Bob's Discount Furniture, Inc.

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 prepared remarks. As a reminder, this conference call is being webcast live and recorded for replay. I will now turn the call over to Eddie 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 Lukacs, 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 want to 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 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 to 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 omni-channel 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 in our differentiated e-commerce platform. At the center is our Omnicart technology, which creates a seamless customer experience, channel synergies, and a higher conversion. In stores, our AI-driven smart scheduling has significantly improved the 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 teams 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 omnichannel 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, an 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 will 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, but 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 LA 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's anniversary they're 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. And 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 recovered 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?