LL Lumber Liquidators

Stephen Calk Lumber Liquidators Holdings, Inc.
Dennis R. Knowles Lumber Liquidators Holdings, Inc.
Martin D. Agard Lumber Liquidators Holdings, Inc.
Charles E. Tyson Lumber Liquidators Holdings, Inc.
Simeon Ari Gutman Morgan Stanley & Co. LLC
Brian Nagel Oppenheimer & Co., Inc.
Matthew J. Fassler Goldman Sachs & Co. LLC
Seth M. Basham Wedbush Securities, Inc.
Laura Champine Loop Capital Markets LLC
Rick Nelson Stephens, Inc.
Gregory Scott Melich MoffettNathanson LLC
Peter Jacob Keith Piper Jaffray & Co.
Beryl Bugatch Raymond James & Associates, Inc.
Call transcript
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Good morning, ladies and gentlemen, and welcome to the Lumber Liquidators' Second Quarter 2018 Earnings Conference Call. With us today from Lumber Liquidators is Mr. Dennis Knowles, Chief Executive Officer; and Marty Agard, Chief Financial Officer.

As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in full or in part without permission from the company. I would now like to turn the conference over to Steve Calk. sir. ahead, go Please

Stephen Calk

Good and operator. joining you us. morning, you, thank everyone, for Thank

the of of contain Harbor laws me operating risks Safe Let reference the including provisions are to statements. future conference and uncertainties that financial for This the Liquidators. call statements may performance forward-looking and subject significant Lumber forward-looking securities U.S.

statements assurance are statements and results Lumber Lumber in statements will any this Investors at could of date reasonable, it are Liquidators forward-looking included The discussed. its information statements any correct. time, be believes filings Although is to materially will the cause SEC. or a not give in prove later of that those the information this that that assume no to Important remain in its the that forward-looking in should expectations contained obligation the update in discussed reflected operative forward-looking these Lumber to expectations accurate Liquidators' reflected Liquidators factors with call only from no undertakes call. as such can risk differ actual

Now, I'm Mr. pleased of Knowles, Dennis? to Lumber Liquidators. CEO introduce Dennis

Dennis R. Knowles

morning, you, Thank good Steve, everyone. and

I'm our Agard, As by Chief Officer. Financial joined always, Marty

associates all, our such to all of for day. for day thank First and your after good of want work customers our hard of I taking care

wonderful drive customer Keep Our work great it feedback is telling customer experience. a the doing to us you're about up.

for reported last were hit the sales year. Now, sales We compared store last few X.X% $XXX.X points X.X% to quarter. increase Comparable let me up of million, QX over on high a of net year. an net

improvement guidance. remain the expectations, our committed levers we to short that fell on profitability annual While pulling remain our of and drive focused

are in and second coming quarter, eight opened on leveraging in And our said, we top work the Our new the liquidity remains strong. improvement priorities margin That stores. quarters. SG&A

expansion track for we're on our goals XXXX. So for right

average the that with representing more Growth business merchandise work than to Our Pro results. our exceeded XX% on yield now continues area solid of company in the Pro sales sales.

are in relationships with and this Our building Pro the field sales a teams job great base. headquarters the growing doing important customer and in lasting

terms our time for results. are This quarter business customers market QX, responding early nationwide first was the that to posted ever installation In service and of our quarter. sale addition, enthusiastically. In we our momentum in strong best started saw last I'm particularly it strong about But I sales throughout revenues. installation the the mentioned quarter April that was. was in that excited and we our

from management to build We value experience and the selection, floor to entire our continue installation. project covering inspiration, proposition the customer

marketing We efficiently. more are much

improved of and Our superior offer great and are customer entire support the is stocking An strategy has value, better, knowledgeable engagement customers increasing stores. the associates number Liquidators Lumber because online to experience. throughout with customer selection, coming the and we broad in both

we we has implications result, appealing now our entire a across base are a broader positive As to customer believe and that business.

to has you take will numbers. the few let about touch a that what We on months better the but Marty do. me through I accomplished for quarter on built looking to the is work of in last items beyond But much strategic we still plan the is our am go proud are always improvement. financials. our and ways continuous there team XX realize first, key get

years and a and team the leaders, two appointments from in key took our is Bohaty of Toys"R"Us. appointed and Ethics Chief the compliance Officer Tyson. in retail Jennifer experience key second was we of at on and One Compliance brings important solidifying We product most now quarter and past Jennifer quarter. Target this safety, wealth her steps Charles the management quality senior

enhancing our when Charles XX want all to recently LL OfficeMax. Charles in of And is our comes our to industry experience, capstone seamless on whether years. me, supply Jennifer Jennifer's center. from investment. transformation. investments through retail brings made enhancing Jennifer and customers We merchandise leader goal. have compliance our the Chief creating focused Parts appointment be for product help unique Experience few leadership completion major through of facets and in over and the Customer Auto at We of most past Charles May or appointment store, experience. commercial on web Advance senior chain, the contact in an on comprehensive shopping team Officer and a experience as The is our realize and years will Charles will joined and us quality our the focus marks us that it to

Over a the of legal our sustainable, appointed And believe to functions the years, new company the lead critical together, eight of professionals and and two we're for long-term. past operations, finance. total I to a most compliance, company customer-focused we accomplished from that have building growing to recruited

On the and in product side, I'm introduced styles. excited the to our products see growth newly

really line engineered the new wood our performed product styles are above of white waterproof, turning expectations. hardwood original vinyl Also, Our well. rigid

We invest areas. in will continue to these

is texture, Our or is whether designs, focus attributes on layout. customer-friendly in forward, that color, trend bringing

for is passion beautiful customers. make flooring Our to all possible and easy

supportive In partnering initiatives and are addition, remain businesses. our of with enhance both our our us suppliers to

are a both sales supporting install and Pro right organizations initiatives. on stores great Our and are track, doing our job

inventory us store substantial warehouse they showing with support. are small, appreciate design-oriented customers our knowledgeable employees intimate, and Pro Our

Our their increased and with an developing stronger of wallet. reward share Pro customers, our Pro customers employees with relationships their are us

our are happened their offer our to one-stop ability a tickets that some This service this we're We finishing see add have our regarding full also with excited saw solution our morning materials want advantage I installed service on commentary projects to and flooring to our flooring needs. has finished pleased as operations. headquarters customers their our customers to of and and solution product, our announcement taken for grow.

