Seth Basham • Wedbush Securities Inc.

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CEO William Nash stated that first quarter-to-date comparable sales were running in the high single digits. Regarding tariffs, he speculated that rising new car prices would increase the price gap with late-model used cars, potentially driving demand to their segment. However, he also cautioned that used car prices could rise and that increased parts costs would make their COGS efficiency initiatives even more critical.

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CEO William Nash reported that CarMax is about halfway to its $200/unit savings goal, split between reconditioning and logistics, with most savings passed to consumers. Regarding wholesale, he attributed the strong performance to both a more stable pricing environment and the success of the Max Offer tool, which grew its active dealer base by nearly 40% year-over-year.

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SVP of CarMax Auto Finance (CAF) Operations, Jon Daniels, stated that while industry-wide credit challenges exist, CarMax feels confident in its current underwriting standards following tightening measures in April 2023 and April 2024, with no further tightening planned at present. He described the full-spectrum lending initiative as being in a 'learning mode' and noted the success of recent securitizations. EVP & CFO Enrique Mayor-Mora added that these loans remain highly profitable for the company.

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Jack Preston, executive, confirmed Q4 margins were at the lower end, noting that while product margins were up year-over-year, some other expenses came in higher than anticipated. Gary Friedman, executive, added that Q1 would have the highest advertising costs due to mailing two sourcebooks, but did not provide specific ad spend guidance for the full year.

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Chairman and CEO Gary Friedman confirmed the peak inflection is now seen as 'several years out' due to a much larger market opportunity than previously understood. He reframed the company's identity from a specialty brand to a 'platform for taste.' He clarified the significant new brand extension is within their current domain—'the same thing we're doing'—but is aesthetically different and targets the largest part of the market.

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CEO Gary Friedman explained that the contract business, like all other ancillary businesses, follows the trajectory of the core RH brand; as the core strengthens, so will the contract division. Regarding inventory, he described the higher levels as a necessary 'insurance policy' to navigate the complex product transition without disrupting sales. He expects this inefficiency to continue in the near term as they prioritize the transformation over optimizing inventory turns.

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CFO Sabrina Simmons identified the two main drivers as gross margin expansion and SG&A leverage, which will be pursued in a balanced manner. She quantified that the 25 net store closures in 2024 removed about $50 million in annual sales. As for risks, she noted a key strength of the plan is that it does not rely on a robust consumer or macro environment, meaning any improvement there would serve as a tailwind to their self-help initiatives.

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CEO Joel Anderson detailed that merchandising improvements involve an end-to-end review of the assortment, pricing, in-stock levels for consumables, and enhancing vendor partnerships. CFO Brian LaRose addressed industry trends, noting that while adoptions have slowed, shelter intakes are also down from prior years. He stated the company is focused on controlling its own execution to win as the industry returns to historical growth levels.

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CFO Jamere Jackson stated there is no specific 'breakpoint' for tariffs, as the company has multiple levers like sourcing, negotiation, and pricing to maintain its margin profile. He also explained that SG&A investment will remain at an accelerated pace for the next few quarters to capture market share opportunities, though they have a playbook to manage costs if sales growth doesn't materialize.

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CFO Ryan Grimsland attributed Q1 volatility to weather and a pressured consumer, noting that tax refunds appeared delayed. He quantified the Q4 atypical items as a 280 basis point headwind to gross margin and a $0.68 impact on EPS. For the full year, the impact was a 90 basis point headwind to gross margin and a $0.64 impact on EPS.

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CEO Shane O'Kelly guided toward a low single-digit share dilution for 2025 EPS modeling but deferred specific FCF guidance. Regarding execution risk, he acknowledged the challenge of transforming the business while running it, but expressed confidence, highlighting the external support from firms like Alvarez & Marsal for store closures and a disciplined focus on the plan's three core pillars: store operations, merchandising, and supply chain.

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John Reed, CEO, stated that new showrooms are performing very solidly, meeting or exceeding expectations. He confirmed that this strong performance reinforces their strategy and that their growth plans for 2025 and beyond are not changing.

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CEO John Reed attributed the strength in large sales to beautiful store remodels, the growing interior design services program, and a booming trade business with outside designers. He reiterated that Arhaus does not need to be more aggressive on price and that while the reeded trend is popular, Arhaus is already innovating the 'next thing' to stay ahead of competitors.

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CFO Mark Jenkins described having an active ATM program as 'good corporate housekeeping' that is viewed opportunistically, with no specific near-term issuance targets. The long-term goal is to achieve investment-grade credit ratios. He reiterated that Q4 and Q1 are typically the lowest retail GPU quarters of the year, a pattern that aligns with historical industry depreciation trends.

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CEO Ernie Garcia explained the modest ad investment is to test and understand growth levers during a seasonally slower quarter. He positioned the retail marketplace as a substitute for auction purchases, aiming to leverage ADESA's infrastructure to create a more efficient supply channel for cars from large commercial partners.

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President and CEO William Stengel stated there are no unique disadvantages for company-owned stores and framed the opportunity as improving the bottom quartile of performers. He confirmed that a competitor's exit presents a market share opportunity, which GPC aims to capture through strong local execution and its scaled national network.

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President and CEO William Stengel attributed the slowdown to worsening market conditions and hurricane-related disruptions, stating a flattish market feels accurate. EVP and CFO Herbert Nappier added that the competitive landscape remains rational. Stengel explained that the sequential improvement in major accounts was driven by traction from specific, intentional initiatives focused on profitable growth with regional accounts and independent affiliates.

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SVP of Customer Offerings & Fulfillment Jason Bonfig reported that the laptop category had a 7% comparable sales growth in Q3, its highest since April 2021. He stated the primary driver is the upgrade and replacement cycle, with AI features expected to fuel future interest. He highlighted Best Buy's exclusive assortment of AI-ready PCs and noted the upcoming end-of-life for Windows 10 in October 2025 as a continuing catalyst for replacement demand.

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CEO Steve Lawrence detailed several growth drivers, including the new loyalty program which is seeing sign-ups 3x faster than previous efforts and is on track to exceed 10 million members. He noted that the 2023 stores are performing better than the 2022 vintage, and confirmed that the company plans to accelerate store openings in 2025 beyond the 15-17 planned for this year.

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CFO Jeff Howie reiterated that the back-half operating margin is expected to be flat year-over-year, with the full-year guidance increase stemming from Q2's outperformance. He noted that gross margin tailwinds will dissipate in the back half. Howie confirmed the company has flexibility to manage SG&A, primarily through adjusting variable employment costs and optimizing advertising spend based on effectiveness.

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