Steven Forbes

Steven Forbes sought high-level thoughts on the cross-selling opportunities now that GMS is integrated, asking for a rank order of these opportunities and how the business is being built for cross-selling into the next year.

Answer

Richard McPhail, Executive Vice President and Chief Financial Officer, described ongoing account handoffs and successful cross-selling examples between Home Depot's outside salesforce and the SRS/GMS salesforces, occurring daily and weekly. Ted Decker, Chair, President, and CEO, elaborated on the branch growth strategy for SRS and GMS, which involves organic comp growth, opening greenfield branches, and tuck-in acquisitions at a pace of 40-50 branches per year, noting that non-comp sales from these new branches and stores contribute about half a point of sales growth.

Steven Forbes sought high-level thoughts on cross-selling opportunities across SRS, GMS, and Heritage, asking for a rank order of these opportunities and how the business is being built for cross-selling into next year. He also asked for an update on branch growth across SRS, GMS, and Heritage, inquiring about current branch counts, the out-year branch growth opportunity, and the envisioned end state versus the current 1,200 branches over the next three to five years.

Answer

Richard McPhail, EVP and CFO, described account handoffs between Home Depot's outside salesforce and SRS/GMS salesforces, citing examples of GMS engaging in roofing sales and then introducing Home Depot for additional products like framing and flooring. These engagements are happening daily and weekly, flowing both ways. Ted Decker, Chair, President, and CEO, explained that SRS and GMS deploy a model of organic comp growth through existing branches, opening 40-50 greenfield branches annually, and focusing on tuck-in acquisitions. He noted that non-comp sales from new stores and SRS branches contribute about half a point of sales growth.

Steven Forbes asked about learnings from the SRS sales force, including its size and how it informs Home Depot's own sales force strategy. He also requested an updated timeline for the full rollout of the order management system's delivery capabilities.

Answer

CEO Ted Decker shared that the SRS sales force of 2,500 has provided valuable insights into compensation, management, and credit-based sales models, reinforcing Home Depot's approach. Executive Chip Devine stated that the full order management system rollout is planned for completion by the end of 2025, with key features like inventory reservation currently being activated.

Steven Forbes requested an update on SharkNinja's transition from third-party to self-distribution in international markets, asking for a roadmap and insights into how the risk parameters of this transition have evolved. He also asked for a formal update on SharkNinja's path to becoming a domestic filer, noting investor interest in this transition.

Answer

CEO Mark Barrocas explained that SharkNinja's updated strategy for international market transitions involves a more nuanced approach, recognizing a continued role for distributors, especially for smaller retailers, aiming for a smoother, ongoing transition. He also confirmed that SharkNinja has officially failed the foreign private issuer test and is on track to become a domestic filer in 2026, aligning with previous statements.

Steven Forbes requested an update on SharkNinja's transition of international markets from third-party distribution to self-distribution, including a roadmap and how the risk parameters have evolved following learnings from the Mexico transition. He also asked for a formal update on the company's path to becoming a domestic filer.

Answer

CEO Mark Barrocas explained that the company learned not to approach transitions with a 'big bang' strategy, instead opting for a smoother, ongoing model where SharkNinja handles larger retailer relationships directly while partnering with distributors for smaller retailers in markets like Spain, the Nordics, Poland, Italy, and South America. CFO Adam Quigley confirmed that SharkNinja has officially failed the foreign private issuer test and is on track to become a domestic filer in 2026, as previously communicated.

Steven Forbes from Guggenheim Securities asked for insights into conversations with retail partners regarding opportunities for distribution and market share gains. He also inquired about the potential for product category expansion in key international markets like France and Germany, where the company currently offers a limited portfolio.

Answer

CEO Mark Barrocas stated that conversations with domestic retailers are excellent and focused on innovation partnerships. He highlighted the significant excitement from international retailers in Europe and Latin America, who are actively pushing for accelerated direct-market transitions and access to more products. In response to the follow-up, Barrocas discussed the company's internal initiative to drive 50% of sales from outside the U.S. in the near term, which will be achieved by expanding the product portfolio in existing markets and entering new ones like Spain, Italy, and Poland.

Steven Forbes asked how conversations with U.S. retail partners have evolved and whether there is a significant shelf space opportunity for SharkNinja.

Answer

CEO Mark Adam Barrocas described conversations with U.S. retailers as 'highly collaborative.' He explained that partners are primarily seeking assurance that SharkNinja will continue investing in innovation and media to drive traffic, unlike other vendors who are pulling back. By committing to its innovation flywheel and marketing, SharkNinja is reinforcing its position as a key growth driver for retailers, particularly for the holiday season.