of XX past for business you've opportunities aspect the heard optimize every about regularly talk strengthen. reviewing Over and months, to me our

operations. some For finishing been time looking we our particularly now, have at

our are customer retail part exit business and can more merchandising, small that to core decided effectively we which of that operations. so have competencies, our experience, We on focus

step vertical Our entry best strategy, focus offered terms integration The Ultimately, cost no first was sourcing. manufacturing integrated the and style, rely on core business alone strong step was originally really that to capital-intensive for and and more of in innovation into strategy cost-effective finishing our that to years competencies limited a be it can but processes. a innovation flexibility network felt advantage. we finishing several and ambitious into our ago taken our was quite our vendor on finishing in

growth this company. additional Marty give us the minute. let on financial long-term the this of will of will decision While in is more impact sharpen drivers flexibility details the material, provide us and focus believe on true it financial we not a our

talent a business, a area, facility the to metropolitan headquarters in customer in corporate With relocate retention I us distribution facility, senior this great the new for in Williamsburg of provide teams and On end is want of past opportunity in home. the home for at growth to move, facility of Richmond it there that consolidate for the years. is With communities over us to a and our same contact half time our completely At capacity. corporate team our have functions growing a metro single time approximately Toano location environment. and our lease the been benefits pool providing recruiting drive center area XX nearby a into a was our will and an smaller it with new say XXXX, to right and and team a consolidate Toano operational expiring the our the co-location logical efficiencies living a

office satellite functionality. Fortunately, our we serves terms to in size find were an able current of facility that existing us near and

the look and forward and better will our productivity, relationships to financial communications. the of We and small, think we While improve Henrico expanding is our impact our internal with city enhance culture County. Richmond support it presence

and half I'm is officially new in progress. place. about fully we excited The back now So, team the our are XXXX in of

Our strategies are to Liquidators fruit, customers and are bearing offer. Lumber about has enthusiastic what our

us to hand me let the numbers. Marty it to Marty? take through Now, over

Martin D. Agard

morning, Dennis, you, Thank good and everyone.

Let top-line by me again the highlights. covering start

million, up of and The X.X% For of an over X.X%. growth ticket X.X% sales increase This affected expansion transaction an and were net merchandise X.X%. net last comp X.X% up up X.X% year XX%. by the of quarter, sales overall consisted average of comparable was with growth comps second $XXX.X stores installation sales

In resiliency bamboo and and terms aesthetics garner and of continued category attributes, excellent with wood performance, category, show particularly our vinyl products to growth from the strong manufactured categories. share

merchandise bringing Our in sales chain and represented store Pro Installation offered in grew for our sales quarter. been to quarter, in it's markets sales shy opened well to stores our than in in customer track XX the above remain XX XX% We grow XX the Installation segment XX% comp stores also year. represented and to continues our grew the in more over of XX% average just eight set XX% the to and on of months. the quarter. this XX year-to-date new sales of new open us

on $X.X quarter, a this activity two-thirds in costs the due XX legal XX% million SG&A to the ago a anti-dumping related flat. by this gross higher gross from SG&A while quarter second $X.X costs related we legal margin. got Similar in to last similarly to higher the by XX comparison. we $XXX.X seasonally settlement favorable ago, stores QX that was and included the from was costs, the recent behind sequentially included $XX.X for the million basis out XX.X% promotional year-over-year million SG&A and select included countervailing cases and, both decline the P&L XX.X% this both quarter, The rate, of at anti-dumping credit as benefit XX.X%. $X.X of other SG&A adjusted annual margin the from Adjusted down and adjust during $XX.X seen and as card from last quarter settlement in across as year's unfavorable increases mix in and again, the rates XX-Q. balance costs, million, final reflects incremental a in credits the in the margin by sales about higher an partially prior growth, margins. was million, periods. turnover, adjusted payroll basis second kit and versus gross year increased Advertising duty XX-Q, for also well in tabled carry the quarter and of addition fueled quarter of of these were the costs increase the sales are XXXX. year was and basis $X.X year a year. mix for Pro coming obsolescence to duty quarter, organizations, financing and I'll quarter's year's category to commission the $X higher in the products last the expense we gross to Both was reserve compared to SG&A of increased year-ago margin profit. this to from first The of a the periods of compared and increases. the If quality and decline a and merit Moving million, the sales came in related combination margin, these Transportation for air depreciation quarter investigation were higher vinyl improved Comparing MDL. points quarter also higher press out ago. spend the the in promotional a from down XX.X% instillation and year was of up mix the And activity with store in various period ruling XXX team points increased year installation quarter release from and items, to year's increase obsolescence increases ago, transportation the growth the tax costs to last items. items These first assortment the DOJ-SEC balance when tabled installation offset for last adjusting increase fees, from was other XXX million points to a factors million operating volume, since expense move out test adjustment of in a quarter decline of of corporate in on increases. exclude XX%, sequentially

quarter million in we recorded of $X.X we impacted XX-Q last loss profit year's $X items these million unusual quarter, an we If the results release, to the had as For $X.X million operating operating of QX shown profit. of that of to adjusted exclude similarly income million our and adjusted compared XXXX. in $X.X press an operating operating in the compared

and adjustments advertising in as quite are seasonally the As higher SG&A second get to commented, we be expense, Dennis of to gross making half coupled with headwinds margin, isn't this margin the given where year. improvement expect wanted into we we but leverage gross the on see

we liquidity revolving of as million of of cash we June and borrowings and which beginning $XXX had XX, flow, liquidity million credit to our borrowings $XX of to at million, facility the Turning compares the under in had total quarter. $XX

maintaining six are million, Our in growth inventory stores breadth from of beginning the by effects $XXX growth we stores. guidance two at year line us expectations of the the and up we've were through items the quarter both increases in the the our comp With the in store stocked calls. $XXX in ended and at for the and quarter, guidance, million new combined with to comp respect driven shared store the bring profitability to X.X% QX last months. sales of

for growth back the can believe to digits year comp of continue year. We half store and the mid-single for in the the in full be we

cost just X% profit expansion, we range. operating for meaningful X% remain with to of mix, about moved look this, modest that the most operating And gross in We on the comparison this us to full clear, transportation margin range. next and margin QX terms leverage the quarters acknowledge sequential no adjusted in frankly, easiest second comments and, installation bringing year was two this lower focused be the to do adoption. certainly to continue challenging. assume in be margins, profit SG&A In lifts and QX and for to in the have We to earlier increased half my tariff persistent margin pressure

its increased liquidity, breadth $XXX floor we've higher little of million In to as terms level, is $XXX our This previously current through we of at expect million in stocked stay inventory to the guided year. the a than stores.

