Robert Ohmes

Robert Ohmes asked for more details on the direct sales model, including its current profitability, ramp-up plans for stores and sales specialists, and the scale required for it to become significantly profitable.

Answer

Executive Vice President, Chief Stores Officer John Ordus expressed satisfaction with the direct sales team's performance, noting increases in volume, average sales per representative, and transaction value. He mentioned plans to double the specialist count in 2026 and target approximately $50 million in sales for the year, highlighting the structural growth and relationship-building aspects.

Robert Ohmes asked for more details on the profitability and scaling of Tractor Supply's direct sales model, including the number of stores, sales specialists, and the size needed to achieve profitability.

Answer

Executive Vice President, Chief Merchandising Officer Seth Estep reported strong performance in direct sales, with volume, average sales per rep, and transaction value increasing. He noted that the team finished December with over $2 million in sales, with 75% external specialists bringing existing business. For 2026, the plan is to double the specialist count and target around $50 million in sales.

Robert Ohmes asked for an update on Tractor Supply Company's retail media initiatives and for more color on the softness observed in select discretionary categories, clarifying if it was apparel or other big-ticket items.

Answer

Hal Lawton (President and CEO) stated that softness in discretionary categories in Q3 was consistent with Q1 and Q2 trends, with customers cautious on big-ticket purchases unless there's an immediate need. Examples included dog kennels, crates, trailers, and gun safes, noting that strong rider sales offset some of this weakness. Rob Mills (EVP, CTO and CSO) reported strong progress in retail media, expecting triple-digit revenue growth year-over-year, expanding partnerships by over 80%, and increasing average partner revenue by nearly 50%. He mentioned new products like branded pages and offsite offerings, with plans to double down on self-service capabilities in 2026.

Robert Ohmes requested an update on Tractor Supply Company's retail media initiatives and sought clarification on the softness observed in select discretionary categories, specifically whether it included apparel or was distinct from overall big ticket trends.

Answer

Hal Lawton, President and CEO, clarified that the softness in discretionary categories in Q3 was consistent with Q1 and Q2 trends, with customers cautious on big ticket purchases unless there was a strong need. He noted that Q3 strength in riding lawn mowers offset weakness in other big ticket items and the absence of emergency response sales. Rob Mills, EVP, CTO and CSO, reported strong progress in retail media, on track for triple revenue growth year-over-year, with expanded partnerships and new product offerings, and a focus on self-service capabilities for 2026.

Robert Ohmes from Bank of America asked about key drivers for the second half, particularly the role of seasonal categories and whether the observed strength in July was a pull-forward of demand due to tariff concerns.

Answer

President & CEO Hal Lawton stated there was no pull-forward of demand; in fact, momentum from June strengthened into July. He expressed optimism for a second-half comp acceleration, citing favorable lapping of last year's poor weather, continued strength in the rural economy, and an expected balance of strong transaction growth and positive average ticket.

Robert Ohmes asked about the significance of Kroger's reintroduction of paper coupons for non-digital customers, inquiring if it represents a new incremental driver or a significant tailwind for the business. He also asked if there were any changes to the fuel rewards program, particularly on the digital side, given the reported decline in fuel sales.

Answer

Ronald Sargent, Interim CEO & Chairman, stated that paper coupons will help by appealing to older and non-smartphone customers who desire the same deals as digital users, expecting incremental business. David Kennerley, EVP & CFO, confirmed that paper coupons are generating unit lift and positive customer feedback, contributing to retention and recruitment. Mr. Kennerley also stated there are no immediate plans to change the fuel rewards program within the Kroger Plus card offerings.

Robert Ohmes of Bank of America requested a breakdown of the identical sales tailwinds in Q1, including inflation, fresh categories, and GLP-1 drugs, and their expected persistence. He also asked about shopping behaviors of high-income versus low-income customers.

Answer

Interim CEO & Chairman Ronald Sargent attributed the 3.2% identical sales growth to strong performance in pharmacy, fresh, e-commerce, and Our Brands. EVP & CFO David Kennerly noted that inflation was just under 2% and the impact from ESI was minimal. Regarding consumers, Mr. Sargent described all shoppers as cautious, leading to more meals at home, increased coupon use, and softer discretionary spending, to which Kroger is responding with enhanced value offerings.

