VSXY: Digesting the Print Post Rally; Top Line Sustainable, Digging Through Tariff Math, Remaining OW

Research evidence excerpt

VSXY: Digesting the Print Post Rally; Top Line Sustainable, Digging Through Tariff Math, Remaining OW

as VSXY is now benefitting from ~$65M in favorable Prior NC 0.76 E (0.03) E 3.19 E 4.52 E

tariff dynamics (vs. 3 months ago). One key driver of that upside is the assumption that 2027E 0.59 E 0.95 E 0.31 E 3.58 E 5.42 E

tariff rates stay at 10% until the end of July, and then revert-back to 20% after. However, Prior 0.62 E 0.93 E 0.07 E 3.65 E 5.25 E

we believe that 2/3rds of the favorability (or ~$40M of the $65M) is actually more of a

Source: Company Data, Wells Fargo Securities estimates, and Factset.

one-time benefit that will reverse out in 2027. NA = Not Available, NC = No Change, NE = No Estimate

Ike BoruchowMore on The Tariff "Swing Factor" to Consider. We see ~$40M of the FY benefit relating Equity Analyst | Wells Fargo Securities, LLC

to the estimated impact of their DCs being FTZs (in Free Trade Zones), and the timing of Ike.Boruchow@wellsfargo.com | 212-214-8024

the Supreme Court ruling which in effect resulted in a 0% IEEPA tariff on inventory in the Juliana Duque

FTZs at that time. A portion of this benefit hit 1Q ($16M), the largest portion will hit 2Q Associate Equity Analyst | Wells Fargo Securities, LLC

and then less so in 3Q as they turn inventory. So essentially, 1Q-3Q GMs in 2026 will be Juliana.Duque@wellsfargo.com | 305-329-6767

inflated due to the 1x nature of the benefit. Paul Kearney

Associate Equity Analyst | Wells Fargo Securities, LLC

How To Think About 2027. Based on our math, if rates go back to 20% (as VSXY is Paul.D.Kearney@wellsfargo.com | 212-214-4837

planning) - this creates a ~$40M headwind to 1H27 GMs. We now model a 80-100bps Robert Bischoff

headwind to GM in both 1Q27 and 2Q27.