Anthony Chukumba

Anthony Chukumba asked about the composition of Ollie's increased seasonal merchandise and expanded holiday gift program, specifically whether these items are primarily direct sourced from Asia or closeouts. He also inquired about the margin implications of direct sourcing versus closeouts for these categories.

Answer

President and CEO Eric van der Valk clarified that seasonal gifts are a combination of direct source and closeout, with seasonal items tending to be more direct sourced. He noted that this year saw a higher percentage of closeouts in seasonal due to retail bankruptcies and store closures. While gifts tend to be more produced, he stated that Ollie's increased size and scale allow it to buy these products at even better margins, indicating that direct sourcing is not a headwind to margins.

Anthony Chukumba inquired about the composition of seasonal and holiday gift merchandise, specifically if it's primarily direct-sourced from Asia versus closeouts, and the margin implications of direct sourcing.

Answer

Eric van der Valk (President and CEO) clarified that seasonal and holiday gifts are a combination of direct source and closeout, with seasonal having more closeouts this year due to retail bankruptcies. He noted that while gifts tend to be more produced, the increased size and scale allow for better margins on direct-sourced products, making it not a headwind.

Anthony Chukumba asked for an update on Ollie's strategy of buying consumables directly from major CPG manufacturers, noting that consistent availability of items like Tide Pods drives traffic and treasure-hunt sales.

Answer

Executive Eric van der Valk affirmed that these relationships continue to be strong and that Ollie's scale and balance sheet make it an attractive, simple solution for CPG companies looking to move excess inventory. He added that consolidation in the closeout space has increased the availability of such products, aligning well with current consumer demand.

Anthony Chukumba asked about any notable physical differences, such as size or location type, between the acquired 99 Cents Only and Big Lots stores versus the core Ollie's base. He also asked for the comp impact of the flyer shift.

Answer

CEO-elect Eric van der Valk noted the 99 Cents stores were slightly smaller than the Ollie's average, while the Big Lots stores have similar gross footage but larger backrooms, resulting in slightly smaller selling areas. CFO Robert Helm reiterated the flyer shift was a sub-100 basis point headwind in Q3 and is expected to be a 100 basis point benefit in Q4.

Anthony Chukumba from Loop Capital Markets LLC asked if the new Ollie's Army night was a reaction to slow seasonal sales and requested an update on building direct relationships with CPG manufacturers.

Answer

CEO Eric van der Valk clarified the new event was a strategic decision made in January to enhance the loyalty program and is unrelated to current seasonal performance. He also confirmed that relationships with CPG companies continue to expand and strengthen, benefiting from market disruptions including, but not limited to, the situation at Big Lots.

Anthony Chukumba inquired about the acceleration of Ulta Beauty's two-year stack comp performance for the second consecutive quarter, asking how much of this was driven by product newness, better in-store execution, or improved promotions, and the role of overall industry growth.

Answer

President and CEO Kecia Steelman attributed the strong performance to a combination of factors, emphasizing that the company is 'hitting on all cylinders' with a clear plan. She highlighted four key areas: merchandising (gifting, fragrance, holiday exclusives), digital capabilities, amplified marketing (new brand equity campaign), and operational excellence (in-stocks, guest satisfaction, delivery speed).

Anthony Chukumba asked for a stack-ranking of the key drivers behind the company's impressive sequential improvement in performance, questioning the relative impact of promotions, merchandising changes, and partnerships like 'Wicked' and 'Mini Brands'.

Answer

CEO Dave Kimbell responded that there was no single driver, but rather a holistic effort. He highlighted several key factors: 1) Strong assortment newness and exciting collaborations; 2) Improved promotional effectiveness by strengthening tentpole events and using personalization; 3) Enhanced customer experience and conversion in-store and online; and 4) Overcoming system disruptions from the prior quarter. He stressed that while pleased, the team knows more work is needed.

Anthony Chukumba asked for a stack-ranking of the key drivers behind the impressive sequential improvement in performance, questioning the relative impact of promotions, merchandising changes, and exclusive partnerships.

Answer

CEO Dave Kimbell stated there was no single driver, attributing the improvement to a holistic effort. He highlighted several factors: newness in assortment and collaborations like 'Wicked'; more effective promotions based on Q2 learnings; and operational execution to improve conversion, including resolving prior system disruptions. He emphasized it was a broad-based effort across the organization.

