Key Points

• Analysts have been downgrading BYD's full-year delivery forecast.

• BYD is currently on pace to fall short of 2025 delivery estimates.

• BYD is facing a challenging Chinese market amid a brutal price war.

• 10 stocks we like better than BYD Company ›

Over the past few years, BYD investors have been spoiled. The Chinese electric vehicle (EV) juggernaut swept through the country's domestic EV market with relative ease and then applied tremendous pricing pressure with a long list of highly affordable and compelling EV vehicle options. While BYD has been a no brainer winner over the past five years with its stock trading nearly 380% higher over that time, it might finally be showing signs of slowing down.

Time to jump off the BYD hype train?

BYD's monthly sales and deliveries have stagnated over the summer months, which are traditionally slower selling months, providing fresh challenges for China's EV giant. Not only is BYD dealing with slowing sales, but it's also being reprimanded vocally by the Chinese government for applying so much pressure on pricing that it's caused a race to the bottom, slowly but surely eating away at industry margins. BYD slashed prices by as much as 34% in May, causing increased government scrutiny on the industry.

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In fact, in what would be a rare miss for the top Chinese EV maker, the company looks like it's going to fall short of its annual sales target for 2025. BYD would need to sell roughly 560,000 units monthly through December to hit its sales target, which would be more vehicles sold in one month than it ever has in its history -- BYD sold just short of 515,000 vehicles last December.

Image source: BYD.

And now analysts are stumbling over themselves to downgrade BYD's annual sales estimates. In fact, Deutsche Bank AG said it now expects BYD to deliver 5 million in wholesales, which is simply deliveries to dealer networks, which breaks down into 4 million domestic deliveries and 1 million overseas as the company continues its global expansion.

Morgan Stanley lowered its delivery projection to 5.3 million last month, noting that a smaller number of new models would be a drag on company deliveries. Perhaps even worse yet, Bloomberg Intelligence's Joanne Chen said BYD will be forced to sacrifice some profits, while maintaining large incentives and discounting, if it wants to stay on track and have a chance at reaching its delivery estimates.

"Regulatory scrutiny will temper direct cuts to vehicle sticker prices but competition isn't going away and retail promotions are still needed to sustain sales momentum," Chen said, according to Automotive News. "New model roll outs and steady tech upgrade are also crucial."

Global expansion

Further, when you back out BYD's global expansion and the estimated deliveries overseas, investors will see that BYD's domestic car deliveries in China are shrinking. In June, domestic deliveries slipped 8%, compared to the prior year. HSBC data shows that Geely was the largest gainer of market share during the first half of 2025, while BYD was one of the biggest losers.

Back to looking at BYD's global expansion, while the company is on pace to reach its forecast of 800,000 overseas deliveries, it still faces challenges in two emerging markets: Saudi Arabia and India. Both markets are potentially huge, but Saudi Arabia has EV market share of just 1% of total sales and faces high costs, charging infrastructure challenges, and extreme temperatures that make EV adoption slower in the region. India, the world's third largest automotive market, has similar problems and substantial tariff headwinds that can increase the cost of imported vehicles by 100% in some cases.

Ultimately, investors should prepare for an inevitable slowdown in BYD's expansion after years of rocketing higher in deliveries and stock price. That said, eventually it's likely that BYD and other Chinese automakers will enter the U.S. market, and that could provide the company's next massive boost in deliveries and financials -- but when that will happen is anyone's guess. Long-term investors should stay the course because even if BYD slows down from its rapid rise it's still in an incredible position to thrive globally in the years ahead.

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DATE

• Thursday, July 24, 2025, at 11 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — David Foulkes
• Chief Financial Officer — Ryan M. Gwillim

Need a quote from one of our analysts? Email [email protected]

RISKS

• Management stated that tariffs continue to directly impact earnings, with total tariff costs for Chinese imports potentially reaching $20 million to $30 million at current rates, based on the anticipated 2025 impact, in addition to approximately $30 million in Section 301 tariffs already factored into 2025 annual guidance.
• Operating earnings and EPS declined year-over-year in Q2 2025 due to tariffs, reinstated variable compensation, and lower absorption resulting from decreased production levels, with management noting these negative impacts were "only partially offset by new product momentum [and] ongoing cost control measures."
• Sales declined in both the value category for boats and in Navico Group, with value brands highlighted as "challenged" and management continuing to "optimize the profitability of these brands at reduced production volumes."
• Ryan M. Gwillim said, "is an extremely dynamic situation" explicitly acknowledging ongoing uncertainty regarding future tariff policy, exposure, and related capital market disruption.

TAKEAWAYS

• Revenue: $1.4 billion in sales for Q2 2025, with each segment performing at or above management expectations.
• Earnings Per Share (EPS): $1.16 in earnings per share for Q2 2025, exceeding guidance and increased sequentially from Q1 2025.
• Free Cash Flow: $288 million in the quarter, a record for Q2 2025, and $244 million for the first half -- a $279 million improvement over the first half of 2024.
• Propulsion Segment Sales: Propulsion business sales increased 7% in Q2 2025, primarily due to strong U.S. OEM orders; Both sales and operating earnings grew sequentially from Q1 to Q2 2025.
• Mercury Outboard Engine Share: Gained over 300 basis points in U.S. retail share for engines over 300 horsepower in Q2 2025, and 30 basis points overall on a rolling twelve-month basis.
• Engine Parts & Accessories (P&A) Sales: Engine parts and accessories sales increased 1% year-over-year in the second quarter of 2025. Distribution business sales were up 4% year-over-year in the second quarter of 2025. Products business sales were down 4% in Q2 2025, reflecting offsetting trends.
• Navico Group Sales: Down 4% compared to Q2 2024; Year-to-date revenue for Navico Group is down 2.5% versus the first half of 2024. Segment operating earnings declined due to lower sales, tariffs, and the variable compensation reset in Q2 2025.
• Boat Segment Sales: reflecting weakness in value categories, partially offset by premium and core segment performance; with Freedom Boat Club contributing approximately 12% of segment sales in Q2 2025.
• Wholesale Shipments & Inventory: U.S. wholesale boat shipments were down 9% in Q2 2025, resulting in an 11% reduction in U.S. pipelines, or over 1,200 fewer units year-over-year; Global pipelines are down 2,300 units as of Q2 2025.
• Tariff Exposure: Less than 5% of cost of goods sold (COGS) is potentially subject to $20 million to $30 million in new tariff expense from China for 2025, in addition to $30 million in Section 301 tariffs; Mexico and Canada supply approximately 15% of U.S. COGS, but benefit from USMCA exemptions, limiting exposure.
• Guidance: Full-year sales are projected at approximately $5.2 billion for 2025, Full-year adjusted EPS guidance is approximately $3.25, and free cash flow guidance has been raised to over $400 million for the full year 2025; debt reduction target increased by $50 million to reach $175 million in 2025.
• Dealer Inventory & Pipeline: Boat-side weeks on hand in the low 30s at present, which are expected to reach around 40 by year-end 2025, while global and U.S. field pipelines remain at historical lows, excluding the COVID period, as of Q2 2025.
• New Product Launches: Mercury introduced 425-horsepower and refreshed 350-horsepower outboard engines; Sea Ray introduced new models featuring integrated Navico Group technology.
• Awards & Recognition: Brunswick was again named one of America's best mid-sized companies by Time magazine, achieved several Boating Industry Magazine product awards, and earned multiple distinctions from Newsweek.

SUMMARY

Brunswick Corp. (NYSE:BC) achieved record free cash flow of $288 million in Q2 2025 and delivered improved sequential EPS in Q2 2025 while navigating persistent tariff headwinds and segment-specific pressures. Management credited cost controls, operational execution, and resilient aftermarket and premium brand performance for offsetting volume weakness in value categories. Cautious optimism for the second half stems from positive July retail trends, strategic inventory management, and an enhanced competitive position driven by domestic manufacturing and proactive supply chain adjustments.

• David Foulkes emphasized the company's "fully committed" stance on driving further profitability via rationalization and manufacturing capacity optimization actions in the second half.
• Ryan M. Gwillim explicitly stated that over 75%-80% of Q2 2025's tariff impact fell on the propulsion segment, with residual effect on P&A and minimal exposure for boats.
• Management clarified that the impact of 15% tariffs on Japanese imports is not yet visible in Mercury's OEM orders as of Q2 2025 and is not factored into current guidance.
• A 25% reduction in value fiberglass models is planned for the 2026 model year lineup to simplify the portfolio and increase margins in smaller market segments.
• Internal data indicated that retail sales in July 2025 were trending positively compared to July 2024, supporting management's confidence in a steady wholesale outlook for the remainder of the year.
• Restructuring at Navico Group included consolidation of two production facilities, a transition to a third-party logistics provider in Europe, and a leaner organizational structure to improve agility and reduce expenses.
• Debt maturities are deferred until 2029, and the company reported $1.3 billion in liquidity at the end of Q2 2025, supporting ongoing share repurchases and debt reduction goals.
• Management highlighted the enhanced competitive positioning from U.S.-centric manufacturing, vertical integration, and rapid onshoring, allowing Brunswick Corporation to mitigate and adapt tariff exposure more effectively than offshore-dependent competitors.

INDUSTRY GLOSSARY

• USMCA: United States-Mexico-Canada Agreement, a trade agreement that enables tariff exemptions for certain goods moved between the U.S., Mexico, and Canada.
• P&A (Parts & Accessories): Engine and boat parts, electronics, and various consumables sold into both OEM and aftermarket channels.
• COGS: Cost of goods sold; the direct costs attributable to the production of goods sold by a company.
• Aftermarket: Recurring sales of replacement parts, maintenance products, and upgrades after the initial sale of marine engines or boats.
• OEM (Original Equipment Manufacturer): Companies that manufacture boats or equipment using Brunswick’s propulsion and other systems as original content.

Full Conference Call Transcript

David Foulkes: Thanks, Steve, and good morning, everyone. Brunswick Corporation delivered strong second quarter results. As the power of our market-leading products and brands, efficient operational execution, and cost control, continued prudent pipeline inventory management, and the benefits from the resilient recurring aftermarket focus portions of our portfolio resulted in second quarter financial performance ahead of expectations. This was despite the challenging macro environment and uncooperative weather in many parts of the U.S. through the first two months of the quarter. Year to date, both unit retail sales in the value category are underperforming our initial expectations for the year.

The continued overall resilience in the premium and core categories combined with improving retail sales trends in July is expected to provide a floor for wholesale performance in the second half of the year. Tariffs continue to directly impact our earnings and add uncertainty for both our end consumers and channel partners. But all our businesses are executing strongly on their mitigation plans, resulting in a smaller net tariff impact than originally anticipated. Against this backdrop, we are pleased to report second quarter sales of $1.4 billion, up slightly from the prior year, and earnings per share of $1.16, both exceeding the top end of our guidance and sequentially up from the first quarter.

Earnings were impacted by the reinsurance reinstatement of variable compensation and the effects of tariffs but were consistent year over year excluding those items. A continuing highlight of our financial performance is our free cash flow. We had another quarter of our outstanding free cash flow generation, with $288 million of free cash generated in the quarter, a record for any second quarter in company history. This performance also resulted in a record first half free cash flow of $244 million, a $279 million improvement versus the first half of 2024. The free cash generated in the past three quarters represents the largest free cash flow generation in any fourth through second quarter period in Brunswick Corporation history.

In summary, despite everything going on around us, Brunswick Corporation was firing on all cylinders in the second quarter. But of course, NEXT never rests. And we are fully committed to doing a lot more, including progressing certain rationalization and manufacturing capacity optimization actions in the second half of the year to improve profitability and cash flow in several of our businesses while still driving incremental product costs and operating expense reductions, and maximizing the positive impact of our cash generation on our capital strategy. Our overall results were supported by performance ahead of or in line with expectations for each of our segments. Our propulsion business delivered strong year-over-year sales growth, with shipments to U.S. OEM customers outpacing expectations.

Resulting in sequentially improved earnings despite the anticipated tariff and absorption headwinds. Mercury's outboard engine lineup continues to take market share, gaining over 300 basis points of U.S. retail share in outboard engines over 300 horsepower in the quarter, and 30 basis points of share overall on a rolling twelve-month basis. Despite heavy wholesale shipments by competitors, ahead of tariffs being implemented on Japanese imports. Mercury's leadership in high horsepower outboard will be further reinforced by the new 425 and 350 horsepower engines launched earlier this week, with performance, smoothness, quietness, weight, and other attributes far ahead of the competition.