Steven Forbes asked for a breakdown of the significant increase in sales and marketing spend over the past two years, questioning how much is for future growth versus current sales and requesting details on the allocation across different channels like brand and performance marketing.

Answer

CEO Mark Adam Barrocas explained that the heavy investment was foundational for entering new categories and countries, with benefits that will compound in 2025 and beyond. He deconstructed the spend into three main areas: lower-funnel D2C marketing, upper-funnel awareness for new products and markets, and investment in creating a user-generated content flywheel. He noted they can now spark this flywheel pre-launch by seeding influencers, creating a symbiotic relationship where influencers use SharkNinja products to grow their own audiences.

Steven Forbes asked about the general receptivity of Wayfair's multi-channel fulfillment (CastleGate) offering from its supplier network, how the offering is expected to mature, and the anticipated ramp-up speed of CastleGate utilization. He also inquired about the benefits of Wayfair's replatforming efforts, how they are trending relative to expectations, and any new opportunities that have emerged.

Answer

Niraj Shah, Co-founder, CEO, and Co-Chairman, described multi-channel fulfillment as a new, technology-enabled program adding value to suppliers, creating new revenue streams, and leveraging existing infrastructure, with suppliers excited and ramping up usage. He explained that replatforming has dramatically increased developer velocity, improved system quality, and reduced costs, freeing up technology cycles for new programs and enhanced customer/supplier experience. Kate Gulliver, CFO and Chief Administrative Officer, mentioned CastleGate order volume reached an all-time high of approximately 25% last quarter.

Steven Forbes asked about the general receptivity of Wayfair's multi-channel fulfillment (CastleGate) offering from the supplier network, how the offering is expected to mature, and the anticipated ramp-up speed of CastleGate utilization.

Answer

Niraj Shah (Co-founder, CEO, and Co-Chairman) explained that multi-channel fulfillment is a new program enabled by technology, adding value to suppliers, creating a new revenue/margin stream, and leveraging existing infrastructure. He noted strong supplier excitement due to its optimization for larger, bulkier items, which is unique in the market. Suppliers start with trials, then ramp up usage. Kate Gulliver (CFO and Chief Administrative Officer) mentioned that CastleGate penetration (percentage of order volume shipping from CastleGate) was roughly 25% last quarter, indicating nice momentum. Forbes also inquired about the benefits of Wayfair's replatforming efforts, how they are trending relative to expectations, and any new opportunities that have emerged for the coming years. Shah explained that replatforming, a necessary and intensive undertaking, has dramatically increased developer velocity and speed of launching new features, improved quality, and reduced costs by making systems more discreet and interfaced via APIs. He highlighted that Wayfair is now in a much different position, with technology cycles freed up to invest in new programs and enhance customer/supplier experiences, leading to significant benefits.

Steven Forbes asked for context on the performance gap between promotional and non-promotional periods, how it compares to historical levels, and what it implies for the industry's path to growth. He also sought reassurance on Wayfair's ability to settle its upcoming debt maturities with cash.

Answer

CEO Niraj Shah linked the category's recovery to the housing market, which will stimulate demand as it improves. CFO Kate Gulliver addressed the capital structure, emphasizing that strong free cash flow and improving adjusted EBITDA are creating optionality, making both cash settlement and alternative financing viable options for managing debt maturities.

Steven Forbes asked about Bed Bath & Beyond's conviction behind the 12% sales and marketing expense ratio target for 2026, particularly in conjunction with the return to growth narrative, inquiring about the sources of efficiency and stability in the active customer base. He also followed up on the gross margin progression in the quarter and whether it informs the company's medium-term or long-term gross margin targets.

Answer

Marcus Lemonis, Executive Chairman and Principal Executive Officer, explained that the 12% sales and marketing target for 2026 stems from stabilizing revenue in 2025, uncovering inefficiencies, and focusing on improving conversion. He highlighted the misstep of assuming acquired data would translate directly to e-commerce revenue, leading to significant spending on augmenting and segmenting data. Lemonis noted improved customer retention and a focus on personalized experiences and efficient performance marketing, aiming to eliminate $10 million in inefficient spend. Regarding gross margin, Lemonis clarified a short-to-medium term product margin goal of 24%-26%, balancing higher textile margins (55-57%) with more aggressive pricing on furniture. He also mentioned the increasing attachment rates of product protection warranties and the future integration of the private label credit card to enhance overall transaction profitability.

Steven Forbes asked about Bed Bath & Beyond's conviction behind targeting a 12% sales and marketing expense ratio in 2026, the return to growth narrative, and how the third quarter's gross margin progression informs medium-term targets.

