Brian Nagel

Brian Nagel inquired about the trajectory of new member sign-ups during Q2, referencing potential initial softness, and asked about the company's ongoing ability to monetize its membership base through pricing strategies.

Answer

Founder, Chairman, and CEO Bahram Akradi explained that early quarter softness in member sign-ups was a timing issue that naturally corrected, leading to a strong finish. Akradi and EVP & CFO Erik Weaver affirmed the business remains solid, with strong member engagement and a nearly 12% increase in revenue per membership, indicating effective monetization.

Brian Nagel from Oppenheimer & Co. Inc. asked about the Q1 pricing strategy, specifically why dues were not raised for legacy members, and inquired about member sign-up activity leading into the summer pool season.

Answer

Erik Weaver, Executive Vice President and CFO, confirmed that not implementing a broad legacy price increase in Q1 was intentional, with dues growth driven by new, higher-rate members replacing those at lower rates. Bahram Akradi, Founder, Chairman and CEO, added that legacy price increases are planned for Q2 and that retention remains at record levels. Regarding the pool season, Akradi noted it was too early to comment on specific sign-up trends.

Brian Nagel of Oppenheimer & Co. Inc. questioned the funding strategy for the planned 10-12 new centers in 2025, focusing on the role and expected rates of the sale-leaseback market. He also asked for the specific business drivers behind the raised 2025 guidance since the mid-January pre-announcement.

Answer

CEO Bahram Akradi explained that the company has strong partner demand for sale-leasebacks, expecting $250M-$350M in proceeds for the year at favorable cap rates of 6.5%-7.0%. These funds, along with operating cash flow, will fuel growth. Executive Erik Weaver added that the guidance was lifted due to stronger-than-expected membership dues, robust retention, and effective cost control observed in the first weeks of 2025.

Brian Nagel asked about Life Time's growth profile for 2025 following its balance sheet improvements and whether the updated annual guidance implies higher internal targets for Q4.

Answer

Founder, Chairman and CEO Bahram Akradi stated the company's target debt-to-EBITDA ratio is 1.75x to 2.25x, which supports a robust growth pipeline of approximately 100 deals for 2025-2027 while remaining free cash flow positive. He clarified that guidance is set conservatively to a level they are highly confident in achieving. EVP and CFO Erik Weaver added that the implied Q4 guidance reflects strong momentum, with approximately 15% year-over-year revenue growth and 16% adjusted EBITDA growth.

Brian Nagel asked about Carvana's strong used car results amidst industry data suggesting weaker demand, questioning if Carvana is capturing greater market share. He also inquired about the longer-term integration of AI, how it enhances the consumer offering, and the current stage of this technological integration.

Answer

Ernie Garcia, Chief Executive Officer, indicated that macro conditions appear stable with no signs of weakness, and Carvana is well-positioned. He highlighted Carvana's focus on outperforming the industry in customer experience, growth, and economics. Regarding AI, he provided examples of a chat agent interacting with finance, scheduling, and search services to provide dynamic responses, and an 'ambient agent' that autonomously identifies bugs, suggests solutions, writes code, and facilitates deployment.

Brian Nagel asked about Carvana's strong used car results amidst industry data suggesting weaker demand, questioning if there are underlying signs of a difficult demand environment or if Carvana is capturing greater market share. He also inquired about the longer-term integration of AI, how it enhances the consumer offering, and Carvana's progress in deploying this technology.

Answer

Ernie Garcia, Chief Executive Officer, noted that macro conditions appear relatively stable, with no significant signs of weakness, and Carvana is well-positioned for future cycles. He emphasized Carvana's focus on outperforming the industry in customer experience, growth, and economics. Regarding AI, he highlighted significant progress, citing examples like an AI agent interacting with multiple services for car delivery inquiries and another identifying bugs, writing, and deploying code automatically, demonstrating deep integration and a technology-forward approach.

Brian Nagel of Oppenheimer & Co. Inc. inquired about the pace of new reconditioning capacity coming online from both legacy and ADESA centers and its effect on sales. He also asked about any demand choppiness observed due to the tariff environment.

Answer

CEO Ernie Garcia confirmed they are on plan, with production growth outpacing sales and 12 ADESA sites now integrated. Regarding demand, Garcia noted that while there was a minor pull-forward effect from tariffs, the overall quarterly trend was stable, with a noted $100 impact on retail GPU from related pricing adjustments.

Brian Nagel of Oppenheimer & Co. Inc. inquired about the pace of new reconditioning capacity coming online from legacy and ADESA centers and its effect on sales. He also asked about any demand choppiness observed due to the recent tariff environment.

Answer

CEO Ernie Garcia stated that capacity expansion is "on plan," with production growing faster than sales and ADESA site integrations proceeding at a steady pace. Regarding demand, Garcia noted that while there was some minor short-term fluctuation around the tariff news, it was not material to the quarter's overall performance, though it did contribute to a $100 per unit retail GPU impact due to pricing adjustments.

Brian Nagel inquired about the expected trajectory for retail GPU and the level of incremental investment needed to support the new long-term goal of selling 3 million units annually.

Answer

CEO Ernie Garcia explained that the company aims to achieve fundamental gains across all GPU components, providing flexibility to either boost profitability or reinvest in customer value. Regarding the growth to 3 million units, Garcia highlighted that the ADESA acquisition provides significant existing real estate and infrastructure, positioning Carvana to grow into this capacity, which should moderate the need for substantial new capital investment relative to the scale of the growth opportunity.

