Apogee Enterprises (NasdaqGS:APOG) Q2 2026 Earnings Call October 10, 2025 09:00 AM ET Company ParticipantsMatt Osberg - CFOTy Silberhorn - President and CEOJeremy Steffan - VP of Investor Relations and CommunicationsConference Call ParticipantsGowshi Sri - AnalystJulio Romero - Equity Research AnalystBrent Thielman - Senior Research AnalystOperatorToday, and thank you for standing by. Welcome to Apogee Enterprises' second quarter earnings conference call. At this time, all participants are in a listen-only ...

Financial Data and Key Metrics Changes - Net sales increased by 4.6% to $358.2 million, driven by $24.9 million of inorganic sales from the acquisition of UW Solutions [8][10] - Adjusted EBITDA margin decreased to 12.4%, primarily due to lower price and volume, unfavorable mix, and higher material, tariff, and health insurance costs [8][10] - Adjusted diluted EPS declined to $0.98, mainly driven by lower adjusted EBITDA and higher interest expense [8][10] Business Line Data and Key Metrics Changes - Performance Services net sales increased by 18.6% organically, primarily from improved retail channel distribution [9] - Metals segment net sales declined slightly, reflecting a less favorable mix, despite higher volume and price [9] - Glass segment net sales declined, with adjusted EBITDA margin moderating due to reduced volume and price from lower end-market demand [9][10] Market Data and Key Metrics Changes - The competitive environment for glass has not improved, leading to lower expectations for glass volume and price [4][10] - Aluminum costs increased by approximately 20% during the second quarter, impacting pricing and volume in the Metals segment [14][36] Company Strategy and Development Direction - The company is focused on driving year-over-year net sales and adjusted EPS growth, primarily through Performance Services [5][16] - Strategic actions include tariff mitigation efforts and Project Fortify II to enhance organizational agility [7][16] - The company is actively pursuing M&A opportunities that align with strategic and financial objectives [7][16] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment over lowered expectations but remains optimistic about year-over-year growth in the second half of the fiscal year [5][15] - The company anticipates challenges in glass and metals due to competitive pricing pressures and rising aluminum costs [14][36] - Despite macroeconomic challenges, management is confident in the company's strong cash flow and balance sheet for future success [15][16] Other Important Information - The updated outlook for fiscal 2026 includes net sales in the range of $1.39 billion to $1.42 billion and adjusted diluted EPS in the range of $3.60 to $3.90 [10][11] - The One Big Beautiful Bill Act is expected to provide a cash tax benefit primarily impacting fiscal 2026 [11] Q&A Session Summary Question: Can you expand on the organic growth in Performance Services? - Management noted strong growth in UW Solutions, particularly due to regained distribution and cross-selling opportunities [21][23] Question: What is driving the increase in services backlog? - The backlog growth was attributed to projects in the Northeast and efforts to expand into new markets [25][26] Question: What are the expectations for the glass segment's margins? - Management expects mid-teens EBITDA margins for the glass segment despite competitive pressures [32][33] Question: How is the metals segment impacted by cost pressures? - The increase in aluminum costs is the main driver of pressure in the metals segment, affecting pricing and volume [36][39] Question: What is the outlook for Performance Services' flooring mix? - The flooring segment is expected to grow and now represents over half of the UW portfolio [41]

Summary of Stanley Black & Decker FY Conference Call Company Overview - **Company**: Stanley Black & Decker (NYSE: SWK) - **Date of Conference**: September 11, 2025 Key Points Leadership Changes - Chris Nelson will transition from COO to CEO in October, while Don Allan will become Executive Chair [2] - The company emphasizes a strong organic growth strategy and transformation focus [2][3] Brand Strategy - The company is prioritizing investments in three key brands: DEWALT®, STANLEY®, and CRAFTSMAN®, which collectively account for over 75% of revenue [4][5][11] - This strategy aims to enhance brand resonance with end users and improve productivity and safety [4][5] Brand Performance - DEWALT® has shown strong growth, while STANLEY® and CRAFTSMAN® are expected to improve with focused investments [6][8] - CRAFTSMAN® is being retooled to better target DIY consumers [7][8] Innovation and Workforce - The company is focusing on product innovation in carpentry, concrete, plumbing, and electrical categories [9][10] - Over 400 customer-facing