Summary of Conference Call on China Sourcing Exposure Industry Overview - **Industry**: Hardline/Broadline/Food Retail in North America [1][7] - **Context**: Ongoing discussions regarding U.S. tariffs on Chinese imports and recent changes in sourcing strategies due to tariffs and export curbs on rare earth minerals from China [2][3] Key Points on China Sourcing Exposure - **Diversification Efforts**: Most companies in the coverage have made efforts to diversify their supply chains away from China, but significant exposure remains [1][3] - **Updated Estimates**: The estimates of goods sourced from China have been updated to reflect the latest changes in sourcing strategies [1][3] Company-Specific Sourcing Exposure - **FIVE**: 45% sourced from China, reduced by 10 percentage points for the latter half of the year [10] - **AZO**: 35% sourced from China, down from 55% in March 2025 [10] - **BBY**: 32% sourced from China, with tariffs affecting half of these products [10] - **W**: 30% sourced from China, indicating continued flow of goods [10] - **ORLY**: 25% sourced from China, with ongoing reductions [10] - **TGT**: 25% sourced from China, down from 60% in 2017, aiming for below 25% by next year [10] - **DLTR**: 25% sourced from China [10] - **HD**: 20% sourced from China, with diversification efforts noted [10] - **LOW**: 20% sourced from China, with 60% sourced from the U.S. [10] - **TSCO**: 18% sourced from China [10] - **DKS**: 15% sourced from China, with significant diversification noted [10] - **ASO**: 15% sourced from China, reduced from 9% to 6% by year-end [10] - **OLLI**: 10% sourced from China, down from 15% [10] - **AAP**: 10% sourced from China, with plans to reduce further [10] - **WSM**: 10% sourced from China, actively resourcing to lower tariff countries [10] - **ULTA**: 10% sourced from China, with low tariff risk [10] - **DG**: 9% sourced from China [10] - **WMT**: 8% sourced from China [10] - **GOLF**: 6% sourced from China [10] - **COST**: 6% sourced from China [10] - **FND**: 5% sourced from China, with expectations to reduce further [10] - **ARHS**: 5% sourced from China, projecting closer to 5% by year-end [10] - **MODG**: 4% sourced from China [10] - **BJ**: 2% sourced from China [10] - **RH**: 2% sourced from China, down from 16% [10] - **KR**: 1% sourced from China [10] - **ACI**: 0% sourced from China [10] Additional Insights - **Tariff Changes**: The current Reciprocal Tariff of 10% is set to increase to 34% unless suspended [2] - **Sourcing Trends**: Companies are actively seeking to lower their exposure to China due to tariff implications and geopolitical factors [1][3][10] Conclusion - The conference call highlighted the ongoing challenges and strategies of companies in the Hardline/Broadline/Food Retail sector regarding their sourcing from China amidst changing tariff landscapes and geopolitical tensions. The data indicates a significant shift towards diversification, although many companies still maintain substantial exposure to Chinese goods.

Investment Rating - Industry view is rated as "In-Line" [6] - Specific company view is rated as "Attractive" [15] Core Insights - Demand for Temu continues to decline, with household purchases at a record low and purchase expectations trailing competitors [2][4] - The removal of the de minimis exemption and high China tariff rates have significantly impacted engagement with Temu [2] - Dollar Stores are expected to benefit from Temu's market share loss, with a hypothetical 30% decline in US sales potentially representing ~$5 billion in market share being transferred to Dollar Stores and other retailers [2] - Temu's US GMV is projected to compound over the next several years, reaching approximately $39 billion by 2030, with profitability expected in 2025 [2] Summary by Sections Consumer Survey Data - Approximately 18% of respondents reported shopping on Temu in the past three months, marking a record low since the survey began in September 2023 [4][9] - Net purchase frequency expectations for Temu are at -25% in June 2025, the lowest among tracked retailers [12] - Web traffic and visitor trends for Temu have shown a significant drop, with traffic down 81% and visitors down 78% compared to March [16] App Performance - Temu app downloads and monthly active users (MAUs) have continued to decline, with downloads down 85% year-over-year and MAUs at approximately 49% of peak levels [17][20] Competitive Landscape - Shopper overlap ratios for Dollar Stores have declined, indicating that Temu's competitive threat is waning [21] - BURL and TJX have seen increases in customer overlap with Temu, while ROST has experienced a decline, suggesting a shift in market dynamics [24][27]