Answer

Executive Chairman and Principal Executive Officer Marcus Lemonis explained that the 2025 revenue stabilization proved KPI improvements, uncovering inefficiencies. He detailed plans to achieve the 12% marketing target through data augmentation, personalization, and improved performance marketing, aiming for high contribution margin transactions. Regarding gross margin, Lemonis outlined a 24-26% product margin goal, balancing textile margins from omnichannel with competitive pricing on furniture, and leveraging product protection warranties and private label credit cards for overall transaction profitability.

Steven Forbes asked for an update on Tractor Supply Company's direct sales representative build-out, including the planned number of reps by year-end, final mile coverage as a percentage of the store base, and how the incremental sales from this initiative are expected to offset initial startup costs, potentially benefiting margins next year.

Answer

Hal Lawton, President and CEO, expressed strong confidence in the direct sales initiative, noting it's on track and expected to self-fund next year without incremental investment. John Ordus, EVP of Chief Stores Officer, added that reps cover over 300 stores, big barn customers are comping at nearly 50% with specialists, and weekly sales exceed $200,000. There are currently 48 specialists, with plans for 8-10 more by year-end, and average tickets are seven times the company average, driven by feed, fencing, and equine feed.

Steven Forbes asked for an update on the direct sales representative build-out, including the number of reps planned by year-end, final mile coverage percentage, and the expected net benefit of incremental sales offsetting startup costs for the initiative next year.

Answer

Hal Lawton (President and CEO) expressed confidence in the direct sales initiative, noting it's on track and expected to be self-funding next year without incremental investment. John Ordus (EVP of Chief Stores Officer) added that direct sales reps cover over 300 stores, big barn customers are comping at nearly 50%, and weekly sales exceed $200,000. He mentioned 48 specialists are currently in place, with plans for 8-10 more this year, and average tickets are about seven times the company average, driven by feed, fencing, and equine feed.

Steven Forbes from Guggenheim Securities followed up on the Final Mile initiative, asking about the profile of early adopters based on customer segmentation and how to frame the ROI ramp of the offering.

Answer

President & CEO Hal Lawton identified the early adopters as the 'big barn' customers—landowners and multi-species animal owners. He explained that the investment is expense-based and can be scaled. The ROI is driven by three levers: direct sales, fulfilling online bulk orders more efficiently, and enabling in-store delivery for large items. He noted the company remains very bullish on the initiative.

Steven Forbes inquired about the Tractor Supply Rx launch, asking about the expected adoption rate among its member base and the margin profile of the business, considering customer acquisition costs.

Answer

EVP, Chief Merchandising Officer Robert Mills responded, expressing satisfaction with the Allivet integration. He noted that the Rx platform just launched on the website and app with strong early adoption. The focus is now on in-store integration and leveraging the 40 million Neighbor's Club members to drive growth.

Steven Forbes inquired about the company's localization initiatives and the new Field & Stream partnership, asking for context on the opportunity in terms of product categories and potential lift in sales per square foot.

Answer

Chief Merchandising Officer Seth Estep explained that the localization efforts, which adjust about 25% of the floor plan in new and remodeled stores, are expected to deliver an incremental low-single-digit sales lift. He positioned the Field & Stream partnership as a multiyear journey to capitalize on the fast-growing wildlife and hunting categories, starting with products mid-year and expanding into exclusive apparel and marketing opportunities.

An analyst on for Steven Forbes asked how the 37 million Neighbor's Club members informed the decision to acquire Alivet and whether the long-term EBIT margin guidance has changed given two years of flattish comps.

Answer

CEO Hal Lawton described the Alivet acquisition as a strategic tuck-in to add value for its large and engaged Neighbor's Club base. CFO Kurt Barton reaffirmed confidence in the long-term EBIT margin algorithm, explaining that while recent comps have pressured SG&A, strong productivity initiatives have enabled the company to maintain a 10%+ operating margin, keeping the long-term target intact.

An analyst on behalf of Steven Forbes asked how the 37 million Neighbor's Club members influenced the decision to acquire Alivet and requested more context on the strategic opportunity.

Answer

CEO Hal Lawton described the Alivet acquisition as a strategic tuck-in that adds significant value for its large and engaged Neighbor's Club base. He highlighted Alivet's best-in-class platform, distribution, and management, stating the goal is to provide members with a low-cost, convenient source for pet and livestock prescriptions, further strengthening loyalty.

Steven Forbes asked for a breakdown of the 200 international stores planned by 2028, specifically by country, and how the year-one expense weight differs between new U.S. and international stores. He also questioned if the company's commitment to 'marrying expense growth to sales growth' applies to 2026, given the accelerated store growth and mid-single-digit expense per store growth.