Robert Ohmes of Bank of America requested a breakdown of the tailwinds for identical sales in Q1, including inflation, fresh categories, and GLP-1 drugs, and asked about the outlook for these drivers. He also inquired about consumer behavior differences between high- and low-income shoppers.

Answer

Interim CEO & Chairman Ronald Sargent attributed strong identical sales to pharmacy, fresh, e-commerce, and Our Brands. EVP & CFO David Kennerly added that inflation was just under 2%, the impact from Express Scripts was minimal, and GLP-1s continue to show good growth. Regarding consumers, Mr. Sargent noted that shoppers across income levels are cautious, eating at home more, making more frequent trips with smaller baskets, and seeking value through promotions and Our Brands.

Robert Ohmes requested more detail on the OG&A line, specifically concerning wage pressures in the second half and the impact from general liability claims.

Answer

Interim CFO Todd Foley explained that wage pressure is largely predictable due to multi-year union contracts. Regarding liability claims, he clarified that while safety incident rates are at record lows, the average cost to settle claims has increased, necessitating a one-time reserve adjustment in Q2 not expected to recur.

Robert Ohmes of Bank of America requested more detail on customer behavior, asking about any shifts between online and in-store channels, the performance of the back-to-school season, and whether customers were showing increased sensitivity to promotions.

Answer

President & CEO Lauren Hobart clarified that the company is seeing strong growth across all channels, not a shift from one to another. She noted that back-to-school is primarily a Q3 event but the assortment is very strong. Hobart emphasized that promotions have not been a significant factor, as the differentiated and innovative product assortment drives demand, and the company is not observing any consumer trade-down behavior.

Robert Ohmes inquired about the sources of market share gains, particularly from Foot Locker and digital channels, and asked for the expected timeline for FTC approval of the merger.

Answer

President and CEO Lauren Hobart explained that market share gains are broad-based, stemming from the company's ability to tell a complete brand story rooted in sport. Executive VP & CFO Navdeep Gupta added that gains are coming from core categories and that FTC approval for the Foot Locker deal is anticipated in the second half of the year.

Robby Ohmes inquired about the long-term opportunity and financial model for the GameChanger business and asked for more color on new brand partnerships stemming from the House of Sport concept.

Answer

President and CEO Lauren Hobart highlighted GameChanger's growth, with 5.5 million unique active users in Q3, and its strategic alignment with DICK'S. She also mentioned that House of Sport has fostered new partnerships with brands like GOAT Lacrosse and Free People Movement. CFO Navdeep Gupta added that GameChanger is expected to be a $100 million revenue business in 2024, growing at a 30-40% CAGR, and is highly profitable as a SaaS model with a multi-billion dollar addressable market.

Robert Ohmes inquired about the benefit of House of Sport conversions on Q2 comps and the expected impact in the second half. He also asked for a breakdown of the puts and takes for gross margin in the back half of the year.

Answer

CFO Navdeep Gupta confirmed that first-half comps benefited from lapping prior-year store conversion closures, an effect that will moderate in the second half. For H2 gross margin, he noted that while occupancy costs will still deleverage, the impact will be less than previously expected due to higher sales. He also highlighted that the Q3 calendar shift will be a headwind, but merchandise margins are expected to rise modestly due to strong product assortment.

Robert Ohmes of Bank of America asked for an update on Dollar General's fresh food initiatives, including DG Market, and how the company plans to compete with Walmart and Amazon on fresh food delivery in rural areas.

Answer

CEO Todd Vasos highlighted the success of their fresh initiatives, supported by their own distribution network, with produce now in over 7,000 stores. He identified their delivery service as a key competitive advantage in rural markets, offering fresh, frozen, and produce items delivered in an hour or less. He believes this combination of speed and value pricing is a powerful tool for competing effectively.

Robert Ohmes asked for an overview of the 2025 competitive environment, specifically seeking thoughts on Walmart, the impact of drug and Family Dollar store closures, and the role of delivery services.

Answer

CEO Todd Vasos described the market as fluid and competitive, noting that competitor closures create opportunities, with drug stores being the largest share donor. He highlighted that the trade-in from new customers accelerated into Q1. Vasos sees the plan to expand delivery to 10,000 stores as a key competitive advantage, particularly in rural America, with the DG Media Network serving as the linchpin to leverage this growth and drive margin.

