Thank you, Nancy. I’m honored and privileged to have been given the opportunity to lead LL Flooring as the Company’s President and CEO. And I’m extremely excited about the opportunities that lie ahead for our great team and Company.
Over the last few months, our teams have shown immense focus and drive to continue servicing all our customers safely, while meeting the hard-surfaces flooring needs, either online, through our call centers or our stores, for those that were able to operate based on local operating restrictions and laws. It’s gratifying every morning to read our five-star customer reviews, and see the recognition given to our field and digital teams who found creative ways to help customers with their flooring projects during this exceptionally challenging operating environment. This relentless focus on helping invest and improve us across the spaces that they can be proud of is what drives our LL team to become the most sought after hard-surface flooring company. I look forward to working with both, our Board and management team on executing the key elements of our strategy, while navigating through the impact of the COVID-19 virus over the coming months to grow LL Flooring into the premier brand in the hard-surfaces flooring business. This morning, I would like to spend a few minutes recapping our performance in Q1 including our progress against our transformation plan.
We will highlight the actions we’re taking to manage in the current COVID-19 environments, including our cost management and liquidity efforts, as well as our ability to service our pro and DIY customers. I’ll conclude with the steps we’re taking to position our Company as our market continues to reopen for the longer term future.
During Q1, we remained focused on delivering value through competitive pricing, accessible expertise and the trend-right assortment as we executed our transformation plan, focused on our three strategic pillars of improving our customer experience, driving traffic and transactions in our stores and online and improving profitability. We were extremely pleased with our sales and profitability results prior to experiencing the impact of COVID-19, which showed we were making solid progress against our strategic pillars.
Our field teams continued to strengthen relationships with pros through the execution of a store-specific targeted contact strategy that focuses on building both, new and existing relationships with local pros around each store.
As we described on our Q4 call, we continued to enhance our assortment in wood and vinyl, with a significant additions of new trend-right SKUs in our solid wood business and broadened assortment in the fast-growing vinyl plank category to ensure we’re meeting the needs of the pro.
We’re encouraged that third-party data showed we gained market share in these important categories in the first quarter.
In addition, as part of our longer term strategic initiative to enhance our customers’ experience, we made tremendous strides enhancing our omni-channel experience, which enables our customers to utilize our website, customer relationship center, and store teams to simplify their overall experience and expedite purchasing decisions. This has been especially critical in our current environment. We rolled out our new online Floor Finder tool in February to help customers who are early in their flooring journey, narrow their product evaluation based on a series of simple questions related to planned use, desired look and budget. This tool couples well with the online Picture It! tool. The new feature of Picture It! is it allows customers to select a floor from our online assortment and see a digital rendition of their selection in their actual room. We’ve seen growing utilization of both tools and increased conversion as customers advance their flooring journey in the comfort of their own home.
Our first quarter performance provides strong evidence of our transformational progress as our quarter-to-date comp sales through March 21st were approximately 4% and in line with our expectations.
Our sourcing and merchant teams should be congratulated for our enhanced profitability performance in the first quarter. We generated a significant 410 basis-point increase in gross margin rate over the first quarter of 2019, driven by our work beginning in late 2018 to lower product costs for alternative country sourcing and supply chain efficiency efforts. We leveraged adjusted SG&A as a percent of sales by driving lower operating costs, even through first quarter comp sales declined slightly.
As a result, adjusted operating income was $9.6 million and 3.6% of sales, an increase of over $11 million versus the first quarter of last year. This was our highest quarterly adjusted operating income since the first quarter of 2015, excluding Q4 of 2019, where we benefited from the recovery of tariff payments, even with the significant impact of COVID-19 in March.
