Mike Baker

Mike Baker asked about the impact of widening premium spreads on profitability in the current quarter versus the December quarter, the nature of trading losses in the December quarter (backwardation vs. buybacks), and how the Tether investment will affect Gold.com's P&L, specifically regarding storage and interest expense.

Answer

CEO Greg Roberts indicated that widening spreads suggest a 'really good quarter this quarter' for profitability. He clarified that trading headwinds in Q2 were due to backwardation, which turned contango income into an interest expense. Buybacks are currently beneficial, helping meet increased demand by reselling at retail. The Tether investment, providing $150 million in fresh capital and a gold lease, is expected to significantly reduce interest expense by decreasing reliance on higher-rate dollar borrowings.

Mike Baker inquired about the impact of widening premium spreads on profitability in the March quarter compared to the December quarter, the nature of trading losses in the December quarter, and how the Tether investment, particularly regarding storage, will impact Gold.com's P&L and profitability going forward.

Answer

Gold.com CEO Greg Roberts indicated that the company expects a 'really good quarter' due to widening spreads. He clarified that trading headwinds in Q2 were primarily due to backwardation, which turned contango income into an interest expense, representing a significant cost compared to Q2 2024. Roberts noted that buybacks are currently beneficial as increased demand and tightening silver supply mean most buybacks are resold on the DTC platform at improved premiums. Regarding Tether's investment, Roberts emphasized that the $150 million in fresh capital and a gold lease facility will significantly reduce interest expense and dollar borrowings, as gold leases are at a much lower rate than the 6-7% paid on dollar lines.

Mike Baker from D.A. Davidson asked for clarification on the impact of boat closings shifting from Q3 to Q4 2025 on the third-quarter growth rate and the projected 2025 annual revenue growth. He also questioned the necessary investments in brokers and advertising to achieve the targeted 2026 revenue growth, and the long-term margin structure and optimal mix of acquisitions from individual owners versus dealers.

Answer

CFO Chad Corbin stated that adjusting for the shifted closings, the Q3 growth rate would align with the year-to-date growth. Founder and President Jason Roog confirmed a projected 2025 revenue growth of roughly 20%. Jason Roog emphasized that securing the new floor plan is the biggest investment driver for 2026 growth, alongside continued broker hiring and the Q1 launch of their operating software's version two. Regarding margins, Jason Roog noted that while private sellers can offer good deals, dealers also provide strong opportunities, making it difficult to predict the exact mix. He highlighted a focus on boats under $500,000 for 20% margins but reiterated their 'one-stop shop' approach.

Mike Baker asked about the margin structure differences between acquiring boats from individual owners versus dealers, and the optimal long-term mix of these acquisition channels to maximize profitability.

Answer

Jason Ruegg, Off The Hook's Founder and President, stated that while they aim to increase focus on the private market, it's challenging to control the acquisition mix. He clarified that deals from private sellers aren't always superior to those from dealers, who often have margin on new boat sales. He emphasized a desire for more boats under $500,000, which typically yield 20% margins, but acknowledged their role as a "one-stop shop."

Mike Baker inquired about the competitive landscape, specifically mentioning Amazon Premium Beauty, Sephora at Kohl's, and LVMH's selective retail, and how the competitive situation has evolved compared to three months ago or earlier in the year.

Answer

President and CEO Kecia Steelman acknowledged beauty as a competitive category but emphasized Ulta Beauty's unique differentiation through its 'Ulta Beauty Unleashed' plan. She highlighted the strength of 46.3 million loyalty members, a robust newness pipeline, the low-to-luxe assortment, services, activations, and experiential shopping. She also noted that strong e-commerce, particularly BOPUS, indicates consumers still value the in-store experience.

Mike Baker requested more details on the 11-store test for Foot Locker, including initial results and the scope of changes beyond just wall layout. He also asked why back-to-school 2026 is targeted as the inflection point rather than spring 2026.

Answer

Ed Stack, Executive Chairman, stated that early results from the 11-store test are encouraging, involving removing older product, introducing newer/fresher items, and re-emphasizing the apparel business. He explained that back-to-school 2026 is the inflection point because it will be the first time the new management team has complete control over the product assortment, as Q1 and Q2 orders were largely placed by the previous team.

