BOBS

Welcome to Bob's Discount Furniture 2026 first quarter earnings conference call. At this time, we kindly request that all participants remain in listen-only mode. A question and answer session will follow the formal pre-prepared remarks. As a reminder, this conference call is being webcast live and recorded for replay. I will now turn the call over to Edward Plank, Vice President of Investor Relations and Strategy.

Good morning, everyone, and thank you for joining us to discuss our first quarter 2026 financial results. On the call with me today are Bill Barton, President and Chief Executive Officer, and Carl Lukach, Executive Vice President and Chief Financial Officer. After Bill and Carl have made their formal remarks, we'll open the call to questions. As a reminder, the language on forward-looking statements included in the earnings release also applies to the comments made during the call. The release can be found on the website at ir.mybobs.com, along with a reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. I'll now turn the call over to Bill.

Thanks, Eddie. Good morning, everyone, and thank you for joining us today on our first quarter earnings call. Before I dive into our first quarter performance, I wanna begin by thanking our fantastic team members who are truly the heart of our company. They delivered an exceptional customer experience even as we navigated a dynamic operating environment, and we couldn't be more pleased with their efforts. Their dedication enabled us to achieve strong results. Turning to our first quarter performance, sales results met our expectations, which incorporated the adverse winter weather events and broader economic headwinds that we discussed on our last call. Total net sales increased 8.5% year-over-year, driven by new store expansion and comparable sales growth of 1.2%. For the quarter, we generated an adjusted EBITDA margin of 6.5%, which was slightly ahead of our expectations.

During the quarter, the home furnishings category continued to face sales declines, due in part to a continued difficult housing environment. Despite this backdrop, Bob's delivered positive results, highlighting the resilience of our model, the competitive differentiation we've built over the years, and our ability to gain market share in all market environments. This momentum has continued into the second quarter, and as Carl will discuss, we are pleased to see demand trends tracking in line with our long-term algorithm. At Bob's, providing value without compromise is what we do. Our strategic advantages drive operating efficiencies as we scale, setting us apart in the marketplace and enabling us to gain share across market cycles. Let me walk you through the key elements of our first quarter performance and the strategic initiatives fueling our success.

Our first advantage is our merchandising strategy, which centers on a narrow and deep curated assortment, supporting our everyday low price model while providing quality and style. We estimate that on average, our pricing is about 20%-25% below our competitors' listed price and 10% below their lowest promoted prices. Our narrow and deep assortment strategy also enables strong in-stock positions. We aim for over 85% of inventory to be on hand with the ability to be delivered in as little as three days. During the first quarter, we saw customers trade up from our good tier to our better tier, led by strength in the motion upholstery, adult bedroom, and mattress categories. This was a deliberate strategic outcome, not a market anomaly, reflecting our focused efforts to right-size our product architecture and create compelling reasons for customers to trade up.

We saw strength in our new product launches, including in motion, particularly recliners and sectionals, which featured new launches and additional colorways. The success of these launches demonstrates our ability to identify and meet consumer preferences and underscores our strong capabilities in product development. What gives us further confidence in the durability of this trend is that the trade up was broad-based across all consumer household income cohorts. It was not concentrated among higher income households, but consistent across our entire customer base, underscoring the universal appeal of our value proposition at the better price tier. Our results indicate that customers are finding value across our assortment and are willing to invest in pieces with additional features and functionality. Our second strategic advantage is our omnichannel capability.

At Bob's, we are a true omni-channel company built on two key pillars: our portable coast-to-coast retail footprint of 214 stores, where we deliver best-in-class shopping experiences and our differentiated e-commerce platform. At the center is our OMNI Cart technology, which creates a seamless customer experience, channel synergies, and a higher conversion. In stores, our AI-driven smart scheduling has significantly improved manager and staffing efficiency, ensuring we are appropriately staffed to consistently meet customer demand, deliver exceptional service, and continue to drive conversion. Within e-commerce, sales increased low teens year-over-year, with penetration rising approximately 70 basis points to 16.2% of total sales for the quarter. While we are encouraged by the continued increase in e-commerce penetration, as an omni-channel business, we are agnostic as to where our customer chooses to shop.

Our platform is designed to deliver a consistent high-quality experience with seamless integration between digital and physical touchpoints. That said, we continue to enhance our online experience by leveraging AI and expanding our digital capabilities. This includes AI-powered product recommendations on our website, and more recently, the launch of a new sectional configurator that allows customers to design their own sectional and visualize in their own homes, one innovation that has been very well received. Our third strategic advantage is driving brand awareness through compelling messaging and increasingly precise customer targeting. To that end, we are applying AI to turn proprietary and third-party customer data into real-time personalized targeting, enabling us to reach the right customer with the right message at the right moment.

As a result, we continue to see strong growth amongst higher income households with rising penetration of customers earning over $100,000 and $150,000. We intensified our focus on this higher household income customer segment in late 2025 through precision performance media and tailored product recommendations and built on that momentum in the first quarter of 2026. Our value proposition resonates across a broad range of income levels, and we remain encouraged by our growing penetration of higher income value-seeking households. In addition, enhancements to our customer data platform are improving site personalization features that will enable deeper customer insights and more targeted messaging to cohorts beyond just household income. We see this as a huge opportunity.

Looking ahead, we remain focused on executing to our long-term growth algorithm, growing our store base across new and existing markets, driving comparable sales, and leveraging our scale and density to improve efficiency and expand margins. Let me walk you through how we're executing on each of these objectives. First off, at Bob's, we believe everyone deserves a home they love. We are energized to bring Bob's tremendous value proposition to more and more customers nationwide. We opened five stores during the first quarter, including three in Central Illinois, a new location in Pasadena to strengthen our presence in the L.A. market, and an infill store in Seekonk, Massachusetts. While it's still early, we're very pleased with their performance to date. The openings in Central Illinois are particularly exciting as they provide valuable insight into our ability to succeed within smaller markets outside of our traditional multi-store market clusters.

We're also seeing continued strength from our 2025 new store cohort as the first location anniversary their opening. Our stores in North Carolina, in particular, give us strong confidence in our expansion strategy as we continue executing our contiguous market growth plan and open more stores across the Carolinas and Tennessee this year. Speaking of Tennessee, we've already kicked off our market entry playbook, just as we did in North Carolina. We're leveraging customer insights to craft our messaging and broader marketing campaigns while also implementing pricing and other competitive strategies. This disciplined, repeatable, market-specific approach to new market entry has proven successful in North Carolina and will remain a key part of our Southeast expansion strategy, beginning with our entry into Tennessee.

In all, we remain on track to open approximately 20 stores in 2026, representing 10% unit growth, and we continue to see a clear and actionable path to more than 500 stores by 2035. Turning next to our comp store sales performance. Comp increased 1.2% in the quarter as strong results in March offset the significant impact of winter storms earlier in the period. March was our strongest month of the quarter. We saw historically large delivery weeks at the end of the month, and our teams rose to the occasion, delivering sales in line with our expectations. Our results were driven by continued improvement in conversion rates, reflecting ongoing benefits from investments in our retail operating system, enhanced scheduling effectiveness, and increased OMNI Cart penetration. We expect these foundational investments to deliver benefits for many years to come.

In addition, mix shift from good to better categories drove higher AOV. These gains were partially offset by lower traffic, largely due to the adverse winter weather. Looking ahead, we're closely monitoring the evolving macro landscape. Bob's has a long history of successfully navigating a variety of market conditions, and we are confident in our ability to continue to do so. In the meantime, the demand side of our business remains solid. Moving forward, we continue to execute on key operational initiatives. Our new Midwest regional fulfillment center opened in the first quarter to support ongoing expansion in this region. We are also progressing on our transition to Synchrony as our primary financing partner, which we expect to launch in May and roll out through the summer. We believe that this represents a meaningful opportunity to increase financing penetration and drive higher average order value over time.

All that said, we continue to operate in a dynamic environment. We saw some incremental trucking surcharges related to domestic fuel costs during the first quarter, though the impact was small. While conditions remain fluid, we have a proven playbook for managing these situations as we've demonstrated through prior supply chain disruptions and more recently, tariffs. Touching briefly on tariffs, we are encouraged by recent rate reductions in the elimination of steel and aluminum duties for our covered products. We will continue to monitor developments as the backdrop evolves. At Bob's, we take our people and culture very seriously. It is the foundation that represents the Bob's way and drives our long-term results. I'm particularly proud that Newsweek recently awarded Bob's five stars as one of America's greatest workplaces for entry-level roles, which is a testament to the culture we built and the commitment we have to our people.

In closing, we remain focused on our long-term strategy of delivering double-digit unit growth, driving low single-digit comparable store sales, and accelerating EBITDA growth. I'm excited by the tremendous opportunity in front of us. Through discipline and prudent execution of our playbook, we see a well-defined path forward to expand our market share. Our vision is supported by strong unit economics, a proven portable business model that works across diverse markets, best-in-class omni-channel capabilities, a differentiated merchandising strategy that delivers innovation, value, and quality, and an exceptional team that executes with consistency and passion. With that, I'll turn the call over to Carl to review our financial results and outlook in more detail. Carl.

Thank you, Bill. As Bill discussed, our first quarter performance reinforced the resilience of our model and our ability to navigate a dynamic environment while continuing to invest in our future. The team remains focused and disciplined, and we are confident in our ability to continue delivering solid results. In the first quarter, net revenue increased 8.5% to $578.1 million, driven by comparable store sales growth and contributions from new store openings. We opened five new locations in the first quarter, bringing us to a total store count of 214 stores. Comparable sales increased 1.2% in Q1 on top of a 6.2% gain last year.

Performance was driven by conversion growth and higher average order values across both our retail and e-commerce channels, partially offset by lower in-store traffic due to the winter storms and related lost store operating hours that we discussed on our last earnings call. As Bill mentioned, we saw historically large delivery weeks at the end of the first quarter, reflecting strength in March demand and seamless execution by our supply chain teams to meet customer delivery preferences. Average order value benefited from a mix shift into our better pricing tier, while pricing increases taken last fall were largely offset by lower units per transaction. First quarter gross margin was flat to last year at 44.4%.

During the quarter, we benefited from a favorable mix shift into the better category, which carried a higher margin rate and reinforcing our confidence that our targeted good, better, best architecture is resonating with customers. We also benefited from a more normalized freight environment compared to last year when we saw elevated costs associated with supply chain disruption, in addition to higher protection plan margins that we will anniversary next quarter. These benefits were offset by the initial ramping of our new Midwest DC that opened in January this year, which we refer to internally as a regional fulfillment center, in addition to costs related to inventory growth. SG&A as a percentage of net revenue was 40.7%, an increase of approximately 20 basis points compared to the prior year due to a one-time non-recurring cost associated with the termination of our Bain management fee.

