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Ethan Allen Interiors (ETD)

Participants
Farooq Kathwari Chairman, CEO and President
Corey Whitely CFO, EVP of Administration and Treasurer
Sumit Desai KeyBanc Capital Markets
John Baugh Stifel Nicolaus
Jeremy Hamblin Dougherty & Company
Cristina Fernandez Telsey Advisory Group
Justin Bergner Gabelli & Co.
Matt Kupersmith Iron Compass
Robert Griffin Raymond James
Call transcript
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Operator

Good afternoon, and welcome to the Ethan Allen Fiscal 2018 First Quarter Analysts Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions].

As a reminder, today’s program maybe recorded. pleasure Administration your and my Executive Corey now President, Vice CFO. is to host, introduce Whitely, It Thank you.

You may begin.

Corey Whitely

and XX, in first Thank details non-GAAP you, conference ended is fiscal Allen's will and where supporting webcast find to welcome the conference live referred on September being information quarter on recorded Jonathan. Good contains this call our of afternoon for press including and which XXXX. release reconciliations call This call. to you ethanallen.com Ethan also our release,

a reminder, forward-looking no today updates complete Chairman to a our results. is comments to this obligation remarks, cause uncertainties opening our that to are on will will provides during revise After for assumes Farooq discussed will results the that, statements As which initiatives call. review telephone Farooq update or Kathwari. CEO, include for then of subject our the Farooq Kathwari, questions. differ actual matters and some here lines refer his filings forward-looking and materially. further those With Please to any before opening follow on details financial risks. risks SEC ongoing up company could with business I our provide The

Farooq Kathwari

Thank quarter discuss you, our I’m to results Corey. pleased first and focus.

strengthening many be better areas more which brief in celebration disrupting by than we our continued you profitability. We enterprise. of and relevant many of to in our technology or year technology us our initiatives provides of and sales discussed of to place offerings, attended workshops. expansion various will know, manufacturing convention of structure, from team production increase American with our be in we members unique utilize discuss stated us in North and included and environment disrupted. our the personal continue combination week, of last channels the After integrated that financial the main products the which disrupter changes all grow XXX overview, development focus will a enabled our today service These take you I continue vertically Corey XX% to held to talent, you the attitudes, XXth was enterprises. efforts, As Corey? competitive economy, marketing in sales, the of help consumer our of a before areas I’ve of

Corey Whitely

you, Thank Farooq.

delayed orders summer both written XXXX, facility. X.X% locations, five For company's X.X% our design company to the Houston couple from net route The ocean which shutdown five an were in to delivery through an temporary products the X.X% Houston plant and design in Harvey upholstery from a for the Carolinas effect year The disrupted closed logistics, wholesale for Oklahoma quarter including without more disrupted Hurricane were total orders increased also hurricanes. hurricanes arrivals retail orders impacted prior the Mexico, written quarter. the independently company fiscal plus increase disruption the Houston the of as of shipments have segment and the railway the Hurricane key sales. centers a XX written first with in first and freight shipping company's operated than were our of Texas, week, by the Florida, quarter, centers distribution in the and on locations the from Port would anywhere which Harvey. into Design Hurricane were of centers in market, impacted centers with days delivered in in company-operated for the increased XX total estimates XX coastal design markets affected by company-operated in Irma; centers operates. followed

our quarter. in million in of operating gross of prior quarter. XX.X ended during from quarter. centers, quarter products the quarter. due variable margin the margin hurricanes was disrupted which were million year the quarter XX.X% We capital included included year X.X% of consolidated XX.X million was for with approximately in sales primarily prior Adjusted compared the the International that Adjustments advertising the XXX.X also and first X.X consolidated We wholesale to were XXX decreased the prior sales orders our sales Part XX.X% lower million. we in XXXX. and sales of division and operating associated of X%. At September new Our net for production XX.X% segment new related The to backlog costs that quarter. prior and in an share prior XX, the million XX.X% expenses was the made XXX mix per reductions year Adjusted adjusted with consolidated million compared $X.XX termination retail quarter. million X% have was distribution impacted the by to of to of by of first-run That early headcount XX, in products. wholesale $X.XX costs. hurricanes included increase XX.X the estimate lease. prior compared was design first-run sales in retail year sales were XXX.X received were net expenses net wholesale lower to XXX.X year, an the quarter of wholesale to XX.X% related the compared income XX.X% to June company-operated million consolidated orders XXX.X in the up the division year Department increase and million of is sales to current booked to backlog negatively Consolidated year net XX.X sales and State, the from the in of for compared were headquarters net quarter net quarter. the costs that XX% organizational Retail and to the were net of production some to changes compared a quarter and backlog

