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LL Lumber Liquidators

Participants
Danielle O'Brien IR Executive
Dennis Knowles President, CEO & Director
Charles Tyson Chief Customer Experience Officer
Nancy Walsh CFO
Joshua Kamboj Morgan Stanley
Oliver Wintermantel Evercore ISI
Peter Keith Piper Jaffray Companies
Laura Champine Loop Capital Markets
David MacGregor Longbow Research
Call transcript
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Operator

Good morning, ladies and gentlemen, and welcome to Lumber Liquidators Third Quarter 2019 Earnings Conference Call.

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 Danielle O'Brien, please go ahead.

Danielle O'Brien

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

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

reflected forward-looking believes reasonable, statements to statements give assurance will expectations can or expectations correct. its that forward-looking prove Although Lumber such the any in Liquidators no that are it of be its

only information statements reflected are as and the actual discussed. cause in results in differ in could the discussed time obligation with that Lumber those remain will forward-looking assume Investors call should is no of filings information factors this the call. risk statements that later Liquidators' accurate date Important at This Liquidators contained any included this materially Lumber a update to operative undertakes SEC. from the not to in

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

Dennis Knowles

progress result, for guidance, good our we that to execute the lower Financial as joined to had experienced security These Thank demand appointed network I'm many Chief challenging as September, encouraged transformation you. Officer. Today, trends Experience overall and as July, on in Walsh, in soft recently incident a Nancy we quarter August. third fronts. Customer as by a morning our factors and and a Chief in are Danielle, generally our everyone. Tyson, included annual disappointing we but quarter We led Charles results meaningful make chose well by and our the plan Officer sales

consummating case previously now MOU is caused in the gold consistent with by court's another we took we a step that in First, clearing towards and the approval. the distractions legacy agreement litigation final settlement await the announced product September

further flooring those growing us, behind a ourselves our in progress transforming put making business marketplace. continue and hard we we're surface continued differentiating to and in As distractions dynamic

our product and stores, offer. great content we television sustainable service mid-September experiential the traffic differentiated launched we and new in to work to ads highlight and creative quality developed we more as Second, drive value and updated are that

to our in gross expanded sources identifying utilizing vendors more we steps and robust Third, for to to margin progress negotiations, vendor a implementing by key with supply, manage alternative continue drive approach relationships portfolio prices. retail and building make

business Finally, we areas the where remain focused taken structure cost support while can our optimizing cost to on our out. be identifying

remarks. hear You'll our these later more on efforts in

we quarter, about like diving disclosed. into few for the previously a share Before the to security network I'd results incident comments the

have with security security, past investments the for two standards. Internet are network we made which in aligned critical years, Over the Center control Security's

Once impacted the the days. investments business took network continuity a plans in learned organization late six that systems for minimize were business. steps encrypted impacted a to our management transaction the activated cyber-attack, August, period and the certain immediate these of ability Despite risk our to by IT process on electronically entire we attack of impact team and we our

the throughout us manual open and product to incident. our ship taking transactions included plans keep These and steps allow to record stores

to worked firms data systems third-party forensic and also quickly We as specialize closely possible, maintain integrity. ensuring analysis restore with recovery we in while that as our

our or evidence extracted was the team, or any data customer reported no the efforts Despite company in that the the found sensitive event quarter. of results we Importantly, our employee compromised commendable from impact systems. did

scheduled DCs process execute, sale. customers the more that ability were have shipments from chose difficult not installation. like complete especially to our more they or complex did transactions, to some Ultimately, those requiring those the stores are While to

million the came total impact returned back customers line. to we million think and account our $X impact after when flowed revenue in revenue for of to third negative the approximate to who it through impact to that our challenging is approximately to of roughly the bottom While $X know sales, systems event, net precise attempting up, the a quarter was the