expect the are spend year. in settlement landscape the call still We the to million $XX we've It's things to million of $XX.X been in MDL while a on million to this cash and the legal fund payment talked on front. the remaining fourth during active quarter continue to the year that in since contemplated $XX about but capital

of new, various will There the is in note. none comment I and of to matters, our While XX-Q. them developments detailed on are each them

So, first, the investigation DOJ-SEC is ongoing.

the while into I rate we DOJ and SEC on We continue to investigations, to to their legal spend and to sense moving the continue the both cooperate, are have conclude through and year expect XXXX.

seen which, settlement approval notices class quarter. have our will Then consider the court issue third agreement, then approval or mentioned, will to awards, notification direct may the which voucher the review final and funding you distribution in MDL, our determine and participation, begin. preliminary would process the fall cash expect fourth whether The final the approval. triggered run and On through the court trigger and to as quarter. we granted the That not to mail Internet the are out to

in addition identified disclosures. impacting in P&L MDL-related P&L costs the see working cases and our our from unusual terms collective separately these you been the to to have tax, individual activity we through and fees settlement, what and settlement in are items MDL of In related legal

While schedule reached will been disclosure I expect to to our resolution we want ramp has legal early mediation, do for down settlement ordered for this spend in see for that just to both completely, out I prepare the note and can't second The participated has court and in costs though when continue in we some half. phase no promise time gold and I been case bamboo XXXX. that trial the

on provide a Dennis, to it handing more announcements morning back this filings. color the in other let little at before Lastly, our me

is our decision the The operation. finishing to first these exit of

final encompasses approximately It this the only a the production. in employs step people. finishing currently flooring said, operation small that XX is Dennis As

In we the over terms third impacts the time of the an assets year's related of financial proceeds based a change, in quarter. and receive sale removal on million in from to of $X will steps impairment $X.X production million incur approximately approximately the

occupancy severance exiting cost will over incur will of don't the our end to and We in at of exceed quarters year spread prior some XXXX. $XXX,XXX. that we expect we unabsorbed this Toano the And facility costs fourth to other have third the XXXX, and transition

outsourcing mitigated will from of we along with XXXX, leverage of beyond Some certainly lower the expect and sourcing as this transition cost vendors' and this we be savings to our by goods innovation see from the capabilities. opportunities

distraction Richmond XXXX expense in the quarter degree On mainly the risk headquarters By there XXXX the quarter the will fourth minimal overlapping will relocation, satellite can be again, minimize will we and this some employee impact support Relocation XXXX. XXXX XXXX. transition and getting an start in be our near of half event. in first we an but current XXXX of of late move. this perhaps in early a will selecting building elements begin fourth existing and have run and office, and retention expenses expense and the through XXXX of also of that rent Financially,

goal in our but location we understand some certainly Our employees will to result attrition. new the retain is all

also will than Toano the On We that on incremental of portion the facility below operations of higher Toano will XXXX. basis, the be slightly new furniture space and of under spending office have ongoing modest related in only the inclusive new the headquarters' capital our finishing equipment occupancy our lease to lease. headquarters an renewed and renewed cost

right the Thanks result, with hand gaps it board company. market-level cover, lapsing committee board everyone. severance updated all for agreements back prior was provide the to described a to over and, the felt leadership in the got Dennis. again, compensation its so this The and from terms retain the and and on to I've conduct compensation or adopted compensation personnel X-K, employment due routine new to committee to consultants That's where Finally, agreements had attract I'll emerged these offer the terms. either compensation appropriate reviews and of advice the as consistency the

Dennis R. Knowles

Thank you, Marty.

XXX% turn to As half focused execution. are we the second on we XXXX,

by remind three guided we still installer. means for to is customer, This we to with better quickly, serve needs which key make our beautiful continue articulate the the all. possible we flooring else in deliver to them customers do-it-for-me anyone inspiration continually is, their statement mission customer, DIY from on identify and easy connect critical is how than are the we We that and and passion ourselves our It customers: can specific the professional these marketplace. installation, that

will of the value the of And our in is We our customer items. the bring integrated and of we the of continue breadth I base. our knowledge growth will quality talked to store and is improving, as hone sales about how strategy services. Earlier, assortment we breadth emphasize associates, in continue terms exclusive our to our installation

build continue we things are a there several to we that maximize. customers, these As new reputation must with

terms operational in loop this about We've First, excellence, drive our of action. to before. feedback customer is talked

better for we short of on to both must gaining and lot understand long what stores a first terms us we customers. the attracts the our and giving also the are decisions, are a fall assortment customer us purchase this best have in our understanding place. what of run, We we to expectations surveys experience Charles at team and understanding where to his customers compete customer the perspective, to new we muscle marketing. and in in insights effectively must Our fresh from be But and to brings of already do improve.

customers. compete assortments We to customer to DIY working align are from across Pro all to segments

greater opportunity meet all for the there lifestyle needs diverse of to recognize also regionalization We is customers.