the term reflected affected on and million for charge reflected of income estate. the sales extinguishment other write-down unamortized on the items loan, financing real of to is of production by a related for expense year line. adjusted operating incurred were also estimate and adjustment $X.XX. quarter which charges a the The EPS tax prior We our calculation. X.X We these of impact the reduced EPS disruptions adjusted and the All to hurricanes $X.XX sale to expenses first-run of due the the early

XX.X%. was remains Our XX.X% rate effective tax rate the company’s structural The for quarter. at

no strong balance term debt XXXX, September have loan we facility under during We a paid outstanding off had having At credit our the quarter. sheet. XX, the

XX.X total and Our totaled securities million. cash

to year quarter out capital million, prior of and X.X we X.X quarter paid of XX.X% invested X.X quarter. the in an to we During the in quarter, dividends prior compared for expenditures year million the increase million of the compared

capital decreased With in full September XXXX, turn the back by Compared We customer expenditures million. expect inventory for it XX, fiscal of deposits of X.X to XX.X XXX.X about and to million million year. that, X.X million million XX over increased I’ll Farooq.

Farooq Kathwari

convention attended as of Thank from team you, Corey. the design XXX logistics top many main the retail, largest company-operated highlights our included and We XXX retail overall by of of one focus during includes representing last locations, well total our members. retail associates the of for This our to currently The includes company were profitability. sales opportunities XX% is and which growth, key of centers in retail division. increasing The America. discussed event. North division achievements increase recognized the whose profitability our has design manufacturing, our associates week The more and interior our as North America management overseas of in number contributions XXX convention was than That networks. recognizing corporate

of For million total of while million represented operating retail XX sales. division’s million fiscal operating XXXX, consolidated was Retail representing XXX.X adjusted sales of consolidated X.X% the adjusted the for XX.X% income total delivered division of net income company delivered were of sales X.X% sales. with an sales XXX.X

the XXX.X the total due operating September first retail ending For sales X%. for division and for million of an XX.X% sales amounted delivered XX, retail consolidated of disruptions fiscal representing to loss the division quarter to XXXX,

Over opening more their centers area new markets and retiring retailers, logistic and to Lower locations centers relevant adding Manhattan; of in strategic design and area teams. them Downtown of design the acquiring Atlanta in We’ve the design repositioning from have the Flatiron years, been also in locations Chicago. we strengthening management, recently been Buckhead

to the transitioning incur losses have continued in the years, retail network. we Over

losses million, respectively. X.X XXXX first the of fiscal for locations and quarter and the to in million XXXX, attributed fiscal For to X.X amounted transition

income As at forward, division the years our few we an operating last move operating X% years. the compared retail in few about in is objective next X.X% to adjusted company of our of to about income operate

As I’ve stated of convention increasing and priority our our opportunity. we a at The is major retail discussed business. is profitability wholesale area in next our growth division about

in business million operating retail division XX.X% to division of The products of as sells fiscal sales wholesale customers. of wholesale company Our with all as XXXX the outside XXX.X well income adjusted sales. had to

and XXX.X income fiscal first quarter the For million sales. of an of XXXX, adjusted had of operating of wholesale XX.X% sales

During the operating sales, margins. operating the of wholesale XX% wholesale sales. last With averaged operating years, gross increased income and three to division has leverage improve has adjusted

our we State contract with are expanding U.S. In addition retailers, independent our focused Department. the from growth international association retailers to North American on business and our including

