Jonathan Matuszewski

Jonathan Matuszewski asked about Leslie's pricing strategy, focusing on opportunities in chemicals versus equipment and whether the new pricing aims for historical parity or a more value-oriented approach. He also questioned the P&L geography for EBITDA margin expansion, specifically if gross margin would decline while SG&A rationalization drives the improvement.

Answer

CEO Jason McDonell stated that price optimization is focused predominantly on key value items in chemicals, leveraging vertical integration. He confirmed the strategy is to be comparable to specialty retailers and slightly ahead of big box stores. CFO Jeff White confirmed expected gross margin degradation (100-150 bps) due to pricing investment, offset by freight expense reduction, occupancy costs, and SG&A optimization.

Jonathan Matuszewski asked for clarification on Leslie's pricing strategy, specifically where the most opportunity lies between chemicals and equipment, and if the new pricing aims for historical parity or a more value-oriented approach. He also questioned the P&L geography of the EBITDA margin expansion, asking if gross margin would decline due to price investments while SG&A rationalization drives the overall improvement.

Answer

CEO Jason McDonell explained that price optimization focuses predominantly on key value chemical items, leveraging vertical integration. The strategy aims for comparability with specialty retailers and slightly ahead of Big Box. CFO Jeff White confirmed an expected 100-150 basis point margin degradation from pricing investments, offset by freight expense reduction, occupancy costs, and SG&A optimization.

Jonathan Matuszewski of Jefferies followed up on competitive pressures, specifically asking about the equipment category, and questioned the potential path to gross margin recovery.

Answer

CEO Jason McDonell reported that core equipment sales were down mid-single digits due to lower residential traffic. Interim CFO & Treasurer Tony Iskander and McDonell both linked future gross margin recovery to the company's strategic pillars, particularly asset utilization and cost optimization, to address fixed cost deleverage, with more details expected in November.

Jonathan Matuszewski of Jefferies asked for context on Q2 sales performance versus the competitive landscape and for details on planned strategic pricing increases.

Answer

CEO Jason McDonell stated that while weather impacted overall top-line results, he believes the company is gaining share in the PRO segment due to a network-wide focus on service, assortment, and in-stocks. He acknowledged the DIY segment is a work in progress, supported by new marketing, loyalty, and delivery initiatives. Interim CFO Tony Iskander clarified that any pricing actions would be strategic and limited to offsetting tariff impacts, which affect less than 1% of total sales.

Jonathan Matuszewski from Jefferies inquired about early signs of progress from Leslie's transformation initiatives, specifically the Local Fulfillment Centers (LFCs), and questioned the historical scale of out-of-stock issues and the long-term expansion plan for the LFC network.

Answer

CEO Jason McDonell provided examples of "green shoots," noting that LFCs are already improving inventory turns by centralizing high-ticket items like heaters, which enhances working capital. He shared an anecdote about an LFC in Arizona quickly fulfilling an order for another store, preventing a lost sale. McDonell emphasized that improving in-stock reliability is critical for building customer trust and that the initial 26 LFCs are a starting point, with plans to learn from them before further expansion.

Jonathan Matuszewski requested high-level qualitative views on fiscal 2025 trends, particularly regarding discretionary vs. non-discretionary demand, and asked about the growth opportunity in e-commerce.

Answer

CFO Scott Bowman noted that while equipment sales remain soft, targeted promotions are showing promise, and the hot tub business has improved. He differentiated e-commerce between the price-sensitive marketplace business and the proprietary Leslie's site, which saw positive growth and offers synergies with stores. CEO Jason McDonell emphasized the strategy is to build a more integrated omnichannel approach, connecting digital channels with the physical store footprint.

Jonathan Matuszewski asked for more details on Best Buy's approach to agentic commerce, including potential top-line and margin benefits from features like instant checkout, and any projected timelines for integration. He also inquired about the magnitude of hiring and technology spend for retail media in the next year compared to 2025, and how much the neutral operating margin impact for this business is constrained by current elevated investments.