Robert Ohmes of Bank of America inquired about gross margin scenarios for the second half of the year, asking if Walmart has gained more certainty on competitive pricing and consumer elasticities.

Answer

President, CEO & Director Doug Mcmillon stated that maintaining flexibility is paramount, so a precise forecast is not prudent. He praised the merchant team's ability to navigate the dynamic environment by managing costs, elasticities, and sell-throughs. He affirmed the focus remains on achieving the full-year goal of growing profit faster than sales while preserving the ability to make item-level decisions.

Robert Ohmes asked about the general merchandise category, seeking clarity on the outlook for deflation versus tariff-driven inflation and any significant mix differences between in-store and eCommerce sales.

Answer

CFO John David Rainey confirmed that general merchandise has been deflationary for over a year, but noted that units grew in the quarter. Walmart U.S. CEO John Furner added that categories like toys and apparel were strong and that eCommerce growth rates in general merchandise are higher than in-store. He also mentioned that the quarter ended strong after a weather-impacted February.

Robert Ohmes asked about the SG&A deleverage in the fourth quarter and the long-term outlook for the SG&A ratio, including key drivers and pressures.

Answer

CFO John David Rainey explained that while the mix shift to higher-cost e-commerce channels creates pressure on SG&A, the company maintains a 'hyper focus' on costs. He identified supply chain automation as a major long-term driver of efficiency, noting that less than half of U.S. stores are currently served by full automation. He also cited higher Q4 marketing spend as a factor in the quarterly deleverage.

Robert Ohmes requested details on the share gains with upper-income consumers, specifically asking about the drivers across grocery vs. general merchandise, price vs. convenience, and stores vs. marketplace.

Answer

CEO Doug McMillon called it an 'all of the above' situation, driven by both value and convenience. Walmart U.S. CEO John Furner added that convenience options are attracting these shoppers, who are buying premium grocery items like organic produce and grass-fed beef via pickup and delivery. Sam's Club CEO Christopher Nicholas noted their higher-income members are responding to both price and an enhanced, more convenient experience.

Robert Ohmes of Bank of America asked if Franchise Brand comps are expected to remain negative in the second half and if there are any new competitive dynamics in that segment.

Answer

EVP & CFO Mike Diamond acknowledged ongoing end-market pressures for Maaco and Collision but noted the full-year guidance incorporates a range of outcomes. President & CEO Danny Rivera added that there are no 'tremendously new' competitive dynamics in these mature industries, and highlighted that the Meineke brand is performing quite well.

Robert Ohmes asked for more detail on the drivers of store expense and SG&A pressures and how a more challenging consumer environment might impact Driven's various businesses.

Answer

EVP and CFO Michael Diamond explained that higher SG&A reflects deliberate investments in long-term growth initiatives like Driven Advantage and its fleet business. EVP and COO Danny Rivera added that the business is resilient in a downturn, as most services are non-discretionary and an aging car park from deferred new vehicle purchases acts as a tailwind for the repair businesses.

Robert Ohmes of Bank of America Corporation asked for a comparison between the homeowner and pro customers. He inquired about differences in purchasing behavior, the trend towards 'better and best' products, and whether the 50/50 sales split is expected to hold.

Answer

CEO Tom Taylor stated that the company is very pleased with its professional business, which has been a source of strength. The homeowner side remains challenged due to the weak existing home sales market, leading to smaller projects like backsplashes instead of full renovations. He noted that the purchasing behavior is similar, with both customer types gravitating towards 'better and best' products. The primary difference is the lower engagement and smaller project size from homeowners in the current environment.

Robert Ohmes of Bank of America asked for more detail on the strategy to maintain the gross margin rate amidst tariffs, requesting a rank order of the contributing factors like pricing, supply chain savings, and sourcing shifts.

Answer

CEO Tom Taylor declined to rank the factors but outlined the key levers. These include securing better costs through global sourcing diversification, a favorable mix shift as consumers buy 'better and best' products, continued benefits from lower year-over-year supply chain costs, and higher-margin sales driven by the growing in-store design team. He noted that taking price is the final lever they can pull while maintaining a significant gap to competitors. CFO Bryan Langley added that these efforts are powerful enough to offset the 60-70 basis point drag from new distribution centers.

