Alexia Morgan

Alexia Morgan, on behalf of Peter Keith, questioned the confidence in driving long-term EBITDA margin expansion while maintaining steady unit growth, given the typical margin drag from new store openings, and asked about specific offsetting efficiencies. She also requested further details on the drivers of U.S. sales acceleration and the rationale behind the Canada forecast.

Answer

CFO Michael Maher explained that confidence in EBITDA margin expansion stems primarily from the continued maturation of new stores, which will increasingly provide a tailwind as they enter their third, fourth, and fifth years. He cited Q4 performance as evidence of this trend and mentioned ongoing innovation for additional long-term benefits. COO Jubran Tanious attributed U.S. sales acceleration to secular trends, strong selection, value, and an exceptional brick-and-mortar experience, supported by growth in younger and higher-income customers. CFO Michael Maher added that the Canada forecast is conservative (flat to low single-digit comp), reflecting a stabilized but weaker economy, while COO Jubran Tanious highlighted Canada's progress in Q4 towards increased segment profit growth and strong free cash flow in a modest comp environment.

Alexia Morgan asked about the company's confidence in driving EBITDA margin expansion longer-term while maintaining steady unit growth, given the typical margin drag associated with new store openings, and if there are specific efficiencies that might offset this pressure. She also requested more detail on the specific drivers of U.S. sales acceleration and what informs the Canada forecast going forward.

Answer

Michael Maher (CFO) explained that confidence in long-term margin expansion stems from the continued maturation of new stores, which will provide a growing tailwind as they enter their third, fourth, and fifth years, offsetting the impact of new openings. He cited Q4 performance as a near-term proof point. Jubran Tanious (COO) attributed U.S. acceleration to ongoing secular trends, terrific selection and value, an exceptional brick-and-mortar experience, and the increasing presence of younger and higher-income customers. Michael Maher (CFO) added that the Canada forecast is conservative, reflecting a stabilized but weaker economy compared to the U.S.

Alexia Morgan asked for elaboration on the favorable sales mix driver for 2026 EPS growth and whether metal margin expansion is expected to benefit all of 2026 or be concentrated in Q1. She also inquired about organic growth assumptions by segment and quarter, specifically if sales trends are expected to improve as the year progresses or remain steady. Lastly, she sought early reads on Q1 mattress industry trends and longer-term growth drivers for the bedding segment, including their expected contribution timeline.

Answer

Tyson Hagale (President of the Bedding Products segment) and Ben Burns (CFO) explained that metal margin expansion assumes a continuation of Q3 and Q4 2025 steel economics throughout 2026. Favorable sales mix in bedding is driven by traded rod and wire, and improving mix within the US spring business. Ben added that operational efficiency improvements, primarily in bedding, and additional restructuring benefits will also contribute to higher EPS. Ben stated that while normal seasonality is expected (Q1 and Q4 lower, Q2 and Q3 stronger), organic growth is generally anticipated to be "pretty ratable" over the year. Tyson and Ben noted that Q1 mattress trends have been impacted by recent weather events, affecting retail activity and facility operations, with an expected catch-up. Longer-term bedding growth drivers include housing, consumer confidence, and general affordability.

Alexia Morgan inquired about the 2026 EPS growth drivers, specifically asking for elaboration on the 'favorable sales mix' and how to assume the duration of 'metal margin expansion' benefits. She then asked about organic growth assumptions by segment by quarter, and whether guidance assumes any business segments see sales trend improvement as the year progresses. Finally, she asked for management's view on mattress industry trends for Q1, including any early reads, and longer-term growth drivers for the bedding segment, and when those are expected to contribute.

Answer

President of Bedding Products Tyson Hagale stated that the guidance assumes a continuation of steel economics from Q3 and Q4 of the prior year, providing a full-year metal margin impact in 2026. He noted favorable mix in bedding comes from traded rod and wire, and improving mix within the U.S. spring business. CFO Ben Burns added that operational efficiency improvements, primarily in bedding, and additional restructuring benefits will contribute to higher EPS. Ben Burns also mentioned that normal seasonality is expected, with Q1 and Q4 generally lower, and Q2 and Q3 stronger, but organic growth is generally pretty ratable throughout the year. Tyson Hagale noted that early Q1 mattress industry trends have been impacted by significant weather events, expecting a catch-up, and highlighted housing, consumer confidence, and general affordability as key long-term recovery drivers. Ben Burns added that Q1 could be more impacted by weather.

Alexia Morgan asked about the sequential improvement observed in the home furniture business, with volumes down 5% in Q3 compared to 12% in Q2, and sought interpretation on whether this indicates an underlying improvement in the broader category. She also inquired about shifts in end customer behavior across different price points within furniture and the drivers behind the significant drop in steel rod volume in the bedding segment.

Answer

EVP, President of Specialized Products and Furniture, Flooring and Textile Products Sam Smith explained that the Q3 home furniture performance reflected a normalization after April 2nd tariffs, with unit volume declines aligning with broader market data. He confirmed that higher price points in furniture remain stable while lower price points face pressure. EVP and President of Bedding Products Tyson Hagale clarified that the steel rod volume drop was primarily due to the elimination of billet sales in Q3 2025, which were strong in Q3 2024, noting stable trade rod volumes and a positive mix shift.