Answer

Corie Barry, CEO, stated that the timeline for agentic commerce is 'fast' but emphasized prioritizing the customer experience, especially given complexities like scheduled delivery, installation, and services. The focus is on ensuring Best Buy's brand and expertise are helpful to customers using these tools. Matt Bilunas, Chief Financial and Strategy Officer, indicated that while they are not guiding for next year, they anticipate continued investment in the marketplace and ads business to drive long-term growth and rate opportunities. He noted that these initiatives are expected to be accretive over a 1-3-5 year period, though the exact investment levels and their impact on operating income are still being evaluated.

Jonathan Matuszewski asked for an expansion on Best Buy's agentic commerce initiatives, specifically how the company views potential top-line and margin benefits from features like instant checkout, and any timelines for integration. He also inquired about the magnitude of hiring and technology spend for the retail media business next year compared to 2025, and how much the neutral operating margin impact for this business is constrained by elevated investments this year.

Answer

Corie Barry, CEO, indicated a fast timeline for agentic commerce, emphasizing the need to prioritize customer experience, especially for complex transactions involving scheduled delivery, installation, or services, while protecting the brand's knowledge. Matt Bilunas, Chief Financial and Strategy Officer, stated that while specific guidance for next year is not available, the company expects to continue investing in marketplace and ads to drive long-term growth and rate opportunities. He noted that these investments are considered a good trade-off for accretive returns over a 1-3-5 year period, with the exact flow-through to operating income still being evaluated.

Jonathan Matuszewski from Jefferies asked about the blended price increase embedded in guidance and for an update on the strategic role and profitability path for the Best Buy Health business.

Answer

CFO Matt Bilunas declined to provide a specific price hike figure, noting the fluidity of the situation. CEO Corie Barry reaffirmed the 'care at home' strategy for Best Buy Health, noting the Lively business remains viable. She acknowledged that the in-home services partnership segment has developed slower than anticipated due to external healthcare industry factors, and is being optimized.

Jonathan Matuszewski asked about the key learnings from Best Buy's marketplace in Canada and how the U.S. launch might differ. He followed up by asking if the U.S. marketplace could achieve a similar scale, where one in four items shipped is from a third-party seller.

Answer

CEO Corie Barry explained that the Canadian marketplace, initially focused on refurbished goods, proved there is strong customer demand for deeper product assortments. The U.S. launch will leverage this insight but focus more on new products and offer multiple seller options for the same SKU. While bullish on the U.S. opportunity due to observed customer search behavior, she noted that its evolution and scale might differ from Canada's given the different product focus from the outset.

Jonathan Matuszewski inquired about Stanley Black & Decker's potential to benefit from current administration housing policies aimed at catalyzing and unlocking dormant housing supply.

Answer

President and CEO Chris Nelson stated that the company does not see any near-term catalysts for the housing market and is focused on controllable actions like margin expansion and product line growth. He believes Stanley Black & Decker is well-positioned to benefit from any future housing market unlock due to strong market share and investments in end-user relationships and innovation during the current market retrenchment.

Jonathan Matuszewski inquired about Stanley Black & Decker's potential to benefit from future housing policy proposals aimed at stimulating dormant housing supply.

Answer

Chris Nelson, President and CEO, stated that there is no real near-term catalyst for the housing market, and the company is focused on controllable factors like margin expansion and product line growth. He affirmed that Stanley Black & Decker is well-positioned to benefit from any housing market unlock, serving those trades with high share positions and investing in innovation during the current market retrenchment.

Jonathan Matuszewski from Jefferies inquired about the performance trends of the Craftsman brand, the competitive landscape in the DIY segment, and potential demand drivers beyond lower interest rates.

Answer

COO, EVP and President of Tools & Outdoor Christopher J. Nelson acknowledged that the DIY segment where Craftsman competes has been softer than the professional market. He stated Craftsman is performing in line with the market and the company's focus is on driving organic growth by expanding the brand's product assortment, particularly in power tools, to be well-positioned for an eventual market recovery.

Jonathan Matuszewski inquired about Bed Bath & Beyond's conversations with suppliers regarding their willingness to pass along price on the marketplace, especially in light of recent tariff noise, and how this impacts AOV trends. He also asked about the potential cost-savings opportunity from increasing AI automation in customer service.