Robert Ohmes of Bank of America inquired about the outlook for new product innovation, competitive pressures on new items and organic pricing, and the status of the company's agreement with distributor KeHE.

Answer

CEO Jack Sinclair highlighted the success of their foraging team and Sprouts brand in driving innovation, stating they aim to be a launchpad for entrepreneurs and are not seeing significant competitive pressure on organic pricing due to long-term supplier contracts. CFO Curtis Valentine added that Sprouts is working through the details of a long-term extension with their partner KeHE.

Robert Ohmes inquired about potential store capacity constraints with the smaller store format given strong comps, and asked about the future penetration rate of e-commerce.

Answer

CEO Jack Sinclair expressed confidence that the current 23,000 sq. ft. store format has ample capacity for growth, noting that space reductions came from back-of-house areas and self-checkout has improved throughput. CFO Curtis Valentine projected that e-commerce will continue to grow as a percentage of sales, albeit at a more moderate pace than in recent years.

Robert Ohmes asked for more detail on the impact of social media on the sales acceleration and what factors would determine whether Q4 comps land at the high (10%) or low (8%) end of the guidance range.

Answer

CEO Jack Sinclair explained that social media has driven impressions from 'millions to billions,' fueled by specific messaging, celebrity partnerships, and viral products like CMOS, which directly drives traffic and sales. CFO Curtis Valentine stated that hitting the high end of the comp range would depend on a strong holiday season, while acknowledging the business has seen rapid step-changes in performance recently.

Robert Ohmes of Bank of America asked about the cause of softness in basketball and golf and for commentary on the potential Dick's Sporting Goods and Foot Locker merger.

Answer

CEO Steven Lawrence attributed the softness in basketball and golf primarily to weather. Regarding the potential merger, he declined to comment on competitors' strategies, stating Academy will remain focused on its own opportunities, such as its broad assortment including a large outdoor business, its value proposition, and its focus on a younger family demographic.

Robert Ohmes of Bank of America requested more details on the upcoming Nike product expansion. He also asked about the current holiday competitive environment compared to last year and the performance of digital versus physical stores.

Answer

CEO Steve Lawrence described the Nike launch as the 'most meaningful in company history,' covering 140+ stores with broad assortments, but declined to provide further product specifics at this time. Regarding competition, he stated the promotional environment is slightly more elevated than last year but in line with expectations. He also noted that digital sales are performing in line with expectations and store trends.

Robert Ohmes asked about the merchandising setup for the holiday season, inquiring about allocations from key brands like Nike, YETI, and Stanley. He also asked for the digital sales penetration rate for the quarter and the expected impact from DoorDash.

Answer

CEO Steve Lawrence expressed confidence in the holiday positioning, confirming better allocations from Stanley and YETI, and noting the emergence of Owala as a strong third brand. He also mentioned expanded distribution for brands like Birkenstock. For digital, he stated that dot-com penetration was up 30 basis points to 9.7% of sales, and clarified that DoorDash sales are not currently included in that number but will be in a future phase.

Robert Ohmes from Bank of America asked if the strong seasonal sales performance from Q1 would continue into Q2 and requested more information on the new higher-income customers, such as where they previously shopped.

Answer

CEO Michael Creedon noted that Q2 is traditionally the weakest seasonal quarter. However, he believes the expanded multi-price assortment is changing this dynamic by providing a year-round draw. While not specifying where new higher-income shoppers came from, he emphasized the goal is to create a 'sticky' relationship with them by exceeding their expectations.

Robert Ohmes of Bank of America sought clarity on the gross margin outlook, particularly the impact of occupancy cost deleveraging seen in Q1. He also asked for more detail on customer behavior, given the reported record-high average order value (AOV).

Answer

SVP of Finance Ryan Brody clarified that the Q1 occupancy deleverage was a function of lower revenue in the quarter and that the company still expects the full-year gross margin to be roughly flat to the prior year. CEO John Reed and CMO Jennifer Porter both stated there has been no significant change in consumer behavior across ticket sizes. Porter added that while April traffic was softer, conversion and engagement remain strong once clients are in the store or online.

Robert Ohmes questioned the drivers behind Arhaus's inventory growth in the quarter and asked for insights into the gross margin outlook for Q4 and 2025.