Our engine parts and accessories business had another strong quarter, with slight year-over-year sales growth and steady earnings, despite a weather-affected start to the boating season. This primarily aftermarket-based business continues to derive its success from stable boating participation and the world's largest marine distribution network, which in the U.S. has gained 180 basis points of market share resulting from our ability to support same-day or next-day deliveries to most locations in the world. Navico Group had slightly lower sales compared to 2024, with aftermarket sales and sales to marine OEMs modestly lower. However, sales trends continue to improve each month in the quarter.

Navico Group earnings remain consistent with first-quarter levels and were driven by enthusiastic customer acceptance of new products and steady operational performance. Year-to-date revenue for Navico Group is only down 2.5% versus the first half of 2024, led by steady performance from the group's aftermarket businesses. Restructuring actions continue to gain traction despite tariff and market headwinds, and in the quarter, we consolidated two production locations and transferred European distribution to a 3PL. While in July, we implemented a leaner organizational structure that will reduce expenses and increase agility.

Our boat business had lower overall sales mainly resulting from weakness in value categories but outperformed the market in some other key categories, resulting in overall market share gains and has delivered 30 new model launches year to date. In response to the tighter value fiberglass market, we have rationalized our value fiberglass model lineup by 25% for the 2026 model year. Dealer inventories remain healthy, and Freedom Boat Club continues its journey of profitable growth, launching its first club in the Middle East, located in Dubai, and with plans for additional expansion, further reinforcing its position as the world's largest and only global boat club.

Now looking at external factors, we see some areas of continued uncertainty, but also some emerging bright spots. Compared with the first quarter, interest rates remain steady with the potential for improvement, and foreign exchange tailwinds should benefit predominantly U.S.-based business. In addition, the One Big Beautiful Bill Act favorably addressed tax increases that were previously scheduled to take effect and restored key pro-business provisions such as full expensing of U.S. R&D. We are still analyzing the impact of all these changes on a global basis but anticipate a significant positive cash flow impact moving forward. Brunswick Corporation continues to actively monitor and manage tariff exposure.

Our coordinated team across trade compliance, supply chain, and finance analyzes the latest updates, implements mitigations, and continually refines our forecast. Despite recent tariff increases for some countries, overall, we've revised down our estimate for total potential net exposure. Ryan will go into more detail, but I will again stress that despite the negative direct impact of tariffs on our earnings, given our primarily U.S.-based vertically integrated engine and boat manufacturing base and predominantly domestic supply chain, and the fact that we manufacture almost all our boats for international within those markets, we remain competitively well-positioned in an environment of persistent tariffs.

In addition, our leading position and scale afford us the resources and sophistication to effectively manage this complex evolving situation, including through the deployment of AI tools. We see an improvement in longer-term dealer sentiment and inventory comfort, which is moving closer to historical norms. Boating participation remained strong with upticks throughout the quarter, dealer foot traffic is stable, and we have seen a slight increase in people considering a boat purchase in the next twelve months. OEM production rates were up over the second half of last year, and while overall retail was down for the quarter, July is off to a strong start.

We're using competitive incentives where appropriate to support second-half sales and are continuing to invest in and derive benefits from the latest digital marketing technologies to generate more leads and optimize conversion. Overall, while we remain mindful of the dynamic macroeconomic backdrop and soft consumer sentiment, there are some reasons for cautious optimism as we progress through early Q3. Moving now to industry retail performance, outboard engine industry retail units declined 6% in the quarter, with Mercury gaining 30 basis points of share on a rolling twelve-month basis and 140 basis points of share in the same time frame on engines 150 horsepower and greater.

Mercury continues to gain share internationally, with 170 basis points of share gain in Canada over the past twelve months, and strength in high horsepower share continuing around the globe. As of the latest reporting from May, U.S. main powerboat industry retail was down modestly year to date with Brunswick Corporation boat brands outperforming the industry. Since June, internal Brunswick Corporation U.S. registrations are only down mid-single-digit percent over the same period in 2024. On a global basis, first-half retail remained very steady for our premium brands, including Boston Whaler, Sea Ray, Lund, and the van, as a whole for our core brands.

Retail performance for our value brands continues to be challenged, and as noted, we're working to optimize the profitability of these brands at reduced production volumes. We have continued to diligently manage both levels and second-quarter U.S. wholesale shipments were down 9%, resulting in an 11% reduction in U.S. pipelines, or over 1,200 fewer units versus last year. Global pipelines are down 2,300 units over the same period, reflecting our continued focus on maintaining the freshest inventory in the market.

Lastly, as I indicated earlier, according to internal data, July retail for essentially all our businesses has accelerated and is trending positive versus July 2024, giving us and our channel partners positive momentum to start the back half of the year. Before turning the call over to Ryan, I want to highlight the diligent efforts across our enterprise that resulted in record free cash flow. Despite some inventory banking for tariff mitigation, and continue to support our investment-grade credit profile, our strong Q1 cash performance continued into the second quarter. And in the first half of the year, we delivered $244 million of free cash flow, up $279 million versus the prior year.

We've delivered $1.5 billion of free cash flow since 2021, and a record $542 million in the last three quarters, in very dynamic and challenging market conditions. Our balance sheet remains very healthy, with no debt maturities until 2029, and an attractive cost of debt and maturity profile. Given our continued strong cash performance, we're increasing our previous debt reduction guidance for 2025 by $50 million, a total target of $175 million for the year. With this increase in our 2025 debt reduction target, by year-end, we are on track to have retired $350 million of debt since 2023. We remain on the path of returning to our long-term net leverage target of below two times EBITDA.

We're accomplishing this while maintaining significant financial flexibility, as evidenced by and commitment to our investment-grade credit rating. At quarter-end, we'll have $1.3 billion in liquidity, including full access to our undrawn revolving credit facility. I want to thank the entire Brunswick Corporation team for their disciplined focus on execution, driving efficiencies, working capital management, optimization of capital expenditures, and many other actions that together allow us to return capital to shareholders while maintaining financial flexibility and opportunistically reducing leverage. Our cash generation profile and investment-grade credit rating are important to our business and also differentiate Brunswick Corporation in our industry and sector.

I'll now turn the call over to Ryan Gwillim to provide additional comments on our financial performance and outlook.

Ryan Gwillim: Thanks, Dave, and good morning, everyone. Brunswick Corporation's second-quarter results were solidly ahead of expectations. Sales were up slightly over the second quarter of 2024 as steady wholesale ordering by dealers and OEMs, together with modest pricing benefits, offset the impact of continued challenging consumer demand market conditions. Operating earnings and EPS were ahead of guided expectations but down versus the prior year, as the impacts of tariffs, reinstated variable compensation, and lower absorption from decreased production levels were only partially offset by new product momentum, the benefits from the slight sales increase, and ongoing cost control measures throughout the enterprise.

Lastly, as Dave mentioned earlier, it was a historic second quarter from a cash generation standpoint with Brunswick Corporation generating a record $288 million of free cash flow. On a year-to-date basis, sales are down 5%, primarily due to anticipated lower production levels in our propulsion and boat businesses only being partially offset by steady sales in our aftermarket-led engine P&A and Navico businesses. Year-to-date adjusted operating earnings and EPS are also ahead of expectations but below the prior year as expected, due to the same factors from the second quarter.

Year-to-date free cash flow of $244 million is a first-half record and is the result of focused inventory and other working capital initiatives started in the second quarter of 2024. Now we'll look at each reporting segment starting with our propulsion business, which reported a 7% increase in sales resulting primarily from strong orders from U.S. OEMs. Operating earnings were below the prior year primarily due to the impact of tariffs, lower absorption from decreased production levels, and the reinstatement of variable compensation, partially offset by cost control measures and the benefits from the increased sales. The propulsion segment sales and operating earnings both grew versus the first quarter of 2025.

Our aftermarket-led engine parts and accessories business had another solid quarter reporting a 1% increase in sales versus the same period last year, due to slightly stronger distribution sales. Sales from the products business were down 4% while the distribution business sales were up 4% compared to the prior year. Segment operating earnings were slightly down versus the second quarter of 2024 due solely to the enterprise factors discussed earlier. Note that first-half engine P&A earnings and sales are essentially flat to 2024, despite the challenging marine retail market conditions and overall unseasonable weather for a significant portion of the early year.

This performance reinforces our well-stated view that our continued focus and investment in this aftermarket recurring revenue and earnings business is critical to driving stable financial and shareholder returns. Navico Group reported a sales decrease of 4% versus Q2 of 2024, while sales to both aftermarket channels and marine OEMs were down modestly, partially offset by benefits from new product momentum. Segment operating earnings decreased due to the lower sales, tariffs, and the variable compensation reset. Finally, our 7%, resulting from anticipated cautious wholesale ordering patterns by dealers, was only partially offset by the favorable impact of modest model year price increases.

Freedom Boat Club had another strong quarter contributing approximately 12% of the segment sales including the benefits from recent acquisitions. Segment operating earnings were within expectations as the impact of net sales declines and the variable compensation reset was partially offset by pricing and continued cost control. This slide shows an updated view of our 2025 tariff impact should the current tariff rates continue for the remainder of the year. This slide shows the approximate percentage of COGS affected by tariffs currently in force along with our anticipated 2025 net tariff impact for each category after planned mitigation measures are considered.

The largest tariff impact remains China, and while less than 5% of our COGS could represent $20 million to $30 million of tariff expense at current rates, for product and component importation into the U.S. These incremental tariffs are in addition to the approximately $30 million of Section 301 tariffs that were included in our initial guidance for the year. Mexico and Canada supply accounts for approximately 15% of U.S. COGS, but most of the supply from these two countries is imported under the USMCA, meaning that our tariff exposure here remains small assuming the continued USMCA exemption. Finally, there are other smaller tariffs on rest-of-world imports.

Not included in this analysis are other impacts or potential impacts, both positive and negative to the enterprise. Including potential retaliatory tariffs from the EU and Canada on U.S. manufactured boats and possibly engines and parts, tariffs on boats imported into the United States by our European OEM partners that use Mercury engines and parts, Mercury engine competitors, are paying tariffs on the importation of engines from Japan, or other non-U.S. manufacturing locations, and maybe most importantly, the continued disruption of the capital markets and the corresponding impact on our consumer.

As everyone is aware, this is an extremely dynamic situation and the entire Brunswick Corporation team is committed to minimizing the overall impact that tariffs ultimately have on our enterprise. My last slide shows our updated full-year guidance. Taking into account the anticipated net tariff impact and continued market and consumer uncertainties, but also our strong operational performance and the recent market momentum. Despite a slightly softer marine market than initially anticipated to start the year, we remain confident in our ability to deliver our full-year plan, with the result being us holding the midpoint of our guidance with anticipated sales of approximately $5.2 billion and adjusted EPS of approximately $3.25.

However, given our exceptional first-half cash generation, we are raising our free cash flow guidance by $50 million to greater than $400 million for the full year. This will allow for increased debt reduction efforts, which we discussed earlier, and should enable us to repurchase no less than $80 million of shares at a time when we believe that our share price remains severely dislocated from our performance in a challenging market.

As Dave mentioned earlier, retail conditions in July have improved from the early part of the season, giving us more confidence in steady wholesale for the remainder of the year with Q3 expected to deliver sequentially slightly lower revenue and earnings driven by the annual seasonality of our businesses. I will now pass the call back over to David Foulkes for concluding remarks.

David Foulkes: Thanks, Ryan. As we wrap up, I want to highlight some of our recent exciting new product launches, announcements, and awards. Navico Group's SIMRAD brand recently launched AutoTrac technology for its HALO radar portfolio that enables automated tracking of multiple targets and provides unrivaled situational awareness to voters. Our boat brands across the globe have been busy launching many new products, all featuring Mercury power and Navico Group technology. Our Harris Pontoon brand launched the 2026 Sunliner Series, with a very stylish and contemporary new exterior and interior. The Sunliner is affordable but also aspirational, with many thoughtful features, premium finishes, and uncompromised quality.

Our Ray Glass brand in New Zealand unveiled the all-new Protector R edition range, a bold evolution with its iconic high-performance ribs, leading with the 330 Targa R edition, the first vessel in New Zealand powered by Mercury Racing's 400 R V10 outboard engines. And Sea Ray launched its all-new SDX 230 lineup, available in sterndrive, outboard, and surf configurations, with a SURF version featuring the innovative NexWave SURF system designed to create consistent rideable wakes for every skill level. The system integrates an exclusive Sea Ray interface with Mercury's smart tow system, Bravo Four S drive, and dual SIMRAD touchscreen displays offering easy control and visualization.