Brian Nagel asked if other expenses, such as labor, will need to ramp up to support growth and what the key drivers are for further retail GPU improvement.

Answer

CFO Mark Jenkins stated that the company is seeing leverage across all labor cost categories and expects to drive further per-unit efficiencies. CEO Ernie Garcia detailed that future retail GPU gains will come from a wide range of operational improvements, including smarter vehicle bidding, lower logistics costs, and better merchandising.

Brian Nagel asked if Wayfair's increased focus on contribution margin represents a philosophical shift in how the company views gross margin, or if it indicates a new lever to drive better outcomes. He also inquired whether generative AI is currently contributing to Wayfair's improving market share dynamics and what specific results investors should monitor to identify Wayfair's differentiation through generative AI.

Answer

Niraj Shah, Co-founder, CEO, and Co-Chairman, clarified that the ultimate goal is to maximize 'owner's earnings dollars' (EBITDA/free cash flow). Kate Gulliver, CFO and Chief Administrative Officer, explained it's not a philosophical shift but a clearer articulation of optimizing multi-quarter contribution margin dollars to drive strong flow-through to adjusted EBITDA dollars. Niraj Shah stated that generative AI is still in its 'first inning' and has not played a significant role in Wayfair's past market share gains, but expressed excitement about its future potential for differentiation.

Brian Nagel asked if there's a philosophical change in Wayfair's approach to gross margin, given the recent focus on contribution margin, and if gross margin is now a lever they are more likely to pull for better outcomes.

Answer

Niraj Shah (Co-founder, CEO, and Co-Chairman) stated Wayfair's ultimate focus is on maximizing "owner's earnings dollars" (EBITDA dollars, considering stock-based compensation as a real cost) through both revenue growth and cost management, acknowledging the interplay between margin rate and volume. Kate Gulliver (CFO and Chief Administrative Officer) clarified that the philosophy hasn't changed but they are better articulating how they optimize adjusted EBITDA dollars over a multi-quarter view by managing contribution margin (gross margin less CS&M and AC&R). She noted that the optimal gross margin has consistently been around 30-31% to achieve this. Nagel also inquired about generative AI's current impact on Wayfair's market share gains and what metrics to watch for to indicate Gen AI is truly differentiating Wayfair. Shah described Gen AI as being in the "first inning" of its potential, with the bulk of gains yet to come. He stated that Gen AI has not played a significant role in Wayfair's market share gains over the past couple of years, as current gains are from earlier technology evolutions and machine learning. He expressed excitement for Gen AI's future potential to differentiate Wayfair, noting that some companies will be more adept at leveraging it.

Brian Nagel of Oppenheimer & Co. Inc. asked if the recent sales inflection was due to a specific lever or a broader culmination of business initiatives. He also sought clarity on where gross margin upside is being specifically reinvested.

Answer

CEO Niraj Shah emphasized that the building momentum is not from a single lever but from the sustained execution of their three strategic pillars: improving the core recipe, leveraging technology, and launching new programs. CFO Kate Gulliver explained that gross margin is reinvested into enhancing customer value, primarily through strategic pricing based on elasticity data and service improvements like faster delivery.

Brian Nagel from Oppenheimer & Co. Inc. sought to clarify the impact of tariffs, asking if the burden lies primarily with suppliers and what specific levers Wayfair is pulling internally to navigate the situation and improve the business.

Answer

CEO Niraj Shah confirmed that Wayfair's platform model creates competitive pressure on suppliers to absorb costs. He detailed two key levers Wayfair uses to help: sharing real-time platform data to guide supplier pricing decisions and offering its integrated logistics network, CastleGate, to help suppliers lower costs and maintain competitive retail prices. CFO Kate Gulliver reiterated that the model is designed to outperform in such environments through diligent partnership with suppliers.

Brian Nagel asked if Wayfair is facing challenges taking market share from mass-merchant, value-oriented retailers. He also inquired about the potential for further cost reductions in 2025 if the top-line environment remains weak.

Answer

CEO Niraj Shah acknowledged that Wayfair is not the only winner in the market, citing Amazon and HomeGoods as others also taking share in their respective niches, but stressed that there is a much longer list of retailers who are losing share. On costs, CFO Kate Gulliver confirmed they see ongoing opportunities for efficiency across the P&L, including SOTG&A, CapEx, and equity compensation, and will balance investments to continue growing absolute adjusted EBITDA dollars in 2025.

Brian William Nagel asked about the primary factors impacting CarMax's used unit sales in fiscal Q2 2026, specifically inquiring about the pull-forward demand from Q1 and the subsequent sales run rate. He also questioned CarMax's pricing strategy, asking if the company is becoming more aggressive due to market competition.

Answer

Bill Nash, President and CEO, explained that Q2 performance was impacted by two main factors: ramping inventory ahead of the quarter followed by a $1,000 depreciation, and a pull-forward of demand into Q1. He noted that September sales are stronger than Q2 but still soft year-over-year, with improved inventory and pricing. Regarding pricing, Mr. Nash affirmed CarMax's continuous focus on competitive and nimble pricing in an aggressive market.

Brian William Nagel asked about the impact of demand pull-forward on used unit sales in Q2 FY26, seeking to quantify the disruption and understand if sales have returned to a normal run rate. He also inquired about CarMax's pricing strategy in a competitive market.

Answer

President and CEO Bill Nash explained that both inventory depreciation (approximately $1,000 over a month) and a pull-forward of demand into Q1 impacted Q2 performance. He noted that September sales were stronger than Q2 but still soft year-over-year. Nash emphasized the company's focus on competitive and nimble pricing in an aggressive market environment.