Answer

CEO John Reed explained that the inventory build was a deliberate strategy to support best-selling collections and prepare for new 2025 product launches. CFO Dawn Phillipson indicated that Q4 gross margin will face pressure from lapping last year's significant abnormal backlog deliveries and from pre-opening expenses for new showrooms. She deferred specific 2025 guidance.

Robert Ohmes from Bank of America asked about the behavior of the low-income consumer, changes in exam cycles, and the company's efforts in optometrist recruitment and retention, including the cost outlook.

Answer

Executive L. Fahs explained that the low-income consumer is facing increased financial pressure, contributing to a broader market shift toward managed care plans. Executive Alex Wilkes followed up by stating that optometrist retention and recruitment are both healthy, with costs remaining in line with expectations. He highlighted the company's attractive career paths for doctors as a key retention tool.

Robert Ohmes from Bank of America Corporation asked about the behavior of the low-income consumer, questioning if they are deferring purchases or going elsewhere, and if there are any changes in replacement cycles. He also inquired about optometrist recruitment, retention, and cost trends.

Answer

Executive L. Fahs explained that the low-income consumer is financially strained, and there's a broader market shift towards insured lives, reinforcing the company's strategy to target managed care. Executive Alex Wilkes added that optometrist retention and recruitment are both healthy, with costs remaining in line with expectations, partly due to an attractive work environment and career paths.

Robert Ohmes asked if the new real-time order guide, now active in California and the East Coast, has produced any noticeable improvement in comparable sales.

Answer

CEO Jason Potter reported that while it's early for a direct sales impact, the initial results are very positive. He highlighted that store fill rates have significantly improved, jumping from the 92-93% range to over 99%. He expects this improved ability to match supply and demand will translate to sales growth over time, with a full rollout completed by the end of Q2.

Robert Ohmes from Bank of America inquired whether the new systems, once fully implemented, will be superior to the legacy systems and asked if the company lost any independent operators (IOs) due to the recent disruptions.

Answer

Chairman Eric Lindberg stated that he does not believe they lost operators due to the system issues, noting that overall turnover remained in line with historical levels. He explained that the goal for Q2 is to restore the previous functionality to stabilize the environment. The subsequent phase will focus on enhancements to make the new system superior to the old one, with a target to achieve this by the end of the year.

Robert Ohmes requested more details on the departure of former CEO RJ Sheedy, the characteristics being sought in a new CEO, and whether the systems disruption is fully resolved or still poses a risk for early next year.

Answer

Interim President and CEO Eric Lindberg explained the CEO transition was a mutual agreement following a period of operational challenges, with no major disagreement or new findings. He stated the system is 'fully functional' but still requires enhancements for speed and efficiency, noting that the restoration of the real-time order guide for operators is a key remaining task. The search for a new CEO is focused on finding a leader with public company and retail scaling experience.

Robert Ohmes sought clarification on when higher tariff-related costs would flow through the income statement and whether O'Reilly was observing any pull-forward in orders from customers.

Answer

President Brent Kirby clarified that while the Q1 impact was immaterial, some tariff-related costs are beginning to flow through in Q2, though the situation remains fluid due to exemptions and negotiations. Executive Brad Beckham stated definitively that they are seeing "no pull forward" in demand from either professional or DIY customers, as this behavior is not typical for the auto parts business model.

Robert Ohmes of Bank of America inquired about the drivers of pharmacy growth, specifically the contribution from GLP-1 drugs versus benefits from competitor store closures, and asked about the anticipated wage rate pressure for fiscal 2025.

Answer

CEO-elect Susan Morris confirmed GLP-1s contribute to growth but noted core script volume is also growing. President and CFO Sharon McCollam added that the company sees the GLP-1 customer as an opportunity to fulfill a new, more profitable basket. Morris also confirmed they are actively acquiring scripts from closing pharmacies. Regarding wages, McCollam stated that the significant wage growth seen in 2024 is expected to continue in 2025 due to multiyear contracts.

Robby Ohmes asked for color on the FIFO gross margin, excluding the impacts of pharmacy and digital, and whether there were any underlying competitive pressures on core margins.

Answer

President and CFO Sharon McCollam reiterated that the primary margin drivers are the dilutive mix shifts from pharmacy and digital growth, which are offset by productivity gains. She acknowledged ongoing price investments but stated these are balanced by productivity efforts like shrink reduction. CEO Vivek Sankaran added that there was 'nothing abnormal' occurring in core margins.