Freedom Boat Club recently announced an exciting new franchise in Dubai, our first location in the attractive Middle East boating market. The flagship location will open this fall and feature many Brunswick Corporation boats with additional locations to follow in 2026. At a time when several other smaller boat clubs are experiencing difficulties, Freedom continues to grow and thrive, globally supported by the ready availability of Brunswick Corporation's broad portfolio of boats, Mercury engines, rapid availability of P&A and accessories from our global P&A and distribution businesses, and a variety of financing, insurance, marketing, and IT services also provided by Brunswick Corporation. In return, Freedom generates substantial synergy sales while showcasing our exceptional products.

And finally, Mercury reinforces its position as the industry leader in the high horsepower outboard market this week, with the introduction of the new 425 horsepower and refreshed 350 horsepower outboard engine, delivering performance, smoothness, quietness, and lightweight far ahead of the competition. During the quarter, we received significant recognition for our people, products, and commitment to innovation, putting us well on track to surpass 100 awards again in 2025. Among the highlights, Brunswick Corporation was named by Time Magazine as one of America's best mid-sized companies for the second year in a row. We also earned six Boating Industry Magazine product awards.

These awards highlight the marine industry's best new and innovative products, and our awards underscore the breadth and depth of our innovation. On the topic of innovation, the Experiential Design Authority also honored us with an award for our impressive and engaging exhibit at CES 2025. For the third consecutive year, Newsweek named Brunswick Corporation one of America's most trustworthy companies, placing us in the top 10 within the manufacturing and industrial equipment category. And we were recognized for the first time on Newsweek's list of America's greatest workplaces for parents and greatest workplaces for women, reflecting our commitment to being an employer of choice. Congratulations to all those who contributed to these awards.

Finally, this quarter, we released our 2024 sustainability report, which describes our work to reduce our environmental impact while making our businesses more efficient and supporting the communities in which we live and work. That's the end of our prepared remarks. We'll now turn it back over to the operator for questions.

Operator: Thank you. We will now be conducting a question and answer session. Our first question is from James Hardiman with Citigroup. Please proceed. James, your line is live. Please check if you're on mute. We will move on to the next question. There you go. Go ahead, James.

James Hardiman: Sorry. AirPod fail. I apologize. Thanks for taking my question. So you know, obviously, the tariff impact came down I get to about a 60¢ benefit versus last time. Guidance is unchanged. And so is the right way to think about this you know, that the ex-tariff guidance came down by about that amount. And, ultimately, from here, how should we think about it? Is there more risk of upside versus downside just based on sort of the changes you've made there?

Ryan Gwillim: Hey, James. It's Ryan. Good morning. Yeah. I mean, so if you remember back to April, we gave a tariff that impact potential of $225 million. And then when we translated that to the EPS bridge, we only put a dollar on the bridge. And it was for really two reasons. One, we anticipated we'd probably mitigate better than anticipated and indeed, we have. And second, if you remember when we reported earnings back in April, it was literally the height of all tariff rates. China was at 145%. Others were at extreme high levels. We didn't know if Canada and Mexico would be receiving USMCA exemptions.

So really, the dollar of tariff impact that we put on the bridge hasn't really changed that much. I think maybe it's lower on the margins a little bit. But on balance, think what we saw in April has kind of come through, that the tariff impact we think it's going to be certainly lower than we thought, but that dollar is still relevant is still pretty reasonable. The markets unfolded a little bit softer than we thought, although premium core is holding up. So no, I wouldn't think that the rest of the business was down $0.50 and that's what we're guiding.

It's just really the years coming in relatively similar to what we thought in April with $325 million still being the midpoint of balancing the risks and opportunities.

David Foulkes: Yes, James, it's David Foulkes. I would add that you know, given the dynamics of the are all around us, it is very difficult at a moment to take things to the bank. You know, really nice to see the trajectory in July, and we're very hopeful. But, you know, that's that is a know, four or five-week trend. We just need to see a little bit more of that before I think we can flow through.

James Hardiman: Got it. Makes sense. And then as I think about sort of the phasing that you've laid out here, it looks like we should be expecting a significant decrease in Q3 earnings then a significant increase in Q4. Remind us, if memory serves, I thought that Q3 was the big inventory reduction quarter a year ago. Which would have created a really easy comp this year, assuming we weren't Again, undershipping Q3. So I guess is it is it safe to say that we're now going to be again, undershipping in Q3 and maybe I don't know, maybe there was a shift between shipments between Q2 and Q3 because, obviously, Q2 was a was an outperformance quarter.

So how do we think about all that?

Ryan Gwillim: Yes. It's pretty hard, James, to delineate Q3 and Q4. I certainly wouldn't read much into it. Again, as Dave said, giving guidance in a dynamic environment like this is pretty challenging. I would say, as a reminder, production was down in the third quarter last year and then even more so in the fourth. Both in propulsion and in our boat businesses. So there will be pickup there, goodness, if you would, in both. Wholesale shipments in both of those businesses. Together with a very consistent P&A business, which obviously continues to perform extremely well in this environment. So no, I think we're looking at Q3 and I think we're off to a good start with July certainly.

But I wouldn't read much into the difference between Q3 and Q4. Although, the production increased in Q4 of last year will be greater than the production increase in Q3. But again, although there's a lot of timing impacts that go in there, and then we're still thinking about a pretty strong second half of the year.

James Hardiman: Makes sense. Thanks, guys.

Operator: Our next question is from Xian Siew with BNP Paribas. Please proceed. Your line is live. Please check if you have yourself muted. Okay. We will move on to the next question. Which is Craig Kennison with Baird. Please proceed.

Craig Kennison: Hey, can you hear me?

Ryan Gwillim: Yes. Yes, Craig. Good morning.

Craig Kennison: Good morning. Thanks for taking my question. I wanted to start with Navico. Guess big picture, when the market normalizes, whenever that is, and then your innovation pipeline matures. Where should Navico revenue and profitability settle feels like that's a big needle mover when you think about some of the out-year earnings potential?

David Foulkes: Yes, Craig, thank you for the question. I think as our expectations in the long term for Navico Group are still in kind of low to mid-teens operating margin range. So we've got quite a bit to go. And we you know, we should with a little bit of tailwind have top line CAGRs in the mid to high singles. So we have a there's a lot of potential in that business. I think we're doing a lot of great work both in refreshing the product lines, which are now regaining share even against the, you know, strong and capable competition. So we're very excited about that.

But also just getting the structure of the business reset or rightsized if you like. And optimized for a market that is certainly smaller than we originally anticipated. And as you can see and as we gave some examples, in the release in the slides, we are continuing to work our way through that. That all of our businesses had some headwinds as year, as you know, from the reset of variable comp. We didn't really pay any meaningful variable comp last year. Tariffs, bit of absorption in the first half. But if you net those out, I think we're in a really you know, getting ourselves in really good shape in Navico Group.

I'm very excited about the trajectory of the business. And the reception of the new products. Pretty much everything that we have brought out has been a hit in the marketplace. So, yeah, very excited for that business, and it will be an engine of growth for us in the medium term.

Craig Kennison: Great. Thanks, Dave. And Ryan, if I could ask you just on the tariff question. Slide 17 is super helpful as it relates to 2025, but it's been such a noisy environment that it's hard to get a feel for the true run rate. Have you done any work to look at '26, like, current policy persists we should think about the full year kind of run rate for tariff policy as it stands today?

Ryan Gwillim: Yes, Craig. Obviously, we anticipate getting the question this morning. So we have played around with what '26 would look like. The answer is still pretty uncertain given all the variables. So not only are we paying the tariffs, right? You pay the cash tariffs, but it flows through the various financials in a different way, right? It goes on the balance sheet, as an inventory cost and then flows out through the P&L over time. And then there's counteractions on duty drawback and benefit that we get to counteract those tariffs.

So it's a big basket of things that we think about supply chain team, trade compliance, finance, everyone's kind of figuring out what the best course of action is that it changes. Right? Because the tariffs change every couple of weeks and then our response needs to change. I would say as we sit here today, don't see a huge change over next year It's probably somewhere in the same magnitude. This year, we had a ten-month impact, right? But some of that was at higher rates. We also had some of the cost being hung up on the balance sheet by the end of the year.

But next year, we'll have a little bit more duty drawback and some of the other financial benefits. So tough to tell. I don't think it'll be greatly different from the 2026 impact, but I definitely need to get closer to the end of the year. To really see what a run rate looks like. And certainly, we'll provide that guidance once we get to the January call. But certainly, I don't see a huge step change at this date.

Craig Kennison: Yeah. Thanks, Ryan.

David Foulkes: Maybe just to add, Craig, I think, I mean, clearly we are working to onshore as much as we can at the moment. So the rates are one component of what the tariffs will be, and certainly, are balance sheet and other implications here. But broadly, our basis should be going down significantly as we move supply onshore into the U.S. And we're doing that at a pretty rapid clip as you can tell from the way that our exposure even this year is reducing I would say, though, and it was a little bit difficult to say this, earlier, that and we did state it. We are in competitively a pretty advantaged position.

The U.S. market is by far the biggest marine market We are very largely a domestic company here with a very large manufacturing footprint with a lot of vertical integration. And we believe that, you know, even though we'll be impacted by tariffs directly, our competitive position is strengthening.

Craig Kennison: Thank you, Dave.

Operator: Our next question is from Noah Zatzkin with KeyBanc Capital Markets. Please proceed.

Noah Zatzkin: Hi, thanks for taking my questions. I guess first just on the decision to rationalize kind of the value fiberglass model lineup for 2026 by 25%. How should we think about maybe structurally the boat group, whether from a margin perspective or volume potential perspective, given that rationalization? Thanks.

David Foulkes: Yes, thank you. Yes, good question. So really, the amount of complexity that you can tolerate in a product line depends on the volume. And with volumes reducing, we can tolerate less complexity So we take out those models that are obviously selling less, and that's the kind of rationalization process. We want to leave ourselves with a good progression in the product portfolio, but not excess complexity. And that's really what we've been doing.

There are other actions that we are taking that will be able to talk about a bit later in the year to further ensure that we have stronger profitability in that part of the market, but that's really the way to think about it reducing complexity in a market that is smaller. I would say, though, I think everybody understands this, that the profit contribution of all of our Brunswick Corporation boats The boat group margin is only one component of it. All of those value boats have Mercury engines on them. A lot of them contain Navico Group technology. And so this the margin stack even in our value product lines remains pretty good.

And so we want to make sure that we are thoughtful as we approach this. And that we consider the entire Brunswick Corporation margin impact.

Noah Zatzkin: Really helpful. Maybe just one more quick one. Any color on the tariff impact in the quarter? And then apologies if you already said this, but how should we think about maybe the distribution of that impact across segments at a high level? Thanks.

Ryan Gwillim: Yeah, I could take that, Noah. I mean, again, it's a bit different because the cash tariffs paid obviously, much greater than what's on with that's what's flown through the P&L. Through the P&L, it's somewhere in the mid-teens for the quarter millions. But again, there's all kinds of offsets and duty drawbacks that kind of net against that number. And then about 75%, 80% of the tariff impact is on Mercury, is on the Mercury segment. I'm sorry, on propulsion, mostly a little bit on engine P&A. With Navico having kind of the rest of it and boats having a very small amount.

One other item, just and obviously, is late breaking from earlier this week or late last week. We're obviously monitoring the 15% tariffs coming from Japanese imports. As Dave mentioned, we are the only U.S. engine manufacturer with our main competitors primarily manufacturing in Japan and almost none in the U.S. And so one thing we'll be monitoring, and this is not in the tariff number and obviously a benefit is the impact of that on Mercury sales and our ability to continue to take market share as obviously we believe our products are already market leading And this is just another input for the for the costing profile.

Operator: Our next question is from Tristan Thomas Martin with BMO Capital Markets. Please proceed.

Tristan Thomas Martin: Hey, good morning. Did you update your full-year industry retail assumption for Boats?

David Foulkes: No. I don't think we didn't specifically do that. I think that the trend that we are seeing really that we called out is you know, solid performance in premium and core, which is you know, 75% or more of what we make. And weaker performance in the value part of the segment, which is the value part of the market, which is down about 20% I see a really strong reason to deviate from that kind of profile. I don't think we specifically updated any numbers yet.

Tristan Thomas Martin: Okay. And then what are your channel inventory weeks on hand? And then how are you expecting to manage that? Or what's your target by year-end? Thanks.

Ryan Gwillim: Yes. So on the boat side, we are in the low 30s today, weeks on hand. By the end of the year, it's going to be around 40, give or take. But, really, remember that is looking at backwards looking retail, so rolling 12 backwards. If you look at just pure units, right now, we are basically in the lowest inventory position we've been outside of COVID since the GFC. And by the end of the year, both global and U.S. field pipelines will be kind of at historical lows.

