Ed Kelly

Ed Kelly asked about the drivers behind the strong per-store expense growth in 2025, which was below initial guidance, and the outlook for 2026 remaining below the 5% normal run rate. He also questioned what the correct long-term run rate for per-store expense growth should be.

Answer

Mindy West, President and Chief Executive Officer, attributed the strong expense management to the store excellence campaign, including self-maintenance initiatives (saving nearly $2M), reduced overhead through efficient staffing and scheduling, and improved loss prevention (saving over $4M). She expects these impacts to continue and amplify. Ms. West projected a long-term run rate of around 4% for per-store expense growth, noting that new, larger-format stores contribute to higher initial operating expenses due to full staffing requirements.

Ed Kelly inquired about Murphy USA's per-store expense growth, noting the strong performance in 2025 below initial guidance and the 2026 outlook remaining below the 5% normal run rate. He asked for the key drivers behind this efficiency in 2026 and what the correct long-term run rate for per-store expense growth should be.

Answer

Mindy West, President and CEO, praised the team for managing expenses, achieving only 3.3% OpEx growth in 2025. She attributed this to the Store Excellence campaign, self-maintenance initiatives (saving $2 million), cutting overhead through efficient staffing and scheduling, and improved loss prevention (saving over $4 million). These efforts are expected to continue and amplify. For the long-term, she suggested a run rate of around 4%, acknowledging that the growth of larger new-to-industry stores will contribute to higher initial costs, particularly for staffing, but the company remains committed to operational efficiency.

Ed Kelly asked about the sustainability of Casey's fuel outperformance given a challenging backdrop, expectations for Q3 fuel margins, and any fundamental changes in approach or competitive landscape. He also inquired about the higher-than-expected 4.5% same-store operating expense increase and the outlook for the back half of the fiscal year.

Answer

Steve Bramlage, Chief Financial Officer, stated that Casey's consistent approach to balancing profitability and volume, coupled with the strong inside store offer, contributes to fuel outperformance. He noted that winter typically brings seasonally lower margins but did not prognosticate beyond November's experience. Regarding operating expenses, Mr. Bramlage explained that full-year expectations remain unchanged, with the timing of the FICOS transaction lap expected to naturally step down year-over-year changes in the second half. He also mentioned flat same-store labor hours due to prudent additions for strong pizza demand, along with higher insurance, utilities, legal, and advertising costs.

Ed Kelly asked for early thoughts on the 2026 comparable store sales build, considering the normalization of Big Lots tailwinds, the performance of Big Lots conversions (like 99 Cents Only Stores), and the potential for a traditional 1%-2% comp guide, also inquiring about opportunities from fiscal changes like tax cuts.

Answer

Robert Helm (EVP and CFO) confirmed that the company will likely stick to its traditional 1%-2% comp algo for 2026 guidance, despite potential tailwinds. He cited elevated tax money in H1, multi-year Big Lots market share capture, and the absence of AUR drag (as seen in Q3) as positive factors, but emphasized maintaining the algo for business management.

Ed Kelly sought early insights into the 2026 comparable store sales build, considering factors like the normalization of the Big Lots tailwind, whether Big Lots conversions will perform similarly to 99 Cents Only stores (flattish/low comp in year one), and if the traditional 1-2% comp guide is the most probable outcome. He also asked about opportunities related to upcoming fiscal changes, such as tax cuts.

Answer

EVP and CFO Robert Helm indicated that Ollie's will likely maintain its long-term comparable store sales algo of positive 1-2% for 2026. However, he acknowledged several potential tailwinds, including elevated tax money in the first half of the year, a multi-year market share capture from Big Lots closures, and the expectation that average unit retail (AUR) will not be a drag as it was in 2025. He emphasized that while the official guidance will be reset at 1-2%, the company will aim to outperform.

Ed Kelly of Wells Fargo Securities asked about Kroger's current grocery identical sales trends, the competitive landscape, recent price investments, and their impact on underlying gross margin stability. He also inquired about the potential for EBIT margin expansion in the upcoming year, particularly concerning e-commerce profitability.

Answer

Chairman and CEO Ron Sargent attributed softer sales to consumer caution, government shutdown concerns, and the pause in SNAP benefits, noting a negative comp in general merchandise. He affirmed continued price investments and promotions, supported by strong vendor funding. CFO David Kennerley added that share trends improved despite sales impacts and emphasized responsible gross margin management, with selling gross declining due to pricing but offset by mix, sourcing, and shrink improvements.