Bobby Griffin

Bobby Griffin inquired about the current competitive landscape for Murphy USA, specifically how competitive pressure has evolved over the past 6-8 months and the typical recovery time for stores impacted by new entrants to return to company-wide trends. He also asked for details on the accelerated maintenance capital spending, its role in limiting disruptions, and any potential EBITDA impact.

Answer

Mindy West, President and CEO of Murphy USA, explained that competitive pressures vary by market, with some states showing higher volumes/margins (e.g., Texas) and others lower (e.g., Colorado, Florida). New entrants typically price low for 3 months to a year to gain share, but markets eventually stabilize, leading to higher margins. She noted that the increased maintenance capital is a proactive measure to replace end-of-life equipment like dispensers and HVAC units, aiming to prevent disruptions, enhance customer experience, and save an estimated $6 million to $8 million in future maintenance expenses.

Bobby Griffin asked about the current competitive landscape, specifically if pressure is worsening or improving compared to 6-8 months ago, and the typical recovery time for stores impacted by new entrants. He also inquired about the acceleration in maintenance capital spending, its role in limiting disruptions, and any potential EBITDA impact.

Answer

Mindy West, President and Chief Executive Officer, explained that competitive pressures vary by market, with some states showing higher volumes/margins while others experience declines. New entrants typically price low for 3 months to a year to gain share, after which margins stabilize and rise. Murphy USA views competition positively as markets mature. Regarding maintenance capital, Ms. West stated it's a proactive investment in end-of-life equipment (dispensers, HVAC, safes) to improve uptime and customer experience, anticipating $6M-$8M in avoided maintenance expense.

Bobby Griffin of Raymond James Financial asked if OpEx savings were fully offsetting merchandise and volume pressures to maintain the implied EBITDA from original guidance. He also requested confirmation on July's volume recovery and any color on July retail margins, and further details on the drivers of the impressive OpEx performance.

Answer

President, CEO & Director Andrew Clyde clarified that while OpEx and G&A improvements are significant, they would not fully offset the volume and Q1 impacts if fuel margins were merely in the original range. EVP & COO Mindy West provided directional guidance for July retail-only margins to be in the 'high twenties'. Both Mindy West and Andrew Clyde detailed that the OpEx savings were driven by sustainable initiatives in maintenance, loss prevention, and labor rate management, supported by a stronger applicant pool.

Bobby Griffin of Raymond James sought to understand if the original implied EBITDA would be achievable assuming the original fuel margin range, given the offsets from OpEx. He also asked for clarification on July's volume recovery and any color on July margins, and questioned whether the strong OpEx performance was due to timing or sustainable productivity gains.

Answer

President, CEO & Director, Andrew Clyde, clarified that even with the original fuel margin, EBITDA would be below the initial implied level, primarily due to Q1's impact and volume trajectory. EVP & COO, Mindy West, confirmed the OpEx improvements are the result of sustainable productivity initiatives, not timing, citing progress in maintenance and labor. Andrew Clyde added that loss prevention and favorable labor rates were also key drivers. Mindy West hinted July retail-only margins were trending in the 'high twenties'.

Bobby Griffin inquired about the discretionary weakness observed in Q4, asking if it signaled a fundamental shift in spending patterns among Tractor Supply's rural customers or if it was primarily weather-driven, and what factors would drive improvement in 2026.

Answer

CEO Hal Lawton attributed the Q4 discretionary weakness to transitory factors, including the absence of emergency response sales and underperformance in seasonal holiday categories like toys and holiday decor. He expressed confidence in the 2026 outlook, particularly for big-ticket items in spring, and noted broader retail pullbacks in big-ticket and general merchandise during December.

Bobby Griffin asked for more detail on the discretionary weakness observed in Q4 2025, questioning if it represented a structural shift for rural customers or was primarily weather-driven, and what factors might drive improvement in 2026.

Answer

CEO Hal Lawton attributed the Q4 discretionary weakness primarily to transitory factors specific to the quarter, such as the absence of emergency response sales and softness in seasonal holiday categories. He expressed confidence in the big-ticket plan for spring 2026 and did not believe it indicated a structural change in customer behavior.