Answer

CFO Jamere Jackson stated that the majority of international store openings will be in Mexico, given the market opportunity and existing scale, with fewer in Brazil. He noted that the cost profile for international stores is similar to the U.S., with a comparable early-year SG&A drag and a 4-5 year maturation period. Mr. Jackson clarified that while SG&A growth is accelerated due to new store investments, it is predicated on driving corresponding sales growth. He affirmed that AutoZone will manage expenses to ensure profitability if sales performance does not meet expectations.

Steven Forbes asked for details on AutoZone's path to 500 stores by 2028, specifically the country breakdown for the 200 international stores and how year-one expense weighting differs between new U.S. and international stores. He also questioned if the earlier comment about marrying expense growth to sales growth applies to FY26, given the ramp in new stores and mid-single-digit expense per store growth.

Answer

Jamere Jackson, CFO, stated that most international stores would be in Mexico due to market opportunity and existing scale, noting that while absolute costs differ, the 'cost drag' in early years and the four-to-five-year maturity period for new stores are similar to the U.S. He affirmed that accelerated sales growth from new and existing stores is necessary to align with the mid-single-digit SG&A growth for FY26, emphasizing the company's ability to adjust expenses if sales targets are not met.

Steven Forbes inquired about AutoZone's path to 500 new stores by 2028, asking for a breakdown of the 200 international stores by country and how the year-one expense weight differs between new U.S. and international stores. He also asked if the company's earlier comment about marrying expense growth to sales growth applies to FY2026, given the ramp-up in new stores and projected mid-single-digit expense per store growth.

Answer

Jamere Jackson, CFO, stated that most international store openings would skew towards Mexico due to market opportunity and existing scale. He noted that the cost profile for international stores is relatively similar to U.S. stores, with a 4-5 year maturation period and initial SG&A drag. Jackson confirmed that the principle of managing SG&A in line with sales growth applies to FY2026, emphasizing that the accelerated expense growth is predicated on achieving corresponding top-line sales growth from both new and existing stores.

Steven Forbes from Guggenheim Securities requested more context on the evolution of the 'average weekly sales per commercial program' metric and asked for success stories related to the initiative to improve delivery times.

Answer

Executive Philip Daniele framed the opportunity by highlighting AutoZone's small (5%) share of a very large market, implying significant room for growth. He explained that technology has been leveraged to improve fulfillment and delivery times for hard-to-find parts, a project with a long maturity curve. CFO Jamere Jackson added that Hub and Mega-Hub expansion is a key enabler of this strategy.

Steven Forbes of Guggenheim Securities asked about the rationale for increasing the long-term Mega-Hub target to nearly 300 and sought an update on the planned cadence of new domestic and international store openings.

Answer

Executive Philip Daniele and CFO Jamere Jackson explained the Mega-Hub target was raised after tests showed they could be placed closer together with minimal cannibalization, driving significant sales lifts. Jackson reaffirmed the goal of reaching 300 domestic and 200 international annual openings by the end of the decade.

Steven Forbes from Guggenheim Securities sought context on the trend in weekly sales per commercial program and asked for clarification on the key non-controllable EBIT headwinds, such as FX and LIFO, for fiscal 2025.

Answer

CEO Philip Daniele clarified that on a comparable 16-week basis, commercial sales grew 4.5% and have been sequentially improving, driven by inventory and delivery speed initiatives. CFO Jamere Jackson confirmed the headwinds from the reversal of prior-year LIFO credits and provided specific estimates for the potential negative impact of foreign exchange rates on revenue and EBIT for FY25.

Steven Forbes asked about the recovery of stores that faced competitive cannibalization last year and which specific company initiatives are helping to recapture and sustain sales in those locations.

Answer

President and CEO Kecia Steelman confirmed that as competitive expansion has slowed, they are seeing recovery in impacted stores. She credited the loyalty program and investments in personalization as key tools for recapturing guests. She also noted the future opportunity to win back customers after the Target partnership concludes in 2026.

Steven Forbes asked how Ulta is planning for external factors like competitive cannibalization and how long it typically takes for an impacted store to recover its performance.

Answer

CFO Paula Oyibo acknowledged that competitive pressures will persist but expects the impact to be lower than in 2024. She noted that stores impacted by competition in recent years are showing an improving performance trend, aided by operational efforts and the lapping of new openings.

Steven Forbes asked for more context on the competitive pressures Ulta Beauty is facing, inquiring about the magnitude of the headwind from new points of distribution and the expected recovery path for impacted stores.

Answer

CEO David Kimbell explained that the current competitive environment is unique due to its scale and pace, with over half of Ulta's stores impacted by multiple new competitor openings. He noted that stores without such impacts delivered positive comps, reinforcing confidence in the core model. While acknowledging it will take time to mitigate these pressures, he highlighted underlying strengths in loyalty, newness, and brand love as drivers for eventual recovery.