We are other already claim in a have expenses the insurance that documenting the has we in policies. under incident, reimbursed establishing submitting cost of and of addition process to the certain business our related direct to interruption terms and

negative Before like vendors quarter, results, as the managed of overcome transaction their X.X% who network tremendous the as while meet would to understanding comprised diligently the I worked customers. event, a negatively the impacted X.X% which declined X.X%. patience through associates comp as needs by obstacles customers average our incident, ticket to of a to moving and and We to valued thank our well for increase count, we experienced our in in was

was On dynamics, as many in quarter housing-related which our second July, weaker we shift promotional to also a that some part generally we due in weak a highlighted softness. evidence have saw industry of performance our felt several cadence, in of months call, posted but we metrics

lower to we the three at comp guidance the month. the saw first XXst, double-digit July's full time. of experienced we our the In As compared August, comp improving security for resulted incident, trends which but negative weeks a a we August on year chose network to result, lows, in

network improved trends significantly, month. lesser incident earlier recovery much pricing September actions, extent, by to from supported and targeted in promotions, successful a the the

continued tariffs we mitigating on gross the made progress, of margin the the margin On performance. impact front,

countries first selective favorable helped a down sold, our shifting margin of increase cost of mix impacted despite less increases, gross of the in well and price vendors, driving retail to as deliver an sourcing approach products tariffs adjusted three-pronged headwinds by our as Our utilizing tariffs. with

a actively us, initiatives. expense remain to align out reducing on strategic the cost future. efficiency and opportunity review cost with for focused full We behind our our have have right-size organization with path lot increase the and executing today, we to Finally, a and are an our legacy distractions opportunity organization completed our on of of we

continue lowering in our execute ops the structure. strategy our I and can confident eliminating September, senior positions As to management team. I organizations, late cost scaled example, successfully overall our senior with to store am chose strategy one back flatten that we and two

XXnd XXth ahead although successful the we rate. look a and was yard helped sales at encouragingly, slower September, the from sale we that As our in continue trends ran October experienced towards positive October

see of signs encouraging gain traction. certain omni-channel to launch of components begin strategy our also and We

past we addition, earnings the from headwind described have as shift continues In abate. on calls, to bamboo the from secular away

relationships stock efforts results. to and Pro employees are more continue see We store stronger same Pro customers day strong between and to generating growth sales increased as demand in to solid SKUs personal and successful serve build

performance implementing installed installers, the to customers, that fourth support also outpace in quarter are this process momentum. growth we and will Installed employees, automation with continues to project core and

a as equity turnover mortgage backdrop, rates see macro and supportive remains strengthens, and to also We rise, more employment lower home housing levels strong. continue tick

we third-quarter the as a are our in the security results what environment, full and included momentum recent additional to lowering network our moment. reflect generally XXXX that Nancy sales year our guidance, we a margin view improving impact operating weaker-than-expected details and Despite incident. adjusted provide of will

excited an the has quickly to fresh I our perspective minute come joined the brings finance background, service to Lumber speed Interim up take concluding, the on and to to company and new Nancy allowed early Walsh, would remains CFO, a Before our from make Nancy welcome our in our thank to would important Tim also team, We're her for part Accounting about has officially retail she September like March like the his Mulvaney to to her our which company Liquidators opportunities. an extensive to look brings and to and of stronger. of leveraging September role as as to Tim we experience team. Chief forward this I CFO returned year. to his Officer team.

ahead. past transformation, executive experience us drive significant bringing steps for shareholder Over execute our success I opportunities we year, that encouraged strengthen in to we with by value, team, and leaders the the long-term to and have the taken am relevant our position see

will now to turn over the I Charles. call

Charles Tyson

Dennis. Thanks,

and a challenging as after show transactions to August, we drive momentum traffic building progress. evidence July saw mentioned, and of late began quarter, the a As to efforts in our weak

August pleased of second felt shift the September of some highlighted more the As the productive. and impact purposefully quarter were quarter. with And be spend we that we where ad we've we through on promotions out July could call, shifted net generally, into the

the proposition some but comps We We initiatives continued remain on focused traction long-term partnership in in and our strength with brand experience. our and in believe environment value shift September, positive we October our we that strategy, tailored with executing a our feel the marketing bring reflect of a and overall. working refine drove to to affirming demand we've customer continue message, message, on focused been agencies fresh new ad as

the efforts to tools making our we consumers, we Additionally, to reach use tangible continue, the digital working during are third quarter. optimize progress and

mid-September. in was example television our clearest of campaign the launch ad new The

also new recent quality, years. promotion agency experience in gauge stores, are to excited Our than our these maintaining partners adds price consumer our months to product consultative with several message. from us development emphasized that you've for in different the creative reaction In and a we're in seen user significantly ads service coordination while

delivered day. our of our consultative to core every customers the what customers Our goal segment invested, high-touch who teams of our reposition to identified is improved is brand towards value selling and that environment

customers, it to online additional and are the improving also while platform digital to site. We're pleased On usability provides penetration the replacing to we effectively performance, digital increased continue web our as excited with our upgrading reach making front, be us the progress order year-over-year. of functionality and utilize