Answer

Marcus Lemonis, Executive Chairman and Principal Executive Officer, acknowledged significant pressure on suppliers due to tariffs and unpredictability. He stated the company's focus on ensuring profitable vendor relationships, mitigating costs, and accepting potential future pricing pressure by eliminating unprofitable SKUs and seeking volume targets/rebates. Lemonis highlighted the benefit of being an asset-light retailer with minimal inventory risk. Regarding AI, Lemonis declared it an absolute mandate, aiming for staffing efficiency (operating with fewer people) and an improved customer experience (personalized communication, better conversion, and retention). He noted the company's clean slate without significant technical debt and the establishment of a Board Tech Committee to engage third parties for AI solutions, rather than building everything internally.

Jonathan Matuszewski inquired about supplier willingness to absorb or pass along price increases on the marketplace, especially given recent tariff noise, and the potential cost-savings opportunity from AI automation in customer service.

Answer

Executive Chairman and Principal Executive Officer Marcus Lemonis acknowledged significant supplier pressure from tariffs, emphasizing the need for profitable vendor relationships. He noted the asset-light model mitigates inventory risk and that the company is eliminating unprofitable SKUs while seeking volume targets and rebates. Lemonis stated AI is a mandate for staffing efficiency (operating with fewer people) and enhancing customer experience through personalization, conversion, and retention, highlighting a strategy of engaging third-party experts rather than building everything internally.

Jonathan Matuszewski asked about shopping pattern disparities among ethnic cohorts, focusing on the Hispanic consumer, and requested quantification of the in-stock improvements from the RFID initiative.

Answer

CEO Steve Lawrence and CFO Carl Ford, citing Placer.ai data, noted that while the overall Hispanic consumer segment is growing, stores that heavily index to this demographic are underperforming. Regarding RFID, they reiterated that the initiative has improved inventory accuracy by 20 points and in-stocks by 400-500 basis points for tracked items.

Jonathan Matuszewski asked about spending patterns across customer cohorts, specifically inquiring about disparities in shopping patterns among different ethnicities, including the Hispanic consumer, and whether any underperformance in this group was widening, narrowing, or consistent with prior periods. He also followed up on improved in-stocks from RFID and the Georgia DC, asking for a way to quantify the current frequency of out-of-stocks versus the potential magnitude of conversion improvement in future quarters.

Answer

CFO Carl Ford clarified that income quintiles (below $50K, $50K-$100K, above $100K) each represent about one-third of the customer base, but there's been a significant shift towards higher-income quintiles. He noted Placer AI data indicates the Hispanic consumer in Academy's markets is up year-over-year, but stores over-indexing in Hispanic consumers (e.g., Texas/Mexico border) are performing slightly worse due to border disruption. Other ethnic groups show no significant outliers. CEO Steve Lawrence stated that RFID-counted goods show about a 20-point improvement in inventory accuracy, leading to a 400-500 basis point improvement in overall in-stocks, which helps conversion.

Jonathan Matuszewski of Jefferies inquired about the retention of higher-income consumers and whether the positive sales momentum from April continued into May.

Answer

EVP & CFO Earl Carlton Ford IV confirmed that the company is retaining the higher-income customers it began attracting in Q3 2024, noting they are shopping more frequently and across categories. CEO Steven Lawrence added that while May sales were down low-single digits in a choppy environment, the company remains optimistic for Q2, citing upcoming key shopping periods like Father's Day and Back-to-School.

Jonathan Matuszewski of Jefferies asked for more detail on the 'faster fulfillment' benefit from the FBM acquisition, seeking to frame the potential improvement in service speed for pro customers. He also inquired about the long-term working capital and inventory efficiencies that could be realized from Lowe's new 3P marketplace.

Answer

President, CEO & Chairman Marvin Ellison explained that fulfillment efficiency would be 'exponentially better,' citing the example of a large drywall order that is currently a painful process but could be fulfilled by FBM in 24 hours or less. EVP & CFO Brandon Sink commented on the marketplace, stating that while it's early, he is excited about the progress and expects it to be a meaningful contributor to the online offering long-term, though specific working capital targets have not been set.

Jonathan Matuszewski from Jefferies LLC inquired about the company's B2B strategy, particularly for the trade and contract business, and asked if there were historical parallels to help frame expectations for the new Bath collection launch.

