WEBVTT - ICYMI: Wayfair Tops Estimates Despite Tariff Concerns

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<v Speaker 3>Another stock that's been rallying in a big way today,

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<v Speaker 3>in fact, up about eight and a half percent at

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<v Speaker 3>its highs is Wayfair stock right now still again about

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<v Speaker 3>three and a quarter percent, rallying after earnings. Results came

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<v Speaker 3>in better than expected as consumers brought forward spending while

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<v Speaker 3>suppliers are holding back from price increases. We should put

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<v Speaker 3>out the stocks off about thirty percent year to date.

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<v Speaker 3>Kate Gulliver is the chief financial officer at Wayfair, which

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<v Speaker 3>delighted to have her back with us. She joins us

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<v Speaker 3>once again from Boston. Kate, how are you and how

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<v Speaker 3>is your environment? It's been about a month since we

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<v Speaker 3>last talked. How has it changed?

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<v Speaker 4>Yeah, you know, great question. I guess i'd just start

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<v Speaker 4>with first, you know, the printed this morning. We feel

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<v Speaker 4>great about the quarter, the strength and the top line,

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<v Speaker 4>frankly in the US segment, and ultimately the flow through

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<v Speaker 4>to adjusted EBITDA, you know, the enduring strength in the business. So,

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<v Speaker 4>you know, we feel like we're on very solid ground

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<v Speaker 4>right now.

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<v Speaker 1>We saw earlier and even earlier this week as well

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<v Speaker 1>from companies such as Meta Platforms, but mostly Microsoft. And

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<v Speaker 1>then of course with the GDP figure that companies and

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<v Speaker 1>people are pulling purchases forward. I'm curious what you saw

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<v Speaker 1>on the platform over the last month in terms of

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<v Speaker 1>what customers are buying, how they're buying it, and how

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<v Speaker 1>that behaviorist may be changed.

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<v Speaker 4>Yeah, it's a great question. You know, we shared on

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<v Speaker 4>the call this morning. There's one category where we have

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<v Speaker 4>seen some pull forward of demand, and that's an appliance

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<v Speaker 4>is So you know, we don't do a large business

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<v Speaker 4>and appliances. We've gone to that business a few years ago.

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<v Speaker 4>But that category we have seen what we would call,

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<v Speaker 4>you know, a pull forward of demand. We actually have

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<v Speaker 4>not seen a pull for demand in sort of the

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<v Speaker 4>core furniture part of the business. You know, we look

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<v Speaker 4>at this on a variety of different metrics around you know,

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<v Speaker 4>search volumes, traffic version, et cetera. And from everything that

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<v Speaker 4>we're seeing you know, over the past month to your question,

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<v Speaker 4>we've not really seen you know, any discernible pull forward

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<v Speaker 4>on the furniture business really just on the appliance part,

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<v Speaker 4>and the appliance part is a very small part of

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<v Speaker 4>our business in total. And obviously, you know, the last

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<v Speaker 4>month that you're referred to, you know, would be post

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<v Speaker 4>the quarter that we've posted this morning, which ended on

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<v Speaker 4>March thirty.

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<v Speaker 1>First, is that lack of pull forward a sign at

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<v Speaker 1>all to you of a lack of confidence that the

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<v Speaker 1>consumer has in their situation right now? Is it concerning

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<v Speaker 1>to you? These are obviously big purchases, we're talking furniture here.

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<v Speaker 1>If consumers don't feel comfortable buying those, then they might

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<v Speaker 1>not buy.

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<v Speaker 4>Yeah, great question. So you know, first, our average AOV

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<v Speaker 4>is about three hundred dollars, right, so we sell range

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<v Speaker 4>of products and the average ticket size of about three hundred.

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<v Speaker 4>We did say actually the demand had been quite healthy

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<v Speaker 4>in in April quarter to day period, and so we

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<v Speaker 4>feel very good about where demand is. I do want

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<v Speaker 4>to point out that our category, you know, we're hearing

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<v Speaker 4>a lot of noise in the consumer and certainly something

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<v Speaker 4>that we're following very closely and you know, monitoring quite thoughtfully,

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<v Speaker 4>but we are in our category, we've been in a

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<v Speaker 4>position where our category has actually been down for multiple

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<v Speaker 4>years in a row at various points from sort of

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<v Speaker 4>twenty you know, back half of twenty one to current

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<v Speaker 4>you know, our category has been down double digits during

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<v Speaker 4>some of that time. Over this last quarter, you know,

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<v Speaker 4>we still saw the category under pressure in the US.

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<v Speaker 4>So we're talking about a category you know that his

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<v Speaker 4>head actually sort of a negative consumer impact for some

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<v Speaker 4>time after obviously a big pull forward in the beginning

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<v Speaker 4>of COVID.

