LL Lumber Liquidators

Julie MacMedan Head, IR
Charles Tyson President, CEO & Director
Nancy Walsh SVP & CFO
Laura Champine Loop Capital Markets
Seth Basham Wedbush Securities
Brian Nagel Oppenheimer
Call transcript
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Good morning. My name is Aman, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Lumber Liquidators Second Quarter 2021 Conference Call. [Operator Instructions]. Thank you. Ms. Investor may of conference. begin Head MacMedan, Relations, now you your Julie

Julie MacMedan

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

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

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

be of the adjusted management financial an release. discussing measures the call, on conference non-GAAP comparable directly may explanation most financial today's non-GAAP and of GAAP financial why useful today's discussed will earnings During in our results are measures reconciliation measures be A basis. to

X discussing that year In the discussed. update operative should call, in today's Investors we to date of both will impacted by call. basis, discussed not the the severely as no only and today, after remain this accurate was information X-year financial LL addition, statements in information that is will performance The call Flooring this any obligation assume undertakes on be a contained second quarter during last and given our of closures. COVID-XX

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

Charles Tyson

reflect to strong results, our and and culture, to On we're growth, and improving Good I navigating last up deliver basis. transactions and traffic job today's Julie. financial all our up chain delivered I'd sales will and improving versus four which a sales review morning, second XX% People outstanding comp second our continued call, quarter customer We thank the tremendous dynamic driving environment pillars. on making Thank results. experience, a profitability. progress profitability strategic service everyone. impressive with quarter supply and the like you, on quarter a X-year stack doing for year associates XX.X% customer second strong

higher, growth of both Our the driven second shutdown strong increasing compared global to that transformation of quarter of comp for economy supply as on as widespread last have was the believe traction We well in our not by year. having our much been second sales if effect the quarter chain COVID-XX disruptions the the for initiatives impact. reopening could are

up financial disciplined XXX pleased an EPS merchants XXXX. margin On go what the to to improving quarter sales organization's up our operating customers. of and points $X.XX X.X% was sourcing what on of and quarter and These to was operating management. great fourth seeing remarks, a we drove per up $X.XX X-year and our work basis at versus grow We basis DIY investments materials in-store basis experience. the our with into XXXX. results strengthen $X.XX transportation quarter Taking will done versus and Adjusted our adjusted the mitigate pleased basis, the share our the and sheet diluted second to expense and up debt. pay second the We execution versus a respectively, versus Second quarter of closer $X.XX, versus with and $X.XX helped of higher tariff, were from XXX sales. XXX are XXX in second have increasing 'XX XXXX traction up were diluted of points points underscoring down our year $X.XX last X.X% details look basis, we report investments including Pros, all teams customer which XXXX. during of more earnings margin and balance of was Nancy up and costs increased our versus of the and XXXX on

performance customer X-year our on basis. experience our primarily of long-term comp our comp pleased to of property the the execution We Pro on Pro combination and a of economy. quarter report Growing we of managers, balanced company during customers both with strategy. to growth is very public achieving flooring reopened in improving strategic total well a remodelers, as business with Pro growth sales products growth key Pros. exceeded work the each as installers, as the working sales growth serve First, Pros component We were across such to more builders focused growth sales in We that and types of Pro X attribute our a pillar the due spaces.

align we for this Pros, pricing program sales This June, our Pro XXXX, Pros access awareness are now program rep pros the in everyday very and drivers levels Building value web support XXXX. nearby understanding their XXXX. competitive customers positive Pros, we're and service pricing combined build the inventory better our now services. with the We in their these The experience that, we're feedback approach We've and them outside continuing organization for how web to new combination on gives can rep Pros We of better with launched as referral to has for X plan online believe we our field experience the Pros inside ahead. business, sales account in to meaningful incremental and we We also to account so in pleased pilot, stronger we continue delivered consistently beginning these drive throughout reinforced to were program dedicated continue and important our continuing partner. with XXXX Pro results March we valuable us stores. a on to and field relationship for by and to create on the real-time will Pro, for allow been reconfigured of our national provide that services on reps build that business so new focus early results. third with with and foundational In program. are these with customers. help pricing the driving are we the relationships grow received with extend referral true is serve program to the April the additional to experience richer Pro quarter with and focused to building relationships we a aligned geographically and build deeper important to better our to services Pros from This is We launched dedicated and introducing introduced we our growth. our monitor relationships enhance and of months dedicated seeing better