Steven Forbes from Guggenheim Securities, with Jake Neibosh asking on his behalf, requested an update on the progress of planogram resets. He also asked for more details about the company's 'North Star' strategic initiative.

Answer

CEO Joel Anderson reported that the dog and cat planogram resets were successfully completed, leading to better in-stocks and improved store associate productivity. CFO Sabrina Simmons added that these operational efficiencies contributed to SG&A savings. Regarding the 'North Star' initiative, Anderson outlined its four key pillars for future growth: delivering amazing store experiences, scaling services, achieving merchandise differentiation, and ultimately winning with omnichannel.

Steven Forbes of Guggenheim Securities inquired about the infrastructure and capital investments required to support Petco's 'Phase 3' growth plan and asked for details on the strategy to optimize the performance of existing vet hospitals.

Answer

CEO Joel Anderson stated that no significant new infrastructure investments are required for the growth phase, emphasizing a focus on disciplined execution and ROIC. He noted the vet hospital strategy centers on low-capital initiatives like staffing and marketing to drive utilization. CFO Sabrina Simmons added that approximately 40% of the current year's CapEx is allocated to expansion capital, which includes IT infrastructure and digital capabilities, effectively preparing the business for future growth.

Steven Forbes asked for a rank-ordering of profit improvement opportunities and the internal timeline for execution. He also requested contextualization on what is driving the gross margin improvement in the services business.

Answer

CEO Joel Anderson identified merchandising as the greatest opportunity for profitability improvement, reaffirming the company is on track for its $150 million run-rate savings goal by the end of fiscal 2025. CFO Brian LaRose added that services margin improvement is driven by productivity in grooming, the maturation of the vet hospital portfolio, and the high-growth, capital-efficient Vetco mobile clinics.

Steven Forbes of Guggenheim Securities inquired about Foundation Building Materials' (FBM) year-to-date performance and the number of new SKUs it would add to Lowe's. He also asked about the potential impact of FBM's order management and trade credit solutions on the core Lowe's Pro customer experience.

Answer

President, CEO & Chairman Marvin Ellison stated that specific FBM performance details would be shared post-acquisition but expressed excitement about its historical growth. EVP & CFO Brandon Sink added that there are meaningful cross-selling opportunities, with FBM's core categories complementing Lowe's offerings like tools and fasteners. Ellison highlighted that FBM's advanced capabilities, such as its AI-driven blueprint takeoff technology and MyFBM mobile app, can be immediately beneficial to Lowe's ProDesks and help expand Lowe's presence in key geographies like California and the Northeast.

Steven Forbes asked about Lowe's high-level strategy for its DIY business for the upcoming year, given recent trends, and requested a quantification of the hurricane-related impact on comparable sales and gross margin in Q3.

Answer

Chairman and CEO Marvin Ellison explained that the strategy is to grow Pro and online sales while stabilizing the DIY business, leveraging the new loyalty program to gain more control over this segment. EVP and CFO Brandon Sink quantified the hurricane impact as a 100-basis-point lift to Q3 comps, noting it created gross margin pressure due to product mix, higher transportation costs, and inventory losses.

Steven Forbes asked for context on the relevance of spring transactions in Q1 versus Q2 and requested an update on the progress of Lowe's localization and space productivity initiatives, such as workwear and pet.

Answer

CFO Brandon Sink noted that while Q1 transactions were down due to weather and DIY pressure, average ticket grew 2.1%, and he expects transactions to recover in Q2. CEO Marvin Ellison framed localization as part of a broader space productivity strategy. EVP, Merchandising, Bill Boltz provided updates, stating the rural initiative will be complete by early Q3, workwear will be in over 1,000 stores by year-end, and the pet initiative is also progressing well.

Steven Forbes asked for context on the significance of spring-related transactions in the first and second quarters and requested an update on the progress of Lowe's store localization strategy.

Answer

EVP and CFO Brandon Sink explained that while average ticket was up, comparable transactions were down due to fewer seasonal purchases and ongoing DIY pressure, but he expects transactions to recover in Q2. Chairman and CEO Marvin Ellison and EVP, Merchandising Bill Boltz framed localization as part of a broader space productivity initiative. They reported that the rural store rollout will be completed by early Q3, over 1,000 stores will feature the new workwear sections by year-end, and the pet initiative is also progressing well.

Steven Forbes of Guggenheim Securities asked whether recent underperformance was due to field-level execution or the price-value proposition, and how the company would fund necessary price investments.

Answer

CEO Jason McDonell expressed confidence in store-level execution, citing strong in-stock levels and conversion rates, and identified the primary issue as the overall value proposition and traffic generation. Interim CFO & Treasurer Tony Iskander added that funding for price investments would come from cost savings achieved through the asset utilization and cost optimization pillars.

