our brand growth playbook, which we've deployed with Merrell and Saucony, I think that the Wolverine brand is really focused on the right things. What is that innovation? What product are we bringing? What consumers are we targeting? And then how do we plan to sell it in and sell it through at wholesale?

I think the marketing piece, you know, some really good moves by that brand over the last handful of months, the partnership with Landman to really raise awareness and a lot of, sort of, on the ground activations taking place right now. And then I think importantly, just a very thoughtful segmentation and distribution strategy at U.S. wholesale and getting back to that core Work business. So, I think that brand is doing the right things. We're certainly pleased by the early results, some of the metrics that we're seeing beyond just the P&L. You know, consumer interest and Google search interest, I think those things are positive. At the same time, we acknowledge there's more work to go do, and we don't expect it to be a perfect linear path from here on out. But with all that said, I remain enthusiastic about that team, the work that we're going to go do, and certainly what a healthier Wolverine brand and a healthy Work group can mean for the greater portfolio.

Ashley Owens

Got it. And then on Sweaty Betty, with the UK DTC business now growing multiple quarters, you mentioned that international wholesale is strong. I would just be curious as to which strategy is working best today. And then just given the comments on the business growing, if we had exclude the U.S. part of that. Now the reset started 3Q last year. We'll just be curious at what point the reset becomes small enough that that underlying growth we're seeing internationally really begins to shine through and then maybe just quickly on Saucony to put a bow on things here, but with the mention of the Lifestyle door count being flat, brand outlook moved up. Is the implication there that you're seeing stronger productivity within the existing accounts in the back half?

Christopher Hufnagel

Yes, great couple of questions there. I'll hit Sweaty Betty first. You know we really worked hard really about a year ago this time on a strategy for that team, spent a lot of time in London with that leadership team and really came down to several key moves that we had to go do. And really sort of doubling down on what we thought was most important and that team has done that work and executed with great determination, and I'm encouraged by some of the early results. And we're seeing some improvements in our UK direct-to-consumer business, and that is a little bit of a challenged market right now, just in general, that consumer, but pleased with the performance, both at sweatybetty.com as well as in our stores. I'm really pleased by the evolution of the product pipeline, diversifying beyond just the leggings business, more bottom silhouettes, mid layers, the outerwear has been very good. And then really sort of taking back its rebellious voice and having a distinct point of view in a very competitive market. So really well done there.

We finished the integration of Sweaty Betty into the Wolverine portfolio last year. And part of that was to plug their business into our international 3P market, versus trying to go do it ourselves around the world. And that has sort of paid off with some early gains, encouraged by some of the recent progress seen across Europe and into Asia Pacific. And I'm excited about the prospects for what that can mean for that business as well. The U.S. reset that really began to happen in the third quarter of last year. And we will shortly lap that, which will provide some easier comparisons. So I remain optimistic about where Sweaty Betty is, the improvements we've made. All of that said, they operate in an attractive yet fiercely competitive category, and the UK market certainly has been under a little bit of pressure over the past handful of months, but optimistic about the new strategy. The early results that we're seeing, every time I'm with that team, I think the product gets better and better and really pleased with the stories they're telling in the marketplace. And I think that team does a good job as anyone driving the business each day. So pleased with Sweaty Betty progress.

And then as relates to Saucony U.S. lifestyle, we did talk about that door counts are about where we had anticipated them to be when we spoke to you last, but we are encouragingly, we are seeing the inventory in the channel begin to clear and we are seeing those doors being more productive. And that's an important piece. We want to run productive doors. We want to drive sell-through. We want to operate with a pull model. And I think we're working hard to optimize that business. And even with where that U.S. lifestyle was the last couple of quarters, really pleased that we can post growth and certainly raise our outlook and our optimism for the back half of the year after what we've seen in the first half of the year.

Operator

Your next question is from the line of Tom Nikic with Needham & Company.

Tom Nikic

I want to ask another Saucony question. I guess when we think longer term about the opportunities for the brand, even with the strong performance over the last couple of years, it's still quite a bit smaller than a lot of other peers in the space, which would suggest there's quite a bit of runway for growth over the long run. Like where do you think the long-term opportunities lie? Is it shelf space gains? Is it door count increases? Is it category expansion? Would love to get some color there.

Christopher Hufnagel

Yes, thanks for the question. And we agree with you. Even with the great performance of the Saucony team over the last handful of years, '25 being a record year, we still view ourselves as a small challenger brand in a very attractive category. And that gives us both optimism and drive to go be bigger and better. And I think Saucony possesses some amazing attributes. A century old brand, one of the OGs, known for innovation, loved by serious elite runners. Known for bringing great products to market. At the same time has been able to tap into the intersection of Performance run and Lifestyle culture in a very special way and doing it in a very sort of unique way in an authentic way and I give that team a lot of credit for what they've done. So the ability to grow both Performance run, more Casual run, Lifestyle run, and then sort of grow street and fashion, I think that is an amazing, amazing opportunity ahead of us.