So we're going to take out a couple of thousand or so boats in the U.S., and about that globally as well, maybe plus or minus depending on how the back of the year shapes up. Just remember again, this is just remember this is this is all value stuff we're talking about here. This is our pipelines and premium lower than that.

Tristan Thomas Martin: That's right. Okay. And then the thousand, was that a full-year target or is that a second-half target?

Ryan Gwillim: No. That'd be a full-year target.

Operator: Great. Thank you. Our next question is from Xian Siew with BNP. Please proceed.

Xian Siew: Hey guys, sorry about that earlier. It's okay. Good morning. How's it going? On propulsion, it was up 7%, including, I think, 11% outboard engines versus retail. For outboard a bit down, like, six. And then I guess like what's kind of going on there You mentioned kind of the OEMs pulling orders ahead of tariffs on the Japanese side. Are you kind of matching that? Should we kind of expect things to kind of moderate from here? Is it just kind of the market share gains that are kind of offsetting? I guess, retail weakness?

Ryan Gwillim: It's actually a little bit of pipeline. So it's something we really talked too much about. I know we have a little bit on the engine side. But over the last call it, six quarters or so, we have taken out substantial pipeline inventory on the engine side. Call it 25 ish percent, maybe plus or minus even more on high horsepower. And that's at a time when, like you said, some of our competitors were pushing engines into the U.S, whether it's in advance of tariffs or other But that's certainly the wholesale trend.

But so what you're seeing is now kind of a matching of our continued retail share gains with our OEM customers that are actually producing a little bit more of this time of year than they were last year. At this point, even in June, May and June, a lot of our OEM partners were taking fewer engines because they had them in stock and were gonna produce fewer boats on the, you know, in the outlook months. And that ended up happening So today, at a time where production is pretty stable, and pipeline is lower, they're needing engines and we're fulfilling them.

I can you know, we've we've done like a entire review of all of our OEM customers. There is we are not losing share in any of them. Any of them that are kinda dual sourced, if you would. And we plan to continue to gain retail share for the full year just as we've done the past several years. So it is really a pipeline. It's a pipeline game and that's right now at a really healthy point where we'll probably be able to add engines here into the, you know, make sure that wholesale exceeds retail over the coming quarters.

Xian Siew: Okay. Got it. That's super helpful. And then maybe so then on that point, where does the pipeline kind of end for engines and by the end of the year? And how do you think about kind of the margin progression from here? In propulsion?

Ryan Gwillim: Yes. As we currently sit, by the end of the year, pipeline will be down about 25% from the beginning of 2024. And it's kind of in the mid-thirties down percentage-wise on engines greater than 175. And, you know, a lot of what it does from there is dependent on kind of the OEM patterns as we start all the way into '26 and the and the and the you know, the next retail cycle. But as we sit now, I don't we're going to take much more out. I would say the second half this year, second half is not anticipating a whole lot of takeouts.

So what you what we've taken out is kind of is where we'd set. But a little of that depends on where retail lands.

Xian Siew: Got it. Super helpful. Thank you, guys, and good luck.

Operator: Our next question is from Stephen Grambling with Morgan Stanley. Please proceed.

Stephen Grambling: Hi, thank you. You mentioned the initiatives to improve inventory and working capital and I know you talked about it a little bit on the call, but maybe you could just expand on what some of the initiatives are and how specifically investors think about the impact of free cash flow conversion longer term particularly if the retail cycle does start to turn here? Thank you.

David Foulkes: Yeah. Maybe we could tag team it up. So, yeah, a lot of work going on particularly with our supply chain and it's been a very dynamic time. Obviously, we've we've been a time when we have done some banking of inventory. But, essentially, it has been very diligent management of incoming supply chain to make sure that we aligned the weapon overall inventory levels with the production requirements. That is not an easy process. It does require us to work very closely with the supply base, and our team has done a wonderful job of doing that. And managing to make sure that we keep a very healthy supply base, but that we don't oversupply ourselves.

I think there's more room to run. There and we continue to see from that and we have very clear targets both in the short term and long term for our inventory levels. But that those inventory levels have come down, I think, $100 million in the last in over the first half of the year end.

Ryan Gwillim: Yeah. The significant reduction in production in the second half of last year balancing the income inventories really a helpful driver of that. And the businesses, as Dave said, have done a really nice job of ensuring the balance. And that will then move forward as we look at the second half financials and gives us a nice benefit because we will be producing and wholesaling more in both engines.

Stephen Grambling: Got it. Thank you.

Operator: Our next question is from Joe Altobello with Raymond James. Please proceed.

Joe Altobello: Thanks. Hey, guys. Good morning. Just go back to the engine commentary for a second. If we assume a 15% tariff on Japan, I would think the impact here is pretty straightforward, right? And that would obviously significantly improve your competitive positioning. So I guess, first, is that showing up yet in OEM orders? And second, is that baked into your outlook at all?

David Foulkes: Hi, Joe. Kind of I guess, no and no really. It well, first of it's not baked explicitly into our outlook. Although, obviously, it's it's gonna be helpful to us. It's it is not particularly showing up yet because of the amount of engines that were shipped in the second quarter in particular. I don't think it's something like this was not a surprise. So I think that our competitors still have stock of pre-tariff engines. But obviously, over time, those will kind of bleed out. And we have not explicitly baked an uplift in Mercury share into our forecast at the moment. But obviously, it's going to give us good momentum.

Joe Altobello: Okay. Very helpful. And maybe secondly, you referred to a certain rationalization and manufacturing capacity optimization efforts. Maybe could you elaborate on that? What businesses? It sounds like Navico and Boats is part of that, but maybe are there others as well?

David Foulkes: Yeah. I think, know, it's certainly we need to continue the process of ensuring that we have good productivity and efficiency and that our overall capacity is aligned with our expectations for the market. We've been continuing to work on that. And I gave a few examples in the in the commentary that we previously provided. But there is more work to do And honestly, Joe, we'll we'll be able to share a bit more explicitly probably in the third quarter call on that or maybe in an some kind of intermediate basis. But there are various things that we're continuing to progress that will think, materially address fixed costs in those in those businesses.

Joe Altobello: Okay. Understood. Thank you.

Operator: Our final question is from Jamie Katz with Morningstar. Please proceed.

Jamie Katz: Hey, good morning. Thanks for squeezing me in. So I'm curious about the second half projection for both sales and it implies basically that we're returning to growth. And I'm wondering if part of that is just mix from higher-priced boats or if you guys have seen know, interest or rising commitments from dealers, that may help us see if we are at the trough.

Ryan Gwillim: Yes. Good morning, Jamie. I think it's kind of two things. One, good news in July has given us some momentum here as we get into the back half of the year, and we believe we'll continue to spur dealer orders. But certainly, the year-over-year comps versus the second half of last year really are a bit of a driving factor. We took substantial production out in the 2024 in order to keep inventory fresh and at the right levels. This year, just to match retail and wholesale, the wholesale will be stronger, right, in the second half.

And so yes, premium and core, we plan on being up more than value, as Dave and I have said on the call. But really, if you go back and look at production rates, it's just matching wholesale and retail and comparison versus an extremely light back half of 2024.

Jamie Katz: And then can we just focus on value? Obviously, are some value products that are moving. Do you guys have any insight into, like, what consumers what is facilitating conversion of those sales? And then maybe what we should be looking for, to determine when, those sales may return outside of interest rates perhaps?

David Foulkes: Yeah. A couple of things. Obviously, you know, that's just broader economic sensitivity in that by a population, if you like. So any uncertainties about, you know, inflation employment, other things tend to be more acute in that population. It is an area where we see more financing at the point of sale. So more sensitivity to interest rates certainly. I think we're doing a pretty good job in that segment, but it does require more promotions. You need to provide a reason for somebody to make that purchase. We try and do that by having the freshest inventory, the newest products, and other things in the marketplace.

But in the current environment, it, you know, also takes a bit of an economic push as well. So I think hopefully, we'll begin to see some interest rate reductions. In the back half of this year that will provide a bit more momentum We'd hope to see something earlier in the year, but those didn't materialize But I would say that those interest rate reductions are probably going to disproportionately benefit the buyers of value or entry-level product.

Jamie Katz: Thanks.

Operator: We have no further questions at this time. I would like to turn the conference back over to David Foulkes for some concluding remarks.

David Foulkes: Well, thanks for your questions, everyone. Much appreciated. It was another solid quarter for Brunswick Corporation, lots of new products. Very diligent operational work leading to our performance really across all of our businesses and segments. A couple of things probably stand out. Our cash performance and also the fact that our revenue was slightly up over the second quarter of 2024. It was nice to see that inflection. So great to see. As we noted, we're continuing to work hard and in a smart way to mitigate the direct impact of tariffs. But as we discussed in some of the questions here, our footprint and vertical integration, do provide us with a fundamental competitive advantage.

In the presence of persistent tariffs We are still we are working really tirelessly on further to re-expand margins. In the business, and we really have very tangible actions lined up to achieve that. And then finally, although we are beyond the midpoint of the selling season, we do get a real sense that the market wants to rebound. With just a little more kind of normalization of the macro backdrop maybe later in the season, some tailwind from interest rates. So as we enter the second half, we do enter it with some cautious optimism. Thank you very much.

Operator: Thank you. That will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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DATE

• Tuesday, July 15, 2025, at 8:30 a.m. EDT

CALL PARTICIPANTS

• Chief Executive Officer — Susan Morris
• President and Chief Financial Officer — Sharon McCollam

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RISKS

• The gross margin rate declined by 85 basis points to 27.1%, excluding fuel and legal expenses. This was due to investments in the customer value proposition and an unfavorable mix shift related to pharmacy and digital growth.
• Sharon McCollam said, Pharmacy will be the biggest driver of comparable sales growth for FY2025. She also noted the impact on profitability, stating, "There is an impact on profitability there."
• Susan Morris stated, "We're starting to see increases in in cost of goods moving ahead," indicating that tariffs and ingredient costs may contribute to future inflationary pressure.
• Susan Morris said, "there will be an impact from the strike that we had, during the quarter."

TAKEAWAYS

• Identical Sales Growth: 2.8%, driven by a 20% increase in pharmacy and 25% growth in digital sales.
• Adjusted EBITDA: Adjusted EBITDA was $1.111 billion versus $1.14 billion in the prior year, reflecting ongoing investments and margin pressures.
• Adjusted EPS: $0.55 per diluted share, compared to $0.66 per diluted share last year.
• E-commerce Growth: 25% year-over-year, with e-commerce accounting for 9% of total grocery revenue.
• Loyalty Program: Membership rose 14% to 47 million. 30% of engaged households chose the "cash-off" option.
• Pharmacy and Health Digital Platform: Grew 20% year over year, with GLP-1 prescriptions contributing approximately half of pharmacy comp growth.
• Gross Margin Rate: 27.1%, a decrease of 85 basis points excluding fuel and legal expense; productivity initiatives partially offset this decline.
• Selling and Administrative Expense Rate: Improved by 63 basis points, excluding fuel, due to employee cost leverage and lower merger-related expenses.
• Interest Expense: Decreased by $4 million to $142 million, compared to $146 million in the prior year.
• Capital Expenditures: $585 million deployed in capital expenditures, including three new stores and 36 remodels.
• Shareholder Returns: $401 million returned through $86 million in dividends and $315 million in share repurchases; $1.5 billion remains authorized.
• Own Brand Sales Penetration: 25.7% own brand sales penetration, with continuing expansion of product offerings and launches.
• Net Debt to Adjusted EBITDA: Net debt to adjusted EBITDA ratio was 1.96 at quarter end.
• Guidance Update: Full-year identical sales growth now expected in the 2%-2.75% range (previously 1.5%-2.5%). Adjusted EBITDA and EPS outlook unchanged at $3.8-$3.9 billion and $2.16-$2.30, respectively (non-GAAP).
• Media Collective: Growth outpacing the industry with accelerated audience refinement, faster campaign feedback, and expanded digital inventory.
• Labor Negotiations: Agreements reached for nearly half of approximately 120,000 associates covered by current negotiations. Two remain pending in Colorado and Southern California.
• Productivity Initiatives: Targeting $1.5 billion in savings from FY2025 through FY2027 to fund growth and offset inflationary headwinds.
• Technology and Automation: Deployment of AI, data analytics, and in-store digital tools aimed at enhancing labor productivity and operational efficiency.