to name. the team marketing reframe role the and working is brand our promise Lumber of Liquidators the Additionally,

we XXXX. more This for of enhanced effectiveness mix convert to allow website. digital building with to capacity. and We greater are committed XXXX the also from omni-channel into an are reevaluating half and us customers our back media Currently, will and capture experience

new We preferences. assortments the in align will our their understand décor the to partnerships and of and existing of marketing future to terms meet and leverage home design strategic and trends needs customers

for habits will shopping the his and team. customer astounding. be experience, enhancing Charles evolving the priority Our second at is The focus, also speed are customer the which

in-store online, this integrated. ensure We and that service stay our consistently to platforms have and ahead are of wave

of number We have in-store. to services to available customers, our online both continue products to and expand the and

expanding business, third Our drive to our strategy, this. continues

Our efficiently. more new stores opening are

New with stores are knowledgeable staffed, equipped to are stocked opening market, advertising relevant local fully products with strong the day. for proper and a receive team, leadership,

is years three attract today the stores diversified opening we did nothing stores to these approach ago Our more a like customer. way and new

in while more are we are methodical our stores now we remain approach, one. competitive opening that from So, day

already seeing As I installation are our nationally, the earlier, are mentioned impact of now advertising we and performance. we

fully world, the this best with and once we that are our to we're a the that refining the a us, marketing employees experience. customer aspect And customer word service mouth, customers, of Now ensure word this in learning are experience we improving program about the deployed, customer has helps Liquidators. great of Lumber spread from the

terms the we a are of customer, next them I keep customer Pro, add attracts new Pro will expand to Pros great a to service for and our and stores. Once seeing our capabilities, In develop assortment, years, build to to tend level we assortment, experiences as of pattern. our reputation and repeat associates, growth several similar we our our our broad believe a and the outperform Pro locations. business continue continue particularly standard as

leverage basic IT, SG&A. corporate dollars as will place. spend to both our in be and two on through our with we dollars margin margin initiatives to last, is infrastructure and we improving our by at I XXXX and that in the points one that track but in last will profitability, advertising the mentioned likely would did our now assertive be quarter in on few we operating remain be SG&A. at some years to still expect a next to I on mention these Finally, modest level call of our the And SG&A to we adding expand more gross combination

we about in I the the results plans these sales digits, in can operating our in the annual and execute we sales what upper-single team operating in about to accomplished growth we and continued achieve are As front improvement total mid- next over mid-single see upper-single believe growth very the years, few including store opportunities in annual I on and digits. enthusiasm like new at centers ways, Liquidators. well-rounded a with a Lumber team There's the here quality, of and to distribution lot of and can we and stores. accomplish In are years. that open in a we it optimistic experienced, the we comprehensive the and And headquarters commitment would feels and coming comp of us. to profit digits, that questions. what excellence, we've sustainability our The to lot excited With adjusted the operator, call energy like


you. Thank

question Stanley. comes the line your Simeon of first Our with proceed Please from with Gutman question. Morgan

Simeon Ari Gutman

Thanks. Good morning.

for Sorry any noise. background

big questions half they think – about can I I your much guess targets, – get op and be to second the the that get compares don't financial will how easier. you get I your

be the in some the half. or comps back lapping of service installation You'll

improve, mentioned doesn't feel start and that be margin the you that you but how if so, to meaningfully And okay should will top line reaccelerate?

Dennis R. Knowles

And the to month full a take installation merchandise QX promotional to comps start comp quarter really in a always deployment we we would April relates strongest I comparisons QX. been our standpoint you as this. it had promotional such. we last have tell sale in QX, I much quarter from fourth the shot and most a we as are Simeon, of it's at until – our and and guess, softer don't – But start I'll notably, half.

the ended July. margin we and QX see So, improve we in month are QX as of that traditionally already our and seeing

Simeon Ari Gutman

fell you you less Was at or SG&A, the a gross quarter, Okay. you plan? to the more it mentioned profits little. if second how short margin relative look perform And versus

Martin D. Agard

worse but little oriented was of Marty it. That's I of The It's stronger on don't that to here. would it Simeon. gross shouldn't so was range say should business a bit little it's the install a continue, And outlier be probably charge the say install promotional the disadvantaged bit timing was into will a – any get shouldn't in that while on comp is heavier bit particularly by mix also we had want the did it more business. we have and Yes, the side. obsolescence really bit dilutive and why a period. comparison of We stronger had to had year-over-year repeat. the timing a a Part this that. sort pure less I total got thing; quarter then this couple And of impacts of part margin that effect. actually a the little a

is always sale extra in this little a expected that half. did there. with back not in couple We quarter in things a heavier April the quarter the Second would of be

the guidance we've So out to we engineered top that margin help some on we seeing to we're a about compare well On other margin The areas coming couple a still of quarter the to back continue bit. do back. of expect those laminate getting it's some also how or from. deliver more than in as fourth of ground so make easiest of issue the sort that bounce quarter, new really up that kind full-year and maybe coming and items in like we should both that timing past talked is third us, benefit the have but some

the quarter we second was expected. had than still gross but lift, think get a lower little So, the margin we we'll

Simeon Ari Gutman

Okay. Good luck. Thanks.

Dennis R. Knowles

you. Thank


you. Thank

question proceed next with Please Nagel question. from your line the comes with Brian Oppenheimer. Our of

Brian Nagel

Hi. Good morning.

Dennis R. Knowles

Morning, Brian.

Brian Nagel

again, the And less much to to here, half with but know operating simple X%, first your that operating I than singles, says, low my a the asked So, year pretty – math, there's a question X%. moving pieces per the what to assuming get doing very is half. is to margin and to a this I'm X% the you to second of adjusted just Simeon X% margin. correct, or X%, mid to guidance, regard at in track lot to the need a the probably math margin guidance, If operating that going of be follow-up just someone means in

the correct. then first then margin the guess, year? components, we gross in and I But if that expect we of where SG&A at second the maybe margin that's, guidance my are those question, So, in numbers look should half we both within about should if how think

Martin D. Agard


some – where back that math somewhere would that lifting quarter, the our adjusted and towards first it would get on between And the us, And first improvement should And we good the if the range. think million to quarter points of it And and fourth best that think get pretty you sort ran – say, quarter's comparison steadily say gross the SG&A, I first mean more get $XX the quarter's from right. when half, second dollar say, quarter, margin looks quarter's about decent you is on the was, let's quarter. got I that but typically a of we've to is towards you that second for $XX X% when X% I between half, as on SG&A you that I leverage. the add there, margin. the does year, the year-over-year that sort then gross on that XX-plus higher of shows operating basis you margin. us. million basis a in that the first first to are should, add And to and it we

upside gross year. fourth And half. the even math coming We with last that It some the second comparison So, strong had margin there's a to a still that's then how is think together. that – we strong and we on second the see half half, stronger quarter. side, in second

So, yeah, that there way. think get we'd we

Brian Nagel

that look go risk – at as to could What Marty. let to that? follow-up your me plans, and And question you you wrong? if ask What, that. biggest where's a out Okay, this the lay what