Robert Ohmes asked for more detail on U.S. average ticket trends, specifically the mix of items versus inflation, and questioned why the bakery category was inflationary if key commodities were deflationary.

Answer

Executive Gary Millerchip explained that significant inflation in egg prices was the primary driver of bakery inflation, outweighing deflation in sugar and butter. Regarding the average ticket, he noted a positive turn over the past year, driven more by an increase in items per basket, particularly in non-foods, rather than by price inflation.

Robert Ohmes of Bank of America inquired about any notable competitive impacts, such as benefits from rivals raising membership fees or pressure from competitors' adoption of technologies like Scan & Go.

Answer

Executive Gary Millerchip stated that Costco primarily focuses on competing with itself but noted a significant tailwind from disruption in the retail pharmacy industry, which is driving substantial growth in Costco's pharmacy business. Regarding Scan & Go, Executive Ron Vachris acknowledged that while they hear about it, the company's focus is on improving the front-end experience through options like self-checkout and will continue to monitor technology, but it is not a frequent member request at this time.

Robert Ohmes inquired about how BJ's has managed tariffs in the past and its current strategy for tariff risk, and also asked about the primary drivers behind the recent strength in its digital business.

Answer

CEO Robert Eddy explained that while tariffs can raise consumer prices, such periods often benefit BJ's as shoppers seek value. He noted the company has less exposure than many retailers and has robust processes for managing cost inflation. Regarding digital, Mr. Eddy attributed the 26% growth to enhancing member convenience through services like BOPIC, same-day delivery, and in-app features, which leads to higher spending. CFO Laura Felice added that 90% of digital sales are fulfilled by clubs, providing a structural advantage.

Robert Ohmes from BofA Securities asked for details on the Q4 comp sales guidance of 2.5% to 3%, seeking clarity on assumptions for holiday sales, general merchandise performance, and the digital versus in-store mix. He also questioned the expected margin impact from the fresh initiatives in Q4 and into the next fiscal year.

Answer

Chairman and CEO Bob Eddy expressed cautious optimism for Q4, anticipating stronger general merchandise performance driven by holiday traffic from the robust fresh food business. He highlighted that digitally-enabled sales grew 30% and, while more labor-intensive, drive larger baskets and loyalty. CFO Laura Felice added that the fresh business carries a lower margin rate but is critical for long-term member engagement, as it increases shopping frequency and renewal rates.

Robert Ohmes of BofA Securities requested details on the Q4 comp sales guidance, including assumptions for holiday sales, general merchandise performance, and the digital versus in-store mix. He also asked about the margin impact from fresh initiatives.

Answer

CEO Robert Eddy expressed cautious optimism for the holidays, expecting stronger general merchandise performance and noting that 30% growth in digitally-enabled sales drives larger baskets despite slightly higher labor costs. CFO Laura Felice added that the growing fresh business carries a lower margin rate, a strategic trade-off for boosting long-term member loyalty and shopping frequency.

Robert Ohmes of Bank of America asked for more color on why Q1 comps are expected to be the 'high watermark' for the year and sought details on the drivers for margin investments, such as Fresh 2.0, tariffs, or competition.

Answer

CFO Laura Felice reiterated that the comp cadence outlook (stronger first half) is unchanged from initial guidance, influenced by last year's laps. CEO Robert Eddy clarified that the Fresh 2.0 initiative is primarily a sales and member engagement driver, not a significant margin headwind, as gross margin rates are similar across divisions.

Robert Ohmes asked for more color on the guidance, specifically why margin investments are needed and why Q1 comps are expected to be the high watermark for the year. He also questioned if the Fresh 2.0 initiative is a significant margin headwind.

Answer

CFO Laura Felice explained that margin investments are to maintain BJ's core value proposition, which is their 'North Star.' She noted the comp cadence reflects lapping dynamics from the prior year. CEO Bob Eddy clarified that Fresh 2.0 is not a significant gross margin headwind, as perishables have similar gross margin rates to other divisions. The initiative's goal is to drive member engagement and trips, which boosts long-term value even with some investment costs below the gross margin line.

Robert Ohmes requested more detail on the drivers behind potential margin investments and the reasoning for expecting comparable sales to decelerate after a strong first quarter.