employees have been added to support sales and field service [9][10] Market Dynamics - The company aims to outgrow the market by 2% to 3% above real GDP growth, targeting a growth rate of 4% to 6% [14][15] - The competitive landscape includes several players, with the company and TTI brands each holding about 12% market share [15][16] Financial Performance - Gross margins are recovering, with a target of reaching 35% in the future, although tariffs have delayed this by about 12 months [18][20] - The company anticipates achieving around 31% gross margin for the full year 2025, with plans for further improvements through price increases and tariff mitigation [20][21] Tariff Impact - Tariffs have introduced approximately $800 million in annualized costs, which the company plans to mitigate through pricing strategies and supply chain adjustments [20][21][32] - The company is working to optimize its supply chain to reduce reliance on China and enhance USMCA compliance [30][36] Market Conditions - The pro market remains resilient, while the consumer market is under pressure, with fluctuations in point-of-sale (POS) performance [22][23] - The company expects that certainty in tariffs and interest rates could positively impact market conditions [23][24] Future Outlook - The company is preparing for a potentially volatile macroeconomic environment in 2026, focusing on maintaining gross margins and cash flow [38][39] - Plans for divestiture of certain assets, particularly in the fastener business, are ongoing, with expectations to monetize these assets in late 2025 or early 2026 [40][41] Strategic Considerations - The company is committed to maximizing shareholder value and is evaluating its portfolio composition to ensure alignment with growth strategies [41][42] Additional Insights - The company is focused on maintaining pricing discipline while competing on innovation and product support [15][29] - There is a recognition of the need for multi-nodal manufacturing capabilities to adapt to changing global trade dynamics [36][37]

Financial Data and Key Metrics Changes - Net sales for the first quarter were $50.7 million, down from $56.5 million in the prior year, primarily due to market softness and tariff-related shipment pauses [21] - Gross profit increased to $7.2 million or 14.3% of sales, compared to $5.1 million or 9% of sales in the prior year, reflecting a 530 basis point improvement driven by restructuring initiatives [21] - Operating income was $1.6 million, a significant recovery from a loss of $6.9 million in the prior year [21] - Net loss for the quarter was $231,000 or $0.02 per diluted share, compared to a net loss of $7.3 million or $0.58 per diluted share in the prior year [22] Business Line Data and Key Metrics Changes - Bedding segment sales were $28 million, flat compared to the previous year, with gross profit improving to $2.9 million or 10.5% of sales from a negative $326,000 or negative 1.2% [24] - Upholstery segment sales were $22.6 million, down approximately 20% from $28.5 million in the prior year, with gross profit at $4.3 million or 18.9% of sales, down from $5.5 million or 19.4% [25][26] Market Data and Key Metrics Changes - The home furnishings industry continues to experience depressed demand, with challenges from consumer spending and housing market trends impacting both business segments [10][11] - Despite the downturn, there are indications of pent-up demand in the mattress market, with analysts suggesting that demand may be close to bottoming out [8][9] Company Strategy and Development Direction - The company is focused on restructuring and integration initiatives to improve operational efficiency and profitability, with expectations for sequential sales growth throughout fiscal 2026 [31][32] - Project Blaze aims to unify the two former divisions into a single Culp-branded business, enhancing operational capabilities and cost efficiencies [16][18] - The company is strategically positioned to leverage its global supply chain and manufacturing flexibility to navigate tariff challenges and capitalize on market recovery [19][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the ongoing challenges from tariffs and a low demand environment but remains optimistic about gaining market share and improving profitability [31][32] - The company expects adjusted EBITDA results to range from near breakeven to slightly positive for the second quarter, with continued improvements anticipated throughout the fiscal year [31] - Management emphasizes the importance of not waiting for market recovery but instead making proactive adjustments to enhance profitability [42] Other Important Information - The company reported $11.1 million in total cash and $18.1 million in outstanding debt, maintaining a net debt position of $7.1 million [26] - Capital