Martin D. Agard

get what and that some that as little do is whether there's well. the see the promotional a we of for some the flat in do bring But still we are bit again, in sort can relieving into the it's with bear, mid-single we of we things the improve that the of half, and removal second is a activity back products we lift transportation described to always looking to this the digit. of balancing and that's to nature, the But do quarter margin-accretive get structure in the and we of comp Well, same margin answer tricky I tricky before, to as seasonal that comps get of actually we're just we think transportation thing Dennis costs lift. always get growth think, to kind that cost obsolescence, for think

got where can going, So, see it improvement kind the it. it's there. sales and can we see manage by risk we to SG&A, interplay the area. probably we The that's an that and of and that's the uncertain divide we not such That's margin


Dennis R. Knowles

sales month wouldn't I is margin the second I guess, anything, any back we're he Marty's to for the be a of always relates piece us to not as in between have. we in the and repeat negatively I expect it work few already working than the and mean, the seen gross last it it as the team the that mentioned, July. things a of risk of we'd risk to half back had Brian, half sales mitigate – comments second he year impact add other But big margin. Charles where half. We've hoping remain – in additional to balance Yeah. We business the merchant are year this to kind on snap the gross

as margin. said, to a I makes that traffic, gross our continues cadence We've to same sense the got but drive to isn't we've make that doesn't way a obsolescence. Marty think, to in time our at risk, promotional So – that sure got manage decrement

other execution I and that's in management to do than our feel second half. work the that, So

Brian Nagel

a QX during the more sales I bright mean, the spot That's Right. if quarter, Then the just QX here perfect. here I because year? regard add, issue at into quarter top trend you we in could a and with just was the in discussed of know discuss I that then whether – normalized through your markets first to the as Thank in one first lot in throw the can in of the particularly part early line, least you.

Dennis R. Knowles

Brian. Yeah,

Our carrying through and sequentially the the continued all comp to of far improvement July. quarter three through accelerate performance months into with so month

the the of trends it's and and to now got the We sales manage the trajectory – positive. for liked trajectory Mark the and go, the business still second a quarter. but and just end store way Charles sales to teams continue to So, was long of through improve we

Brian Nagel

you. Thank

Dennis R. Knowles

you. Thank

Martin D. Agard

Thanks, Brian.


Thank you.

with the with question Please line comes Fassler Goldman your proceed Matt of Our Sachs. from questions. next

Matthew J. Fassler

Thanks so couple Good much, guys. questions. A of morning.

on comments to your relates The promotions. first

the promotional likely second talked would You about that be quarter, in strongest year. that fact but the your most cadence the case is every typically

So, that that was than seen you activity had expected? changed prior or evolved in there promotional anything had the market more drove perhaps you than

Dennis R. Knowles

wouldn't promotionally I typically we were a say are. little we than necessarily, Matt, we more but than deeper expected,

line that in we Marty for deeper as We couple on line. make As clearance of would. some room than a we categories new went product particular couple categories start normally we a product mentioned, product to in of

Matthew J. Fassler

anything your sort what's install, DIY to customer, the market bit. going about softer DIY pro, Is think cadence, business of suggests tone numbers the customers activity obviously in so seem on the is your mix and DIY categories, at promotional read on among from be case the market promotional that but the comps, from a a and presumably you little aimed there and would that more down the that If of strong; strong; broadly?

Dennis R. Knowles

as Pro, if strong, look disappointment the the strength if to and me our been a installation Pro you quarter. Well, the were across has the for I sales business at of mentioned,

seem Brian July. mentioned improving We the to through I While to into and we be comps central. north in quarter still the lagging saw

North comp were behind three falling with – performance quarter, If divisions both for you divisions looked at the well they company's four the the our comps company. the the of division the still the of were rest above

expected like not that. it broke. the hard it's just to that come It weather haven't the summer, of saying we middle would've whether the in So, to once the say – division back North we're seen

it – that watching know looking balance looking closely any macro his I but at impacts So, spin right of promotional don't in at of that's and team indication Charles we're area sure any the are make now to that but a our in paying helped across to area. of seeing division We're Western division. then pretty kind in serve. we're And that kind the saw that still South. it's broad strength renewed Eastern close of strength attention We it,

tickets So, all segments average growing. strong, are our still not three really ticket growth in customer seeing, to our are

are stores a So, good our job. doing

there's matter of out out to and that country. Our there what's a want conversion just file figure the the conversions people trying seeing in healthy still do of It's up. to still north-central a part going then lot estimate of on who We're a business. indicating

Matthew J. Fassler

last my could, question, And relates if to inventory. I

be But carry want have at of of should in-transit change a the there I you the come in seem different your stock a of couple the I to where and competitors some So, was. in pop things guess that's more know also inventory really happening. business. One the a way bit to is, is

how whether So, if guess, short temporary you philosophy stores could in a and of the the convert move into that's more think you that then also about I carrying just talk will inventory in-transit of bulge the about, to in way kind order? that stock

Dennis R. Knowles

Great question.

Matthew J. Fassler

Thank you.

Dennis R. Knowles

part to to I'll take the then Marty inventory. relates wants and if it add anything first the in-transit as

that truly – For some categories what went time, at was of our hardwood the what call was Lumber, business half now. the or think floor up Vinyl my it would more sold. had doors appreciation seen of the that day it door more I solid tried day and we've categories manufactured the from migrated laminate out don't we well more at are really between as – traditional what manufactured we've it's understand whether happening vinyl. We a the this And product time least did goes much to at be categories, for to our how – business inside business sold. makes an our And vinyl. migration XX% of the into out I of over

categories And obvious better we're increasing implications, our sales, margin that positive the stocking better assortment. mix So, has we it as broaden for company.

costs the moving what transportation take so that and was store our into second cash a we cash is worked we've can And quarter. I that so, product of call hard carry really bit more and that It in advantage – of business. our

business the So, have are has normally sure in customer and that centers as much the a little strategy process to as make to that ready-to-ship. of distribution a cycle selling and is available with our time solids to business that it take longer is that relates we for our which

stores our that Northwest stores product. Pacific of stock more Our the that do business, the of in in more East will that

Marty in-transit, it in have SKUs. as brought those the some as it stores new to products as be we some As mentioned, and depth manufactured we as additional relates it of the relates will well categories going within that to the – – laminate some to

Matthew J. Fassler

so Got it. Thank you much.

