Citi Trends (CTRN) Q1 2026 Earnings Call June 03, 2025 09:00 AM ET Company Participants Nitza McKee - Senior Associate - IRKenneth Seipel - CEO & DirectorHeather Plutino - CFO & Executive VP Conference Call Participants Michael Baker - Managing Director, Senior Research AnalystWill Forsberg - Associate Analyst Operator Greetings, and welcome to the Citi Trends First Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow t ...

Financial Data and Key Metrics Changes - Net sales increased by 5.3% to $10.4 billion in Q1 2025 compared to $9.9 billion in the same quarter last year [9] - Gross profit as a percentage of sales was 31%, an increase of 78 basis points, primarily due to lower shrink and higher inventory markups [17] - EPS for the quarter increased by 7.9% to $1.78, exceeding internal expectations [19] - Merchandise inventories decreased by $344 million or 5% year-over-year, with a 7% decrease on a per store basis [20] - Cash flows from operations increased by 27.6% to $847 million compared to the prior year [20] Business Line Data and Key Metrics Changes - Same store sales increased by 2.4%, driven by a 2.7% growth in average basket size [10] - Positive comp sales were observed across all categories, including consumables, seasonal, home, and apparel [10] - Non-consumable product categories performed well during the Easter and early spring seasons, with comp sales in seasonal and home categories at or above 3% [11] Market Data and Key Metrics Changes - Customer traffic slightly decreased by 0.3% during the quarter but remained strong on a two-year stack basis [10] - 25% of Dollar General customers reported having less income than a year ago, indicating a financially constrained core consumer [12] - Increased trade-in activity from both middle and higher-income customers was noted, with new customers spending more compared to last year [12] Company Strategy and Development Direction - The company aims to enhance its value and convenience proposition while focusing on long-term financial goals and shareholder value [16] - Plans include opening 575 new stores in the U.S. and executing approximately 4,885 real estate projects in 2025 [24] - The company is diversifying sourcing strategies to mitigate tariff impacts, reducing exposure to China for direct imports to less than 70% [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining comp momentum due to improved store standards, customer service, and reduced turnover [41] - The company updated its financial guidance for 2025, expecting net sales growth of approximately 3.7% to 4.7% and same store sales growth of approximately 1.5% to 2.5% [23] - Management acknowledged the dynamic tariff landscape and its potential impact on consumer spending and cost of goods [22] Other Important Information - The company is focused on reducing inventory while increasing sales, which has positively impacted operational performance [20] - The company continues to invest in its digital initiatives, including partnerships with DoorDash for delivery services, which saw a 50% increase in sales through this platform [32] Q&A Session Summary Question: Confidence in sustaining comp momentum and any surprises on the top line - Management highlighted confidence due to improved store standards, customer service, and reduced turnover, with trade-in activity contributing positively [41][48] Question: Changes in traffic and consumer behavior - Management noted positive traffic in May and anticipated continued comp momentum, supported by trade-in customers with disposable income [60][62] Question: Willingness to invest in price and wage rates - Management expressed comfort with current investments in wages and pricing, emphasizing the importance of maintaining a $1 price point for over 2,000 items [75][76] Question: Shrink benefits and future expectations - Management reported a 61 basis point improvement in shrink and expects continued benefits throughout the year, with ongoing efforts to mitigate shrink [86][89]

Financial Data and Key Metrics Changes - The meeting discussed the election of directors and the ratification of the independent auditor, Deloitte and Touche LLP, for the year ending December 31, 2025 [11] - The advisory vote on executive compensation was approved, indicating shareholder support for management's compensation practices [11] Business Line Data and Key Metrics Changes - No specific financial data or business line performance metrics were provided during the meeting [14] Market Data and Key Metrics Changes - No specific market data or metrics were discussed during the meeting [14] Company Strategy and Development Direction and Industry Competition - The company is focused on maintaining strong governance through the election of directors and the appointment of independent auditors, which is crucial for investor confidence [11] Management's Comments on Operating Environment and Future Outlook - Management did not provide specific comments on the operating environment or future outlook during the meeting [14] Other Important Information - The meeting was conducted virtually, and all voting was done electronically, ensuring shareholder participation [4][5] - The final tally of votes will be published within four business days, demonstrating transparency in the voting process [12] Q&A Session Summary Question: Were there any questions submitted during the Q&A session? - There were no questions submitted during the Q&A session, indicating either a lack of inquiries from shareholders or satisfaction with the information provided [14]