Excluding this one-time charge, SG&A as a percentage of net revenue was relatively flat, driven by efficiencies at existing stores and offset by incremental marketing and occupancy expense associated with new stores and greenfield market expansion. The team remains focused with respect to managing costs and driving greater leverage. In total, adjusted EBITDA was relatively flat to last year at $37.6 million, and adjusted EBITDA margins decreased 50 basis points to 6.5%, primarily due to supply chain inefficiencies during the periods of extreme weather and incremental pre-opening expenses. As a reminder, due to seasonality, Q1 is our lowest adjusted EBITDA margin quarter. Adjusted net income was $11.1 million compared to $14.1 million in the first quarter of fiscal 2025, reflecting higher interest expense associated with our term loan, which was outstanding from October 2025 until our prepayment during the first quarter.

Adjusted diluted EPS was $0.09 compared to $0.13 in the first quarter of FY 2025. Moving on to some balance sheet and cash flow highlights. At the end of the first quarter, cash and cash equivalent was $28 million, and we maintained total liquidity of nearly $127 million. During the quarter, we prepaid our $350 million term loan in full using the proceeds from our IPO and cash on hand. We are pleased to report that we recently amended and extended our ABL, which upsized our facility to $200 million from the previous amount of $125 million and extended the loan maturity to 2031. Our amendment was opportunistic, driven by growth in our borrowing base and designed to further strengthen our liquidity profile. As of quarter end, our ABL balance was $25 million.

Our balance sheet remains strong and flexible, enabling us to self-fund our growth. Turning to inventory. Inventory increased approximately 5% compared to last year, primarily driven by store growth and increases in comparable store sales. We are comfortable with the level and composition of inventory. Total CapEx, net of tenant allowances, were approximately $23 million in the quarter, largely the result of investments associated with new store growth. Turning to our outlook. Following the rebound in traffic in March, we have continued to see healthy sales trends into the second quarter. Demand is tracking in line with our long-term algorithm of low single-digit comparable sales growth, and we feel confident about our positioning as we move through the quarter. At the same time, we are monitoring the cost environment closely.

We anticipate some incremental fuel related pressure during the second quarter through delivery and line haul costs, which are real-time indicators that flow through our cost structure immediately. We are managing this actively through our logistics network and consider it largely manageable at this point. As a reminder, gross margins during the second quarter last year benefited from a highly favorable freight rate environment that is not expected to recur this year. As a result, we continue to expect second quarter gross margins to be approximately 100 basis points below last year. As stated in our earnings press release, we are reiterating our 2026 full year guidance. We continue to expect net revenue of $2.6 billion-$2.625 billion, supported by comparable sales growth of 1.5%-2.5%.

Adjusted net income between $121 million and $129 million. Adjusted EBITDA between $255 million and $265 million. At the midpoint, our outlook implies an adjusted EBITDA margin of around 10%, driven by our expectations for a relatively flat gross margin performance year-over-year and slight operating expense deleverage to invest in our 2026 and 2027 greenfield store growth, including continued expansion into the Southeast and the associated marketing expense. Although the environment remains fluid, our guidance reflects our current expectations for mitigating cost pressures. With respect to tariffs, our guidance assumes that the current 10% tariff rate under Section 301 and the current 25% upholstery tariff rate remains in place for the full year. Our guidance also does not assume any tariff refund opportunity, although we are actively evaluating these avenues.

In addition, we are in ongoing dialogue with our vendor and ocean freight partners on fuel cost mitigation. We have navigated similar environments in the past, including the recent tariff cycle, where a combination of vendor contribution and pricing actions helped offset cost pressure. We believe this experience positioned us well to respond to a range of market conditions. Moving to CapEx. We continue to expect approximately $110 million-$115 million of net capital expenditures for the year, deployed primarily towards new store growth and supporting infrastructure. This includes a majority of the associated capital for the new distribution center in Georgia that we expect to open in 2027. With respect to store expansion, we continue to expect to open approximately 20 stores in 2026, reflecting 10% year-over-year growth.

These stores will primarily be in newer markets in the Southeast, with some infill locations in existing markets. As we noted on our last call, we expect pre-opening costs of approximately $23 million-$24 million in 2026, a portion of which is earmarked for the accelerated timing of a handful of early 2027 stores opening in the Southeast. Finally, to be helpful with modeling, we expect a full year tax rate of around 27% and a full year share count of approximately 135 million. The fully diluted shares beginning in the second quarter is expected to be approximately 137 million. Before I hand the call back over to Bill for closing remarks, I want to thank the entire Bob's team for their hard work.

As our business continues to scale and we face ongoing macro uncertainty, it is our culture and the dedication of our people that drives our results. Looking ahead, we remain focused on our near and long-term objectives. With that, let me pass it over to Bill.

Thank you, Carl. As we close today's call, I'll highlight three things that define both our performance and our path forward. First, our results validate our strategic focus. We delivered 8.5% top line growth and positive comps despite material weather disruptions and a challenging industry backdrop. We continued to see healthy demand through the start of the second quarter, all driven by disciplined execution across merchandising, omni-channel capabilities and customer acquisition. Second, our growth engine is working. We opened five stores in Q1 and remain on track to open approximately 20 stores this year. The strong performance of our North Carolina stores reinforces our confidence in our contiguous southeast expansion plans. Third, we're built to navigate uncertainty. We've managed through cycles before, and we continue to do so through strong vendor partnerships, pricing strategy, and operational agility. The Bob's way is more than culture.

It's our competitive advantage, and it underpins our confidence in delivering double-digit unit growth, low single-digit comp growth, and accelerating EBITDA profitability over time. Thank you to our team for the relentless commitment and to our shareholders for your continued support. With that, we're happy to take your questions. Operator.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate you're lined in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question comes from the line of Simeon Gutman with Morgan Stanley. Please go-

Hey, good morning, everyone. My question is, we're beginning to lap some of the toughest comparisons. Can you remind us how you build your sales plan? You know, how do you know, lap some of these double digit comps? Remind us what the pricing piece of it is and then any of the initiatives that you're, you know, you're layering on top of last year. Thanks.

Yeah. Good morning, Simeon. It's good to hear from you, and thanks for that question. As we think about lapping last year's strong performance on comp sales in Q2, the drivers that we've seen recently continue to be the drivers that we're watching unfold. Strong conversion, maximizing every customer visit, be it on the website or in our stores or on the phone with our Bob's Squad organization. Conversion remains strong as well as AOV. We commented in the release that we saw a nice strong shift of some of our business up into the better price tier, which was planned. It was orchestrated and architected by our merchandising team going back to last fall when they started sourcing new goods.

We're very pleased with the conversion and the AOV growth, and we're continuing to see that into the second quarter against a tough traffic backdrop. Again, you know, we've taken the momentum that came out of March. It's continuing into April. When you take all that together, we're feeling very good about the current trends we're seeing in the second quarter and consistent with our long term algorithm.

Simeon, just to add a couple details. Last year in the second quarter, our comp was a +10.5%, as Bill mentioned, largely driven by conversion. We talked about the performance we're seeing April so far, and conversion has been a favorable driver to our to our performance, so encouraged by lapping that conversion performance last year. Lastly, you asked about pricing. Our year-over-year pricing remains at 7%, largely offset by units, so really not a factor in comp performance.

As a follow-up, this shift that you're seeing into better and best, is this a higher income customer that's allowing you to move there? How is the, let's say, the middle to lower income customer, are they not part of that shift, or you're just doing a better job targeting customers who have the means to be able to trade up?

Yeah, Simeon, great question again. Thank you. Look, we're seeing consistent performance across all the income demos. You know, as we saw this lift into the better price tier, we had an assumption going in that it was being driven by the increased penetration of the higher income households, but not so much. It's pretty consistent across all the demos, I think it's really a reflection of our merchandising team creating these compelling values. You know, as we've talked about before, you know, oftentimes people would be pulled into our store based on things they've seen in our good price tier. What they discover once they come to Bob's is that we have compelling values at all price tiers.

This leaning in with the new merchandise and the better and best price tiers, we've just seen a consistent reaction positively from all the income demos. As far as we've seen thus far, Simeon, it's not being driven by our increased penetration of higher household incomes.

Okay, thanks. Good luck.

Yeah, thank you.

Your next question comes from the line of Oliver Wintermantel with Evercore ISI. Please go ahead.

Yeah, good morning, guys. You opened five stores in 1Q, excuse me, and expect 20 for the rest of the year. How are the newest cohorts performing versus underwriting, especially in the greenfield markets? Has anything changed in your view of mature store productivity or ramp timing?

Yeah. Good morning, Oli. Thanks for that question. Look, we're very pleased with the performance of the stores we've opened in Q1, and it's very consistent with the prior cohorts in 2025 and 2024. Again, this is a reflection of how we approach new markets. You know, we spend on average two years studying and planning market entry, right? We hold focus groups. You know, we study the competition. We study intensely the kind of furnitures being bought in those markets. With that level of depth and planning, we continue to see very consistent new cohort performance. I'm very pleased with the five that we've opened thus far and very encouraged that the playbook that we're executing will continue to yield those results. Specific to your question, the five are performing very, very well.

You know, the remainder are either, you know, under construction or at least under lease. We have really great visibility into our 26 cohort in total.

Got it. My follow-up is on gross margins. It was flat year-over-year despite the new Midwest DC and inventory growth. Can you help us size the track from the new DC and how we should think about freight mix and protecting the margins over the balance of the year with I think you said 100 basis points down in the second quarter, so more view of the second half. Thank you very much.

Sure. In terms of Q1, we did have the new DC opening in January that was ramping up to utilization. As we sit here now in May, that's largely complete and fully utilized. The offset there and the expense that we saw to get that up to full capacity was fully offset by what we mentioned earlier on a trade up into the better category from good, which tend to carry a higher margin, in addition to lapping a more favorable freight environment this year than we had last year in the first quarter. We head into the second quarter, we are now lapping a more favorable freight environment that occurred last year. That's the 100 basis point headwind that we mentioned.

Largely in line with what we had anticipated, given this was lapping a more challenging environment. As we head back into the remainder of the year, we're expecting some sequential improvement quarter-over-quarter into gross margin, largely driven by the continuation of the better and best strategy that we have landing in our stores in terms of our product mix.

Thanks very much.

Thank you.

Your next question comes from the line of Bobby Griffin with Raymond James. Please go ahead.

Good morning. This is Alessandra Jimenez on for Bobby Griffin. Thank you for taking our questions. First, I wanted to follow up on the current cost environment. Can you walk us through the puts and takes and how much incremental cost pressure you could see for the year if crude remains at current levels versus the potential offset from lower tariffs?