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<v Speaker 3>Well, that's interesting, yeah, exactly right there, I mean COVID

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<v Speaker 3>was crazy, right. I'm assuming we all talked about everybody doing,

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<v Speaker 3>you know, buying for their home because they were living, working,

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<v Speaker 3>doing everything in their home. Does the environment feel well

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<v Speaker 3>after a couple of years of things being pulled back,

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<v Speaker 3>does it feel more normal? How do you describe today's environment,

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<v Speaker 3>especially Kate, when we talked to so many leaders and

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<v Speaker 3>heads of companies where you know they're using the word uncertainty.

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<v Speaker 3>You've got you know, as Tim mentioned, you know, companies

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<v Speaker 3>giving out dual earnings outlooks depending on what happens out

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<v Speaker 3>of the White House and in terms of terrorf So

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<v Speaker 3>I'm just curious how you would kind of describe it.

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<v Speaker 4>Yeah, it's a great question. So maybe to start with

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<v Speaker 4>our category and some of the evolution of our category

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<v Speaker 4>over this period. To your point, we had significant pull

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<v Speaker 4>forward in the category in the COVID time, right, so

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<v Speaker 4>in the sort of twenty twenty twenty twenty one time.

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<v Speaker 4>Since then, the category has been down consistently since then.

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<v Speaker 4>And actually when we look at the data, if you

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<v Speaker 4>were to take a normalized growth rate from twenty nineteen

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<v Speaker 4>to now, you know, typically is a category that grows

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<v Speaker 4>somewhere on the order of three to four percent a year.

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<v Speaker 4>If you were to sort of straight line that out,

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<v Speaker 4>we're quite a bit below where the trend line is.

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<v Speaker 4>We actually think on a basis or on a sort

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<v Speaker 4>of total sales basis for the category, the category itself

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<v Speaker 4>is actually below you know, starting to be below twenty

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<v Speaker 4>nineteen levels, right, So we're seeing a category that has

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<v Speaker 4>historically been over the last few years quite depressed, which

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<v Speaker 4>may be different than you know, some of the other

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<v Speaker 4>consumer discretionary categories that the folks are referring to. That said, yes,

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<v Speaker 4>it's it's absolutely an uncertain environment. This category. Well, it's

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<v Speaker 4>not down as much as it was in sort of

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<v Speaker 4>twenty two to twenty three. It was still down the

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<v Speaker 4>last quarter. So our focus then becomes on share gain, right,

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<v Speaker 4>So if the category is uncertain, if the overall consumer

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<v Speaker 4>environment is uncertain, what we want to do is make

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<v Speaker 4>sure that we're gaining share. We've done that consistently every

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<v Speaker 4>quarter since the fourth quarter of twenty two, and that

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<v Speaker 4>we're doing that in a very cost discipline way. And

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<v Speaker 4>that's where you've seen us grow our margins and adjusted

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<v Speaker 4>EBITDAD dollars throughout that period as well. So you know,

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<v Speaker 4>certainly there's a lot of noise out there, there's a

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<v Speaker 4>lot of uncertainty within that. We're trying to control what

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<v Speaker 4>we can control, and to us, that results in share

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<v Speaker 4>gain and you know EBADUG growth.

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<v Speaker 1>Hey, Kate, I think I think it's fair to say maybe

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<v Speaker 1>not all customers know that you're a marketplace. You don't

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<v Speaker 1>necessarily have inventory when people are looking at the Wayfair platform,

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<v Speaker 1>but you have relationships with all of these suppliers and

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<v Speaker 1>you have many suppliers. But I want to ask you

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<v Speaker 1>to characterize what you're hearing from these suppliers because they

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<v Speaker 1>are the ones who are affected by tariffs. Such a

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<v Speaker 1>small portion of this stuff is actually made in the US.

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<v Speaker 1>What have the conversations been like with the largest folks

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<v Speaker 1>on your platform? What are they saying?

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<v Speaker 3>Yeah, my understanding is something like more than twenty thousand

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<v Speaker 3>suppliers that you're working with.

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<v Speaker 4>Yes, that's exactly right. So I appreciate that you know it.

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<v Speaker 4>And to your point, you know, mostly to the consumer,

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<v Speaker 4>it reads like a retailer. On the front end, you're

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<v Speaker 4>absolutely right in terms of the dynamic. But on the

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<v Speaker 4>back end you have the benefits of a marketplace and

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<v Speaker 4>we do think that is a benefit to us during

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<v Speaker 4>this time because we work with over twenty thousand suppliers

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<v Speaker 4>from around one hundred different countries including the US. There

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<v Speaker 4>is some you know, domestic manufacturing in this space, but

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<v Speaker 4>you know, we work with suppliers from all over the

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<v Speaker 4>world world. These suppliers range in size, you know, they

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<v Speaker 4>have a wide range of categories that they're involved in.

