La-Z-Boy Incorporated (LZB) Earnings Call Transcript & Summary

Good afternoon, everyone. Thank you for joining us at the Goldman Sachs 32nd Annual Global Retailing Conference. I'm Emily Ghosh, and I'm part of the Hardlines team at Goldman. It's my pleasure to introduce La-Z-Boy Inc. and to moderate our fireside chat. Today, we have with us Melinda Whittington, Board Chair, President and Chief Executive Officer of La-Z-Boy. Melinda joined La-Z-Boy in 2018, serving as Chief Financial Officer prior to becoming CEO in 2021. We also have Taylor Luebke, Senior Vice President and Chief Financial Officer, who joined La-Z-Boy in 2021 and was promoted to CFO at the beginning of the year; and Mark Becks, Director of Investor Relations and Corporate Development. Melinda, Taylor and Mark, thank you so much for joining us today.

Thanks for having us.

Thanks for having us.

Just to start, can you provide a brief overview of La-Z-Boy's Century Vision strategy? What were the goals that you set out to achieve in 2021? And where is the company at on the journey now?

So we are a 98-year-old company, founded in the U.S. on the high-quality recliner. And manufacturing is our history. When I stepped into the role in 2018, we leveraged outside consultants as well as a lot of internal capability to really look at -- what got us here won't get us there. Do we need a complete pivot of the company? We've been strong and stable, but where do we go from here? And we really identified two core assets that needed some tender loving care, what we really believe can drive for the future. One of them is our iconic La-Z-Boy brand. We did the testing to see what do we know about this brand and does it have legs for the future. And what we learned based on real consumer testing is that La-Z-Boy remains a highly -- a brand that people know about, people trust. They think of us for quality. They may not think of it as relevant for them, particularly a younger consumer. It's kind of like, oh, I remember when my dad had kind of thing. And so we looked at does the brand have the legs to leverage sort of that foundation but become more relevant for today's consumer and a broader base of consumers. And then the second thing we realized is we have this manufacturing foundation, but we had a fairly small portion of what we were making selling through our own company retail. And we realized that we were getting quite good at that, and we had a great opportunity with the company retail that we can own the entire consumer experience to give a great experience end-to-end as a vertically integrated retailer. We're able -- because part of what we do is we customize, about half of what we sell is customized. We can own the entire experience to make sure that is comfortable in all ways. We own the ability to test by having our own retail and test new products, test messaging, test shopping experiences. And we can acquire the consumer data to then kind of make that flywheel back into the entire process. We also recognize that when we have the entire integrated model, we have more sales and more profit by owning that entire side of things. So we really set out to extend La-Z-Boy's brand reach to a broader consumer base, making it more relevant, extend our stores and then strengthen the foundational base of our supply chain to be more agile and our people and our technology to enable that for the next 100 years. And that's the journey we're on.

That's very helpful. And -- so one thing that you guys have mentioned is in addition to strengthening your core business, you're evaluating alternatives to address financial pressure from noncore parts of the business. Can you talk us through what some of those opportunities might be?

Sure. You want to take those?

Yes. So I think it's worth defining or redefining what we consider a core business, which Melinda hit on a bit with our Century Vision strategy. But how we've won for 98 years and where we really have a right to win is in the North America market, where we're mid-single-digit market share in a really fragmented industry. So a lot of right to win, room to expand just here domestically. But we do that via branded, customized comfortable upholstery products. That's kind of where we win. Where we're at in our journey, it makes sense that we continue to look at optimizing our portfolio for the next 100 years. And there are certain parts where we still need to reevaluate, do we really have that right to win looking forward? Or is it better off with an adjustment or in some other hands or another alternative moving forward. So we're just starting it. We alluded to in prior earnings or releases, some financial pressures from some of those smaller parts of our enterprise, whether it be our casegoods business, whether it be our international segment. So again, still in evaluation, we intend to continue to give updates quarter-by-quarter as we publish our earnings.

Thank you. Shifting a little bit now to industry trends. In the first quarter, you mentioned that industry traffic was depressed as housing transactions continue to be near 30-year lows. What's your assessment of the health of the furniture industry today and your expectations for the remainder of the year? And then what would you think industry growth could look like when we return to a more normalized environment?

