OneWater Marine (NasdaqGM:ONEW) Q1 2026 Earnings call January 29, 2026 08:30 AM ET Company ParticipantsAnthony Aisquith - CEOAustin Singleton - Executive ChairmanJack Ezzell - CFOJoseph Altobello - Managing DirectorConference Call ParticipantsCraig Kennison - Senior Research AnalystGerrick Johnson - Senior Research AnalystMichael Albanese - Equity Research AnalystNoah Zatzkin - VP and Equity Research AnalystOperatorGood morning. My name is Julie, and I will be your conference operator today. At this time, I ...

OneWater Marine (NasdaqGM:ONEW) Q1 2026 Earnings call January 29, 2026 08:30 AM ET Speaker8Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the OneWater Marine Inc. Fiscal First Quarter 2026 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, press Star, followed by the numbe ...

Core Thesis - Dollar General Corporation (DG) is viewed positively due to its potential for recovery following operational challenges stemming from rapid expansion during the pandemic [2][4]. Operational Challenges - The company faced significant operational issues post-pandemic, including inventory mismanagement, shortages, and markdown pressures, which were a result of its aggressive growth strategy [2]. - Management has shifted focus from new store openings to optimizing existing operations, emphasizing inventory control, margin recovery, and cost efficiency [2]. Market Sentiment and Stock Performance - In January, DG's stock was near a ten-year low, reflecting investor pessimism that overestimated the company's difficulties, which were primarily execution missteps rather than insolvency risks [3]. - The stock price has appreciated by 36.88% since previous bullish coverage, indicating a recovery in operational discipline and margin recovery [5]. Recovery Potential - With stabilizing fundamentals and compressed valuation multiples, DG presents a compelling rebound opportunity, driven by a correction in operational focus and sustainable growth [4]. - The narrative emphasizes that the recovery potential lies in operational focus and not speculative turnaround hopes [4]. Hedge Fund Interest - DG is not among the 30 most popular stocks among hedge funds, with 55 hedge fund portfolios holding DG at the end of the second quarter, unchanged from the previous quarter [6].

Financial Data and Key Metrics Changes - Net sales increased by 4.6% to $10.6 billion in Q3 compared to $10.2 billion in the same quarter last year [6] - Same-store sales rose by 2.5%, driven by increased customer traffic, while average basket size remained flat [6][7] - Gross profit as a percentage of sales was 29.9%, an increase of 107 basis points, attributed to higher inventory markups and lower shrink [14] - Operating profit increased by 31.5% to $425.9 million, with operating profit margin improving by 82 basis points to 4% [15] - EPS for the quarter rose by 43.8% to $1.28, exceeding internal expectations [15] Business Line Data and Key Metrics Changes - Positive comp sales growth was observed across all categories: consumables, seasonal, home, and apparel [7] - Non-consumable sales growth outpaced consumable sales growth, indicating a shift in consumer preferences [7] - The Value Valley offering, with over 500 SKUs at the $1 price point, achieved same-store sales growth of 7.6% [9] Market Data and Key Metrics Changes - Market share grew in both consumable and non-consumable product sales, reflecting improved execution and broader customer appeal [6] - Customer count increased, particularly among higher-income households, indicating a successful strategy to attract diverse income brackets [8] Company Strategy and Development Direction - The company is focused on enhancing its real estate footprint, with plans for 4,885 projects in 2025, including 575 new store openings in the U.S. and up to 15 in Mexico [19][24] - Digital initiatives are being expanded, including partnerships with DoorDash and Uber Eats to enhance delivery capabilities [28][29] - The company aims to strengthen its non-consumable growth strategy through brand partnerships and improved store layouts [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term financial framework and the ability to deliver sustainable growth despite potential consumer behavior uncertainties [18][20] - The low- and middle-income consumer remains pressured, but the company's value proposition is resonating well, as evidenced by traffic growth [55] - Management anticipates continued gross margin expansion, driven by improvements in shrink and operational efficiencies [39][78] Other Important Information - The company redeemed $600 million of senior notes ahead of schedule, strengthening its balance sheet [16] - A dividend of $0.59 per share was paid during the quarter, totaling approximately $130 million [17] - The company is committed to maintaining a balance between investing in growth and returning cash to shareholders [17] Q&A Session Summary Question: Insights on gross margin for Q4 and long-term improvements - Management noted a 107 basis point expansion in Q3 gross margin and expects continued improvement in Q4, despite some headwinds from LIFO [38][39] Question: Real estate growth opportunities in light of competition - Management expressed confidence in the remodel program and the potential for long-term growth, citing 11,000 opportunities for new stores in the U.S. [51][52] Question: Assessment of low to middle-income customer health - Management indicated that the low- and middle-income consumer is being mindful of spending, but the company's value offerings are resonating well [55] Question: Comp growth sustainability and promotional strategies - Management is confident in maintaining a 2.5% comp growth without needing to increase promotional activities significantly [73][74] Question: Digital initiatives and their impact on business economics - Management highlighted high incrementality rates from digital initiatives, with over 70% of digital orders delivered within an hour [64][66]