Financial Data and Key Metrics Changes - Total sales for Q1 2025 increased by $15.4 million or 8.3% compared to Q1 2024, reaching $201.7 million [23] - Adjusted EBITDA for the quarter was $5.4 million, an increase of $6.2 million compared to Q1 2024, with a sales to EBITDA flow through of 40% [26] - Gross margin expanded by 90 basis points to 39.6%, driven by higher initial markup and lower freight costs [25] - Adjusted SG&A expenses totaled $74.4 million, or 36.9% of revenue, down from 39.1% in the prior period [25] Business Line Data and Key Metrics Changes - Comparable store sales grew by 9.9%, marking the third consecutive quarter of sequential improvement, with a two-year stack of 13% [24] - The plus-size business showed meaningful improvement, and the footwear category also experienced consistent top-line growth [9][10] - The accessory business was slightly below plan, prompting adjustments to better meet customer needs [9] Market Data and Key Metrics Changes - Strong performance was noted across all apparel and home categories, with many experiencing double-digit growth [8] - Increased traffic and mid-single-digit transaction count growth were observed, alongside improved conversion rates [24] Company Strategy and Development Direction - The company is in a three-phase strategic transformation: repair, execute, and optimize, aimed at building a high-performance company for sustainable profit growth [5][7] - Focus on enhancing product offerings, particularly in plus sizes and big men's apparel, while also improving trend relevancy in juniors and young men's categories [10][54] - Plans to open up to five new stores and remodel approximately 50 locations in the year, with a disciplined approach to fleet optimization [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround plan, expecting full-year comparable store sales growth in the mid-single digits and gross margin expansion of approximately 200 basis points [28][29] - The current tariff environment presents both challenges and opportunities, with the company well-positioned to capitalize on market disruptions [20] Other Important Information - The company ended the quarter with no debt, $42 million in cash, and liquidity of approximately $117 million [27] - A new AI-based allocation system is being tested, with plans for a full rollout following the back-to-school season [14][15] Q&A Session Summary Question: Can you provide context on the change in closeout strategy? - The company is focusing on in-season closeouts and extreme value products, aiming for a long-term goal of making this segment incremental to top-line growth by about 10% [41][43] Question: Why is the full-year guidance below current comp trends? - The company is facing tougher comparisons in the back half of the year and is being cautious due to uncertainties in the macro environment [46][48] Question: Can you share insights on specific category performance? - All categories performed well in Q1, with particular strength in plus sizes and footwear, while the accessory business was slightly off plan [52][54] Question: What performance uplift has been seen from remodeled units? - Early performance from remodeled stores is promising and consistent with prior remodel classes, although it is still early to quantify [61]

Financial Data and Key Metrics Changes - Net sales increased by 5.3% to $10.4 billion in Q1 compared to $9.9 billion in the previous year's first quarter [7] - Gross profit as a percentage of sales was 31%, an increase of 78 basis points, primarily due to lower shrink and higher inventory markups [16] - EPS for the quarter increased by 7.9% to $1.78, exceeding internal expectations [19] - Merchandise inventories decreased by $344 million or 5% year-over-year, with a 7% decrease on a per store basis [20] Business Line Data and Key Metrics Changes - Same store sales increased by 2.4%, driven by a 2.7% growth in average basket size [8] - Positive comp sales were observed across all categories, including consumables, seasonal, home, and apparel [8] - Non-consumable product categories performed well during the Easter and early spring seasons, with both seasonal and home categories comping at or above 3% [9] Market Data and Key Metrics Changes - Customer traffic slightly decreased by 0.3% during the quarter but remained strong on a two-year stack basis [8] - 25% of Dollar General customers reported having less income than a year ago, indicating a financially constrained core consumer [11] - Increased trade-in activity was noted from both middle and higher-income customers, with new customers making more trips and spending more compared to last year [11] Company Strategy and Development Direction - The company aims to enhance its value and convenience proposition while focusing on long-term financial goals and shareholder value [15] - Plans include opening 575 new stores in the U.S. and executing approximately 4,885 real estate projects in 2025 [24] - The company is diversifying sourcing strategies to mitigate tariff impacts, reducing exposure to China for direct imports to less than 70% [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining comp momentum due to improved store standards and customer service [42] - The evolving tariff