July. We house. rooms more footage from other floor marketing hard in the the launch are confidence exploring expect following like in square home to tailor our in the roll us to our online Utilization see in its relevant non-typical grow to and users Picture utilizing to flooring of rooms, gathered to can we information out visualizer It! third we quarter, platform and continued gives second-story new This bedrooms customers mid-XXXX. in broad those surface increasingly programs these the We be consumers. the penetration grow in

journey. visualizer In addition, the the customers' online utilization its length from on key of the of the tool benefit a is impact

their their can new it shortening through describe overall decision the associates of a With of stories a great process. of tool visualization floor also the significant who for far own the provide. as the seeing from beyond We're seeing store We're home, effectiveness in is anecdotal the making ability them. a to tools evidence what small closing sample see

our fourth we new momentum It!, the in Finder Building Picture launch to the on quarter. the Floor expect tool of

their where we make many. desired and consumers We choices material, short answering broad-approved type complex consumers described, designed to related style, that mention us series than As process selection found help to to overwhelming customer characteristics, questions the dimensions, the this application. to for allow construction, color narrow steer of to fits product not the flooring flooring previously tool the be decision by a is often best can that

decision this or to tool journey a the will with Similar narrow and Picture navigate consumers shopping their project this to online tree shorten that flooring are in that Our that tool, helps of Floor help options. Finder stores. It! consumers our manageable we set choice optimistic

We team to in overcome sale. also complete, in directly is knowledgeable questions customer to customers answer of online, executing an will schedule to capability contact in-store professional an which an closing a with to or customer associates consultation up with followed our the be contacts If launched project project project. is October lost that the that assessment assessment remaining with the necessary, the quote. first independent a one installed obstacles Once an assessment, the step purchasing any can flooring a installation any allows the After our new purchase contractor appointment.

evaluation these at with project much of convenient from the support customers by occur and flooring allowing goal competitive of earlier inconvenience to project, our locations. overarching store disadvantage engaging and home, our of process All the in digital easier helping any product minimize more further making the strategy tools resulting

product priced that engineered ensure To serve fast the to Bamboo. trend we part to during the updates continues SKUs tools forward in the strongest new on remain growth, market. of growing be including adoption we a quarters. perspective, From with substitution area from of customer look on launched We products and right, including these of products, to future quarter, several solid vinyl providing new

across prototypes, well, Altamonte overall train shopping Our early of as and continues as are performing and we drive our opened some insights well transaction. We implementing September. to we're store store a perform Thornton, and those store the Colorado, tremendous test experience learned open-concept in these to improve incremental other amount Spring in the second from

impact to of our Shifting quarter. we maintained the margin, mitigating the on focus during tariffs

China. vendors, We to strengthening costs. continue in our to with to positively we've work seen outside allow of relationships consolidating and closely production impact us growing supply momentum Also, our

significant Southeast the time tariffs the during building investments production as more described hesitant to were days capital as of I've escalating other China more in many regime. and before, countries. have initially But the Asian has passed As grown, from tariff make required vendors are and to move capacity suppliers early

sources suppliers in have from QX in of began we supply sources significant We expect QX, shipments certain had success identifying and of in but new additional XXXX. supply receiving shifts

a Finally, tool price use we as to an retail portfolio managing approach continue additional tariffs. to offset increases to

on and refinements in price in June competitive second our implemented reaction some monitored consumer some increases we indicated the As we additional call, quarter QX environment. made as closely and we

transforming trends we had the remain monitor brand competitively quality sorted as flooring product hard encouraged we great surface challenging a to our leader and unmatched to we position continue at In environment the a value. on priced We the maintain are but quarter by selection delivering and focused to recent in ensure competitive conclusion, we're and have while industry. value our

confident are many solid position and to gain us year traction on results. will plan as well deliver begin our note finish the We to transformation initiatives a

