Jonathan Matuszewski • Jefferies

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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