environment poses risks, but the company has plans to mitigate potential impacts on consumer spending and cost of goods [22] - The updated financial guidance for 2025 reflects Q1 outperformance while considering uncertainties in the macroeconomic environment [22] Other Important Information - The company generated cash flows from operations of $847 million during the quarter, an increase of 27.6% compared to the prior year [20] - The company returned cash to shareholders through a quarterly dividend of $0.59 per share, totaling $130 million [20] - The company is focused on reducing its adjusted debt to adjusted EBITDAR leverage ratio to below three times [26] Q&A Session Summary Question: Confidence in sustaining comp momentum and any surprises on the top line - Management highlighted improvements in store standards and customer service as key factors for confidence in sustaining comp momentum [42] - The company noted that trade-in activity has accelerated, contributing positively to customer retention [49] Question: Traffic progression and changes in consumer behavior - Management reported positive traffic in May and expressed optimism for continued momentum through the year [62] - The company is focused on retaining trade-in customers and leveraging delivery partnerships to enhance sales [66] Question: Willingness to invest in price and wage rates - Management indicated satisfaction with current investments in wages and pricing, emphasizing the importance of maintaining a competitive price point [72] - The company continues to monitor promotional activity and is prepared to adjust pricing strategies as needed [78] Question: Importance of comp growth for margin expansion - Management stated that sustained comp growth is essential for achieving long-term margin targets, with a focus on improving non-consumable sales [86] - The company expects shrink improvements to continue benefiting margins throughout the year [90]

Financial Data and Key Metrics Changes - Global RevPAR increased by a little over 4% in Q1, with the US and Canada up over 3% and international markets up over 6% [2][3] - In April, global RevPAR was up a little over 2%, adjusting for holiday timing, it was closer to 3%, while international RevPAR increased by 9% [3][4] - Group bookings showed an 8% increase in Q1, while leisure and business transient bookings were up 2% [4][5] Business Line Data and Key Metrics Changes - Group segment bookings are showing strong medium-term visibility, while transient bookings have a short booking window of less than three weeks [5][10] - Mid-scale RevPAR in the US is under pressure, particularly in pricing, but demand remains stable [15] - The company has entered the mid-scale space with its extended stay platform, Studio res, which opened its first new build hotel [14] Market Data and Key Metrics Changes - International inbound travel to the US is performing as expected, with a 5% decrease in inbound from Canada offset by increases from other international destinations [16] - The Greater China market is currently the softest, but development activity remains strong in that region [20] Company Strategy and Development Direction - The company signed more deals and rooms in 2024 than in any year in its history, indicating strong long-term confidence in travel and tourism [19] - The focus on conversions has been significant, with 30-40% of signings and openings coming from conversions [22][28] - The company is exploring partnerships and licensing deals, but expects most future growth to come from conventional management and franchise agreements [31] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about demand stabilization after a dip in March, with a focus on the short booking window creating uncertainty [5][10] - The company is closely monitoring economic indicators such as GDP and unemployment to assess potential pullbacks in demand [75][79] - A shift in consumer spending patterns towards prioritizing travel and experiences is seen as a positive trend, offsetting some negative economic indicators [80] Other Important Information - The company is implementing a new technology platform that will enhance operational efficiency and improve revenue opportunities for owners [60][61] - The company is on track with its technology transformation project, which is expected to significantly reduce training time for staff and enhance guest engagement [58][60] Q&A Session Summary Question: How do we think about the 5% net unit growth contribution to fees over the next two years? - Management indicated that 38% of the rooms in the pipeline are in the luxury and upper upscale segments, suggesting confidence in fee growth despite mid-scale activity [54] Question: Do you think there's a greater ability for direct bookings with AI advancements? - Management noted that AI could challenge the relevance of OTAs, as technology leaders are focusing on the travel space [56] Question: What is the status of the technology transformation project? - The project is on track, with testing underway and expected rollout later this year, promising significant benefits for owners [58][60]