Steven Forbes of Guggenheim asked for more detail on the cost optimization pillar, particularly the long-term vision for the expense ratio, and requested an update on the e-commerce versus brick-and-mortar channel mix.

Answer

Interim CFO Tony Iskander noted that while he is still new, the company has identified $5 million to $10 million in annualized savings, primarily from indirect procurement, with a methodical review of other areas ongoing. CEO Jason McDonell added that optimization efforts span the entire asset base, including the new LFC network. Regarding channel mix, McDonell framed the strategy as 'omnichannel,' leveraging all assets as a dynamic network to serve customers, rather than focusing on distinct channel performance.

Speaking on behalf of Steven Forbes, Rene Marin asked for an explanation of the $5 million contractual gross margin headwind and inquired about a breakdown of the implied gross margin pressures for Q1 2025.

Answer

CFO Scott Bowman explained the $5 million headwind was a one-time issue from a renegotiated supplier contract where assumed warranty costs escalated unexpectedly; the contract has since been revised to eliminate this risk. For Q1 2025, he guided to margin pressure from the loss of a fixed rebate (~75 bps), higher DC and inventory adjustment costs, and significant occupancy deleverage (~100 bps).

Steven Forbes of Guggenheim Securities asked about the company's reach across customer income demographics and its strategy for attracting higher-income consumers, including the role of the design studio format. He also sought clarity on the profitability and growth plans for the commercial business, Spartan.

Answer

CEO Tom Taylor explained that the stores appeal to a wide range of income levels, with a continued push into 'better and best' products that attract higher-end customers. He noted the company is revisiting its studio strategy for an update later in the year. Regarding the commercial business, he confirmed that Spartan's profitability pressure is due to investments in sales reps to drive growth and that the company is actively exploring ways to expand its commercial footprint.

Steven Forbes of Guggenheim Securities asked about the company's long-term philosophical approach to deploying growth capital beyond 2025, particularly the balance between growth and profitability. He also inquired if new store productivity cohorts are still maturing in line with historical models.

Answer

CEO Tom Taylor stated it's too early to commit to a 2026 plan but emphasized a thoughtful approach to managing growth, profit, and the balance sheet. He indicated that a return to higher store opening rates would depend on a clearer line of sight to economic improvement. CFO Bryan Langley confirmed that the new store comp waterfall, while compressed, remains intact, with newer stores still showing year-over-year growth consistent with the maturation curve.

Steven Forbes of Guggenheim Securities requested an update on the current sales and EBITDA margin profile for a mature store versus historical levels. He also asked for more detail on the comp spread between new store cohorts to better understand the maturation 'waterfall' benefit.

Answer

CFO Bryan Langley provided current metrics for mature stores (5+ years old), stating they generate over $22 million in sales with EBITDA margins in the low 20s, confirming their high profitability even with lower volumes. However, he declined to provide specific granularity on the comp waterfall between different new store vintages, describing it only as a 'material meaningful difference.'

Steven Forbes of Guggenheim Securities asked for insights into the return on invested capital (ROIC) for new stores amid a challenging macro environment. He also requested guidance on modeling the impact of store growth on selling and store operating expenses for the upcoming year.

Answer

CEO Tom Taylor explained that the company has reduced new store capital and operating costs by rightsizing stores and focusing 2025 openings on established markets. This is intended to improve returns. CFO Bryan Langley noted that while these efforts help mitigate pressure on ROIC, new stores are currently opening below the historical pro forma targets. He deferred specific 2025 expense guidance to the next call, acknowledging that late 2024 openings will create a drag.

Steven Forbes of Guggenheim Securities inquired about the progress of SKU rationalization efforts at Bed Bath & Beyond and the strategy behind targeting a more affluent customer for the Overstock banner. He also asked for an update on Overstock's run rate and contribution margin.

Answer

COO Alexander Thomas confirmed that while the heavy lifting of SKU rationalization is complete, it remains an ongoing process of fine-tuning. Executive Chairman & Principal Executive Officer Marcus Lemonis explained the Overstock strategy is based on extensive research into its historical, affluent customer base, aiming to leverage luxury items to attract and retarget consumers for higher-end furniture. Lemonis noted Overstock's contribution margin is stronger due to lower marketing costs but did not disclose specific revenue breakouts at this time.

Steven Forbes asked for an update on SKU rationalization efforts at Bed Bath & Beyond and the strategy behind targeting a more affluent customer for the Overstock banner, including any key engagement metrics. He also followed up on Overstock's run rate and contribution margin.

