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Lennar reported a difficult quarter as higher mortgage rates and deteriorating affordability continued to pressure homebuyer demand. Revenue declined to $8.05 billion as home deliveries fell 3% to 20,840 and the average selling price declined to $372,000 from $383,000 last year.

Homebuilding operating earnings declined to $502.0 million as gross margin on home sales fell to 15.8% from 17.5% last year. Lennar continued using aggressive incentives to maintain its sales pace, with incentives averaging roughly 12% of the selling price. New orders declined 9% to 20,879 homes, while backlog ended the quarter at 16,857 homes worth $6.3 billion.

Management emphasized that the company is prioritizing volume and affordability rather than waiting for housing conditions to improve. Lennar's construction cost per square foot declined another 6% YoY and is now 14% below its fourth-quarter 2023 baseline, while cycle times improved to a record 116 days. The company also reduced completed unsold inventory to 1.8 homes per community, demonstrating that its lower-price and incentive strategy is helping prevent inventory from building despite weaker demand.

CEO Stuart Miller said rising interest rates, persistent inflation and declining consumer confidence made the housing environment more difficult than management anticipated entering the quarter. The executive team also highlighted growing competition from the resale market as existing homeowners increasingly become willing to cut prices, while continuing to argue that the country's structural housing shortage should support longer-term demand.

Looking ahead, management expects fourth-quarter deliveries between 22,000 and 23,000 homes with gross margins between 15.5% and 16.0%. Lennar also lowered its full-year 2026 delivery target to approximately 80,000 to 81,000 homes, down from its previous expectation of 82,000 to 83,000, reflecting continued pressure from mortgage rates and worsening market conditions.

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Dave & Buster’s reported another challenging quarter. Comparable store sales declined 2.9%, improving from a 5.4% decline in the first quarter, while July comps improved further to -1.6% compared to -5.0% in June.

Entertainment remained the primary weakness, with revenue declining 9% YoY to $332.6 million. Conversely, food and beverage revenue increased 10% to $211.5 million, with comparable F&B sales growing 7.6%. Management said food and beverage has now posted positive comps for five consecutive quarters, helped by the return to a more proven menu and better execution of its Eat & Play Combo, while special events sales have grown for seven consecutive quarters.

Management focused heavily on rebuilding relevance inside the arcade. Dave & Buster’s has launched 10 new games and attractions this year, while internal research found that more than 70% of guests would visit more frequently if they knew about new games or activities. The company’s remodel program also continues to outperform the broader system, with six Dave & Buster’s locations remodeled year-to-date and two more planned before year-end.

Profitability remains the biggest challenge. Adjusted EBITDA declined to $98.9 million from $129.7 million last year as weaker same-store sales and higher costs pressured margins. Management has already identified $15.0 million in annualized cost savings and is targeting at least twice that amount, while slowing new-store development and prioritizing remodels, games, technology, free cash flow and debt reduction. Adjusted free cash flow improved to positive $19.5 million year-to-date from negative $36.5 million last year.

Looking ahead, management did not provide formal quarterly revenue or earnings guidance, but said third-quarter same-store sales trends have continued improving and expects same-store sales, revenue and EBITDA to return to growth in the near term.

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Vera Bradley reported its second consecutive quarter of revenue growth as its ongoing Project Sunshine turnaround continued gaining traction.

The Direct segment, which represents more than 90% of the business, was the clear bright spot. Revenue increased 8% to $65.4 million and comparable sales climbed 9.2%, with growth across both full-price and outlet channels. Conversely, Indirect revenue declined 39% to $6.3 million, primarily reflecting intentional changes to its marketplace strategy and a reduction in liquidation sales rather than weakness across its core wholesale partners.

Management highlighted stronger back-to-school demand as product and marketing changes began resonating with customers. Collaborations including Hello Kitty, Winnie the Pooh and Star Wars performed well, while the return of heritage prints and iconic styles helped re-engage existing customers. Vera Bradley has also moved beyond the halfway point in clearing legacy inventory, with total inventory declining 28% YoY to $69.3 million.

Profitability improved substantially, although the headline margin expansion received a meaningful boost from $7.7 million in tariff refunds. Reported gross margin increased to 59.8% from 50.1% last year, but excluding those refunds, gross margin improved by just over 40 basis points. Management pointed to better assortment planning, more disciplined promotions and stronger product sell-through as evidence that the underlying economics of the turnaround are improving.

Looking ahead, management reiterated full-year revenue guidance between $255.0 million and $270.0 million and continues to expect its non-GAAP operating loss to improve by at least 50% YoY. The company ended the quarter with $34.2 million in cash, no debt and improving momentum entering the important holiday season.

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“We have seen some of the most radical and abnormal swings in fuel prices that I think we’ve ever seen.”