Financial Data and Key Metrics Changes - Consolidated net sales increased by 36.3% to $4.17 billion, driven by approximately $931 million from the Foot Locker acquisition and a 5.7% comp increase for the DICK'S business [26][28] - Non-GAAP EPS for the DICK'S business was $2.78, up from $2.75 in the prior year's quarter [31] - Consolidated gross profit was $1.38 billion, or 33.13% of net sales, down 264 basis points from last year, primarily due to the lower gross margin from the Foot Locker business [28][30] Business Line Data and Key Metrics Changes - DICK'S business comps increased by 5.7%, with growth in average ticket and transactions, following a 4.3% increase last year [18][27] - Foot Locker's proforma comp sales for Q3 declined by 4.7%, with a 10.2% decline internationally [8][28] Market Data and Key Metrics Changes - DICK'S business saw broad-based strength across footwear, apparel, and hard lines, contributing to the overall sales growth [27] - Foot Locker's comparable sales in North America decreased by 2.6%, while international sales decreased by 10.2%, primarily due to softness in Europe [28] Company Strategy and Development Direction - The acquisition of Foot Locker is viewed as a transformative opportunity, aiming to redefine sports retailing and expand the total addressable market [7][9] - Immediate priorities include cleaning out underperforming assets, optimizing inventory, and closing underperforming stores to position Foot Locker for future success [10][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround of Foot Locker, emphasizing the need for operational excellence and strong supplier relationships [9][55] - The back-to-school season in 2026 is anticipated to be an inflection point for Foot Locker's recovery [14][39] Other Important Information - The company plans to invest in Foot Locker to return it to profitable growth, with a focus on cleaning out unproductive inventory and optimizing store performance [10][35] - Future pre-tax charges related to the Foot Locker acquisition are expected to be between $500 million and $750 million [35] Q&A Session Summary Question: How is DICK'S business driving strong comps and confidence going into the holiday season? - Management highlighted the success of their differentiated product assortment and engaging athlete experience, contributing to a 5.7% comp increase [43][44] Question: What assumptions were made about Foot Locker's inventory cleanup in Q4? - Management indicated that Foot Locker's gross margins are expected to decline by 1,000-1,500 basis points due to aggressive inventory markdowns [48][49] Question: Can you walk through the building blocks for Foot Locker to be accretive to EPS in 2026? - Management emphasized the importance of cleaning out unproductive inventory and the confidence in the new management team to drive the turnaround [52][55] Question: How will markdowns at Foot Locker impact the market and DICK'S sales? - Management expressed confidence that markdowns on older inventory will not affect the sales of new products, which are expected to be well-received [67][68] Question: Will there be infrastructure investments needed for Foot Locker's turnaround? - Management indicated that the focus will be on inventory management and merchandising improvements rather than significant capital investments [76][80]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $594.3 million, down from $628.7 million in the prior year, reflecting a 5.5% decrease in same-store sales [18] - Gross profit decreased to $90.9 million from $121.8 million, with a gross profit margin of 15.3% [18] - Net loss for the quarter was $13.2 million, or $0.58 per diluted share, compared to a net income of $9.4 million, or $0.41 per diluted share in the previous year [20] Business Line Data and Key Metrics Changes - Agriculture segment revenue decreased by 14.1% to $384.4 million, with a pretax loss of $12.8 million compared to pretax income of $13 million in the prior year [20] - Construction segment saw a slight increase in same-store sales by 0.9% to $72.1 million, but reported a pretax loss of $4.2 million compared to a pretax income of $0.3 million last year [21] - European segment revenue increased by 44.2% to $93.9 million, with a pretax income of $4.7 million compared to $1.4 million in the prior year [21] - Australia segment same-store sales decreased by 1% to $44 million, with a pretax loss of $0.6 million compared to a loss of $0.5 million last year [22] Market Data and Key Metrics Changes - Domestic agriculture market remains subdued, with farmers in a wait-and-see mode influenced by commodity prices and government aid [11][12] - European market, particularly Romania, benefited from EU stimulus funds, leading to increased buying activity [14] - Australian market conditions are similar to the domestic agriculture segment, with lower new order activity due to dry conditions and low commodity prices [15][16] Company Strategy and Development Direction - The company is focused on optimizing inventory and managing through the current market cycle, with a target of reducing equipment inventory by $100 million [24][25] - The customer care initiative is emphasized, with parts and service expected to contribute significantly to revenue and gross profit [10] - The company anticipates a challenging back half of the year but remains committed to disciplined execution and improving inventory health [16][29] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing headwinds in the agricultural sector, with weak farmer profitability and uncertain government support impacting demand [9][10] - The construction segment shows more stability compared to agriculture, with contractors starting to fill their project backlogs [38][40] - Management expressed cautious optimism regarding the agricultural sector, citing recent government payments and favorable weather conditions as potential stabilizers [34][35] Other Important Information - The company closed on an acquisition of two stores to expand its presence in Eastern South Dakota [13] - The adjusted debt to tangible net worth ratio was 1.8, well below the bank covenant of 3.5 times [23] Q&A Session Summary Question: Is there any positive outlook on the agricultural sector? - Management indicated that some government payments have started to come through, providing stability, but overall conditions remain challenging [34] Question: How is the construction sector performing amid macro uncertainties? - Management noted that while the construction environment is cautious, there is more positivity compared to agriculture, with contractors seeing improved backlogs [38][40] Question: What programs is the USDA looking to implement for additional support? - Management explained that USDA programs are focused on natural disaster relief and specific allocations to support the agricultural industry [46][48] Question: Are inventories expected to remain flattish in Europe? - Management confirmed that inventory levels in Europe are expected to remain stable, with a focus on reducing aged inventory in North America [58][60] Question: What is the outlook for same-store sales in agriculture for Q2? - Management expects same-store sales in agriculture to be down approximately 30% year-over-year for Q2, with a challenging back half of the year anticipated [75][76]