So for those that don't spend their entire lives thinking about furniture, to step back a little bit, furniture is driven by housing. We know that transactions, whether in changing houses, first homes, that is going to be when I buy a lot of furniture, those big life events. And the reality is for 3 years plus at this point between interest rates, housing affordability, housing availability, all of those have been depressed at sort of decades-low levels. That is still the case. We also know that, that will turn around. We know that there is pent-up demand for furniture. There is pent-up demand for housing. And over time, that will unlock. Exactly when, my crystal ball isn't working as well. But certainly, beginning to see interest rates come down will be one of those big steps. At the same time, challenged consumers make for a challenging time because we are a larger discretionary purchase. So what we really had to do is work on making sure that our product offerings, our messaging and our execution in-store and with our B2B customers is really top of the line to collect those transactions when they are happening. What we've seen, we mentioned it particularly in the first quarter as we've just seen a lot of choppiness with the consumer. Again, we believe the momentum we do see is when we're making our own momentum to really out-execute with the competition, but we feel really good about the long term. At the same time, that's why when we talk about expanding our brand recognition, our brand presence and expanding our own retail and the agility of our supply chain is all around laying that foundation so that we disproportionately benefit when we do get that eventual tailwind for the industry.

Thank you. Following up on the consumer, you mentioned some choppiness. How would you characterize the health of the La-Z-Boy consumer today? And then have you seen any signs of customers front-running tariffs?

So a couple of things. Maybe I'll talk about the consumer, and then maybe you can speak a little bit more on the tariff side of things. Our consumer is an upper middle income consumer. So roughly 2/3 of what we sell is at a household level income of over $100,000. And so we continue to see that consumer healthy. In fact, in our stores, we offer free design services. And we generally see -- like, our average ticket is about a $3,000 ticket, a design service ticket, which is less than 10% of our total transactions. But those design service customers, the average ticket goes to almost $10,000. It's more than triple. And we will, from time to time, have tickets at or near $100,000. So that consumer, we know when we can delight with a high-quality product for a consumer that wants to invest in the quality and comfort. Particularly with design, where we're filling out a whole room or even a whole home, are still alive and well, but it requires us to really to execute. The other side we've seen is certainly that you see a consumer that is strained, that is getting more constrained, particularly if tariff costs are passing through to the consumer. So we also know that we need to be sharpening our price points at the opening end. We know that our brand is aspirational to many. We won't be down in that -- in the discount space of sort of the 1 use, the 1 apartment-type of furniture. But to get to consumers that are aspirational, particularly for like an iconic recliner, we want to make sure we're sharpening price points so that they have a way to at least get into our franchise.

On the tariff front, so I think it's worth just talking about how we're positioned relative to the rest of the industry. So 90% of the finished product that we sell in the United States and Canada is actually produced in the United States, which is far and away above any of our peers, public or private, call it, be it domestically sourced. And we're not that way because of trade policy per se, we're that way because that's how we -- that's our competitive advantage and how we've won over the decades, which is high-quality, customized upholstered product at speed. And to enable those, you have to be close to your consumers, which over 90% of our sales are in the U.S. And to even enable that, we domestically source big inputs like wood, steel, foam at a premium per se to other places you get because it enables us to win with that formula. It just so happens that in the current climate, it does well position us for tariff exposure. So we feel really good about where we're at. As Melinda had mentioned a little as she was talking, our larger concern has been on further pressure on a consumer that's been pressured for years now in a housing market that's been pressured. But we've taken actions over the last 4 to 6 months to mitigate our minimal exposure, and we feel pretty good relative to our peer set and continuing to offer value to the consumer. On your exact question on consumers front-running tariffs, we largely didn't see that, like you would hear in the news on like people buying trucks and automobiles trying to really, really get ahead of it. We didn't see it from a La-Z-Boy perspective, nor in the industry data we watch. If anything, we saw our Joybird consumer, which is a typical younger consumer, more online, we actually saw them kind of close the browser and go away for a bit, just to see how things would shake out, which we're now seeing them start to come back into the business and accelerate purchases, and they've gotten maybe more accustomed to the new normal.

That's great. So while it sounds like La-Z-Boy is less impacted from a tariff perspective than many of its peers, how are you guys taking into account tariffs and company guidance? And how should we think about the timing or magnitude of any price increases?