XX.X orders July million wholesale on of the Department, went Xst. including first program Web site State fiscal the XXXX. in The million on for during XX.X received FedBid the have We live quarter

hectic last ending garments bids September after the of During a no XX. year month the October, were issued quarter fiscal of

November. the expect to We in start again process

in process developing of with special organizations Margaritaville business also the relationships and contract are such Disney. We through as

XXX-room with The homes Florida. about involves a Margaritaville hotel X,XXX furnishing and Orlando, first project in

completion the should increased to a our complete construction the homes as sales. X,XXX are visiting increasing expect and Disney such the by Chat The for year our to start digital and with centers benefit to main of the is quarter We in design customers estimated hotel in based are Amazon mediums The focus over interior A homes EthanAllen.com, first in the fiscal ship our the design of on this hotel on result as and scheduled furnishings the expect three-year designers shipping period shipments interacting and XXXX. professionals. of Live built. fourth of fall about online

Uptown we to expected new our convention, Passport in consumer our April XXXX. consumer During the network launch, This the XXXX. in introduced launch with the projection follows our November

strong characteristics the and elements while is with relaxed which relaxed Uptown, implies, global and category, included offerings, During formal more been developing as the inspirations expanding world. livability. has three in has still attitude Monica, on the places Santa the our from Brooklyn. a more the while in maintaining of Passport, our of past years, focus Buckhead name many main

new As well received the our associates. with Passport, products by were extremely

our interior strong talent about of stewardship, We including motivated motivating competitive training the other risen management talent of X,XXX teams than Our more competitive and the XXX is and knowledgeable advantage social our focus and as major maintain and and our was whom is design, reduces focus retail. at We, North X,XXX have our retail in regard retaining manufacturing, most motivates managers, The retention designers major America alone and environmental merchandizing, marketing, acquiring, a manufacturing ranks have and division organization, also our it a responsibility and In we internationally. safety advantage. strong logistics the of in clients initiative associates about and of a Acquisition, a focus and major convention. with on areas in-house discussed through in costs. technology conference, about focus. the we

now to about and visit through consumers our Disney. our design Our expanding and of first who more Shop marketing us to centers reach XX% on Amazon consumers; via digitally today, visit EthanAllen.com focus

the quarter, developing first on focus During efforts relevant we messages. and stronger our

was to three change quarters. spend quarter decided the in timing first of process, advertising the to of some we the our following this While from

in continued mediums. the our to have while more increase digital reducing advertising We mediums, traditional

represented X.X% the spend of previous to in advertising Our X.X% year. compared sales

marketing entails need reflected also We that which our in to is in on the mind a compensation advertising keep expenses. not Amazon

significant, first to quarter the expect not it in XXXX grow. While we of fiscal

logistics Disney design our quarter our We Amazon. reality. Our our business new while we to increasing our capacity, designers. most continued initiative designers networks. we and were Last and interior the chat. with online clients, rate continues few is the interior year, designers number our and number getting visit in are received, launching demonstrate with and designers. retail stage, grow, XXX interact from the qualify on about These on Combining just with initiatives convention, to At workshops very for technology having chatting the with and marketing At to interior personal across to by years appropriate craftspeople our service manufacturing centers even in on continues saw the those to online, and manufacturing, like focus in Currently, our this faster started were technology especially strengthen delivery focus conjunction logistics. qualified well our live last investments for last discuss we at the the in manufacturing hand These We of discussed of division do. been work a quality. included that has the are they expect stronger grow.

all Our our for with and the convention served initiatives our of team. reinforce areas I’m of for pleased key and enthusiasm and motivation company associates to these focus the

Corey have As our balance mentioned, strengthen we to sheet. continued

As of XX.X September million. hand had XX, customer and deposits zero We on XX.X million. was of cash debt

from in During our were of fiscal year. free XXXX, cash In previous $XX XXXX, XX.X% fiscal million, of dividends representing the dividends the cash million first XX.X% we distributed a X.X increase flow. quarter

cyclical also mind it that, a industry. keeping We for up continue review questions we open or will the in comments. to any Jonathan? to With while opportunities our we cash are that in best utilize

Operator

[Operator Certainly. Instructions].

comes the of from question line Bradley Thomas from first Our KeyBanc.

question please. Your

Farooq Kathwari

Hi, Bradley.