Bobby Griffin inquired about the future trajectory of same-store operating expenses, specifically whether the current high-threes average is sustainable or if there are opportunities to reduce it further. He also asked about expectations for promotional activity in the alternative nicotine category for the new calendar year.

Answer

Darren Rebelez, Chairman, President, and Chief Executive Officer, stated that while a lot of the labor hour reduction work is largely complete, efforts to improve in-store efficiency are ongoing. He highlighted that increased traffic and outsized growth in high-margin categories necessitate some labor additions to meet demand, emphasizing that the focus is on driving traffic, growth, and guest satisfaction. Mr. Rebelez noted that the alternative nicotine category has been growing rapidly as combustible cigarette volumes decline, and Casey's has reset back bars to allocate more space to these products, expecting the longer-term trend to continue.

Bobby Griffin asked for clarification on operating expenses, specifically how much of the prior year's one-time integration costs might carry over into fiscal 2026. He also questioned whether the FY26 plan assumes a further reduction in same-store labor hours.

Answer

CFO Steve Bramlage estimated that approximately $5 to $7 million in integration-related costs would carry over into FY26, significantly less than the prior year. CEO Darren Rebelez confirmed that a modest labor hour reduction is assumed in the FY26 plan, noting that while the company is ahead of its three-year reduction target, there is still room for improvement.

Bobby Griffin asked for clarification on whether the one-time integration costs from the FICS deal would carry over into FY26. He also inquired if the FY26 plan assumes a continued reduction in same-store labor hours.

Answer

CFO Steve Bramlage confirmed there will be a carryover of approximately $5-7 million in integration-related costs in FY26. President and CEO Darren Rebelez stated that a modest labor hour reduction is assumed in the plan, noting that the company is ahead of its three-year target after achieving a reduction of over 2% in FY25.

Bobby Griffin asked for more details on Dollar Tree's progress in addressing shrink and what assumptions regarding shrink rates (elevated vs. pre-COVID or return to 2019 levels) are embedded in the multi-year outlook.

Answer

CEO Mike Creedon stated that Dollar Tree has reorganized its approach to shrink, leveraging lessons from Family Dollar and focusing on training and technology, rather than self-checkouts. CFO Stewart Glendinning confirmed that some improvement in shrink is built into forward expectations, driven by investments in asset protection and changes to people and processes.

Bobby Griffin asked for an update on the company's shrink reduction efforts, its current progress, and what specific shrink rates (e.g., elevated vs. pre-COVID or return to 2019 levels) are embedded in the multi-year outlook.

Answer

CEO Mike Creedon stated that Dollar Tree is applying lessons learned from Family Dollar to address shrink, focusing on training and technology rather than self-checkouts. CFO Stewart Glendinning confirmed that the multi-year outlook includes an expectation for some improvement in shrink, driven by investments in asset protection and changes to people and processes.

Bobby Griffin inquired about the net financial impact of the 15-store acquisition versus non-core business divestitures on sales and margins, whether Q2 pricing actions cover expected January 1st tariffs, the reasons for significant inventory reductions, and the integration of the recent acquisition alongside future retail growth strategies including new stores and remodels. He also asked about balancing the product portfolio for designers after exiting non-core case goods businesses.

Answer

Taylor Liebke, SVP and CFO, confirmed a net sales impact of +$40M from the retail acquisition and -$70M from non-core exits, with a combined 75-100 basis point operating margin improvement for the entire enterprise. Liebke stated that pricing actions and supply chain optimization cover current and expected January 1st tariffs, and attributed lower inventories to tight supply chain management and improved working capital. Melinda Whittington, Chair, President and CEO, outlined plans for 10-15 net new stores annually, continued prudent remodels, and successful integration of the 15-store acquisition. Whittington emphasized that case goods remain important for design sales and whole-room offerings, to be supported through more efficient sourcing and partnerships.

Bobby Griffin from Raymond James sought clarification on the net sales impact of the 15-store acquisition versus non-core business divestitures, the scope of the 75-100 basis point operating margin improvement, the effectiveness of Q2 pricing actions against upcoming tariffs, the drivers behind the significant year-over-year inventory reduction, the integration of the recent 15-store acquisition, future retail network growth, and the strategy for maintaining a robust case goods portfolio post-divestiture.