Our strong profit performance, combined with the working capital efficiency resulted in nearly $36 million in cash flow from operations, a $29 million improvement from Q1 last year. In early March, as we began to see the effects of COVID-19, we established the crisis team in reaction to the pandemic to identify and execute our business continuity plan to mitigate the impact, while safely serving customers across our national footprint. We complied with state and local orders, and prioritized the safety of employees, customers and communities, while developing flexible operating strategies. In the final weeks of March, many municipalities issued stay-at-home orders in reaction to COVID-19. And we closed as many as 56 stores for a period of time, while all other stores operated under reduced hours and/or warehouse-only conditions offering curbside pickup and job site delivery for our pros and DIY customers. Comps for the last week of March were approximately negative 45% as customers pulled back, resulting in a negative 0.9 comp for the quarter.
While our practice is to not provide intra-quarter updates, due to the unprecedented current circumstances, I’d like to provide a little color on actions we’ve taken since the end of Q1, and a few quarter-to-date trends to help frame the current environment. In April and May, the team established operating procedures to safely maintain operations and minimize store closures, allowing us to continue to serve our pro and DIY customers.
We also saw the opportunity to leverage the strategic investments and digital capabilities that we made over the past 18 months, including the new Floor Finder and Picture It! tools to serve customers at LLFlooring.com. Web traffic has increased meaningfully in recent weeks, with online sales growing approximately 260% in April from the 2019 run rate and accounting for approximately 20% of total sales in April.
In addition, our website allows customers to connect with our fully open and warehouse-only stores to complete transactions and fulfill orders.
We have expanded availability of online flooring samples and are operating with extended hours in our customer relations center for voice and click-to-chat customer support.
Our customer relationship center transitioned seamlessly to remote work and has been generating positive revenue in recent weeks, specifically supporting our pro business.
We have also developed a new in-store remote video consultation service as we adapt to changing consumer behavior and preferences. And we’re encouraged by the orders that the new technology is driving. To further support customers during this challenging time, we extended the length of our private label promotional financing offer, increased the frequency of our 24-month deferred interest promotion that caters to our DIFM customers and lowered the minimum qualifying purchases for other financing offers to give our DIY customer better monthly payment options.
As we entered April, we saw a gradual improvement in demand, but due to the restrictions related to COVID-19, we chose to significantly scale back our April sales, our largest event of the year.
We are confident this was the correct decision, considering the reduced demand environment and out of an abundance of caution for our team and our customers.
While the right decision, it did further impact comps this year in both, April and May. Despite that, in May, comps have shown further gradual improvement and through the week ending May 23rd, second-quarter-to-date comps are down approximately 30%. The continued expansion of gross margin percentage and lower expenses is partially offsetting the impact on profitability from the lower sales.
We’re encouraged by the moderating sales trend. But it is important to note that with the uncertainty of the current environment and with more than one month left in the quarter, these trends could change materially.
As markets have begun to reopen, we continue to update our financial scenarios with refined assumptions.
We will be closely monitoring the broader macro trends and the variables that have historically influenced flooring demand, like housing turnover, unemployment, interest rates, and remodeling activity and are utilizing federal, state and local COVID impact recovery forecasts to evolve our operating models.
We’re utilizing safety measures such as personal protective equipment for employees and the intimacy of our small show remodel provides the opportunity for scheduled appointments, and other steps to ensure social distancing and contact-free engagement. Today, approximately 60% of our stores are fully operational, approximately 25% are scheduling appointments to allow customers to visit showrooms and approximately 15% are utilizing a warehouse-only model while less than 10 stores remain closed. In regard to liquidity, we have taken steps to increase financial flexibility and maintain agility during this challenging time. These steps include reducing or eliminating costs, managing inventory flow, deferring and abating payments and reducing the number of planned store openings in the second half, as well as overall capital spending.
We have suspended all overnight travel and other discretionary spending and reduced our advertising spend to enhance near-term liquidity.
While we reduced our overall advertising spend, we have continued to invest in digital marketing to drive growth through search and social channels like Pinterest. Through this investment, we will ensure our brand grows in relevance for customers beginning their flooring journey online. Responding to reduced demand and the changes in the current operating model related to COVID-19, beginning in April, we made the difficult decision to furlough a number of store associates, cut store associate hours and reduced operating hours in our distribution centers.
Our corporate staff has also been working remotely since early March, and salaried corporate employees as well as our Board of Directors have taken a temporary reduction in pay.