Anthony Chukumba asked for a breakdown of the comp split between traffic and ticket, specifically how much of the ticket growth was attributable to price adjustments versus a mix shift towards higher-priced items, particularly those above $5.

Answer

CEO Winnie Park confirmed the equal split between transactions and tickets. She explained that higher Average Unit Retail (AUR) was driven by a strategic pricing strategy (simplification of price points) and, significantly, by double-digit growth in items above $5. This growth was fueled by smart pricing decisions, packing value into products, and strategically placing these items in-line within departments rather than in a separate 'Five Beyond' area.

Anthony Chukumba from Loop Capital Markets asked about the potential opportunity for merchandise related to the 'K-pop Demon Hunters' trend for Halloween and Christmas, and whether it could be as significant as the 'Frozen' trend was in the past.

Answer

CEO Winnie Park recognized the explosive popularity of the trend and confirmed the teams are actively pursuing it, though product is still being chased. She framed it as part of a broader cultural zeitgeist, highlighting the growing influence of Asian culture in categories like food and beauty, which the company is closely following.

Anthony Chukumba from Loop Capital Markets LLC asked about the cadence of comparable sales during the first quarter and if there was any noticeable acceleration after Easter.

Answer

CEO Winnie Park noted that comps improved month-over-month, and after accounting for the Easter shift by viewing March and April together, the business continued to see strong performance. She confirmed that the comp rate continued to accelerate on a week-by-week basis coming out of the holiday period.

Anthony Chukumba of Loop Capital Markets asked about the issue of in-store complexity and specifically inquired if the company was reassessing its assisted self-checkout (ACO) strategy as part of its restructuring efforts.

Answer

Interim President and CEO Kenneth Bull confirmed they are addressing store complexity. Regarding ACO, he clarified they are shifting from a recent shrink-mitigation tactic of associate *scanning* at checkout back to an associate *monitored* process. He believes this will be a better operational balance and is part of a broader plan to simplify store tasks and reinvest labor hours where they are most effective.

Anthony Chukumba asked for a high-level assessment of Best Buy's market share, given the recent sales acceleration and the best comparable sales in several years. He also inquired about the Nintendo Switch 2 allocations, specifically how Best Buy's allocations compared to initial expectations and its historical over-indexing on Nintendo products.

Answer

Corie Barry, CEO, acknowledged the difficulty in obtaining precise market share data but stated that Best Buy believes its share position improved over the last two quarters, estimating it as flattish to slightly up in Q3. She emphasized that share is a long-term game and that current initiatives are driving sustainability. She noted strong performance in computing and gaming, with TV unit share now positive, and the marketplace bolstering their share view. Jason Bonfig, Chief Customer Product and Fulfillment Officer, expressed satisfaction with Switch 2 allocations, noting that units in the market are higher than for Switch 1, allowing them to come closer to meeting customer demand. He also highlighted the broader growth in handheld gaming from other brands like Asus and Lenovo, which is compensating for slowing sales in traditional consoles. Corie Barry added that Best Buy's ability to deliver strong retail experiences contributes to favorable allocations.

Anthony Chukumba asked for a high-level assessment of Best Buy's market share, considering the recent sales acceleration and the best comparable sales in several years. He also inquired about the company's Nintendo Switch 2 allocations relative to initial expectations and its historical tendency to over-index on Nintendo products compared to PlayStation and Xbox.

Answer

Corie Barry, CEO, stated that based on triangulated data, Best Buy believes it has improved its market share position over the last two quarters, estimating it was flattish to slightly up in Q3, with strong performance in computing and gaming, and positive TV unit share. She noted that the marketplace is bolstering their share outlook. Jason Bonfig, Chief Customer Product and Fulfillment Officer, expressed satisfaction with Switch 2 allocations, indicating the company's ability to meet customer demand more closely than with Switch 1. He highlighted strong holiday demand for Switch and overall growth in handheld gaming, including new products from ASUS and Lenovo, which are compensating for slowing sales in traditional PS5 and Xbox consoles. Corie Barry added that Best Buy's ability to deliver exceptional retail experiences contributes to favorable allocations.