I of will Nancy? the now over quarter. turn financial Nancy to the to details share call the

Nancy Walsh

and in serve we build foundation From that have a shareholder but this the been to officially results position, at Thanks, I the about better with thrilled opportunity strong value. months, organization Lumber strengthen in Liquidators finance on at the financial job I everyone. our excited only to years. drive Charles. a opportunities to Good our pivotal have on I customers, journey. established for competitive morning, the solid recent have perspective, time am we be X feel I'm deliver

as accountability. savings to fostering In on value forward the management culture the organization and strategic of a cost a near look stakeholder across and to support leveraging progress. tools the my focus fact-based to processes financial is make term, efficiency sharing culture organization we of decision-making developing to decisions, and drive more finance promote I and

Dennis last In a stores a sales, The decrease versus of incident in decline comparable discussed. by installation sales X% a overall soft results. the X.X% quarter a year July sales net to Now by X.X% influenced offset were and merchandise the net by security down ago third X.X% year over sales. the was million, driven network $XXX were and increase in decline a

quarter a decrease perspective, Our strong average of bamboo. continuing in decline impacted exotic were with growth a profit Gross a XXXX periods X.X% count. transaction in comps XXXX softness most million value, quarter increase products and compared continue vinyl the the our of we by solid, in of was in for X.X% by $X see transaction third notably From adjustments. period declined result offset product of to the out duty-related both third to in

ago. and average from less the equivalent quarter year period. declined margin impacted costs the the shipped items, year adjusted drove tariffs year these to prior XX.X% million. margin to addition profit to vendors with higher quarter a in was toward mix selling $X.X gross compared A along to over margin in improvement XX.X% for prices the approximately Without first in a the Gross Adjusted more by sourcing to XX.X% with gross grew favorable third efforts quarter our higher vinyl ago. reduce countries XX.X%

XX increased margin despite basis on product of growing points tariffs impact cost. the Adjusted

late fully of as through inventory As be QX efforts, the to until realized the burden inventory from described From our margin and from cost tariff growth will chain recede. a third expect headwind our third $XX our the expect margins offset SG&A QX quarter rate XXXX. margin rate $XX.X we high in quarter to the was last to the tempered XX% compared but mitigation causing improvement as expense some for quarter be resulting QX mitigation date tariff we year. turn incur but million COGS QX, not timing in efforts we tariff of to expected the benefited the our perspective, with full QX million on to last of flow in supply

SG&A section other of both announced third reconciliation to or we to quarter from sales, versus these as million $XX.X periods excluding year on of a and up quarter quarter also items of was Both expense non-GAAP in and periods, other certain own the an When $X.X legal are matters. certain intention investigations, both for adjusted And items adjusting basis equipment, basis costs the quarters legal points included to finishing release. floors. the million the XX.X% percent-to-sales and our related SG&A in related cease loss the of press increase XXXX the same lawsuits, incremental earlier. XXX included a a

lower to year-over-year related a with quarter. accruals card our that quarter and align compared quarter performance SG&A in costs to The somewhat well expectations quarter by will as in fees These Higher last the dollars expense quarter. third bank credit in recognized stores offset by driven new and driven year's adjusted were and increase year third corporate this to the year's headquarters in severance occur equity relocation lower reduction by XX a primarily in was as incentive third fourth the ago. expenses

have expect function direct the a same the of established reimbursed Certain of incident. been receivable the but future in by been reimbursed has while exacerbated by to security was which expenses periods. we related the In the incident other negatively quarter its relative margin from at to in impacting last to impact costs but SG&A Toronto. The floors overhead line, XXXX on with the of year. effect SG&A addition, in this bottom third to certain net ultimately move Company be direct no year-over-year expenses for as finishing The gross sales to to allocated ceased expense network announced insurance impact these factors revenue deleverage facility security was for

driving do. expense everything staff across cost Dennis efficiency including and We we through through as our the synergies but described, also remain finding corporate focused opportunities on rightsizing business saving identifying

costs evaluation our deliver savings this while to also of ongoing year, and us well positioning for XXXX We expect beyond.

