Peter Benedict • Robert W. Baird & Co. Incorporated

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President, CEO & Chairman Marvin Ellison confirmed that pros report stable backlogs and confidence, though they are focusing on smaller R&M projects and facing rising labor costs. Executive Vice President of Merchandising William Boltz attributed flooring strength to carpet, tile, and adhesives, noting the addition of the Dal-Tile brand will further boost the category. Executive Vice President of Stores Joseph McFarland added that the centralized selling model for flooring has improved associate focus and installation satisfaction.

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CFO Brandon Sink explained that a hurricane benefit is included in the H1 forecast, but the company has taken a conservative approach due to uncertain timing of insurance payouts. CEO Marvin Ellison defined the Pro customer by shopping patterns and spend, attributing growth to Total Home investments in product, service, and delivery. EVP, Merchandising, William Boltz, added that Pro growth was positive across all merchandising divisions, led by building materials, lumber, and millwork, with notable strength in appliances and paint.

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Chairman and CEO Marvin Ellison stated that the MyLowe's Rewards program is performing well, with a record enrollment week in October and positive trends in repeat purchases and average order value, but deferred future plans to the upcoming investor day. Regarding tariffs, Ellison, EVP of Merchandising William Boltz, and CFO Brandon Sink expressed confidence in their diversified sourcing strategies and data-driven processes, noting that while about 40% of COGS are sourced internationally, they are well-prepared to manage potential cost impacts.

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Chairman and CEO Marvin Ellison and EVP, Stores Joe McFarland described the extended aisle for Pro as being in its early innings but already showing strong results. The initiative provides immediate visibility to supplier inventory, enables quotes within minutes, and offers direct-to-jobsite delivery, significantly accelerating the sales cycle. Regarding sourcing, Marvin Ellison and EVP, Merchandising Bill Boltz reiterated their commitment to reducing the 20% exposure to China through a disciplined, SKU-by-SKU review in partnership with both private and national brand suppliers to find alternative countries of origin.

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CEO Marvin Ellison noted that vendors in the extended aisle soft launch saw dramatic performance acceleration. EVP, Stores, Joe McFarland added that while it's 'early innings,' the initiative provides immediate visibility to supplier inventory and pricing. On sourcing, Ellison reiterated the commitment to reduce the 20% China exposure, while EVP, Merchandising, Bill Boltz described the ongoing, disciplined SKU-by-SKU process of finding new sourcing locations with all supplier partners.

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CFO Mike McMullen conveyed that while tariff impacts are uncertain, the company will pursue offsets through cost efficiencies and potential price adjustments. Regarding capital allocation, he explained that the $200 million buyback target balances strong free cash flow, maintaining a robust balance sheet, and preserving flexibility for strategic acquisitions, ensuring a disciplined approach to returning capital to shareholders.

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Executive Matthew Reintjes stated that the primary tariff mitigation is accelerating the supply chain shift out of China. He described YETI's pricing strategy as targeted and thoughtful, aimed at long-term stability rather than short-term reactions. Regarding international expansion, he highlighted strong momentum in Europe and positioned the Japan launch as a strategic bridge into the broader Asian market.

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EVP & CFO Michael McMullen quantified the potential annual impact of a 10% China tariff at less than $10 million, which he described as manageable and not included in the current outlook. President & CEO Matthew Reintjes explained that the recent powered cooler IP acquisition is a developmental project not expected to contribute to 2025 sales. He emphasized that YETI's M&A strategy is disciplined and focused on acquiring technologies and capabilities to accelerate its existing product roadmap.

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CFO Mike McMullen confirmed that products made in China can be shipped directly to other regions, which helps offset potential U.S. tariff risk. He also stated that SG&A investments in 2024 were intentional, funded by gross margin gains, and that the company's long-term goal is to manage gross and operating margins together to drive operating margin expansion over time.

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CEO Jeremy Andrus noted that while they have the data, early reads on the new Woodridge grill showed more new buyers than replacement buyers, though he expects it to be a strong upgrade product over time. CFO Joey Hord stated that the company will be cash flow positive for the year with no significant deviation in CapEx plans. He clarified that of the $30 million in Phase 1 run-rate savings, $13 million will be realized in fiscal 2025, with the full amount materializing through 2026. He added that it is too early to quantify the potential savings from Phase 2.

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CEO Jeremy Andrus and CFO Dom Blosil clarified the complex tariff situation: grills from China face a 45% total tariff (25% Section 232 steel tariff + 20% IEEPA tariffs), while grills from Vietnam face a 25% tariff. Jeremy Andrus confirmed the Walmart pellet and rub rollout is meeting expectations and serves consumers who want to buy consumables during their grocery trips. Regarding demand, he acknowledged it's hard to parse, but it could be a mix of a normalizing replacement cycle and some consumer pull-forward.