Brian Nagel inquired about the primary drivers behind the decline in used unit sales during Q2, specifically asking for quantification of the demand pull-forward from Q1 and an update on current sales run rates. He also questioned CarMax's intensified focus on competitive pricing and whether it's a response to increased aggression from competitors.

Answer

President and CEO Bill Nash clarified that the primary impact was inventory depreciation, followed by a demand pull-forward, both difficult to quantify precisely. He noted that September and month-to-date sales were stronger than Q2, though still soft year-over-year, with improved inventory and pricing. Nash affirmed CarMax's continuous focus on competitive and nimble pricing in an aggressive market.

Brian Nagel of Oppenheimer & Co. Inc. asked about the sustainability of the recent acceleration in the used car business and how SG&A expenses might scale as sales continue to recover.

Answer

President & CEO Bill Nash attributed the performance to both macro factors and internal execution, expressing confidence for the rest of the year. EVP and CFO Enrique Mayor-Mora highlighted the model's power to leverage SG&A, noting the company is committed to continued efficiency gains.

Brian Nagel questioned the sustainability of the strong high-single-digit sales trend seen early in the first quarter, asking if it was a temporary catch-up from a softer February or indicative of a more durable trend.

Answer

CEO William Nash asserted that the strong start to the quarter was not a catch-up, as any benefit from delayed tax refunds or weather was minor. While not providing formal guidance, he stated that CarMax expects the momentum seen over the last three quarters to continue, acknowledging the fluid macro environment.

Brian Nagel asked about the potential for a normalized used car unit comp for CarMax and the forward path for SG&A expense leverage as sales improve.

Answer

CEO William Nash indicated that sales momentum accelerated through Q3 and into December, expecting Q4 comps to surpass Q3's performance. CFO Enrique Mayor-Mora reaffirmed the company's goal of reaching a mid-70% SG&A-to-gross-profit ratio, noting that less gross profit growth is now required to achieve leverage compared to their prior heavy investment phase.

Brian Nagel asked for the key drivers behind the improving used car unit comps and whether the quarter's higher loan loss provision was driven more by CarMax's specific portfolio performance or broader macroeconomic factors.

Answer

President & CEO William Nash attributed the stronger comps to both internal execution, such as the nationwide rollout of a new order processing system, and favorable macro trends, including seven straight quarters of declining average selling prices. SVP Jon Daniels clarified that the loan loss provision, while informed by economic factors, is primarily based on direct observations of performance within CarMax's own loan portfolio, which they believe mirrors industry trends.

Brian Nagel asked about the specific impact of tariffs on Q4 results, questioning if they drove sales or affected margins. He also sought clarification on the strengthening sales cadence throughout Q4, asking how much was attributable to tariffs, weather improvements, or better underlying demand.

Answer

Jamere Jackson, CFO, explained that tariffs directly contributed to accelerated ticket growth in both DIY and commercial, leading to higher same SKU inflation and retail prices across the industry. Phil Daniele, CEO and President, attributed the strengthening sales cadence to a combination of factors: improved weather (mid-July heat), strong performance in specific regions due to normal winter/spring, same SKU inflation, and the success of AutoZone's initiatives, including new store openings, improved assortments, and enhanced hub/megahub coverage.

Brian Nagel asked for clarification on the impact of tariffs and trade policy on AutoZone's fiscal Q4 results, specifically whether incremental tariffs drove sales or affected margins. He also inquired about the cadence of sales growth throughout Q4, asking for a breakdown of how much of the strengthening trend in both DIY and commercial segments was attributable to tariffs, improved weather, or better underlying demand.

Answer

Jamere Jackson, CFO, explained that accelerated ticket growth in both DIY and commercial segments was partly driven by cost increases associated with tariffs, leading to higher product costs and industry-wide retail price adjustments. Phil Daniele, CEO and President, attributed the strengthening sales cadence to a combination of factors: favorable weather (mid-July heat boosting categories), positive winter/spring weather impacts in certain regions, same SKU inflation, and AutoZone's strategic initiatives, including new store openings, improved assortments, and enhanced execution in hubs and megahubs.

Brian Nagel asked about the specific impacts of tariffs and trade policy on the fiscal Q4 results, particularly whether they drove sales or affected margins. He also sought to understand the factors contributing to the strengthening sales cadence throughout Q4 for both DIY and commercial segments, distinguishing between tariffs, improved weather, and underlying demand.

Answer

CFO Jamere Jackson confirmed that a portion of the accelerated ticket growth in both DIY and commercial was directly driven by cost increases associated with tariffs, leading to higher same SKU inflation and retail prices across the industry. He anticipates this trend to continue without a notable drop-off in units. President and CEO Philip Daniele attributed the strengthening sales cadence to a combination of factors: favorable weather (mid-July heat), strong performance in specific regions (Northeast, Midwest), same SKU inflation, and AutoZone's strategic initiatives, including new store openings, improved assortments, and enhanced execution.

Brian Nagel from Oppenheimer & Co. Inc. asked what specifically catalyzed the sales acceleration in Q3, given initiatives have been ongoing, and whether the company consciously reinvested the sales upside, which limited profit flow-through.

Answer

CEO Philip Daniele explained that many initiatives, while discussed for a year, are just now reaching full rollout, leading to a culmination of benefits. CFO Jamere Jackson confirmed that the company has been intentionally reinvesting in growth opportunities, particularly in SG&A, to capitalize on the current market environment and build a faster-growing business for the long term.