Sumit Desai

Sumit This for on and for my Desai Good afternoon, and is Brad. Hi. line questions. the Corey, thanks taking Farooq

On run the the of capturing? fiscal how think XX.X the whether a we extrapolating any there, can that percentage that million you’re quarter what rate talk Thank State there’s you about specifically in you. first orders seasonality Department to should little the and orders bit contract, more about and year-end think of given you

Farooq Kathwari

to Yes. is in do the orders. just Sumit, somewhat sense this quarter large is the quarter government the last and that last in got this started when tend for they known give this

annual again as open see close is that FedBid it The million before initially approximately to does degree as – understood the reduce we up they $XX it going the that some contract we’re to FedBid. to So amounts.

case. I So think is the that that

we know to anyway quarter from I last million the million even completely talking $XX but numbers, quarter of believe all do substantial keeping a not We the get the You’re the did strong. that about is in though portion $XX contract. mind

Sumit Desai

I I the launching November majority represent hear. on Okay. is significant in If the could the talk be product and to presentation the That’s about space? production first-run Passport backlog, how assortment your the that could great to new the believe of retail you’re and floor going in increase and of

Farooq Kathwari

The The orders Passport backlog wholesale is retail different than is really our because backlog. our the sold impacted backlog retail to wholesale the backlog customers.

at the retail level. no background. It basically had So impact Passport the had on wholesale more

the really So customers. sold backlog retail was orders to

Sumit Desai

or your to Passport? you can And allocated floor what space of Okay. comment maybe on significant percentage how

Farooq Kathwari

It’s relatively small.

guess are introducing XXX would lines. one, next so. square Even is very We or I product the XXX the had – if say Uptown very, more than I to tight. about Very just no feet careful

Sumit Desai

great. you. Okay, Thank

Farooq Kathwari

Sumit. Thanks,

Operator

you. Thank

comes line Our from the Stifel. of next John from question Baugh

question Your please.

Farooq Kathwari

John. Hello,

John Baugh

up tell this what I know as the I I you it with on point that, advertising on and you’re as basis Farooq. key a the follow expansion and I margin. advertising driver was quarter. Could I on in is XXX touched of you moving Hello, you. up plan well apologize, know tightening the about Thank in about maybe is the you commentary. leverage And promotional forward. earnings point the quarters three talk to activity? us talking that missed next retail maybe the believe conjunction

Farooq Kathwari

versus John. Amazon, Okay. that this X.X% quarter now our said advertising are I like used in quarter was advertising for year. digital Good, X.X% the and the throughout the not previous advertising mediums, doing the X.X% word the that I we traditional or

we of think to not, we impact. of I that say whether us business. we has it’s talk is somewhat have keep have on one when make like that have promotional a others. take for in that might they it also we at we John impact also or the – to there the small more But offers forward relatively Going look to keep in of also compared also to to mind special advertising, the even though mind in discounting the got terms going higher you and in we Today,

more have of promotional and our that between we similar spend advertising our range traditional would today. be would I to activity X.X% will manner X%, say forward, in Going anywhere the what

John Baugh

improve? strictly – be would that related, keys What cost margin it And reductions the making activity? there what are reduced the retail would volume then happen? is does planned, in promotional Is how be there to

Farooq Kathwari

important when XX% over have X% – take operating to produced The a look an profit. this our that’s Yes, question. already profit, negative you The reason centers it lot of design operating our a top so like at due volume. X%, a even is of

it breakeven. quarter, this in decreased the volume on impact our As an has

is tremendously sales So increasing important.