So we've executed against our mitigation in our last, call it, fiscal quarter 4, so call it April, March, Feb timing. I kind of went backwards there, but you get it. And we've been planning for a while. It was pretty clear with the new administration coming in that something was going to happen on the trade policy front. So between a combination of vendor diversification, vendor cost sharing, our own sourcing footprint and some inventory moves, we're able to mitigate a lot and also some nominal pricing actions. So we went out in our last quarter 4 and took some nominal pricing to offset tariffs. Again, low single digits, relatively speaking to the universe of furniture retailers or manufacturers out there on the lower end of what we've seen. So that's been in market and reflected in our guidance. And our outlook for quarter 2, whatever verbiage we had in there is based on at the moment in time, which still kind of holds today. If the trade policy fundamentally changes, we'll have to reevaluate. But right now, it's based on kind of current policies in effect.

Thank you. Moving now specifically to your Retail segment. Delivered sales increased 2% in your first quarter, and you mentioned an increasingly challenged consumer and macro environment which weighed on traffic. Can you talk us through the puts and takes for the quarter for this segment what actions are you taking to drive traffic? And how are you thinking about sales cadence for the remainder of the year?

So let me maybe talk about a little bit when I talked about Century Vision and the importance of expanding our store footprint. Stepping back, of what we manufacture as La-Z-Boy brand, we really sell through 3 channels. The biggest, a little bit over 1/3 of that is through our own company-owned retail Furniture Galleries. The -- a little bit smaller 1/3 of that is through Furniture Galleries that to a consumer would -- you wouldn't know, you'd be agnostic if they were company-owned or not. And if I look at those two groups together, that's about 2/3 of what we manufacture and sell as La-Z-Boy product, and that's sold across a network of 370 stores, ballpark, of which we own over half of them at this point. And then about 1/3 of our product is sold -- La-Z-Boy product is sold through multi-branded retailers. And we still see this. That's where our heritage was. And we also see it as an important place to reach consumers that in such a fragmented marketplace are never going to come into the Furniture Gallery, but they might be interested in the one-off chair. It's a way of driving brand relevance. And so we have some great compatible distribution with great strategic partners that help us actually expand brand awareness and sell furniture. As we think about what we're doing with our Furniture Galleries, I'll also step back to say for a higher-end quality purchase particularly focused on comfort, consumers want to come in the store. We still find 70% to 80% of consumers broadly, they'll start their purchase cycle online. They're going to do a lot of research, but they're going to come in to experience the product before they actually close that transaction. So stores and omnichannel experience is important, stores remain a very important piece of that. So for our about 370 stores, we have declared that we're on a journey to expand stores up to over 400 stores. And we have the modeling to show that we have good profitable places to put those additional stores in North America. But there's really 3 ways to expand our retail footprint for all the reasons I talked at the beginning. One is to expand same-store sales, which is obviously great from a profitability standpoint, you're leveraging your fixed cost base of those stores out there. I'll come back to that one. The second one is to expand the number of stores that we have out there, so net new stores. We added -- in the last 12 months, we've added 13 new stores. And for our fiscal year, which is May through April, we intend to add 15 stores, and we've been on a cadence of 10 to 15 stores for our total network. The third way, same-store sales, net new stores. And then the third one is we are opportunistically buying back independent licensees. So before La-Z-Boy Incorporated was as much of a retailer ourselves, decades ago, we offered these licensees and we offered the opportunity to open La-Z-Boy stores. Again, to the consumer, you wouldn't know if they were company-owned or independently owned. Slowly, a lot of these independent licensees are interested in the transaction, either multigenerational kind of handover or for a variety of reasons. So that's our third way of kind of building our retail footprint. In fact -- just last month, 2 months ago? I've lost track. We announced one of our biggest ever transactions in buying back that will close here at the end of October, but a 15-store network across the Southeast, including the Atlanta area, some of Florida and some at Tennessee. So 3 ways to grow our retail footprint. On those same-store sales, that is the one that is -- we are investing because of the leverage that you have when the market is growing on the same-store sales and really being able to get more out of each of those assets. In our first quarter, that was more challenged. We continue to see a choppy consumer. Q1 for us, again, May, June, July, is always our slowest time period for furniture. People are thinking about everything except their home and buying furniture. And that was particularly exacerbated for us this year on leveraging that base footprint. So our focus, again, one thing is the tailwind over time helps, and we believe with our footprint, we'll disproportionately benefit. But we also are tightening up all of our execution to ensure we're driving maximum traffic into our stores, and then super importantly, making sure that we're treating that traffic well and converting that into happy consumers.

