5 Takeaways from the 2025 ICR Conference
Everything seems to be growing... except DEI
I spent much of last week and this week in Florida and got back home to Amsterdam two days ago. Flew to Miami last Wednesday for the Orange Bowl (a brutal loss for Penn State) and then spent this Monday-Tuesday at the ICR Conference in Orlando. If you don’t know it, Jim Cramer calls it the “Super Bowl of consumer conferences.” I guess that means it’s not? Nah, it is — a rare Cramer call that’s actually correct. Virtually every consumer company that’s growing or wants to grow presents or at least attends, often setting up private meetings with investors behind-closed-hotel-doors at the JW Marriot and Ritz-Carlton which joint-host the conference. Here are the schedules.
ICR helps me kick off the year, mentally and emotionally. It’s a vibe check on what executives and investors are thinking in the world of consumer. I also get to catch up with my Wall Street and industry friends in the flesh — something increasingly infrequent in my post-COVID, post-careerism, post-expatriate days.
It’s easy to come back from this conference — any conference, really — and share positive takeaways. Almost every Wall Street analyst in attendance will soon write a glowing report about the companies they met with or listened to, if they haven’t done so already. It’s far easier to sell good news than bad news and they call them “sell-side” analysts for a reason. And if you think I’ll be doing the same… you’d be right! There was a lot of bullishness and good news because… what company shows up to talk about poorly their business is doing?
Overall, the sentiment among investors and corporate executives was net bullish. Yes, there are concerns about potential near- to -medium-term inflation (especially tariff-led inflation), but several companies noted the strength of consumer balance sheets and confidence that consumers will pay up for quality, etc. There was also talk of improvements in targeted promotion or advertising which could help them offset cost inflation by reducing what I’d call “subsidized volume” in which consumers buy on discount when they would have paid full price otherwise. Subsidized volumes have been next to impossible to solve forever… maybe AI can help this time around. There were countless growth narratives at the conference, but here are five takeaways I found particularly interesting among them all.
#1 Walmart is media now
A few weeks ago we published a deep dive on Walmart called The Behemoth of Bentonville. We explored how it’s transforming into what we call a MAAS retailer. That is, Marketplace-as-a-Service versus a MASS market merchandiser. After absolutely dominating US retail with a ~25% grocery share, equal to its four next competitors combined, Walmart has launched new ancillary cash flow streams to subsidize its leading low-cost position and drive earnings — creating a seemingly impenetrable fly wheel for which competitors and regulators alike have no answer. We argue that Walmart has essentially become something of a real estate business (i.e. shelf space, foot traffic, and website impressions) that it charges brands fees to access. These fees subsidize their underlying loss-making merchandising business and a sliver of EBITDA. But consumers have benefited from this — and unless the consumer is somehow harmed by Walmart’s market power, we don’t see anything changing. Walmart’s stock price is up over 200% in the last 10 years — about 20 points better than the S&P500.
On Tuesday, Rich Lehrfeld, SVP & GM of Walmart Connect (its newly organized online and in-store advertising business) explained how impactful this new advertising strategy is to earnings today and how large the business can grow:
On Walmart Connect’s financial impact right now —
“Last fiscal year, we reported $3.4 billion of global advertising revenue for the Walmart business. We have reported last quarter a 26% growth rate. And about 1/3rd of last quarter’s operating income is coming from membership and advertising. So a big business.”
On rapid future growth —
“Retail media is expected to be about $100 billion over the next couple of years. And I would say probably retail data or the notion of commerce data is going to probably be infused in every part of the media business.”
Rich is hinting at, in our view, how this new advertising business is essentially funding its core low-cost merchandising business —
“It’s a high-margin business. And that profitability can go back to the business to support our customers and support that overall retail transformation.”
On how Walmart’s gargantuan scale makes it not only one of the world’s largest captive advertising platforms, but also enables advertising attribution by levering and matching point-of-sale (POS) data against dollar spend.
