Josh Young

Josh Young asked for details on the puts and takes of the EV impairment and how to size the potential DPU benefit, noting it was previously around $600. He also inquired about the key financial considerations and timeline for material benefits from the Waymo collaboration.

Answer

CFO Daniel Cunha explained that the permanent 100% bonus depreciation from the 'Big Beautiful Bill' reduced future tax liability, prompting the monetization of $180 million in EV tax credits. This allowed them to reassess EV strategy, shortening the economic life of EV vehicles from 36 to approximately 18 months to reduce risk, effectively cutting DPU from around $600 to slightly over $300 per month. SVP David Calabria stressed this was an opportunity to monetize tax credits with little prior value, reduce depreciation, and fund it via a new securitization. CEO Brian Choi stated that specific Waymo economics are not being disclosed, emphasizing that the partnership is currently focused on building operational capability without deploying outsized capital, with vehicles in Dallas on Waymo's balance sheet. He noted they would consider owning vehicles if economics justify it, under strict return thresholds.

Josh Young inquired about the puts and takes on the EV impairment, specifically how the $500 million write-down was decided and the potential benefit to DPU, given the previous $600 monthly depreciation. He also asked about the key financial considerations and potential material benefit from the Waymo partnership.

Answer

CFO Daniel Cunha explained that the EV impairment was an opportunity to monetize federal EV tax credits (generating $180 million cash) after the 'Big Beautiful Bill' made 100% bonus depreciation permanent, reducing future tax liability. This prompted a reevaluation of EV strategy, leading to shortening the useful life from 36 to 18 months, which reduces DPU from $600 to slightly over $300 per month. SVP, Corporate Finance, and Treasurer David Calabria stressed it was an opportunity to reduce depreciation funded by a new securitization. CEO Brian Choi stated that Waymo is currently focused on building operational capability in Dallas, with vehicles on Waymo's balance sheet, and Avis Budget Group would only consider owning vehicles if economics justify it under strict return thresholds.

Josh Young asked for an update on the performance of stores in markets similar to now-closed Big Lots locations and whether there have been any operational stresses (supply chain or labor) due to the accelerated pace of new store openings.

Answer

Robert Helm (EVP and CFO) stated that stores near Big Lots closures continue to outperform the rest of the chain, with those within five miles of a non-reopened Big Lots showing low to mid-single-digit lifts. Eric van der Valk (President and CEO) explained that investments in infrastructure (supply chain, project management, real estate, construction, store leadership) and the soft opening approach helped manage stress, pacing openings to spread resources and successfully deliver 86 stores without significant operational issues.

Josh Young requested an update on the performance of Ollie's stores located in markets similar to the now-closed Big Lots locations. He also asked if the accelerated pace of new store openings has introduced any operational stresses, such as in supply chain or labor.

Answer

EVP and CFO Robert Helm stated that stores within five miles of a Big Lots closure (where it has not reopened) continue to outperform the rest of the chain, showing a low to mid-single-digit lift. Stores where Big Lots closed and other wholesalers reopened also show similar, albeit slightly lower, improved performance. President and CEO Eric van der Valk explained that Ollie's proactively invested in infrastructure (supply chain, project management, real estate, construction, store leadership) and adopted a soft opening approach, pacing openings over the first three quarters to mitigate operational stress. While the team was tired, the plan was successfully executed, and they are prepared for 2026.

Josh Young inquired about the early results of revamped marketing efforts, specifically regarding re-engaging less frequent guests, seeking quantification of the lift observed, and the potential outlook for these initiatives moving into 2026.

Answer

Chairman and CEO Chris Morris explained that robust reporting now allows for better insight into guest behavior and targeted engagement. He highlighted the significant improvement in guest contactability, from 38% to 60%, which enhances the ability to drive frequency. While not disclosing specific frequency numbers, Morris confirmed meaningful progress in converting non-routine guests into regular visitors, expressing confidence for future growth.

Josh Young asked about the early results and quantification of the lift from European Wax Center's revamped marketing efforts, particularly in re-engaging less frequent guests, and the outlook for these initiatives into 2026.

Answer

Chris Morris, Chairman and CEO, explained that robust reporting and guest behavior insights, combined with improved contactability (from 38% to 60%), have led to meaningful progress in driving non-routine guests into routines and improving frequency, though specific numbers were not disclosed.

Josh Young asked whether the slowdown in sales was primarily due to a lack of customers entering the sales funnel (top-of-funnel issue) or customers dropping out later in the process (bottom-of-funnel issue).

Answer

President and CEO Bill Nash explained that web traffic was up year-over-year, and conversion rates further down the funnel were improving. The main opportunity lies in converting web traffic into 'selling opportunities' (customers taking actionable steps), which is influenced by both macro factors and CarMax's website engagement strategies.

Josh Young asked whether the slowdown in sales was primarily due to a lack of customers entering the top of the sales funnel or customers falling out further down the funnel.

Answer

President and CEO Bill Nash stated that web traffic is up year-over-year, and conversion rates further down the funnel are improving. He identified the biggest opportunity as converting initial web traffic into 'selling opportunities,' noting that some visitors are just window shopping while others represent areas for CarMax to improve website stickiness. Jon Daniels, EVP of CarMax Auto Finance, added that conversion rates vary significantly by customer FICO score.

Josh Young, on for Scott Ciccarelli of Truist Securities, asked if heightened clearance activity drove recent sales and questioned the sustainability of positive comps across all categories, especially discretionary.

Answer

CEO Todd Vasos clarified that there was no heightened clearance activity beyond minor store closure liquidations, which did not materially impact the comp. He attributed the balanced sales growth to strong merchandising in non-consumables and the influx of trade-in customers. He expressed confidence in sustaining this balance, emphasizing that the composition of the comp is as important as the overall number and that the team is focused on driving both consumable and discretionary sales through value and convenience.

Josh Young, on for Scott Ciccarelli at Truist Securities, asked if heightened clearance activity contributed to recent sales and questioned the sustainability of positive comps across all categories.

Answer

CEO Todd Vasos clarified that there was no significant clearance activity impacting comps, aside from some related to a small number of store closures. He attributed the balanced growth across categories to strong merchandising initiatives in non-consumables and the influx of trade-in customers. He emphasized that the balance of value and convenience across the assortment is key to sustaining this performance.

Josh Young, on for Scott Ciccarelli, asked about the extent of price increase requests from vendors and whether Tractor Supply has begun to pass those costs on to consumers.

Answer

CEO Hal Lawton clarified that Tractor Supply is not taking price increases at this time due to market uncertainty. He acknowledged that vendors are incurring the 145% tariff on Chinese goods, which is impacting their balance sheets, and he expects conversations about cost sharing to begin in the coming weeks and months.