Brian Nagel of Oppenheimer & Co. Inc. asked what specifically changed in Q3 to drive the meaningful improvement in sales growth, questioning if it was a culmination of initiatives and if there was a conscious decision to reinvest the sales upside back into the business.

Answer

CEO Philip Daniele confirmed it was a culmination of initiatives that have been rolling out over time, such as commercial delivery strategies that are now fully deployed. CFO Jamere Jackson added that the company has been intentional about investing in SG&A to capture the current growth opportunity, noting that the strategy is working as evidenced by the top-line momentum.

Brian Nagel from Oppenheimer & Co. Inc. asked if the elasticity of demand has changed given potential tariffs and a more inflation-wary consumer. He also sought to contextualize the impact of weather, questioning if it was incremental demand or a pull-forward of sales.

Answer

CFO Jamere Jackson responded that the majority of AutoZone's business is inelastic (needs-based 'break/fix'), so they expect it to perform consistently. Executive Philip Daniele explained that harsh weather provides an immediate sales lift for certain categories (like batteries) and also creates lingering demand for other parts (like brakes and suspension) that surfaces later in the year.

Brian William Nagel asked if the moderation in inventory growth observed in Q2, which helps drive cash, could potentially become a headwind to sales if inventories remain tighter in the second half of the year. He also followed up on RH's tariff mitigation efforts, specifically regarding the timing of price adjustments.

Answer

Chairman & CEO Gary Friedman outlined various offsets to potential sales headwinds from tighter inventory, including the launch of new concepts, new galleries in London and Milan, and the creation of an 'RH ecosystem' in Los Angeles. He emphasized that RH Paris is generating significant global interest and creating optionality for future expansion. CFO Jack Preston explained that tariff mitigation involves a strategic mix of price increases and other measures, following a proven playbook from past tariff challenges.

Brian William Nagel sought clarification on inventory growth moderation and its potential impact as a headwind to sales. He also asked about RH's tariff mitigation efforts, specifically if price increases are implemented as tariffs hit or if adjustments are made proactively.

Answer

Chairman and CEO Gary Friedman explained that RH's investments in new concepts, galleries (London, Milan), and compounds are setting the company up for the next 10 years, creating optionality and breakthrough potential. He emphasized that the success of RH Paris is generating significant inbound interest for global expansion, including potential licensing deals in the Middle East and Asia. CFO Jack Preston stated that tariff mitigation involves a mix of both proactive and reactive price adjustments, with a strategic and thoughtful approach to balance margin protection and revenue impact, drawing on experience from previous tariff periods.

Brian Nagel questioned whether RH's improved inventory management, leading to tighter inventories, could potentially become a headwind to sales in the back half of the year.

Answer

Chairman and CEO Gary Friedman emphasized that RH's long-term investments in new concepts, global galleries, and brand building are creating significant optionality and future growth, outweighing potential short-term inventory impacts. He highlighted the breakthrough work in Europe as a key driver for future opportunities.

Brian Nagel of Oppenheimer & Co. Inc. asked if RH is working towards any specific target debt levels or coverage ratios for its balance sheet, particularly in light of the dynamic tariff environment.

Answer

Chairman & CEO Gary Friedman acknowledged that the current debt and interest expense levels are higher than desired, a result of share repurchases followed by a rapid rise in interest rates. CFO Jack Preston added that while they have no specific target ratios or covenants, the company's leverage ratio has already improved from its peak due to EBITDA growth, and they expect further deleveraging.

Brian Nagel from Oppenheimer asked about business trends through Q4 and into Q1, and followed up on RH's philosophical approach to managing higher sourcing costs from tariffs.

Answer

Jack Preston, executive, directed the analyst to the earnings letter for Q4 trends, which noted demand stabilized at +19% in January. Gary Friedman, executive, explained their approach to tariffs is 'all of the above': a mix of price adjustments, vendor negotiations, and internal efficiencies. He stressed that RH's large inventory position provides a significant short-term advantage.

Brian Nagel asked if the improving demand was influenced by an easing housing market in addition to new products, and questioned if the recent product transformation was a one-time step-up or a new, more consistent cadence.

Answer

Chairman and CEO Gary Friedman asserted that the momentum is company-specific, driven by its product transformation, as competitors are not seeing a similar lift. He stated that going forward, investors should expect a 'much more aggressive approach' to product expansion, as the company now sees itself as a 'platform for taste' with a much larger market opportunity than a traditional specialty brand.

Brian Nagel asked about the sustainability of the positive comp momentum into the second half of the year and questioned if recent tariff-related price increases were impacting consumer demand.

Answer

CEO Steve Lawrence expressed confidence in continued momentum, citing accelerating e-commerce, strong new store performance, and growth from new brands like Nike and Jordan. He noted that the only wildcard is consumer health. Regarding pricing, he explained that demand elasticity varies by category, with some big-ticket items showing sensitivity.

Brian Nagel congratulated Academy Sports + Outdoors on achieving a positive comparable sales increase and asked if there were any internal reasons why the current business momentum, which has strengthened throughout the year and quarter, would not continue into the back half of the fiscal year. He also followed up on tariff-related price adjustments, asking if Academy Sports + Outdoors was observing any impacts on consumer demand as these higher prices began to roll through various product categories.