SUMMARY

Albertsons Companies (NYSE:ACI) reported modest top-line gains in Q1 FY2025, driven by pharmacy and digital platforms and supported by elevated investment in price and loyalty initiatives. Sequential improvement in core grocery units was noted, although total adjusted EBITDA and adjusted earnings per share declined compared to the prior year due to margin and expense headwinds. Management raised full-year guidance for identical sales growth, citing ongoing pharmacy and digital expansion confirming earlier forecasts for adjusted EBITDA and adjusted EPS. Significant capital was allocated to expansion, technology upgrades, and share repurchases, underscoring the company’s multi-year strategic roadmap centered on digital engagement, labor productivity, and national buying scale.

• Susan Morris said, From FY2025 through FY2027, we expect our productivity engine to deliver $1.5 billion in savings, earmarked for reinvestment in growth and cost-offsetting measures.
• Susan Morris indicated that the e-commerce business is near breakeven and improving. Profitability advances attributed to volume leverage and operational efficiencies.
• Store and digital platform integrations -- including app-based meal planning and omnichannel features -- are positioned as key enablers for cross-selling and customer retention.
• Management stated that gross margin investment and expense leverage dynamics will gradually improve as national buying and productivity initiatives ramp in the second half of the fiscal year.

INDUSTRY GLOSSARY

• Identical (ID) Sales: Comparable store sales, excluding fuel, reflecting performance at established locations over consistent periods.
• GLP-1: Glucagon-like peptide-1 agonists prescribed for diabetes or weight management, which have recently driven pharmacy sales comps.
• Media Collective: Albertsons’ digital retail media offering that monetizes first-party data for marketing and advertising partners through targeted campaigns.
• Own Brands: Private label product categories owned and distributed exclusively by Albertsons Companies, Inc.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring and certain other items.
• Shrink: Inventory loss due to theft, damage, or administrative error, a key factor in retail profitability.

Full Conference Call Transcript

Susan Morris: Thanks, Cody. Good morning, everyone, and thanks for joining us today. In the first quarter, our teams delivered solid results with ID sales growth of 2.8%, adjusted EBITDA of $1.11 billion, and adjusted earnings per share of $0.55. These results again demonstrate gradual and incremental progress against our five strategic priorities, which include driving customer growth and engagement through digital connection, growing our media collective, enhancing the customer value proposition, modernizing capabilities through technology, and driving transformational productivity. Within these priorities, our four digital platforms continue to be the catalyst for customer growth and engagement. We continue to drive increased sales, all while generating data and insights for the media collective.

Our first digital platform is e-commerce, which grew 25% and reached 9% of total grocery revenue in the first quarter. This growth was again led by strong performance in our first-party business, driven by award-winning capabilities and our fully integrated mobile app, and supported by our five-star certification program. Our focus on delivering exceptional customer service experience is fueling new customer acquisition and strengthening existing customer retention. To do this, we are continuing to enhance our digital shopping experience, including the introduction of AI and interactive features that deliver both ease and convenience.

For example, we launched our new shop assist feature, which enables a connected shopping experience that allows customers to communicate back and forth with our in-store associates throughout their order's fulfillment process. We've also created more flexibility in our basket building. Customers can now add items to their orders up until picking has started, recognizing that shoppers often think of one more item they need just after an order is placed. While our e-commerce penetration is still below industry peers, it is one of our biggest growth, customer acquisition, and customer retention opportunities for 2025 and beyond. From a profitability perspective, our e-commerce business is near breakeven and improving.

Our second digital platform is loyalty, which grew 14% to 47 million members in the first quarter as we capitalized on the simplification of our program and further enhanced the value the program offers. Members in the program today are engaging more frequently, using more of our easy-to-understand and redeem features, and spending more with us. As a case in point, 30% of our engaged households are now electing the cash-off option, reinforcing the customer's desire for immediate value. As we did last quarter, loyalty is a key enabler of digital engagement and a rich source of data for our media collectives.

Throughout 2025, we will continue to introduce compelling benefits that will attract new members, improve share of wallet, and further enable marketing and monetization opportunities for the media collective. We will also continue to simplify and expand the program to include strategic partnerships to offer even more value. Our third digital platform is pharmacy and health, which grew 20% year over year, driven by industry-leading script and immunization growth, best-in-class customer satisfaction scores, and the ongoing integration of pharmacy and Sincerely Health into our overall digital experience. Cross shoppers between grocery and pharmacy are exceptionally valuable.

Over time, these customers visit the store four times more often and buy significantly more groceries with us, resulting in outsized customer lifetime value across the entire store. For this reason, in addition to the market share opportunity competitor closings are creating for us, we're also continuing to invest in our pharmacy and health digital platform. Through this platform, we're also launching customized omnichannel benefits that are not only attracting new customers but also converting existing pharmacy and grocery-only customers to become cross shoppers. It is also helping customers to find new and personalized ways to improve their health and well-being, consistent with evolving national trends.

Our pharmacy and health plus platform is an integral part of our customers for life strategy and a significant growth and customer engagement opportunity. For this reason, leveraging our growing scale to improve pharmacy profitability over time is a key operational priority. To deliver this, we are continuing to pursue higher-margin service offerings and drive productivity through improved sourcing, increased automation, and labor optimization. This quarter, we opened our third central fill processing facility, which is reducing our cost of serve while at the same time improving overall customer experience. The fourth digital platform is the integration of the mobile app for use in our stores. We're not just selling food.

We're simplifying meal planning and making shopping easier and more convenient both in-store and online. Our app has become the epicenter of the omnichannel experience, with digital customers engaging nearly three times a week on average. What began as a tool for enabling e-commerce and delivering great deals is now a Swiss army knife of tools that makes customers' lives easier, regardless of whether they're shopping in our stores or online. These tools include best-in-class list building, personalized meal planning capabilities, powerful search and product locating capability, and an in-store mode that connects meal planning and other store-specific capabilities.

In our media collective in the first quarter, we significantly increased the high-impact digital inventory as our digital platforms work together to enrich our data and generate deeper customer engagement to accelerate growth and deliver superior return on ad spend. We'll continue to invest in building industry-leading integrated solutions that will support both endemic and non-endemic partners. These solutions include refining shopper audiences, running targeting media campaigns with compressed measurement timelines, and delivering consistent omni execution to develop personalized relationships for our collective partners with our customers. These same solutions are also providing benefits for our internal loyalty and marketing initiatives.

As we look forward, we expect the collective to grow faster than the retail media market and ultimately be one of the largest sources of fuel for reinvestment into our core business over time. To improve our customer value proposition, we intentionally invested in value, both loyalty and promotional offerings, as well as by partnering with strategic vendors to invest in price in certain categories and certain markets. We also surgically manage through the pass-through of cost inflation to further invest in the customer's needs for immediate value. While it is early, these investments did deliver a sequential quarterly unit sales improvement and over time are expected to drive greater existing and new customer engagement across our banners.

We additionally amplified our own brand presence to drive further value for our customers. Own brand sales penetration finished the quarter at 25.7% as we launched new offerings across multiple categories. We also expanded the assortment in our recently introduced Overjoyed brand and launched our newest brand, Chef Counter, a chef-inspired meal solution targeting foodies seeking fast and easy restaurant-quality choices at affordable prices. These launches, coupled with greater prominence and better value in OMEN, were increased digital and omnichannel household engagement and higher transaction counts over time. Our next priority is the modernization of our capabilities through technology.

As we said last quarter, our North Star is to use technology in everything we do, and we are energized by the progress we are making toward this aspiration. Our technology-first focus is positioning us to make a greater impact faster, allowing us to drive greater innovation at a lower cost. Our advanced technology platform, on which we are continuing to innovate, powers our e-commerce, store, pharmacy, supply chain, merchandising, and media collective operation. And is allowing us to leverage emerging AI technologies to accelerate our operational transformation going forward. We are also using our advanced capabilities to use AI agents to enhance many business functions, including pricing and promotion, personalization, customer care, and cogeneration, among others.

Driving transformational productivity is our next priority, which is an imperative to fuel our growth. Our productivity engine continues to reduce costs, offset headwinds, and fund our growth priorities. It works hand in hand with our technology modernization, including our initiatives to leverage AI and data analytics, optimize supply chain costs through automation, build out shrink and labor management tools, to name a few. In addition, the largest of our opportunities continues to be the leveraging of our consolidated scale to buy goods for resale through national buying and more efficient supplier relations.

As we previously shared, from fiscal year 2025 through 2027, we expect our productivity engine to deliver $1.5 billion in savings, which we plan to reinvest in growth and our customer value proposition, as well as to offset other inflationary headwinds. Before I hand the call over to Sharon for an overview of our first quarter and to provide an update to our 2025 outlook, I'd like to give you an update on recent labor negotiations. In fiscal 2025, we have negotiations covering approximately 120,000 associates. As of today, we've reached agreements covering nearly half of these associates, with two pending rectifications in Colorado and Southern California.

We appreciate and value our associates, and in these contracts, we are meaningfully improving wages and benefits. At the same time, we're working to negotiate contracts that are not only financially responsible but also provide the operational flexibility the company needs to streamline operations, manage costs, and offer affordable prices in a rapidly changing grocery landscape. Sharon, over to you.

Sharon McCollam: Thank you, Susan, and good morning, everyone. It's great to be here with you today. As Susan shared, the investments we are making are delivering value to our customers and adding breadth to the capabilities we need to drive future growth. During the quarter, we saw early wins from these investments, affirming our confidence in our strategic priorities and our customers-per-life strategy. Included in these wins was identical sales growth this quarter of 2.8%, driven by 20% growth in pharmacy and a 25% increase in digital sales. We also saw a sequential improvement in core grocery units.

To drive this growth, our gross margin rate of 27.1% was lower than last year by 85 basis points, excluding fuel and legal expense. Incremental investments in our customer value proposition and the mix shift impact related to the strong growth in our pharmacy and digital businesses drove this decrease but was partially offset by benefits driven by our productivity initiatives, including improved shrink expense. Offsetting this gross margin investment was a 63 basis point improvement, excluding fuel, in our selling and administrative expense rates. This decrease was primarily driven by the leveraging of employee costs, reflecting the positive benefits from our ongoing productivity initiatives and lower merger-related costs.

Interest expense in Q1 2025 decreased $4 million to $142 million compared to $146 million last year due to lower average borrowings. Income tax expense in the first quarter totaled $75 million or 24.1%, compared to $69 million or 22.3% in Q1 last year. This tax rate increase was primarily driven by a reduction of an uncertain tax position last year that did not recur in 2025. Adjusted EBITDA was $1.111 billion in the first quarter compared to $1.14 billion last year. Adjusted EPS was $0.55 per diluted share, compared to $0.66 per diluted share last year. Now I'd like to discuss capital allocation, the balance sheet, and cash flow.

Consistent with our capital allocation priorities, during the first quarter, we invested $585 million in capital expenditures, including the opening of three new stores and the completion of 36 remodels, as well as the ongoing modernization of our digital and technology capabilities. We also returned $401 million to our shareholders, including $86 million in quarterly dividends and $315 million in share repurchases, leaving approximately $1.5 billion in our multiyear $2 billion share repurchase authorization. At the end of the first quarter, our net debt to adjusted EBITDA ratio was 1.96. Now, let me walk you through our updated 2025 outlook. As Susan said, we remained focused on our five strategic priorities.

Through the balance of fiscal 2025, we will continue to invest in our customer value proposition, customer experience, digital growth, media collective, and health and pharmacy. These investments are expected to drive outside growth in digital and pharmacy, both of which drive higher future customer lifetime value but create near-term margin headwinds. We will also continue to drive our productivity agenda to fuel this growth and offset inflationary headwinds. With that backdrop, we are updating our outlook this balance. We expect identical sales growth in the increased range of 2% to 2.75%, up from 1.5% to 2.5% last quarter. This assumes continuing growth in pharmacy and digital sales, as well as gradually increasing units in grocery.

From a cadence perspective, expect the second quarter ID sales to be towards the lower end of our guidance range, with gradual acceleration in the back half of the year. We expect adjusted EBITDA to be in the range of $3.8 billion to $3.9 billion, unchanged from last quarter. As a reminder, this includes approximately $65 million in adjusted EBITDA in the fourth quarter related to our fifty-third week. We expect adjusted EPS to be in the range of $2.30 to $2.16, unchanged from last quarter and including $0.03 related to the fifty-third week. The effective income tax rate is expected to be in the range of 23.5% to 24.5%, unchanged from last quarter.