Anthony Chukumba asked how Best Buy's positive Q4 comparable sales growth compared to the broader industry and whether the company gained market share. He also inquired about the anticipated impact from upcoming gaming launches like a new Nintendo console and GTA 6.

Answer

CEO Corie Barry responded that based on their internal analysis, market share was flattish in Q4. However, for the full year, she noted share gains in computing and gaming, highlighting that the company reached a 30-year high in gaming console share. EVP Jason Bonfig added that the company is actively preparing for new gaming launches by modifying store layouts to capitalize on the excitement, which is expected to drive sales of hardware, accessories, and the games themselves, particularly in the back half of the year.

Anthony Chukumba asked for commentary on the performance of the mobile phone category, specifically regarding the impact of new AI-optimized models.

Answer

CEO Corie Barry reported that mobile phone trends improved slightly in Q3 versus Q2, though they were still down year-over-year. She believes it is still the early stages for AI's impact on phone sales, with much of the innovation yet to come. SVP of Customer Offerings & Fulfillment Jason Bonfig added that a key trend is the customer shift toward purchasing premium, unlocked phones, which is supported by in-store labor partnerships with carriers like AT&T and Verizon.

Anthony Chukumba asked for the identities of the three new retail partners mentioned and questioned PROG Holdings' capital allocation strategy, particularly regarding share buybacks, given the $150 million proceeds from the Vive portfolio sale.

Answer

Steve Michaels, President and CEO, declined to name the new retail partners but described them as 'recognizable logos' and 'super regional' in size, expecting them to be building blocks for 2026 GMV. Brian Garner, CFO, reiterated PROG Holdings' capital allocation priorities: funding organic growth, pursuing strategic M&A, and returning excess capital to shareholders through repurchases and dividends. He noted the company's comfortable net leverage ratio and commitment to being good stewards of capital.

Anthony Chukumba asked for the names of the three new recognizable retail partners mentioned and questioned the capital allocation strategy, particularly regarding share buybacks, given the $150 million proceeds from the VIVE divestiture and the company's strong balance sheet.

Answer

Steve Michaels, President and CEO, declined to name the new retail partners but confirmed they are recognizable logos and competitive wins, expected to be building blocks for 2026 GMV. Brian Garner, CFO, explained that the company's capital allocation priorities remain unchanged: first, funding organic growth (including working capital for leasing and Four Technologies); second, pursuing strategic M&A synergistic to their ecosystem; and third, returning excess capital to shareholders through repurchases and dividends. He noted the 1.1x net leverage ratio was prior to the VIVE sale and that the company now has more capital to deploy within these priorities.

Anthony Chukumba of Loop Capital Markets LLC asked how the American Signature (ASI) partnership was ramping relative to expectations and requested an update on efforts to retain former Big Lots customers.

Answer

CEO Steven Michaels reported that the ASI partnership is ramping as expected relative to underlying business trends and the company is pleased with the balance of sale performance. On Big Lots, he confirmed that targeted marketing campaigns are in place to convert those customers to other partners or the Prog Marketplace, noting the company is now much more effective at these retention efforts and is seeing success.

Anthony Chukumba requested the order of magnitude for the reduction in lease approval rates, how that contrasts with application volume, and a clarification on the year-over-year growth of gross lease assets.

Answer

CEO Steven Michaels stated the approval rate was 300-400 basis points lower year-over-year, attributing it to a combination of deliberate tightening, channel shift, and lower quality of incoming applications. He noted that application volume grew year-over-year excluding Big Lots, but conversion post-approval declined. CFO Brian Garner clarified that gross lease assets entered Q1 up 6.1% year-over-year and ended the quarter up just over 2% year-over-year.

Anthony Chukumba asked about the expected 2025 GMV contribution from the new American Signature partnership. He also requested management to dimensionalize the recent credit tightening actions, asking for specifics on changes to lease approval rates or average lease amounts.

Answer

CEO Steven Michaels expressed strong satisfaction with the American Signature partnership, stating the goal for 2025 is to at least replace the volume the partner did with its previous provider and then grow from there. Regarding credit tightening, he revealed that approval rates are currently 350 to 400 basis points lower year-over-year, driven by a combination of direct decisioning actions, channel mix shifts, and a lower quality of incoming applications.

Anthony Chukumba of Loop Capital Markets questioned why lease merchandise write-offs were not lower given the influx of higher-quality 'trade-down' customers, and also requested an update on the company's pipeline for large new retail partners.