Answer

COO Alexander Thomas stated that while the heavy lifting of SKU rationalization is complete, it remains an ongoing process of fine-tuning. Executive Chairman Marcus Lemonis explained the Overstock strategy is based on extensive research into its pre-COVID success, which identified a core affluent customer (household income over $150k) seeking luxury brands at value prices. He noted that while Overstock's contribution margin is stronger due to lower marketing costs, specific run-rate figures would not be broken out until 2026.

Steven Forbes inquired about the contribution margin mix across the company's brands and whether the assortment has been rationalized to the point where all transactions are expected to be contribution margin positive.

Answer

President and CFO Adrianne Lee noted that the vast majority of transactions are on Bed Bath & Beyond, which has been the focus of SKU rationalization. COO Alex Thomas added a focus on competitive offerings. Executive Chairman Marcus Lemonis clarified that while the company's mantra is not to consciously sell items at a loss, some 'bait' items in a larger, profitable basket may be used to attract customers. He also confirmed the contribution margin spread between brands has tightened.

Steven Forbes of Guggenheim Securities asked for more detail on expense pressures from medical and casualty insurance and inquired about the initial store count and ramp-up plan for the new Virginia DC.

Answer

CFO Jeremy Fletcher acknowledged a heightened period of inflation for insurance costs but expects them to normalize over time, adding that field teams are focused on servicing growth, not managing new friction. President Brent Kirby explained the Virginia DC is a large, 350-store capacity facility that will start by servicing about a third of that total by year-end, with the remainder fueling future growth.

Steven Forbes from Guggenheim Securities asked for more details on the expense pressures from medical and casualty insurance and whether field teams are reporting increased operational friction. He also requested a rule of thumb for the new Virginia DC's store ramp-up cadence.

Answer

EVP & CFO Jeremy Fletcher acknowledged a heightened period of pressure on insurance costs but expects normalization over time, adding that field feedback is more focused on capturing specific market opportunities than on broad friction. President Brent Kirby explained the new Stafford, VA DC is a large regional facility with a 350-store capacity. It will absorb stores from other DCs and have about one-third of its capacity utilized by year-end, leaving significant room for new growth.

Steven Forbes of Guggenheim Securities asked about the go-forward industry implications of the self-insurance reserve adjustment and requested details on the capital cost and margin differences between owned and leased stores.

Answer

CFO Jeremy Fletcher explained that while the pressure from rising claims resolution costs is not unique to O'Reilly, it is a manageable operating expense. He noted the pressure stems from higher resolution costs, not higher accident frequency. On real estate, Fletcher provided cost estimates of $3-4 million for an owned store versus $400k-600k for a leased store. While not providing specific margin details, he stated that strong new store performance makes owned stores an increasingly attractive investment.

Steven Forbes of Guggenheim Securities inquired about RH's demand forecasting for its upcoming European galleries in Paris, London, and Madrid, given the strong performance of RH England. He also requested a breakdown of the $500 million in real estate assets mentioned in the shareholder letter.

Answer

Chairman & CEO Gary Friedman expressed high confidence in the European market, stating that resolving key execution issues like inventory and fabric availability could potentially double the business. He detailed the $500 million in real estate as comprising several galleries available for sale-leasebacks, a significant joint venture portfolio in Aspen, and other owned properties, providing strategic flexibility for monetization.

Steven Forbes of Guggenheim asked for an expansion on the comment 'inventory is your friend' in the context of new tariff risks and requested an outlook on free cash flow for 2025.

Answer

Gary Friedman, executive, explained that excess inventory was a strategic buffer for their product transformation and now provides a competitive advantage against tariff-related cost increases. He expressed confidence in strong 2025 free cash flow, supported by this well-priced inventory and the ability to delay certain investments, stating the company is well-positioned to navigate the uncertainty.

Steven Forbes inquired about the expected pro forma payback periods and ROI for the new galleries and how discussions with landlords have evolved.

Answer

Chairman and CEO Gary Friedman stated that payback periods are still expected to be 1-3 years, though building costs are now 70-100% higher than pre-COVID. He cited the new Newport Beach gallery as an example that will likely achieve a cash payback in 1 to 1.5 years, partly due to a significant $25 million investment from the developer partner. He noted that iconic international galleries might take 3-4 years but have exponentially higher potential.

Steven Forbes requested insight into how the new collections are mixing into the 'top, middle, and bottom' tiers of the assortment and what this implies for the potential aggregate demand lift.

Answer

CEO Gary Friedman explained that the current demand inflection is evidence that new collections are successfully redefining the top third of the assortment, which in turn pulls up the productivity of the middle and bottom tiers. He emphasized that the key to moving the business is successfully launching products that land in this top third, setting a new, higher standard for the entire assortment.