And capital expenditures are expected to be unchanged in the range of $1.7 billion to $1.9 billion. Looking beyond 2025, to capitalize on the investments we are making behind our strategic priorities, we continue to expect fiscal 2026 to coincide with our long-term growth algorithm of 2% plus identical sales and adjusted EBITDA growth higher than that. I will now hand the call back to Susan for closing comments.

Susan Morris: In closing, our customers for life strategy is working. We're investing in our core operations and improving our customer value proposition. These investments are driving increased traffic and growing digitally engaged customers, omnichannel households, and loyalty members. To fuel these initiatives, we are driving productivity and leveraging new technologies to drive efficiencies across our operation. As Sharon said, we continue to expect 2025 to be a year of investment, including enhancing our customer value proposition.

As a result, we expect gradual and incremental improvement in top-line trends in our grocery business in the second half of 2025, ultimately driving growth in line with our long-term algorithm of 2% plus identical sales and adjusted EBITDA growing higher than that in fiscal year 2026. With just over two months as CEO of Albertsons Companies, Inc., let me say that I am more confident in our strategy with each day. I'm energized by the work our teams are progressing and excited to continue building on our strong foundation. To our 285,000 great associates, I am more inspired than ever by you and all that you make possible for our customers and our communities each day.

No matter where you are across our business, you make a difference. To keep our systems running, ensure our products are in stock, and delight our customers. We will now open the call for questions. Thank you. Before pressing the star key. To allow for as many questions as possible, and one follow-up. Thank you. Our first question comes from the line of Paul Lejuez with Citi. Thanks, guys.

Paul Lejuez: Curious if you could talk about the drivers of the gross margin decline this quarter, maybe find some for us, and how we should think about each of them remaining a headwind for the rest of the year, which stay, which might go away, which become less of a headwind. Maybe that you'd start with that. And then also curious how you would characterize the pricing environment around you in the competitive landscape. Thanks.

Susan Morris: Thanks, Paul. As I think about gross margins, so I we've been very clear that our top priority is driving sales and specifically driving an increase in units. And we're investing in that and remain true to that. We expect to continue that, by the way, throughout the rest of the year. As we think about Q1, it was actually one of our largest overlaps year over year. And thus the compare that you're seeing from the gross margin investment. That said, as I mentioned before, we're gonna continue to invest in margin, but we also expect our productivity to begin to provide a tailwind as our national buying gradually kicks in as the year progresses.

Also, keep in mind, our focus is on gross margin pillars.

Sharon McCollam: On EBITDA dollars, and not on rate. You had a second question about the pricing environment and if I promotional investment from the competitive set, of course, in our own operations. We're also leaning in more heavily on loyalty on personalized deals. I would say that the pricing environment is rational. So we've not seen any broad swings across the industry at this point in time. And I would just add to that you're continuing to see pressure from mass

Susan Morris: club stores and the value players. Thank you, guys. Good luck.

Sharon McCollam: Thank you.

Susan Morris: Our next question comes from the line of Leah Jordan with Goldman Sachs. Please proceed with your question. Good morning. Thank you for taking my question. You made an interesting comment that e-com profitability is near break-even and improving. Just seeing if you could provide more detail on the key drivers supporting that improvement. You know, how much is Albertsons media collective a factor at this point? And what's your line of sight into reaching breakeven in that business? So, Leah, I think it's really important to recognize that different companies are calling e-commerce different things in their P&L's. When we are talking about e-commerce, that is specifically our e-commerce business.

There is nothing in our e-commerce P&L related to the media collective from a financial point of view. Of course, it creates data, for the media collective, and it is a major provider of information for the media collective, but from a P&L point of view, it's pure. What is driving that is volume. First and foremost. Leveraging the fixed cost of the operations of that business. Also, labor efficiency in the business. We've invested in tools and systems in order to drive efficiency and labor. And then we are also very much focused on continuing to leverage transportation costs in that process.

So it's across the P&L where we're seeing improvement, but in that type of a business where you've got fixed costs, that put the space in the stores, the real estate, because all that's allocated to that business. We are continuing to lever that. So we are getting very close to breakeven in our e-com business.

Sharon McCollam: Sharon, if I could just add to that as well. I know you touched on this a reminder that the our fulfillment model is through our stores. And our stores are already in the neighborhoods that are serving our customers. So that creates efficiencies for us, perhaps, versus some others out there. I think that's

Susan Morris: That's very helpful. Thank you. And then I just had a quick follow-up on the ID sales guidance. I mean, just seeing if you could comment on the cadence of ID sales throughout the quarter. And then with the deceleration that you're guiding in 2Q, just

Sharon McCollam: what are the key drivers of that? Are you seeing something change with the consumer? Is this related to the pharmacy business?

Susan Morris: Anything there would be helpful. Thank you. Leah, there's a couple of things. First and foremost, that compares on pharmacy you have to look at pharmacy growth last quarter, which we disclosed. So if you take a look at that, that has a major swing impact on the comp each quarter, so look at that. Secondly, from a cadence point of view, we feel pretty confident that as we progress through the year, we expect to see our on the grocery side of the business, we talked about the fact that we're expecting to see progressive units as we go through the back half of the year thus the price investment that we have spoken about.

So in Q2, we do need to keep in mind that there will be an impact from the strike that we had, during the quarter. So that'll have an impact, but we quantified that for you in order for you to help model. We said in our prepared remarks that we expect it to in the second quarter to be at the low end of our guidance range. So hopefully that will be helpful and we continue to expect to see strong pharmacy in the numbers going into Q2. Very helpful. Thank you. Thank you. Our next question comes from the line of Edward Kelly with Wells Fargo.

Edward Kelly: Hi. Good morning, everyone. I was hoping that you could maybe take a step back and update us on your price investment goals, you know, just kinda given what you have seen so far you customer response, you know, does that give you any confidence maybe to lean in a little bit more? And then as you think about know, productivity initiatives rolling in, then you think about, you know, returning to your algo next year, is it your expectation that eventually get to the point where, you know, you will continue to invest in price, productivity offsets, gross margin is a bit more stable. Curious as to how we should be thinking about all that. Thank you.

Sharon McCollam: Sure. Thanks, Ed, for the question. So, as we think about price, just a reminder, as we went into the year, we have an incredible amount of data, and our price investments are very surgical. We know the categories and the markets. Where we need to make those investments, and we've begun that process. And keep also keeping in mind too that as we talk about investing in price, it's really investing in the total value proposition. So, yes, some of it's based pricing. It's promotional, is investing in our loyalty programs as well, and, of course, focusing on own brands. To date, it's still early. In the investment process, so we'll be able to understand a little bit more.

This is certainly a journey not something that we're is a one and done. It'll be an iterative process with multiple phases launching throughout the year. Right now, we've seen sequential improvements in our unit trajectory, which is what we expected to see.

Susan Morris: We have

Sharon McCollam: been tracking our CPI versus the competitive set, and are generally pleased with what we see. But once again, it's quite early in the process. You asked about productivity, and what I would say here is as I mentioned a moment ago, there will be a tailwind from a gross margin perspective as we implement our national buying processes. But keeping in mind too that is a process. We're working closely with our vendor partners, category by category, vendor by vendor. So we expect to see that start to show through towards the second half of the year. And expect to leave 2025 going into 2026 delivering on the long-term algorithm.

Edward Kelly: And then just maybe a follow-up on the pharmacy and grocery cross-shopping momentum. I mean, pharmacy growth has obviously been know, very impressive. But the grocery, you know, business has lagged. And I'm just curious as to you know, what's happening with, the momentum of that cross shopping activity, you know, what you're doing to know, to get those customers to engage more in the store and in over time, I mean, it seems like we should expect the grocery ID to respond to all this. I'm just kinda curious as to how you are thinking about you know, the momentum there and, you know, when that really begins to improve.

Sharon McCollam: So it's to be shared with before, it does take time for our the cross-shopping to begin between pharmacy and grocery customers. That said we know what they do. They often visit the store four times more frequently. They drive outsized customer lifetime value. They and they one of our goals with all of this is, of course, getting an engagement with both center store and pharmacy. Recognizing that if they're engaging in the pharmacy side of the business, we are working to increase their engagement with higher service offerings. Test and treat is one example. Immunizations is another. From a grocery perspective, we did see positive growth in grocery in the first quarter, exclusive of our pharmacy business.

So we were pleased to see that happening there. As I mentioned before, two words, focused on creating incredible product incredible amount of productivity in our pharmacy business

Paul Lejuez: including

Sharon McCollam: improving our sourcing, buying better increasing automation, creating solutions for our pharmacy techs and teams to create to make their jobs more efficient. We've invested in three central fill facilities. In our Southwest division, in Dallas, and in Southern Washington state, which are also helping our productivity. So again, we like the total value equation when our customers engage with us in store, in pharmacy, online. That's a virtuous flywheel for us to drive ongoing growth. And productivity, by the way. So we're very excited about the future and believe in the priorities that we've laid for us.

Edward Kelly: Thank you.

Susan Morris: Thank you. Our next question comes from the line of Rupesh Parikh with Oppenheimer and Company. Please proceed with your question.

Rupesh Parikh: Good morning, and thanks for taking my question. Just going back to retail media, I was just curious how that ramp is going versus expectations so far and just anything surprising at this point.

Sharon McCollam: Hi, Pash. We are very pleased with progress that we're seeing on the media collectives. I Our growth is outpacing the industry. Our team has done a phenomenal job of condensing the amount of time that it takes for us to be able to give feedback to our vendor partners on performance of their investments. They're enhancing our digital properties. So that we have more inventory to be able to settle. And we are also working on really creating more streamlined personalization opportunities so that our vendor partners can have direct connections with the customers that they're serving. So we feel good about our progress there. But we also see that as some blue sky ahead.

We recognize that we're catching up in some ways, and our goal is to leap forward. But there's there's great progress there from the team. Great. And then maybe just one follow-up question. Just on the consumer,

Rupesh Parikh: just curious what you guys are seeing right now and with the recently passed legislation, just any thoughts on SNAP impact?

Sharon McCollam: I'll start with the SNAP impact. So for us, we have a lower penetration of SNAP than majority of the competitive set that we have. That said, that customer is very important to us. They did typically have a larger basket. They're very loyal. We'll work hard to make sure that they have the communication information they need to get access to them. To resources when available.

Susan Morris: I would also add to that there when you look at the new legislation, there is a very long ramp to implementation of many of the things within that legislation. So in the short term, we don't anticipate that being a headwind of any material amount in the short term. Thanks, Sharon. And on the on the consumer side, we continue to see the customer seeking value. We're selling more on

Sharon McCollam: promotion. That's been happening for quite some time now. We're leaning heavily into owned brands. Understanding that. And as we've mentioned before, we're proud of our own brands program that we have, but we're not satisfied with the penetration that we have. So we're really leaning in for the Q2 and the rest of the year. That's upside potential for us moving ahead. As I think about the customer, we were looking at some category information and it's been interesting. Some of our top performing categories in the first quarter was kind of a tale of two cities.

We absolutely saw increases in a shift into pork and ground beef as one example, again, indicating that the customer is looking for value. We also saw strong growth in our deli chicken business as an example. Knowing that, I think, customers are always looking for quick and easy meal solutions and with these increase of food away from home, I think inflation was almost four percent. We're absolutely providing value there.

Rupesh Parikh: Great. Thank you for all the color.

Susan Morris: Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

John Heinbockel: Hey, guys. I want to start with I think you said if maybe I heard wrong, food volumes were positive in the quarter, grew Was that right? If so, is that predominantly traffic or items per basket? And then I think your goal

Sharon McCollam: is a couple of quarters ago, you talked about fifty basis points. Is that still a fair goal? You think you can do better than that?

Susan Morris: Yeah. So, John, traffic and AIV were positive. On the units. It is a sequential improvement in units from Q4 to Q1. And that is not yet to positive.

John Heinbockel: Okay.

Sharon McCollam: Then and then follow-up is if you think about you reference technology. Where do you think the most fruitful labor productivity opportunities are? Right? I think about these you guys are promotional electronic shelf labels. You know, thinking about that. Thinking about know, automation back into the warehouses. Where are the biggest opportunities to move the needle on cost per unit?

Susan Morris: John, thanks for the question. So you actually touched on a few that are very important to us today, one of which is DC automation. We've had great success with recent launches and look forward to accelerating that agenda for a variety of reasons. Efficiency being one of them. With regards to store labor, we are so have an incredible amount of data, and I think about e-commerce as one example where we've actually been able to enhance productivity because we're able to get the data that we need to create more predictive scheduling. That's really helping us create efficiencies there. That's already underway.

In the rest of the store, and we're in the process, is actually fairly robust in center store, we're working through the fresh departments.

