Executive Summary

Q2 FY25 delivered modest top-line upside and stronger profitability: revenue $1.214B (+7.1% YoY) and diluted EPS $0.58 (+11.5% YoY), with EPS and revenue slightly ahead of S&P Global consensus; first positive comp since 4Q22 (+0.4%) driven by mix and category strength in wood and better/best tiers . Q2 EPS beat consensus $0.556* and revenue beat $1.209B*; Adjusted EBITDA $150.2M (+9.7% YoY) . Values marked with * from S&P Global.
Gross margin expanded ~60 bps to 43.9% on lower supply chain costs, offsetting SG&A deleverage from new stores; operating margin rose 50 bps to 6.8% .
FY25 guidance tightened: revenue $4.66–$4.75B (upper bound trimmed), comps -2% to flat (upper bound lowered), EPS $1.75–$2.00 (low end raised), Adj. EBITDA $520–$550M (upper bound trimmed), capex cut to $280–$320M; Q2 gross margin likely the high quarter for the year given distribution center (DC) startup headwinds (60–70 bps for FY) .
Near-term watch items: Q3-to-date comps -1% and management expects Q3 to be the peak quarter at the high end of comp guidance; tariff mitigation strategy (vendor negotiations, sourcing diversification, surgical pricing) remains central to preserving margins; Pro and Design Services momentum continues to support mix and gross margin .

What Went Well and What Went Wrong

What Went Well

Gross margin execution: Q2 gross margin 43.9% (+~60 bps YoY) on lower supply chain costs; operating margin +50 bps to 6.8% and Adjusted EBITDA +9.7% YoY to $150.2M .
Mix and category strength: wood and better/best tiers outperformed, lifting average ticket (+3.8%) despite transactions -3.3%; connected customer penetration ~19% and Pro ~50% of sales .
Management focus and tone: “diluted earnings per share increased by 11.5% to $0.58…reaching the high end of our expectations…first quarterly [comp] increase since Q4 FY22,” highlighting disciplined execution amid macro/tariff complexity .

What Went Wrong

Traffic and cadence: comparable transactions -3.3% with comps positive in April (+1.7%) and May (+0.6%) but negative in June (-0.8%); hurricane lap contributed to volatility; Q3-to-date comps down 1% .
SG&A deleverage from new stores: selling & store operating expenses +10.2% YoY and +90 bps as % of sales; ERP and growth investments pressuring G&A despite leverage vs sales .
FY25 margin headwinds: management reiterated DC-related gross margin drag of 60–70 bps; also flagged potential slight tariff pressure despite mitigation actions; Q2 likely the high GM quarter for FY25 .

Financial Results

P&L highlights (QoQ/YoY progression)

Metric	Q1 2025	Q2 2025
Revenue ($USD Millions)	$1,160.7	$1,214.2
Diluted EPS ($)	$0.45	$0.58
Gross Margin %	43.8%	43.9%
Operating Margin %	5.5%	6.8%
Adjusted EBITDA ($M)	$129.8	$150.2

Multi-quarter comps and profitability context

Metric	Q4 2024	Q1 2025	Q2 2025
Comparable Sales %	-0.8%	-1.8%	+0.4%
Diluted EPS ($)	$0.44 (incl. $0.05 settlement)	$0.45	$0.58
Gross Margin %	43.5%	43.8%	43.9%

Q2 2025 actuals vs S&P Global consensus

Metric	Actual	Consensus*	Surprise
Revenue ($USD Millions)	$1,214.2	$1,208.9*	+$5.3M / +0.4%*
Diluted EPS ($)	$0.58	$0.556*	+$0.024 / +4.3%*
EBITDA ($USD Millions)	$141.2 (GAAP EBITDA)	$146.9*	-$5.7M / -3.9%*

Values marked with * retrieved from S&P Global.

Key KPIs and operating metrics

KPI	Q2 2025
Comparable Sales %	+0.4%
Transactions (comp)	-3.3%
Average Ticket (comp)	+3.8%
Monthly Comp cadence	Apr +1.7%, May +0.6%, Jun -0.8%
Hurricane Helene/Milton Comp Lift	~40 bps (vs 100 bps in Q1’25; 110 bps in FY24 Q4)
Store Count (end of Q2)	257 warehouse stores; 5 design studios
New Stores Opened (Q2)	3 (Kissimmee FL, San Antonio TX, Chula Vista CA)
Inventory (end of Q2)	$1,211.4M
Cash & Equivalents (end of Q2)	$176.9M
Liquidity (cash + ABL availability)	~$876.9M

Non-GAAP note: Adjusted EBITDA excludes non-cash stock-based comp and other items; see reconciliation in the release .

Guidance Changes

Metric	Period	Previous Guidance (5/1/25)	Current Guidance (7/31/25)	Change
Net Sales ($B)	FY25	$4.66 – $4.80	$4.66 – $4.75	Narrowed lower; upper bound -$0.05B
Comparable Sales %	FY25	-2.0% to +1.0%	-2.0% to 0%	Upper bound lowered
Diluted EPS ($)	FY25	$1.70 – $2.00	$1.75 – $2.00	Low end raised
Adjusted EBITDA ($M)	FY25	$520 – $560	$520 – $550	Upper bound lowered
D&A ($M)	FY25	~$245	~$245	Maintained
Interest, net ($M)	FY25	~$5	~$5	Maintained
Tax Rate	FY25	~21%–22%	~21%–22%	Maintained
Diluted Shares (M)	FY25	~109	~109	Maintained
New Stores	FY25	20 (reduced from 25 on 5/1)	20	Maintained
Capex ($M)	FY25	$310 – $360	$280 – $320	Reduced

Management color: FY25 gross margin expected ~43.5%–43.7% with Q2 the high-water mark; DC startups drive 60–70 bps annual GM headwind; SG&A (store) ~31.5%–32%; G&A ~6% incl. ~$9M ERP; pre-opening ~0.6% .