Martin D. Agard

that ball. in-transit, the And, Matt, just in terms that's on of the –

its all make the Sometimes, to water, going DC. It's the in it's all-inclusive we way, it's amount. to and guide on sometimes the

the matter of is but a in So, yeah. just it chain, it's where supply

Matthew J. Fassler

that, guys. for you Thank

Dennis R. Knowles

You bet.


Thank you.

your Our Please Securities. next line from of the comes with question Wedbush question. with proceed Seth Basham

Seth M. Basham

Thanks morning. a lot good and

Dennis R. Knowles

Seth. morning, Good

Martin D. Agard

Good morning, Seth.

Seth M. Basham

margins question first is on issue the quarter. back My of in just the gross second

two sources Now, relative the you've biggest what to miss? or your expectation, of your were one ones things mentioned of the

Martin D. Agard

from assortment – Yeah. here. a I been churning categories we've The would Marty standpoint. couple it's of say obsolescence an piece, through

how solid got weren't quick is of sort the format going sure to would Some that of sides we because to both on pregnant engineered we this adoption be.

to leftover engineered we've stabilized I'd And call with on, – so, solid. what least sort started come the at as that stuff or we've where process deal completed has of the the

out And we stuff of sort of thought So, this need across transition that could more running to quicker some end At stuff. take has been a the charge. of move and of and the a we longer we felt categories. couple day, this gradually the

that a kind was outlier of So, It's bit a to onetime frankly one that was an thing. thing. non-cash of

just to originally one top bit a set deal So, out. that little line of we with. mix more it's strength we install The the included had than

anything, sort That's probably that margin slight we much bit don't we were store movement little contributed doing on inventory. pieces. out Transportation goods the as of kind knew it into those the it to had we was of there bit a in it two was little I type elevated. worse. of know stores Those If cost increased is effort onetime us. more a a that of So, pressure. But impact but available that the a strategy the were and pushed that

So, of there. themes basic that's kind the

Seth M. Basham

to comps. particularly flattish is DIY tough another North that drive more I to Obviously, going as in weakness it. That's of the you growth. my had around that a can comparison is transaction presume division called customer? but Got be quarter it but still the more helpful. promotion being or And transactions area what around soft, going question mostly marketing, for out forward? you around transaction as Is do we second

Dennis R. Knowles

Tyson Charles I'll that a at us. stab and follow I'll the I've got call on up. take let him with then

Charles E. Tyson

and Seth good morning. Yes. team,

of when of So, We've couple I a the customers to flooring to ideation and in of are be have phase. to got improve there journey their work lot our most them experience. Clearly, we a capture they're do we know, as able online, our think start online things. to

enhancing customers relevant more It's that drive new capabilities we our digital visual number us we've online – our connect to with digital probably partnering new how really and efforts short-term, members platform speak and new enhancing segments we've important in So, of the we enhancing been We're We're with don't Seth. help team online help merchandising got approach us our actually a as really coming to traffic we conversion. channel of in with partners with. believe marketing.

being are from younger increasingly you disconnected cable. who the consumers are homeowners As know,

XXXX, to our that invest testing to customers, heavily both the into QX past. taken and going sure strong approach mix our our need we've traditional media piloting in but approach plans is we programs balanced very and invested than a much make today. more where DIY accelerate to customers, than also of robust customers marketing QX digital got And of both and in base our our to at to be in we're more looking so, we've And in segmentation marketing that we

of in-store, part and to But getting we members some team transact experience minute, I that company, this of through walks bring online is our first in joined customer the want So, have we could into which time attracting value to proposition. I about take of I've a the the value the hopefully of call. think this you I reasons and stores. to terms then level And a when customers critical of a a that on If both our how customers our our lot it's competitive been gives brand time both door. proposition really in spent one a insights

the that omni-channel that customer a an have, online that connects in where between out strong the our experience have with other So very than get we into the styles innovation organization new experience of many store delights that are we a marketplace. the product through of they we've customers players different have, got to will balance who

excited So here. be I'm very to

I insight. opportunity. was an it answer, Seth, think got a we've some but amazing longwinded gives amount of you hopefully, And that

Seth M. Basham

the color. all Appreciate Thank you.


Thank you.

next Our with the question. Markets. Laura Champine your question comes with from Capital line proceed Please of Loop

Laura Champine

taking It's for hit installation morning. second the my the quarter. of tile? take Good Thanks sales? of increased sales increased from on the the How much gross vinyl what of a question. benefit penetration margin that from line did in line offsetting And was

Martin D. Agard

give of comparison install Yeah. sort gone. been range. year-over-year piece And category Laura, is it's the has The the pure mix, sort on a heavily The to that is that of vinyl, that as the XX-basis-point we've sense the year-over-year just multiples has in steady, of and in category that headwind influenced Marty. just mix I positive. won't is vinyl by but you been

and give realize out net just to visibility over do that the detail the last all positive don't pretty steadily of year meaningfully been some mix has but break stuff. course install we We So the those of plus.

Laura Champine

Got it. Thank you.


Thank you.

your Inc. Stephens, line from comes Nelson Please of question with next Our question. with the Rick proceed

Rick Nelson


promotions what you in categories, So talked categories speak be? stepped about select can those would if and the competitive you that up environment to

Dennis R. Knowles


total As it's competitive. just more gotten think in to that I don't the environment, it know relates competitive I

product. seen just to to attention brings to which across competitors waterproof showcase our the and again of there's more We've gives more the more space. to attention – I us a think like all a it's It chance the that attention categories the categories. our we

categories. of relates trying as through mentioned, to across some the obsolescence were some it bamboo solid that we move to As – in categories we other more other had we're there as had Marty promotional our categories, we

Rick Nelson

same to those light Is reverse categories color. categories? and hardwood the Thanks to any for the continue and decline store they the there with The at year-over-year look tunnel at end like bamboo total course of sales.