Financial Data and Key Metrics Changes - Sales for the second quarter were $177.1 million, down from $188.7 million in the prior year, reflecting a decline of 6% year over year [21][22] - Gross profit decreased to $43.9 million from $54.3 million, with gross margin dropping to 24.8% from 28.8% [21][22] - Adjusted EBITDA was reported at a loss of $36 million, consistent with guidance despite top-line softness [8][9] Business Line Data and Key Metrics Changes - Pro Pool sales were down 2%, while Residential Pool sales declined by 9%, and Hot Tub sales increased by 4% year over year [7] - Conversion rates improved by 174 basis points year over year, with significant increases observed after water tests using proprietary technology [8][46] Market Data and Key Metrics Changes - The company experienced weaker foot traffic in February due to colder temperatures, impacting overall sales performance [7][21] - The introduction of Local Fulfillment Centers (LFCs) has begun to positively impact customer service and inventory management [9][10] Company Strategy and Development Direction - The company is focused on a transformation journey centered around customer centricity, convenience, and asset utilization, with a new pillar of cost optimization introduced [6][14] - Strategic initiatives include optimizing inventory, enhancing the Pro customer experience, and improving DIY omnichannel capabilities [9][12][13] - The launch of a new loyalty program, Pool Perks, aims to reward loyal customers and enhance engagement [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by weather conditions but expressed confidence in the team's ability to meet guidance for the remainder of the year [25][29] - The company is committed to reducing debt and improving working capital through inventory optimization and cost management strategies [23][26] Other Important Information - The company reduced inventory by 12% year over year, ending the quarter at $335.1 million [23] - A partnership with Uber for same-day delivery services is set to launch, enhancing customer convenience [19][20] Q&A Session Summary Question: Competitive landscape and comp sales performance - Management noted that weather impacted sales but expressed confidence in gaining market share, particularly in the Pro segment [31][34] Question: Pricing strategy related to tariffs - The company plans to implement pricing increases only to offset tariff impacts, which are estimated to be less than 1% of total sales [39][40] Question: Comp weakness in Q2 - Management attributed comp weakness primarily to weather, but highlighted improvements in conversion rates as a positive sign for future performance [43][45] Question: Inventory purchases and defensive strategies - The company is focused on optimizing inventory while preparing for potential market challenges in the second half of 2025 [48][49] Question: Cost optimization and expense ratio - Management is identifying areas for cost savings, particularly in indirect procurement, and is focused on optimizing the entire asset base [53][56] Question: E-commerce and digitally initiated sales - The partnership with Uber for same-day delivery is aimed at enhancing customer convenience and reducing fulfillment costs [69][70]