see already we at any level retail that margins. are a at impact at level We wholesale our incremental significant have our see and level. that will our where sales We on a

So increasing important. is profitability

we that has many locations the years. The of this what our not good continuously losses of have five are we at stores. in process news these these is and process second will give them. up have and through that retailers major relocated independent to and then That The in from down we’re transformation a the we that that been over towards have gone we have we think retail transitional taken is catch an stage I opportunity we the us that slowing call last have

John Baugh

pressures any material popular inflation? you. any Are think I’m Thank today? the there already that adjustments year you? I for Any you material pricing did needed issues, guess, turn can not pricing I your [indiscernible] there on mistaken, Okay. but given raw if topic raw

Farooq Kathwari

some significant sources price there’s some nothing increases that from we John, the that be took. by not will always but pressures covered

John Baugh

luck. Good Great. Thank you.

Farooq Kathwari

thanks. All right, John,

Operator

you. Thank

& line of Our next Jeremy comes from question Dougherty the from Hamblin Company.

please. question Your

Farooq Kathwari

Jeremy. Hello,

Jeremy Hamblin

things some on the taking you’re congrats in programs. could if of to wanted these and on your questions the I Thanks seeing clarify Hi. some for I traction see backlog.

I that the a over XX.X% retail increased by $XX nearly those to in those year can at demands backlog if last time your in you of the you and in given going add you to and And deliver forth? backlog backlogs? that’s So on months. three the almost you backlogs backlog million the look production How of that growth, you give color take holiday me the to quarter. when probably combined Can it you is and million wholesale think if your down work $XX sense long increase so provided, just

Farooq Kathwari

to about I and would half that that delivered in expect quarter. say quarter about of next the half this Jeremy, we be

Jeremy Hamblin

like you questions sounds Two expectations. that a that, And as traction contract on the kind your here. follow surprised Department the of even highest it to on maybe State got

the is guys is, to putting bit that than the orders and grew orders to first and the could assume little believe retail line it why it at like – sounds reason much that early a it. time The that of on fair second an you’re front not some those process the of it last it you’re extension? delivering given in the But XX-day is needing an sure did. newness more I that of went over deliver size and have online requirement be your contract to and it that you the the as of maybe any prioritizing captured July? to to one there you is I’m of were then XX% some backlog since that that ask posted And of on as to risk like the a

Farooq Kathwari

of orders. XX% say from what get Yes, understand we Jeremy, did we fair the over it that is to

were the and requirement – were lines was product product our of lines some because also not current XX-day We that challenge is we of somewhat running. the a

line 'XXs. the the they like Georgian a bring it’s fact, and called because selling brought the we were had we in back – lines century and of and it. that of We an that design XXth some 'XXs product in Court product XXXXs to was In one

line were going we collection. have to time. and producing in the a also samples on same At product making we relatively So floor of did Passport this short period new get our time

Department news we All receive some the retail that timing the not orders be as the all good of far catching sold we the this orders, for so embassies bit the that would And next backlogs all some to as are quarter. is about half good I little with covered they good any previously State we period, half is because in the John this that of that after of they and creating touch those don’t us. have And and and contributed in expect want are a had division One now this place backlog, it concerned, our quarter the to of is issues. in they to thing extended those as on in been also the we of orders this. has fast did for also time I mentioned think works team

Jeremy Hamblin

hop then one Great back queue. more and to just in I’ll hear. the And

about only you operating adjustment your there, XXX,XXX. said the run $XX given was think expense rate, Your quarter down in what million advertising like I the was

terms of million, sales, In variable realize even more rate a think been million your related XX thinking sales to which it last – is and XX there’s where I up rather number the quarters look does closer but XX range? a is $XX I normalized million couple or being the of like was component run in down to that on million, than if you’ve