Answer

CEO Steve Lawrence stated there's no internal reason for momentum not to continue, citing accelerating dot-com growth (10% in Q1, 18% in Q2), mid-single-digit new store comps, successful technology investments (RFID, save-the-sale), strong performance from new brands like Jordan and Nike (double-digit growth), and the growing myAcademy loyalty program (12M+ members). He identified consumer health and the macroeconomic environment as the primary external wildcard. Mr. Lawrence explained that demand impact varies by category: highly inelastic items saw no impact; some goods saw roughly in-line unit demand with AUR increases; and a few bigger ticket categories experienced demand erosion greater than AUR increases, prompting adjustments.

Brian Nagel of Oppenheimer & Co. Inc. asked for details on the Jordan brand launch, including product scope and incrementality, and its indication of the broader Nike relationship. He also inquired about potential hidden tariff impacts.

Answer

CEO Steven Lawrence detailed that the Jordan launch is incremental, focusing on sport products in 145 stores and online, signaling a stronger overall Nike partnership. Regarding tariffs, he explained the company uses a portfolio approach with its pricing tools to mitigate costs on key items and protect value perception.

Brian Nagel asked for clarification on the sales trajectory, seeking to bridge the Q2 comp decline with the reported positive comp in August, and questioned the company's promotional strategy in light of event-driven consumer shopping patterns.

Answer

CEO Steve Lawrence confirmed that after disruptions from storms and DC issues in July, the business rebounded to a positive comp in August. He explained that the company's strategy is to leverage strong everyday value during lulls and concentrate promotions during key shopping events, as stimulating sales during slow periods has proven to erode margins without a significant unit uplift.

Brian Nagel from Oppenheimer & Co. Inc. inquired about the strategy and timeline for revitalizing the Foot Locker business post-acquisition, given its recent weaker performance. He also asked about DICK'S mitigation efforts regarding tariffs and any observed impact on consumer demand from price adjustments.

Answer

President & CEO Lauren Hobart expressed strong optimism for the Foot Locker acquisition, outlining plans to invest in stores, marketing, and merchandising, with more details to be shared in the Q3 call. Regarding tariffs, she stated that the updated guidance already accounts for their impact and noted that Q2 gross margins expanded despite surgical price increases, which consumers have responded well to, as evidenced by the 5% comp growth.

Brian Nagel asked about the market's perception of the Foot Locker acquisition and for an update on the company's strategy for managing potential tariffs.

Answer

Executive Chairman Ed Stack explained that while some investors prefer the status quo, the Foot Locker deal is a long-term strategic move to enter new global markets, enhance brand partnerships, and drive synergies. President and CEO Lauren Hobart added that all known tariffs are factored into the reaffirmed guidance, and the company's momentum and advanced pricing capabilities provide confidence in navigating the environment.

Brian Nagel sought to clarify whether the company is seeing a weaker consumer, contrary to some news headlines, and asked about the level of product innovation coming from key manufacturing partners like Nike.

Answer

CEO Lauren Hobart stated emphatically that the company is not seeing a weaker consumer and that its guidance reflects appropriate caution amid macro uncertainty. She expressed strong optimism about the product innovation pipeline from all key brand partners, highlighting newness in running, basketball, and lifestyle footwear as a key driver of confidence for the year.

Brian Nagel asked for an update on the House of Sport rollout plan for 2025 and its impact on comp sales, and also questioned if the Q4 guidance lift reflects higher internal projections and how the company is managing the shorter holiday season.

Answer

President and CEO Lauren Hobart highlighted the positive community and vendor partner impact of House of Sport and noted the company is prepared for the shorter holiday season by starting promotions early. CFO Navdeep Gupta detailed the plan to open approximately 15 House of Sport locations in 2025, with a long-term goal of 75-100 by 2027, clarifying that most are remodels/relocations and remain in the comp base. He added that the Q4 guidance raise reflects confidence but is balanced against macroeconomic uncertainty.

Brian Nagel inquired whether product innovation from key vendor partners is accelerating and how this might serve as an incremental tailwind. He also asked for more detail on the planned incremental SG&A investments for the second half of 2024.

Answer

President and CEO Lauren Hobart confirmed excitement about the product innovation pipeline from vendor partners, which complements DICK'S own innovation in store experiences and product access. CFO Navdeep Gupta clarified that the SG&A investments are targeted at core strategies like portfolio repositioning and technology to drive long-term growth. He noted these investments are balanced by higher gross margin expectations, resulting in a net increase to the full-year operating margin outlook.

Brian Nagel of Oppenheimer & Co. asked about the forward-looking risk from tariffs and whether the company's guidance implies that mitigation efforts will simply evolve and be managed over time.

Answer

CEO Winnie Park confirmed that tariffs are a 'reality' that is baked into the company's outlook. She described a comprehensive 'toolkit' for mitigation—including pricing, assortment changes, and vendor diversification—and stated that managing this fluid environment has become a 'way of life' and a core competency for the team.

Brian Nagel of Oppenheimer & Co. Inc. asked for a better explanation of the rapid 'flip the switch' acceleration in business performance from Q4 into Q1, especially given a sluggish broader retail environment.

Answer

CEO Winnie Park attributed the acceleration to two factors: easier year-over-year comparisons on a two-year stack basis in the first half, and a 'maniacal focus' on executing their core strategy of product, value, and experience. She described it as improved 'retail blocking and tackling,' including better trend execution, targeted value, and a cleaner store experience.

Brian Nagel asked about the sales cadence during the third quarter and whether Five Below observed the same 'event-driven' consumer shopping patterns noted by other retailers.