Sure. I'll start there. As we mentioned on the call, I'll speak to it from a guidance perspective and how we're looking at what we expect. Our guidance assumes current tariff policy. As a reminder for that policy, we are operating under a 10% tariff rate under Section 122 and operating under 25% upholstery tariff rate. Our assumption here is that this continues. The assumption also is that there's really no additional tariff refund opportunity that's implied in the guide. Secondly, as we think about any fuel-related pressures, it is a volatile environment. Right now, the guide assumes that any incremental costs that we would incur would be fully mitigated under our tried and true playbook.

To put that in context a bit, in our 35-year history, we've seen several periods of volatility, and we've successfully navigated these and maintained, you know, minimal disruption and in year profitability. This is a demonstrated capability that we have. We have confidence that the ongoing volatility that we are seeing in 2026 with the team and the playbook to fully navigate.

That's very helpful. Then maybe just a follow-up on that. Do you anticipate any pricing adjustments in the second half of the year?

I'll jump in that first, and Bill may weigh in. As a reminder to our playbook for cost mitigation, pricing is a factor. Right now, the pricing would be considered under a variety of scenarios as we think about where the cost landscape ends up landing. That's just one of several factors within our playbook. We also think about vendor partnership, both on an ocean freight vendor and our product vendors, in addition to thinking about, you know, country of origin sourcing and then how we think about the costing within our goods.

Yeah.

Do you wanna jump in?

Yeah. You bet, Carl. You're exactly right. Let me just add one thing here. As we all know, you know, pricing and value are at the heart of our value proposition to the consumer. We're always committed to maintaining value without compromise. As we think about pricing, as Carl mentioned, you know, we have a playbook to deal with cost issues, and it's well tested and well proven. Pricing is always the last thing that we will take into consideration, and we will always do it with an eye towards maintaining our price leadership or value leadership in every market we serve. We take it very seriously. We use it when we need to, but we have other pillars that we lean on first. For example, working with our great vendor partners.

They've been really great partners through all kinds of cost disruptions over the last five years. Focusing on price is something that we take very seriously, and we're always maintaining our commitment of value without compromise.

Thank you so much, and best of luck here in 2Q.

Yeah. Thank you.

Our next question comes from the line of Peter Benedict with Baird. Please go ahead.

Hey, guys. Thanks for taking the question. I guess you mentioned in the prepared remarks the positive momentum you've got with OMNI Cart penetration rates as well as, I think it was financing penetration. I wonder if you could dig into that a little more, maybe give us some color on the magnitude of the change there and maybe how much further you think you can take it.

Yeah, Peter, thanks for that question. We appreciate it. We love talking about our OMNI Cart. Look, our strategy is based on the belief and that the consumer naturally behaves in an omni-channel way when they're buying furniture, which means, you know, they use digital, they come into the stores, they go online, they call our telecenter, et cetera. We've enabled that uniquely with this omni-channel cart. Now, we've only launched it a couple years ago. It's still a relatively new thing for us, but it's rapidly becoming very popular with our customers. I get letters literally every week from customers who appreciate it, and it's also a manifestation of our low-pressure environment, right?

The customer comes into our store and is helped by one of our guest experience specialists, and they're not quite ready to buy at that moment. Which is not unusual, right? Furniture is a considered purchase. You know, we will create on their behalf what we call the omni-channel cart. We'll put into that cart all the things that they looked at in the store, and we will email it to them. They can go home, they can open it, look at it with their significant other. They may choose to purchase on our website, which is an exact replica of the experience they have in the store, so they can buy online or they can take that cart back into the store and close it. It's growing in popularity, it's easy, and they appreciate it.

That's the part I wanna underscore here is that we're getting thank you letters and it has a higher AOV and higher closing rate than many of our other channels. We're very excited about how it's performing. It increased last quarter. I'll let Carl jump in, you know, to add to this, I just wanna underscore the importance to the consumer of our OMNI Cart and how much they appreciate that we do it on their behalf. Carl, go ahead.

I'll actually jump in on your financing question. Financing remains a headwind in terms of our penetration, and our mix is lower than historical averages. Encouragingly, within the second quarter, we do expect to transition our primary financing partner to Synchrony, and we see a number of benefits. We see better approval ratings at the primary level. We see more customer insights, fees and incentive structures. Our secondary, tertiary lease to own remain unchanged, so we can really provide financing to all customers, but we do see this as a potential opportunity in the back half.

Oh, that's super helpful. My follow-up would just be, maybe, Carl, around the margin gaps across your mix, across good, better, best. Can you remind us maybe what the differences are there as you see the consumers continue to trade up? Thank you.

Sure. It's an average of averages. When you look at the better and best category, they tend to run at a higher margin rate than our good category. It really does depend by family and by style. It's difficult to quantify the exact number, but they tend to run more favorable. As we see a mix shift into better and best, we anticipate that being benefit on the comp side from an AOV perspective and on a overall gross margin perspective.

Got it. Thanks so much.

Our next question comes from the line of Michael Lasser with UBS. Please go ahead.

Good morning. Thank you so much for taking my question. There still remains an intense amount of focus on how Bob's will maintain its long-term, low single-digit comp growth as the business confronts more difficult comparisons, especially getting into the back half of the year. Seems like your message today is, given the momentum that you're seeing, along with more opportunities to improve conversion, you feel confident that you'll be able to do that. A, is that fair? B, at what point should we hold Bob's accountable for driving more traffic in order to be able to provide more cushion for the ability to drive the comp? Thank you.

Yeah, Michael, good morning. It's good to hear from you, thanks for that question. Look, you know, we're very pleased with the performance we've seen thus far into the second quarter. Again, I would underscore our performance with conversion and AOV is continuing to drive our year-over-year performance. We feel very good about that. Again, in line with our long-term algorithm. We have a very effective marketing organization, you know, we continue to take market share when it comes to traffic as well. Again, you know, we reach out. We have a plan to target the consumers and bring them back into our stores. We have very effective marketing, very high recall, for example.

You know, we're punching above our weight on ad recall and ability to drive traffic into our stores. Our traffic share continues to grow. you know, we would certainly benefit from a shift in the industry towards positive overall traffic growth. In the meantime, we're not waiting for that, right? We're leaning in to take share of traffic, and we're seeing that as a result. Carl, you wanna jump in on any of that?

I'll just jump in on the traffic component. As Bill mentioned-

Yeah

The industry has been challenged. Where we're focusing is what we can control. From a traffic perspective, it's qualified traffic. It's getting to know our customer better, and targeting customer segmentation. At Bob's, this is all beginning to be more and more AI-driven, understanding who our customer is, what they've shopped at, but also, the AI capabilities that let us see that customer behavior across all their different patterns and all the areas they shop. This has been encouraging that even as traffic levels in the industry have remained challenged, we can make sure we're targeting the right customer at the right time, driven by AI tools and capabilities, and have them come in to be more qualified to purchase.

Yeah, perfectly said, Carl. All in service of our consumer, right? To better serve them. Great question, Michael. Thank you.

Thank you. My follow-up question is, it seems like your expectation for the back half of the year is that conversion in AOV will still be the drivers of your comp. Can you give us a frame of reference of what you need to see in order to continue to drive those levers as a way to generate this low single-digit same store sales increase? Meaning, where do you stand on average versus where the opportunity lies? Are you seeing some stores at the hurdle rate that you expect the entire chain to be?

In addition, to what extent do you think those factors, AOV and conversion, have been helped in the last few months from something like tax refunds, which in the absence of that benefit in the back half of the year could make the business a little bit harder to drive?

Michael, look, another great question. Let me say this, you know, we have been in the process for the last couple of years, rolling out what we call our retail operating system, right, all the productivity and efficiency enhancements in our stores. Concurrent with that, continuously improving our digital environment with our e-com site, et cetera. You know, those continue to roll out. We're nowhere near what I believe can be the top productivity results coming from these enhancements. We learn from them and continue to improve them in a real-time basis. As excited as I am about the improvements that we've seen in store productivity and e-com productivity, the OMNI Cart, which glues it all together, I'm even more encouraged by the changes that we have coming.

I feel very confident that the approach and the strategy we've taken in the last few years has not yet yielded the kind of improvements that we see as a potential. We're gonna stay the course. We're gonna continue to do what we've been doing, enhancing all this to drive better customer experience. I would expect that we would continue to see those results in improved conversion in AOV, plus other things that Carl's called out. For example, you know, introducing our new financing partners midyear with Synchrony. You know, we're very encouraged about that.

As we've reported, you know, prior, we've seen, you know, our financing penetration drift downward over the last several quarters, both as a result, we believe, of pressure on the consumer, but also we believe that Synchrony will be bringing to the table a better offer for the consumers. We're, again, we're just very excited about that. Look, you raised the issue of tax refunds, that happens every year. You know, we've digested the tax refund impact as we expected, we obviously don't rely on the tax refunds to deliver results into the second half.

Again, you know, we're very clear on the road ahead, what we've implemented and what we have yet to come, and feel confident that we'll continue to see the drive through both conversion and AOV that we've seen in the recent past. It's stay the course and keep driving the results that we've seen.

Thank you so much, and good luck.

Yeah, thanks, Michael.

Our next question comes from the line of Christopher Horvers with JPMorgan. Please go ahead.

Thanks. Good morning, guys. I wanted to follow back up on the new store performance. As you think about the North Carolina stores last year relative to your pro forma model of $9 million mature AUV, and 84% year one new store productivity, you know, how did those stores come out of the gate relative to that? You know, I would think that your brand awareness is pretty relatively low in that market. Does it give you any sort of optimism that perhaps we mature at a much higher level than that $9 million?

Yeah. Hey, Chris, good to hear from you today, a great question. I love talking about our North Carolina stores, thank you. Look, again, let me underscore first and foremost that we take on average two years to study and plan our entry into a market. Look, North Carolina was our first major move into a southern, a southeastern market, although we did test our model in Southern Virginia for a year first to get a handle on it. Prior to the entry into North Carolina, you know, we held focus groups. We studied what furniture was being sold there, we were highly aware that North Carolina is the mecca and hub of furniture in the U.S. We took it very, very seriously. I think the, you know, the results are just amazing.

You know, we were welcomed there. To your point about lower brand awareness, it was about average for us going into a market that hasn't necessarily seen Bob's before. We knew the brand awareness level. We tailored our entry to that market after holding focus groups, showing them our advertising, getting responses to it and reactions to it. We went in with a well-prepared plan. We executed it really, really well, and the consumers there responded really well. On top of that, let me just add that the, you know, just to put a cherry on top of that cupcake, we're sponsoring our first ever NASCAR.

You know, again, in response to trying to, you know, make sure that the people in North Carolina know that we're a part of the community. We wanna be a part of who they are. All that put together, our entry has been very well received. The stores are over-performing as a cohort. I'll let Carl jump in on any additional comments. It gives us, Chris, really high confidence that we will continue with this approach as we think about our entry this year into Tennessee, into South Carolina, and elsewhere. You know, I would call this overall approach, you know, confident humility, right? We're confident in our playbook. We're humble enough to listen to the consumer, study the markets, modify our approach as needed.