that, consumers' in In second last installation largely our which increase year a addition This sales. the started This service shutdown of the quarter automation The tool installers with better comprised quarter installation driven to basis, were productivity. we with XXXX, reduced sales other it results customers in in-store add successfully and installation severe Pros, seamless, primarily a our well versus the our were to installation our success our store are quarter portal when in last increase second due and has to plan to the rolled and us. believe helped to workflow installation benefit make of by December customer our COVID-XX We expectations. professionals an of in to portal. installation to installation customers estimates our year. plan launched having who customers competitive XXX% is into to Building customer to purchase possible tool, services projects, sales, We net their for We installers this installation jobs. XX%, offer both our beyond core from efficiency customer store installation reflects Pro. and items. visibility an Using services to sales inspiration on manage much as their grow our associates grow second the to On time of management installation in attracting improving comfort the quoting increase their to conduct experience new compared with advantage our many business homes financials, and fast can continue increase partners out the X-year original XXXX, for demonstrating business out independent turnaround up when for and us. installer through improve a the as schedules, capabilities in-home of investments offering experience enhance in easy delivery automating new to We sales by solution in-store complete select for from portal experience. we third-party customers net

last DIY customers in for second sales grew also year. quarter We versus the

for inspiration both expect growth we That's complete educational the a get trend scale and a itself the In project. largely the online We began traffic convenient, of right engaging customers customer with starts through matching the the end-to-end and services we and DIY from strategy campaign, for us creating tools XXXX. In and flooring Our love business transactions. solution quality, our More and we represents and guided with May, the deliver initiatives guiding to shopping expertise Floor making Buying repositions that our include business helping of with an do in-store floor Transformation to stores, convenient brand our and assortment, a The to easier rebranding flooring LL launched our experience the brand retail dedication high-touch complex LL highlight Flooring and customers superior customers supporting at installation, journey reinforces guided right broad generating floors experience. to new select installation assortment. it digital be campaign DIY is accessories July, by which driving underlayment customers trend grow and specifically, with our completed the experience. through to brand strategy, finally is a end tagline Love with to accessible. to customer transaction. provide which you engaging content a entire more experience the and that Flooring. only high-quality in improving for to demand a affordable

our experience new the includes both new store that better expertise showcases store quality of interior creates our and signage environment, people. Our appealing which rebranded and products an the of format

enhanced portfolio water We launch product new, design trend flooring. our on the innovative width wide also and of resistant with further

hardwoods site, at offer now online were and virtual quarter, in including second than customers that again plank our through solid our top-performing a the SKUs easily more discover We categories. XXX experience can or During flooring completely stores. vinyl e-commerce

part Our is important into customers digital an more the experience flooring journey. of bringing

which tools, our floor XXX% were peak, continue quarter easy to X-year store stack a plan to but the our it to homes. Customers floor picture to During effective our digital enhance our sites of were stores marketing. to with expanding experience sales make web engaged more to We also on in basis. last were imagine versus at over down by when were year traffic it COVID how their with will We're digital and making second convenient XX% our finder quarter, shutdowns the and it e-commerce drive the look footprint. that second up very shop us and

quarter, count second total to the the XXX stores, at opened store our we During X June. new bringing of end

traditional customer are our to stores, of Flooring showroom convenience a and opening LL addition In piloting by reinforcing only brand enhancing further locations. test proposition we