Answer

Taylor Liebke, SVP and CFO, confirmed a net $30 million sales decrease from the $40 million acquisition gain and $70 million non-core divestiture headwind, and clarified the 75-100 basis point margin improvement applies to the entire enterprise, encompassing acquisitions, divestitures, and leadership realignment. Liebke also stated Q2 nominal pricing and supply chain adjustments cover expected January 1 tariffs and attributed inventory reductions to improved supply chain efficiency. Melinda Whittington, Chair, President, and CEO, detailed plans for 10-15 net new stores annually, primarily company-owned, ongoing rebranding, and a strong pipeline for future acquisitions. Whittington emphasized the importance of case goods for design sales, confirming a strategy to source them more efficiently through partnerships rather than in-house manufacturing.

Bobby Griffin of Raymond James requested details on the cadence of written business during the quarter, the reasons for the EBIT margin coming in below guidance, the long-term margin impact from the supply chain transformation, and the productivity ramp of new stores.

Answer

CEO Melinda Whittington noted a slight improvement in traffic trends from Q4 through Q1 into August, but acknowledged it was less than hoped for due to a soft consumer and investments in promotional discounting. CFO Taylor Luebke confirmed this combination of factors led to the margin miss. Luebke reiterated that the supply chain project will be a modest drag on margins for two years before savings begin in year three, ultimately targeting a 50-75 basis point expansion for the wholesale segment by year four. Whittington stated that the two-to-three-year productivity ramp for new stores remains consistent with historical trends.

Bobby Griffin of Raymond James Financial inquired about the key drivers for expanding the wholesale segment's operating margin to 10%, the strategic timing of the new distribution network redesign project, and recent written order trends for May and the Memorial Day period.

Answer

SVP and CFO Taylor Luebke explained that reaching a 10% wholesale margin long-term depends on both controllable factors, like the multi-year distribution redesign, and a recovery in the broader housing market. President & CEO Melinda Whittington added that the distribution project's timing is driven by the company's increased scale from acquisitions, aiming to boost efficiency and service. She also noted that Memorial Day sales provided a 'solid start' to the new fiscal year, following a challenging February during the fourth quarter.

Bobby Griffin from Raymond James asked about the primary growth opportunities across Somnigroup's various brands and whether the ongoing enterprise optimization will yield a major breakthrough or more gradual, incremental improvements over the next three to five years.

Answer

Chairman, President, and CEO Scott Thompson identified Sealy Posturepedic as having the greatest short-term growth potential due to new technology and advertising. He also highlighted ongoing opportunities with Tempur's consistent market share gains, the early stages of Mattress Firm's advertising and merchandising changes, and multi-year cost synergies. Thompson also praised the sustained double-digit growth of international operations (Dreams and Tempur International) despite challenging markets, and the potential for significant flow-through if the U.S. bedding industry recovers to pre-downturn levels.

Bobby Griffin inquired about the most significant growth opportunities across Somnigroup's various brands and whether the ongoing enterprise optimization represents a major singular unlock or a series of incremental improvements over the next three to five years.

Answer

Scott Thompson, Chairman, President, and CEO, Somnigroup International, identified Sealy Posturepedic as having the greatest short-term growth potential due to new technology and advertising, followed by future Stearns products and the consistent share gains of Tempur. He noted that Mattress Firm's advertising and merchandising changes are just beginning, and cost synergies will provide multi-year benefits across logistics and warehousing. Thompson also highlighted the sustained double-digit growth of international operations and the significant upside from a potential recovery of the U.S. bedding industry.

Bobby Griffin inquired about the revenue synergies from the Mattress Firm acquisition, asking for clarification on the implied contribution margin and which product lines would drive the incremental revenue.

Answer

CFO Bhaskar Rao clarified that the EBITDA flow-through from the faster-than-expected revenue synergies is between 30% and 35%, which accounts for the incremental $20 million in EBITDA. CEO Scott Thompson added that the benefit is a blend, with the Tempur brand being a strong contributor on both the retail and manufacturing sides of the business.