expenditures were reduced to $179,000 for the quarter, reflecting a strategic focus on managing capital and operational efficiency [29] Q&A Session Summary Question: Are all known tariff impacts accounted for in your initiatives? - Management indicated that they have adjusted pricing and operational strategies to mitigate tariff impacts, and they feel confident in their current position regarding tariffs [35][36] Question: What is the elasticity of pricing in the current market? - Management acknowledged the competitive nature of the industry but emphasized the need to pass on costs to maintain profitability, while being fair and aggressive in pricing strategies [37] Question: How does the current market downturn compare to past cycles? - Management noted that while down cycles are common, the current downturn has been prolonged since 2020, but they remain confident in a future recovery [40][42] Question: Will the company be able to meet increased demand with the existing cost structure? - Management assured that they have not limited capacity and can grow as needed, indicating significant cost leverage available when demand increases [43][44] Question: What is the estimated market value of real estate and the future use of NOLs? - The net book value of real estate is approximately $12 million, with an estimated market value of $40 to $45 million, and NOLs will provide future tax benefits once profitability is achieved [45][46]

Financial Data and Key Metrics Changes - Net sales for Q2 were approximately $1.6 billion, up 3.3% year-over-year, with a comparable sales increase of 0.2% [24][26] - Gross margin was 36%, down 2 basis points from the previous year, while merchandise margin improved by 40 basis points [26][28] - Operating income was $172 million, and diluted earnings per share were $1.85, with adjusted earnings per share at $1.94 [27][28] - Inventory per store increased, with units per store up 4.6% and dollars per store up 8.2% [28] Business Line Data and Key Metrics Changes - The e-commerce channel saw a positive comparable sales increase of approximately 18% during Q2, building on a 10% increase in Q1 [24][10] - Performance across major business categories was consistent, with footwear, apparel, sports and recreation, and outdoor all showing low single-digit increases [10][11] - Seasonal categories like swim and summer footwear experienced a slow start but rebounded in late June and July [11] Market Data and Key Metrics Changes - Strong double-digit growth in foot traffic was observed among customers in the top two income quintiles (households making over $100,000) [12][13] - Traffic share remained flat among middle-income consumers (households making $50,000 to $100,000), while there was erosion in lower-income cohorts (households making less than $50,000) [12][13] - Market share data indicated meaningful gains across key businesses such as apparel, footwear, and sporting goods [13] Company Strategy and Development Direction - The primary growth strategy involves opening new stores, with three new locations opened in Q2, bringing the total to 306 stores across 21 states [15] - The company aims to grow its e-commerce business by improving site navigation, order fulfillment, and expanding product assortment [16][18] - Initiatives to enhance store productivity include adding desirable brands and implementing new technology like RFID scanners [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of inflation on consumer behavior, noting a trade-down effect among lower-income consumers [12][13] - The company remains optimistic about future performance, citing positive momentum and the effectiveness of strategic initiatives [30][31] - Management is closely monitoring tariff impacts and has implemented strategies to mitigate these effects [23][46] Other Important Information - The company has maintained strong liquidity with $300 million in cash and an undrawn $1 billion revolver [28] - Capital allocation remains disciplined, with investments in inventory, dividends, and strategic initiatives totaling approximately $148.7 million in Q2 [29] Q&A Session Summary Question: Insights on consumer behavior post back-to-school period - Management noted episodic shopping patterns and expressed optimism about momentum continuing into the remainder of the quarter [34][35] Question: Impact of tariff pricing on average ticket - Average unit retails (AURs) were up low to mid-single digits, with expectations for further price adjustments in the back half of the year [36][37] Question: Guidance on SG&A and operating leverage - Management indicated expectations for continued moderation of SG&A deleverage, with a focus on maintaining investment in growth initiatives [41][42] Question: Promotional environment and merchandise margin - The promotional environment remains competitive, with higher take rates observed during promotional events [84] Question: Performance of higher-income consumers - The top two income quintiles showed double-digit growth in traffic, offsetting declines in lower-income segments [86][87] Question: Expansion of Nike and Jordan assortments - The company has significantly expanded its Jordan brand assortment and is seeing strong performance from both Nike and Jordan products [92][100]