X retail second open in on showroom to in locations on and half these attractive and X locations, pilots future are have We XXXX. we we scheduled open stores the more to look on forward new of XX on sharing convenient the during to calls. XX to track XXXX Including corridors,

level building includes an both customer next deliver skills June, leadership new learning program This company. workshops. associates We've including in that a our the important building helping throughout as equity equity choice. experience professional within all creating that recently we associates of for development develop and that investing our the we're our new of attracting We're strong the a At to to establish talent. and value, including LL in a career team, program employer for the believe path scalable inclusion Flooring components and and a provides take are can launched our a for raising talent diversity, our these programs actions increasing company as that staffing inclusion development these them well end values of critical diversity, our retaining that an in outstanding as and and reinforces to We value. permeate wages. investment company our of we order our culture completed critically in customers. the is an embraced core and of retains are also attractive and and organization, We're attracts do all levels to our goal top store to foundation increase high-performing ensure initiatives, Turning culture and building people as field culture

tailwinds we driver have home flooring. As the improvement from of improving win improving under perspective, month home each believe experience, by we traffic look us to with sales spending strategic consumer In People sale May. supportive remain these consumer an supply, profitability. potential Traditionally, X.X From a gaining sales customers a of long-term million, encouraged pillars. will and hard sustainable existing are and culture, representing transactions was drive ahead, of traction and pillars we're important for by encouraged we multiyear of and flooring June, a the slight inventory which existing customer enable growth. surface been was $X.XX projects. our demand driving We the on

on the to COVID-XX motivate sales. continued more more homes, existing home their work remodel flexible are move. affordability monitoring existing cannot new environment inventory tight post and said, if they consumers We That housing may

work-from-home are monitoring projects. the So on we also remodeling positive flooring impact

consumers monitoring leisure activities spending In half to as in Since has the of we're home potential improvement XXXX. the prioritize seen from U.S. shift May, impact projects. addition, goods over in of durable spending the they second patterns services a consumer shift

consumers In addition, to until big-ticket could cause inflationary pressure affordability improves. projects postpone

the in CODIV-XX cases we're have and recently, monitoring suppliers abroad, U.S. this demand variant caused impact homes. willingness increase and in the of has in as Finally, well their consumer of as the Delta contractors an to their on potential and

the to chain. supply now Turning

we more sales captured been could higher. our believe During have if quarter, have we second inventories the

job chain teams a across great effectively supply new projects. do allocating help Our it to stores in to our customers inventory bringing continue their and our complete flooring

of strategy right across innovative a delivering our from with XXX and we'll new to win we high continue and believe this currently the offer of in chain a being trend in sourced consistent us addition, world SKUs, environment. to leader that supply challenging our and products collection demand. with In expertise introduce over advantage We allows level a to competitive help is satisfy service, key customers assortment,

our Asia supply We costs. shipping. some delayed continuing expect materials shutdowns and this inventory an experienced to chain increased perspective, availability outbreak, COVID-XX potentially production temporary of the sourcing and international which From foreseeable to due limit constrained international partners remain Southeast for have future, transportation limited to and across

domestic Domestically, expect container the not continue higher to at container normalize general availability hardwood until navigate international to supply also We earliest. XXXX and do limited costs. we the solid

We also see domestic on availability is our continue to constraints trucking, which impacting transportation costs.

higher strategies, market We promotional will and look costs materials and to transportation pricing continue the monitoring to to guide while and mitigate inform decisions. through our

traction growth, a our this with building we're X overall and pleased underscoring outpacing We're X-year both the We transformation in gaining demonstrated strategic on will and look our efficiency and pillars. basis, expense management, the In momentum. to on forward sales and initiatives. we growth sales quarter in particularly profitability while summary, to improvement execute productivity increasing our we continue second also Pro growth investing on disciplined strong

strategies and delivering our position the associates we us of for While to quarter. will near-term details environment now the an believe for our in the of I challenges, operating our all share will want dedication to the I turn customers. transformation long poses Nancy? Nancy well call term. to outstanding over their for thank financial energy experience the