Answer

Interim CEO Ken Bull confirmed that Five Below's experience mirrored the broader retail sector. He described the quarter as starting slower, consistent with Q2's exit, before improving from the middle to the end of the period. He stressed that the company was able to successfully capitalize on traffic during key events like Halloween with a strong product assortment.

Brian Nagel of Oppenheimer & Co. Inc. asked if the moderation in store growth for 2025 should be viewed as a one-time pause or a new, ongoing rate. He also inquired if the company was changing its real estate strategy for new locations.

Answer

Interim President and CEO Kenneth Bull explained the moderation is primarily to ensure focus on executing the turnaround plan. While suggesting a similar growth rate could continue in the near term, he stressed the priority is fixing the business. He confirmed the real estate strategy remains flexible, as the model is successful in diverse locations (urban, rural, suburban) and the long-term whitespace opportunity remains intact.

Brian Nagel of Oppenheimer & Co. Inc. asked if there were any notable geographic trends in the quarter that could help distinguish weather impacts from underlying demand. He also inquired if the current tariff environment provides an opportunity for a scaled player like Lowe's to gain additional market share.

Answer

President, CEO & Chairman Marvin Ellison noted that besides hurricane overlaps, there were no material geographic anomalies impacting the business. Regarding trade, he explained that Lowe's has significantly diversified its sourcing, with 60% of goods now from the U.S. and only 20% from China. He described pricing as highly dynamic, managed by sophisticated systems to remain competitive and drive share, stating the team is efficient at navigating the environment to give customers reasons to choose Lowe's.

Brian Nagel asked if management sees any signs of a positive inflection point in the business despite macro headwinds. He also questioned the sustainability of Lowe's significant market share gains in the Pro segment.

Answer

CEO Marvin Ellison identified two key indicators for an inflection: a rebound in DIY discretionary big-ticket spending and sustained positive trends in the home services business. On Pro sustainability, Ellison pointed to the fragmented $250 billion addressable market for small-to-medium Pros. EVP, Stores, Joseph McFarland added that initiatives like Pro fulfillment centers and outside sales are still in early stages, providing confidence in continued growth.

Brian Nagel questioned the timeline and investment required for the company's strategic repositioning toward commercial customers and sought to clarify if the recent solidification in demand is due to internal initiatives or broader industry trends.

Answer

CEO Darren Lampert stated that the company has most of the internal assets needed for its transformation, highlighting the goal of reaching a 40% private label sales mix next year. He confirmed that demand is solidifying, with the largest durable goods backlog since 2021, attributing this to a combination of industry dynamics and GrowGen's strong relationships with the largest cultivators who are leading industry consolidation.

Brian Nagel from Oppenheimer asked for more color on the drivers behind the incremental weakness in consumer demand. He also questioned the company's capital allocation strategy, asking how management views its substantial cash position and the baseline capital required to operate the business.

Answer

Darren Lampert, Executive, attributed consumer weakness to cannabis price compression, which has reduced the number of individual growers and caused commercial operators to delay durable goods purchases. He explained the shift to the B2B portal is a direct response to this trend. Regarding the balance sheet, Lampert stated that while preserving capital is prudent due to regulatory uncertainty, the company is actively seeking accretive acquisitions in products, distribution, and lawn and garden, noting they have the back-office capacity to integrate them.

Brian Nagel inquired about the final target for the company's store count following its rationalization efforts and asked for a comparison of sales performance between new and legacy proprietary brands.

Answer

CEO Darren Lampert responded that the company is comfortable with its current 31 stores but may close a few more next year. He explained that proprietary brand growth is driven by both new product adoption and expanded distribution, which carry significantly higher margins (around 40%) compared to third-party products (low 20s). Lampert reiterated the goal for these brands to constitute 35% of sales by the end of 2025, emphasizing that GrowGen will continue to offer customers a choice with best-of-breed partner brands.

Brian Nagel of Oppenheimer & Co. Inc. asked about the company's perspective on a sustainable long-term revenue growth rate and whether tariffs are causing any disruptions among competitors.

Answer

CFO Sarah Oughtred outlined a growth strategy focused on first revitalizing the core business (US, new customers, scrubwear), followed by scaling international, teams, and retail hubs, with these latter drivers expected to ramp up more significantly in 2026. Co-Founder & CEO Trina Spear addressed the competitive question by stating that FIGS remains focused on its own execution and industry leadership.

Brian Nagel asked if FIGS has any historical precedent for managing trade issues like the current tariffs and sought to understand the key drivers behind the strong Average Order Value (AOV) growth in Q1.

Answer

CEO Trina Spear cited the company's experience managing supply chain challenges during COVID, highlighting FIGS's advantages: a non-seasonal, replenishment-driven business with a high-volume, low-SKU count model. She stated the company will use its strong balance sheet to be opportunistic. CFO Sarah Oughtred explained that the record $119 AOV was primarily driven by a reduction in discounts due to fewer promotions and a favorable product mix shift.

Brian Nagel asked for a bridge between the strong Q4 results and the downbeat 2025 guidance, and questioned the long-term building blocks for returning to normalized growth.

Answer

CFO Sarah Oughtred attributed the Q4 beat to strong December color launches. She explained the 2025 guidance reflects headwinds from lower active customer growth and a significant reduction in promotions. For long-term growth, she highlighted reinvigorating the U.S. business and active customer base as key.

Brian Nagel sought to quantify the sales growth impact from footwear issues in Q3 and asked for clarification on whether the higher-than-planned fulfillment center expenses were ongoing or related to one-time transition events.