And we're not sitting back, feeling good about what we've done the last couple of years, we look out and see what the opportunity can be. And importantly, it's not just a one region story. We're seeing a really strong pickups in markets like Europe, which I previously mentioned. We have a great partner in China, an expert there who's helping us grow that business. I was in Tokyo a few months ago and saw Saucony on the streets in Harajuku. And it really gives us a lot of confidence. And I even mentioned today, apparel and accessories opportunity beyond just footwear, tapping into the Sweaty Betty team, tapping into the collective genius of the broader corporation to bring products to market. So excited about what that opportunity can be. We're going to test that and learn and then go from there. So I agree with your premise is that despite the success we've had, it's still relatively small. I would agree with that. And certainly if you believe the total addressable market, the size of our competitors, it's our job to go chase that growth right now in a responsible way. And that's what our team is heads down trying to do.

Operator

Your next question is from the line of Dana Telsey with Telsey Advisory Group. Your line is now open. Please go ahead.

Dana Telsey

Nice to see the progress. As you think of product, whether it's core versus innovation and newness, what should it be for each of the brands? Where do you expect it to go? And what does that mean from a price and margin standpoint? You mentioned apparel and other categories, does that become a bigger role given what you've learned from Sweaty Betty?

Christopher Hufnagel

Thanks, Dana. I think innovation is paramount in our business. Someone once told me, if you've got the right product, everything else matters. If you don't have the right product, nothing else matters. And I think that was true then, and it's true now. So truly innovation is critically important. I would say it varies a little bit by the categories in which we plan. I think there's a different expectation maybe in work versus outdoor versus run versus apparel like Sweaty Betty. But first and foremost, you have to bring great products that are driven by consumer insights that solve consumers' problems that are priced right and placed right within the marketplace. And I think if you look at where we're winning today and not just Wolverine brands, but the broader category is sort of brands that can do that. Brands that bring great products, that's visually distinctive, that helps solve consumers' problems that are placed right and priced right. I think those brands will continue to win in any environment.

I think too about our ability to grow and the responsibility to drive growth for the company. I would think about how we've shaped the portfolio over the past couple of years, brands that we have divested of and brands that we've chosen to double down on. We've chose brands that we thought would be aligned well with consumer and macro trends. I think that is playing out. The categories which we play in are some of the healthier categories in footwear and apparel today. And that's where our brands and our company is focused. And importantly, not only did we do that reshaping the portfolio, we work to distort resources towards we thought were the highest, fastest value adds first. And you can see sort of what Saucony has been able to do and how Merrell has been a fast follower. So at the same time, all of that, I also think we've worked hard to make our brands more premium, bringing more innovation, telling better stories, placing them in the right doors.

And then I think we can talk about what price they can be placed at and then obviously what the margin implications are. As far as apparel and accessories, I do think that remains an opportunity for us and I think we've learned a lot for what Sweaty Betty has brought to the business and I certainly think Saucony has an opportunity to play there in a bigger way and leveraging the expertise of the Sweaty Betty brand to help a very good Saucony product team. I can't wait for that test to come live and hopefully there's something there that we can go chase to be another growth lever for the company and the brand moving forward.

Operator

Your next question is from the line of Anna Andreeva with Piper Sandler.

Anna Andreeva

Congrats, really nice results. We wanted to follow up on SG&A. Taryn, really tightly managed dollars up only 2% and 3Q guide assumes something similar. Just to double check, were there any timing shifts within that and should we think that very low single digit growth is the right way to think about SG&A growth going forward? You mentioned higher freight. I'm not sure if you quantified that impact in 2Q and what should we expect for 3Q?

Taryn Miller

Yes, thank you Anna. The SG&A, I wouldn't call out any timing. If you look at the Q2 performance, the SG&A was really a reflection. The improvement there was driven by stronger revenue, so we were able to get leverage from the revenue beat flowing through in SG&A. So I wouldn't call out any timing as it relates to the second quarter performance. When we look at the balance of the year, at the midpoint of our '26 guidance, our implied SG&A as a percentage of revenue is largely consistent with what we said in May. And that reflects a decrease of around 130 basis points to last year. And as we -- consistent with what we said in February as well as what we said in May, is we're continuing to invest in our brand. Chris talked about the growth enabling capabilities, whether it be in marketing, the Key City activations, digital initiatives. And so we do continue to invest in those areas and remain disciplined across the rest of the cost structure. And that is helping improve the profitability of what we've seen year to date and expect for the balance of the year. We did not quantify. Sorry, you asked about oil. We didn't quantify it. I would say it was modest is how I would describe it. Certainly we would expect it to be a bit more in Q4 than in Q3, but just given the revenue and the shipments, particularly in e-commerce in the fourth quarter, but I wouldn't, I'd still describe it as modest.