Nancy Walsh

compared We $XXX.X installation of of million increased merchandise XXXX million as net in of XX.X% transactions sales. increase XX.X% X.X%. increase in greater When mix everyone. a X% average driven and comparing and to Good net increase average merchandise XX.X% a net sales the to increase sales same improved or reflecting higher a XXXX. X.X% transaction the ticket sales in second second versus quarter net in Charles. our increased count in net morning, of the Average quarter, saw merchandise XXX.X% sales In a higher XX.X% as second Thanks, $XX.X and ticket, sales service the to due well XXXX, period quarter were sales. service ticket and higher by XX.X% X.X%, down

good achieved stacked comparable-store We second a great our to deposits, continued strong our second are basis. customer versus orders. across based feel noted, constraints. doing demand customer We XXXX and network sales on results Charles increased and flooring XXXX As the X-year on XX% these quarter underlying supply job a of XX.X% chain quarter inventory for the about teams customer managing our fulfill our expectations and despite

XX% and the gross in to Turning now last pricing, $XXX.X increased in year XX.X% increased costs, comparable XXXX, China of quarter by to of and quarter of the XXXX. compared sourcing million XX.X% XX were from XX.X% gross higher gross reflects profit. inbound quarter profit second $XXX.X XX.X% margin of XXXX second promotion the of $XX.X The and XXXX. million strategies. Gross quarter and basis of decrease The certain of imported in in transportation XXXX in point in goods partially to second the margin second materials tariffs the from million in higher from second the XXXX primarily quarter on and versus which offset period

of quarter adjustments non-GAAP margin. second had XXXX The to no XXXX gross and

of XX% the merchandise margin gross XX% in second margin particularly only quarter in adjusted point sold excluding products quarter During HTS XXXX. compared tariff second the a The XX.X% impressive favorable imported in second rates When improvement XXXX quarter of second categorization the basis the of given that gross included prior China, the the gross was quarter for of XXX quarter $XXX,XXX versus XXXX of is on XXXX that adjustment second periods. of margin XXXX, adjustment, in cost XXXX. included duty from certain for to

our each million XXX leveraging quarter basis of in expense now or the XX.X% of points was SG&A for periods, compared sales. in second XXXX legal SG&A. second expense XX% these the higher SG&A substantial the or address to compared SG&A XXXX. fuel management included was XXXX from invest of quarter quarter reflected to improvement $XX.X certain When $XX.X expense with million spend SG&A Even disciplined all cost of in second and expense sales quarter performance. to continue million efficient $XX.X in initiatives the for growth lower to marketing sales, compared The that XXXX adjusted million second SG&A of made of initiative. settlements. COVID-XX to the the profit we to pandemic. or XXXX matters was year in adjusted expense expense XX.X% to XXXX. When reflected company's line and and excluding $XX.X last adjustments million the rigorous for costs million more related $XXX.X XXXX, Turning controls, under the SG&A in compared our XXXX items $XX.X top quarter to

points income the percentage in XX.X% SG&A good reflect and from operating quarter material merchant the million X.X% a on sales year from of XXXX up from basis adjusted sourcing sales, second XX.X% of million operating second of basis improvement tariffs points $XX.X in million income X.X% second to second the of up sales XXXX second we quarter the costs. XXX initiatives to million, The from basis teams and of improved operating XXXX, up XXXX As million, progress up margin of million second The quarter profit XXXX. of delivered XXX period the $XX.X operating strategies mitigate improved loss of for income margin was of compared of $XX.X the XXXX. of our quarter XXX points with second of an of in XXXX $X for XXXX. operating an and Adjusted for points $X.X our quarter and from million in from in of XXXX XXXX. Adjusted million transportation quarter increase and quarter the higher in implementing and of was and $XX.X quarter XX% the basis X.X%, the XXX higher prior $X.X second in $XX.X

million amendment second marketing reported of of fees our XXXX. the the expenses disciplined for Our second last overall recognized decrease of lower tax management. an by effective paying an income XX.X% months or tax expense of our XXXX, and of credit tax XXXX. XXXX, for effective we quarter reflects quarter $X.X $XXX,XXX of April marketing rate teams other ended our the organization of quarter the Act during XXXX driven impact The other tax or of year. million second quarter The of XXXX. $X.X variability tax effective expense of In compared to of deploy interest more outstanding income In of efficient rate the second expense debt spend million the of and the XX.X% agreement in XX, and $X.X the due on and June rate was compared in expense to our down the of X we $XXX,XXX XXXX driving to Cares