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<v Speaker 4>In those categories all have different dynamics. I will point

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<v Speaker 4>out that no single supplier comprises any meaningful portion of

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<v Speaker 4>our sales. So you know, from a sales perspective, the

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<v Speaker 4>suppliers are quite diversified, and what we are focused on

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<v Speaker 4>with our suppliers is partnering with them right now to

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<v Speaker 4>have conversations around what levers are at their disposal depending

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<v Speaker 4>on you know, how the environment works from here and

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<v Speaker 4>to us, that means helping them understand, you know, where

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<v Speaker 4>we're seeing demand, what we're seeing in terms of price elasticity.

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<v Speaker 4>So if they were to change whole sales, what does

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<v Speaker 4>that resultant from a price elasticity perspective, and how might

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<v Speaker 4>that impact them in their given category. Many of our

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<v Speaker 4>products are highly substitutable, So you know, let's take this

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<v Speaker 4>chair I'm sitting on right now. We probably sell miniature

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<v Speaker 4>quite similar to this chair. So if you're a supplier

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<v Speaker 4>and you raise price in that category, you could be

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<v Speaker 4>at a dis advantage. Then somebody else has been able

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<v Speaker 4>to maintain a more cost efficient wholesale and so that's

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<v Speaker 4>something we help the suppliers understand and you know, share

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<v Speaker 4>information with them on. We also talk them through what

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<v Speaker 4>other levers they have. During a time where you might

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<v Speaker 4>have some you know, demand disruptions, how do they think

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<v Speaker 4>about leaning in and using our three pl program called

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<v Speaker 4>castle Gate to be able to get inventory, you know,

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<v Speaker 4>into the country. We actually did talk about in the

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<v Speaker 4>first quarter some whole forward of inventory into the castle

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<v Speaker 4>Gate network to land ahead of you know, tariff conversations.

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<v Speaker 4>How do they think about posts, how do they think

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<v Speaker 4>about supplier advertising or retail media. So all of these

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<v Speaker 4>are tools in their toolkit, and our focus is really

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<v Speaker 4>partnering with these suppliers so they're getting the same information

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<v Speaker 4>that we're getting and we're helping to think through, you know,

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<v Speaker 4>these different levers and what is best to pull.

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<v Speaker 3>When I am curious in terms of the consumer, you

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<v Speaker 3>said that they bought a lot of appliances. That's a

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<v Speaker 3>smaller part of your business or small part that they

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<v Speaker 3>weren't pulling forward in terms of furniture. Is that I mean,

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<v Speaker 3>I don't know if you understand this world more than most,

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<v Speaker 3>And I'm just curious. Do you think consumers we've talked

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<v Speaker 3>about we're seeing consumer sentiment. We've all seen the numbers

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<v Speaker 3>that sentiment, and then there's actual actions. Do you think

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<v Speaker 3>the consumer is slowing down? The consumer is stressed right now?

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<v Speaker 4>Yeah? You know, I won't I guess I won't speak

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<v Speaker 4>to the consumer broadly. I can tell you what we're

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<v Speaker 4>seeing in the category. The category itself was down in

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<v Speaker 4>Q one, right, So we look at a variety of

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<v Speaker 4>different panels for the category, you know, various credit card panels.

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<v Speaker 4>We also talk to suppliers because we work with twenty

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<v Speaker 4>thousand of them, so we have a pretty good read

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<v Speaker 4>on what's happening with the category as a whole. And

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<v Speaker 4>when we look at the US four Q one, the

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<v Speaker 4>category was down. Now in our case, that's a continuation

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<v Speaker 4>of a trend that's been going on for quite some

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<v Speaker 4>time in the category, you know, as I said, has

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<v Speaker 4>been down since you know, sort of let's say, back

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<v Speaker 4>half of twenty one. So the category itself has remained

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<v Speaker 4>under pressure. We haven't seen an alleviation you know, of

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<v Speaker 4>that pressure. That said, we feel good about our navigating

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<v Speaker 4>through that and our ability to continue to gain share

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<v Speaker 4>in that environment.

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<v Speaker 1>How do you see that holding up if tariffs remain

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<v Speaker 1>in effect or if we don't see if we don't

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<v Speaker 1>see one hundred and forty five percent tariff come off

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<v Speaker 1>of China.

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<v Speaker 4>Yeah, you know, I go to the dynamic of the

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<v Speaker 4>marketplace and what we're really focused on driving there, which

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<v Speaker 4>is helping suppliers understand the competitive dynamics and our ability

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<v Speaker 4>to work with suppliers from all over the world. So

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<v Speaker 4>certainly we work with supplier from China, but we work

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<v Speaker 4>with supplier India, Turkey, Brazil, Southeast Asia, Mexico, the US,

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<v Speaker 4>right everywhere. And so what you'll see happen, you know,

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<v Speaker 4>as different teriff rates evolve, is suppliers want to be

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<v Speaker 4>quite prudent in making sure particularly because frankly, demand has

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<v Speaker 4>been so slow for them over the past few years.