Anna Andreeva

Okay, that makes a ton of sense. And just to Chris on the DTC versus wholesale dynamic across the brand. So DTC has been coming in more muted for a few quarters now. And I know you've been focused on driving more of that full price business. So that's been a headwind. But do you expect DTC to bounce back in the guide? And where are you with refocusing on full price across the brands at this stage?

Christopher Hufnagel

Yes, thanks Anna. I appreciate the question. Yes, DTC is a significant focus for us these days and how we can get that business moving the way the rest of the organization is. I think the story is a little bit different by brand. We're really pleased with the progress we've made in Saucony and seeing good growth in our DTC channel there. Sweaty Betty obviously is hampered by the U.S. reset, which we will very quickly lap. And then we previously talked about Merrell. We are really focused on both being -- working to become less promotional, having a higher full price mix, and then telling more frequent better stories in our online channels. At the same time, really being thoughtful about how we're spending money up and down the funnel and where we choose to spend that. So we acknowledge that there's more work to go do in DTC. But certainly I'm pleased with the progress overall in total. And I do think we're taking the right steps to get that business checking the way most of the rest of the company is checking. Obviously entering an important holiday selling season in the next few weeks as we work towards the end of the year. So we are very focused on improving the DTC performance overall. But at the same time, really pleased with where our brands sit in general.

Operator

Your next question is from the line of Sam Poser with Williams Trading.

Samuel Poser

Just 2 questions or 3 questions. One, was how much the -- was the international business better than you anticipated? And if so, did that -- like how -- with the gross margin, did the mix of business by geography help your gross margin more? And is that anticipated to continue? If I'm -- am I thinking about that right?

Taryn Miller

What was your second question on margins?

Samuel Poser

Well, the mix of -- your geographic mix of business, international is generally higher margins than domestic. So was the international business better than you anticipated? And if so, how much did that help the gross margin in the quarter and how much of that is built into the increase of the gross margin guidance for the year?

Taryn Miller

Yes, and I appreciate the question. Geographic mix is as anticipated. I wouldn't call it a driver for Q2 nor for balance of year.

Samuel Poser

Okay, and then secondly, your inventory levels. How much of that was a timing shift relative to something showed up on July 1st, rather than June 30th? And if we looked at inventories, let's say, today, what would that -- like what would it look like on a year-over-year basis?

Taryn Miller

Yes, the timing shifts, there's 2 pieces within the timing shift. There was a piece that related to last year, frankly was one of them in terms of the receipt last year versus receipts this year. And then there was some between what I would call, to your point, between, call it, June and July in terms of a delta. So the timing shift is across both of those components. I think that what I want to stress though, which I said earlier when Peter asked the question, we are confident that with the inventory that we have and that the inventory that we're receiving, that we are supporting the higher growth. And to put a finer point on that, I've talked before about, for example, Wolverine, we had more work to do to get that inventory in a better place. That was one of the drivers of the decline we saw from the more efficient versus some of the more timing piece was more in Sweaty Betty and Merrell. Saucony was not a driver of the decline in terms of the inventory. And when you think about where our raise is for the balance of the year on Saucony and the brands in total, we are confident we have the right inventory to meet that demand.

Samuel Poser

Okay. And then lastly, Chris, with Merrell, what percent of sales is the Lifestyle business now, and where do you see that going over the next few years?.

Christopher Hufnagel

Yes, good question. Lifestyle is approximately less than a quarter of the total business today, but we certainly see that as an opportunity for us. And I guess part of the pivot we're trying to make with that brand is obviously maintain our dominance on the trail. And I think that that's coming through in our market share gains and how we're seeing that business. At the same time, the broader outdoor lifestyle opportunity beyond the trail and then specifically with her. I want to make sure that I emphasize the focus that we can have a better split between him and her and what that opportunity presents for the brand. So I think there is ample opportunity if we can crack into that lifestyle piece in a more meaningful way and then certainly bring trend-right, colored-right, priced-right products that solve problems for her, and then make sure they show up in channels where she shops. And that's what I think the team is really focused on. So I'm optimistic both about protecting that core business, which we've done a nice job of, and then a broader lifestyle opportunity, which I think provides a lot of runway for the business beyond where we are today.

Samuel Poser

Just quick follow up, the guidance and again, the results in the second quarter. Did the Lifestyle growth, even though it's smaller, outpace the Performance growth or can you give us some breakdown there?

Christopher Hufnagel

I would say we saw a lot of strength in Performance in the quarter. I think that came through in the market share gains. We talked about increases in the classic Moab 3. We talked about the Moab Speed 2 with 3 styles in the top 10. And certainly if you think about the broader Merrell business beyond just the U.S., it very much is a Performance brand in many other parts of the world. So pleased with the progress in Merrell in total. We believe there's a very strong opportunity in Lifestyle, but the Performance piece showed particular strength in the previous quarter.

Operator

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.