“We have unparalleled insights, and we reached that omni-shopper, 145 million shoppers on a weekly basis.”
“What makes us differentiated is -- there's lots of media companies out there, they're probably straining together lots of third-party data to say what kind of sales were generated. We have the strong first party, but it's that point of sale. Customers are coming on to Walmart.com or they're going into store and they're making those decisions. And if we can influence those decisions, that is really, really powerful.”
“The holy grail to me was to really understand what's the impact of what I was doing. I was buying broad-based TV, and I'm old. So going back in the day, broad-based TV or radio or print, it was -- there's always that saying of, I know 50% of my advertising works, I just don't know what 50%.”
“Having a rich first-party data set that is deterministic -- both deterministic on the targeting and really understanding what they're buying, that is really, really powerful.”
On how everything is omnichannel now —
“Customer behaviors are changing. There's rapid shifts in shopping behaviors. It's no longer just a linear, maybe they see an ad, they come into a store or they go online. Every moment becomes now a shopping moment.”
“We test our way into all the ad experiences. So we don't just launch experiences, whether that is video on our site or another type of experience. We test everything to make sure that it adds value.”
On how search is a critical feature of the advertising business —
“The digital piece, so search and display and experiences online, we're probably a little further along. That's what we started with. We started building out search capabilities. Search is probably one of the most powerful mediums.”
Emphasizing how Walmart’s advertising business is simply built on top of its existing retail infrastructure, a previously and largely untapped growth opportunity —
“We've built the retail business. The core, the crux of this platform is being built. From my perspective, I do have technology costs, I build advertising products on top, but the core pieces are built into the retail business already.”
“We believe the future is really bright. We're going to drive growth. We're going to do it responsibly. We're going to add value to that customer experience, and we're transforming Walmart's retail experience.”
#2 Shake Shack triples its long-term US store count target — now eyes 1,500 stores versus just 329 today (prior target was 450).
We’ve been paying more attention to Shake Shack lately, ever since it announced a partnership in NYC last year with TALEA — the “only exclusively woman and veteran-owned and founded production brewery” in New York in which we are also investors. It was cool to see the partnership make it into their slide presentation.
Shake Shack now believes it can expand to 1,500 company-operated locations in North America, up from the previous target of 450. It currently operates 329 stores (plus another ~250 licensed locations globally), nearing the 450 goal it set a decade ago at its 2015 IPO. This aggressive expansion will require a major effort in scaling operations, optimizing store formats, and increasing efficiency. But it’s entering this new growth phase from a position of strength. It reported 15% YOY revenue growth in Q4 with same store sales (SSS) up over 4%. It’s Average Unit Volume (AUV) sits at $4.1 million — among the highest in the industry (McDonald’s and Chipotle’s AUVs estimated around $3 million). In 2015 it expects 16-18% revenue growth (3% SSS growth + 14-15% unit growth or 80-85 new builds, 45 company-operated). Restaurant profit margin expected to expand by 60 basis points to 22%. Adjusted EBITDA expected $200M-$210M (+14%-20% YoY growth). No wonder the stock trades at 26x NTM EBITDA (vs MCD ~17x).
CEO Robert Lynch and CFO Katherine Fogertey on how there are surgical pathways to cut through the inflation headwind and drive consumer value perceptions—
"We've gotten really good at targeting guests with surgical incentives that give them what they need to come back more often."
"We've talked about adding combos that's going to improve our speed of service. It's also going to improve our value equation."
On finding cost efficiencies from store builds, to labor, to advertising —
"We reached an all-time high of a net cost [to build a new store] of $2.6 million just 2 years ago. This year, we wrapped up with an average of $2.2 million, and we've already committed to another 10% reduction next year."
"A lot of the work that we've had in operations with really refining that labor model and just getting tighter on how we're managing the overall system as well as other profitability improvement plans."