Answer

Chief Marketing & eCommerce Officer Jennifer Porter stated it was too early to detail the new B2B lead's specific plans but highlighted the significant growth opportunity within the trade designer community. Founder, Chairman, and CEO John Reed added that the trade channel is a tremendous growth avenue. Regarding the Bath launch, Reed compared it to the successful launch and continued growth of the outdoor category five years ago, noting the Bath collection is a comprehensive, multi-year effort he is very bullish on.

Jonathan Matuszewski asked about the macroeconomic and housing assumptions embedded in the 2025 comp outlook and requested quantification of the tariff headwind included in the guidance.

Answer

Jennifer Porter, CMO, said the guidance assumes a conservative, 'status quo' macro environment similar to last year, noting that home refreshes are a larger driver than the housing market. An executive added that while they have worked with vendors on potential tariff impacts and have contingency plans, they could not provide a specific magnitude, as the situation remains fluid.

Jonathan Matuszewski asked for an analysis of Q3 demand trends, including metrics like traffic, conversion, and AOV. He also requested an update on the company's sourcing exposure to China and its ability to manage potential tariff impacts.

Answer

CFO Dawn Phillipson noted that while Q3 comp traffic and transactions were down, units per transaction were up, and the penetration of high-value orders (over $5,000) increased. CEO John Reed stated that Arhaus has been diversifying away from China for years and is in 'great shape' to handle tariffs, having previously managed them by working with vendors and implementing modest price increases.

Jonathan Matuszewski from Jefferies asked if there has been any evolution in the sources of Wayfair's market share gains. He also inquired how Wayfair is positioning itself to benefit from the growth in referral traffic from LLMs like ChatGPT.

Answer

CEO Niraj Shah responded that the source of share gains remains consistent: taking share from a large, fragmented market. He noted that Wayfair is actively working with major LLM players to optimize how they understand and recommend Wayfair's offerings, leveraging the company's technology and complex, non-commodity product catalog as a key advantage.

Jonathan Matuszewski from Jefferies inquired about supplier pricing strategies, asking if vendors might be raising prices on other retail platforms before Wayfair. He also requested quantification of the gross margin headwind from the Q1 CastleGate inventory rush and the expected magnitude of the subsequent tailwind.

Answer

CEO Niraj Shah stated he has not heard of suppliers aggressively raising prices on other platforms, as they are generally wary of doing so in a challenged demand environment and recognize the competitive dynamics of Wayfair's marketplace. CFO Kate Gulliver explained that the Q1 CastleGate investment will yield future benefits through better pricing and availability, which supports the top line, and through future pick-pack fees, which will benefit the gross margin line over subsequent quarters.

Jonathan Matuszewski from Jefferies asked about the current pricing environment, specifically how vendors are approaching potential tariff headwinds. He also inquired how the company's recent EBITDA momentum influences its timeline for achieving breakeven.

Answer

Executive Chairman & Principal Executive Officer Marcus Lemonis responded that while there have been modest price hikes, he expects manufacturers to absorb most tariff impacts due to low consumer price elasticity. Regarding breakeven, Lemonis explained that the company's mindset has shifted from aggressive cost-cutting to investing for smart growth, noting that the Q2 EBITDA loss included strategic investments in technology and new categories that were necessary for performance.

Jonathan Matuszewski inquired about the current pricing environment, specifically how vendors are managing tariff headwinds. He also asked how the recent positive EBITDA momentum influences the company's timeline for achieving breakeven.

Answer

Executive Chairman Marcus Lemonis responded that vendors are absorbing most of the tariff impact due to low consumer price elasticity, and Beyond is actively shifting sourcing away from China. Regarding breakeven, he explained the company's mindset has shifted from pure cost-cutting to smart investment in growth initiatives like new technology and categories. While not providing a new timeline, he emphasized the focus is now on growing revenue and improving margins to reach profitability, rather than just cutting expenses.

Jonathan Matuszewski requested a roadmap to achieving breakeven EBITDA and inquired about the brand activation strategies planned for the newly acquired buybuy BABY.