Answer

CFO Brian Garner clarified that while trade-down customers have stronger credit profiles, the portfolio overall is seeing a slight increase in delinquencies, consistent with broader industry trends. He stressed that the 7.7% Q3 write-off rate is at pre-pandemic levels and is expected to decline in Q4. CEO Steve Michaels mentioned continued progress in discussions with potential large retail partners, citing positive exposure at recent industry events, but did not provide specific names or timelines.

Anthony Chukumba asked for an update on the expansion of the Jordan brand assortment since its launch and inquired about plans for further growth through the end of the year.

Answer

CEO Steve Lawrence explained that the Jordan assortment has expanded dramatically, with the footwear SKU count more than tripling since launch. He noted the addition of new categories like cleats and backpacks, with further expansion planned for apparel in the back half. The brand will be rolled out to more stores next spring.

Anthony Chukumba followed up on the Jordan brand, asking how its current assortment size compares to its initial launch and what further assortment expansion is anticipated for the remainder of the year.

Answer

CEO Steve Lawrence explained that the Jordan footwear assortment has dramatically expanded, more than tripling from two shoes at launch to a much broader basketball and football cleat offering. Categories like backpacks have also expanded to all doors, and apparel will see further expansion in the back half. He anticipates continued expansion in door count and SKU count through the back half and into next year.

Anthony Chukumba of Loop Capital Markets asked about traffic trends among core, lower-income customers and sought clarity on new store opening plans for next year given the pause on lease signings.

Answer

EVP & CFO Earl Carlton Ford IV explained that while the lowest-income quintiles are shrinking, this is being outpaced by growth in higher-income groups, and the core $50k-$100k customer inflected positive in April. CEO Steven Lawrence clarified that while they have paused signing new leases to assess construction costs, he does not expect a change in the overall number of openings for next year, but rather a timing shift from Q1 into Q2.

Anthony Chukumba of Loop Capital Markets questioned the drivers behind the fiscal 2025 gross margin guidance, noting the forecast for expansion despite anticipated tariff impacts.

Answer

CFO Carl Ford explained that the expansion is driven by recapturing supply chain headwinds from 2024, a higher penetration of high-margin softlines (like Nike/Jordan), and improved promotional effectiveness through new pricing tools.

Anthony Chukumba of Loop Capital Markets asked about the in-store presentation for the new Nike products and whether this enhanced partnership could help attract other sought-after premium brands.

Answer

CEO Steve Lawrence confirmed the new Nike product will be presented as a 'separate statement' with investment in its in-store presentation. He acknowledged that upgrading assortments with major brands like Nike is a 'step in the right direction' for attracting other premium brands and that dialogue with them is ongoing.

Anthony Chukumba inquired about the current competitive landscape and whether promotional activity is increasing, particularly given the financial pressure on consumers.

Answer

CEO Steve Lawrence stated that while promotions are creeping back in compared to the pandemic era, the environment is not nearly as promotional as it was pre-pandemic. CFO Carl Ford added that promotions often spike when retailers lose control of inventory, and he feels confident in Academy's disciplined inventory position, with units per store down 5% year-over-year.

Anthony Chukumba of Loop Capital Markets LLC inquired about the drivers for the year-over-year increase in the lease merchandise charge-off rate and its expected trend. He also asked for an update on the pipeline for new direct and waterfall merchant partners.

Answer

CFO Nancy Walsh addressed the charge-off rate, attributing the 50 basis point increase to normal quarterly fluctuations and noting it remains within the company's 8% to 10% target range. CEO Orlando Zayas added that June is a seasonally challenging month for delinquencies and expects performance to normalize. Regarding the partner pipeline, President & Chief Growth Officer Derek Medlin confirmed it is strong across various segments, driven by Catapult's success in delivering new customers to its merchant partners.

Asked about the reasons for the year-over-year increase in the lease merchandise charge-off rate, its expected trend for the rest of the year, and the current pipeline for new waterfall and direct merchant partners.

Answer

The company stated that the charge-off rate fluctuates quarterly and that June is a seasonally tough month, but the rate remains within their 8-10% target range and is expected to normalize. The pipeline for new merchant partners is described as very strong across various segments, driven by Catapult's strategy of introducing new consumers to its merchant partners.

