Molly Baum

Molly Baum inquired about the impetus for the larger initiative to enhance dining offerings, whether it was driven by guest feedback, the value proposition, and its expected impact on ancillary business, and asked if the improvement in pass sales trends post-September was an intentional byproduct of marketing changes, and expectations for future mix improvement or unit acceleration.

Answer

Rob Katz, CEO of Vail Resorts, explained that the dining initiative was prompted by a slow recovery post-COVID, recognizing the need for new strategies beyond pre-COVID approaches. The initiative involves improving physical dining structures, optimizing seating arrangements, and investing in food quality, seen as a multi-year effort to differentiate the food business. Mr. Katz confirmed that marketing was intentionally weighted more heavily towards unlimited products this year, citing Epic Friends tickets and upper-funnel brand building, with an intent to continue focusing on unlimited products to re-engage those pass holders.

Molly Baum asked about important considerations for 2026 new club openings, specifically regarding larger club formats and their potential impact on margins and new club rent. She also inquired about the balance between using sale-leasebacks versus self-development for new club growth, and the implied interest rates on leases versus the company's cost of debt.

Answer

EVP and CFO Erik Weaver stated that larger clubs (average 94,000 sq ft in 2026 vs. 66,000 sq ft in 2025) are expected to have similar margins but higher average revenue per club. CEO Bahram Akradi added that new clubs are designed for optimal returns with lower membership counts (3,500-4,000) and cautioned that early-stage openings will have negative margins. Regarding capital allocation, Akradi noted that sale-leasebacks offer significantly better IRR on remaining capital, while the company also benefits from low financing charges, and expects cap rates to improve as interest rates decline. Weaver emphasized seeking the cheapest cost of capital.

Molly Baum asked about the implications of opening larger clubs next year, specifically regarding potential considerations for margin or new club rent in 2026 compared to 2025. She also inquired about the company's balance between using sale-leasebacks versus self-development for new club growth, asking if there's an opportunity to improve lease terms or if it ever makes sense to keep stores on the balance sheet given Life Time Group Holdings Inc.'s lower cost of debt.

Answer

Erik Weaver, Executive Vice President and CFO, stated that larger clubs are expected to have similar margins but higher average revenue per club, with an average size of 94,000 square feet for 2026 openings compared to 66,000 in 2025. Bahram Akradi, Founder, Chairman, and CEO, added that new clubs will have lower membership counts (3,500-4,000) to achieve optimal returns and cautioned against expecting further EBITDA margin expansion due to initial negative margins from new club openings. Regarding capital structure, Akradi noted that sale-leasebacks offer significantly better IRRs on remaining capital, and he expects cap rates to improve as interest rates decline. Erik Weaver emphasized the objective is always the cheapest cost of capital, whether through sale-leasebacks or sub-6% debt.

Molly Baum asked for a comparison of same-store sales performance between mature and newer clubs, and whether the new club ramp-up profile is expected to change with the shift towards opening larger-format locations.

Answer

Founder, Chairman, and CEO Bahram Akradi and EVP & CFO Erik Weaver both stated that strong performance is being seen across the board in mature, new, and ramping clubs, and is not isolated to any specific group. Weaver added that all in-center business lines are up, indicating system-wide health, and that some newer clubs are ramping faster than historical builds.

Molly Baum sought clarification on optometrist recruiting, asking to reconcile mid-year softness with strong year-end results, and questioned if fewer doctors are needed now due to the growth of remote exams.

Answer

CEO L. Fahs acknowledged the mid-year lag but said the team 'rallied' to end in a 'healthy place,' securing 10% of the graduating class for a third consecutive year. He explained that while remote exams (now 12% of total) provide crucial flexibility, the company still prefers live doctors, and they are now in an 'encouraging place' regarding overall exam capacity.

Molly Baum asked for an update on the percentage of 'dark and dim' stores and how remote technology is offsetting these capacity constraints. She also sought clarification on a slight sequential decline in remote exam penetration and the promotional strategy for managed care customers.

Answer

CFO Melissa Rasmussen stated that dark and dim store levels remain consistent, with America's Best having low-single-digit dark and high-single-digit dim stores, which remote technology helps offset. CEO Reade Fahs attributed the slight dip in remote exam penetration to minor, de minimis tech-related issues. He clarified that the '40% off a second pair' offer for managed care customers is a long-standing, always-on promotion.

Molly Baum of Bank of America asked about Floor & Decor's competitive price positioning, particularly in its 'good' tier products, and whether the company is still observing relative elasticity from any price reductions.

Answer

CEO Tom Taylor stated that the company feels good about its price spread versus competitors like home improvement centers on an apples-to-apples basis. He noted that they have seen good reactions to targeted price adjustments, particularly in installation materials aimed at increasing wallet share with Pro customers, and that these actions are paying dividends.