Financial Data and Key Metrics Changes - The company reported record net sales of $1,210,000,000 for Q2 2025, representing a 7% increase compared to the previous year, exceeding expectations [7][19] - Operating margin was 13.9% of sales, above the outlook range provided in May, with operating income of $168,000,000 compared to $176,000,000 last year [22][23] - Adjusted net income per diluted share was $2.32, above the outlook, compared to $2.50 last year [24] Business Line Data and Key Metrics Changes - Hollister brands achieved a 19% increase in net sales for Q2, with comparable sales also up 19%, driven by strong cross-channel traffic [9][21] - Abercrombie brands saw a 5% decline in net sales, with comparable sales down 11%, primarily due to lower average unit retail (AUR) as inventory was cleared [11][21] Market Data and Key Metrics Changes - The Americas region reported an 8% increase in net sales, marking its twelfth consecutive quarter of growth [8][20] - APAC region grew by 12%, while EMEA experienced a 1% decline in net sales, impacted by softness in Germany and other European markets [8][20] Company Strategy and Development Direction - The company plans to increase full-year net sales growth expectations based on strong year-to-date results and brand positioning [16][27] - The company is focusing on maintaining strong brand health and engaging customers through partnerships, such as the collaboration with the NFL [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to growth by the end of the year, citing strong traffic and successful product launches [36][100] - The company is navigating a new tariff landscape from a position of strength, with plans to mitigate costs through various strategies [17][72] Other Important Information - The company repurchased $50,000,000 worth of shares in Q2, totaling $250,000,000 in repurchases for the year [7][25] - Inventory levels were reported to be in a clean position, with inventory at cost up 10% and units up 7% [23][51] Q&A Session Summary Question: What are the markers for acceleration for the Abercrombie brand? - Management highlighted strong traffic, exciting partnerships, and successful store openings as key indicators of future growth [34][36] Question: Can you clarify the credit card settlement inclusion/exclusion? - The $39,000,000 net benefit from the credit card settlement was included in the operating margin guidance, offset by increased tariffs [37][38] Question: How is the Abercrombie Kids launch going? - The launch has received positive feedback, and the company is excited about expanding its operating model [40][42] Question: What is driving the momentum in Hollister? - Management noted that everything is working well for Hollister, with strong consumer engagement and successful product launches [47][49] Question: What is the state of carryover inventory? - The company reported significant progress in managing carryover inventory, with a clean and current position heading into the back half of the year [50][51] Question: What gives confidence for Abercrombie's future performance? - Management cited strong traffic, successful campaigns, and a solid start to Q3 as reasons for confidence in returning to growth [100][102] Question: Can you elaborate on the tariff impact? - The company is facing a $90,000,000 cost impact from tariffs, with ongoing efforts to mitigate these costs through various strategies [26][72] Question: How is the EMEA business performing? - The UK market is performing well, while Germany has faced challenges; however, management remains optimistic about future growth in the region [75][76]

Financial Data and Key Metrics Changes - The company reported record net sales of $1,210,000,000 for Q2 2025, representing a 7% increase compared to the previous year, exceeding expectations [7][19] - Operating margin was 13.9% of sales, above the outlook range provided in May, with operating income of $168,000,000 compared to $176,000,000 last year [22][23] - Adjusted net income per diluted share was $2.32, above the outlook, compared to $2.50 last year [24] Business Line Data and Key Metrics Changes - Hollister brands achieved a 19% increase in net sales for Q2, with comparable sales also up 19%, driven by strong cross-channel traffic [9][21] - Abercrombie brands saw a 5% decline in net sales, with comparable sales down 11%, primarily due to