For quarter compared $X.X XXXX, net by loss to the the income of of We quarter $X.X XXXX. earnings second in adjusted quarter for XXXX. XXXX. second of for the $X.X second quarter a of million million income reported were to net million XXXX million net in $X of of the increased to million second for of compared Adjusted XXXX earnings and $XX.X million $XXX,XXX $XX

to per $X.XX share per XXXX. for loss quarter share and the XXXX. earnings adjusted $X.XX $X.XX versus adjusted $X.XX XXXX earnings diluted quarter of for an the a ago second diluted in earnings the share in $X.XX quarter compared diluted and of second earnings Finally, adjusted per of year earnings of of basis, $X.XX quarter On of in were

level. March Turning quarter to chain and end of second inventory supply was driven at XX% constraints sheet. the June The in replenishment balance the and of the $XXX was million reduction inventory million by the XXXX million below our to end $XXX on end that the at sales at strong Inventory XXXX. targeted year-over-year $XXX kept primarily of compared

liquidity with and sheet cash quarter $XXX compared million $XXX are ended equivalents of December strong. to We cash balance as XXXX. of the and Our million

June working provided changes due we as income. of of constraints repaid quarter, second supply capital, with the the was credit we by net call. continued outstanding positive million on our debt, million months for Net well facility to XX, inventory ended XXXX, consistent in reflecting as the $XX primarily cash plans $XX all operating million our $XXX X During shared last activities

work rebuilding inventory our to continue toward We to optimal levels.

expect able are we to do have operating and cash capital activities. provided we working to As impact that unfavorable an by would on so,

we excess million agreement. comprised liquidity the of million As $XXX under million This of represents in credit from $XXX $XXX and availability June XXXX, an had of $XX liquidity XXXX. June cash cash of million XX, XX, and of increase of equivalents

Turning dedicated our the now a would the details operating that of to a remains growth In on to Charles expand at remainder XXXX. team of transformation, face level. the driving our dynamic I some like environment, high of and to on improving touched profitability.

remain delivered in to We stacked XX%, persist we constraints while second with is the pleased inventory of the and of material are slowing are for look prudent compared We guide our of second the decisions. COVID-XX delta we the half, higher in will potential that the increasingly and the That to plan market the it on we higher the XXXX second given initiatives. quarter. offset chain transformation monitoring impact to and inform costs we traction basis consumer shifts to demand said, replenishment, half potential variant, challenging gaining supply pricing strategies through concerned X-year costs on sales promotion combination our the believe a and on comparable for transportation

primarily during more attract the margin This the discussed having second dollars $XX term. spending quarter, and our gross to strategic compared rate. the sales we in investments approximately lower margin our We respect saw CapEx to pre-COVID customers in the that due as growth new investments initiatives field customers benefit but support we in investments more to adjusted to a in increasing increase million second homes. half and continued to we in rebranding gross Charles long the the of organization stores as digital. still our their to percent to comfortable is over will With XXXX, expect in SG&A investment installation as sales people the expect XX of opening XX This XXXX, our execute well expect the mix SG&A quarter. second of would scale primarily enter for of initiatives return million are our we of stores, broad to to a as XXXX to As our as $XX

