LL LL Flooring

Julie MacMedan Investor Relations
Charles Tyson President and Chief Executive Officer
Nancy Walsh Chief Financial Officer
Laura Champine Loop Capital Markets
Brian Nagel Oppenheimer
Seth Basham Wedbush Securities
Peter Keith Piper Sandler
Call transcript
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Good morning, ladies and gentlemen and welcome to the Lumber Liquidators Fourth Quarter and Full Year 2020 Earnings Conference Call.

As a reminder, 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 Julie MacMedan. Please go ahead.

Julie MacMedan

Thank you, operator. thank joining and everyone morning, you us. for Good Charles President Walsh, and I Chief am Executive our by joined Nancy Today, Chief Tyson, Officer Officer. Financial our and

of reference As operating let call and the Lumber significant may that of forward-looking the risks the statements conference U.S. Liquidators. forward-looking financial subject safe statements. we performance This securities me future harbor are begin, contain and for laws including provisions to uncertainties,

are reflected with Although of can from reasonable, cause are Lumber materially prove those differ statements in believes Important its Liquidators could Liquidators’ such its any factors results SEC. correct. risk statements will it included Lumber expectations no or in reflected the that the statements assurance to in give be to forward-looking filings actual that forward-looking that expectations forward-looking the

undertakes call, During will are non-GAAP after to call and release. the this the financial accurate today’s adjusted contained why explanation operative results basis. financial information on discussed most will of reconciliation discussing measures directly an be in measures be of useful is comparable The obligation measures no GAAP that any discussed. may non-GAAP update our the information this assume discussed remain Investors only date as Liquidators should earnings Lumber to today’s call. A in not conference statements and financial management of today, the in

Tyson. CEO, am I Now, Charles Charles? to and President introduce pleased

Charles Tyson

execute to plan about a a deliver as Julie. a opportunities you, solid Thank year us company, value. shared and specialty my ago, A leverage transformation flooring shareholder high-touch the you I ahead for with excitement foundation

and both strong has deliver shopping ahead. the for and leading for team our our are to I customers, thank teams Customers flexibility demanded and outstanding experience the year very back whether am entire how opportunity, our dedicated to day perseverance they DIY, occasion. energized through accomplished pros. our safe to all throughout vendors, lies working dynamic customers. thank look and our a that a results it and experience, of on year. proud As do still helping execute challenging navigate entire to COVID-XX want XXXX, me every suppliers be service I a want by or environment are much their elevate I who our financial our rose for also for and service all both our was and to customers. the I XXXX transformation the am to to proud landlords strategy us to team such commitment omni-channel I team

our positive to us delivered improvement spending results on in a increase demonstrated Turning of positioned to environment. fourth we quarter, advantage which quarter, our a progress robust take for sales. XX.X% transformation comp the plan, we home solid In the

improvement we operating an tariffs. $XX the XXX exclusion quarter achieved $XX prior operating of XXXX, given achieved one-time when benefit of retroactive $XX a the income year also profit compared fourth underlying XXXX of the underscores XXXX. quarter We included million to fourth the This Section impressive million from versus million in in that

$X.X the in the billion COVID-XX the sales half XX.X% spring flat to full comp we as year, in in XXXX. delivered resilience For navigated sales, of the demonstrating XXXX, shutdown we grow to net second

stores and transactions financial income improving progress X.X%, in continued million of margin We an year driving adjusted reflect results our fourth online quarter in our of experience, with the against of and customer strategic $XX and full profitability million, our and and execution and on profitability. culture, profit strong pillars to our people XXX basis These XXXX, due XXXX. improving also traffic from initiatives, significantly operating up achieved points $XX higher up adjusted versus operating

strategy. a is culture, our transformation and people pillar, strategic first driving behind Our critical force

formalized level. we our purpose customers step strategy quarter, the and values, serve to in highest and culture fourth our our executing at a the making developing company’s vision, our critical During

the Our start be first in finish. vision by providing is best to the to choice flooring customer’s hard experience from surface