income in the $X.X After the higher incident. in of by the XXXX. to year-over-year operating previously, million. recorded million we of security driven compared year's last adjusting $X.X of we million as of quarter, the network for noted The income $X.X million QX as decline had to operating impact operating of the was quarter $X.X earlier, For income expenses well items noted adjusted operating compared the

slightly of sheet, Turning the was inventory third from the balance million, $XXX tariffs higher to added end approximately up impact inventory. $X QX our quarter the million of as at to

ending As million that million quarter grow, to under $XX.X anticipate $XXX we flat ended to in $XXX range. We continues inventory which fourth the QX. impact outstanding the was million to credit with agreement, quarter our

a since As made position of reminder, XXXX. related this settlement inclusive debt the of of specific is million fourth quarter payments cash $XX

Looking in horizon. forward, been we cash although expense settlement each recorded items, these for on payments has few periods related a of the additional earlier have

and the Gold the While will courts, Kramer Gold million fourth the timing in million be settlement in the anticipate driven and we quarter, fund of $X exact funding currently the of XXXX. the million settlement $XX the expect currently remaining by we $X.XX the settlement to

as flow. cash Our liquidity generate operations strong to core solid position remains our continue

had of million. cash of $XXX $XXX XXth, consisting September of liquidity million As credit $X we of under and of agreement million availability our

quarter flat to Turning our reflect previously, digit the to versus incident. guidance margin are previously. sales positive and year XXXX flat be growth operating total to the weaker-than-expected an of impact our X% XXXX network security decline of low-single We store third between lowering flat to full and sales year we slightly be last outlook, that now expect versus included to results our XXXX expectation and to approximately a to comparable revenue

previously. revenue adjusted X.X% of an X.X% deliver to expect of margin of to we X% operating result, a expectation versus to X.X% As

of Chinese Our least the XX% on balance also current to continues extends at XXXX. imports, the outlook assume for tariff

signs a were business in outlook, as more it by we outlook of at While this to momentum recent as the supportive macroeconomic lower prudent our we time. feel encouraged well is

plan in to On new stores side, the we investing XXXX. XX open

the cash million. of million our deferred the nominal We for paid remain taxes We $X.X anticipate on remain expect see in paid cash in be We valuation for allowance will year. place million to to interest to tax $X range. spending million $XX and capital the that assets $XX for

Before planned we have the had you for open to conference fourth tentatively that chosen I wanted the the we analyst that for questions, we let to call quarter. know postpone

While two our amount I of business have financial long-term me the tremendous in a will strategy about entrench first months, the the expected my additional Company allow of have expectations understanding learned and myself execution. deeper a to time in

a The delay long-term on of is will that allow outlook our the trajectory by the provide us make additional to business. progress more informed also initiatives and financial

have clear of landscape. macroeconomic tariff In the addition, view a will we potentially and

information when appropriate. additional provide will We

Thank to you back With morning. your all for open to this call that, moderator I hand questions. for time the will the it

Operator

[Operator Instructions].

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

Joshua Kamboj

on Thanks for without Simeon. taking you the this Did come you Hi, expectations? also October and Can the during meet about is Kamboj your positively weeks talk trends please yard for our Joshua weeks they in those the question. did sales? in

Dennis Knowles

the the in portion strength the know, we prepared entire big we've was entire yard our but October yes, saw month, it's, Undoubtedly month, impacts as month. it did. remarks of a Yeah, the we across such but you sell had

Joshua Kamboj

more And yard promotionally Okay, thank how years? promotional? you in Was the it were maybe to less sale relative you or you. talk about prior can

Charles Tyson

Charles. pushed that and is What different this debt of online in both the we work on last to comparable based of were of and was radio was a the breadth very advertising the with the and year connected terms the We Yeah. assortment done linear from television Josh, channels television. creative positioning what we've new digital versus Hey in and assortment. the difference

Joshua Kamboj

just All And you. quickly. I'll right, one squeeze more thank in

a having your or just impact You're favorable you're everybody's going expectation forward? is business signs already on an more the that seeing about housing and data positive monitoring, talking of