Answer

CFO Laura Felice reiterated that delivering value is the company's 'North Star,' and they will continue to invest in pricing. She noted the comp cadence expectation (stronger first half) is unchanged from initial guidance. CEO Bob Eddy clarified that initiatives like Fresh 2.0 are not a gross margin headwind; their purpose is to drive member engagement and trips, which ultimately boosts loyalty and overall sales.

Robert Ohmes sought more color on the outlook, asking about the drivers behind planned margin investments and the reasoning for expecting Q1 comps to be the high watermark for the year.

Answer

CFO Laura Felice reiterated that value remains the company's 'North Star' for margin decisions and that the comp cadence reflects tougher comparisons in the second half. CEO Bob Eddy clarified that initiatives like Fresh 2.0 are not a headwind to gross margin rates but are investments to drive member engagement, trips, and sales.

Robert Ohmes from BofA Securities asked for context on how BJ's is thinking about potential tariffs, including how they were managed previously, and also questioned what is primarily driving the significant strength in the company's digital sales.

Answer

CEO Robert Eddy explained that while tariffs can raise consumer prices, periods of price inflation have historically benefited BJ's as shoppers seek value. He noted the company has less exposure than many retailers and robust processes for managing cost inflation. On digital, Eddy attributed the growth to a focus on convenience, with digitally-engaged members spending more. CFO Laura Felice added that 90% of digital sales are fulfilled by clubs, which is a key structural advantage.

Robert Ohmes asked for the reasoning behind the lower CapEx guidance of $275 million to $305 million for 2025, compared to the roughly $330 million run-rate of the last couple of years.

Answer

CFO Jed Gold explained that the decrease in capital expenditures is primarily due to two factors: a fewer number of planned greenfield openings for the year and a slightly higher mix of ground leases within the new build pipeline, which do not require capital for land purchases. He noted that core store maintenance CapEx remains consistent.

Robert Ohmes asked for quantification of onetime supply chain impacts, whether these issues affected sales, and if the Target Circle relaunch had a greater negative cost impact than anticipated.

Answer

COO Michael Fiddelke reiterated that the primary profit pressures were from discretionary sales deceleration and unique costs like managing inventory around the port strike, without providing a specific dollar amount. He framed the Target Circle relaunch as a positive investment, highlighting the addition of 3 million new members and nearly 20% growth in same-day delivery, stating it is accretive to the top and bottom line over time.

Robert Ohmes of Bank of America inquired about the potential drivers for a return to inflation in the auto parts industry, the historical impact of tariffs, and asked for a historical parallel to the current challenged DIY consumer environment.

Answer

CEO Philip Daniele explained that a return to historical 3-5% ticket growth would be driven by parts technology and cost inflation, which he expects to normalize in 2025, and noted that tariffs are typically passed on to consumers. Both Daniele and CFO Jamere Jackson acknowledged the current consumer pressure is unique but emphasized the business's resilience due to its non-discretionary, needs-based nature.

Robert Ohmes questioned the potential impact of tariffs on pricing for both private and national brands, and asked for management's long-term vision for the new online product marketplace.

Answer

CEO Marvin Ellison asserted that Lowe's will remain price competitive and will not cede market share, using a portfolio approach to manage pricing. EVP, Merchandising, Bill Boltz added that about 20% of sourcing is from China and they are actively diversifying. Regarding the marketplace, Ellison expressed high expectations, noting the partnership with Miracle will help scale the business, expand assortment without adding inventory, and is a key component of a successful omnichannel strategy.

Robert Ohmes questioned the potential impact of tariffs on pricing for both private and national brands, and asked for management's long-term vision for the company's new online marketplace.

Answer

Chairman and CEO Marvin Ellison affirmed that Lowe's will remain price competitive and will not cede market share, leveraging its pricing tools and strong supplier relationships. EVP, Merchandising Bill Boltz detailed the company's sourcing mix, with 60% from the U.S. and about 20% from China, noting ongoing diversification efforts. Regarding the marketplace, Marvin Ellison expressed high expectations, highlighting the partnership with Miracle for scalability. He sees it as a crucial element for omnichannel growth, allowing Lowe's to expand its assortment into premium and value tiers without adding inventory or fulfillment capital.