Focusing robust achieve help we are deploying programs vision our serving by training better them associates, that on our customers. this

progress making our in are goals. on that we We right ensuring to roles the effectively have right the achieve leaders company’s

the During bench store training managers more added quarter, build fourth store we regional our to leadership. future in and for

pillar Our customer second improving experience. is the

high-quality to ourselves stocked flooring First, and value and market. plan a in chain. to to store, this national highly our the local the offer accessible of selection wide customers. brand our promise I expertise advantage products service the omni-channel reiterate a want of We a We leverage fragmented convenience and with differentiate scale, of to flooring

towards fourth quarter, announce progress platform pleased good elevating we to the December digital customer am I of our made the new the launch experience. in of XXXX. During

story, and visited a better If quarter by to take up scenes, clearly flooring have an room digital inspirational our same installers the period versus initiatives you samples sales mobile-friendly we homes. to important in XXXX digital installation such like reflecting progress look. and and features you in I tools on their have our customers highlights encourage flooring floor our delivery. not and our promotes the the that picture Installation content that the new showcases our site, quarter, in services, sequentially it site tells were The finder free is installation, third and service as willingness provide. from Fourth

services strong. installation assessment demand remain indicate for installation New trends

their monitor customers’ in willingness However, continued we installers COVID-XX and the have will to homes. environment

store reduce During we quoting new the began when jobs. for for time and portal a customers new our fourth for will that testing quarter, turnaround installations our efficiency in-store increase associates

quarter transitioning Pros building flat strategy. credibility is business which transformation will time. our to some core longer-term of a element on to fourth with sales and our a take were year Pro a versus Pros, remain relationships in the ago. We focused sales transactional Our approach Building from

to which as they our strategies, and trial, segment. our evolution. customer sales program, during in expect partnerships to We scale map drive including associates trusted this new growth retention this investing we important store road a build are and And with tools provides

to where Pros level. are leveraging are we learn enhanced more also Pro teams store and what Our at hard reporting better local working behaviors about understand the to want our

we customers homes. the letting watching of their on Pros into Finally, are COVID-XX impact

Turning both to pillar stores and strategic our traffic transaction driving and online. third in of

fourth quarter, sales web the For XXXX. more increased versus our than XX%

We are pleased customer growth. with the new

investment ticket is for encouraged many And so delivering. to engage digital purchases. Our in marketing see online we to customers are large want

over We at are extremely and quarter. end the strategy. This new platform of digital further work done excited advances past launched X great builds platform our that years have new omni-channel the our the our teams fourth on about

is with pleased customers. the mobile experience engaging We our enhanced how particularly are

key is traffic product a and assortment Our advantage driver. competitive

as During our quarter, fourth from design our brand. the vinyl most XXXX. categories, assortment, in further new and we expanded an in emphasized and wood benefited it see Vinyl and Bellawood we room innovation expand driving popular to such

flooring through the driven As customers, and growth were versus complete accessory accessories. attachments, also training selling by emphasized growth comp moldings sales to a sales programs a and the retailer, high-surface in adding pleased other higher-margin necessary high-touch, This associates was awareness solution for significantly XXXX. we the increased quarter We and with our such as fourth

new the are of We and critical to both the continue components our platform physical digital this. brand, evolve and stores

viewed feedback, the approachable, of revitalization LL on experienced of customers Flooring our brand and XX as with relevant higher are it the stores. We pleased brand who pilot of performance more early quality. plus Based

our forward fourth our margin looking spring for the improvement the gross quarter, in to of fourth, of of We’re broader this revitalization our brand evolution. execution as brand the And rollout stores was part profitability, strategies meaningful. long-term improving

promotional introducing quality XX% our our Our margins. purchased We our XXXX. sourcing teams process sourcing to year driving full continued merchant The on our new is ensure improve the strategies strategies, of undertake improving XX% for products ended down diversification with to given and and of from and goods sourcing the their standards alternative pricing XXXX are country work of we substantial China, met. from impressive rigorous vetting pace gross

margin focused success. And pillars It’s on of compared adjusted see on quarter remain the the retroactive When hard that our million impact in from the was one-time we gross transformation good under excluding adjusted We quarter XXXX points gross item, our are full fourth developments benefit to recent our because tariffs. to basis million, XXX long-term from to you margin, XXXX. in fourth briefly XX% in $XX comparing up and from four Section increased million quarter the XXX margin our on exclusion executing $XXX us fourth each making Our our was profit of strategic gross for want adjusted pillars. update XXXX. of work I of quarter against the gross XXXX. plan $XXX to of of XX% against fourth the progress position

culture. First, let’s with people start and

the and attract, promote the comprised force, cross-functional a task associates, programs process of inclusion Our targeting identifying of develop, charter retain diversity, equity workforce. in created to working ability and a team inclusive of an has is and company’s

commitment build high-performance team communicate core can purpose about as values reinforce vision. and I and what am After with training XXXX. leadership. a values aligned excited establishing program robust developed commitments Our our We’ve in we really fourth messaging to to one and our vision, organization a socialize to to we around in achieve throughout organization. our remains the them around singular quarter, began the a our