As demand trends have improved, we have already recalled a number of furloughed associates and returned to normal operations in our Virginia DC. Nancy will describe these liquidity steps in greater detail in her remarks.
Our near-term focus remains on maintaining flexibility and navigating the crisis. But, we are also continuing to invest in and execute our key strategic initiatives. These include, among others, continuing our pro initiatives, updating our digital platform, and advancing our brand revitalization plan, all while continuing to build a strong leadership team to execute our transformation.
We have performed extensive research into pros most relevant to our retail model, including flooring installers, small to medium sized home builders and remodels. And as I mentioned earlier, we are focused on building strong relationships with them and have developed assortments that meet their needs.
As we look to the future, our plan is to enhance associate training, allowing our teams to initiate trial by pros, who haven’t shopped us before, build scale and earn retention of these important customers.
We’re also continuing to make progress on our new digital platform that will launch in Q3 and will significantly enhance the customer online experience, especially in the mobile environment as we continue to drive engagement earlier in the project journey.
Turning to our brand.
Over the past several quarters, we have shared some of our work related to revitalizing our brand in the marketplace.
As part of that, we have updated our advertising campaign to be more experiential, connecting with consumers in their home and emphasizing our full value proposition and the response has been positive.
In addition, we have evolved our brand to make our name more relevant to hard-surface flooring. That journey began with the utilization of LLFlooring.com in our new ad campaign beginning in September of 2019. And we took another step in April of this year as we began using Lumber Liquidators is now LL Flooring, in media including our website and other digital marketing.
We are closely evaluating consumer and pro response and are continuing to take a thoughtful and measured approach to our brand evolution.
In addition, even during these uncertain times, we’re continuing to strengthen our leadership team. In April, we announced the addition of Matt Argano as our Chief Human Resources Officer. Matt brings an extensive HR background to our team, including significant retail experience.
We will lean heavily on Matt as we continue to focus on leading with expertise for our customers and driving engagement with our employees. Furthermore, I’m excited to announce the promotion of Damien McGaugh to Senior VP of Retail and Commercial Sales, leading our stores, pro an install organizations, and customer relationship center. Damien has been with LL Flooring for nine years, taking on roles of increasing responsibility, including serving as Regional Manager, Divisional Vice President of our Southern division, and most recently as interim Head of Stores. He is a strong leader with years of flooring experience and has been an integral part of our COVID-19 response. I’m confident he will bolster our sales culture and commitment to customer service that will deliver future performance. I would like to thank all our vendors, landlords and service providers, many of whom are partnering with us to reduce and defer payments as we carefully manage liquidity. Most of all, I would like to thank all of our associates for their committed service during these trying times. Many, including those working reduced hours or taking salary reductions are making personal sacrifices to help our Company weather the current COVID-19 crisis. Despite the current challenges, I’m amazed and encouraged by the energy I see in our teams, their creativity and flexibility and their commitment to safely serve our customers. It’s that drive that positions us well to capitalize on opportunities that exists during this crisis, and when it passes. That’s just one example of the team’s desire to serve customers. In April, Aaron Gruber [ph], our store manager in Redford, Michigan, a suburb of Detroit, received a call from a return customer who wanted to complete a bedroom flooring project. Aaron spent time on the phone with the customer discussing the attributes of the product he could offer. He walked her through the steps to use our online Picture It! tool to allow her to visualize the narrowed list of products in her room.
As a final step, Aaron invited her to the store. And while the showroom was closed due to state order, the customer remained outside and Aaron held out large flooring samples up to the window to allow her to confirm her selection. He worked up a quote, added some samples of the selected floor to a bag and set it outside for the customer to retrieve. The next day she called and placed the order. Certainly not a typical quote to close process, but an example of our team’s ingenuity and drive to service customers. LL Flooring is resilient, and we believe we are positioned to manage the current unprecedented crisis.
Our transformation is well underway and we are investing in the key initiatives that we believe will position us for a strong future. I will now turn the call over to Nancy Walsh to share the financial details of the quarter. Nancy?