Answer

Executive Chairman Marcus Lemonis provided a model for reaching the 'neighborhood of profitability,' stating it would require approximately $1.2 billion in annualized revenue with a 25% gross margin and 13% sales and marketing spend. Regarding buybuy BABY, he outlined a careful, content-driven launch strategy with a distinct budget, focusing on community engagement and ensuring the product assortment serves all potential customers.

Jonathan Matuszewski of Jefferies requested an update on the Waterworks business, focusing on brand elevation efforts, integration with RH, and the timeline for introducing Waterworks products into more RH galleries.

Answer

Chairman & CEO Gary Friedman praised the Waterworks brand and team, noting significant EBITDA margin improvement since the acquisition. He stated that RH is currently testing a Waterworks shop-in-shop concept in its Newport Beach gallery to learn the best way to integrate the brands. The long-term vision is to leverage RH's global platform to expand Waterworks' reach.

Jonathan Matuszewski from Jefferies asked if clearance activity was acquiring new customers, noting a decline in member count. He also asked about consumer benefits from increased U.S. sourcing.

Answer

Gary Friedman, executive, explained that promotions in a down market are crucial for maintaining sales volume and that the member count variance is not significant. He clarified that the plan to source nearly half of its product from the U.S. applies specifically to the upholstered furniture category, not the entire business.

Jonathan Matuszewski inquired about the pricing strategy for new collections and whether future growth would come from price or volume. He also asked for color on outperforming product lines.

Answer

Chairman and CEO Gary Friedman indicated future growth would likely be driven by 'probably both' higher prices and greater unit velocity, emphasizing that the RH brand halo allows for more disruptive value. He respectfully declined to identify specific outperforming product lines, stating that doing so would provide valuable information to competitors.

Jonathan Matuszewski asked for perspective on how a housing market recovery might affect luxury versus non-luxury spending and inquired about the reason for the increased financial headwind from international investments.

Answer

CEO Gary Friedman opined that a housing recovery hinges on closing the 'affordability gap' and that RH's performance is not dependent on it. He stated a preference for the Fed to definitively defeat inflation before cutting rates. CFO Jack Preston explained the international investment drag increased as a percentage because the overall sales forecast was revised slightly lower, making the fixed costs a larger portion of the total.

Jonathan Matuszewski asked if trimming assortments was a strategy to offset tariffs and requested details on the mix of free versus paid users on GameChanger.

Answer

President and CEO Lauren Hobart stated that trimming assortments is not part of their strategy; they will continue to optimize inventory to meet athlete needs. Executive VP & CFO Navdeep Gupta noted strong engagement on both free and paid tiers of GameChanger, with the DICK'S Media Network providing a way to monetize free users and the team effectively upselling subscriptions.

Jonathan Matuszewski from Jefferies requested context on demand trends throughout the quarter, the exit rate in April, and any early indications for May, noting weakness reported by industry peers.

Answer

Executive Jeff Howie declined to provide intra-quarter details but emphasized that strong results were seen across all brands, with every brand achieving a positive comp. He highlighted that the furniture category comped positive for the first time in nine quarters, attributing the success to consumer response to the company's products and strategies, which is enabling it to gain market share.

Jonathan Matuszewski asked about how demand trended throughout the quarter, the company's exit rate, and if management could share any color on performance in early May.

Answer

CFO Jeff Howie declined to comment on intra-quarter cadence but highlighted that all brands delivered positive comps and the furniture category returned to positive comp growth for the first time in nine quarters. He attributed the strong performance to consumer response to the company's product assortments, marketing, and strategic priorities, which is enabling market share gains.

Jonathan Matuszewski from Jefferies requested insight into demand trends throughout the quarter, specifically the exit rate in April and any early indications for May, given that some industry peers reported significant declines.

Answer

CFO Jeff Howie did not comment on intra-quarter trends but emphasized that all brands posted positive comps and the furniture category turned positive for the first time in nine quarters. He attributed the strong performance and market share gains to the consumer's positive response to the company's products, assortments, and overall strategy.

Jonathan Matuszewski asked about how demand trended throughout the quarter, particularly the exit rate in April, and whether the company could share any color on May trends.

Answer

EVP and CFO Jeff Howie declined to provide intra-quarter details but emphasized the strong results and positive comps across all brands. He highlighted that the furniture category turned positive for the first time in nine quarters, attributing the overall outperformance and market share gains to the consumer's positive response to the company's products and strategies.