lower average unit retail (AUR) as inventory was cleared [11][21] Market Data and Key Metrics Changes - The Americas region reported an 8% increase in net sales, marking its twelfth consecutive quarter of growth [8][20] - APAC region grew by 12%, while EMEA experienced a 1% decline in net sales, impacted by softness in Germany and other European markets [8][20] Company Strategy and Development Direction - The company is focused on leveraging its strong foundation to balance current market conditions while investing for long-term global potential [6] - Plans include opening 60 new stores and remodeling 40 existing locations, with a net increase of around 40 stores expected by year-end [29][92] - The company aims to enhance brand positioning through partnerships, such as the recent collaboration with the NFL [14][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in returning to net sales growth by the end of the year, supported by strong brand health and clean inventory [16][36] - The company anticipates a $90,000,000 impact from tariffs for 2025, with strategies in place to mitigate costs through various operational adjustments [26][112] - Management highlighted the importance of maintaining customer value without broad-based price increases, focusing on brand experience [70][112] Other Important Information - The company repurchased $50,000,000 worth of shares in Q2, totaling $250,000,000 in repurchases for the year [7][25] - Inventory levels were reported as clean, with inventory at cost up 10% and units up 7% [23][50] Q&A Session Summary Question: What markers give confidence for Abercrombie's acceleration? - Management highlighted strong traffic, new partnerships, and successful store openings as key indicators of confidence for future growth [34][36] Question: How is the Abercrombie Kids launch going? - The launch has received positive feedback, and management is excited about expanding the operating model [40][42] Question: What contributed to Hollister's 19% growth? - Management noted that strong consumer engagement and successful product launches contributed to Hollister's performance [47][49] Question: What is the state of carryover inventory? - Management reported significant progress in managing carryover inventory, with a clean position heading into the back half of the year [50][51] Question: What is the outlook for gross margin in Q3? - Management expects some margin pressure due to tariffs and marketing investments, but remains focused on maintaining AUR [59][61] Question: How is the company addressing tariff impacts? - The company is employing a strategic approach to mitigate tariff impacts, including vendor negotiations and operational efficiencies [70][112] Question: What is the outlook for the EMEA region? - Management remains optimistic about the UK market while acknowledging challenges in Germany, with plans to replicate successful strategies [72][73]

Financial Data and Key Metrics Changes - For Q2 2025, net sales from continuing operations were $2 billion, an 8% decline compared to the previous year, primarily due to store optimization activities completed in Q1 [28] - Comparable sales growth was positive at 0.1% for the quarter, with an estimated 25 basis points headwind from the timing of Easter [28] - Adjusted gross profit was $880 million, representing 43.8% of net sales, resulting in gross margin expansion of about 16 basis points compared to last year [31] - Adjusted diluted earnings per share from continuing operations was $0.69, compared to $0.62 in Q2 last year [33] Business Line Data and Key Metrics Changes - The Pro business achieved low single-digit growth sequentially, translating to mid single-digit growth on a two-year basis, driven by core hard parts categories [23] - DIY business performance was stable compared to Q1, with signs of stabilization, although it underperformed with a low single-digit sales decline [25][30] - The company added over 60,000 new SKUs year to date, a nearly 300% increase compared to last year, improving parts availability [13] Market Data and Key Metrics Changes - The company noted that more than 90% of its business is non-discretionary, driven by maintenance work for an aging vehicle fleet in the U.S. [5] - The market is in a transition phase, with consumers adapting to higher prices, and the company is closely monitoring consumer behavior [6][37] Company Strategy and Development Direction - The turnaround plan is built around three strategic pillars, focusing on merchandising excellence, supply chain optimization, and operational efficiency [9] - The company is committed to enhancing parts availability and service levels, with plans to open a total of 10 market hubs this year [22] - The company aims to achieve an adjusted operating income margin of approximately 7% by fiscal 2027, with