The consumers specific to your North Carolina question have responded very well to that. Again, great question, and Carl, you might wanna add into that.

I'll just jump in from a model perspective. We continue to believe that our new store prototype is the appropriate way to think about our new store openings. $9 million by year five, 84% by the first year, and that all implies 60% cash on cash return by year two and 80% by year five, which is a highly attractive use of capital. We're encouraged by this. Having said all that, as Bill alluded to, we saw some outperformance in North Carolina. That's giving us confidence to continue our expansion in the Southeast. It's a bit too early to be looking at that as a true indicator of any changes to our prototype. We're continuing to track along with those plans.

That's fantastic. Then as you think about tariffs. Could you perhaps size, you know, tariff refunds? The relative to last year, what were your tariff rates year, you know, in the back half of 2025? As you think about this category, you know, big ticket durable, definitely some consumer pressures out there. It does, based on what peers have reported, does seem like you're taking share. How do you think about, you know, the risk of deflation in the category? Sort of the puts and big picture puts and takes, like what are potential, you know, refunds? What are tariff rates year over year? How do you think about the risk of the category actually becoming deflationary?

I'll jump in with the tariff refund part. Bill, you can maybe talk about just the overall category, inflation, deflation. From a tariff refund perspective, we applied for a tariff refund. It's too early to tell timing or certainty of the refund. It all remains in audit process. We'll just leave it as it's a bit too early to tell in terms of the refund itself. From a tariff rate perspective, we've been operating at 10%, Section 122 tariff and 25% tariff. That 10% was previously 20% in last year's in last year's environment. There was a steel and aluminum tariff that was live last year as well, which was largely de minimis for us specifically.

The 25% upholstery tariff is really one area that's been more outsized, given 50% of our product mix is upholstery.

Yeah. Excellent, Carl. Look, Chris, as far as deflation or inflation, we don't have a crystal ball for sure. You know, we're gonna maintain our commitment to be the value leader in every market we serve. We work very closely with our vendor partners. I was at the High Point Market a few weeks ago with our merchants and buyers, speaking first person with our major vendors and the CEOs there. Look, we're gonna work collaboratively to make sure that we can maintain our value leadership and protect our margins. I'm thankful for those long-term relationships. As far as whether there's deflation or inflation, I don't have a crystal ball on that. We're just trying to maintain, and we will maintain our value leadership in every market we serve.

That's great. Thank you very much.

Yeah. Thanks, Christopher.

Your next question comes from the line of Robert Ohmes with Bank of America. Please go ahead.

Hey, Bill. Hey, Carl. Thanks for taking my question. My first question is just a follow-up on the new markets. You know, you're calling out the Carolinas. Is anything changing in your thinking about, you know, how fast the profitability of new markets, you know, ramp up versus existing markets? Is it maybe cheaper to operate, you know, in the Carolinas than in the Northeast? Is it maybe less competitive there? I would love to just get your thoughts on, does it seem like newer markets are gonna be, I don't know if easier is the right word, but maybe easier to hit higher levels of profitability than you initially thought, you know, based on what you're seeing in the Carolinas?

Sure. I'll jump in with that. First, just the prototype is probably the best way to model it. Anytime you enter a new greenfield market, you do wanna make sure you're investing in the supply chain infrastructure and you're investing in your marketing to make sure you're entering with first share of voice and building up your brand awareness. Brand awareness is highly correlated with your sales and the trajectory. That investment is one area of the new store operating model that may not accelerate the margin performance, but will operate alongside what we would have expected. I would continue to think through our new store prototype as the right way to model on a go-forward basis.

That's really helpful. Just another quick follow-up. The, you know, having great success, I think you guys are seeing a lot of great success up to better, and I know you're throwing in best, but is there more of an unlock coming, you know, in the best areas of the store? You know, is there any sort of merchandising architecture coming, you know, that could accelerate trade up, you know, beyond better into best?

Yeah. Robert great question. This is Bill. I'll take that one. Look, you know, our merchants are very thoughtful about planning out the architecture of our price tiers and our products in each one of the categories we operate. They're constantly looking to make sure that as a standalone value, every article speaks to the value commitment that we make to the consumer. They also spend a great deal of time thinking about how they perform relative to each other within the architecture. Good to better to best. We've introduced some new best products as well, and we like how they're performing. We will continue to invest in all those.

You know, we have to always protect our opening price when it's good because, you know, we're known for that, and we're always gonna have great leadership at that price tier. We're always gonna be very thoughtful about bringing out new product in the better and best that follow trends, that create compelling values, that if the consumer sees it and wants it, they can step up with confidence that even at the better and best price tiers, they're getting the best possible value. Yes, we saw an outsized shift to better this last quarter, and it's continued into this quarter. We've seen good performance among our new entries into the best price tier. And we're not done. We'll never be done.

We'll continuously evolve and architect across all three of those. To be very specific, we like the performance we're seeing of our new best price tier items as well.

That sounds great. Thanks so much.

Yeah, you bet. You bet, Robert. You bet.

Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Please go ahead.

Thanks. Good morning. A question for Carl initially, if I could, just about thinking about margin puts and takes as we move through the year. You gave some comments on 2Q. Just with some of the moving pieces and input costs and potential price increases, can you just remind us how you're thinking about the margin as we move through the back half of the year? Thanks.

Sure. First, as we think about our playbook of continuing to drive the customer into better and best, that's gonna be an opportunity for us to drive margin, and we would expect some sequential gross margin improvement throughout the year heading into the back half. That's just underlying the opportunity we see from a product mix perspective. In terms of the cost environment, it remains volatile. We're carefully monitoring. We know we have a playbook. The cost that would potentially actualize would first come at origin, and there would be country of origin, and then it would take time to make its way through to our distribution center, in addition to our moving average price inventory accounting.

It would take some time, we're gonna watch through that as the cost environment begins to become more certain and we understand the landscape. Again, price there would be a part of the equation. There's other areas that we constantly look at from our playbook to mitigate those potential cost impacts.

That's great. Maybe I could zoom out, and we could just talk about the competitive landscape. Curious if you've seen anything of late? We know from many manufacturers there were price increases going through to retailers in May. Curious if you've seen anything and the degree to which you think that the Bob's value proposition could resonate even more in a backdrop where your competitors keep raising prices? Thank you.

Yeah, Brad. Hey, this is Bill. It's good to hear from you. Thanks for that question. Look, as I mentioned a moment ago, I was with the our merchants and buyers at the High Point market a few weeks ago. Obviously, the topic du jour is, you know, the impacts of oil cost on both transportation as well as input costs, right, to the vendors. As we said a few times, you know, we have this now well worn out playbook on how to deal with cost increases. Thus far, we're in a pretty good place. We're feeling very good about the costs that we're getting in line with what we need to maintain the margins we have.

We have a playbook to deal with them as they may go up. As Carl intimated, you know, we have multiple strategies within that playbook, one of which is working with our vendor partners to keep the costs low. If costs come down, you know, we have the ability to do things such as resource product to other vendors or other venues. It's one of the strengths of our merchandising strategy, right? Because we don't sell any third-party brands in our stores. Everything that we sell is made for us, which gives us tremendous flexibility on sourcing between factories, between geographic venues. We have in the past, and we will as needed in the future, make moves to protect our cost and our value proposition.

As we've said, you know, pricing is always the last thing we'll take, and always with an eye towards where the competitors are in any given market to maintain our value commitment to the consumer. We like where we are right now. We're watching everything very carefully. You know, admittedly, it's a very dynamic backdrop. In this situation, having these long-standing relationships with our vendor partners and their willingness to work with us to maintain that relationship is playing out yet again right now for us.

Very helpful. Thanks, Bill.

Yeah, you bet, Brad.

Our last question comes from the line of Mike Baker with D.A. Davidson. Please go ahead.

Okay, great. thanks for sliding me in. I guess I'll ask, you know, bigger picture. Southeast, you've talked a lot about North Carolina and then South Carolina and Tennessee later this year. How big can South, can the Southeast be for you? Florida is out there. I don't know if Texas is considered Southeast, but, you know, Florida and Texas, huge markets. We suspect that you're looking at real estate down there. Can you talk about how big Southeast can be and when you could hit those two big markets?

Yeah, Mike, it's good to hear from you. This is Bill. Listen, we love talking about our growth plans, of course. Look, we have shared in recent past that we believe there's approximately 100 stores available to us in the southeast, plus or minus. You know, as we get further in, you know, we'll know better and refine. We have a long-term strategy, you know, by 2035 of 500+ stores. We don't know that that's the top end. We just know that that's a major milestone of, like, 2035. The southeast is a focus for us right now. It's not the sole focus. We continue to do infill stores in all of our regions, right? We're not done in the northeast.

Believe it or not, our original region of the Northeast, we opened some new stores just this past year. Plenty of infill left for us. We're excited about the Southeast. Again, a target of approximately 100 stores, and as we get closer to that, we'll know better. You know, our strategy is contiguous growth. You know, as we think about expanding our distribution model, first to North Carolina, now this year into South Carolina and Tennessee. As we solidify those, we'll continue to expand into other markets in the South, like you might imagine, you know, Georgia, Florida, et cetera. Always with a very disciplined eye towards studying the market, preparing our entry, being disciplined about it, and always with a commitment to value without compromise to the consumers in those markets.

Hopefully at the higher level, it gives you good visibility into our strategy and our imminent plans. Again, all of it underscored by our satisfaction with the performance of North Carolina and our excitement for entry into South Carolina and Tennessee this year.

What I'll add to that is our current stores in the southeast are being serviced by our existing infrastructure. As we mentioned on the call, later this year in 2026, we'll begin to allocate some capital to building a distribution center in Georgia. We're encouraged that that should be able to service the opportunity that Bill walked us through.

Understood. Appreciate the color. Thank you.

Yeah, thanks, Mike.

This now concludes our question and answer session. I would like to turn the floor back over to Bill Barton for closing comments.

Thank you. Thank you everyone for joining the call today. Obviously, you know, we're pleased with where we are. We're excited about the remainder of the year. We have our strategy and our plans, a proven playbook for dealing with various disruptions, and we're disciplined operators, and we look forward to speaking to you again in the future. Thank you for taking the time to speak with us today.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.

Thank you, and good afternoon, everyone. Welcome to Bob's Discount Furniture 2025 fourth quarter and full-year earnings conference call. At this time, we kindly request that all participants remain in listen-only mode. A question and answer session will follow the formal prepared remarks. As a reminder, this conference call is being webcast live and recorded for replay. On the call today are Bill Barton, President and Chief Executive Officer, and Carl Lukach, Executive Vice President and Chief Financial Officer. Before we start, I'd like to remind everyone that the language on forward-looking statements included in the earnings release also applies to the comments made during the call. The release can be found on the website at ir.mybobs.com, along with reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Let me now turn the call over to Bill Barton.