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CFO Dominic Blosil did not quantify the Woodridge load-in but noted its contribution was balanced by strong sell-through of core grills. He stated the long-term leverage target is at or below 3x turns and that 2025 free cash flow is expected to be similar to or slightly down from 2024 due to working capital investments. CEO Jeremy Andrus added that the company's manufacturing partner in Vietnam is scaling up, with mass production beginning in the current quarter, providing sourcing options outside of China.

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CFO Dom Blosil confirmed the headwind was tied to promotional activity, specifically a new Labor Day promotion in Q3. He stated that Q4 promotions are consistent with past years and that promotions have successfully unlocked pent-up demand, particularly for sub-$1,000 products. The company will continue to use promotions as a lever while staying within brand guardrails.

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CFO Todd Comfort explained that mid-teens sales growth would provide significant G&A leverage, which is key to hitting the 22% target. He noted the 48% adjusted gross margin goal is within reach and could be exceeded if new production technologies are successful. CEO Billy Cyr reinforced this, stating that strong current operating performance drives their confidence and that the benefits from new technology are not yet factored into the long-term targets, representing potential upside.

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CFO Todd Cunfer explained that mid-teens sales growth would enable significant G&A leverage and logistics improvements, which are key to reaching the 22% margin target. He noted potential upside to the 48% gross margin goal, which would further support profitability. CEO Billy Cyr emphasized that strong current operating performance and future benefits from new technology, which are not yet factored into the targets, provide additional confidence.

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President & Co-Founder Scott Morris stated the company is accelerating existing plans around affordability and targeted marketing. He expressed confidence in media effectiveness, citing two key factors: modifying creative messaging to attract new consumer groups and focusing media execution more precisely on high-potential 'MVP' consumers, which is driving extraordinary growth and higher buy rates, particularly through e-commerce channels.

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CEO William Cyr expressed that the new COO brings a fresh perspective and adds significant bench strength to the management team. He noted that while her immediate impact is limited by non-compete restrictions until May of next year, she is already digging into the business and is seen as a key talent to help the company achieve its large, long-term ambitions.

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Executive William Cyr expressed excitement about Nikki joining, stating she brings a 'fresh set of eyes' and different capabilities that add to the management team's bench strength. While her activities are temporarily restricted until May of the next year, her hiring is seen as a key step in enabling the company to achieve its ambitions of becoming a much larger and more expansive business.

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CFO Amy Campbell attributed the softer second-half RV outlook to tariff impacts and potential consumer uncertainty, noting Class B inventory levels are higher while Class A and C are healthier. CEO Mark Skonieczny added that overall dealer inventory is well-positioned with newer models. Regarding the S-180, Campbell confirmed strong demand and expansion to other brands, with margins comparable to custom trucks. She also stated that overall Fire & Emergency demand is normalizing toward long-term trend levels after recent peaks.

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CFO Gary Millerchip explained that the volatility in renewal rates is expected to continue due to the lagging effect of digital promotions and large new warehouse openings in Asia entering the calculation. He noted these cohorts are typically younger and initially renew at lower rates. The strategy to improve this is to increase engagement through more personalized digital communication and drive them into the warehouse to move them "up the loyalty curve."

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Executive VP & CFO Gary Millerchip explained that the volatility in renewal rates is expected to continue for a while due to the lag in calculating renewals for members acquired through digital promotions, who are typically younger and renew at a slightly lower rate. He also noted that large new warehouse openings in Asia can temporarily impact the rate. The strategy to improve this involves deeper engagement with these members through personalized digital communication to bring them into the warehouse and move them up the loyalty curve.

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Executive Ron Vachris expressed confidence in the U.S. growth runway, citing the success of new openings in dense, mature markets like Pleasanton, California. He explained that new warehouses create significant incremental business by relieving pressure on high-volume locations, which leads to increased shopping frequency from existing members and a quick sales build-back at the older stores. He also noted success in new, smaller markets like Scarborough, Maine, demonstrating a dual strategy of infill and new market entry.

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CEO Laura Alber stated that pricing decisions are made on an item-by-item basis and are driven by the competitive environment, not just cost inputs. She emphasized that value is defined by design, quality, and service, not solely price. Alber also noted that the company's vertically integrated model provides pricing advantages and that opportunities remain to improve markdown margins.

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CEO Laura Alber highlighted the company's competitive advantage as a 'holiday headquarters' and its commitment to value through in-house design rather than deep promotions. She identified further opportunities for efficiency in customer service, occupancy cost reduction via retail fleet optimization, influencer-driven marketing, and payroll management.

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CEO Laura Alber explained that advertising is a long-term investment in customer growth, particularly for their multi-brand portfolio, and highlighted the success of creator-led content. CFO Jeff Howie noted the company is largely insulated from ocean freight spot market volatility due to its scale and contracted rates. He also stated that China-sourced imports have been reduced from 50% to 25% since 2018, with a plan to pivot further if necessary.