Jonathan Matuszewski inquired about the company's plans for its retail store base in 2025, referencing a prior plan to close 25% of stores and asking if that framework was still relevant.

Answer

CEO Laura Alber affirmed the importance of retail stores as profitable brand billboards. She confirmed the company continues its optimization strategy, having already closed 17% of its fleet since 2019. She emphasized that they are simultaneously investing in successful renovations and relocations, citing a relocated Oklahoma City store that is performing with double-digit growth compared to its prior location.

Jonathan Matuszewski asked for quantification of product newness introduced this year versus last and for an update on the company's strategy and performance within the 'trade' segment of its B2B business.

Answer

CEO Laura Alber noted that newness is driving double-digit comps in key areas like West Elm furniture but emphasized the quality of innovation over a specific quantity. CFO Jeff Howie reported that the trade business grew 4% due to strong engagement by retail teams with local designers, but stressed that the faster-growing contract business, up 17%, remains the primary focus and opportunity within B2B.

Jonathan Matuszewski asked about intra-quarter demand trends, the exit rate for April, and any early indications for May, noting that some industry peers had reported significant declines.

Answer

EVP and CFO Jeff Howie declined to comment on the specific cadence of comps during the quarter but highlighted that all brands posted positive comps. He pointed out the significant achievement of the furniture category comping positive for the first time in nine quarters. He attributed the market share gains to strong consumer response to the company's products, marketing, and strategic priorities.

Jonathan Matuszewski of Jefferies asked about the demand cadence throughout the quarter, the exit rate in April, and any early trends for May, referencing weakness among industry peers.

Answer

EVP and CFO Jeff Howie declined to provide intra-quarter details but highlighted strong results across all brands, which all posted positive comps. He noted the significant milestone of the furniture category turning positive for the first time in nine quarters, attributing the outperformance to the successful execution of their core strategies.

Jonathan Matuszewski of Jefferies asked for elaboration on the survey data indicating a 25% consumer trade-down to do-it-yourself (DIY) from do-it-for-me (DIFM) services, and also inquired about the current competitive pressure from private label brands.

Answer

CEO James Hagedorn and President & COO Nate Baxter responded. Hagedorn reframed the DIY shift as a 'trade-up' for consumers seeking better results for less money. Baxter clarified that while the survey data is noted, this level of fluctuation between DIY and DIFM is historically consistent and is not explicitly factored into guidance, though it could represent potential upside. Regarding private label, an executive stated that the current highly promotional environment for Scotts' brands has significantly narrowed the typical price gap, thereby reducing competitive pressure from store brands.

Jonathan Matuszewski of Jefferies asked about the expected contribution from innovation, such as natural fertilizers and liquids, to the medium-term sales growth target. He also requested details on the dot-com channel opportunity, including current penetration and execution steps.

Answer

Executive James Hagedorn and Executive Nate Baxter explained that innovation in areas like organics and liquids is key to addressing consumer concerns, improving product effectiveness, and adapting to changing weather. For the dot-com channel, they confirmed that Scotts' market share is in the low-double digits, a fraction of its 40% share in brick-and-mortar, representing a massive growth opportunity. Executing on this requires developing new, smaller form factors and different go-to-market strategies than those used for traditional retail.

Requested more detail on the cadence and composition of the $100 million synergy realization, asking where the initial $10 million in 2025 will come from and how the sources of synergy will evolve over time.

Answer

The initial $10 million in synergies, realized in the back half of 2025, will primarily come from sourcing initiatives in corporate functions and some manufacturing efficiencies. The realization will be a slow build, more than doubling in 2026, and then filling in to reach the $100 million target. The run-rate impact of actions taken in 2025 will be significantly larger than the in-year P&L benefit.

Jonathan Matuszewski of Jefferies inquired about the trend in in-store conversion rates, particularly asking if they are holding up in stores that are operating with minimum labor hours.

Answer

President Trevor Lang confirmed that a recent detailed brand tracker showed that conversion rates for customers who shop the brand remain very consistent with historical levels. CEO Tom Taylor added that customer service scores among both pro and retail customers are also showing continued improvement, indicating that execution remains strong despite cost controls.