Sharon McCollam: So

Susan Morris: wall-to-wall forecasting is what we call it, and that's gonna be a big unlock for us. We are currently in pilot on ESL and I think it's forty stores at this moment in time, seeing great results there. But to your point, we're absolutely leaning in heavily on technology and automation of tasks where we can eliminating pain points across the organization and the existing experiments on AI across the company because we see further opportunity there for efficiency.

John Heinbockel: Thank you. And also as

Susan Morris: that over the last several years, we've invested heavily in our stores in several technologies that are used by a very large number of people in our stores. We implemented Refresh, We've implemented ordering and other types of technologies. And one of the big opportunities that every retailer has. Is the utilization of that technology and there is a full court press within the company on execution in the stores and elevating that in our stores. So we are expecting to see changes and continued improvement in the stores in the utilization of the tools we currently have. Another area that we continue to invest in you have to invest in it from two perspectives.

One is the customer experience, and one of them is from a shrink perspective. But is in the self checkout. And the various things we can do with self checkout from a customer experience point of view. Using vision AI as part of that process. We saw if you saw in our prepared remarks, that we did have some favorability in shrink. Part of that, we believe, is coming from the technology that we have invested in sub checkout.

So that is another area that it benefits you in labor in many different ways, but the key to self checkout is making sure that customer experience is as great as it can be, and we're spending time on that and then ensuring that, and I believe that will help us continue to take self checkout to the next level.

Rupesh Parikh: Thank you.

Susan Morris: Thank you. Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed.

Simeon Gutman: Hey, Susan. Hey, Sharon. How are you? I wanted to follow-up on pricing. Susan, I'll I ask you a about where your head is on pricing. I think you've lived in the high low environment for most of your career. So curious what this iteration looks like. Are you moving to part EDLP with Hi Lo? And you mentioned this isn't is this a one time catch up or this is iterative? And, of course, you know, open to changes down the road? And then I don't know what in the conversations with vendors, how you're communicating some of the changes as you try to work with them on the central buying.

Sharon McCollam: Damian, thanks for the question. So first and foremost, I wanna highlight the fact that and I've mentioned this a couple times and we talked about this last time. We have an incredible opportunity with our own brand. Our penetration well it's growing at 25.7% for the quarter. We should be at 30% plus. So we are leaning into that from both ends. Both from a price perspective, but also from a cost of goods perspective so we can fuel our own growth there. Going back to your price question in general, I would yes, you're right. We typically bid a high low retailer.

And if I had to describe our go-forward approach, I think we're more of a modified high low. That's that's where we're looking to achieve. And, yes, it's iterative. This is absolutely not a one-and-done. And what the team has created, which is it's actually pretty fantastic. And, Charlie, we've created a suite of tools that helps us utilize the data that we have to anticipate the changes that we're making based off of past performance of various price points understand the customer elasticities, and then feed us what those pricing changes should be to optimize unit growth, optimize profitability. And those tools are only becoming more and more robust. We continue to add to the suite.

So to I guess, to no. This is not a one-and-done. This is a new go-to-market strategy. We are deeply engaging our vendor partners, That takes time, by the way. So as we talk about our productivity, as a as a tailwind, that will come gradually over time. As we're leaning into partnerships with our vendors to say, hey, how do we do this together? We wanna move more units. We wanna move them with you. How can we lean in and create the right opportunity to grow sales and share unit sales and share collectively?

Simeon Gutman: Okay. And then switching topics for follow-up. SG and A run rate, Can you talk about I think it was up three and a half or so percent. Union contracts, I'm sure, was part of your plan at some point. Because you know when they come up and you have some expectation. Can you talk about how the unit contract could or couldn't change that run rate and any investments that come in and then you know, managing it relative to where you think comps can come in. Is it in the right range so that you could eventually leverage when you get some of the unit pickup in the back half?

Susan Morris: To me, yes. In our SG&A guidance that in our outlook for this year, we have anticipated what these increases could look like and that is incorporated in the adjusted EBITDA value that we provided for the year. As it relates to other areas in SG&A that you didn't ask about, keep in mind this quarter, we were we had a year-over-year benefit of about 63 basis points. Take a look at how much of that is one-time cost. You can see the one-time cost in our reconciliations in the press release. So about half of that comes from the elimination of departure costs. But the rest of that has been driven by productivity.

One of the big areas of productivity that we expect to see this year, early in the year particularly, is going to be in SG&A. Remember, we are materially changing our ways of working. We've had several announcements on the opening of our new headquarters in India. For technology, which we're very excited about. We are also transitioning many of our back-end accounting functions to an existing location that we have in the Philippines. And that transition is also happening. So we are making several I call we call them internally ways of working moves that are helping to offset some of the pressure that we're seeing in wages. And wages, it's your I don't wanna specifically say union wages.

It's wages in general.

Simeon Gutman: K. Thanks. Good luck.

Susan Morris: Thank you. Our next question comes from the line of Mark Carden with UBS. Please proceed.

Mark Carden: Thanks so much for taking the questions. So on the pharmacy front, how did that contribution shake out from GLP one And then for the growth outside of GLP ones, is it being more driven by newer customers or more by your engaged existing customers?

Susan Morris: The JLP one question, it's about half the pharmacy comp. So think about GLP one as half the comp. However, remember, it comes in an incredibly outsized average unit retail and script growth actual script growth outside of GLP one was also very strong Susan, do you have something you'd like to add to that?

Sharon McCollam: Yeah. So and Sharon touched on it. Clearly, the profitability is quite different on the DLT one script itself, but the customer is quite valuable. What we found is there might be an initial dip when they start shopping with us in their in their grocery basket, but that quickly turns around. And actually leans into items like supplements, lean proteins in our meat department, categories that are actually quite profitable for us as a company. Sharon mentioned our course group count GLP one is very strong.

And we're that's, again, exciting to us as customers continue to engage in our total ecosystem that adds profitability, that adds long term lifetime value, So we feel very good about where we're at the pharmacy's pace. That said, and I mentioned this earlier, we are very focused on productivity there. Improving sourcing, increasing automation, and of course, the central field that I spoke of.

Mark Carden: Great. And then on tariffs, I know that indirect impacts

Sharon McCollam: were a big unknown from the ingredient and a packaging standpoint in grocery and pharmacy. Now that we're a few months in, are you expecting this to be any more or less a contributor to inflation over the course of the next few quarters relative to what you're expecting last quarter?

Susan Morris: Thank you. And yes, as we've mentioned before, well over ninety percent of the goods we source are domestically based, but to your point, ingredients are certainly playing a factor in our CPG partners and their cost of goods. We're starting to see increases in cost of goods moving ahead, and we've got a very rigorous process of first and foremost quite frankly, just pushing back. We've worked hard and it and it showed that our price as well that we've not passed through all of the inflation that we're seeing. From a cost of goods perspective.

Our first line of defense though is to push back with our vendor partners, deconstruct the costing increase, and make sure that we're all in alignment of their back rationale behind it. Looking for alternate sources of supply or other products that we can push if the tariffs become unwieldy and then finally in certain cases, if we have to, we'll pass them on to customers but we're gonna remain very close to the competitive set, especially on key items. When I start to think about commodity items that come through, which is something we do every day. By the way. You know, this is part of our DNA.

We sell a lot of commodity-driven items, and we are very agile in the pricing process there.

Sharon McCollam: And Susan, I would just add to that. It is also having us take a look

Mark Carden: at

Sharon McCollam: what we are offering in other branch. So as we look forward and we look at the tariffs, it may be that there comes a point where we decide that an expansion in our assortment and own brands is a great solution for our customer, and we're looking at that as well.

Susan Morris: Great. Thanks so much, and good luck.

Sharon McCollam: Thank you. Our next question comes from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question. Hi. Good morning, Susan and Sharon. Thanks for taking our questions. Wanted to go back to the sequential

Susan Morris: improvement in grocery units. It sounds like you were pleased with that. Just wanna clarify, would you expect that to continue into Q2, and just a pharmacy dynamic there in Q2? Just wanted to understand really what underpins that confidence regarding the stronger second half IDs, and what's the measure of that? Is that more of a grocery unit dynamic?

Sharon McCollam: Yeah. Kelly, first and foremost, in Susan's prepared remarks, her statements about the sequential improvement in units that is and we were clear. It is grocery. So when we are referring to this sequential improvement and what we expect for the balance of the year, what is important and one of our top priorities is growing units in grocery. When you now as we look for the rest of the year, we said last quarter and we continue to believe that each quarter this year, we will continue to sequentially improve grocery units.

We're making the investment in the margin We are focused on driving those units and as we get toward the back half of the year when you think about the March that remember what Susan said the productivity will start to provide a tailwind to the investment order to drive the units But we are committed to driving units through the balance of the year.

Susan Morris: Susan, do you wanna add to that? No. Sure. I think I think you said it well. The primary purpose of the investments that we're making, yes, in price, yes in loyalty, yes in home brands is literally all about driving that unit growth and driving those improvements. So we do expect it to continue We will be funding it again over time. As we mentioned, those investments and the deal with don't exactly line up. Which, again, though, fits the algorithm that we've shared.

Sharon McCollam: But that's what gives us the confidence. Your question was what gives us confidence That is why we are confident. That's that's helpful. And is there anything that you've learned as you

Susan Morris: had these discussions with, vendors in terms of more of a national buying process that makes you think about the opportunity, you know, over time and in any different way. And sizing that up in terms of the impact that could have on productivity. Yeah. So just what we're learning is we go through the process is there's an incredible opportunity for us. Right? And as you think we own our own manufacturing plants. So we understand that the more information that we can get and the further out that we're out on forecasting for our own plans creates incredible efficiencies. For production. It's no different for our vendor partners.

Who shared with us that their ability to forecast demand which by the way we're also developing have developed and then there's more in development. Various AI tools to help us create stronger and further out demand planning signals. But it's it's just a complete unlock in terms of efficiencies for everybody. It also enables us to plan further ahead and align our media collective dollars along with our digital dollars. And, of course, the cost of goods reductions that we'll see so that we can create a comprehensive program in store online to drive more traffic, and drive more units by creating this again, this total package for the customers that we serve.

Our vendors, I think, you know, we're a large company, and there are times when it's very efficient and effective for us to act.

Sharon McCollam: Locally.

Susan Morris: And be very agile, but our vendors clearly recognize that there's a significant change in our thought processes we're committed to doing this. And I'm excited about what that brings for the future.

Sharon McCollam: And in the conversations the goals that we have about driving units are completely aligned with our vendors. So we are aligned when you're aligned on the same business objective, it's very helpful and very constructive in those conversations.

Susan Morris: Yes. And to your point, sure. We have joint business plan

Sharon McCollam: goals that we put in place with most of the major CPGs. So again, we're aligned on the same targets We're leaning in together. And I really am excited about what will come in the second half of the year.

Susan Morris: Thank you.

Sharon McCollam: Our next question comes from the line of Michael Montani with Evercore ISI. Please proceed with your

Michael Montani: Yes. Hi. Good morning. Thanks for taking the question. Just wanted to ask one on guidance and then one on the trends for the consumer. So on the guidance front, there was about a forty or fifty bit increase in ID sales. But then, obviously, EPS did not change. I just wanted to confirm, is that due to the nature of the ID sales being stronger in pharma, or was there incremental investments either in price or labor as you do the union contract negotiations that caused that?

Susan Morris: Yes. So I think I think it's a blend of some of the things that you just described. Yes. Some of the growth within our pharmacy growth continues to be outsized. Right? And that's great because we love that customer. We will love that relationship. There is an impact on profitability there. Cherish, is there anything that you would add from

Sharon McCollam: I think that throughout the year, we expect this in the total comp guidance for 2025, pharmacy is going to be biggest driver of cockspur sales growth for the year. We are continuing you know what that business doing like, and we continue to believe that we are going to continue to take share from pharmacy. On the grocery side, you will see that each quarter, we expect to see gradual and incremental improvement in units and that will, through the year, bring the grocery comp as a slightly bigger percentage of the total but on the top line, you're gonna see a bit the increase that we put in the guidance for 2025 that is pharmacy.

Michael Montani: Got it. Okay. Thanks for clarifying that. And then just in terms of the consumer trends, as it relates to kind of better for you product, natural, organic, and otherwise, what percent of the mix is that for you today? You know, how is that trending? And I guess, is there any surprises that you're seeing with respect to GLP one absorption and then you know, how that's impacting consumer buying behavior. Sure. So, like, what we're seeing in

Sharon McCollam: we have a we call it Noshi, natural organic specialty health and ethnic products. And those categories are growing for us. And what we're and it's interesting as you start to break it down, I think there's a few things in play. Certainly trends for you sorry. Certainly trends in better for you products. Are strong. Also interesting though, the influence that we see from specialty items like premium sparkling water is one of our top gross categories. It's it's fascinating to watch. This one oh, I had to double check the numbers, but cottage cheese. Is actually a strong growth category. Yes.