Mike Baker requested more details on the 11-store test for Foot Locker, including any initial results or sales uplift, and if the changes involved more than just relaying a back wall. He also asked why back-to-school 2026 is identified as the inflection point for Foot Locker, rather than spring, implying the first half of the year might not be as strong.

Answer

Ed Stack, Executive Chairman, stated that while specific results for the 11-store test wouldn't be shared yet, they are 'very encouraged.' He explained that the test involved removing older product, adding newer/fresher items, and reintroducing the apparel business, which is performing well, emphasizing that 'basic retail 101' will have a meaningful impact. He clarified that back-to-school 2026 is the inflection point because the spring product was bought by the previous management team, and Q3 2026 will be the first time their team has complete control over the assortment and merchandising.

Mike Baker from D.A. Davidson questioned the implied Q4 guidance of approximately 2-2.5% comp sales, noting it represents a significant pickup on a two-year basis, and asked how this aligns with the company's cautious outlook, or if the lower end of the implied guidance is more reasonable.

Answer

Chairman and CEO Bob Eddy reiterated a cautiously optimistic stance for Q4, emphasizing extensive planning, investments in value, incremental promotions (like the free turkey offer), and strong digital performance. He highlighted the team's dedication, including a new 10% discount for team members, and acknowledged the early stage of the quarter, with key holiday weeks ahead, as the basis for the guidance provided.

Mike Baker from D.A. Davidson questioned the implied Q4 fiscal 2025 guidance, which suggested a significant two-year stack pickup, asking how this aligns with management's cautious outlook and if the lower end of the guidance range was more reasonable.

Answer

Chairman and CEO Bob Eddy reiterated cautious optimism, citing extensive planning, value investments, incremental promotions, and strong digital performance. He thanked team members, mentioning a new 10% discount, and noted momentum from Q3 carrying into early Q4, while acknowledging the early stage of the quarter influenced the guidance range.

Mike Baker questioned the Q4 guidance of a low single-digit comparable sales decline, given October's flat performance, asking if it signals a post-Halloween slowdown. He also inquired about the expected margin performance within the wide Q4 EPS range.

Answer

COO Michael Fiddelke acknowledged Q3's monthly volatility (flat August, September decline, flat October) and stated that the Q4 guidance is prudent, reflecting this volatility. He highlighted a strong inventory position entering Q4, appropriately balanced between frequency and discretionary categories. CFO Jim Lee added that Q3 gross margins were broadly flat despite a dynamic environment, and similar volatility is expected in Q4, necessitating a wider EPS range for agility. Michael Fiddelke emphasized Target's value proposition for guests, combining price cuts (e.g., Thanksgiving meal deal) with 20,000 new items for the holiday season.

Mike Baker noted that October sales were flat but Q4 guidance projected a low single-digit decline, questioning if this indicated a slowdown post-Halloween. He also asked about the wide EPS range for Q4 and the expected margin performance within that range.

Answer

Michael Fiddelke, Chief Operating Officer, acknowledged the volatility in Q3, with flat sales in August and October, and a decline in September, which informed the prudent Q4 guidance. He emphasized Target's strong inventory position entering Q4, being down 2% overall but appropriately balanced between frequency and discretionary categories. Jim Lee, Chief Financial Officer, added that Q3 gross margins were broadly flat, and continued volatility is expected in Q4, justifying the wider EPS range. Fiddelke reiterated Target's focus on offering guests value through competitive pricing (e.g., 3,000 price cuts, Thanksgiving meal under $20) and a strong product assortment (20,000 new items).

Inquired about the status of the potential TrueBlue acquisition, the broader M&A pipeline, market share trends, and the reasons behind MRI franchisees not renewing their agreements.

Answer

The company remains interested in the TrueBlue transaction but has no new updates and is exploring other M&A opportunities. Market share is difficult to gauge due to lost MRI franchisees, but individual performance is in line with the market. The MRI non-renewals are part of a long-term trend for that network, which has a looser affiliation model compared to other company brands.

Inquired about the path to the 75% SG&A-to-gross-profit target, the scale of future cost savings, and the current progress towards the $50 million new inventory reduction goal.

Answer

The SG&A target will be reached through a combination of gross profit improvement and further cost optimization. Additional cost savings are expected but won't be as large as the initial $30 million. The company is confident in hitting the $50 million inventory reduction goal by year-end but declined to provide a specific progress figure at this time.