Thank you, operator. Good afternoon, and thank you for joining us today for our fourth quarter and full fiscal year 2025 earnings call. It's an historic moment for the Bob's team to present our first earnings call as a public company following our successful IPO last month. At Bob's, we believe that everyone deserves a home they love. This core belief goes back to our founding and the important role we play in providing high-quality, stylish furniture at everyday low prices. At the center of our flywheel and in everything we do is value without compromise. This promise is what has propelled us to become a coast-to-coast high-growth retailer with over 200 showrooms across 26 states. We are powered by the dedication and hard work of our nearly 6,000 team members who live our values of honesty, integrity, transparency, and fun every day.

The Bob's way represents a culture that sets us apart. Our guest experience specialists present a welcoming, low-pressure sales environment that differentiates the customer experience. Our team members build careers at Bob's, evidenced by an average store manager tenure of over seven years, coupled with a strong track record of internal promotion. Our customer satisfaction ratings exceeding 90% are a testament to our compelling store and online experience. In addition to our curated assortment and differentiated value proposition. I want to thank each of our team members for getting Bob's to where we are today and for their continued commitment that will propel us into the future. Before I dive into what makes Bob's so unique, I want to briefly touch on highlights from our full-year performance. 2025 was a strong year as we continued to gain market share and successfully navigated ongoing macro uncertainty.

For the full-year, total net sales increased 16.8%, driven by new store expansion and comparable sales growth of 7.7%. Adjusted EBITDA grew 24.1%. Our performance is reflective of both our structural advantages and continued strong execution, healthy new store economics, and an enhanced omnichannel experience supported by investments and initiatives that are still in the early stages of yielding results. At Bob's, providing value to our customers is at the center of our flywheel, supported by distinct cost advantages as we scale. These strategic advantages are what makes Bob's so differentiated in the marketplace. Our first advantage is our merchandising strategy, which centers on a narrow and deep curated assortment supporting our everyday low price model.

We estimate that on average, our pricing is about 10% below our value-oriented furniture competitors' lowest promoted prices, which we believe equates to roughly 20%-25% below their listed prices. Our curated assortment allows us to leverage our scale coupled with deep vendor relationships to provide both quality and style and to maintain our price leadership. This strategy enables strong in-stock positions with 87% of our inventory available for delivery in as little as three days. Our second strategy advantage is our omnichannel capability, which is a key differentiator at Bob's. Furniture is inherently an omnichannel purchase, and we are uniquely positioned to meet customers wherever they are in the shopping journey, whether online or in store. Our retail footprint spans coast to coast and offers significant white space opportunity, supported by a proven and portable model highlighted by a warm and friendly shopping environment.

Our stores feature free snacks and coffee available in our cafes and knowledgeable sales associates equipped with digital and AI-driven technology to enhance the selling experience. In addition, during 2023, we completed a digital transformation that optimized our website and enables customers to transact seamlessly wherever they prefer. In 2025, we began to see the financial benefit of a newly launched feature we call Omni Cart, a digital cart that travels with the customer between stores and online. Today, if you find something you love in a Bob store but are not ready to complete the purchase, an associate can create a digital cart and email it to you. You can complete the transaction online, come back into the store, or get on the phone with us.

We are committed to executing a frictionless experience wherever the customer prefers to transact, including the same prices across channels, the same product, and the same delivery experience. Our Omni Cart penetration was a meaningful driver of 2025 sales performance. Positively impacting conversion, and we expect to see continued contributions from this initiative over time. Our third strategic advantage is driving brand awareness through marketing leverage and compelling messaging. Our marketing strategy is proven and resonates with our customers. As we've scaled the business across more markets, we've increased national aided brand awareness to 45%, growing consistently each year and leaving room for continued expansion. As a point of reference, in our top 10 DMAs, our aided brand awareness averages approximately 70%. These three advantages, everyday low price, seamless omnichannel experience, and growing brand awareness, work together to attract a broad customer base.

Our differentiated voice resonates broadly across multiple cohorts. We attract customers throughout all life stages and income levels, including higher income, value-seeking households. In 2025, we saw a meaningful increase in new customers earning over $150,000, underscoring the broad appeal of our value proposition. We also see a strong balance across age cohorts, which makes sense given that consumers often purchase furniture at major life milestones, whether setting up their first home, growing a family, or entering retirement and downsizing. Looking ahead, we are focused on three primary strategies to drive our long-term growth, growing our store base across new and existing markets, driving comparable sales, and leveraging our scale and density to drive efficiency and margin expansion. Let me walk you through how we're executing on each of these priorities. First, store growth.

We continue to execute on a disciplined expansion strategy built around our proven portable store model that delivers strong cash-on-cash returns and an average payback period of approximately two years. We ended 2025 with 209 stores, adding 20 new locations, which represented 11% growth. During 2025, we entered two new markets, including our first entry into the Southeast region in North Carolina. By the end of the fourth quarter, we opened six stores in North Carolina, and performance to date has exceeded our expectations. We anticipate opening an additional four stores in North Carolina in 2026 as we continue to densify this important market for us, which is representative of how we grow. We do not just open stores, we develop markets.

We spend time studying pricing and competition, conducting focus groups, evaluating cluster-based real estate opportunities, and building a market-specific approach to driving brand awareness. As we look ahead, we will apply a similar playbook from our successful North Carolina openings as we enter new markets in 2026 and beyond. We have strong pipeline visibility with plans to open approximately 20 new stores in 2026, and we see clear and actionable path to more than 500 stores by 2035, representing almost 2.5 times our current footprint. Turning next to our plans to drive comparable sales growth. We believe that three foundational elements drive sustainable comp store sales, driving qualified traffic, increasing conversion, and growing average order value. Let's start with traffic.

We think about driving traffic to our stores and our website through a comprehensive strategy that revolves around investing in and leveraging our robust customer data platform to broaden our customer reach. For example, our deep customer insights allow us to efficiently identify and segment customer cohorts that have a high propensity to purchase from Bob's and to provide targeted product recommendations to drive repeat purchases. In 2025, we saw outsized performance in higher income cohorts, and we see opportunity to continue driving incremental sales through additional consumer cohorts within age, household income, and regional targeting. Our marketing approach is highly digital and tailored to the communities that we serve. By combining data-driven precision with creative community-focused messaging, we're not just driving traffic, we're building lasting customer relationships that fuel sustainable growth. Turning to conversion. We've made multiple investments in recent years in our in-store technology.

Tools such as AI-driven workforce scheduling systems, manager check-in tools, and real-time conversion dashboards support our associates so they can provide a consistently excellent Bob's experience for the customer, including selling with the support of the Omni Cart that I mentioned earlier. Next, increasing average order value. As an everyday low price leader, we don't drive comparable sales with price increases. Rather, AOV growth is supported by offering additional features and benefits to our merchandise that can drive average ticket and create a compelling proposition to trade into our better and best categories. In addition, we're excited about our store clustering initiatives, where we're emphasizing specific assortments by region. We are piloting this initiative in some of our more urban store locations around New York City, where we emphasize products for smaller space living.

This allows us to more efficiently align inventory with customer demand and showcase products that resonate in these markets while leveraging our existing supply chain and inventory planning capabilities. We're in the very early innings of this initiative, but we believe this could be a meaningful unlock for us. We also believe that offering our customers more constructive financing options could be a meaningful opportunity for us to drive higher average order value. Historically, our financing mix represented approximately 50% of overall purchases, but for 2025 it was 42%. We're in the process of transitioning to a new primary financing partner, and we believe we have an opportunity to increase that mix. Lastly, let me touch on how we plan to leverage our scale and expand margins. As we densify, we will continue to leverage distinct cost advantages across merchandising, supply chain, marketing, and fixed costs.

Our purchasing power with vendors, combined with our sophisticated supply chain network, provides a foundation for margin expansion while consistently reinvesting value back into our customers. As discussed today, and with many who we have met with through the IPO process, Bob's is a unique and differentiated model. While at face value, the business seems simple, executing at scale is complex and takes a strong team to deliver. I could not be more proud of our teams and the broad-based support that we have across the organization. Our internal employee survey positions Bob's within the top 5% of consumer retailing peer organizations. Looking ahead, despite ongoing macro uncertainty and near-term disruptions from winter storms, Bob's has a long history of navigating successfully in various market conditions, and I'm confident in our ability to continue to do so. I'm energized by the tremendous opportunity still in front of us.

We will continue to gain market share through disciplined and prudent execution of our playbook. We have a clear and actionable path forward, supported by strong unit economics, a proven portable business model that works across diverse markets, best in class omnichannel capabilities that meet customers where they want to shop, a differentiated merchandising strategy that delivers innovation, value, and quality, and an exceptional team that executes with consistency and passion. With that, let me turn the call over to Carl to review our financial results and outlook in more detail. Carl?

Thank you, Bill. Echoing Bill's remarks, I am incredibly proud of what our team has accomplished to reach this milestone as a newly public company. We have been preparing for this moment with discipline and focus, and we now have the teams, systems, and strategies in place to successfully lead Bob's into this next chapter of growth. We had a strong fiscal year 2025, particularly during a volatile macroeconomic, where we leveraged our investments in tools and capabilities to fuel top line growth and gain market share. For the year, we delivered 16.8% sales growth, supported by new store openings and comparable sales growth of 7.7%. This performance helped to drive 24.1% year-over-year growth in adjusted EBITDA and resulted in a healthy adjusted EBITDA margin of 10.2%, despite navigating a volatile tariff environment.

For the fourth quarter, net revenue increased 8.2% to $648.8 million, driven by new store openings and comparable sales growth. We opened three locations in the fourth quarter, and we ended the year with a total of 20 new stores and an ending store count of 209 locations. As Bill touched on, we entered two new markets in 2025, North Carolina and Vermont, and are very pleased with the performance we have seen in these locations as well as more broadly across our new store cohorts. Adjusted comparable sales during the quarter increased 2.8%. This performance includes an estimated timing shift of deliveries between the third and fourth quarter last year that negatively impacted the fourth quarter comp by about 180 basis points due to a network disruption in 2024.

Our comparable sales performance was primarily driven by growth in conversion and higher average order values in our retail channel, as well as increased e-commerce traffic. For the year, our 7.7% comp was primarily driven by our multi-year investments to drive conversion. While we lapped the initial impact in the fourth quarter, these foundational improvements will continue to support performance over time. Fourth quarter gross margins increased 20 basis points to 45.7%, compared to 45.5% in the prior year. The year-over-year increase in our gross margin rate was driven by more normalized freight costs compared to higher costs last year. This increase was partially offset by product mix shifts. During the fourth quarter, while we experienced higher cost associated with tariffs, we were able to largely offset the impact through vendor credits and targeted pricing actions.