Alexia Morgan inquired about the significant drop in Leggett & Platt's bedding segment steel rod volume, which inflected negative to down 20% in Q3, and asked for the drivers behind this inflection.

Answer

Tyson Hagale, EVP, President of Bedding Products, clarified that trade rod volumes were stable, and the drop was primarily due to the elimination of billet sales. He explained that last year, they sold billets to keep the rod mill operating and employees employed, but this year, internal and external demand did not necessitate billet sales. He added that the trade rod mix was strong, trending towards high carbon, which was positive for profitability. Karl Glassman, President and CEO, emphasized that selling billets is non-value added compared to selling rods.

Alexia Morgan asked if Boot Barn is reevaluating the long-term potential of the work boots category given its strength in the quarter and new strategies, and if other categories could be similarly optimized. She also inquired about the recovery status of stores impacted by winter storms and whether past storm-related sales are typically recovered or eliminated.

Answer

CEO John Hazen expressed satisfaction with work boots' mid-single-digit comp, attributing it to marketing and remerchandising efforts, but noted it's a stable, needs-based business unlikely to see outsized growth. He mentioned looking at other categories for improvement but kept specifics confidential. CFO Jim Watkins stated that stores are recovering from the winter storms, but sales lost due to storm closures are typically not recovered.

Alexia Morgan asked if the company is reevaluating the long-term potential of the work boot category given its recent strength and new strategies, and if other categories could be optimized similarly. She also inquired about the recovery of sales impacted by winter storms and whether such lost sales are typically made up or eliminated.

Answer

CEO John Hazen expressed satisfaction with the mid-single-digit comp in work boots, noting its stable, needs-based nature, and did not foresee outsized growth. He mentioned opportunities in other categories but kept them confidential. CFO Jim Watkins stated that business is recovering from the winter storms, but sales lost due to such events are typically not recovered.

Speaking for Peter Keith, Alexia Morgan of Piper Sandler Companies asked about the drivers of the promotional Drinkware environment and whether recent product success was due to a specific focus on female consumers.

Answer

CEO Matt Reintjes attributed the promotional environment to market-wide inventory cleanup by competitors, noting YETI's strategy is to diversify its portfolio beyond these trends. CFO Mike McMullen confirmed guidance assumes this pressure continues in Q3. Reintjes clarified that recent product success, including the Camino bag, reflects broad-based appeal across all demographics, not a specific gender-focused strategy.

Alexia Morgan, on for Peter Keith, asked about the potential positive impact from the ending of the de minimis exemption affecting competitors like Temu and Shein, and whether Overstock's closeout-focused model could be hindered by suppliers holding onto non-tariff inventory.

Answer

Executive Chairman Marcus Lemonis responded that he expects more, not less, opportunity for closeout inventory as other large retailers struggle. President and CFO Adrianne Lee addressed the competitive question, noting that competitors like Temu are reducing performance marketing spend, creating an opportunity for Beyond to capture attention. Marcus Lemonis added that Beyond does not sell the same type of 'junk' products.

Alexia Morgan, on behalf of Peter Keith, inquired about the 'dead rent' dynamic, its impact on earnings flow-through from 2025 to 2026, and how the new Big Lots stores are expected to perform compared to the successful 99 Cents Only acquisitions.

Answer

Executive Robert Helm clarified that while dead rent on acquired stores pressures near-term earnings, it should lead to stronger, mid-to-high teens earnings growth in 2026 due to below-market rents. Executive Eric van der Valk expressed high confidence that the Big Lots conversions will be as strong or stronger than the 99 Cents Only stores, citing the benefit of acquiring 'warm boxes' with an existing value-oriented customer base.

Alexia Morgan, on for Peter Keith, asked about the promotional environment in Q1 and the outlook for franchise unit growth towards the company's 2027 target.

Answer

CEO Lori Flees stated there has been no significant change in the competitive promotional environment, attributing performance to the brand's quality and customer experience. On franchise growth, she expressed high confidence in reaching the goal of 250 total new units by fiscal 2027 (150 from franchisees), citing strong partner engagement, upsized development agreements, and a robust new unit pipeline.

Alexia Morgan, on for Peter Keith of Piper Sandler, questioned the company's exposure to China, its strategy to mitigate tariff risk, and the drivers of gross margin expansion, including the reason for an implied Q4 decline.

Answer

CEO Jeremy Andrus detailed that while about 80% of grills are made in China, the company is actively diversifying its supply chain with a new partner in Vietnam and has sourcing optionality. CFO Dom Blosil explained the implied Q4 gross margin decline is due to product mix and normal holiday promotions, noting Q3 benefited from a one-time 110 basis point credit that will not repeat.

Alexia Morgan, on behalf of Peter Keith at Piper Sandler, asked if Floor & Decor has noticed any impact on big-ticket sales from 'election distraction' and if there is a discernible sales opportunity from the recent Lumber Liquidators store closures.

Answer

President Trevor Lang stated that the company has not yet seen an impact from election distraction, noting that quarter-to-date comps have improved. CEO Tom Taylor commented that the Lumber Liquidators closures are a net positive, creating an opportunity to capture displaced business and hire affected associates. He expressed confidence that Floor & Decor's superior offering positions them to be a beneficiary.