Financial Data and Key Metrics Changes - The company reported a net sales decline of 10.2% in Q3, with organic sales decreasing by 11.1% when excluding foreign currency benefits [20][34] - Adjusted EBITDA was $76.6 million, a decrease of $29.7 million year-over-year, primarily due to lower sales volumes and reduced gross margins [35][36] - Gross margins contracted by 110 basis points to 37.8%, driven by unfavorable mix, tariffs, and inflation [21][35] Business Line Data and Key Metrics Changes - Global Pet Care reported a net sales decrease of 9.6%, with organic sales down 11.4%, primarily due to targeted stop shipments during tariff-related pricing negotiations [38][39] - Home and Garden net sales decreased by 10.3%, negatively impacted by a cold and wet start to the season [46] - Home and Personal Care saw a reported net sales decline of 10.8%, with organic sales also down 11.4%, driven by softness in personal care and home appliance categories [52][53] Market Data and Key Metrics Changes - The overall North American Companion Animal category declined in the low single digits, while European consumer sentiment weakened, impacting sales [40][45] - In Latin America, organic net sales grew in the low double digits, predominantly in the chews category [41] - The Home and Garden category experienced lower total sales, but Spectracide gained market share in pest control products [47] Company Strategy and Development Direction - The company is focused on protecting its balance sheet and maintaining a nimble stance during volatile times, with a target of approximately $160 million in free cash flow for the fiscal year [26][60] - There is an ongoing effort to diversify the supplier base and develop non-Chinese sourcing alternatives to mitigate tariff impacts [16][17] - The company is actively pursuing M&A opportunities to accelerate growth in its pet and home and garden businesses, while maintaining a disciplined approach to capital allocation [29][83] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming near-term tariff-related volatility and emphasized the importance of making difficult decisions for long-term health [19][66] - There are signs of improving macroeconomic conditions, with expectations for consumer confidence to stabilize as geopolitical tensions subside [65][66] - The company anticipates a strong start to Q4, with improved sales performance and positive momentum in the Home and Garden division [23][66] Other Important Information - The company executed cost reduction activities, expecting to reduce costs by over $50 million in fiscal 2025 [15] - Share repurchases totaled approximately 900,000 shares during Q3, with a total of about 4 million shares repurchased since the HHI transaction [31] - The company is streamlining its global business and reducing fixed costs while diversifying its sourcing footprint [59] Q&A Session Summary Question: How much sales were left on the table by stopping shipments in Q2, and what impact lingers into Q4? - The estimated sales left on the table in Q3 is around $30 million, with a significantly lower impact expected in Q4 [72] Question: Why is guidance still difficult despite improved clarity on tariffs? - The company emphasized the complexity of the situation, noting that Q3 results were distorted due to significant operational changes and tariff impacts, making it challenging to provide accurate guidance [75][76] Question: Can you discuss your capital allocation strategy in a soft consumer environment? - The company believes the market is undervalued and plans to continue share repurchases while pursuing M&A opportunities to grow its pet and home and garden businesses [82][83]

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.45 for Q1 fiscal 2025, a slight decrease from $0.46 in the same period last year [8] - Total sales increased by 5.8% to $1.161 billion from $1.097 billion year-over-year [9] - Gross profit rose by 8.1% driven by a 5.8% increase in sales and a 100 basis point increase in gross margin rate to 43.8% [34] - Selling and store operating expenses increased by 10.3% to $368.8 million, primarily due to new stores [34] Business Line Data and Key Metrics Changes - Comparable store sales decreased by 1.8% year-over-year, with the West Division outperforming this decline [20] - Sales growth was strongest in laminate and luxury vinyl plank, wood, and installation materials [22] - Connected customer sales increased by 2.1%, now accounting for approximately 18.3% of total sales [24] - Sales to professional customers continued to grow, accounting for about 50% of total sales [27] Market Data and Key Metrics Changes - The U.S. is now the largest country of manufacture for the company, accounting for approximately 27% of products sold, up from 20% in fiscal 2018 [14] - China accounted for 18% of products sold in fiscal 2024, down from 25% in fiscal 2023 and 50% in fiscal 2018 [14] Company Strategy and Development Direction - The company plans to open 20 new warehouse format stores in fiscal 2025, down from a previous expectation of 25 [18] - A tariff steering committee has been organized to manage tariff complexities and maintain operational agility [11] - The