Dennis R. Knowles

team process and that experience. selling that category. improved on focused much teams different think, than store we've a and the I It's the are selling Charles manufactured sure making a

So, stores. attention in it takes some the

the be the was of cost reason part only mentioned Marty his We fact the manufacturing style exiting It a can us of that not it an as competitive. of was for company the was able have And capabilities focused line to comments, finishing there prepared offer. in that no that being larger benefit. take in and on advantage also us terms to innovation limited

got assortment it do offering. on as to style, as folks the the the making our stores to a then work as some in of not focusing we've – it's just got so issue And focused well. trends relates that on competitive much it we've So, and sure that again, the is as

think I we solids in So, QX. see did the in improvement

In performance and one of better-performing just fact, probably, well. as engineered months strength gain continues is manufactured year-over-year. the our relates to as the continued There it migration categories, to then to

So, coming see SKUs I of solid year as to think well. in second as new some as that improve in engineered some here well we'll the SKUs, half the think got as we've new start I

Charles E. Tyson

Dennis, could as I add to Yeah. if well. that

there's of wood an us to I in a our think improve assortment. when the greater we certainly, our our opportunity regionalization and like we things opportunity penetration program, think of engineered see for And productivity. our

around focus hardwood program. lot of to our So, a we're going have

intensely but on. For us the program sure, that focus outcomes, important vinyl one we're going is driving is hardwood significant to to and

Rick Nelson

the product is Got you, clearance And obsolete you activity, that the now that referenced? you. behind

Martin D. Agard

say from Yeah. across expect work this, to to charges. Generally, would a little is. here. these recur. from we this I'd – we do like just Yeah. but it a shouldn't a of Marty transitioning we still don't lead have bit I obsolescence It's charge categories those say

Rick Nelson

Got luck. you. and Thanks good lot a


you. Thank

comes with your proceed line the question. Our Melich question Greg of next with from MoffettNathanson. Please

Gregory Scott Melich

I the couple impact One questions. on mix? morning, is in inflation. average Hi. Thanks. ticket Did all that Good had it any was growth, a guys. have or

Martin D. Agard

bit in there, category. pushed but Yes. of category. that's little I I the would had all smaller pricing a little we've a generally, a We've of wood solid piece small bit of mean, a inflation mix-oriented. say

average mix, say, I the ticket, from would Pro growth. generally is it's benefiting and this the So, been

doubles of than of And As talked more the It has And ticket call, is DIY, than the labor ticket, the and we've larger ticket. considerably DIY. on a then – by bit a install the a the the we – that than been a because also up course, labor. doubles because far biggest and ticket bigger bigger of so stuff, have growth. Pro quite mix factors better business with that's attach has you two a average the those end driving ticket

Gregory Scott Melich

it. of follow-up Got Charles. your is second again. And to great congrats. to hear to Great voice a – Charles, then sort

Charles E. Tyson

Thanks. Greg.

Gregory Scott Melich

be You terms is if to of you today think about. budget what of and XX you mentioned digital months this? and ad What thinking shift where'd real the in it marketing expect the you're XX the in about month, mix

Charles E. Tyson

digital are underpenetrated for in that our be both our dollars, specific allocating not technology will how but we're in we I'm terms So, I Greg, going to and tell you existing spend television, example. new linear on of

you example. I'll a unique So, give

So, have television. many little we very customers connected are migrated have television, connected Linear And to there television, we investment. that have investment. significant

what that market doing And so, capability gaps deep to spending to the we're do of we the capabilities. new marketing the and of are is we to and in close effectiveness dive see new a each through need on opportunities where how we P&L line really middle those dollars customers our of against

our for the on a I a say, dollars frankly, not because to see in deep would analysis. different I opportunity the Greg, we're specific going greater So, marketing. us of I'm drive mix to still that backgrounds a that's some rich gap folks brought us who – who and we with to the got gap here, digital space, which will close. We was for are have helping in us good in be very

I So, on future get go will that. we as quarters, into deeper

Gregory Scott Melich

you China guess imported have of the you that of remind tariffs directly COGS heard proportion imported, great. what's those? back us for not a your and or anything your That's indirectly the as half? And versus on what's guidance, are on I percentage what are included that Marty, Could thinking then, I

Martin D. Agard

comes range then It's those. we XX% of to range to Yeah. a that we in China. try various the have But And it. would manage from ways appeals

that. clean would sort than the so speculate as And what we'd margin we'll we're impact bridges of sticking then cross include, on So, guide those kind rather of to what of we is of go. we wouldn't, and forth, what kind

Gregory Scott Melich

meaningful but China Is XX% that bulk? a is of – about COGS, what is China as the or And but other amount imports? still

Martin D. Agard

forth. There's we No. Europe America a and South so import I and mean distribution from and yeah. good

Gregory Scott Melich

are most at imported So, your of point? this COGS

Dennis R. Knowles

in would we're I U.S., America say the balance XX% Europe South in then about Asia. XX% about and and probably

Gregory Scott Melich

Got Good lot, it. guys. All right. Thanks a luck.

Dennis R. Knowles

bet. You Thanks.


Thank you.

Our next Keith Piper of Jaffray. question line with from comes proceed the question. your Please with Peter

Peter Jacob Keith

dramatic Hey. lower on has from wood and It's to been products. the pretty to Good a just back want morning, some of mix QX this products I consistent you're away QX. Presumably, the per towards square manufactured ticket experiencing everyone. the pretty shift circle foot. that and manufactured natural

what So, from think now up is overall mix you I'm if this shift. headwind could we comp right frame wondering the

Dennis R. Knowles

ticket the a selling lower I its that average I bit I higher. mean don't price know a would bit – is is but

it relates manufactured as water-resistant to So, and we laminate. in continue that lean vinyl to the the business particularly to

that big know don't see we a that don't I headwind. So, we've really –

I recover As mentioned, we – wood the category. we're as starting to business albeit engineered also Peter, see

we're business helping and installation attaching with because – better it. actually is it's grow the then that offsetting ticket So –

Peter Jacob Keith

Fair Okay. enough.

manufactured, with larger jobs. is So are with the but per doing it people guess, foot lower like dollars I square

kind the is So, holding ticket steady. of

Dennis R. Knowles


Peter Jacob Keith


Dennis R. Knowles

would I our in tell our was plank categories, you price example, up that $X.XX for Just average QX. vinyl selling

and up units significantly. So were our then –

Peter Jacob Keith

were X%, more X% towards to did framing you when of Marty, you up that. And lower of you're guidance the that comment margin end the Okay. the turning for

freight I you higher building as a is And that is I freight. Could costs how it think because maybe headwind? it is had up And mentioned overall? Do capture of guess, or self-inflicted much? we frame the you that?

