The headline EPS result merely met expectations. Adjusted diluted EPS was $0.20 versus a published consensus of approximately $0.20, so the quarter was not a meaningful earnings beat despite GAAP diluted EPS rising to $0.43 from $0.31. The GAAP increase was largely created by the $39.4 million after-tax impact of IEEPA tariff refunds and related interest, which the company excludes from adjusted results (Adjusted diluted EPS reconciliation; Non-GAAP Financial Measures).
| Metric | Q2 FY2026 | Q2 FY2025 / expectation | Read |
|---|---|---|---|
| Net revenue | $619.6M | $569.5M | +8.8% year over year (Income Statement) |
| Gross margin | 51.5% | 46.4% | Inflated by $37.9M tariff refund (Financial Highlights) |
| Adjusted gross margin | 45.4% | 46.4% | Down 100 basis points (Adjusted gross profit and margin) |
| Adjusted EBITDA | $60.8M | $62.8M | Down 3.3%; margin fell to 9.8% from 11.0% (Adjusted EBITDA reconciliation) |
| Adjusted net income | $27.8M | $32.2M | Down 13.7% (Adjusted net income reconciliation) |
| Adjusted diluted EPS | $0.20 | $0.29 / ~$0.20 consensus | In line with consensus, down from prior year (Adjusted diluted EPS reconciliation) |
The underlying quarter was weaker than the GAAP headline suggests. Revenue grew 8.8%, but excluding the tariff refund, gross margin fell to 45.4% from 46.4%; adjusted EBITDA declined despite higher sales, and adjusted net income dropped 14%. The result points to pressure from freight normalization and the cost of opening and marketing new stores rather than broad operating leverage (Financial Highlights; Adjusted gross profit and margin; Adjusted EBITDA reconciliation).
Dilution helped obscure the earnings deterioration. Diluted weighted-average shares increased to 135.6 million from 112.8 million, reflecting the post-IPO share base. That left adjusted diluted EPS at $0.20, down from $0.29 even though revenue was materially higher (Adjusted diluted EPS reconciliation).
Guidance was maintained, but the quality of that reaffirmation weakened. Full-year revenue, comparable-sales, adjusted EBITDA, and adjusted net income ranges were unchanged, while expected pre-opening expenses increased to approximately $26 million from the prior $23–$24 million range. Net income now includes the tariff refund, but the company explicitly excludes it from adjusted EBITDA and adjusted net income, so the refund does not improve the core outlook (Fiscal Year 2026 Guidance).
The net read is modestly negative versus expectations. The reported adjusted EPS matched the published estimate and liquidity improved after receiving the $41.9 million tariff refund, but those positives were offset by lower underlying margins, declining adjusted profitability, heavier dilution, and higher planned store-opening costs. No reliable published Q2 revenue consensus was available in the materials reviewed, so the revenue result is best anchored to its 8.8% year-over-year growth rather than called a beat or miss.
Read the original 8-K on SEC EDGAR ↗