"The thing I get really excited about is the marketing team, it's like a gorilla marketing team, right? We don't have big national media budgets, but they're out there driving top line sales growth, leveraging surgical, targeted promotions to drive transactions, while we're still growing margins."
#3 I like girls (stocks) that wear (are) Abercrombie & Fitch
Has anyone noticed that the company whose long-time former CEO and Chairman who recently pleaded not-guilty to sex trafficking charges and who once allegedly said “a lot of people don't belong [in our clothes], and they can't belong” and whose stock price returned a paltry ~1% CAGR in the almost 25 years between its 1996 IPO and pre-COVID 2020…. is suddenly a fashion sector darling whose stock is up over 600% since under the leadership of new CEO Fran Horowitz? Does Fran wear Abercrombie & Fitch? How could she not?
Horowitz spoke at the ICR Conference after preannouncing a bump in its expected 4Q net sales growth to 7% to 8% from 5% to 7%. It also tweaked its operating margin guide higher. But the stock plummeted almost 20% anyway. Clearly the “whisper number” was higher — which speaks to just how high investor expectations have grown thanks to Horowitz’s leadership and turnaround strategy. She sounded bullish.
#4 Laird Superfoods: An asset light case study
Laird Superfoods is a “clean label” food and beverage mix company originally co-founded by legendary surfer Laird Hamilton and his wife Gabrielle Reece. It IPO’d during the COVID mania but quickly fell from grace much like many of the high-flying growth stories that debuted in the ZIRP (zero interest rate period) era. Largely forgotten and left for dead by investors (traded as low as $0.71) between mid-2022 and early-2024, the stock is up almost 700% in the past 12 months. In January 2022, the company replaced its CEO with Jason Vieth, formerly of Sovos Brands and Poppi. He began overhauling the company’s entire business model, namely the closure of their Oregon manufacturing facility which resulted in the elimination of 46 employees. He shifted production to co-packers and freed up significant internal focus and funds for redeployment towards marketing and innovation. After two consecutive years of declining sales, 2024 sales are expected to grow almost 30% YOY.
I spoke to Jason briefly 1x1 after his fireside chat. He’s an impressive executive whose confidence about his strategic maneuvering was equaled only by the bewilderment he expressed about the company’s previous state of affairs.
#5 DEI and ESG receding fast
The apparent accelerating decline of DEI has made countless headlines in the wake of Trump’s “red wave” and “mandate” election win. Has everyone really been red-pilled? Or is this just a predictable balancing between progressive ambition and hear-and-now pragmatism? Months before the election, conservative activist Robby Starbuck was already pressuring companies to modify or end their DEI programs. For example, Walmart announced it will no longer consider race and gender in supplier contracts, will phase out its Center for Racial Equity, end certain racial equity training programs, reassess support for Pride events, and withdraw from the Human Rights Campaign’s rankings. Ford, Harley-Davidson, John Deere, Molson Coors, and even Toyota have all announced similar moves in recent months.
Starbuck might make headlines when “taking down” individual companies, but the real power center and influence lies with companies like Blackrock — the world's largest asset manager with ~$11 trillion in AUM — which wield significant influence in corporate governance through its proxy voting activities. During the ICR panel discussion on proxy voting and ESG issues, one of the speakers reminded the audience of the changes recently made at Blackrock. For example, it exited the Net Zero Asset Managers initiative — a coalition committed to achieving net-zero greenhouse gas emissions by 2050. It also updated its US proxy voting guidelines for 2025, softening its stance on board diversity after previously explicitly recommending that companies aim for at least 30% diverse board members. The new guidelines emphasize a broader view of diversity, including experience and perspectives, without specific references to gender, race, or ethnicity. Lastly, it expanded its "Voting Choice" program which allows institutional investors more flexibility to direct proxy votes according to their personal preferences versus broad comprehensive votes in one direction. This move enables clients to align voting with their own goals, including options that may de-emphasize ESG or DEI issues or even reverse certain policies.
Thanks for reading these takes. It was a good trip. I’ll be back there.