SG&A as a percentage of net revenue increased approximately 30 basis points compared to the prior year. If we adjust for the fourth quarter timing shift of deliveries last year, the SG&A rate would have been flat for the quarter. In total, net income grew over 6% to $41 million, compared to $38.6 million last year, and adjusted EBITDA increased 4.9% to $76.5 million. Turning to the balance sheet, by the end of the fourth quarter, we held approximately $53 million of cash on hand and maintained total liquidity of nearly $178 million. Inventories increased approximately 15.3% compared to the prior year, primarily driven by store growth and increases in comparable sales. We are comfortable with the level and composition of inventory.

Total capital expenditures for the year were approximately $83 million, driven by investments associated with new store growth. In February, we successfully completed our initial public offering, resulting in $302 million of net primary proceeds. These proceeds, together with cash on hand and other available liquidity, were used to prepay all of our $350 million term loan, resulting in a long-term debt-free balance sheet. Now turning to our outlook. As Bill mentioned, we had a strong start to the year, with comparable sales growth in the first few weeks of the quarter running modestly ahead of our low single-digit algorithm. However, that was followed by significant snowfall and prolonged cold weather that materially impacted store traffic and sales across most of our footprint.

We are no strangers to winter weather, yet this year was exceptional as Winter Storm Fern and the February blizzard struck on weekends, which typically generate more than double our weekday sales, resulting in five times more operational hour losses than last year. Taken together, we estimate that weather represented an approximate 340 basis points headwind to comparable sales growth in January and February. Encouragingly, as we've moved into March, traffic has rebounded and our recent sales trends have benefited from a partial recapture of lost sales from the weather impacted weeks. Therefore, we expect the first quarter to deliver comparable sales growth of approximately 1.0%-1.5%.

For the first quarter, we also expect EBITDA margins to be around 6% compared to 7% last year, driven by flow through of the expected comparable sales performance as well as opportunistic marketing spend. As a reminder, the first quarter is typically our lowest EBITDA margin quarter, driven by lower sales volume. As we look to the remainder of the year, we continue to anticipate top line performance in line with our long term algorithm. For the full-year, we expect net revenue of $2.6 billion-$2.625 billion, supported by comparable sales growth of 1.5%-2.5%.

As I mentioned in March, we expect to realize a partial recovery from the lost weather-related sales, and the midpoint of our comparable sales growth range assumes no additional recovery beyond the first quarter and no additional benefits from the macro environment with respect to the housing market or consumer health. Turning to profitability, we expect adjusted net income between $121 million and $129 million and adjusted EBITDA between $255 million and $265 million. At the midpoint, our outlook implies an adjusted EBITDA margin of around 10%, driven by an expectation of relatively flat gross margin performance year-over-year and slight operating expense deleverage to invest in our 2026 greenfield store growth and the associated marketing expense.

In addition, our outlook incorporates pre-opening costs of $23 million-$24 million, reflecting the potential strategic acceleration of a handful of store openings into early 2027, and a 53rd week impact, which we expect to contribute approximately $40 million in net revenue and $5 million in adjusted EBITDA. Turning to CapEx, we plan to spend approximately $110 million-$115 million of net capital expenditures focused on store growth and supporting infrastructure, including a new distribution center in Atlanta that is expected to open in 2027, with the majority of that associated capital to occur this year. We expect to open approximately 20 stores in 2026 or 10% store growth. Our 2026 cohort includes new greenfield markets in South Carolina and Tennessee. In addition to continuing our expansion in North Carolina, where we saw strong reception last year.

Our pipeline also includes a handful of single store market locations in the Midwest. As a reminder, greenfield and single store market locations typically require investment in marketing and supply chain in the first year, which is fully factored into our expectations. In the first quarter of 2026, we opened a new regional fulfillment center in the Midwest to support continued expansion in this region. Finally, to be helpful with modeling, we expect a full-year tax rate of around 27% and full-year share count of approximately 137 million. We expect to generate positive free cash flow for the year with the first half of the year, including consistent borrowings under our revolver to support the full repayment of our long term debt.

We expect to incur net interest expense of approximately $8 million, of which $5 million is expected to be incurred in the first quarter, compared to $7 million in full-year 2025. This excludes the one-time impact of debt extinguishment costs. In closing, we continue to have high confidence in our ability to deliver on 2026 and our long-term financial targets and the execution of our significant white space potential. Our long-term financial model expects to drive approximately 9% revenue growth, supported by 10% unit growth and low single-digit comparable sales growth, yielding approximately 10%-12% EBITDA growth. With our proven strategies, exceptional team and clear roadmap, we are well positioned to execute on our 2026 objectives and drive sustained value creation over time. With that, let me hand it back over to Bill for closing remarks.

In closing, Bob's is a brand that can win in all seasons. Despite ongoing macroeconomic uncertainty, we remain confident in our ability to continue to grow and take market share. We're energized by the tremendous white space in front of us and are encouraged with the performance of our new store program. We remain focused on executing our strategic initiatives while preserving the Bob's culture that differentiates us in the marketplace. At Bob's, our commitment to honesty, integrity, transparency, and fun isn't just a philosophy, it's the Bob's way, and it's a proven formula for sustained growth and shareholder value. When you build a business that puts people first, you don't just build loyalty, you outperform the industry. It's how we consistently deliver attractive returns and why we're positioned to capture the significant opportunity ahead. Looking forward, our ambition is clear.

We're targeting 10%+ unit growth annually with a path to 500+ stores by 2035, which is more than double our footprint today. As we grow, we're committed to the Bob's way in every market while strengthening our advantages as a business through disciplined execution, best-in-class unit economics, and operational excellence. What started as a better way to buy furniture is now a better way to build a business, and we're just getting started. I couldn't be more excited about what lies ahead as we continue to transform how America shops for furniture. Thank you to our incredible team, our loyal customers, and now our shareholders who believe in the Bob's way. With that, I would like to open the floor to questions. Operator?

Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Christopher Horvers with JPMorgan. Christopher, is your line on mute?

Thanks. Good evening, guys. My first question is, if you look at the fiscal year outlook, the high end of your sales and EBITDA dollar outlook is in line with where the Street had modeled you, but you've widened the low end, so you know, $255 million in EBITDA at the low end. To what extent is that wider range simply due to something that changed in your first quarter outlook because of the storms versus a change in 2Q and going forward?

Sure, Chris. It's all in the first quarter and related to the weather-related impact. Just to level set on the weather, it was significant, prolonged, concentrated in the first quarter, and 80% of our regions were impacted, including the West Coast. The guide there, the midpoint of the guide really does assume that the first quarter impact flows through to the full-year and the remaining quarters are in line with our long-term algorithm.

Then as you think about the nature of your category, it's very much a considered purchase. I'm not sure if you've seen in the past when you have weather events like this, obviously with a very East Coast-oriented footprint, you do see weather impacts. Is it something where you typically recapture nearly 100% of that demand, i.e., this 1%-1.5%? Why wouldn't, you know, we carry over into the second quarter considering if you're thinking about getting a sofa prior, unless something changes, you would still shop for it just down the road. Or are you trying to take into account some of the macro uncertainty given what's going on geopolitically?

Yeah. Hey, Chris, this is Bill. Look, you know, we've been, as you know, we've been around a long time. We've seen these kind of impacts before. In our experience and what we believe we're experiencing today, the weather impact, you know, we will deliver all the sales that were made, and there's usually a partial amount of the demand that we don't recover. It's not a 100% recovery from the lost demand, but a high percentage of it. We think we're seeing that now, and we believe that we'll see all that impact in the first quarter.

Hey, Chris, let me add to that, just in terms of the rebound of traffic that we saw in March. Really the demand this month includes that partial recapture. As a result, we're running a bit higher than the algo in March so far. Really confident in the demand we're seeing. The directional guide for Q1, the 1%-1.5%, that's really from a delivered perspective. The demand is certainly there, and we have two weeks till the end of the quarter to deliver the demand that we have seen. There's a couple big delivery days coming up as we get to the end of the quarter, so that represents the range that we've provided.

Just to make sure I understand that the 340 basis points in January and February, if you were planning growth of about 2%, that would imply that you were down about 1 point in those two months and therefore the recapture would suggest that March is obviously, you know, running something in the, say, 3.5%-4% range.

The March performance is running above the algo. Again, that's a result of this partial recapture that we're seeing right now.

Got it. Thanks so much.

Thank you. Our next question is from Michael Lasser with UBS.

Good evening. Thank you so much for taking my question. The market's probably gonna look at this situation and say that was a very significant weather event, but to what degree is there cushion in Bob's outlook for the second half of the year if some other exogenous variable were to happen to materialize, especially as you get into a period where you're going to have tougher comparisons. What factors would you point to say this was a one-off event, and we still feel highly confident in the outlook for the back half of the year? Thank you very much.

Yeah. Hey, Michael, this is Bill. Great question. Look, first off on the weather event in the first quarter. You know, we are no stranger to weather events in the first quarter of the year. You know, we mentioned that, you know, this year this has been an extreme outcome. Our planning would have anticipated a normal kind of weather event year, which we've seen in prior years. This time we saw five times the amount of operating hour losses due to weather that we saw last year. It was a pretty extreme event. The planning had called for, you know, a normal weather event, kind of Q1.

Having said that, as we go forward into Q2 through Q4, I have a high confidence that our plans, you know, build in adequate visibility to the kind of events that we would expect in the normal course of business. Now, having said that, there's a lot of things going on in the macro that we certainly can't anticipate, but I feel very confident watching the momentum that we've had in the first quarter going into the second, third and fourth quarters that we'll be able to deliver against those.

I'll jump in with two quick-

Yeah, you go.

Two quick things. The first is the midpoint of the range we assumed really underscores all the comp driving initiatives that Bill mentioned in his remarks. The high end of the range would be any potential tailwinds that we would see, whether that's, you know, competitive dislocations, anything in housing the consumer. The low end would be any other headwinds that would be from the consumer end. That's where we look at the range. The midpoint really is our confidence in the execution of the plan we have today. Then the second point I'll mention, just in terms of the weather impact, we feel very confident that the impact we saw in Q1 was weather.

We've done detailed analytics to look on a day-by-day basis, to really analyze what the weather impacted days compared to non-weather impacted days were. That gives us confidence that Q1 was truly a weather dislocation.

Understood. To borrow my friend Bill's just comment from now, there's a lot going on in the world. Can you give us a sense of what has changed in your profitability outlook for this year today versus since the beginning of the year? It sounds like you might have pushed a little bit more towards marketing for demand generation. Obviously, there's been a lot of moving pieces with respect to the tariffs. Now finally, some of these fuel related headwinds that could impact things like delivery and freight costs. How have you factored in all of those moving pieces into your outlook? Thank you very much.