to omni-channel showcasing and experience new priority. in we digital a videos, to top Moving design customer better the home seamless able style with how the platform, our trends. content, relevant reach LL the our latest new customers such to experience, are improving XXXX, delivering remains With a as content,

store. associates people better install we our the the both guide they to will and served. completed capabilities, our our XXXX, associates of customers empower end the we tools We customers, enhanced Pros sure drive right want the with virtual also and consultations capabilities now staffing the roles make and partner to And quarter deployment Wi-Fi have to leverage in online in-person new right be efficiency. rollout to that of fourth in January. will began tablets how serve can sales and with by Sales In and largely to ever the we conduct

deliver In our our organization. addition, ability the enhance tablets to across further training

upgrade the the relationship cost all a We is to customer technology of for associates seamless customers. our This technology lower to to across our customer model center engage with key experience more also driving support brand. engagement efficient, channels our in our

will we quarters. out future and old be the installation enhancing to We have rolled stores in capabilities its portal new

who to would do forward upcoming with how Turning we compelling since to high of for and in future ride service Pro with assortment, immediate with is value reconnected current with we a new choice, I who opportunity And rep, Pros opportunity the an their had allows share level a that you of discussed relationships customers. account key In accounts. business Pro trend to account to Flooring. an had for customer to high-growth like Pros programs them our a XXXX, delight pilot and major outside our Davison, more with hardwood updating project. the that with was looking want example a hickory a see look relationship their a recently launch shopped A Pros Pro in it stores expertise a Pro us. of wider Pro reps Building will our for elevating and the in these customers, XXXX with we Pros. to Denver win program are markets a on and potential focus. Laura of us capabilities an X-inch quarters. The for to serve a easier number not We LL launched make better He and develop us.

manager, schedule. provided to early tight store his Cushing, Laura, top options Sean Laura Pro the the and opened picked then Our to Sean Pro’s cater and Denver to the store two.

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traffic Turning we tools to objective drive transactions, new with and driving of customers. to our traffic transactions help with strengthen capabilities and our will omni-channel

picture finer drive responded traffic begun our agility to our of tools. to Our speed And of and showcase new power platform and the our well us extremely more take that to just customers to better have gives flooring stores. services we’ve our and floor advantage and digital

continue flooring. update then our to invest and SKUs such With can most our we to our the new drive into offerings omni-channel popular strength innovation website, water resistant and as assortment will SKUs stores. online our assortment We rapidly and vinyl introduce exclusive leverage hardwood our in areas expand and with look to new

and of as moldings, will selling grills. such We also stairs promote items attachment

We our XXXX. will success in build on digital marketing

focus journey. their prioritize targeted expanding These efforts to audiences also XXXX, efforts to high-quality we traffic can that our and marketing, advertising, will intent-driven HGTV. will television digital attract and drive as such inspiration We begin where search on into on we will social, convert transactions. customers our In new continue

As excited our rebranding about make on leveraging reinforce our And more value and footprint proposition. our store it stores, relates stores physical based we’re will approachable. attractive feedback our rebranding we to further the to from early help store of believe the customers,

XXXX, planning regarding calls and rebranding a broad progress. in future of our We’re scale you updating look to stores forward our on we

profitability. to Finally, on work improving continue we

We investing our internal building our initiatives are transformation strategies. and momentum around as growth execute we in

outlook Given for in color We and COVID-XX, are like the we the our not share uncertainty guidance approach however at providing year. some this due time. financial around to XXXX would to

improvement that early Residential low The second existing persist home trends investment, period XXXX home And in was by sales believe in of home several half That in such people shutdowns significant said spending interest as tailwinds. substantial year, the of sector. category preferences of remains our out. consumer prices a spurred we ‘XX. unknowns and XXXX expansion and boosted if will to as a rising rolls number spending from mobile once more to year risk provide this later rates COVID-XX consumer should continue this renewed due there and vaccine the become in

We are behaviors Visibility customers’ the home contractors their customers. a this and Pro how is impacted for to year is are install willingness in balancing later more have that enter sales nesting by time, positive limited watching at the DIY towards tougher apparel some the we comparisons begin third spending becomes improvement anticipate we travel, are face safer and it leisure, And that shift services in away-from-home may leave home. more quarter customers and the to of once to will fourth XXXX. but

to on-hand our customers inventories more levels focused current supply million domestic and the remain volatility our Based also we we operating further with the supply, the offering half. of of we barring In if on stores increase of sales our our said, higher. XXXX optimal first $XXX the expect end potential today inventory fourth That teams have to DCs alternative been disruptions. and in the field half to and international quarter more to further from initiatives. products the disruptions, are captured our inventories great have hardwood now in work transformation chains through know be believe to between could on of flow for from We did in we any of what chain all midst fulfill executing managing on orders. We and million these supply and the second the focused crosscurrents environment, $XXX similar