That's great. Thank you. On the subject of opening new stores in the network of 400-plus stores that you mentioned for the future, what is your strategy there? And how are you thinking about targeting new versus existing markets? And then any detail you can provide on new store performance in the first year and how that ramps over time?

Sure. So I'll talk a little bit about the where, and then Taylor can talk about the financial side of it. We have great modeling to show where our La-Z-Boy consumer is and where stores will do well. So it's a -- nothing is a sure bet, but it's a pretty sure bet on where we're placing those stores. We, years ago, declared that we saw opportunity for around 400 stores. But as we got into more expensive real estate and some of those type of things, we backed off of that at about 350. With the way we're now running our Furniture Galleries and the profitability we're able to drive to the Furniture Galleries, we're able to update those models and continue to expand. We have national coverage as well as a significant presence in Canada as well across the entire network, whether they be company-owned or independently owned. But it's less about moving into a new region. It's more about fleshing out for populations that are growing to ensure you have appropriate coverage, or in some cases, moving a little bit into some areas that maybe we couldn't reach before when we weren't as refined in our business model and how we went about it.

And on the kind of progression or pace, I would just start with -- generally speaking, with a couple of exceptions aside, low capital intensive for us to stand up new stores. We're generally having developer or others work it for us. We'll sign a -- typically a 10-year lease, and that's kind of our operating model. But from a kind of cadence of year 1 to call it, year 3, typically, our year 1, our store is about 80% of maturity. And then from a profitability, generally breakeven, give or take, depends on if it's a multi-store market or a more isolated one. But then we see by kind of into year 3 more at a, call it, a going state, growing profitability, which is accretive to the entire enterprise. So generally speaking, a really quick payback period on the upfront investment, but then also a pretty quick acceleration to kind of a going accretive part of the enterprise. I will say, just as we've grown over time, we continue to get smarter. So we continue to look at ways at optimizing the start-up even quicker. So for example, if you're going to open a store in our quarter 1 in May, June, July, let's open it before Memorial Day. Otherwise, maybe there's a better time because you want to catch that consumer when they're coming out to a new location versus more of a trough period. So those are the type of things we continue to look at refining, but really happy with our expansion. And as Melinda mentioned, last year, the last 12 months, we opened 13, that's the most in decades. And then we'll go again with 15 again this year. So even though the market is continuing to challenge, we continue to invest our capital, which we have a really healthy balance sheet to, again, grow the business for the future.

That's really helpful. Thank you. We also wanted to make sure to ask about Joybird. Can you talk a little bit about how Joybird fits in with the rest of your assortment and your plans to grow the business?

Sure. So we bought Joybird. It was a start-up making about $45 million a year, 7 years ago. It was at the time that our industry was one of the last industries to start to shift to online. And so there were a lot of kind of digital start-up furniture brands. What we've learned over the last 7 years is that late shift on to digital has sort of settled into that 70% to 80% still buying in-store. And so we've seen a lot of the pure digital players kind of disappear out of the marketplace. What we like about Joybird and where the transformation is for us is we really are transforming Joybird into an omnichannel model as well. So if I think about Joybird was a start-up, it was all online, and we now are supporting that online business, but we're up to 14 stores. And with an expansion plan certainly to '25 and beyond, but prudently because we're still working through growing that business in a profitable way. On the other side, you got the La-Z-Boy brand that's got a multiyear heritage in store, and we're now working to strengthen our digital presence as well, knowing that consumers are going to start their journey there. And so you need to be both super inspirational, but also functional to capture the consumer online. For Joybird, when we bought it, we did it for a couple of reasons. First one is we wanted to learn our way into the digital space, and that has certainly been a big benefit. The second thing we were looking to do is really capture a different consumer. So the Joybird consumer is still a more upper middle income consumer, but they tend to be more urban. They tend to skew about 10 years younger, although both of our consumer brands service a fairly broad age group. And they also tend to be a -- the Joybird consumer is about expression through their brand. And so it's a very color forward, very -- currently more mid-century modern, kind of clean line kind of furniture. We love it also in that it is a relevant consumer brand. It's vertically integrated. We make our own furniture with Joybird as well, but it's reaching a slightly different consumer. So even when we talk about some of the noncore portions of our business, we see Joybird, while still very much in an investment phase, we see it as fitting into that model of a branded, vertically integrated D2C brand for us.

Thank you. Shifting now to margins. La-Z-Boy has set a long-term goal to grow its operating margins as part of its Century Vision strategy. And you've mentioned targeting Retail adjusted operating margins in the mid-teens and Wholesale in the low double-digit range. Can you walk us through the key drivers to achieve these targets for where margins are right now?