Yeah. Michael, this is Bill again. Look, there's a lot of things going on, as you mentioned, and, you know, we've been around a long time, so we have essentially a playbook for every one of these types of events. You know, on the oil price situation, you know, it wasn't that long ago that we all had to deal with increased, you know, freight costs and fuel costs. We feel very good that we have a playbook in place. You know, we're a large player. We've got great relationships with both our ocean freight and delivery partners. So we're feeling very confident on being able to deal with whatever fuel shocks come our way. You know, we contract a long way out.

In fact, we're right now entering into our contract negotiations for next year with the ocean freight carriers, so we're feeling pretty good about that. Speaking to marketing, I think you asked a question about marketing. In the first quarter, you know, we took some opportunity to invest in some marketing opportunities specific to competitive dislocation where it made sense to get our name out there, as well as take advantage of other opportunities that come up. You know, we plan our marketing obviously ahead of time with our, you know, our methodology that we've developed over many years. At the same time, we're very agile. When we see an opportunity in the market to lean in, we took advantage of that.

We spent a very little amount on marketing post the weather event just to get some of that traffic back in, but most of it was to take advantage of new market opportunities that presented themselves in the first quarter.

Michael, just to wrap up on what's included in the guide. From a tariff perspective, it's really current landscape, so we're not baking in any potential benefit or refund. We're not baking in any change in policy. It's consistent with how we've operated last year. From a fuel perspective, the Q1 directional guide does include a little bit of surcharge related to current fuel prices, but for the remainder of the year, it assumes this normalizes beginning in Q2. The only thing that I'd add that did change a bit in profitability outlook, from a pipeline perspective, we do from time to time see opportunities to accelerate our store pipeline, and we are looking at potential acceleration of some of our 2027 locations that would go to the earlier part of 2027 versus the midpoint.

That would put some of the pre-opening expense and capital expense charges into 2026, and that's reflected now in the guide.

Thank you very much, and good luck.

Thanks, Michael.

Our next question is from Simeon Gutman with Morgan Stanley.

Hey, Bill. Hey, Carl. Hey, first to start, just to paraphrase something that I think Carl said. You expect to comp positive in all quarters of the year, and the benefit or the recapture from weather is imputed into your first quarter guide, and you're making no assumption for that it rolls over to the second quarter. Is there still a possibility you still see some in the second quarter as well?

You know, you're correct in your assumption that we are forecasting positive quarters for the rest of the year. The partial recapture assumed in the guide is really that it's complete by March. That's what we've seen typically historically as Bill was describing. When we've seen events like this before, we have a pretty good sense as to the duration and the level of partial recapture. Right now, the guide assumes that there's no further recapture into the second quarter or beyond.

Okay. Then the follow-up, you said it about every market effectively, including California, but, you know, maybe give another chance here. Maybe you're being overly cautious about this, but were there any markets that didn't experience that double whammy weekend, you know, where sales are much higher? Are there any places where you can point to underlying trends. I understand you don't want to extrapolate for the rest of the country. I would assume things were more steady, but if there's any markets that you can speak to, it would be a good opportunity.

You know, it's really tricky. 80% is our estimate of the regions that were impacted. The way that we looked at sizing this was truly on a day-by-day basis and comparing weather impacted days versus non-weather impacted days. If I was to point to any region specifically, it would be our recent new entry into the Southeast and sort of the continued momentum we're seeing there in some of our non-comp locations, specifically in North Carolina.

That's helpful. Just to close the loop on those locations, would you say there's been any sensitivity to, like, recent economic shocks or it's too early to say?

Yeah. No. Well, so far, no. In fact, we've seen an increase in the customer cohorts across all income demos, Simeon. Encouragingly, the over $150,000 income demos have grown faster than the others. They've all grown this year, but the more affluent ones have grown faster. Their buying behavior shifted up from a focus on good to more of our better or mid-tier pricing, which is very encouraging. All the behaviors we're seeing across the cohorts are very encouraging. Absent the weather impact that, when you peel that away, we really like the underlying momentum across all the cohorts.

Okay, thanks. Good luck.

Yep. Yeah, thanks, Simeon.

Our next question is from Oliver Wintermantel with Evercore ISI.

Thanks, guys. I had a question regarding the comp guidance throughout the year. If we assume that we're staying in the low single digits for second, third and fourth quarter, as you mentioned. It looks like the two-year comp would be, you know, would go, you know, to a double digit, given the second quarter and third quarter were already double digits in 2025. If you could maybe just talk a little about the two-year comp and how you're gonna lap these double digits comps in the second and third quarter. What's the driver? Is it conversion? Is it traffic? Some information there would be helpful. Thanks.

Yeah. Oliver, thanks. Ah, great question. Thank you for that. Yeah, look, I think, you know, as we discussed during the IPO roadshow, the big step up in our comp performance last year was because of systemic initiatives that we've been working on for a couple of years that really created a step change up in performance in our stores that continued throughout the year and into this year. We're operating at a whole nother level. Comping on top of that feels pretty good to us. In fact, if you think about this first quarter and the guide that we've given, it's in fact a positive comp on top of a positive comp last year as well.

We have high confidence that all the initiatives put in place that were performing last year are continuing to, and that we'll be able to have positive comps on top of those strong quarters that we experienced last year. Carl, do you want to add anything to that?

That's great.

Okay.

All right. Thank you. Just as a follow-up on the gross margin line, if you could maybe talk a little about the drivers in 2026 on your gross margins and if you could maybe the cadence throughout the year. Thank you very much.

Sure. The guide assumes a relatively consistent year-over-year gross margin. Implied in that is also some of the gross margin impact that we saw in Q1. Typically, with a sales impact, you would see flow through that would be more concentrated in SG&A. In Q1, given the weather impact, we did see some gross margin headwind as it relates to some supply chain inefficiencies. That's gonna be reflected in the full-year guide, but otherwise it's consistent flat year-over-year in terms of the midpoint of the guidance range.

Thank you very much, and good luck.

Thanks, Oliver.

Our next question is from Robby Ohmes with Bank of America.

Oh, hey, Bill. Hey, Carl. Thanks for taking my question. I wanted to follow up on just, you know, maybe looking at the 20% of stores not impacted by storms and any color you can give on, you know, are you seeing a lot of benefits from tax refunds right now? Maybe a little more on, you know, the customer trade up in those stores. Are you getting a lot more best, you know, versus good going? I know that you're entering this year with, you know, prices a little higher, you know, any response to that? Maybe another would just be, it sounds like North Carolina is going well. Have you not seen any competitive response to you guys going in there?

Yeah. Listen, Robby, it's good to hear from you. A couple things related to your questions. Number one, you know, you mentioned our prices. One of the things when we take price, we always do it in a manner that protects the value proposition to the consumer. We always wanna be the best value in the market. What we've seen is a continued positive consumer response to our prices across our regions. When we look at the non-weather impacted days, we're very encouraged by, again, the performance across our good, better, best. This is in all the regions, including the ones that were weather impacted. That's the way we looked at it rather than one region versus another. We looked at each region individually, weather versus non-weather impacted.

We looked across the cohorts, we looked across our product assortment in our good, better, best, and we're really pleased with the performance we've been seeing. As I mentioned earlier, for example, we've seen all the cohorts stepping up more into the better price tier from good and the more affluent consumers, in fact, stepping up even more. It's a continuation of the trends we saw last year. You know, the weather hit in the middle of the quarter. It was unfortunate, but I couldn't be more proud of the team and how they responded the Bob's way in taking care of the customers, fulfilling those deliveries, but then getting back on track with our great values.

Again, as we've seen post weather event in the month of March across our regions, we're really pleased with the momentum and the comp growth that we're seeing going into the second quarter.

Let me just jump in there on tax refunds as well. Historically, we have correlated well with tax refund season. There's a few dynamics in the industry going on right now, specifically in March as we see this outperformance. Certainly the recapture due to weather demand, and you could certainly say that there's a tax refund benefit happening in March as well.

Just a quick follow-up, and sorry if I missed this, but the propensity of your customers to use financing. Are you seeing any signs of that going the other direction, starting to use financing again?

No. So far in 2026, it's pretty similar to how we ended the year. We're closer to that low 40% area where historically we've been about 50%. We see great opportunity with a new partner coming on board midyear, Synchrony. We see several benefits in terms of, you know, better approval ratings, more customer data and analytics, and then better just overall, you know, transaction terms. We're really looking forward to that partnership and helping drive that opportunity to impact AOV.

Got it. Thank you.

Thanks, Robby.

Our next question is from Bobby Griffin with Raymond James.

Good afternoon. Good afternoon, everybody. Thanks for taking the questions. I guess first for me, Carl, could you maybe spend some time just double-clicking into the gross margins? You know, called out flat for the year, but it seems like you have fuel as a headwind. You got 1Q as a headwind. What are some of the good guys to help us get back to flat for the year?

Sure. So one thing we're seeing, you know, from a full-year basis is we are looking at, you know, maintaining our, you know, the playbook that we had last year with the tariff mitigation. We're maintaining, you know, our dynamic pricing teams to make sure that we're holding to a targeted gross margin that we wanna be at. That's really a target area where we're able to focus and hit a profitability that we see as where we wanna land. From the headwind in Q1, again, that's more weather concentrated and some supply chain dynamics happening. But to your point, any fuel cost is not embedded in the guide if that was to extend beyond the first quarter.

All right. That's. I appreciate that. Then maybe secondly, just given the environment here is a lot more dynamic, and you guys, you know, we don't have as much history maybe with the company being out here public. Can you just talk about the different opportunities inside the P&L that you can flex, given if things move one way or another, and how you can manage in kind of this more dynamic environment geopolitically?

Sure. I mean, what I'll start with is, you know, we have a long history of managing through any macroeconomic environment, whether that was, you know, a supply chain dislocation, COVID, et cetera, financial crisis, and we tend to do better and take market share during these periods. That's been our history, because of the value and discount player. In terms of flexing, you know, we're a large player. We're national coast to coast. We're able to use that strength of really the size of our business to navigate these types of environments.

Yep. We're always, Bobby, looking at different initiatives to get efficiency regardless of whether there's economic challenges or not. A number of the things that we've taken on in the last few years has been reflected in our outsized performance, both in our top-line growth, the strong comps we saw last year, as well as our growing EBITDA margin over the last handful of years. You know, we took this company from pre-COVID, you know, mid to high-single-digit EBITDAs up to around 10% EBITDA for the last three years. We have a history of being very disciplined operators at the SG&A level, as well as driving top-line, and we're very disciplined in gross margin. You know, just now Carl mentioned our pricing dynamics.