Steven Forbes asked about the new servicing model being tested in 10% of stores, inquiring about the specific actions being taken and any visible lift in core KPIs. He also sought to understand the key strategic message behind the statement that 75% of stores are now in markets with #1 or #2 store density.

Answer

CEO Shane O’Kelly explained the store operating model test involves smarter asset allocation, such as moving delivery vehicles from underutilized stores to those with higher demand and matching them with appropriate driver hours. He noted that while results are encouraging, it is too early to share crystallized insights. Regarding store density, O'Kelly stated that being #1 or #2 gives the company a 'right to participate and win' in those core markets through proximity to both Pro and DIY customers, logistical efficiency, and a strong legacy presence, which is a more favorable position than competing in thinner, more expensive markets.

Steven Forbes sought more detail on the 'time to serve' metric, asking about its variability across different markets and whether there is a clear correlation between achieving the target time and stronger comparable sales performance.

Answer

CEO Shane O'Kelly confirmed that 'time to serve' is a critical KPI for the Pro business and that there is significant variability across the network. He stated there is a direct correlation between lower service times and higher sales, and the company's goal is to replicate the success of its fastest-serving locations across the entire system to drive more business from professional customers.

Steven Forbes asked for a framework on the potential growth and margin contribution from the Best Buy Marketplace and Best Buy Ads initiatives over the next few years. He also followed up on the status of other profit streams like corporate device lifecycle management and Partner Plus.

Answer

CFO Matthew Bilunas indicated both Marketplace and Ads are future profit opportunities. Marketplace is expected to be accretive to EBIT dollars and rate this year, with more impact next year. Ads will be more profit-neutral this year due to investments but should contribute more significantly in the future. CEO Corie Barry framed the initiatives in 'horizons,' with Partner Plus moving toward near-term returns (Horizon 1) and device lifecycle management being a longer-term play (Horizon 3). The current primary focus is on Marketplace and Ads for their high near-term potential.

Steven Forbes asked about the sustainability of profit improvements in the services category, warranty revenue trends, and the profitability of the new Best Buy Express stores.

Answer

CFO Matt Bilunas explained that the significant gross profit expansion from services and membership will moderate next year as the company fully laps program changes. However, he noted that the stand-alone warranty business is performing well with rising attach rates, which could continue to be a positive driver. Regarding Best Buy Express, he stated the venture is expected to be profit-neutral in the current fiscal year due to ramp-up costs but should become profitable next year.

Steven Forbes from Guggenheim Securities, LLC inquired about the potential for wallet cannibalization within consumer electronics as innovation accelerates and whether the category can regain share of total consumer spending. He also asked for the relative size of the tablets and computing categories.

Answer

CEO Corie Barry expressed confidence that the combination of widespread innovation and the onset of a natural replacement cycle will enable the consumer electronics industry to rebound and regain wallet share, overcoming current pressures like a stagnant housing market. While declining to provide specific percentages, management confirmed that notebooks/computing is a considerably larger category than tablets, and that the two combined represent the majority of the 'Computing and Mobile Phones' segment.

Steven Forbes asked about the factors driving the decline in the habitual buyer base and what these repeat buyers want from Etsy's loyalty program as it develops.

Answer

CEO Josh Silverman explained that the habitual buyer count can fluctuate with life events like weddings and that the company aims to convert more users into habituals by creating more browsable, discovery-oriented experiences. Regarding the loyalty program, he noted that early results from the 'Etsy Insider' beta are encouraging, with members valuing free shipping and showing higher engagement. The focus for 2025 is on iterating the program to ensure the unit economics are scalable and successful.

Steven Forbes inquired about the performance of recent showroom cohorts (2022-2024) relative to internal models and the impact on 2025 real estate plans. He also sought clarification on whether the projected $15-$20 million in 2025 strategic investments is incremental to the 2024 spend.

Answer

CEO John Reed stated that new showrooms have performed solidly, with some being 'super home runs,' and confirmed Arhaus is sticking to its real estate growth and renovation plans. CFO Dawn Phillipson clarified that the $15-$20 million strategic spend for 2025 is the total expected amount, not an addition to the $10 million spent in 2024.

Steven Forbes asked how the new House of Sport and Fieldhouse formats are trending against their initial sales and profitability targets. He also inquired about the expected mix of ticket versus transaction growth in the second-half comp guidance.

Answer

CFO Navdeep Gupta confirmed that the new store formats are performing 'right in line' with pro forma expectations and are meeting their financial return hurdles, which supports continued investment in the strategy. He declined to provide a detailed breakdown of the H2 comp drivers, stating that the overall guidance range reflects a balance of confidence and caution regarding the macroeconomic environment.