Yes. So you had mentioned it, so I won't have to repeat it. I'll tell you how we get there, if that helps. So Retail -- and both of those have proxies in our relatively recent history, which is why I think it's a good proof point of getting back with just both over the longer term. So Retail to double digits, which we've shown recently, the ability to do that even -- or call it, mid-teens, I'll say that, even what a, call it, a challenging backdrop with no real market headwinds, trailing 12 months for a while now, we've been double digit on Retail, which -- incredibly proud of even as we stood up new stores, invested in remodels, et cetera. But it's really getting those 3 kind of growth levers that Melinda mentioned all working in unison is how you get there, and you get there relatively successfully, which is growing same-store sales, successfully leveraging that embedded fixed cost base, acquisitions of independent licensees, which generally are profit accretive from day 1. And if not, it's a kind of brand salvage path for us which we improve back to our standard. And then three, new stores, which in the first year can be a little bit of a drag, but quickly over year 2 and year 3 gets to accretive profitability. So those three working in unison is what enables Retail back to, call it, the mid-teens. Wholesale to 10, our Wholesale segment is the one that has been kind of most impacted into the pandemic and out of it. Pleased to say of our Wholesale business, our La-Z-Boy part of that, which is far and away the largest, has now grown sales and margin 5 consecutive quarters, which is impressive. And again, back to no kind of volume headwinds from housing or anything else. But we see that segment back to double digits in two ways. One is half of it, we see fully within our control, which is general continuous improvement every day, but also bigger transformative projects like our distribution and home delivery transformation we've announced in the last quarter and kicked off, which over the next 4 years will be a 50 to 75 basis point margin improvement for that segment. And I'll just spend a couple of times on that one before I get to the other half of it. It really is a culmination and a transformation of where we've been, which is over time organically through new stores, acquisitions, we ended up with a distribution network that was the way it was for all the right reasons at the moment in time. When you took a step back, there was a much more efficient, better way to set ourselves up not only to service our current consumer business, but also as we look forward to further expansion and growth, et cetera. So over the next 4 years, we will go from what was 15 distribution centers down to 3 centralized hubs located very closely to legacy manufacturing sites. In doing so, it will enable, obviously, a lot less building with 30% less square footage and more efficient square footage. Our products will travel 20% less mileage, which is meaningful on the heavy upholstered furniture and also enable much more productive inventory and working capital management. So check, check, check, but it's a big project, so it's going to take some time. But -- so we'll have a little transition over the next couple of years, but going into year 3 of this project, we expect to turn and start seeing savings and then year 4, we see the ultimate payoff of that 50 to 75 basis points. So that's kind of -- we're in the mid- to low 7s on Wholesale now. We see half of it, we fully can control that as one big project to help get us there. The other half, frankly, we do need some normalized industry growth on the back of housing to enable volume growth to better leverage our overhead. So those two, Retail to mid-teens, Wholesale to double digit is kind of the sweet spot on how we get the total enterprise to a double-digit long-term margin.

That's great. Thank you. A core pillar of your Century Vision strategy is expanding brand reach. Could you walk us through your marketing strategy and how you're approaching brand campaigns? And then along with that, are there any particular customer segments you're looking to gain share in? And how are you thinking about advertising spend?