Flooring opened opened second new we May, Medford, New April, store The quarter, branding, quarter on and opportunity opened stores have additional we initiatives. second on Mississippi profitability stores. solid profitability and LL And and these growth West a Beckley, opened Virginia. Hattiesburg, the the in new in are to and a summary, the new X through new excited we basis, Exton, we stores sales growth In about our in our York. store. strong locations. During transformation sales delivered new we and drive In X we In X-year Pennsylvania the both demonstrating in June, progress

open financial strategic the strong LL Thank success. long-term that, Our ask and you liquidity provide Flooring and questions. With driving the your for entire our fund organization growth morning. us position time for balance our I'll remains the to And with this focused flexibility to on growth XXXX. and call to in sheet all profitability initiatives moderator


Instructions]. [Operator

from today Markets. Loop first Laura Our from Champine Capital question comes

Laura Champine

of in increasing can through we the a as penetration margin, impacts the the increase in installation is year? of that a move not tell you sense which sort how mentioned of the QX surprise. of impacted installation But that impact shape us much gross You and negatively gross us give margin

Nancy Walsh

increase tell that. not We installation the than shared us. have merchandise will you, our of specific the What I that offsets is details mix more for though, around

had margin gross factor a of the sales. the a installation terms in impact within as minor very So and

Laura Champine

expect we Should the Okay. same in near-term quarters? future

Nancy Walsh

It would be consistent.

we us and mix. mix driving in our between the pre-COVID to installation in do, to for sales the saw hardwood queue, as terms levels. are of We that's expecting And you the really return vinyl, increase

going So I expect forward. that to would continue


Seth question from Wedbush comes next from Our today Bashman Securities.

Seth Basham

transaction that XXXX to were chain. transactions presume the Could quarter. limitations seeing? around second in down just you're trends due supply relative the to like seems focus I you on is It some And that

half that back begin expect the So any would other forward, that around of going versus color about improve as transactions you you be helpful. the to in would to And think year? XXXX

Nancy Walsh

our with see look I'll in first transaction. And When down impacting the of inventory based X% a increase on But XXXX our about in X.X%. we ticket demand we about we're underlying that transaction. customer XX% ticket believe than the that is deposits, did XXXX, in good our optimal XX% our lower we the at do strength up that we for and feel the start really is increase products. transactions,

Seth Basham

relative more work were down able any to customer quickly. flattish quarter the those you been the second in to deposits So your first, haven't

you thinking customer As How deposits by you your in look that? about quarter? forward, end to expect third of the would you are come the

Nancy Walsh

well timing expect, chain Seth, And deposits. But situation customer pretty we're if doing the you of the feel to see the what amount look is to flat. amount balance you our teams Q, inventory continue coming our the we looks that as keeping uncertain. pleased the you now what as and strength get have we're in like at been The in And fairly that. consistent, as that with settling, to really really would settle supply

inventory starting but good overall, right see we're and now. we're that fact to of a service orders, Flooring continue and customers So good that value repositioning that attracting expert feel believe settling position who to is assortment, we're improve as to our we the our about on in time quality trend that customer adding and we the all going also that those brand, goes to LL

Seth Basham

higher you complete Are of in cancellations seeing of able because being them? delays of to orders rate a

Charles Tyson

at all. not, is Seth. we're not No, Charles. No, This seeing absolutely that

Seth Basham

you're half demand Okay. lastly, inflation some services also the about back the And to just then supply picture spending, shift for including environment, of variant. year, versus and headwinds as COVID demand thinking that wanting the the

ones limit your which will half thinking you're about As you than growth the think and the are XX% biggest back those comps that drivers, drive sales be basis? in to X-year lower

Charles Tyson

that Yes. great is question, Look, a asking think and I everybody that's think I question. themselves

potential there's those where land full. initiatives headwinds to nobody go the to in knows invest going outcomes the think into lot drove issue COVID we is We're of in our impact a volatility, that that our we consumers right? all QX. watch as I really in drivers in of as terms to just of to continue growth And going is terms of

terms cautious highlighted So execution our initiatives you being of impact in those we clearly made investments earlier and good around the headwinds the our work flowing field we're how year that who's with mentioned, through. in in the on initiatives Pro doing Pro our And proposition. operators seeing from of the very road ahead happy our value we we're those the while positive team, see benefit the we're in in field, terms being really also positive from the positive of we've that


[Operator Instructions].