Asked about the reason for the year-over-year increase in lease merchandise write-offs, the drivers of the significant EBITDA margin improvement implied in the 2025 guidance, and the specific Q4 origination growth from Wayfair.

Answer

Management stated that write-offs fluctuate within a target range and the increase was not due to a significant reason. The expected EBITDA margin improvement is driven by operating leverage from managing expenses while investing in growth areas like technology and marketing. The company did not provide a specific growth number for Wayfair but noted the trend of declining application flow continued, while the business outside of Wayfair grew by 50%.

Asked for an update on the Synchrony waterfall integration, the terms and timing of the new line of credit, and clarification on the recent increase in shares outstanding related to litigation.

Answer

The Synchrony integration is in its early stages with only pre-approval flow active; a broader plan is expected in 2025. Details on the new credit line are confidential, but the company is working to close it soon under market conditions. The share increase is due to the de-SPAC litigation settlement, separate from prior warrants issued for the credit line restructuring.

Asked about the early results of the Ray-Ban pilot program and for details on a promotion from the prior year that was not repeated.

Answer

The company reported that the Ray-Ban pilot in ~50 stores is 'super encouraging,' with the current focus being on learning how to best scale the new product category. The unrepeated promotion was a lower-priced 'Wise Buys' offer that drove low-margin traffic in the prior year. The decision not to anniversary it suppressed traffic but was a key contributor to the strong EBIT margin improvement in the quarter.

Anthony Chukumba of Loop Capital Markets expressed pleasant surprise at the positive customer traffic growth and asked for the key drivers behind it. He also requested commentary on the performance difference between managed vision care and cash-pay customers during the quarter.

Answer

Executive L. Fahs attributed the 0.7% traffic increase to the company's successful efforts to become more relevant to its target segments: managed care, outside Rx, and progressive lens customers. Executive Alex Wilkes added that managed care continues to grow in the high-single-digit range, while the cash-pay consumer remains more financially constrained, though they are also contributing to average ticket growth by trading up.

Anthony Chukumba of Loop Capital Markets asked about the drivers behind the positive 0.7% customer traffic increase and requested commentary on the performance gap between managed vision care and cash-pay customers during the quarter.

Answer

Executive L. Fahs attributed the traffic growth to the company's successful efforts to appeal to its target segments (managed care, outside Rx, progressive) and the strong resonance of its value proposition in the current economic climate. Executive Alex Wilkes added that managed care continues to grow robustly, while the cash-pay segment is more challenged, partly due to a structural shift of consumers into insured plans.

Anthony Chukumba inquired about the drivers behind the guided 50 basis points of operating margin expansion for 2025, compared to previous 'flat' expectations, and asked about the remote exam rollout plan for 2025.

Answer

CFO Melissa Rasmussen attributed the improved margin outlook primarily to the new $12 million expense reduction plan, which was not included in the prior 'flat' commentary. CEO L. Fahs stated that remote technology is now an integrated part of the business and will be deployed in new stores where allowed, but will be discussed less as a standalone initiative.

Anthony Chukumba asked for confirmation that the previously guided headwind from immature stores is still in the forecast and whether the Canadian inventory restock remains a tailwind.

Answer

CFO Michael Maher confirmed that the new store financial progression and related headwinds are unchanged from the previous outlook. CEO Mark Walsh stated that after Q2's investments, Canadian selection is now at the desired level, and they are pleased with the business momentum heading into Q3.

Anthony Chukumba of Loop Capital Markets asked for the total number of stores currently being serviced by the six Central Processing Centers (CPCs) and inquired about the maximum number of stores a single CPC can support.

Answer

CFO Michael Maher stated that 45 stores are currently serviced by CPCs. Executive Jubran Tanious explained that the maximum capacity is a 'moving target' that continues to increase as they improve efficiency, emphasizing that the primary role of CPCs is to enable new store growth in markets that would otherwise be inaccessible.

Anthony Chukumba inquired about the long-term store target for Canada given the planned slowdown in openings and asked which macroeconomic KPIs are most critical for tracking the Canadian consumer.

Answer

Executive Jubran Tanious clarified that the U.S. is the primary growth engine due to significant white space, while the Canadian strategy will shift to opportunistic infills and relocations. Executive Michael Maher identified inflation in non-discretionary categories like food, housing, and transportation as a key indicator of pressure on their core Canadian consumer, beyond general economic metrics.