the platform For we but example, customer are new, our is pleased generating. are digital we still new growth with

technologies and new experience a building culture. Our better we’re the equipped teams customer improve in services. high-performance momentum through are to And new creating

customer’s opportunity an energized in environment. operating agile remaining in around and first surface choice our hard being Our uncertain optimizing flooring, the teams are

to a gross good and order costs Turning headwinds. promotion improve will tariffs, with partnering margin. execute margin, material done products, country the have mitigation transportation over to to we through through expect our X past we lot new enhanced and XXXX, years these sourcing, continue strategies. we reducing to of offset work to to alternative our vendors costs pricing In In be headwinds, raw of our and strategies introduce

Section of the our all August products be our Imports of cost China from from operations of the to end best unfavorably of XXXX by went the effect for down XX%, Leveraging will tariffs, impacted sourcing mitigation tariffs our key across country First, remains that on XXXX. reinstatement we for XXXX. into at suite XX% XXX strategy. year entire were full XX%

been We stringent point for inventory could that as our and also the are I costs. margins impacted supply, the the input standards. continuing This by material review for to strong our want country our meets sourcing that have best from COVID-XX due and hardwood to in remains global the both gross supply during post out transportation suppliers demand XXXX higher domestic recovery opportunity constrained impact raw tight unfavorably to COVID-XX. chain quality

as We renewal for this both are transportation costs, monitoring domestic, up our year. international and contracts come

We costs to decisions. and promotion will XXXX, offset to monitoring inform guide in to through disciplined sourcing strategies, market respect maintain look the expense SG&A while will we With pricing our management. higher and

our XXXX. pleased the and growth based deliver summary, lower strong and really are on company transformation level initiatives SG&A percent our the about expense of Pro initiatives of for our are our delivered about profitability we teams, improvements and marketing the Rep in marketing to the our internal We investing with given on spend initiatives, our progress are strategic customer the In stores we These we excited business new in savings the in we’ve Account spend technology investment on expected opening achieving are rates. efficiency leverage base we program. hurdle and reinvest of including Pro made to to on returns the year-over-year as appropriate We plan good expense sales. our a digital. new current with improve And feel experience, focus our in effectiveness

highly their choice team flooring elevating and meeting and needs. experience LL on first making Our hard Flooring is engaged customer’s customer focused the in the

our our defined values got robust vision, customers. for and execution a have We XXXX. in place win plan going with how And we to we’re have

macro an financial each our We have will the the share also look our agile reporting I quarter. navigate Nancy? and proven execute we to uncertain the environment forward plan. call We now over as will progress turn our to to to on ability of we disciplined remain details Nancy quarter. and

Nancy Walsh

of increased sales. $XXX margin XXXX XX.X% to the of quarter XX.X% of X.X% in will of improvement maybe to that In I comparable to in in reconciliation in to note morning non-GAAP Please and Thanks, the increase Comparable $XX.X a the execution most ago, our financial Please to X% for due transformation adjusted fourth press XXXX. release result today’s higher and installation be XXXX. same sales. the quarter compared of XXXX an on million a financial remarks, We refer ticket to XXXX merchandise XX.X% my in in Gross on Charles transaction or increased Gross the the our saw period home and in sales sales higher demand basis. consumer good from versus the million useful. increase due store and measures million an quarter, in comparable why an a year on for fourth as discussing everyone. primarily X.X% and results XX.X% increase measures GAAP during directly healthy million count XXXX quarter of projects. net our in in increase XX.X% of the compared a average sales fourth versus service to fourth $XXX.X $XXX profit increased sales XX.X% explanation period

in shipments When from gross compared expense XXXX. and gross to million to items million net fourth XX.X% the associated prior a quarter with from $XXX the the engineered of expense hardwood $XXX year. adjusted antidumping in quarter was these from of profit both included excluding the margin was compared countervailing XXXX, prior applicable for margin China During a periods, in to and year gross million quarter fourth year prior the $XXX,XXX XX% the compared adjusted net of $X.X benefit

tariffs, XXX significant fourth gross Excluding basis lesser quarter from retail efforts, price exclusion the of margin reflects of Section This a costs and versus the out merchandising, retroactive primarily one-time increased extent, benefit XXXX. margin selective in gross XXX and increases. the sourcing XXXX points to improvement