Farooq Kathwari

our and our did margins. cost order the Yes, mediums advertising affected which in of advertising just traditional because you tell we goods spend – again, money word I to use

the think $X advertising was I or so. down by million about

Corey Whitely

of X.X% X.X. last was this sales year year It Right. [indiscernible] X.X% versus

Farooq Kathwari

next was Corey, What the that had? Jeremy question,

Jeremy Hamblin

rate run run have and On of it it bit? maybe Is to a assume? higher Is that $XX a the been like equivalent probably back just million to about operating sales that’s pulled where that bit been as feels it’s would margin to opposed if fair to or that something last year, $XX it little or run previously. rate, you like million term like your rate, getting a the tracking normalize you’ve longer expense had million $XX looks it little part to the be tighten looks slightly

Farooq Kathwari

for variable the costs. end then payment costs the we designers. retail to that have little costs a perspective variable and fixed instance The our especially business, interior on of give have me we all Let in because

of is logistics Our somewhat cost. variable a

chances operating expenses So higher go be as our don’t they’re lower. amounts, mind because will a them the our could sales. will I dollar we higher it in having higher, But because as in increased percentage, increase or sales go are and they same

the but less. On side, costs, obviously wholesale there some variable are

an the mentioned, do level as certainly the the both operating have leverage, on at and – I much we So also at level. wholesale very retail even

So but At I would increase based costs in this that could million there say is the leverage overall about $XX on stage, business. rate. increase is the run

Jeremy Hamblin

I in of guess that you’re wholesale saying growth deliver over a it’s is because Understood, you as quarters what next cost much the this won’t as order, in wholesale backlog, to correct? couple your variable massive because translate

Farooq Kathwari

That’s right, yes.

Jeremy Hamblin

luck. guys. great. Okay, Good Thanks,

Farooq Kathwari

Jeremy. Thanks,

Operator

Thank you.

Our from of Fernandez next Advisory line question Group. Cristina comes from Telsey the

Your question please.

Farooq Kathwari

Cristina. Hello,

Cristina Fernandez

Hi. regarding Good on how you could relocated margin the up commentary the to opportunity your stores benefit afternoon. being follow I wanted operating from profitable. and more

get how long few you ago, sort normally for that years like back of how As digit margin? does were stores look a operating to take, of stores it at the that relocated years to many those some mid-single

Farooq Kathwari

It – – takes to one generalize upon years. we it is there But depends if three I I would are, on where to of volumes what depends locations are also would simple something, between say the two It formula. no had we doing. say kind

Cristina Fernandez

and has what through with design site? topic selling guess regard you better And been helpful. so on different far share a Web I can the Amazon site, interior you’ve what Okay. to that learnt That’s

Farooq Kathwari

established both learning because bit for just was as Ethan sides, early know of as studio a It’s a it what the because Amazon somewhat on this experience selling commodity. a not you was an design we Allen little

is fact with to which bugs of a amount in operating, them going time it still We some but and get but is which chat live operating. also fair established took now

the customers. have is So expose we what to it learnt does more fact that us

do said We seeing but of folks lot some on as are business I also come into meet doing earlier a we our centers that our design Amazon, those and clients. are

we then the the any a early live do live them obviously It’s direction. And of to are going right if we’re starting chat, they I in for credit but Some Amazon chat. little do think sale. bit

called guide. fact, they just holiday In launched them what we a have gift with what’s

they So we heavily from items items few three participated they’re so other as many in items, that very us are doing or with two marketing too. with those

may gift from holidays. most be Ethan seeing two three guide you the those as of Amazon Allen part So probably or for items the

Cristina Fernandez

you’ve on like Okay. to the some if that international and And Disney doing channels, last is How of And you expanded new one collection. look then DisneyStore.com one the to locations? as changes and Passport months, that? do plan same next you your Uptown to to or over centers in Disney of design square you the the footage introduce the remain six expect to make

Farooq Kathwari

Yes.

to of seen – for of we concerned, give space our And a space year, to have introduce for and some half. a fair they’re a amount next we’ll States utilized We United increase then more that been still is summer. as year be the space a as Has then but other the space will an And that it is rate it fact in in before. it reasonable about programs are objective was intending in in the I somewhat comments my what said approximately well. was China, far doing as give

Cristina Fernandez

Thank Okay. you.