We have a pricing analytics team that's very, very data-driven by market, and they can flex our pricing both to protect our value proposition and to protect our margins. We are very agile and dynamic when it comes to market conditions, and I think the recent track record has demonstrated that.

Thank you. I appreciate the details. Best of luck. You're wrapping up the first quarter.

Yeah. Thanks, Bobby.

Our next question from Brad Thomas with KeyBanc Capital Markets.

Hi, good afternoon, and thanks for the questions. I wanted to start with e-commerce and maybe seeing if we could follow up around recent trends in e-commerce. I know those will still be somewhat connected to if someone visited a store. Curious what you're seeing there of late, and then maybe more broadly, how you think about e-commerce continuing to drive sales going forward here.

Yeah. Hey, Brad, it's good to hear from you. This is Bill. Yeah, look, you know, we are an omnichannel retailer, and e-commerce plays a vital role in that. You know, historically, or at least in recent years, we've been running about 14% e-commerce and about 76%, I'm sorry, 86%, transacted in stores. But honestly, we don't really look at it that way. We look at it as an omnichannel across the board. You know, the vast majority, over 70% of our consumers will work with us across channels, and we're kind of agnostic whether they close online or in store.

Having said that, we put a lot of effort into bringing our e-commerce environment since 2023 up to par, making sure that it creates a congruent customer experience to that in-store so that the consumer can have that seamless customer experience as they move between channels. We're seeing a lot of improved customer satisfaction and transactions on the website. Again, you know, whether they wanna transact in the store or online or over the phone, it's all the same to us. In fact, you know, during the weather outage, you know, we were there online being able to take orders and service customers through our e-commerce channel. It's one of our faster-growing channels for sure, as customers get more and more comfortable moving between channels.

You know, we mentioned in our opening monologue the Omni Cart that we introduced a few years ago that travels with the customer between channels. That's become very, very popular. In fact, it's one of our highest average ticket and highest closing rates or conversion rates is from the Omni Cart. E-commerce continues to be a vital part of our business. It's a fast-growing channel, and it's complementary to our physical channels as we think about our omnichannel offering to the consumer.

I appreciate that. Maybe one other area that we have been getting questions about is just, you know, you all moving into the South, and you spoke positively about what you're seeing in North Carolina. It is unique about the furniture industry, and it's a pretty regional industry, both in the style that's offered and competitors being different. Could you just speak a little bit more to the confidence you have in your ability to be successful in the Southeast, much like you've been in other regions you've gone into?

Yeah, you bet, Brad. Great question. Well, first off, let me back up and say this. You know, we talk about opening stores, but we develop markets. We'll spend on average two years planning, studying and planning for our new market entry, and we did exactly that with our entry to the South. Obviously, we look at things like our merchants study the, you know, the furniture being bought in those markets, the styles, et cetera. We study our competitor set. We hold focus groups with consumers to see how our branding and our marketing resonates with consumers. We spend a great deal of time in a very disciplined way developing our entry plan. Now, as you know, North Carolina is mecca for furniture, right? I mean, it's a place that you wouldn't wanna enter casually.

We spent a good two years planning that entry, and the net result of all that is that those stores opened strong, all performing. That cohort is all performing above plan, and we're really pleased with the reception we've had into the North Carolina market. You know, we finished the year with six stores, I believe, in North Carolina. We're opening another four this year. With that strength, we're also opening in two more southern markets, South Carolina and Tennessee. Again, you know, we're taking the time to study and plan entry into those markets, not presuming for a second that this northeastern heritage brand will resonate the same way in the South. In fact, we modified some of our merchandising. We modified some of our brand messaging.

We kept the core message, of course, the Bob's way, who we are didn't change, but some of it we modified to that consumer set, and boy, we've really been performing well down there. Just gives us a ton of confidence. You also heard that we're opening a distribution center in Georgia in 2027 that'll be able to service all of our stores that we anticipate having in the Southeast. We're really excited about the success down there. Moreover, I think it speaks to the discipline and the methodology we use to study, plan, and enter markets.

I appreciate it. Thank you, Bill.

Yeah. Thanks, Brad.

Our next question is from Mike Baker with D.A. Davidson.

Okay, great. Just want to follow up really on that last point. Talk about the local merchandising initiative, how far along you are in that, any particular call-outs or opportunities there?

Yeah, Mike, good, great question. Look, you know, historically, Bob's has had the same product offering in all our stores across the country. Over the last few years, in fact, you heard us talk in our monologue about an initiative we call clustering, which is looking at similar characteristics of stores, you know, be it geographic or be it kind of consumer, and really kind of fine-tuning the offering we have in those markets. We clearly did that as we entered the Southeast when you think about, you know, a propensity for more light color furniture, et cetera.

We anticipate, and this is just broad brush numbers, but we anticipate that roughly 80% of our merchandising will be the same in all the stores across all of our regions, and that we may vary as much as up to 20%, locally. Locally, it's really regional, not really store by store, but regional. You know, we're really focusing a lot on making sure that we're providing the right merchandise to the consumer, at the same time, managing our inventory well. You know, we have rapid turnover, much quicker than the industry on average, and so we wanna maintain that inventory efficiency, but at the same time bringing the right merchandise to market for those consumers.

That makes sense. Thanks. If I could ask one more. You had said something in the prepared remarks about going after additional cohorts that you don't hit now. Just curious if you could give a little more detail on that, or is that you know, something you don't wanna talk about for competitive reasons?

Well, I think what we were trying to say, Mike, was not that ones we're not hitting now, but that, you know, we have a very large customer database, right? We've been doing this 35 years, and so we have a lot of information about customers and their different behaviors. So we slice and dice that information, study it, and market specifically to different cohorts in different ways. I think that's a bit of what we were reflecting on. When we find a, you know, high value cohort that we think we can fine-tune our messaging or fine-tune our merchandising, we'll lean into it. We'll test it first. We're a test and learn organization, and then we'll lean into it. We're just constantly doing that, churning our customer database and finding ways to attract and go after new cohorts.

I think that's kind of the message we were trying to get across there.

Okay. Yeah, that makes sense. Thank you.

Yep.

Our next question is from Peter Benedict with Baird.

Hey, good afternoon, guys. Thanks for taking the question. So, one is just kind of back on the pricing. I know you talked about your dynamic pricing approach. It sounds like that's being flexed to kind of offset maybe some of the higher costs that come through. I'm wondering how that maybe fits with the broader promotional environment. I know you guys aren't promotional, but the industry typically is. I'm just curious what you've seen maybe over the last few months on how some of the competitors in the market have been behaving. Any changes on that front? Just kind of curious what you're seeing. Thanks.

Yeah. Peter, great question. Look, a couple of things. Over the last three years, we implemented a pricing analytics function here at Bob's that allowed us to take a look at zone pricing around the country, and really get specific as to opportunities and competitor dynamics in different markets. That capability really came home and helped us a great deal during the tariff period, where we were able to maintain our value commitment to the consumer and at the same time protect our merchandise margins. We have a capability now to be very flexible, you know, by market to maintain that commitment and protect the margins. The competitors make moves at different times. As you called out quite rightly, we're an everyday low price player. We don't promote.

Where we see that we have an opportunity to reduce price to protect our value proposition or in some cases take price to protect our margin, we can do that in a very surgical plan and thoughtful way. As we sit here today, you know, I'm proud to say that we can maintain our commitment in every market we serve to the consumer, who has the right to know that when they come into a Bob's, they're getting the very best value. That's how we think about managing our pricing. We're not promotional. We don't run sales. We never run a sale, but we'll change our prices as we need be to achieve those two objectives I just mentioned.

Okay, got it. I guess my follow-up, maybe, Carl, to you, just back to the tariff issue. It sounds like the outlook assumes the post-SCOTUS ruling tariff regime, I guess. Is that the right way to think about it? I guess when does that really start to affect you? Would those rates, different rates be helping you in the back half of the year or just maybe a little bit more on that would be helpful. Thanks.

Sure. The assumption in the guide is really current policy. Post-ruling, we're not making any assumption about any follow-up, in terms of implications for, you know, some sort of other offset. The guide assumes current policy pre-ruling and how we've already been structured, the pricing dynamics and the vendor contributions that we did to offset, those tariff co-tariff costs. That's what's assumed in the guide.

Got it. Thanks so much.

Yeah. Thanks, Peter.

Thank you. Our last question is from Anthony Chukumba with Loop Capital Markets.

Good afternoon. Thanks for squeezing me in. Congratulations on the IPO. You know, obviously there's a lot of macroeconomic uncertainty, right? You guys have done well, even in some, you know, not, you know, sort of suboptimal housing markets. Like, how do you think about the opportunity? Let's say that the U.S. housing market actually improves in 2026. Like, you know, how do you think about the opportunity for you in that scenario from an outside perspective? Thank you.

Yeah, Anthony, great question. Thank you. Look, first off, we're not necessarily tied to housing. We prosper in all macroeconomic climates, both you know good and challenged. Again, we've been around for 35 years. We've seen all kinds of different macro environments, and we know how to deal with all of them. One of the things that we've learned along the way is that value is always in vogue and there's always demand for furniture. If we stay true to our knitting and true to our value proposition, there's always plenty of demand for furniture, and we tend to pick up market share in those times. We're also very agile, so we can make moves as needed, depending on the macro. But again, we really do prosper in all economic times. You know, there's.

It's interesting, you know, even though furniture is a discretionary purchase, it's not optional, right? Every home in America has furniture. Furniture has its own life cycle. You know, needs change. You know, as we said, I think in our prepared remarks, right, young people still start their first home and start a family or retire, upsize, downsize. In the distressed macro environments, value is even more important. We really see how we pick up market share in challenging times. You know, we would certainly benefit from any housing recovery, but there's no housing recovery presumed in our guide. In the meantime, we're just making sure we deliver those values to the consumer that they've come to expect from Bob's.

Yeah, just to reiterate what Bill said, the midpoint of our guidance assumes no potential housing recovery or change in consumer, really no major change to macro for the better or worse. Certainly we would benefit from a housing recovery, and that would be on the up end of the guide range.

Got it. Just as a quick follow-up. I was really interested in your commentary on your financing. If I recall correctly, so Synchrony is gonna be your first look. Do you also have a second look credit provider and then also lease to own? Can you just remind me of that in terms of your credit waterfall?

Sure, that's correct. We do have a full waterfall. You know, we have several different tertiary labels, and we have, you know, lease to own, buy now, pay later. The majority of the financing sales are in that first tier, which would be a significant opportunity as we migrate over to Synchrony.

Got it. Thank you.

Yeah, you bet.

Thank you. We have reached the end of our question and answer session. I would now like to hand the floor back over to management for any closing remarks.

Yeah. Thank you, operator. Listen, I wanna thank everybody for joining us today, and we look forward to speaking with all of you again on our next earnings call. Thanks for joining us. Take care.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.