to company to this these of quarter or expense of XX.X% fourth Section XXX our flow product income XXX retroactive November also from reminder, leveraging On statements subset click the financial certain the the both of sold. fourth August as began imports inception exemption quarter made vinyl products was certain impacted to in a Section certain As quarters imported fourth XXXX by tariffs related other China received quarter product for tariffs to In September of affected basis China tariffs was sales on an been in for August products tariffs million on Cash and XXXX. in million on the XXXX, or that the of the costs the The Section as by sales, XXXX, was fourth years. reinstatement. $XX.X recent $XX.X to flow tariff engineered have exemption XXX quarter a began the matters. certain in the Section from of statement XXXX. the XXX imported through products XX.X% pay SG&A XXX points, expired. was X, in reinstatement of compared legal SG&A reduced included in the

related $X.X Additionally, the store and million included XXXX closures, year. bringing to the fourth Canadian on of million to U.S. of the total $X.X quarter costs

and be in versus the on all When although completed was $XX commissions will $X early items SG&A $XX financial in XX quarter periods, by end, from due cleanup adjusted million anticipated, primarily performance. million higher As the quarter higher to certain stores activities these were strong both of for closed fourth XXXX, bonuses excluding year million, XXXX. expense

XXX in quarter the of sales of XX.X% XX.X% points of leveraged to percent SG&A a from XXXX. sales, fourth sales basis As of

million. period operating one-time prior million to of retroactive the the XXXX $XX when adjusted income delivered of For income $XX.X fourth exclusion reported tariffs. income the in operating we in compared the This operating benefit for million million an $XX.X quarter $XX.X we million due to year the fourth to $XX.X compared quarter of was of Adjusted quarter, of XXXX.

XXXX, The higher Excluding XXXX, primarily XXXX. improvement SG&A and net in in event favorable selective was quarter, price In the months interest retail In XX, borrowings income agreement. the for the expense costs-out merchandise $X.X with and of assets. million offset by by of fourth in associated a of no was consolidated expense XXXX. December on for against released most after million company XXXX determining X cumulative years in changes. quarter adjustment U.S. sales, to was our antidumping allowance on expense sourcing of duty X-year ended that non-recurring the tax fourth Both we reflected that other $XX,XXX reversal other recorded rate leverage driven the interest longer of our efforts, $X.X countervailing the we and compared a position, valuation had and loss borrowings the year-over-year significant on deferred credit partially of increases interest

of the tax partial income on quarter release the the tax million. the the valuation or CARES valuation future no has year-end an rate. in the $XX.X tax and $XX.X of fourth we recognized million effective of including result, taxes allowance driven in true-ups, QX of This benefit release impact a As of was deferred by cash Act. impact The allowance

compared million $XX.X $XX.X quarter quarter fourth to For to by income the million $XX.X the million net of of for increased fourth of income XXXX, net XXXX.

XXX of $X.XX to On our quarter COVID-XX million share $XX results, adjusted the full progress earnings X.X% of half second in higher merchant diluted compared margin performance quarter. on the implementing $X.X with was million. gross Operating was diluted fourth the total net up adjusted This quarter XXXX. a adjusted to profit in versus for XXXX. and teams The per in disruption X.X%, $X.XX per share XXXX share margins. quarter. strong strategies up improve Recapping to $XX per reflects operating earnings billion our for operating million and from points $XX fourth sales operating XXXX. $X increased basis, the $XX $X.XX the second our in good ago year of earnings represented increased to Finally, million to income diluted an million $X.XX basis improvement following sourcing quarter initiatives, income year income was

on is organization $X.X management. team expense digital overall and December marketing efficient the expense primarily expense in We $X.X disciplined had years effective XXXX, million The Our respectively. years other driving for XX, both marketing deploying our of million in borrowings XXXX, under XXXX agreement. interest XXXX million the partially countervailing The in reported expense offset borrowings reversal expense our to rate adjustment and spend of duty with by fourth reflected associated and more credit ended interest of related changes. was favorable and and antidumping the of for $X.X a quarter

For reported which million, XXXX, of XX.X%. represented negative $X.X rate tax an tax benefit we of income effective an

represented and reserve CARES tax of Excluding an would rate the valuation the which million, tax release impact, XX.X%. of Act the income expense XXXX for $XX.X effective have been

diluted quarter effective of expense or $X.XX or income million per compared is $X.X rate tax million share in income income share $X.X recognized million, we XXXX. adjusted of XX.X%. per income an Net $XX.X of per year, XXXX tax XXXX. the $X.XX earnings which diluted Net of On prior the and XXXX was per million. in to to release full net for the For diluted $X.XX fourth XXXX partial diluted for compared share of the valuation and from reserve benefited basis, an share $X.XX of earnings year $XX.X

that driven result half managing was year-end. the million of at September to inventory million end up the end by our sales followed inventory balance inventory as on of and by quarter from $XXX at our XX% of purchases end of and second for The kept in was a strong year-over-year inventory below the compared to reduction at level sheet, COVID-XX, XXXX. $XXX the $XXX targeted direct primarily the replenishment fourth supply Turning chain constraints million,

receive Our inventory the working new face supply diligently teams are chain disruption. in to of

inventory million. we a was to in increase more to $XXX million optimal to inventory As are of $XXX January And XX, million of range working $XXX XXXX.