company is focusing on sourcing diversification to find high-quality products at competitive prices [13] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about high volatility and uncertainty in the economic environment, which could impact consumer spending [10] - The company is proactively implementing flexible plans to navigate potential economic downturns [10] - The updated fiscal 2025 guidance reflects the uncertain economic environment, with total sales expected to range from $4.66 billion to $4.8 billion [40] Other Important Information - The company maintained a strong balance sheet with $949.8 million in unrestricted liquidity [38] - The effective tax rate increased to 22% from 12.8% due to a decrease in excess tax benefits related to stock-based compensation [36] Q&A Session Summary Question: Follow-up on guidance and tariff impact - Management confirmed that they have experience dealing with tariffs and are negotiating necessary price increases to offset impacts [46][47] Question: Perception of business weakness and guidance reduction - Management acknowledged the difficulty in predicting consumer demand but emphasized strong execution and market share growth [57][59] Question: Price increases across the industry - Management noted that they have seen price increases from competitors but have not yet raised prices beyond normal adjustments [63][64] Question: Store unit growth criteria - Management stated that the decision to reduce store openings was based on current market conditions and sales performance [68][69] Question: Acceleration in sales trends - Management indicated that improvements in sales were consistent and not solely due to weather or tariff announcements [78][80] Question: Sourcing advantages post-tariff - Management confirmed that they are sourcing from more countries now than in the past and do not anticipate a significant change in their sourcing advantage [84][86]

Financial Data and Key Metrics Changes - The company reported diluted earnings per share of $0.45 for the first quarter of fiscal 2025, a slight decrease from $0.46 in the same period last year [5][6] - Total sales increased by 5.8% to $1,161 million from $1,097 million year-over-year [6][30] - Gross profit rose by 8.1% driven by the sales increase and a 100 basis point increase in gross margin rate to 43.8% [30][34] - Selling and store operating expenses increased by 10.3% to $368.8 million, primarily due to new stores [30][31] Business Line Data and Key Metrics Changes - Comparable store sales decreased by 1.8% year-over-year, with the West Division outperforming this decline [16][17] - Sales growth was strongest in laminate and luxury vinyl plank, wood, and installation materials [18] - Connected customer sales increased by 2.1%, now accounting for approximately 18.3% of total sales [19][20] - Sales to professional customers continued to grow, accounting for about 50% of total sales [22] Market Data and Key Metrics Changes - The U.S. is now the largest country of manufacture for the company, accounting for approximately 27% of products sold, up from 20% in fiscal 2018 [11] - China accounted for 18% of products sold, down from 25% in fiscal 2023 and 50% in fiscal 2018 [11] - The company anticipates receipts from China to approximate mid to low single digits of total receipts by the end of fiscal 2025 [11][12] Company Strategy and Development Direction - The company is focused on managing tariff impacts through vendor negotiations and sourcing diversification strategies [9][10] - Plans to open 20 new warehouse format stores in fiscal 2025, down from a previous expectation of 25 [14][15] - The company aims to maintain its competitive advantage through a broad assortment and innovative product offerings [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding consumer spending due to economic volatility and potential recession risks [7][36] - The company is proactively implementing flexible plans to navigate economic challenges [7][36] - Updated fiscal 2025 guidance reflects a cautious outlook, with total sales expected to increase by 5% to 8% [37][39] Other Important Information - The company maintains a strong liquidity position with $949.8 million in unrestricted liquidity [35] - General and administrative expenses increased by 3.5% to $69.1 million, attributed to investments in store growth [32] Q&A Session Summary Question: Clarification on tariff impact and pricing strategy - Management confirmed that they have experience managing tariffs and are negotiating with vendors to offset impacts, expecting modest price increases if necessary [44][46] Question: Concerns about business weakness and guidance reduction - Management acknowledged the challenges but emphasized strong execution and market share growth, while being prepared for various scenarios [56][58] Question: Store growth strategy and criteria for adjustments - The company plans to open 20 new stores based on current market conditions, with flexibility to adjust if necessary [66][68] Question: Impact of tariffs on gross margin - Management aims to maintain gross margin rates despite tariff impacts, with a focus on managing gross profit dollars [102]