Bobby Griffin inquired about the current environment, specifically if PROG Holdings is seeing any 'trade-down' effects from higher-tier credit providers tightening, and how this compares to earlier in the year. He also asked about the GMV cadence through Q3 and early October, and sought help in framing the 2026 model given the VIVE divestiture, smaller portfolio, and the Big Lots headwind rolling off.

Answer

Steve Michaels, President and CEO, noted that while higher-tier providers tightened in 2024, PROG Holdings has not observed any additional tightening or loosening from them recently, thus no benefit from trade-down. He mentioned that Q3 GMV saw some softness in September compared to August and July, possibly due to macro headlines, with no clear holiday trends yet. Brian Garner, CFO, outlined 2026 tailwinds including relief from Q1 2025 decisioning comps, the Big Lots comp rolling off, effective portfolio management, and Four Technologies' growth. He reiterated the 11-13% EBITDA margin target for the leasing segment and stated the VIVE divestiture represents a ~$65 million revenue haircut, not significantly impacting earnings.

Bobby Griffin inquired about the current consumer environment, specifically asking if PROG Holdings is observing any 'trade-down' from higher credit tiers or tightening actions from other lenders, and requested insights into GMV cadence through Q3 and early October.

Answer

Steve Michaels, President and CEO, stated that PROG Holdings has not observed any trade-down or tightening from lenders in higher credit tiers, despite earlier expectations for loosening in the back half of 2025. He noted that September's GMV was softer than August and July, possibly due to macro headlines, but it's too early to assess holiday impact. Brian Garner, CFO, framed the 2026 outlook, highlighting tailwinds such as easing decisioning comps in Q1, the Big Lots comp clearing, effective portfolio management, and the growth of Four Technologies, while acknowledging macro challenges.

Bobby Griffin from Raymond James Financial inquired about the drivers behind the notable sales improvement in July, the progress and G&A savings timeline for the channel optimization program, and the details behind the Q2 increase in capital expenditures, particularly the purchase of 22 fee properties.

Answer

CEO Arie Kotler attributed the July strength to value-driven promotions like "Fueling America," which boosted loyalty member engagement and trip frequency. CFO Rob Giamatteo explained that the dealerization program's store list is defined, and G&A savings are already materializing and will accelerate. Giamatteo also clarified that the CapEx increase was due to a ~$22 million opportunistic purchase of 22 fee properties, financed separately and not impacting the core CapEx run rate.

Bobby Griffin of Raymond James Financial inquired about the Bedding business, asking for a reconciliation between market consumption estimates and Leggett's U.S. volume, the drivers of metal margin expansion, and the rationale for retaining facilities previously slated for closure.

Answer

President, CEO & Chairman Karl Glassman and EVP & President - Bedding Products J. Tyson Hagale responded. Hagale clarified that U.S. spring core volumes were down mid-single digits, comparable to the market, with the larger reported decline due to restructuring-related sales attrition in Mexico and specific customer issues in specialty foam and adjustable beds. Glassman stated that metal margin expansion is sustainable and driven by 232 steel tariffs. Both executives explained that retaining a few small facilities was a strategic adjustment to evolving market conditions and customer needs.

Bobby Griffin inquired about the stability of the core customer, the key drivers behind Acima's strong GMV and application growth, and the reason for the sequential increase in Acima's loss ratio.

Answer

CEO & CFO Fahmi Karam described the core customer as stable but still under pressure, leading to a conservative underwriting stance. He attributed Acima's 16% GMV growth primarily to new merchants onboarded in the last year (80% of growth) and productivity gains (20%), highlighting the direct-to-consumer channel's 130% YoY growth. The sequential tick-up in the loss ratio was attributed to a product mix shift towards the faster-growing jewelry category.

Bobby Griffin of Raymond James asked how the early results from pricing initiatives have influenced management's view of using price as a lever for growth. He also questioned if the success could lead to more dynamic pricing optimization across all membership tiers.