Anthony Chukumba asked for a directional sense of how much processing was slowed in Canada and requested an update on the integration of the 2 Peaches acquisition.

Answer

Executive Jubran Tanious explained it's difficult to quantify the processing slowdown as it's managed on a store-by-store basis, but noted that the immediate sales improvement upon restoring production levels confirmed they had cut back too far. Regarding the 2 Peaches acquisition, Tanious reported that two of the seven acquired stores have been converted to the Savers model and are experiencing significant double-digit comp sales growth. The plan is to convert the remaining five stores over the next 12 to 18 months.

Anthony Chukumba asked for the drivers behind the year-over-year increase in Rent-A-Center's lease charge-off rate and requested an update on migrating Bridget's decisioning engine to the other segments.

Answer

CEO & CFO Fahmi Karam attributed the 50 basis point YoY increase in Rent-A-Center's charge-offs to the portfolio impact of business written before underwriting was tightened late last year. He characterized the rate as stable sequentially and within an acceptable range. Regarding Bridget's decisioning engine, he confirmed it remains a focus but is a lower priority for 2025, with a larger implementation likely in 2026.

Anthony Chukumba asked for specifics on the lower-margin products that Rent-A-Center has been exiting and the rationale behind their lower profitability.

Answer

CFO Fahmi Karam identified the products as primarily mobile phones and other handheld devices, which exhibited poor loss performance and profitability. CEO Mitchell E. Fadel elaborated that the decision was aligned with tightened underwriting standards. He also explained that mobile devices are a more suitable product for the higher-income Acima customer, and the company is now directing Rent-A-Center customers seeking these products to the Acima platform, where they can be underwritten more effectively.

Anthony Chukumba of Loop Capital Markets asked for quantification of the Acima Marketplace's GMV contribution and growth rate in 2024, as well as expectations for 2025, following the addition of new retail partners.

Answer

CFO Fahmi Karam explained that while the Acima Marketplace grew impressively at around 60% in Q4, it still represents a 'low single-digit' percentage of total Acima GMV. He emphasized that growth will be driven by the virtual lease card and the new 'lease ability engine.' CEO Mitchell E. Fadel added that he expects the marketplace's contribution to grow from low-single-digits to mid-single-digits in 2025 and eventually reach double-digits in the coming years.

Anthony Chukumba asked how the upcoming presidential election and the shorter holiday shopping calendar are factored into the company's fourth-quarter guidance.

Answer

An executive, likely CEO Mitchell E. Fadel, confirmed that these factors are incorporated into the Q4 guidance. He explained that while the shorter calendar has some impact, the strong sales period leading up to Thanksgiving mitigates it. He stated the company is likely being conservative but has strong momentum from a 25% increase in applications, which supports the outlook.

Anthony Chukumba asked for an update on how the American Signature (ASI) partnership is ramping and inquired about the success of initiatives to retain former Big Lots customers within the PROG ecosystem.

Answer

CEO Steven Michaels reported that the ASI partnership is ramping as expected and has been a great launch. He also confirmed that marketing and nurture campaigns are being used to successfully transition former Big Lots customers to other retail partners in the Progressive network, an effort the company has become much more effective at over time.

Anthony Chukumba asked for specifics on potential areas for indirect cost reductions and the targeted magnitude of these savings.

Answer

CFO Chris Miller outlined a cost efficiency program focused on indirect procurement and overall efficiencies. He cited examples like freight, supplies, IT spend, and professional fees as targets for procurement savings. He also pointed to the consolidation of Pacific Northwest warehouses as a source of efficiency but did not provide a specific savings target.

Anthony Chukumba of Loop Capital Markets asked for an update on Grocery Outlet's value proposition, inquiring if management feels it has been restored to its historically compelling levels.

Answer

SVP of Strategy and Finance Dorian Bertsch confirmed they were pleased with the value progress in Q4. She stated they are hitting their targets of 40% savings versus conventional grocers and 20% versus discounters. She highlighted significant improvement in the share of sales from 'extreme value' items (60%+ savings), which they believe translated directly into the 3% traffic increase in Q4. The focus is now on execution to get full credit for these deals.