Financial Data and Key Metrics Changes - Net sales reached $7.6 billion, an increase of 4.3% year-over-year, driven by organic growth of 5% and acquisition growth of 1%, despite a 1.7% negative impact from one fewer sales day and foreign exchange [7][19] - Gross margin improved to 31%, up 50 basis points year-over-year, attributed to actions taken to capture value and moderating deflation [20] - Operating profit increased by 6.1% to $715 million, with an operating margin of 9.4%, expanding by 20 basis points [21] - Diluted earnings per share rose by 7.8% to $2.5, supported by operating profit growth and share repurchases [9][21] Performance by Business Lines - HVAC customer group saw a 10% revenue increase, primarily due to focused growth initiatives [12][15] - Residential trade plumbing revenues declined by 1%, consistent with recent trends, while repair and maintenance performed better [12] - Waterworks revenue grew by 12%, driven by public works and municipal activities [13][16] - Commercial Mechanical revenue increased by 10%, with strong activity in large capital projects [14] Performance by Markets - U.S. net sales grew by 4.5%, with organic growth of 5% and a 1% contribution from acquisitions [23] - Canadian net sales were down 0.3%, with organic growth of 3% offset by foreign exchange impacts [23] - Non-residential end markets showed stronger growth, particularly in large capital projects, with a 7% increase in revenue [11][23] Company Strategy and Industry Competition - The company continues to invest in key growth areas, including HVAC, Waterworks diversification, and large capital projects, while streamlining operations to enhance efficiency [31][32] - The launch of Ferguson Home aims to provide a seamless omnichannel experience for customers, integrating showroom and digital channels [17] - The competitive landscape remains challenging, but the company has managed to balance market share gains with gross margin improvements through strategic pricing and sales management [105] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in medium-term market conditions despite a dynamic and uncertain environment [9][28] - The company updated its full-year guidance to low to mid-single-digit revenue growth, reflecting strong performance in the third quarter [28] - Management noted that deflation moderated ahead of expectations, contributing to improved gross margins [31] Other Important Information - The company completed three acquisitions during the quarter, enhancing its market position [27] - A nonrecurring business restructuring charge of $68 million was incurred, expected to yield $100 million in annualized cost savings [21][78] - The company returned $759 million to shareholders through share repurchases year-to-date, reducing share count by approximately 4.1 million [27] Q&A Session Summary Question: How much of the organic volume strength is attributed to internal initiatives versus market improvement? - Management attributed the 5% organic growth to internal initiatives, particularly in non-residential markets, and noted that the market is expected to improve in the coming years [36] Question: What factors contributed to the strong gross margin of 31%? - Management indicated that the strong gross margin was due to actions taken in pricing strategy and moderating deflation, with expectations for margins to remain above 30% in the fourth quarter [38][39] Question: How is bidding activity progressing in the commercial industrial sector? - Management reported strong bidding activity, particularly in data centers, and noted that open order volumes in commercial mechanical continue to grow [45][46] Question: How is the company managing price increases in the current tariff environment? - Management emphasized a focus on value rather than price competition, with a strategy to work closely with customers to ensure project completion on time and budget [48][51] Question: Can you provide insights on the Waterworks business growth and bidding activity? - Management highlighted strong growth in Waterworks, particularly in public works and wastewater treatment, and noted supportive bidding activity in residential new construction [60][62] Question: What is the timeline for realizing benefits from the restructuring program? - Management indicated that the restructuring is largely complete, with expectations for operational improvements and cost savings to materialize in the near term [78]

Financial Data and Key Metrics Changes - Net sales increased by 13% to $577 million, driven by new store openings and an increase in comparable store sales growth [19][22] - Adjusted net income was $46.1 million, with adjusted earnings per share at $0.75 [22] - Adjusted EBITDA was $72.2 million, with an adjusted EBITDA margin of 12.5% for the quarter [22] - Gross margin remained flat at 41.1%, slightly ahead of expectations [21][22] - SG&A expenses as a percentage of sales increased by 60 basis points to 28.6% due to higher medical and casualty claims and new store growth [21] Business Line Data and Key Metrics Changes - Comparable store sales increased by 2.6%, driven by an increase in transactions [20] - The best-performing categories included food, hardware, electronics, domestics, and housewares [20] - Ollie's Army membership grew by over 9% to 15.5 million members, with sales to members representing over 80% of total sales [20] Market Data and Key Metrics Changes - The company opened 25 new stores in the first quarter, a record for any period in its history, ending with a total of 584 stores, a 13% year-over-year increase [19][20] - The closeout market remains fluid, with significant retail store closures creating