Anthony Chukumba • Loop Capital Markets LLC

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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President and CEO Steven Michaels expressed strong optimism about the American Signature partnership, expecting to at least replace the volume the retailer had with its previous provider in 2025. Regarding credit tightening, Michaels revealed that approval rates in Q4 and year-to-date are approximately 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.

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CFO Brian Garner clarified that two dynamics are at play: while the trade-down cohort performs well, the broader portfolio has experienced a slight increase in delinquencies, keeping the overall write-off rate at a normalized 7.7% for Q3. President and CEO Steve Michaels noted there was no specific update on the large partner pipeline but mentioned that recent industry conference appearances with partners like Lowe's and Best Buy are building positive momentum.

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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.

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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.

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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.

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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.

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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.

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CFO Melissa Rasmussen explained that the margin expansion is primarily driven by the new $12 million in SG&A expense reductions, which were not factored into the prior 'flat' margin commentary. CEO Reade Fahs added that remote exam technology is now fully integrated into the business and will no longer be discussed as a separate initiative, as it's now a standard part of their operational toolkit.

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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.

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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.

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