Earnings Call Themes & Trends

Topic	Q4 2024 (prior 2Q)	Q1 2025 (prior 1Q)	Q2 2025 (current)	Trend
Tariffs & Mitigation	Diversified sourcing; U.S. now largest origin (27% FY24); China mix reduced to 16% in Q4	Emphasized negotiation, country shift, price actions; maintained price gaps	Tariff Steering Committee, vendor negotiation, sourcing diversification (240+ vendors/26 countries), surgical pricing; slight GM pressure possible but DC cost is bigger drag	Robust mitigation framework; manageable GM impact
Pricing & Mix	Better/best and wood strength; price gaps intact	Ticket up modest; price actions as needed	Avg ticket +3.8% from mix; modest back-half price increases expected; maintain price gaps	Mix-led ticket growth; disciplined, localized pricing
Pro & Design Services	Pro ~50% sales; design services momentum	Continued Pro outreach, 155 educational events planned	Pro ~50% of sales, outpacing company; design services driving higher tickets and margins	Ongoing strength; structural drivers intact
Housing/Macro	Expect slow grind; comps improved sequentially	Macro/geo-policy uncertainty; wide FY25 range	Consumer steady but durables challenged; existing home sales 3.93M SAAR in June; expect “bouncing along bottom”	Stable-but-soft backdrop; not assumed to worsen significantly
Supply Chain/DCs	N. Seattle DC investment underway	FY25 GM drag from 2 DCs: 60–70 bps	Confirms 60–70 bps GM drag; Q2 GM likely high for year	Temporary GM headwind; long-term capacity benefit
Commercial (Spartan)	FY24 sales +10%, EBIT -25% (mix/price); plan sector shift	Focus on healthcare/education/senior living/hospitality	Q2 sales +~7%; June record month; FY25 EBIT roughly flat; investing in sales force	Building momentum after sector mix shift
Regional Trends	West division improving	West modestly positive	West continues to outperform	Consistent relative strength

Management Commentary

CEO Tom Taylor: “Our diluted earnings per share increased by 11.5% to $0.58…Our second quarter comparable store sales increased by 0.4%, marking the first quarterly increase since the fourth quarter of fiscal 2022.”
Tariff strategy: “We continue to rely on our dedicated Tariff Steering Committee… guiding alignment on our top priorities… leveraging our experience and scale… to navigate today’s uncertainty” .
Pricing philosophy: “We will continue to adjust our retail prices both upward and downward as needed… while maintaining our pricing gaps and reinforcing our everyday low price message.” .
CFO Brian Langley: “Gross margin rate… rose to 43.9% primarily due to lower supply chain cost… Q2 adjusted EBITDA margin 12.4%, +~30 bps YoY… we estimate our second quarter gross margin rate… will represent the high quarter for the year.” .
President Brad Paulsen: “Design services… delivers significantly higher average ticket and substantially higher gross margin rates… we’re continuing to invest in our design talent.” .

Q&A Highlights

Pricing/tariffs: Ticket growth in Q2 was largely mix (wood, better/best); pricing moves were modest; back-half price increases expected but “surgical,” maintaining price gaps; competitors (independents) took more pricing earlier due to necessity .
Comps trajectory: At high end of guide, 2H comps low-single-digit positive with Q3 the peak; low end assumes sequential deceleration; Q3-to-date comps -1% .
2026 setup: Too early to react to 2026 consensus; benefits from maturing stores, tariff pricing, easier laps possible; macro remains the swing factor .
Gross margin long-term: Multiple positives (mix up-trade, design services, sourcing) vs headwinds (commercial mix, new adjacencies); no ultimate GM target but potential to trend higher after burning off DC headwinds .
Commercial (Spartan): Sector mix pivot driving momentum; June a record month; investing in sales team with FY25 EBIT likely flat vs FY24 .

Estimates Context

Q2 FY25 vs S&P Global consensus: Revenue $1,214.2M vs $1,208.9M*; EPS $0.58 vs $0.556*; EBITDA $141.2M (GAAP) vs $146.9M*. EPS and revenue slightly beat; EBITDA under consensus, noting estimate compares to EBITDA not Adjusted EBITDA . Values marked with * retrieved from S&P Global.
FY25 consensus: Revenue ~$4,684.8M*, EPS ~$1.90* vs company guidance $4.66–$4.75B and $1.75–$2.00, respectively; guidance brackets consensus on both metrics*. Values marked with * retrieved from S&P Global.
Q3 FY25 snapshot: Consensus revenue ~$1,175.6M*, EPS ~$0.454*; management indicates Q3 should be peak comp quarter at high end of guide, but also notes hurricane lap pressure in Q4* . Values marked with * retrieved from S&P Global.