a focus on gross margin expansion and supply chain productivity [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround efforts, reaffirming full-year sales, operating margin, and free cash flow guidance [6][36] - The company anticipates that tariffs will have a more pronounced impact in the second half of the year, with a cautious approach to pricing adjustments [5][38] - Management acknowledged the challenges posed by inflation and consumer behavior, particularly in the DIY segment, and emphasized the importance of training and service execution [25][106] Other Important Information - The company completed a debt offering of $1.95 billion to support its turnaround plan and maintain financial flexibility [34] - The company expects to operate with a net adjusted debt leverage ratio of approximately 2 to 2.5 times, aiming to regain an investment-grade credit rating in the future [42] Q&A Session Summary Question: On the revised capital structure, are you expecting cost savings? - Management indicated that the new structure provides stability for the supply chain financing program and may lead to cost savings over time, but no immediate benefits were implied in guidance [46][48] Question: What percentage of the store base needs CapEx to bring it up to market standard? - Management noted that a significant portion of the store base requires upgrades, with many HVAC systems and roofs beyond their useful life [51] Question: What gives you confidence in achieving comparable sales growth in the second half of the year? - Management highlighted improving trends and easier comparisons in the back half of the year, along with ongoing initiatives in the Pro business [56][58] Question: How should we think about the linearity of progress from here? - Management acknowledged that while some initiatives are progressing well, others may take longer to yield benefits, and they are focused on maintaining a clear trajectory towards their 2027 goals [67][70] Question: What are you seeing in terms of how peers are reacting to tariff costs? - Management observed a rational industry response, with competitors also adjusting prices in line with tariff impacts [84][85]

Financial Data and Key Metrics Changes - The company reported second quarter revenues of $1,100 million, a 3% increase compared to the prior year [6][26] - Crocs brand revenues were $960 million, up 4% year-over-year, driven by a 16% growth in international markets [6][26] - Adjusted gross margins improved to 61.7%, gaining 30 basis points from the previous year [6][28] - Adjusted diluted earnings per share increased by 5% to $4.23 [6][31] - Free cash flow reached $269 million, allowing for share repurchases and debt repayment [7][32] Business Line Data and Key Metrics Changes - Crocs brand saw a 4% revenue increase, while Hey Dude revenues decreased by 4% [6][26] - The Crocs brand's wholesale revenue grew by 6%, while direct-to-consumer (DTC) sales increased by 3% [26] - Hey Dude's adjusted gross margin improved to 50.2%, up 110 basis points due to distribution efficiencies [28] Market Data and Key Metrics Changes - International revenue for Crocs grew by 16%, with China reporting over 30% growth [17][26] - North American revenues declined by 6% due to reduced discounting strategies [19][26] - The international business now represents over 50% of Crocs brand revenue [17][60] Company Strategy and Development Direction - The company is focusing on long-term brand health and profitability by reducing promotional activities and managing inventory conservatively [9][10] - Strategic actions include amplifying measures to protect brand health and profitability, particularly for the Crocs brand [9][10] - The company aims to diversify its offerings and strengthen its position in the casual footwear segment [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted cautious consumer behavior in the U.S. impacting discretionary spending [8][9] - The outlook for the second half of the year is concerning, with anticipated challenges in retail order books [9][35] - Management emphasized the importance of international growth as a key driver for future performance [45][60] Other Important Information - The company has initiated $50 million in cost savings and is exploring further opportunities [11][30] - A non-cash impairment charge of $737 million on Hey Dude's intangible assets was reported due to a longer stabilization timeline [30] - The company plans to continue share repurchases and debt repayment while maintaining a target net leverage range of 1 to 1.5 times [32][36] Q&A Session Summary Question: Outlook for Crocs North America and Q3 - Management acknowledged several factors affecting North America, including cautious consumer behavior and intentional pullbacks on discounting to protect brand health [41][43] Question: Share Loss to Competitors - Management noted a trend towards athletic brands impacting market share but believes Crocs can maintain its position through innovation and product offerings [50][52] Question: International Business Growth - Management expressed confidence in the international business, highlighting strong growth in China and India, and expects mid-teens growth trajectory [60][92] Question: Impact of Tariffs and Pricing Strategy - Management indicated that tariffs will impact margins, but they plan selective price increases and cost-saving measures to mitigate effects [65][66] Question: Inventory Management and SKU Count - Management confirmed cautious planning for inventory receipts and emphasized the importance of maintaining product freshness while managing costs [116][120]

Financial Data and Key Metrics Changes - The company reported a diluted earnings per share increase of 11.5% to $0.58 compared to $0.52 in the same period last year, reaching the high end of expectations [5] - Sales for the quarter rose by 7.1% to $1,214 million, with comparable store sales increasing by 0.4%, marking the first quarterly increase since 2022 [5][15] - Gross profit rose by 8.5% compared to the same period last year, driven by a 7.1% increase in sales and a 60 basis points improvement in the gross margin rate, which rose to 43.9% [26][29] Business Line Data and Key Metrics Changes - Connected Customer sales rose by 2% year over year, now accounting for approximately 19% of sales, with strong growth in weekly active users and conversions [18] - The design services segment delivered strong sequential and year-over-year sales growth, significantly outpacing the company average [18] - Spartan Surfaces saw sales rise approximately 7% year over year, with June marking the strongest month in the company's history [22] Market Data and Key Metrics Changes - Store sales in the West Division outperformed the company for the quarter and year to date [15] - The second quarter benefit to comparable store sales from Hurricane Helene and Milton was approximately 40 basis points compared to 100 basis points in the first quarter [15] - Existing home sales fell 2.7% in June to a seasonally adjusted annual rate of 3,930,000 units, marking the lowest level in nine months [32] Company Strategy and Development Direction - The company plans to open 20 new warehouse format stores in fiscal 2025, with a disciplined and agile growth strategy [7][8] - The company is focused on mitigating the impact of tariffs through vendor negotiations and product diversification [10][11] - The company aims to maintain pricing gaps and reinforce its everyday low price message while enhancing its product assortment [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the resilience of the U.S. consumer, supported by a solid labor market, but acknowledged challenges in discretionary spending due to elevated mortgage rates [31][32] - The company does not expect significant changes in consumer behavior or housing activity for the remainder of 2025 [33] - Management highlighted the importance of internal initiatives to drive sales and improve in-store productivity amid a challenging macro environment [66][68] Other Important Information - The company ended the quarter with $876.9 million in unrestricted liquidity, consisting of $176.9 million in cash and cash equivalents [30] - The effective tax rate increased to 21.8% from 19.8% in the same period last year, primarily due to a decrease in excess tax benefits related to stock-based compensation [29] Q&A Session Summary Question: How much of the ticket increase was tariff-induced versus trade-up to better products? - Management indicated that much of the average ticket increase came from product mix, particularly in wood, with minor price changes affecting the ticket [41][44] Question: How does the company view pricing throughout the year given inventory cycles? - Management stated that modest price increases are expected in the back half of the year, with a focus on managing tariffs through SKU adjustments and vendor negotiations [45][46] Question: What is the outlook for fiscal 2026? - Management noted it is too early to react to 2026 estimates, emphasizing the need for improvement in existing home sales and the impact of new store maturation [52][54] Question: How does the company approach creating shareholder value in a challenging environment? - Management highlighted ongoing investments in in-store experiences and commercial opportunities to drive growth, even if existing home sales remain subdued [65][66] Question: How is the company performing across different income demographics? - Management indicated that the company attracts a wide range of income levels and is revisiting its studio strategy to appeal to higher-income consumers [88][90]