increase require our uncertainty our liquidity unchanged At ABL maximizing debt operating we which navigated amendment These in Our December XX, agreement. XXXX. a This collection will end credit several to with supply nonrecurring accounts and And balance under activities payroll sustained due deposits we capital not levels the impacted as was our in XXXX in our cash the inventory focus our strong offset in $X did December the equivalents XXXX, increase disciplined capital provided These under from of year along is payment since at The deferred replenish which legal second factors ended environment. million, COVID-XX we with environment XXXX. At and $XXX were million to near XXXX. $XX in also equivalents chain liquidity. for in XXXX. cash recovery the in of adjustments receivable, $XXX operating up $XX from and of and program We which increase and position, as announced operations liquidity, the Also, had comprised driven by of and the $XXX the settlements, medium-term CARES favorably sheet million generated of $XXX of management half, contributed cash of payable matters cash by in associated insurance XXXX. to temporary outstanding activities an Net April XXXX. business million strong. settlements. $XXX to during agreement, Act above cash flow average was XXXX. we million the by represents cash compared the Despite rebounded customer of is on from to end, optimal constraints, and our million $XXX performance, tariff strong working million working we included the million $XXX,XXX quarter net XX, availability cash with current excess of taxes in had million credit a

a provide financial a cash the at balance this chosen have as high to manage current we As to through time environment. result, maintain uncertain flexibility we

We will continue to quarter. review this decision each

Turning now growth XXXX, improving team and our to to remains transformation, our dedicated profitability. driving

We flexible times. to a these and and are ability pleased uncertain during costs balance our sheet strong with and maintain challenging manage

COVID-XX the performance. and forecast surrounding uncertainty to duration pandemic uniquely makes noted, Charles As financial challenging future our accurately of it the extent

initiatives on touched details net as and our as to more some high expect are their customers SG&A, into to the comfortable attract annual sales dollars, behind the stores return as not are as plan we Barring to more With closing pre-COVID XX respect result, XXXX related store in management COVIDX-XX a opening financial technology service From we and to execute rate. a Charles our continue gross customer improve but mix in XXXX. I including are XXXX, customers expand to lower to at This a XX a we in experience will we shutdowns, stores on any for efforts can new As versus growth the XXXX. planning margin our X we perspective, gross stores. open our invest and providing to expense however installation people sales to of margin level. levels benefit guidance well having to new initiatives, that homes.

As we COVID-XX downturn demonstrated see if the in a quickly we severe and reduce to shutdown, to ability XXXX, adjust we expenses. due widespread our very have accordingly a

favorably crisis, also expense like the that I’d was due adjusted in to XXXX, expenses a for impacted in the closure reduced insurance rate promotional SG&A run interruption costs. XXXX, of normal response gives of and a our In align the in And by security XXXX versus temporary our our by in on versus and XXXX, store settlement $XX comment August that XXXX higher cannot our million SG&A you primarily advertising in claim of expense benefit $X.X cadence XXXX, some of SG&A by events salary the SG&A second several million SG&A final quarter benefits Board. Recall of but our network our expense to the from better with lower sense onetime in personnel to the to the COVID-XX, store office included for lowered to response significantly payroll corporate expenses in and review quarter, the quarter XXXX. to I to SG&A of variable While to stronger $X.X hope closure staffing third the reductions and this impacts we costs due COVID business financial the demand to as performance. reduced million I incident, fourth offset higher partially a XXXX. related impacted related were $X.X of million

focused tax remain XXXX, XX%, full be we year effective In on rate which approximately our expect For short, profitability statutory will we initiatives. of the rate. reflects the our