excess inventory opportunities [9][11] Company Strategy and Development Direction - The company is focused on aggressive market share acquisition through accelerated store growth, enhanced digital marketing, and the Ollie's Army loyalty program [11][12] - The company aims to maintain its value proposition and price gaps, especially on brand-name items, while reducing reliance on Chinese imports [43][125] - The company is investing in its people and enhancing customer acquisition and retention strategies [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic environment and reaffirmed the financial outlook for the fiscal year [15][25] - The company anticipates continued strong deal flow due to retail store closures and supply chain disruptions [9][11] - Management expects second quarter comparable store sales to be at the lower end of the 1% to 2% range, with strong core comp trends in non-seasonal categories [26][99] Other Important Information - The company completed the initial rollout of a co-branded credit card, seeing strong spending and shopping frequency [13] - A new private shopping event for Ollie's Army members is planned, enhancing the loyalty program [14][68] Q&A Session Summary Question: State of closeout availability and impact of tariffs - Management noted strong deal flow and a 16% increase in inventory, with expectations for more product availability due to supply chain disruptions and retail bankruptcies [32][33] Question: Traffic trends and confidence in second quarter comps - Traffic has been strong, with a core comp running in the low to mid single-digit range, despite some seasonal impacts [35][36] Question: Impact of tariffs on supplier negotiations and pricing - Management emphasized maintaining value propositions and price gaps while working closely with vendors to mitigate tariff impacts [41][42] Question: Real estate opportunities and store openings - The pipeline for new store openings is strong, with expectations for above-average growth in 2026 [50][51] Question: Impact of Big Lots closures on comps - The liquidation of Big Lots stores had a 50 basis point impact on comps, but stores that closed prior to Christmas are seeing low to mid single-digit lifts [55][56] Question: Cadence of comps and Ollie's Army Night - Comps improved significantly in March, and the new Ollie's Army Night is expected to enhance customer loyalty and drive sales [65][68] Question: Gross margin expectations and tariff impacts - Management expects gross margins to follow a seasonal flow, targeting 40% for the year, with some tariff impacts already included [70][71] Question: Pricing strategy amidst competition - The company is committed to maintaining price gaps and is actively sourcing products to ensure value for customers [75][76] Question: Ollie's Army membership growth and performance - Newer stores are seeing higher conversion rates to Ollie's Army membership, benefiting from customer familiarity with loyalty programs [87][88]

Financial Data and Key Metrics Changes - Revenue for the quarter was $1.5 billion with same store sales growth of 2.5%, reflecting growth across every major category, including services [20][22] - Adjusted operating income exceeded expectations at $70 million for the quarter, up more than 20% compared to last year [22] - Adjusted EPS was $1.18, above last year due to higher income and a lower share count, partially offset by a higher effective tax rate [23] Business Line Data and Key Metrics Changes - Fashion same store sales improved sequentially by approximately four points compared to the fourth quarter, driven by key gifting price points [7] - The three largest brands (Kay, Zales, and Jared) delivered a combined 4% comp sales growth in the first quarter [9] - Merchandise AUR grew approximately 8%, with fashion AUR up 10% and bridal AUR slightly increasing [21] Market Data and Key Metrics Changes - E-commerce sales for Kay, Zales, and Jared delivered double-digit growth while expanding sales per square foot by nearly 5% compared to the prior year [20] - Lab grown diamond (LGD) fashion sales grew by 60% this quarter, contributing to notable AUR improvement [14][21] - The penetration of LGD in overall sales is approximately 20%, up about five points from last year [69] Company Strategy and Development Direction - The "Grow Brand Love" strategy aims to align brands with customer expectations and expand into adjacent categories while managing organizational structure [6][12] - The company is focusing on reducing reliance on promotions while enhancing product offerings and customer experiences [11][15] - A four-pronged real estate strategy includes closing underperforming stores, optimizing sales transference, repositioning healthy stores, and refreshing existing locations [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macro landscape and achieving long-term sustainable growth [6][18] - The company is prepared for potential tariff impacts and is actively working with vendors to optimize production and sourcing strategies [16][17] - Management expects total sales for the second quarter to be in the range of $1.47 to $1.51 billion, with same store sales projected to decline by 1.5% to increase by 1% [28][30] Other Important Information - The company has repurchased approximately 2.3 million shares year-to-date, representing over 5% of shares outstanding [24] - The company is actively