Answer

CFO Sarah Oughtred detailed that the footwear underperformance was due to promotional exclusion, a delayed launch, and an out-of-stock on a popular style, stating that the company would have met its quarterly expectations otherwise. She clarified that beyond transition costs, higher fulfillment expenses were due to controllable ramp-up inefficiencies and shipping cost pressure from lower AOVs.

Brian Nagel sought more clarity on the fiscal 2026 revenue guidance, asking what current business trends support the expected inflection to growth after Q1 and how the growth would be split between subscription price changes and new member acquisition.

Answer

President & CEO Peter Stern attributed the confidence in future growth to several factors: new member acquisition driven by upcoming product innovations, higher revenue per member from selling additional equipment, and growth from the commercial business and content licensing. While not confirming a price increase, he heavily emphasized the significant value added to the platform since the last price change three years ago, suggesting a strong justification for one.

Brian Nagel asked for more detail on the plan to deleverage the balance sheet in fiscal 2025 and inquired about where the company is finding incremental pockets of new customer demand.

Answer

CFO Liz Coddington stated that deleveraging will be a natural result of generating meaningful free cash flow and improving adjusted EBITDA, with strategic debt reduction possible over time. Interim Co-CEO Chris Bruzzo identified men as a key growth audience, citing a recent 9% year-over-year mix shift in hardware sales toward men, driven by targeted marketing campaigns.

Brian Nagel of Oppenheimer & Co. Inc. asked for an explanation of the volatility in the company's sales trajectory, despite recent positive comps. He also inquired about the near- and long-term outlook for gross margin and what would constitute a 'healthy' margin level for the business.

Answer

President & CEO Peter Fitzsimmons attributed future sales growth to refined marketing efforts and better use of the Confidrive digital inspection tool, which is already driving sales in high-margin categories. EVP & CFO Brian D'Ambrosia reiterated that Q1 was the toughest margin compare and expects pressure to continue in FY26, but sees long-term margin expansion potential driven by leverage on growing comps and new merchandising programs.

Brian Nagel from Oppenheimer & Co. Inc. pressed for reasons behind the sequential worsening of gross margin from Q2 to Q3 and asked for the specific building blocks required to restore margins to pre-COVID levels over the long term.

Answer

CEO Michael Broderick explained the margin pressure resulted from a strategic decision made in May to reclaim market share in tires by leaning into promotions to combat consumer trade-down. He noted that service categories are now starting to improve, which will help restore balance. CFO Brian D'Ambrosia outlined the path back to historical margins, stating it requires an improved consumer environment (less trade-down, fewer promotions) and top-line growth to leverage fixed costs in labor and occupancy.

Brian Nagel of Oppenheimer & Co. Inc. questioned the dynamic between strengthening sales and weakening gross margins, asking if there was a trade-off and how the company could achieve simultaneous growth in both. He also asked what specifically changed between Q1 and Q2 to cause the margin shift.

Answer

CFO Brian D'Ambrosia clarified there is not a direct trade-off between sales and margin; rather, margin pressure is from the macro environment, including consumer trade-down and promotions. He stated the path to higher margins relies on improving the service category mix (especially brakes) and leveraging occupancy costs with positive comps. D'Ambrosia identified the primary difference from Q1 was a more pronounced trade-down from Tier 1 and 2 tires to Tier 3, which pressured material margins, combined with lapping stronger technician pay improvements from the prior year.

Brian Nagel from Oppenheimer & Co. Inc. requested more specific details on the one-time pressures that affected Q2 gross margin, how quickly those pressures would abate, and whether the margin decline was disconnected from the positive Q3 sales trends.

Answer

CFO Todd Vogensen clarified that new tariffs accounted for slightly more than half of the Q2 margin decline, with the remainder due to ramp-up costs that have now been largely addressed. CEO Robert DeMartini added that the Q2 margin impact was amplified because the company incurred startup costs for Rejuvenate 2.0 but did not ship enough product to realize the offsetting revenue benefit within the quarter.

Requested more detail on the one-time gross margin pressures in Q2, their size, and the expected recovery timeline. Also asked if the Q2 margin decline was disconnected from the sales acceleration seen in Q3.

Answer

Tariffs accounted for over half of the Q2 margin decline, while ramp-up costs were the other factor. Mitigation efforts for tariffs are underway, and ramp-up costs are now addressed. Gross margin is expected to ramp up through Q3 and exceed 40% in Q4. The margin pressure was linked to sales, as startup costs were incurred in Q2 without the full revenue benefit from new products, which is now materializing.

Brian Nagel from Oppenheimer asked about the manufacturing capacity requirements and start-up costs for the Mattress Firm expansion, whether the deal involves exclusivity, and how this partnership intersects with the company's ongoing review of strategic alternatives.

Answer

CEO Rob DeMartini stated that start-up costs are fully reflected in their plans and clarified that Purple will continue to manufacture 100% of its proprietary grid material, with partners like Sherwood handling final assembly. He noted that while some product differentiation exists for partners, the deal is primarily a vote of confidence in the brand's ability to drive traffic and trade-ups. He explicitly stated the partnership is completely independent of the strategic alternatives review.

Asked about the recent consumer demand trend, the expected consumer response to new innovative products like Rejuvenate, and the drivers for future gross margin expansion.

Answer

Executives confirmed a recent softening in consumer demand, noting President's Day was 'lukewarm at best'. They stated that while consumers haven't seen the new Rejuvenate line yet, trade response and initial testing are very positive. Future gross margin gains will be driven by plant consolidation, sourcing initiatives, and production efficiencies.