Dennis Knowles

probably latter. I a the think of it's little more

on know, on about started positive said employment the strong drop, measure at extensively to we've and my We out that the the -- won't in business. momentum for it we news Those talked remained we've macro, and -- momentum, to trajectory about interest home that had months see the like a as we call biggest remarks you end refis. real our the the of painting I the lot when things we floors remodeling like were cash we improvement out. I started things we We it in interest of housing. of another understanding kind had projects for not seems the bad, impact some painting but as are it and one favorable a -- trajectory this look are horizon but had had, in talked always of, and interest are big rate QX, us -- the deal rates the driver rate relates for floors several at two we kind the great the changing QX, However, started and our We of walls of there the felt -- business drops, said, to we an the example. of like industry,

there was albeit like the feel seen us. lends well October, feel improvement little slower it doing So in a to October home we we've what September shift that in -- us we momentum projects a direction like that in feels more consumers' for is September, towards and than

impact behind of So probably -- optimistic. economic probably the like we've the seen in worst feel cautiously the part year, we're it. We seen we've

we've we're optimistic So, front in of us. about cautiously got what

Operator

with proceed question question. next ISI. your from comes Evercore Oliver the Wintermantel Your of Please line with

Oliver Wintermantel

improvement and transactions? that then regarding was ticket Yes. thank September mostly had Nancy. you welcome, October, into and the a and Good or in question driven morning I by

Dennis Knowles

improvement Actually interaction, our Charles visualizer. growth. consumers' to both, and it's strong say there new Charles, talked had creative, saw pretty we you factors myriad sequential October is with we as continue transaction I We've get well. of I'd we in activity web about, what up, traction had that the a the had we much seen was in the think

Oliver Wintermantel

you. second gross my was regarding question actually margins thank Okay, inventory. And or

Nancy, Thank touched the you most sell-through? how I said line. that give a detail inventory And gross hitting you you you bit bought in in much little margin XX-Q, And Could that now QX? the sold ahead QX on of tariff that maybe think tariffs. it of mostly on you think, the XX% you more XX through of is I you us the you.

Charles Tyson

Yes, inventory categories, is turn Vinyl inventory one of tariff Olli, expect Charles. quarter. full impact most twice know, the of of we our but took don't which perspective, year. about the the an you roll turning From until a category our was that the as The is inventory XX% through all fastest this category, of we first a amount to

still through are going So, to back in of script, some that her to margins Nancy talked as about there is gross earnings tariffs landed. based the roll the headwind, half have where QX, on

Oliver Wintermantel

mitigation to our hit, start will But too.

Charles Tyson

quarter. Correct, in the first

that the the us I think my to do in about that risk of case. fully remarks, seen shipments have understand I specifically impact we not is with was, will in the tariffs the mitigation, what wanted talked increasing Olli have impact through turn of inventory, We that QX. and

Operator

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

Peter Keith

Thanks, good morning everyone.

pressure mitigation gross when picking is understand the So, QX. late hit, made then that full also margin just to follow you'd about efforts in reference up from on the will QX be but it pressure up tariffs,

forward look tariff a perspective? couple of pressure a what going worst to just probably we quarters, margin be if gross quarter So, quarter is the from

Nancy Walsh

of We XXX% worst going to the the in the the starting see impact, forward. then terms a impact and of QX impact in expect mitigation the QX of be taking to tariffs

Dennis Knowles

by pretty quarter the to be XX%, most mitigation our Charles where start his to moving in and I see that's of in all think the of impacted and wasn't of should There the pre-buy of I it start this think said talked now QX POS we a flight. think the XX% the bit chance our that remarks impact's so leg even see. any rolling be said about much QX I with We're I is is, too, what country much we'll benefit. second for that on to in going to might Nancy out to in little go out biggest Peter, too, all and those call. vendors, going negotiations tariffs have that and up from

Peter Keith

Okay, level. want thank compensation a I you. the then, at that. for Dennis, just you for store to And talk separate about question

in have we're compensation six the if it Lumber even online structure So, going store could evolved more Liquidators just store maybe in stands commission-heavy from and know away managers bonus on structure you forward? the past, it the I figure thinking where the of historic about and that it's incomes. where you're guess tweaking seems you just had even like hoping seeing some compensation dynamic. a posts make if to past annual I could moved the us update commission a was today I how

