Richard Magnusen

Richard Magnuson, on behalf of Jeff Van Sinderen, inquired about the strategic direction of the MSA+ family, specifically regarding the Altair IO6 and IO4 detectors, potential new detector applications, expansion of software applications, and strategies to accelerate subscription revenue growth.

Answer

Steve Blanco, President and CEO, explained that the Altair IO6 is a valuable long-term solution for confined space and sampling applications. He emphasized ongoing innovation in connected solutions, expanding capabilities, and aligning with customer buying behaviors, reiterating MSA Safety's strategic focus on detection, fall protection, and fire service for growth.

Richard Magnusen asked if the company has seen significant efficiency or performance gains from testing studio variations, such as smaller footprints or different layouts.

Answer

President, North America John Kawaja highlighted two initiatives: rolling out 'double wide' Club Pilates studios to capitalize on utilization, and using smaller 8-bench footprints for StretchLab to lower franchisee costs and improve the financial proposition.

Speaking for Jeff Van Sinderen, Richard Magnusen asked about the key changes in the new Franchise Disclosure Documents (FDDs), any franchisee feedback, and the extent of pent-up demand following the sales pause.

Answer

CEO Mark King explained the primary FDD update was to provide more accurate and realistic studio build-out costs, which saw some increases but has not generated negative feedback. CFO John Meloun confirmed there was pent-up demand, especially for Club Pilates, and the company is now actively selling again, with those sales expected to contribute to openings starting early next year.

Richard Magnuson asked about the expected operating expense impact from new field and international teams, and for an update on Lindora, including its AUV and the effect of new weight loss drugs.

Answer

CEO Mark King stated that the initial build-out of field operations and international teams will be cost-neutral for the year, as they are reassigning current internal employees. CFO John Meloun reported that Lindora's Q4 AUV was $984,000 and confirmed that the increased availability of weight loss drugs has not had a significant impact on its business model.

Richard Magnusen asked which brands CEO Mark King feels strongest about and whether there are opportunities to acquire new modalities, similar to StretchLab.

Answer

CEO Mark King expressed that he likes the current strategic lineup of eight brands and is focused on building momentum in underperforming ones, not divesting them. Regarding acquisitions, he emphasized a culture of innovation where 'everything is on the table,' including new concepts or brand combinations, as long as it benefits franchisee profitability. He views the current portfolio as a strong foundation.

Richard Magnusen, on behalf of Jeff Van Sinderen, asked if Tilly's has been in discussions with activist investors or received requests for board seats. He also inquired about the outlook for leveraging buying, distribution, and occupancy (BDO) costs going forward.

Answer

Co-Founder, Executive Chairman, President & CEO Hezy Shaked stated that the company has not been in any discussions with new investors and that nobody has asked for a board seat. Regarding BDO costs, EVP & CFO Michael Henry explained that while the dollar amount of these costs will decrease due to ongoing store closures, the ability to leverage them as a percentage of sales will depend on achieving flat to positive comparable sales.

Richard Magnusen asked for details on Zumiez's promotional strategy for the remainder of the holiday season, its ability to remain agile with inventory, and whether any product trends have yet to fully materialize.

Answer

Executive Richard Brooks stated that the company's promotional strategy remains consistent, focusing on delivering value through unique products and bundling, particularly with private labels, rather than deep, broad-based discounting. He emphasized being less promotional than competitors. CFO Christopher Work added that the apparel categories, fueled by new and private label brands, have shown strong acceleration and are expected to continue driving sales through the holiday period.

Richard Magnusen of B. Riley asked about the impact of rising operating and labor costs on the competitive landscape and whether Zumiez is observing competitors exiting the business in its core markets.

Answer

Executive Richard Brooks acknowledged that higher labor costs are a significant challenge that Zumiez is addressing through new productivity-focused labor strategies globally. He noted that all retailers face these pressures, but specifically pointed to the European market where the combination of high costs and a difficult macro environment is leading to a noticeable increase in store closures by competitors, creating a potential opportunity for market share consolidation.