Robert Griffin • Raymond James

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CEO Steven Michaels attributed underlying strength to discrete wins with existing retail partners and e-commerce growth, rather than a consumer trade-down effect. CFO Brian Garner explained the conservative guidance reflects second-half headwinds, including the final roll-off of high-margin Big Lots leases, a smaller starting portfolio size, and significant CECL reserving for the fast-growing Four Technologies business in Q4.

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CFO Fahmi Karam explained that Brigit's margin profile is highest in Q1 due to lower marketing spend and seasonally low losses during tax season, with margins expected to normalize to the mid-teens in Q2. CEO Mitchell E. Fadel addressed the Mexico expansion, stating that risk is significantly mitigated by leveraging Rent-A-Center's 14-year operational history, 130-store infrastructure, and local market expertise in the country, providing a low-capital path for growth.

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CEO Mitchell E. Fadel explained that while the core consumer remains under pressure, Acima benefits significantly from 'trade-down' customers from higher credit tiers, which offsets the need for tightening and supports growth. Rent-A-Center has also tightened underwriting but does not see the same direct trade-down benefit. CFO Fahmi Karam added that their underwriting posture remains conservative and detailed the path to improved Acima margins in 2025, driven by lower loss rates and operating expense leverage, rather than gross profit expansion.

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CFO Fahmi Karam stated that the impact on Acima's EBITDA is a timing issue, with gross margin pressure now but loss improvements expected in subsequent quarters, leading to normalized margins in 2025. CEO Mitchell E. Fadel added that the real opportunity in Mexico is expanding the Acima virtual platform, leveraging the new decisioning engine recently implemented for the Rent-A-Center operations there.

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CEO John Lai noted that their new $22.99 price point generally aligns them with competitors, many of whom were already there, so they were not leading the market on price. CFO Jedidiah Gold clarified that the significant year-over-year improvements from labor and chemical optimization were mostly realized in Q1 and are not expected to continue at the same rate for the rest of the year.

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CFO Ben Burns confirmed that proceeds from divestitures and cash flow could eliminate the company's commercial paper balance this year. He stated that after meaningful deleveraging, particularly below a 2.5x leverage ratio, the company would re-evaluate capital allocation, including share repurchases. Burns also noted the interest savings from debt paydown would not fully offset the lost aerospace EBITDA. Tyson Hegel, President of Bedding Products, attributed bedding volume underperformance to restructuring-related attrition, import share gains, and customer volatility.

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Bedding Products executive Tyson Hagale detailed the new footprint of four larger innerspring plants and the need for trade rod sales to keep the Sterling mill at capacity, which would push contribution margins toward the lower end of the 25-35% range. CEO Karl Glassman and Hagale attributed the volume delta to a lost foam customer, mix shifts away from open coil due to imports, and restructuring attrition, while noting Comfort Core volumes have tracked the market. Hagale added that the specialty foam business is diversifying its customer base.

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CEO Karl Glassman and President Tyson Hagale attributed the flat bedding consumption to an easy prior-year comparison and the unwinding of pre-duty imports, with e-commerce channels showing activity. Hagale noted October softness due to election-related consumer distraction. Glassman provided the profitability ranking for Specialized Products as Automotive, Aerospace, and then Hydraulics. CFO Ben Burns stated that reducing debt would primarily involve paying down commercial paper, saving approximately $5 million in interest for every $100 million of debt reduced.

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CEO Steven Michaels explained that while the trade-down trend still exists, it's more muted as they lap the period when it began, with general retail softness being the larger macro force. He noted that after an encouraging start to the quarter, consumer activity slowed and has not yet shown a rebound. CFO Brian Garner and CEO Steven Michaels confirmed that the approximate $30 million quarterly GMV headwind from the lost partner was a fair assumption, though it would step up slightly in Q2 as liquidation sales have ended.

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CFO Brian Garner stated that while growth provides operating leverage, the company prioritizes reinvesting in profitable GMV growth over margin harvesting. President and CEO Steve Michaels commented that GMV growth is currently driven by execution and credit trade-down, as key categories like furniture remain 'pretty tough.' He opined that strong consumer demand is a more powerful long-term driver than tight credit, and he does not expect both to persist simultaneously for long.

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CEO Darren Rebelez expressed confidence that February's results were weather-driven, noting that sales rebound as soon as conditions normalize. He described the coffee promotion as an aggressive but necessary long-term investment to drive trial for a new, higher-quality product. The wing test is showing promising early results with high guest satisfaction and appears to be incremental to pizza sales.

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CEO Darren Rebelez attributed the margin strength primarily to a favorable product mix shift towards higher-margin items like liquor, wine, and nicotine alternatives, as well as improved shrink management, suggesting the change is largely structural. CFO Steve Bramlage confirmed the Fikes business has some seasonality, similar to but less pronounced than Casey's core business, and affirmed the previously stated EBITDA number is a good baseline, noting it includes contributions from ramping stores.

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CEO Darren Rebelez highlighted new initiatives like a digital production planner and a '5s' inventory organization system that have reduced labor hours and waste. He also confirmed there are no significant geographic differences in prepared food performance, noting that Casey's lunch daypart was its strongest despite QSR value offerings, driven by product innovation and a strong value proposition.

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CFO Taylor Luebke stated that while the core North American wholesale business has shown margin growth for three consecutive quarters, a sustained increase in volume tied to a healthier housing market is needed to reach long-term goals. CEO Melinda Whittington added that the international transition with DFS will see slow and steady improvement and that the company is actively rightsizing capacity. Regarding Joybird, she explained that with fundamentals now stable, the company plans to cautiously resume store growth, targeting three to four new locations next year.

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SVP and CFO Bob Lucian explained that the wholesale margin decline was roughly half due to casegoods challenges and half from the international transition to DFS. President and CEO Melinda Whittington added that the core North America La-Z-Boy branded business saw positive margin improvement. Whittington also noted that while the dealer mood is cautious, feedback from High Point was positive, and the company is now prudently pursuing store expansion for the Joybird brand, which has returned to breakeven.

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CEO Andrew Clyde described consumer behavior as stabilizing but remaining highly value-focused, with continued strength at the Murphy banner offsetting competitive pressures at QuickChek. COO Mindy West detailed the store optimization initiative, stating they have identified key performance drivers and are launching a proof-of-concept test, with tangible benefits expected to inform 2025 plans. Andrew Clyde added that this is being paced with other major initiatives.

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CEO Andrew Clyde responded that while low prices can lead some consumers to trade for convenience, Murphy USA is better positioned than in the past due to its loyalty program and the growing pool of value-seeking customers. He attributed the lag in merchandise sales recovery to the promotional cycle, particularly in the traffic-driving nicotine category.

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