Some of that's from the focus on protein, lower carbs, perhaps GLP one users, and then just being totally frank, TikTok is driving some of that. So we're leaning into those categories. They do lend themselves Those categories pair well with some of what we see for GLP one customers. But it goes well beyond just the GLP user. We're definitely seeing overall trends focusing on health and well-being, and that works perfectly for us. As one of our five priorities is driving a cut the customer value proposition, and creating a an environment, an ecosystem that brings customers into brick and mortar, into digital, into pharmacy and health.

Michael Montani: Got it. Thank you.

Sharon McCollam: Thank you.

Susan Morris: Thank you. Our final question this morning comes from the line of Robby Ohmes with Bank of America. Please proceed with your question. Hi. This is Kendall Tiscan. I want to Robby. Thanks for taking my question. Just have a follow-up in terms of the percent of your customers that are cross shopping

Sharon McCollam: grocery and pharmacy today versus much higher you think that number could go over time. And, basically, just trying to get a sense of after four years of pharmacy growth in the double digit range, which has obviously been a huge

Susan Morris: sales driver, but a headwind to profitability. Are we nearing a point where pharmacy could eventually start to normalize or the growth rate could start to normalize?

Sharon McCollam: Thanks. Hi, Kendall. So what we're seeing is, you know, yes, of course, the cross shopping between pharmacy and grocery is pivotal for us. We do have very strong pharmacy growth, and I mentioned a lot of that is core pharmacy business. Just to sidenote on there as well, in that core pharmacy business, we continue to strive for profitability. Stronger profitability, increasing our generics mix, improving offerings such as test and treat, immunizations, those kinds of things. And then and again, creating that linkage between store and pharmacy is critical. From a the pharmacy business, I here's what I see. There's been a experience I mean, you guys see the information out there.

There's been a serious decline in the availability of doors for customers to go to take care of their pharmacies. We think that's critical. And I believe that we're well positioned with this the steps that we've made both from an acquisition perspective meaning acquiring scripts from outside, hiring the amazing pharmacists and techs that are out there that are looking for work we need more and more of that support. So we're leveraging that and becoming know, I think we're becoming helps become an essential choice for customers. I could get my groceries there. I could meet my pharmacy needs in an environment where the doors are shrinking. Right?

We have less and less opportunity in certain markets, less choices for customers, or we're happy to be there for them. So I actually see it as a vote as a competitive advantage for us moving ahead with the investments that we've made in pharmacy. And so that, again, just I can't repeat also the enough the fact that we are striving to improve the profitability there. Again, recognizing that customer's total value when we engage them in both center store as well as pharmacy is tremendous for us. We love those customers. We want to serve them.

Susan Morris: And, Susan, I would only add also, we have invested significantly in the customer experience in pharmacy, integrating it into the total company app, and being able to serve that customer including we talked last quarter, now being able to pick up your prescription at the same time that you're picking up your drive up and go order. And as we continue to create the linkage and the ease of shopping between the pharmacy plus customer and the grocery customer, we believe that does provide incremental opportunity for us as we move forward through the year and into next year.

So these investments we're making on the digital side and linking them together with everything we're doing in pharmacy and health, and then the mobile app for use in the stores, we think that is also going to make a significant difference with these cross shopping customers.

Sharon McCollam: Thank you.

Susan Morris: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Ms. Morris for any final comments.

Sharon McCollam: Just thank you everybody for the time today. We're excited about the year come, and thank you to our associates that make all of this happen.

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

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On Wednesday, Nvidia became the first company in history to reach $4 trillion market valuation as shares rose more than 2 percent, reports CNBC. The GPU maker's stock has climbed 22 percent since the start of 2025, continuing a trend driven by demand for AI hardware following ChatGPT's late 2022 launch.

The milestone marks the highest market cap ever recorded for a publicly traded company, surpassing Apple's previous record of $3.8 trillion set in December. Nvidia first crossed $2 trillion in February 2024 and reached $3 trillion just four months later in June. The $4 trillion valuation represents a market capitalization larger than the GDP of most countries.

As we explained in 2023, Nvidia's continued success has been intimately tied to growth in demand for hardware that runs AI models as capably and efficiently as possible. The company's data center GPUs excel at performing billions of matrix multiplications necessary to train and run neural networks due to their parallel architecture—hardware architectures that originated as video game graphics accelerators now power the generative AI boom.

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Key Points

• Citigroup has been working on a company-wide transformation since 2021.

• Progress is being made. The bank has been divesting international consumer banking divisions and investing capital into higher-returning businesses.

• The stock recently hit highs not seen since 2008.

The large U.S. money center bank Citigroup (NYSE: C) has enjoyed quite the run. The stock is up over 75% in the last five years and now trades at over $88 per share (as of July 3), highs not seen since 2008.

Citigroup also trades at about 97% of its tangible book value (TBV), a significant discount to peers, despite having materially grown TBV per share in recent years. Investors are certainly pleased with the progress and wondering if Citigroup can keep the momentum going. Where will the bank be in three years?

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Finishing the transformation

Shareholders have been through the ringer with Citigroup. They've dealt with consent orders and lackluster returns, which has kept the stock depressed until recently.

But when current CEO Jane Fraser took over in 2021, she immediately launched a companywide transformation plan. The transformation included divesting international consumer franchises that were inefficient from a capital perspective. Citigroup also decided to divest its highly profitable international consumer banking operations at its Mexican subsidiary Banamex. The idea is to free up capital that management could use to invest in higher-returning businesses like investment banking, wealth management, and Citigroup's crown jewel, treasury and trade solutions (TTS).

Image source: Getty Images.

Freed-up capital has also been used to repurchase shares below TBV. These types of accretive buybacks increase TBV per share, which bank stocks trade relative to, so higher TBV tends to result in a higher share price over time.

Citigroup has largely completed sales or exited most of its international consumer banking operations. Banamex has taken longer than management would have liked. Selling the consumer business turned out to be difficult because the Mexican government had to approve the seller, and Citigroup ended up abandoning the process. Management then chose to split its Mexican consumer business from its institutional business and spin it off into an initial public offering. Fraser on the company's most recent earnings call said the bank would like to be in a position to take Banamex public by the end of the year.

With the transformation getting closer to completion, Citigroup will focus on five core businesses: U.S. personal banking, wealth management, investment banking, fixed-income and equity markets, and services, which includes the TTS business.

The transformation has been all about boosting returns. In 2024, Citigroup generated a 6.1% return on tangible common equity (ROTCE). However, management is targeting a 10% to 11% ROTCE by 2026. Analysts and investors seem more confident in this trajectory after the bank put up a 9.1% ROTCE in the first quarter of the year.

If Citigroup can start consistently generating a 10% or 11% ROTCE, with prospects of moving higher from there, the bank may finally begin to close the valuation gap with its peers.

C Price to Tangible Book Value data by YCharts

What to expect over the next three years

I think Citigroup's transformation is real. Over the next three years, I expect it to finish its international divestitures including the IPO of Banamex. I also expect the company to hit the long-awaited 10%-11% ROTCE in 2026. Deregulation in the banking sector and a simpler organization should lead to lower capital requirements, allowing Citigroup to increase capital returns to shareholders through dividends and share repurchases.

As you can see from the chart above, Citigroup doesn't need to do anything heroic to generate strong gains for shareholders. Its current TBV per share is about $90. A $145 stock price would only require a valuation of 1.5 times TBV, which would still be below peers. And remember, Citigroup should be able to continue to grow TBV per share in a meaningful way. I don't ever expect Citigroup to be JPMorgan Chase, but I do think it can continue to close the valuation gap over the next three years.

And who knows, perhaps once Citigroup achieves a better valuation -- and therefore a better stock currency -- it may start to think about whole bank acquisitions to bolster its U.S. deposit presence. That's speculative and still likely several years away, but also something for investors to consider.

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Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool has a disclosure policy.

• Molly Shannon says Lorne Michaels is "irreplaceable" as "SNL" showrunner.
• But there's one current cast member she seems to think could one day take the reins — Kenan Thompson.
• Thompson is the longest-tenured cast member in the NBC show's history.

Actor Molly Shannon has backed the idea of Kenan Thompson one day taking over from longtime "Saturday Night Live" showrunner Lorne Michaels, despite calling Michaels "irreplaceable."

Asked what she thought about Thompson potentially taking the reins at the NBC show in an interview with People, Shannon, who was a cast member between 1995 and 2001, said it was "an excellent idea."

"I love this idea. He's the greatest — I adore Kenan," she said, adding that he was "so talented."

Thompson joined "SNL" in 2003 and is the longest-tenured cast member in its history, notching his 22nd season this year.

Rumors of Michaels' retirement grew as "SNL" neared its 50th anniversary earlier this year, fueling speculation over who could take over as showrunner.

For Shannon, it seems the show will never be the same, no matter who comes in.

"There's no one who could replace him. It would not be the same show," Shannon told People of Michaels, who created the sketch comedy show in 1975. "He's just a one-of-a-kind genius. Brilliant. Smart."

"It's his show, his vision," she added.

In September 2024, Michaels, 80, addressed speculation over his future, telling The Hollywood Reporter he had no "immediate" plans to retire.

"I just know that this is kind of what I do and as long as I can keep doing it, I'll keep doing it," he said at the time.

Earlier this year, Thompson hinted that fans of "SNL" could see a major shakeup when the show returns following the wrap of its 50th season.

"Especially this year where it feels like there's maybe, possibly, a lot of change next year," he told Page Six. "You want everyone to stay forever, knowing that people may be making decisions this summer."

He added that he had yet to sign a new contract for the coming season but expressed interest in returning.

"You just never know what the future holds," he said. "I don't want to be in the way of someone else."

"I don't want to be the stale old man riding the same old thing. That doesn't really happen that much at 'SNL' but there's no guarantees," he added.

Representatives for "SNL" and Thompson did not immediately respond to a request for comment from Business Insider.

Key Points

• MARA Holdings stock soared 17.3% this week after a strong June mining report.

• The mining volume was down 23% from May, but management still set bullish production targets for the full year.

Shares of MARA Holdings (NASDAQ: MARA) soared 17.3% this week. The crypto-mining expert's stock rose 17.3% from last Friday's closing bell to the early market exit on Thursday, July 3, according to data from S&P Global Market Intelligence.

Most of the price gain sprung from MARA's Bitcoin (CRYPTO: BTC) mining report, covering results in the month of June.

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Why block rewards matter to MARA Holdings' bottom line

The company formerly known as Marathon Holdings won 211 blocks in last month's Bitcoin mining sweepstakes.

For those unfamiliar with the process, the Bitcoin mining system awards a certain number of Bitcoins to the computer that completed the validation of each transaction data block.

The reward currently stands at 3.125 Bitcoins, handed out approximately every 10 minutes to the next lucky winner. It was halved in April 2024, and the next halving of rewards is scheduled for the spring of 2028. These inflation-shrinking events occur approximately every four years, on a schedule that is hardcoded in Bitcoin's operating software.

Since MARA runs the largest Bitcoin mining infrastructure in the world, the company handles the final data validation on a significant number of blocks. In June, MARA won 5.4% of all available Bitcoin mining rewards.

This tally was 23% below May's haul of 282 Bitcoin block awards. June is a 3% shorter month, and some of MARA's mining rigs were temporarily turned off due to weather-related events. Nevertheless, management set a year-end production target of 75 exahashes per second (a standard performance metric for Bitcoin mining operations). That's 40% above the 53 EH/s MARA generated at the end of 2024, and 31% more than the current rate of 57.4 EH/s.

Image source: Getty Images.

Why investors are cheering MARA's growing Bitcoin stash

MARA held 47,940 Bitcoin by the end of June, second only to Michael Saylor's Strategy (formerly known as MicroStrategy) among public companies with reported Bitcoin holdings.

Investors are excited about MARA's rapid Bitcoin mining growth, which demonstrates an effective mining infrastructure as well as a deep commitment to the mining operations. If Bitcoin prices continue to grow over time, MARA should end up with a massive balance of Bitcoin-based assets. Today, MARA's Bitcoin holdings are worth roughly $5.47 billion -- more than 88% of MARA's total market capitalization.

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Anders Bylund has positions in Bitcoin and Mara. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.