Financial Data and Key Metrics Changes - The company reported a diluted EPS of $0.53 for Q3 2025, a 10.4% increase from $0.48 in the prior year, marking the second consecutive quarter of double-digit EPS growth [7] - Total sales grew by 5.5% to $1,180 million, while comparable store sales declined by 1.2% from the same period last year [7][8] - The gross margin rate decreased by approximately 10 basis points to 43.4% from 43.5% in the same period last year, primarily due to increased distribution center costs [25][30] Business Line Data and Key Metrics Changes - The company opened five new stores in Q3 2025, bringing the total to 262 stores, a 9% increase from 241 stores in the same period last year [9][10] - Comparable store sales for Pro customers were essentially flat, driven by a slight decline in transactions and a small increase in average ticket [23] - Design services saw robust year-over-year sales growth, significantly outperforming overall company sales for the quarter and year-to-date [21] Market Data and Key Metrics Changes - Comparable store sales in the West division outperformed the company average for both the quarter and year-to-date [19] - Existing home sales hovered around an annualized pace of 4 million units, showing little meaningful improvement, which impacted discretionary spending [18][31] - The company noted that the housing market pressures and evolving consumer preferences have affected sales, particularly in larger markets like Texas and Florida [60] Company Strategy and Development Direction - The company aims to scale towards 500 warehouse-format stores and accelerate commercial flooring distribution expansion [6][10] - A disciplined approach to expansion and capital allocation is emphasized, with a focus on maintaining flexibility in response to economic shifts [11][12] - The company is rolling out kitchen cabinets to approximately 200 stores by the end of 2025 and expanding outdoor and pool product assortments [20][67] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that existing home sales and demand for hard surface flooring will recover over time, positioning the company strategically for growth [8][31] - The company anticipates little divergence from prevailing housing sector trends, with consumer spending likely to remain restrained [30] - Management acknowledged the challenges posed by macroeconomic pressures but highlighted the operational excellence and agility of their teams [17][18] Other Important Information - The company ended the quarter with $893.5 million in unrestricted liquidity, including $204.5 million in cash and cash equivalents [25] - The fiscal 2025 capital expenditures are planned to be in the range of $280 million to $300 million, including investments in new distribution centers and existing stores [34] Q&A Session Summary Question: Concerns about the timing of leadership transition and its impact on growth - Management reassured that the transition to a new CEO is well-planned and that the new leadership will continue to drive growth [37][39] Question: Impact of mortgage rates on existing home sales and business outlook - Management indicated that if existing home sales are positive, it would provide a good opportunity for the company to achieve positive comps [40][42] Question: Use of home equity lines of credit for flooring purchases - Management noted that an increase in home equity lines typically benefits home improvement spending, but it is too early to determine the immediate impact [45] Question: Attribution of sales slowdown to industry contraction versus competition - Management attributed the slowdown primarily to industry contraction rather than increased competition, noting that the company is performing better than competitors [46] Question: Trends in comparable store sales and market share - Management highlighted that while comparable store sales are slightly down, the company is still gaining market share in a challenging environment [50][51]

Financial Data and Key Metrics Changes - Total sales for the quarter were $6.2 billion, up 0.6% compared to the previous year, and up 6.9% on a 16-week basis [18] - Earnings per share (EPS) decreased by 5.6% for the quarter, but would have increased by 8.7% when excluding an $80 million LIFO charge [6][7] - Net income for the quarter was $837 million, down 0.5% on a 16-week basis, while for the full year, net income was $2.5 billion, down 6.2% [29][19] Business Line Data and Key Metrics Changes - Domestic commercial sales grew by 12.5% on a 16-week basis, while domestic DIY same-store sales increased by 2.2% [5][14] - International same-store sales were up 7.2% on a constant currency basis, but faced a 5-point currency headwind, resulting in a lower unadjusted comp of 2.1% [7][16] - The average weekly sales per commercial program were approximately $18,200, up 9% year-over-year [20] Market Data and Key Metrics Changes - Domestic same-store sales grew by 4.8%, with a sales cadence showing positive trends throughout the quarter [10][18] - The company opened 90 net domestic stores and 51 international stores during the quarter, totaling 304 net new stores for the year, the most since 1996 [14][15] - The international store base now comprises over 13% of total stores, with plans for continued expansion [16] Company Strategy and Development Direction - The company