Price investments and tariff refunds
Q: Kate McShane with Goldman Sachs asked about the acceleration in units following price investments, vendor support, and the sustainability of these investments into 2027.
A: John Furner stated that the company is pleased with share gains in food and that price investments are being managed thoughtfully across quarters to ensure durable results.
Q: Krisztina Katai with Deutsche Bank asked about the return on price investments, specifically the metrics used to determine if a rollback becomes permanent.
A: John Furner explained that they are monitoring unit movement and share gains to judge the effectiveness of investments, noting it is too early to determine which rollbacks will be permanent.
Q: Kelly Bania with BMO asked how the company is communicating tariff refund investments to customers and how they are allocating these funds between grocery and general merchandise.
A: John Furner explained that they are investing across the store, including food and general merchandise, and are communicating this value through in-store signage and their website.
Consumer health and category performance
Q: Simeon Gutman with Morgan Stanley asked about the impact of gas prices on lower-income consumers and the elasticity of price investments.
A: John Rainey acknowledged incremental pressure from gas prices, while John Furner explained that rollbacks create a temporary deflationary effect before driving unit growth and share gains.
Q: Brad Thomas with KeyBanc Capital Markets asked about the multiyear outlook for the health and wellness category and the impact of fair pricing.
A: John Furner and David Guggina explained that while fair pricing is a headwind, the health and wellness cohort is highly valuable, with pharmacy delivery deepening customer relationships.
Q: Christopher Horvers with JPMorgan asked about category performance, the impact of stimulus versus gas prices, and back-to-school trends.
A: John Rainey and David Guggina explained that Q1 benefited from stimulus while Q2 faced gas price headwinds, though back-to-college sales are performing well.
Q: Zhihan Ma with Bernstein asked about brick-and-mortar comps and whether there is a structural shift toward delivery impacting store traffic.
A: John Furner emphasized that stores remain a critical asset for fulfillment, even as pharmacy headwinds impact store-specific comps, noting that more volume is going through stores than ever.
Q: Seth Sigman with Barclays asked about ticket composition and whether there is a shift in category mix or trade down behavior.
A: David Guggina highlighted broad-based share gains, noting that grocery sales increased mid-single digits and their Better Goods brand reached $1 billion.
Financial guidance and margins
Q: Greg Melich with Evercore ISI asked about tariff rates and whether operating income will continue to grow faster than sales in 2027.
A: John Rainey stated they have confidence in bottom line growth outpacing top line, noting that operating income grew 10% excluding tariffs.
Q: Michael Lasser with UBS asked about the confidence in U.S. comp acceleration and the plan if that does not materialize.
A: John Furner stated they will balance price investments with market conditions and forecast commitments, emphasizing the durability of their model.
Q: Chris Nardone with Bank of America asked about incremental margins in the digital business and how the company plans to lap price investments next year.
A: John Rainey noted that advertising growth helps margins and that they are managing the business on a multiyear basis rather than focusing on lapping specific quarters.
Q: Paul Lejuez with Citigroup asked about comp assumptions regarding traffic versus ticket and the drivers of SG&A growth.
A: John Furner noted that traffic and units are growing, while John Rainey attributed SG&A pressure to depreciation from CapEx and higher group health costs.
Operational strategy and inventory
Q: Bob Drbul with BTIG asked about inventory levels and inflationary expectations for the remainder of the year.
A: John Furner stated inflation is low at 1% to 2% and inventory is in good shape, with most categories up 1% to 4%.