Sure. So going back to when we kicked off Century Vision now 4 years ago, as I said, we realized one of our very biggest assets was this La-Z-Boy brand, that consumers were aware of the brand. They had positive attributes with the brand, but they didn't see it as relevant to them. And so what we really have set on that journey on is understanding how to drive that relevancy back. And it started with bringing, for the first time, in-house consumer insights. My background is a lot of years at Procter & Gamble. So everything begins with this consumer, and I fundamentally believe that as a branded consumer product, you need to be about the consumer and the unmet need and everything you do. So we brought those insights in-house and really use them to start to test and in a databased way, go after where are our assets, where do we have work to do. So one of the first things that you saw is it's now, we're -- are we 2 years in already? Hard to imagine, but our Long Live the Lazy campaign, which is all around embracing who we are. It's ownable. It is a little bit entertaining, hopefully. And relevant to catch your eye to really embrace the fact that we are motion furniture, we are comfort, and we are for everyday life, right? And even I should point out that for a while, we even tried to downplay like our history of motion and our expertise in motion. But the reality is motion furniture is some of the fastest-growing product in like what consumers want today. So let's embrace that and go with that as a proof point. The second thing where we are on a journey of updating is around our product offering. So again, we're known for comfort, and we still have a great population of folks that want that more traditional super comfortable furniture. But consumers also want for us more streamlined, more modern looks, but they still want the motion, they still want the functionality and the comfort. So we've introduced some pretty significant additional product lines that are still made by us, still fully customizable, half of what we sell is custom. And so really being able to move our product trends along to where the consumer is going. In some cases, even playing some catch up with maybe even everything from more modern products, more design-oriented product to maybe also having some scaled-down options that enable some more aspirational consumers in. And then helping consumers understand use cases as well from is it your main entertainment space? Or is it your nursery? There's some incredible stories where people get very passionate at a very young age when they've leveraged a chair through an injury or through a nursery or that type of thing. So really just becoming more relevant in that space, in our messaging, in our product offering, updating our stores to demonstrate who we are today and where we're headed in the future. And then making sure that we're also, to the point on messaging -- spend is similar, no dramatic changes, up or down. But really, we released a new brand identity that is much more -- I'm looking to see if it's up here anywhere. But that is much more about -- it's more digitally enabled. It's a comfy -- it's back to our heritage in many ways when you look at kind of what that identity is, but it stands for the comfort that we stand for. And then where we go to market with our messaging is much more into relevant social media, targeted influencers, podcasts, those type of things, and really being ready to respond to where culture is going. How often do you see a show or read a book or see a movie and there's a reference to a La-Z-Boy? How do we jump on that and leverage that to just be more relevant and top of mind for a broader base of consumers. What we know is that we have seen -- our sweet spot is still in that upper middle income and tends to gauge a little bit older and into suburban larger homes, more investment in quality. But we know that we are appealing to and becoming more top of mind to a broader consumer base, both in age and then in other demographics.

Thank you. Just in the last few minutes here, we're asking 5 questions to each company to get a view on what to expect in the coming months for the industry and for your business, kind of like a rapid fire question round. So first, we wanted to ask on the health of the consumer. What are your expectations for the environment in the second half of 2025 relative to your recent results? Do you think things will be the same, better or worse?

Five words or less? We're planning against the back half that probably looks about the same. I think the real unlock for our industry is when housing unlocks, and that's going to take a longer time.

Okay. And to the extent that you can answer the same question on the health of the consumer, but for 2026.

Plan for same, and we hope for better.

Well, thank you. That sounds great. On pricing, are you seeing any pushback or elasticity as a result of any pricing actions that you've taken?

Directly linked to pricing, no. I mean, particularly for us, ours is low nominal single-digit. Most of the industry are higher. I think it's a combination of everything going on to the consumer, probably has some pressure on them, but exact elasticity, no, I haven't seen it.

Okay. And on inventory, do you expect to see any disruption in shipments due to global supply chain disruption?

Given that we make our own product, no. No, because there -- we've lived through a lot of disruption in the last 5, 6 years, so we are -- when we talked about our agile supply chain, managing multiple sources of inventory, multiple vendors, multiple countries, managing what the stock parts for all of our raw materials, what are we keeping in stock, how are we staying agile in that, we continue to refine those processes. But from a finished product inventory, we make to order, so we don't have that challenge. And we work closely on our B2B side with customers and we're generally making to order there, too. So inventory, not really a factor.

Thank you. And on non-tariff margin drivers, so freight, wages, materials into 2026, do you expect those to be the same, better or worse?

Generally the same. We've seen pretty good stability thus far. Again, obviously, things are volatile and uncertain out there. So it's not to say that they will. But based on what we see today, generally the same, obviously moderate inflation on wages and others, which is pretty normal. So -- but nothing like we saw during the pandemic.

Okay. And our last question is, looking at the industry, do you think market share consolidation will speed up, slow down or be the same in 2026?

In our industry, consolidations from a transaction standpoint have generally not gone well. Finding the synergies, either the upside revenue synergy or the cost synergies, there's literally books written about that not being a great sign. What tends to happen in more challenging times is both on the manufacturing and the retail side. Some of the smaller, the less strong balance sheets and all just simply end up closing down and dropping out. That has been happening for the last 3 years. I think it will continue to happen. And that's why we're proud of our 98-year history and a very strong balance sheet to weather that.

Great. Thank you for joining us today.

Thank you.

Thank you.