Our next from comes Nagel from Oppenheimer. Brian question

Brian Nagel

A couple of questions.

the to inventory wanted of for your future? logistics you ask remain discuss about your rebuilding of today, we to this latter And the So of for constraints in the to expectations more foreseeable light duration the we the part year? think environment about about should for how of

Charles Tyson

question. Yes. a great Look, that's

in prevent product, that greater our those for contracts. and And with categories. But market think substitute globe have and going on of and about of did and feel availability I lot teams of we near innovate around from that and QX, lucky our constraining - read is into ability vendors region. our continue if the a call, a a strategic can really work new in I constrained to product and SKUs teams I a a we're around of really international did a XXXX. we from accelerating allows in all bringing it for the into we'll cost to for think that country we know core between a on the don't from forecasting teams the now said lot cost that you and new of leveraging areas job And as it expect side about also XXX products perspective, future. were good and publications, through QX this a the expanding environment But a continue container container continues in very we perspective job us constraint we by great good terms environment from as how assortments, that doing our we outside is doesn't chain supply new go as freight great are partnerships to introduce lucky and products. perspective

to of we environment, headwinds of a is constrained how alternative where in great may it work able some country into arise our think those teams are So offset terms but the doing be to going about future. sourcing

to because inventory, impact us terms of specific could COVID month some as ago, the a have, COVID that port, none the particularly Hong freight unknowns through or so we move just control for cautious distribution normal didn't of you terms area inventories particularly, to return in continue out plan in based a of Kong major the of in of we days few more saw, of that. as shutdowns our and build just move the In Asia, to year to can levels. We're on being where

we this COVID just industry for as year. as that through a highlighted through rest potential we of the So move headwind the

Brian Nagel

back But of should give of one - with segue both like and And official about Okay. that tariffs. And talked earlier. balance the time respect tariffs impact I the recognize question, which guidance margin you're the to going my about of to abate. tariffs, next and disruptions impacting you COVID-XX a is think through How to good year. as we the gross not to fiscal over actually, again, how

Charles Tyson


of So I in August XX% I came would that, XXXX. think the tariffs a on of say couple one, back things,

the and the we over So QX of now fully move anniversarying time QX. will inventory, be as we through

Q, we tariffs our China of the dramatically. Second, come our from down from that amount see as can has pretty are purchasing you where product

structure positioning merchant second, talked will innovation. that in headwind initiated offset But product past. through. and lot X we about about really our new the that, third, flowing very we've country probably us which value and this, we're helped both also doing some talked pricing, good believe also pricing we've product spending have of finally, everyday in practice. pro help sourcing, And focused everyday and more have and pricing targeted all business headwind has going be to mix sophisticated Pro we launch us that's margin really one, X proposition. development that's to lot us And of us time We haven't on lot tools a We helping on pricing how is our now promotional a our augment are of our margin which teams that months ago a a to a we've so through work And pricing on said appropriately. fronts: allow managed alternative to

volatile how tariffs, the a to job are manage in through to use environment. the innovate, on whether So looking there's while tools just new a it's capability gross put we on raw that in doing the teams at how fantastic clearly, environment, material to margin


are Instructions]. [Operator There questions at further no this time.

to the So I'll hand you. back I'll call to back over Tyson. hand Mr.

Charles Tyson

our on Thank you, we're joining operator. long-term transformation today. initiatives, of reiterate to the making everyone, progress well the position going success us to excitement that's and that company. for I want Thanks, our for around our us

quarter. executing you. Our to teams and our on focused everyone half Wishing you to and intently are performance updating profitability second drive in next the growth on health forward we and strategies Thank XXXX. look of sales good safety, our


conference today's call. concludes This

may You disconnect. now