We headwinds battle growth the to in will work position and gross to environment And ability as in strategies that to increased XXXX. expenses are pricing reduce us our sourcing will behind costs macro hard needed. the the as margin managing to we and investing choice adjust diligently improve first strategies customer’s flooring, surface with

our our our traditional $XXX in will to in We XXXX, historical and working are and our In between more million, us we in a sheet the increase expect in to In we to million. and our our expect to spend CapEx store balance stores was more up the XXXX, results new overall From invest was return to rebranding capital initiatives investments ability $XX business opening XX XXXX. CapEx levels. cash million, deposits strong, to we digital. XXXX, it million. support XX to of $XX currently inventories liquidity And million plan of $XXX as growth $XX and customer $XX return perspective, of investments broad expect flow levels. to in scale giving the million Our to XXXX, fleet,

initiatives to drive As execute focused remains our our ultimately organization Charles continuing to on entire profitability. stated, transformation

looking the all We uncertain the open operational maximize are call financial ask to an questions. to moderator against you to our as this I’ll execute in time Thank that, With initiatives. morning. your environment and strategic flexibility we for


Markets. of with Thank Capital you. question line proceed Please your Our comes [Operator question. from Champine first with the Laura Loop Instructions]

Laura Champine

pathway issues those? little to the of Thanks for Can growth sort a that the in bit a you of chain supply you in talk taking little sales fixing QX my to about and robbed dig more question.

Charles Tyson

Yes, Laura.

commented, COVID reflective As components. on crisis the of there significant see you do. the – many of raw was shortages are to cut thing amount we inventory across we people the can of that And back right as course, And that to many a where that, that’s felt industries liquidity. protect have obviously, unrolled,

that so And particularly definitely drove a containers, out capacity Asia. on constraint of issue

a work that production were to mills with as of carriers, lumber. the lot the through we of we so start and first Also, the the of And we in repair impacted year. contracts see move the half our will

the materials. raw availability on domestic there side, on so is solid tight And a

international So West particularly freight, there Coast is materials. East Asia from both and really two coming and one, raw the to the Coast, the drivers:

in So the front inventory year. as half Nancy to said, we the but year, expect levels back on typical to for the do the half the expect of balance of back some headwind we get more

Laura Champine

in may just have comments. And QX? it you can Got is it. average give I Nancy’s this missed the But housekeeping. sale in us

Nancy Walsh

sale average $X,XXX. The was just under

Laura Champine

Thank you. it. Got


Thank you.

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

Brian Nagel

Pro standpoint Nice about morning. of back A investment, just it’s effort factor? lot company opportunity want a that of on quarter. from your ask, of infrastructure I step or other good that something you you Charles, talking is a little push there Is to your part Liquidators sort system say, take cultural it stores Can the to more was of there are Lumber whether bit? and of the – and efforts a or to What’s going spend? type some gating Hi, the spent just time question into biggest and the Pro.

Charles Tyson

Brian. morning, Yes. Good

as got to is there the and low that culture that move that the connect has in said experience Pros a on So fashion. that progress relationship building We to we to we one, a sales that have the with offer be data reporting the answer Pros. with they question, this we value see transactional proposition capabilities. I have needs and we’re we’re Pros high, to program We think with Pros those our to be leadership year retail able of, in day areas making in specific with it clearly my through be Pros, to us other understanding environments. find remarks, to specialized transact also build segmentation both. allows how the retention it’s field very – a Brian, we’ll in and from scale trial terms being to a and phone started their the a make back-end don’t with there in answering got But are And for of relationship meeting to very of necessarily our service that easier other to every able

hopefully So that helps.

Brian Nagel

helpful. then just That’s one of efforts the companies company? is environment sales environment in this do of in covered if if the Look, company helped indicative you look overall But your am that a strong think in. But reported results another No. very taking. asking lot has fourth very COVID to the what how very, like question. – again, you’re the and clearly I certain a extent at continued my much I And slip quarter, could this you at –

Charles Tyson

Pro. a and has in And question through a housing and question based improvement. a a versus a whole are then, revitalization got again, the it’s from platform, lumber that our this interest the we’re move great positive as what’s there the out about Clearly, I on about a whether digital fragmented very think, the on we work we’ve over growth And we space, are market liquidator. from we watching of surface foundationally I foundational solid investments of there year, negative our But specialty as hard COVID. think as course, is teams brand to is potentially in-store, happening tailwind our at carefully. rate a fragmented. making and really work still still and repositioning And element with of think flooring on a our XX% and is productive, digitally been tailwinds, got us which There helping agendas, look company home that’s new That’s then regular the Yes. basis. we doing one critical name in long-term, highly be company a highly a taking with that answer is, going share independent we’ve more perspective been

balance a there, is there Brian. So

Brian Nagel

Appreciate helpful. Thank you. the all very That’s color.

Charles Tyson

Thanks, Brian.