recruiting for key leadership roles, including a new Chief Marketing Officer [15] - The company has made progress on its real estate plan, with renovations planned for approximately 200 locations [24][26] Q&A Session Questions and Answers Question: Can you quantify your unmitigated tariff pressure and actions to mitigate those pressures? - Management indicated that they are focusing on assortment architecture and sourcing strategies to maintain price points and margin structure amidst tariff pressures [35][36] Question: How is the performance of fashion compared to bridal, and what is the market share position? - Management noted that bridal trends are improving, while fashion has shown sequential improvement, particularly in the sub $500 price point [48][52] Question: What is the outlook for AUR growth and its sources? - AUR growth is attributed to stability in bridal pricing and the expansion of LGD in fashion, which is opening new avenues for merchandise [60][61] Question: How much of your business is LGD now, and what is the expected penetration by year-end? - LGD penetration is currently around 20%, with expectations for continued growth as the company drives LGD in fashion [69] Question: What is the outlook on achieving the higher end of guidance with potential increased tariffs? - Management expressed confidence in navigating tariff impacts and leveraging their scale to maintain guidance despite potential challenges [78][80]

Financial Data and Key Metrics Changes - Revenue for the quarter was $1.5 billion with same store sales growth of 2.5%, reflecting growth across every major category, including services [21] - Adjusted operating income exceeded expectations at $70 million for the quarter, up more than 20% compared to last year [23] - Adjusted EPS was $1.18, above last year due to higher income and a lower share count, partially offset by a higher effective tax rate [24] Business Line Data and Key Metrics Changes - Fashion same store sales improved sequentially by approximately four points compared to the fourth quarter, driven by key gifting price points [6] - The three largest brands (Kay, Zales, and Jared) delivered a combined 4% comp sales growth in the first quarter [8] - Merchandise AUR grew approximately 8%, with fashion AUR up 10% and bridal AUR slightly increasing [22] Market Data and Key Metrics Changes - E-commerce sales for Kay, Zales, and Jared delivered double-digit growth while expanding sales per square foot by nearly 5% compared to the prior year [21] - Lab grown diamond (LGD) fashion sales increased by 60% this quarter, contributing to notable AUR improvement [14][22] - North America mall revenue penetration has been reduced to approximately 35%, with expectations to decrease to 30% in the coming years [27] Company Strategy and Development Direction - The company is focused on the "Grow Brand Love" strategy, which aims to align brands with customer expectations and expand into adjacent categories [5][12] - A reorganization is nearly complete, with a new Chief Marketing Officer expected to be announced soon [15] - The company plans to close up to 150 underperforming stores over the next two years while optimizing sales transference to remaining doors and e-commerce [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a dynamic macro landscape and managing levers under their control [5][19] - The company is prepared for potential tariff impacts and has taken actions to safeguard against supply chain disruptions [16][18] - Future guidance includes total sales for the second quarter expected in the range of $1.47 to $1.51 billion, with same store sales projected to be down 1.5% to up 1% [29][31] Other Important Information - The company has repurchased approximately 2.3 million shares year-to-date, representing over 5% of shares outstanding [25] - Inventory at the end of the quarter was $2 billion, up approximately 1%, which is lower than the 2% growth in revenue [24] - The company is actively recruiting for key leadership roles to support its strategic initiatives [15] Q&A Session Summary Question: Can you quantify your unmitigated tariff pressure and actions to mitigate those pressures? - Management indicated that they are focusing on assortment architecture and sourcing strategies to maintain price points and margin structure amidst tariff pressures [34][36] Question: How is pricing trending for lab and natural diamonds in bridal and fashion categories? - Management noted that natural diamond prices have stabilized while lab diamond prices are experiencing some deflation, but overall, lab diamonds are expanding AUR due to increased consumer adoption [39][40] Question: What is the outlook for the bridal category and market share position? - Management believes they are gaining traction in the bridal category and expect to see improvements in market share, particularly in fashion [51][52] Question: How is the health of the consumer across different brands? - Management observed resiliency in consumer spending, particularly in the $250 to $500 price point range, and emphasized the importance of aligning product offerings with consumer trends [60][61] Question: What is the penetration of lab-grown diamonds in your business? - Lab-grown diamonds currently represent approximately 20% of the business, up about five points from last year, which is aligned with the strategic positioning of the assortment [69]