Steve Forbes

Steve Forbes asked for more insight into consumer app engagement and online sales penetration, specifically regarding the migration of consumers to dual-channel purchasing versus single-channel, and the drivers behind the mid-teens e-commerce growth.

Answer

President and CEO Kecia Steelman highlighted strong growth in both store and digital channels, with 80% of business still from stores. She noted app engagement grew to 65% from 63% last quarter, and e-commerce has seen three consecutive quarters of double-digit comp growth. This momentum is attributed to new capabilities launched in 2025, such as Split Cart, Replenish and Save, Wishlist, Venmo, and expanded ship-from-store locations, all enhancing the digital experience and personalization.

Steve Forbes asked Joel Anderson to frame the internal opportunity of integrating services and stores, specifically how customer spending evolves as they engage with services beyond just in-store purchases. He also requested a baseline KPI to track service engagement.

Answer

Joel Anderson, Petco's Chief Executive Officer, emphasized services as a key 'moat' and differentiator for Petco. He explained that integrating services with the center of the store, combined with the new membership program, will create customer profiles to understand engagement across services, merchandise, and channels, ultimately growing lifetime value. Anderson declined to provide specific percentages but indicated that overall transactions, with services as a key component, would be the primary KPI to track.

Steve Forbes asked for a framework on the opportunity of integrating services and stores, specifically how spending per customer evolves as they engage in services, or how net sales per customer change with broader engagement across the store. He also requested a baseline KPI for the percentage of customers currently utilizing services.

Answer

Joel Anderson, Petco's Chief Executive Officer, emphasized services as a key differentiator ('moat') that is hard to replicate, noting incredible progress in utilization and engagement with existing assets. He explained that integrating services with the center of the store, combined with a new membership program, will help understand customer profiles and drive a stronger halo effect on the overall business. Anderson declined to provide specific customer service utilization percentages but suggested tracking overall transactions as a key KPI for future progression.

Steve Forbes inquired about demographic differences between DICK'S and Foot Locker and how these impact merchandising plans. He also asked for clarification on Foot Locker's Q4 adjusted EBIT, comparing it to last year's figures and seeking insight into a normalized Q4 or the LTM adjusted EBITDA profile.

Answer

Ed Stack, Executive Chairman, explained that Foot Locker will be merchandised for a more basketball-inspired, trend-driven, and urban demographic, while DICK'S remains sport-led and suburban. He emphasized that all consumers seek new, innovative products, which Foot Locker will offer more of by Q3 2026. Navdeep Gupta, CFO, confirmed the Q4 EBIT comparison is against Foot Locker's normalized non-GAAP results from last year, with the expected negative EBIT driven by inventory cleanup.

Steve Forbes asked about any demographic differences between DICK'S and Foot Locker, particularly Foot Locker's potential exposure to lower-income demographics, and how this impacts merchandising plans going forward. He also followed up on Foot Locker's Q4 slightly negative adjusted EBIT compared to $118 million last year, asking for confirmation and how to think about a normalized Q4 or LTM adjusted EBITDA profile relative to the $395 million in the presentation.

Answer

Ed Stack, Executive Chairman, explained that Foot Locker will be merchandised to be more basketball-inspired, trend-inspired, and urban, distinct from DICK'S more sport-led, suburban concept. He noted that all consumers seek new, innovative product, and Foot Locker will be fully invested in such product by Q3 2026, appealing across all income levels. Navdeep Gupta, CFO, confirmed the comparison to last year's normalized non-GAAP results for Q4 adjusted EBIT, linking the expected slightly negative operating income to the 'cleanup of the garage inventory' and its impact on gross margins.

Steve Forbes from Guggenheim inquired about the observed improvements in app engagement following recent changes to screen real estate and discovery features, and how these learnings are influencing product development plans for the upcoming year to sustain GMS growth.

Answer

President and Chief Growth Officer Kruti Patel Goyal detailed the redesigned app home screen and ML-powered discovery feed, noting significant uplift in engagement. CEO Josh Silverman highlighted that app users visit five times more often and view three times more pages. CFO Lanny Baker added that this data also enhances owned media channels like email and push notifications.

Steve Forbes inquired about the improvements in app engagement, particularly regarding the redesigned home screen and discovery feed, and how these learnings are informing product development plans for the next year to continue the return to GMS growth.

Answer

President and Chief Growth Officer Kruti Patel Goyal detailed the app's redesigned home screen and discovery feed, powered by new machine learning models, which have led to a meaningful uplift in engagement. CEO Josh Silverman added that app users visit five times more often and view three times more pages, enhancing personalization. CFO Lanny Baker noted that this data also powers owned media channels, improving outbound email and push notifications.

Steve Forbes asked how customer spend or wallet share evolves 6-12 months after initial POOL360 adoption, and what future innovations and technological advances are in the pipeline, particularly those requested by the builder community, to drive digital advantage and share capture.

Answer

President and CEO Peter Arvan explained that customers with strong digital connections tend to grow faster, citing POOL360's role in supporting private label chemical sales through water testing and increasing stickiness for service techs. He emphasized that the focus is on improving the customer experience across all facets of the business, including maintenance, repair, and retailers, rather than solely on builders, by providing tools for quotes, ordering, and inventory management.

Steve Forbes asked about the potential for continued net inventory reduction on the balance sheet and the visibility/risk surrounding the planned launch of the new brand extension in spring 2026.

Answer

Chairman and CEO Gary Friedman expressed confidence in the new brand extension launch, contingent on tariff investigations, and emphasized RH's competitive advantage in sourcing. CFO Jack Preston explained that inventory turn rates are expected to improve from mid-twos towards historical highs of 3.0-3.2.