aims to continue investing in customer service, product assortment, and supply chain improvements to drive long-term growth [16][17] - Plans for FY26 include opening 325 to 350 new stores in the Americas, with a focus on hubs and megahubs to enhance inventory availability [33][34] - The company is committed to maintaining a disciplined approach to capital allocation while returning cash to shareholders through buybacks [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about sales growth in FY26, driven by strong DIY and commercial sales trends [15][34] - The company anticipates continued inflationary pressures but believes it can manage pricing effectively without significantly impacting demand [72] - Management highlighted the importance of maintaining gross margins while expanding the commercial business [75] Other Important Information - The company invested approximately $1.4 billion in capital expenditures for growth initiatives and plans to invest a similar amount in the upcoming year [17] - The gross margin for the quarter was 51.5%, down 103 basis points year-over-year, primarily due to the LIFO charge [25] - Free cash flow generated for the quarter was $511 million, contributing to a total of $1.8 billion for FY2025 [29] Q&A Session Summary Question: Inflation expectations for the fiscal first quarter - Management expects inflation to be at least 3% and possibly higher, indicating a disciplined approach to pricing to cover costs [43][53] Question: Growth in discretionary categories - Management noted that discretionary categories have shown growth for the first time in a while, but the lower-end consumer remains under pressure [44][45] Question: LIFO charges outlook - Management anticipates LIFO charges of approximately $120 million in Q1, with potential pressure in subsequent quarters [50][51] Question: SG&A growth dynamics - SG&A growth is expected to remain elevated due to investments in new stores, with a plan to manage it in line with sales growth [54][55] Question: Growth opportunities in Mexico - Management sees significant growth potential in Mexico, with plans to accelerate store openings and expand market share [64][66]

Financial Data and Key Metrics Changes - For the full year, sales reached nearly $3.9 billion, with a comparable sales decrease of 2.7% and adjusted EPS of $5.04 [10][28] - Total sales in Q4 increased 7.8% to $1.39 billion, while comparable sales decreased 3% due to five fewer holiday shopping days [25][27] - Adjusted net income for Q4 was $192.4 million, compared to $193.8 million last year, resulting in adjusted EPS of $3.48 [27][28] Business Line Data and Key Metrics Changes - The company opened a record 228 new stores in 2024, ending the year with 1,771 stores across the U.S. [10][11] - Adjusted gross profit for Q4 was $563.2 million, an increase of 6.2% year-over-year, while adjusted gross margin decreased by approximately 60 basis points to 40.5% [26][27] Market Data and Key Metrics Changes - The company experienced a decrease in comparable transactions of 1.9% and a 1% decrease in average ticket size [25] - Inventory at the end of the year was $659.5 million, compared to $584.6 million at the end of the previous fiscal year [29][30] Company Strategy and Development Direction - The company aims to sharpen its focus on the customer, particularly targeting kids and their parents, to build long-term relationships [14][22] - Plans include simplifying pricing, focusing on $1 to $5 price points, and enhancing the product assortment to drive customer visits [20][23] - The company is also looking to expand its footprint, with a target of 3,500 stores, and plans to densify existing markets while entering new ones like the Pacific Northwest [22][84] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer spending, noting no significant changes in customer behavior despite economic challenges [40] - The company is preparing for potential margin headwinds due to tariffs, estimating a 100 basis point impact for the full year [34][35] Other Important Information - The company is investing in marketing to enhance brand awareness and customer engagement, with a new Chief Marketing Officer appointed to lead these efforts [21][66] - Capital expenditures for fiscal 2025 are expected to be between $210 million and $230 million, reflecting new store openings and infrastructure investments [35] Q&A Session Summary Question: What is the overall health of the consumer? - Management is pleased with sales performance and sees no meaningful difference in customer spending habits compared to the past [40][41] Question: What is the expected impact of tariffs on margins? - The company anticipates about a 100 basis point impact from tariffs, with mitigation efforts including selective price adjustments and vendor negotiations [45][46] Question: How will the company regain lost margins? - Management indicated that improvements in shrink rates and operational efficiencies could help regain margins over time [57][58] Question: What is the status of new product development? - The company is excited about upcoming summer assortments, focusing on value and relevance for customers [62][63] Question: What is the plan for marketing spend? - The company aims to optimize marketing spend, focusing on efficient channels and enhancing customer engagement through social media [66]