Basham Thank with you. proceed the of line [Operator Securities. Instructions] with from Our Seth your Please comes next question. Wedbush question

Seth Basham

impacted by you percentage be of lot a your XXXX, at is fourth around to question the and higher this? the what good in by sales, expect all do Thanks your you of reinstituted quarter My look sales morning. were tariffs tariffs, and impacted as

Nancy Walsh

as our accounting, cost the $XX in from tariffs impact see excluding the a year, XXX we of of reinstatement of expanded expect points. we in of to forward. from benefit That margin mentioned basis said, gross the remarks, rate million tariffs QX exclusion in XX% weighted So going headwind the our QX retroactive average the bigger our the last

We are country best strategies, to our remains to leveraging our pursue strategy. mitigation key continuing mitigation sourcing, which

the XX% during our were we As to compared to full XX% XXXX. from imports year noted, China of down

also and And we’re So while promotional our inform products, decisions launch to excuse we’re new going forward. we – me. projects to sourcing guide monitor to strategies looking costs working vendors market pricing and the higher with through offset

Seth Basham

your just should somewhere in were in or on impacted by tariffs than And the about that? of than is of higher sales number significantly less that, be it we follow-up and ‘XX beyond, lower thinking XX% first quarter. the So to the XX% fourth quarter

Nancy Walsh

in impact is are the because is out to going break that We XXXX. the we’re forward just tariffs to there and that indicating of the going anything is going hitting not way it. be further for product not – we a What there greater for account QX

the impact forward. that of in QX but going you won’t tariffs had until we So QX, see really

Charles Tyson

be Biden’s us There happen in on with discussions policy, just let what environment looking continuing of me at a of said so in remarks, at find we’re quality government trading change? ability lot really terms pause administration tariff long-term look will my today. Seth, continue tariff And supplies our in at going alternative happen that environment, there and with to in different what the we’re is right, looking on countries. Will put but country a as China. to a And doesn’t to to I will – sourcing, also

Seth Basham

you much. Thank very Understood.

Charles Tyson

Thanks, Seth.


Thank you.

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

Peter Keith

everyone. good and Hi, morning thanks

being you Charles, that quantitative could approachable, is more Specifically, more level, that there same-store relevant, about some what store couple tests next at the with a the rebranding then the high months was had effort, here? any rebranded of So look XX notable change us? measures with I seeing, guess, qualitative talked the give like measures in were you there you broader does versus sales of over And any stores? non-rebranded

Charles Tyson

question. Yes. for question. Great the Peter, thanks

our the that website, through see down we start will the through Flooring, launch So LL and for search as to for focused move translate we’re positioning our is think And of we Flooring. will LL as will to customers that where about brand, where example, year. example, continue on the new intensify environment,

XX the rollout I We because of quantitative to both a As stores. in of with said were broader and my remarks, results intending our stores control start rebranding we’re the are we was against it happy seeing. qualitative that a reflected that And that. us this relevant and expertise, more perception is to we over from of believe will we XX in the driving brand customers make months of next feedback the got evolution marketplace. traffic results quality The

months, And next our see part over so and months. XX of this as part transformation again, just it’s being not X the a longer We our next work of the Peter. journey. It’s

Peter Keith

then you’re any know And helpful. That’s not Okay. I providing guidance.

gross it. provided notable that we up your the this think about would takes Is gross be we’ll though? and – tariffs, does are to adjust But then headwinds any puts margin transportation, to how too should year margin maybe overall there with some and seem call be or ability pricing. You to some There some way guardrails, the extreme?

Nancy Walsh

Again, specific giving in we’re margin. of not terms really detail gross

But about. coming to both disruptions there coming We’re just a compared headwinds, of basis to well as improvement related that XXXX. or XXX that transportation as tariffs point talked QX, the are indicating some of had we out Charles into

strategies as to as cannot higher – sourcing through costs are new market. out, work with me, work we excuse word vendors strategies that and that So promotion I showing in country but monitor projects and get launch our pricing sourcing, well Charles products, particularly our that terms the mitigation will mentioned offsetting the good of

just we’re of and is our moving mitigation number there headwinds strategies. So a tailwinds, and forward with

Peter Keith

you. Good thank Okay, luck.

Charles Tyson

Peter. Thanks


session. you. Tyson I’ll and to Thank gentlemen, for comments. our the question-and-answer Ladies turn floor that final Mr. back concludes

Charles Tyson

ability profit good safety. in they in of are these forward this health our excited Thank great difficult strategy joining strong and Wishing that want performance transformation XXXX. environment. dynamic help I business and the growth to for everything want talking during And adapt quickly by thank and everyone look times. Have us we’re our you Again, doing And I you. to our sales everyone, all for us Thanks, a to reiterate we our to associates and today. we are at update. to next day. to a confident operating to


today’s Thank you. This concludes conference.

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