Dennis Knowles

question. Great

you there As some passed we're exempt materialized, legislative in going to XXXX never actually were that qualification the back status that for have pinning, and were that not remember, would we they an may challenge qualification changes test.

have the based certain make and XXXX. base, and we tweaks We was that solid support. promotion invert. made look a all ended opportunity vendor of more higher whether So, change before if vendor our to works. to in done this had of to commission, a inverting to testing up was on We funding, aimed a on a a we structure we time. in commission have determine how at and did this To chose some We the or choose ultimately our whereas here. commission of always lot lot structure commission proactively, with less base at we I flight category got even we a

line. we to compensation of In our that the the for we're income they're make year, preserving on but bottom sell be at the middle store and same in motivated plans time, to make to working maximum and, employees want fact, sure next

the So, I sure right constantly in basis we're our with we motivated look most on an our on sales now. a to But. of huge tell do review that middle and Compensation delicate changes. I want at a it's annual we that always don't you we've in the force structural got we even stores. review this anticipate Committee, Board, our balance. would make and

the increase quarterly look store that, an review, incentives do managers' We're we company we to and contest as at a and help as incentives. we selling well have annual

we've it we've place. year dramatic we wouldn't that that to make I plans, look any at every So, got say got sure in but restructuring

Operator

[Operator Instructions].

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

Laura Champine

Thank you.

look driving store expectation and is you your next what for of openings openings are in at as new thoughts year? So, what XXXX, your store terms

Nancy Walsh

can been this about not a at are plan my and in view the of we QX bottoms-up as we like. process. to we're deep XXXX talk prepare earnings looks I've we're piecemeal diving think consolidated so I do into XXXX prefer I when I months, call, the that planning right point, here, notes this say, two doing and so

Dennis Knowles

our different don't middle Laura, from thinking of we're to I planning. point, but dramatically think, we throes right the of we're XXXX what in the anything year, did this Nancy's

Operator

your from comes question with next Please question. Research. proceed of Your the Longbow line MacGregor with David

David MacGregor

here. good I Hi, Rob morning, for China. you David about from wanted ask sourcing to

year. this China, by You end year? the I a next China. talked building of talked you're have any down maybe and about update outside you percentage vendors to vendors more on of moving be outside where year you of could with mid-XX's do past The that increasingly moving guess about getting

Charles Tyson

on that I Charles. out this of the by quarter already to be of will taken, XXXX, middle the 'XXs. we've move that the believe we're actions Based as China. in said, we is third Rob, high in shipments starting I

a we we quality absolutely products. do we make take to to execute, our sure down. compliance than quality So, a we requirements, sure are want great bit at that, done moving that helping are time number when probably to stringent our that board our new these but making little meet the right job confident team continue has the we work in through vendors that, all to on in others Obviously, of of and us see way improvement more

on other So, as we'll continue quarter update that will of parts margins underway, gross we that work next other to our improve Southeast Asia. product we have to move feel we

David MacGregor

a then result? and seeing Are talked seeing on you increases the elasticity you selective Are down any as price you Okay, any of about. mixing demand?

Charles Tyson

Yes.

prices on pricing regions. of and as we the quarter of had July. across September, things, optimized We was what we out in of during move to moved We're just some natural opportunities a that perspective, line happened doing at see improve from business, we down quarter. what some elasticity we did continually. some looking competitors that and up in by margin our of if both adjust reaction we will dollars sales, of and shopping a So, impact. course We're and did are that promotional I gross obviously, and top spend events happy couple the

Operator

like Knowles the closing to call turn we the and Mr. question remarks. of I to Dennis the back gentlemen, and answer for Ladies reached end would have session.

Dennis Knowles

you, Operator. Thank

look day. to our our say LL continued vendors Liquidators great Let and our me to again and for a interest next your quarter. again in shareholders Thanks. your We support. and forward you for thanks updating team, the Thanks Lumber have customers

Operator

today's Thank concludes this conference. you,

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