Answer

CEO John Lai responded that the company maintains a conservative and 'episodic' approach to pricing, preferring to 'earn' increases by adding value through innovation rather than simply using it as an easy lever. While acknowledging there are future opportunities for optimization, the current strategy is to offer a broad value proposition that appeals to a wide range of consumers, from the price-sensitive to the premium-focused.

Questioned the long-term target for advertising spend as a percentage of sales under the new strategy and asked about the timeline for implementing and testing changes to the customer selling process.

Answer

The company aims for its marketing spend to become a lower, more efficient percentage of sales, in line with industry standards, though near-term volatility is expected. Details on changes to the selling process will be shared in 2026.

Bobby Griffin asked for more details on the rebuilt advertising strategy, specifically questioning what a future goal for ad spend as a percentage of sales might be. He also asked about the timing and potential testing of changes to the customer selling process.

Answer

Linda Findley, President & CEO, responded that while there will be near-term volatility, the long-term goal for marketing spend as a percentage of sales is to become more efficient, lower, and more in line with industry best practices. Regarding the selling process, she indicated that more details on that initiative would be shared in 2026.

Bobby Griffin from Raymond James Financial asked about the resolution of Rejuvenate 2.0 fulfillment issues, the company's production capacity, details on tariff-related price increases and their market impact, and capital allocation priorities for 2026.

Answer

CEO Robert DeMartini stated that the Rejuvenate fulfillment backlog is being resolved and will normalize by mid-August. He confirmed a price increase of about 2% was implemented on July 22nd with no significant negative consumer reaction observed so far. CFO Todd Vogensen outlined that future cash priorities include investing in the showroom footprint and other internal growth projects after establishing a sufficient cash cushion.

Asked for clarification on whether fulfillment issues are resolved, the company's production capacity for new retail accounts, details on tariff mitigation and pricing actions, and the company's priorities for cash flow as it turns profitable.

Answer

The Rejuvenate fulfillment backlog is being addressed and should be resolved by mid-August, with capacity being managed for wholesale expansion. Price increases to offset tariffs were implemented on July 22nd, with no significant negative reaction expected. Future cash flow priorities include reinvesting in the business, such as growing the showroom footprint, and building a cash cushion.

Inquired about the wholesale strategy, the industry assumptions baked into the 2025 EBITDA guidance, and the potential for cash flow from working capital improvements.

Answer

Executives clarified the wholesale strategy is about improving productivity to drive organic door growth, not a pivot from prior strategy. The 2025 guidance assumes no industry improvement. They anticipate a $5-10 million benefit from working capital improvements, which should offset CapEx.

Asked about the timing and components of the restructuring savings, the rationale for exiting certain wholesale doors, and the performance and profitability of the company's showrooms.

Answer

The full $15M-$20M in restructuring savings are expected in 2025 and include conservative assumptions about subleasing closed facilities. The company exited wholesale partners who were not aligned with the premium strategy. Showrooms are seeing improved profitability and flat comps driven by higher average ticket prices and a better product mix.

Asked about the Q1 gross margin performance, specifically if launch and startup costs played out as expected, and for an outlook on Q2, including the impact of new distribution wins.

Answer

Q1 costs, including those for new capacity and product launches, were in line with expectations, with the Crawfordsville facility being a slight headwind. For Q2, consolidated sales are expected to be flattish due to a ~3% headwind from prior-year floor model sales, though new OEM distribution will begin to contribute. Gross margin is expected to continue expanding year-over-year, and advertising will be heavy for Memorial Day and new product support.

Bobby Griffin from Raymond James asked for context on the strong 50% month-to-date October order growth, seeking to understand its strength relative to September and the impact of marketing. He also inquired about the sustainability of the significant SG&A reductions and lower headcount.

Answer

Farooq Kathwari, Chairman & CEO, attributed the 50% October order growth to two factors: approximately 30% from genuine business strength and 20% from an easier comparison to the prior year's membership program launch. He noted that sustained marketing, bringing more staff back, and extending design center hours contributed to the growth. Regarding expenses, he stated the 23% year-over-year headcount reduction is primarily in retail and expects it to normalize to a 10-15% reduction as business levels require more staff.