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CFO John David Rainey clarified that CapEx is not at a peak and should be viewed as trending within 3% to 3.5% of sales, growing with revenue over time. Regarding buybacks, he confirmed they were aggressive in Q1, repurchasing $4.6 billion in stock due to price dislocation, and will remain opportunistic, expecting to spend more on buybacks this year than last.

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CEO Doug McMillon explained that the competitive set is changing more rapidly than in the past, with different key competitors in international markets and 'fierce' competition from many directions in the U.S. He stated their focus remains on the customer while learning from competitors, a strategy he believes is reflected in their current results.

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CEO John Reed described the model as 'incredibly flexible' and effective, noting that customers are responding well and trading up to meet higher discount thresholds. He explained that the company is actively testing different percentage levels to optimize the response and can adjust the model monthly, expressing pleasure with the results since its launch.

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CEO Hal Lawton explained that the guidance only incorporates the impact of tariffs on receipts occurring within the next 90 days (Q2). He confirmed they assume current tariff rates for this period but have not projected the impact beyond Q2 due to ongoing volatility. The company is taking a prudent, near-term approach to its outlook.

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CFO Kurt Barton described Allivet as a relatively stable business with some minor seasonality in the spring/summer for flea and tick products. He confirmed it will be accretive to earnings in 2025, with a focus on top-line growth and onboarding Neighbor's Club members. Barton stated that while there will be initial integration investments, the long-term outlook is for Allivet's operating margins to potentially equal or surpass Tractor Supply's levels.

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EVP and Chief Merchandising Officer Seth Estep attributed the sustained big-ticket growth to three key factors: a differentiated product lineup with strong innovation, strategic inventory investments to ensure availability, and significant momentum from the company's private label credit card offerings, which are supported by vendor partnerships.

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CFO Sabrina Simmons advised against viewing the closures as a long-term run rate, explaining the focus is on optimizing the productivity of existing assets before resuming fleet growth. CEO Joel Anderson discussed merchandising, stating that while he is building stronger vendor relationships to foster innovation, the immediate focus is on optimizing the current assortment around top-selling items. He mentioned the cat business is strong but deferred more specific details to later in the year.

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CFO Brian LaRose explained that Q2 EBITDA came in slightly better than expected, driven by stronger gross margin from cost initiatives and services. He stated the Q3 guide reflects their current expectations in a dynamic retail environment. Regarding trends, LaRose noted consumer behavior and pricing have been relatively consistent, with customers remaining choiceful and seeking value, while the services business continues to show strength.

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CEO Joel Anderson stated that the pricing environment has been relatively stable, with the impact of known tariffs already embedded in the company's forecast. Both he and CFO Sabrina Simmons reiterated that pricing actions are part of a holistic and surgical review of retail fundamentals, not just a reaction to tariffs, and have involved taking prices both up and down at the SKU level to ensure value for customers.

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CEO Robert Eddy explained the higher-tier is a mix of members and expressed confidence in the value proposition to mitigate attrition. CFO Laura Felice quantified the fee increase impact at about $20 million annually, which will be reinvested. On SG&A, Felice confirmed deleverage would continue in Q4 due to club opening investments, which EVP William Werner noted creates long-term shareholder value despite near-term pressure.

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Chairman and CEO Robert Eddy explained the margin pressure is a long-term investment strategy driven by price promotions for value-sensitive consumers, higher-than-expected growth in lower-margin perishables, and 'growing pains' from rapid assortment changes. On membership, he credited a new methodology for growing members in existing clubs. Regarding a fee increase, he acknowledged the strong value proposition but stated the current guidance does not include one.

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CEO Bob Eddy and EVP, Strategy and Development Bill Werner explained that recent success and market share gains have given them the confidence to accelerate new club openings. Werner noted the real estate pipeline is the largest in company history, with a strategy that includes both infill in core markets like Staten Island and expansion into new markets like the Carolinas. He emphasized that as BJ's gains share, the models open up more opportunities for new clubs.

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Chairman and CEO Bob Eddy and EVP, Strategy and Development Bill Werner explained that recent market share gains have fueled the most aggressive real estate pipeline in the company's history. They highlighted broad-based success in both new markets, like the Carolinas, and infill locations, such as Staten Island. The company remains on track to open 25 to 30 clubs over the next two years, driven by strong new club performance.

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CEO Robert Eddy clarified that direct import exposure from China is only a few percent of the business, which is less than many general merchandise retailers. EVP, Strategy and Development, William Werner, addressed new club performance, stating that recent openings are exceeding top and bottom-line plans in both new and infill markets. He cited the company's value model, digital conveniences, and the strategic use of the balance sheet to own more real estate as key factors supporting accelerated growth.

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COO Danny Rivera explained that the company remains focused on growing its car wash membership base to mitigate weather impacts. Regarding Maintenance margins, he attributed the slight degradation to labor inefficiencies caused by hurricanes, noting it was within historical ranges. He confirmed both mature and new Take 5 stores are performing well without providing specific comps.

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