Martin D. Agard

range – more a talked again, basis, then, the the inventory just XX-basis-point bit And the availability. to we Yeah. pushed the And probably of we onetime bit guidance. availability, out transportation that the increase in we as second a on stores quarter to little of some been original the year-over-year it's headwind. persistent, The a more on-hand little in as a more pronounced. breadth of of in a had is on-hand And more about kind

sort The on generally is of caused has in a things guidance but The are So, been that's the And of of lower us rest that those one pieces. wasn't And in move couple that charge, that one worth. either, to range. – okay, the yeah. track. obsolescence quarter's that's

Peter Jacob Keith

Okay. Good enough.

to some service as I guys Lastly benefit feel with comping for per actually you're strongest ever. in me, was a install probably sustainability that the the store some do install on maybe better? basis maybe you guess comp time, there's strongest the that good quite

Dennis R. Knowles

Yeah, really has has good. good The been momentum been Peter. strength throughout the tell would the quarter. I you

well. install our Our the expectation, have a the we as doing providers great penetration has our great – stores not only exceeded grown. doing penetration continue are has the adoption comp job And a just – job with been and

mentioned, the service. really – nationally. more start that peak And get comfortable able we stores the were we QX really time as advertising we And mature I not service and as that was with to so, first really that have

about of half second what brings that bear over the excited year. for to here us So, the

Peter Jacob Keith


Sounds good. and good lot a Thanks luck.

Dennis R. Knowles



Thank Budd and line final Please James. your with proceed from you. Bugatch Ladies gentlemen, our the question with of comes Raymond question.

Beryl Bugatch

and charge? missed I If morning one, my quantify the did I you did, Good you thank taking obsolescence call. you for guess, it.

Martin D. Agard

the point range. was in It Yeah. XX-basis

Beryl Bugatch

level? at I of year-over-year? the year company the you. that. of How look a versus does level appreciate last the going Can you bit little you that of Thank Okay. back maybe a over store an four-wall the for operating color us I appreciate. at give profit idea

Martin D. Agard

four-wall We the corporate view of stores the that. out. incentives have that we evolved bit how versus we not frankly, been breaking based things what like and kind that store a manage charge of little has some versus reporting, on And

would narrative, a say. more bit driven, guess, I fill people not internally and a for little out it's bit to So, I'm It's I here. a ready fluid

Beryl Bugatch

guess look the the the ultimate of all and at, trying numbers. can overhead what like the company understand trying corporate and that, including I'm going necessary has forward what But what of I to model understanding get Marty. and those profitability understand operating I to grown the compliance

or get comments that picture on how and understand a So looks if to we trying some of even flavor that or that. some

Martin D. Agard

and thing four-wall, stuff, that those for we that is near any rare issues Well, me leasehold We improvements. have quickly and with to a might the breakeven. almost the to money short all easiest they're may investment direct Or contribution describe list lose the four-wall in corporate and mean, they're on some on they basis. a before open are allocation stores inventory stores of back I generating get where consistently unusual profitable. cash positive very case, actually paying stores

some changed that's answer. how I'm not specific to year-over-year way, So prepared in

Beryl Bugatch

Lumber of history the that's Well, Liquidators.

Martin D. Agard

– Maybe yeah.

Beryl Bugatch

Lumber of history the is That Liquidators. Yeah.

for yet. you you recalibration, do You profitability what's look you'll quickly. – that's pretty the had news, guess, couple been to some you latest the good the what The that what thing And gain that? level on left the in I do just some future think you've to done can if and – and a the reluctance. have any of in the there that looks anti-dumping, your trying And is reserves, from think mean a haven't forward audits go. is get are me the do reserve What coming you with changed at appreciate maybe that's I was direct audits. last growth understand I the But like.

Martin D. Agard

that's trade Well, to in in is other next a or about well go as might But years, but we've negotiations favorable of plays out. on tariffs have and balance bigger particular unless take I – will mean that right what payable. happened. the the and net just And we four a have kind surprise times of end has how of take can this It's been over seems couple wouldn't to and saber-rattling, in zero. like the and rates this it's as issues going couple $X the of it's for of mean, transparent or And the moving We'll we set and years, come big item we types sheet couple believe. year last frankly, when we it adjustments three me see we of tangled had we'll legacy negative. be of million, That a new the doesn't the what feel be it we got I – And all us. years is this back. believe bucket, as as or direction. some create up been near now if

Beryl Bugatch

control And from – more floor China multi-wood-layered that does they're on, again? importing that incline you – in flooring has wood excluding from the be but issues active does to that multi-layered nobody trade over going

Martin D. Agard

or... that you understood quite I sure question. Not that Can rephrase

Beryl Bugatch


imports think engineered X% your the from now, China, I think I or so if like of hardwood about that's in looks it Q.

upwards year. been XX% the it's past at of – So in back

was curious you, the more inclined that you I that back So of and if make going does more goods? to antidumping away, with some to China import go

Martin D. Agard

and actually. U.S. from We China the have a breadth of sources to engineering elsewhere,

We future. we indication kind levels that decisions. are in take the of of an sourcing So, sensitive our in as the current

So cognizant I that to tariffs potential on away think disadvantage vendors certain does are take also would a Chinese imports. But the of have be going forward. from say we – we as we

category are our we I keep say going. close a more I have we that, on paying if than regulations have on. where is some this So feet attention don't to I know light guess. and to And flexibility much

Beryl Bugatch

it. Appreciate

Dennis R. Knowles

the to vendors and hasn't And where best but and exempt we'll can would – quality we Yeah. the in manufacturers anywhere I the source that world. source get we lot. attention the pay continue innovative duties, our countervailing were from sourcing to most we anti-dumping look a really product. mean I obviously, the close to impacted and

is we've to factor does consideration it it that source. lot, impact let a – tried a we're to not going us so, And at we look but when where

Beryl Bugatch

Thank the year. much. balance luck very Good the you of on

Dennis R. Knowles

you. Thank


comments. any the Thank for questions no this at Mr. you I'll are floor Knowles, to back further time. there final you. turn

Dennis R. Knowles

operator. you, Thank

the and to support. our quarter. our your again to next LL continued We thanks shareholders look updating team, for say our me customers you forward Let vendors,


today's you. Thank This concludes teleconference.

for disconnect this participation. may at your You lines Thank time. you your