Brian Nagel from Oppenheimer & Co. Inc. asked if the marketplace cleanup timeline extending through the first half of fiscal 2026 was consistent with prior plans and questioned the timing of tariff mitigation efforts.

Answer

CFO Matt Friend confirmed the inventory cleanup timeline is unchanged from the prior quarter and that the growth in the holiday order book indicates progress. Regarding tariffs, he explained that mitigation actions are being implemented at different times throughout the fiscal year, resulting in a larger gross margin impact in Q1 before being fully offset over time.

Brian Nagel of Oppenheimer & Co. Inc. asked to what degree potential upside from new products is included in the full-year guidance and questioned the philosophy on balancing tariff-related price adjustments with the ongoing promotional environment.

Answer

EVP & CFO Keith Siegner stated that the guidance is based on a balanced approach and can be achieved even with flat performance from core products, positioning new product success as a buffer. President & COO Mary Fox addressed pricing by noting that while competitive promotions are necessary, Lovesac's strong brand, superior value proposition, and the fact that many competitors have already taken multiple price hikes allowed for recent surgical price increases.

Brian Nagel asked how product innovation should be factored into the top-line growth algorithm and inquired about the customer mix (new vs. existing) for the new PillowSac Accent Chair.

Answer

CFO Keith Siegner explained that the pace of innovation is directly linked to the cash flow generated by the core 'seats and sides' business, which is influenced by the macro environment. CEO Shawn Nelson revealed that demand for the PillowSac Accent Chair has been an exciting '50-50' split between new and existing customers, highlighting the product's success in driving high-margin repeat business and its viral impact on social media.

Brian Nagel of Oppenheimer & Co. Inc. asked about Best Buy's philosophical focus between sales and gross margin amidst tariffs, and whether current cost efficiencies are sustainable if sales strengthen.

Answer

CEO Corie Barry described the approach as a balance, aiming to stimulate demand while optimizing pricing with vendors. CFO Matt Bilunas detailed sustainable efficiencies from technology in customer care, procurement, and supply chain, stating that the company is always seeking cost improvements regardless of the sales environment.

Brian Nagel asked about Best Buy's supply chain flexibility to mitigate potential tariffs by shifting sourcing. He also questioned how to think about expense leverage going forward if the sales environment improves.

Answer

CEO Corie Barry emphasized the company's experienced team and strong vendor partnerships as key assets for navigating the situation. She outlined several actions, including deep vendor communication, supply chain adjustments, and pricing analysis, while noting much diversification work had already been done. CFO Matthew Bilunas addressed leverage, stating that while sales growth provides core leverage, the company is also making strategic investments in initiatives like Best Buy Ads and Marketplace. These investments will increase SG&A but are expected to contribute to operating income this year and drive rate expansion in the future.

Brian Nagel asked about business trends in the early part of Q1 2025 following a strong Q4, and whether there was any evidence of demand being pulled forward into 2024 as consumers anticipated tariffs.

Answer

CFO Jeff Howie stated that quarter-to-date trends are factored into the annual guidance, though the late Easter shift makes current reads difficult. He noted no hard evidence of a demand pull-forward. CEO Laura Alber added that the furniture business trend is improving, which she attributes to the success of their proprietary newness and designs rather than a broader macro lift, providing another reason for optimism.

Brian Nagel pointed out that despite positive commentary, the comparable sales trend showed only slight sequential improvement and appeared to decelerate on a multi-year stack basis, asking what factors were offsetting the wins.

Answer

CEO Laura Alber explained that the top-line is impacted by the deliberate move away from comping prior-year promotions, which she described as lower-quality sales. Additionally, the overall furniture category remains weak. She described this situation as a 'coiled spring,' suggesting significant operating margin leverage potential when furniture demand eventually recovers.

Brian Nagel of Oppenheimer asked about the impact of the increasingly promotional industry environment and sought to identify specific areas of demand weakness that prompted the lowered full-year revenue guidance.

Answer

CEO Laura Alber reiterated the company's commitment to avoiding site-wide promotions, stating this strategy builds long-term value, with regular-priced sales outperforming markdowns. She explained the revised guidance reflects a prudent view of the macro environment and the lack of a housing market recovery, rather than a specific new area of weakness, describing the operating model as a 'coiled spring' poised for leverage.

Brian Nagel requested a more quantitative definition of 'newness' and how different the product assortment will look in early 2025. He also asked if the sales performance of new products could be quantified against a baseline.

Answer

CEO Calvin McDonald explained that while he wouldn't share an absolute number, 'newness' is a percentage of the merchandise mix comprising new colors, patterns, franchises, and seasonal items. He stated the goal is to return this mix to historical levels by Q1 2025. He confirmed that new products introduced this year are performing very well, citing strong guest response to items like the Define jacket variations and Waffle-Knit styles, indicating the issue is the quantity of newness, not its quality.

Brian Nagel of Oppenheimer & Co. Inc. asked about the company's ability to manage potential tariff increases and for an update on the re-engagement with wholesale partners, including what those partners are looking for from the brand.

Answer

CFO Dave Bergman addressed tariffs, stating that the company is monitoring the post-election landscape but is prepared to manage potential changes and does not currently anticipate sizable impacts. CEO Kevin Plank discussed wholesale, noting that retail partners are rooting for Under Armour's success. He stressed the need to provide products that 'cut through' and to better communicate the performance benefits, moving beyond price-based selling. Plank affirmed that Under Armour is actively working to earn back shelf space season by season.