Zach

Zach asked about the strategic priorities for Lowe's wholesale distribution business and an update on the integration of Foundation Building Materials (FBM) and Artisan Design Group (ADG) with the core Lowe's business. He also followed up on the expected core-on-core EBIT margin in 2026, adjusted for acquisition mix impact, and its relation to the rule of thumb.

Answer

Marvin Ellison, Chairman, President, and CEO, expressed excitement about the FBM and ADG integration, noting future tuck-in acquisitions will focus on building out an interior solutions platform for home builders. Brandon Sink, EVP and CFO, provided financial details, projecting $8 billion combined revenue for ADG and FBM in 2026 with low single-digit organic growth, accretive to adjusted EPS, and good progress on synergies. For the core-on-core EBIT margin, Brandon Sink explained that excluding the 30 basis points dilution, the range reflects top-line performance, with the high end tied to a 2% comp and the low end to a flat comp, influenced by sales-driving investments.

Zach asked about the sequential improvement in unit trends, specifically the composition of that trend (loyal families, new customers) and the contribution from digital versus in-store. He also inquired about the economic model for digital sales today and Albertsons' position on the profit curve for this segment.

Answer

CEO Susan Morris stated that unit trends improved sequentially against an industry backdrop of flat to negative units, attributing this to surgical price investments and loyalty-led value. She noted that price-sensitive customers exhibit smaller baskets and trade-down behavior, while personalized promotions and own brands support unit recovery. For digital sales, Susan Morris highlighted 21% sales growth, increasing penetration, and a structural advantage in last-mile fulfillment with fast delivery. President and CFO Sharon McCollam added that margin improvement is seen with scaling adoption and embedding AI, with an expectation to reach profitability possibly by the end of this year or next, driven by volume and fixed costs, excluding retail media.

Zach asked about the composition of the sequential improvement in unit trends, specifically whether it's driven by loyal families spending more or new customers, and the contribution from digital versus in-store. He also inquired about the current economic model for digital sales and the company's position on the profit curve for this segment.

Answer

CEO Susan Morris attributed the sequential improvement in unit trends to surgical price investments and loyalty-led value, noting that industry units were flat to negative in Q3. She explained that customers remain price-sensitive, leading to smaller baskets and trade-down behavior, and that personalized promotions and Own Brands innovation are designed to support unit recovery. Regarding digital sales, Susan Morris highlighted 21% sales growth and structural advantages in last-mile fulfillment. President and CFO Sharon McCollam added that the company continues to see margin improvement as digital adoption scales and AI is embedded, with profitability expected possibly by the end of this year or next, excluding retail media and fully allocating fixed costs.

Zach, on behalf of Simeon Gutman, asked for a comparison of traffic deceleration trends between Dollar Tree's frequent/loyal customers and more episodic customers, and if there was a noticeable gap in these trends.

Answer

CEO Mike Creedon focused on sales performance across income cohorts, noting that the core customer (earning around $60,000 annually) exhibited the highest comparable store sales. He emphasized that all customers, whether new or frequent, are finding value at Dollar Tree.

Zach, on behalf of Simeon Gutman, asked for a comparison of traffic deceleration trends between frequent/loyal customers and more episodic customers, seeking to understand if there's a significant gap in these trends.

Answer

CEO Mike Creedon focused on sales performance across income cohorts, emphasizing that the core customer (earning around $60,000 annually) showed the highest comps. He stated that both new and frequent Dollar Tree shoppers are finding their needs met, regardless of their shopping frequency.

Zach asked for a normalized EPS for the full year 2025, considering various one-time items, corporate and TSA noise, general liability, and tariff impacts.

Answer

CFO Stuart Glendinning explained the complexity, noting the unusual shape of tariffs during the year and pricing strategies designed to address them. He mentioned a ~$115 million cost for stickering/resignage, one-time inventory benefits, and the plan to maintain gross margin into next year.