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<v Speaker 4>How do they be thoughtful about you know, if and

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<v Speaker 4>when they modulate prices and if and when they modulate

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<v Speaker 4>you know, availability, because what they want to do is

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<v Speaker 4>maintain share some cases, you know, if they see an

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<v Speaker 4>opportunity gain share within a category that they sell on us.

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<v Speaker 4>And this is where the substitution helps because if one

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<v Speaker 4>specific geography or region is more impacted than another, you

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<v Speaker 4>can see that other reason will actually start to take share. Right,

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<v Speaker 4>so suppliers that actually are not disadvantage from a price

0:11:17.240 --> 0:11:20.680
<v Speaker 4>perspective will take share within you know, see this chair category.

0:11:20.840 --> 0:11:24.000
<v Speaker 3>All right, So it sounds like glass more half full

0:11:24.480 --> 0:11:26.920
<v Speaker 3>in terms of the outlook, I'm just trying to gauge.

0:11:26.960 --> 0:11:28.839
<v Speaker 3>I mean, it does sound like your suppliers have a

0:11:28.880 --> 0:11:30.319
<v Speaker 3>lot of move But give us an idea if you

0:11:30.360 --> 0:11:31.840
<v Speaker 3>had to use a word to kind of describe the

0:11:31.920 --> 0:11:34.080
<v Speaker 3>environment today. You have such a great read on the

0:11:34.120 --> 0:11:36.920
<v Speaker 3>consumer and spending just as we wrap up what would

0:11:36.920 --> 0:11:37.640
<v Speaker 3>be that word, But.

0:11:37.679 --> 0:11:41.640
<v Speaker 4>You know, it is a very fluid environment, and our

0:11:41.720 --> 0:11:44.240
<v Speaker 4>focus is on controlling what we can control, and we

0:11:44.240 --> 0:11:47.600
<v Speaker 4>think we're set up quite well to continue to offer

0:11:47.640 --> 0:11:50.400
<v Speaker 4>our consumer to the best value. And you know, that's

0:11:50.440 --> 0:11:52.320
<v Speaker 4>the best that we can do during this time deliver

0:11:52.480 --> 0:11:55.240
<v Speaker 4>for our consumer, and we feel in partnership with our suppliers,

0:11:55.280 --> 0:11:56.600
<v Speaker 4>we're going to be able to do that. And we're

0:11:56.640 --> 0:11:58.400
<v Speaker 4>set up on a nice cost structure and a nice

0:11:58.400 --> 0:11:59.959
<v Speaker 4>balance sheet to be able to continue to deliver that

0:12:00.200 --> 0:12:00.959
<v Speaker 4>going forward, and.

0:12:00.920 --> 0:12:03.800
<v Speaker 3>Your suppliers to feel confident about being able to navigate

0:12:03.920 --> 0:12:05.920
<v Speaker 3>kind of all this craziness that's going on.

0:12:06.800 --> 0:12:08.920
<v Speaker 4>Yeah, I mean, certainly, you know, we want to partner

0:12:09.000 --> 0:12:10.920
<v Speaker 4>with them to help them because there is a lot

0:12:10.960 --> 0:12:13.679
<v Speaker 4>of noise out there, and so we're trying to help

0:12:13.679 --> 0:12:16.679
<v Speaker 4>them sort of navigate through this. But you have suppliers

0:12:16.800 --> 0:12:19.640
<v Speaker 4>a range of scale, a range of sophistication, a range

0:12:19.640 --> 0:12:21.320
<v Speaker 4>of geographies that they work in, and you know, we

0:12:21.320 --> 0:12:23.720
<v Speaker 4>feel good about our ability to help them navigate through.

0:12:23.679 --> 0:12:26.000
<v Speaker 3>All right, So enjoy it, Kate, thank you so much.

0:12:26.080 --> 0:12:27.280
<v Speaker 3>Be well, Kate Olliver, She's.

0:12:27.480 --> 0:12:28.280
<v Speaker 4>Nice to talk to you again.

0:12:28.400 --> 0:12:31.120
<v Speaker 3>Same here. She's the chief financial officer over at Wayfair.

0:12:31.160 --> 0:12:34.000
<v Speaker 3>As we mentioned, their stock definitely popping and out performing

0:12:34.000 --> 0:12:35.719
<v Speaker 3>the overall trade today, up as much as eight and

0:12:35.760 --> 0:12:37.360
<v Speaker 3>a half percent right now tim with about a three

0:12:37.400 --> 0:12:38.400
<v Speaker 3>and a quarter percent game