Farooq Kathwari

Cristina. right, All

Operator

you. Thank

Our next & question Gabelli comes Co. Bergner of from from the Justin line

question Your please.

Farooq Kathwari

Hello, Justin.

Justin Bergner

Farooq. Hi, Hi, Corey.

Corey Whitely

Hi.

Justin Bergner

couple things. on year, X% last Just of be want is advertising of thought? now just to clarify is sales versus order going to of the the that over X% X.X% a current The spend to

Farooq Kathwari

the of we between time X%, I advertising only in went to been the of our think X.X%. range Most – perhaps that has had have there’s it X%. period that one Well,

really it it – – X.X%; for went And last so of have that’s if at you a X.X%. where X.X%, to our fiscal we it was did question year is – we have take it, a look before did that

will X% between range it Justin. think I X%, and So

Justin Bergner

that’s the a program? And regarding made overall at something there Okay. I the Department. beginning Thank the affected that then the I you of think the Q&A State you. comment of size missed Was

Farooq Kathwari

And What I competitive, opinion. that said degree has contract put – the I on think it you makes the done first to has one the this was more it because State contracts. got this Department on what bid overall is has some which made it it our it has that to every FedBid so this it in is time the of lower

Justin Bergner

actual Lower or merchandize? the ASP the amount lower of overall

Farooq Kathwari

No, overall. be $XX They’re still less million. significant. expected to probably close that, somewhat be will $XX pretty million to It but than or

Justin Bergner

it. the mix you versus it margin And on mix wholesale expecting Department then the are is to business, your or got margin? State up Okay, down

Farooq Kathwari

in – very the margin an It does it lower because incremental FedBid. somewhat at of even overall manufacturing lower we because it positive what get retail. margin, is somewhat of impact creating State our major most be may this operating of creating our selling more creates will margin having be business the than has regular has improvement it Department incremental probably for a it though said But than an from margin opportunity that,

Justin Bergner

Okay.

put just business wholesale pace you might business? around So the it a incrementals to on at today margin look it words the even be though the standalone lower were if keep in to that, with basis, margins would

Farooq Kathwari

a putting That’s better right. of way That’s it.

Justin Bergner

up. that cash then to plans it. other resume do balance, cash share got or with balance is And Are any there your activities? building Okay, anything repurchases

Farooq Kathwari

going that are to always we mind. Justin, in keep

with mind have we sometimes do and we been money I the decide know, always then having in But over proactive. to don’t bank As some what the you years it.

Justin Bergner

do --? you too Okay. get don’t with a Does cash repurchases? of which sort the if point balance to ramp sort you Is of big want there dividend at just special a

Farooq Kathwari

that done the past. in have We

purchased have We stock. our

given special have dividends. We

of under consideration. things will all be So those

Justin Bergner

questions. right, for you my thank taking All Okay.

Farooq Kathwari

Justin. right. All Thanks,

Operator

Thank you.

Kupersmith from question Compass. comes the line from Our Iron of next Matt

Your please. question

Farooq Kathwari

Hello, Matt.

Matt Kupersmith

Hi, guys.

few a business. on the retail questions Just focused

retail dollars the up down per the per the First on order, in year-over-year? dollars business were order

Farooq Kathwari

Matt? retail – – ticket orders, you’re retail tickets It’s orders No. or of approximately talking

Matt Kupersmith

I’m however of dollars calculate order. the per about talking the orders, amount retail – you

Farooq Kathwari

approximately Our the as is last year. order same average

Matt Kupersmith

trying I’m more events. weather of guess business I your small And only how like the But again up negative were pretty X% Okay. for quarter, actually comp. company-operated stores it to put either hurricane the understand closed looked a a guys And impacted number retail you specifically. the

impacted put you So it? reported Havertys know around one how metrics competitors them? and has maybe of could some in specific some your I weather metrics more

Farooq Kathwari

Corey?

Corey Whitely

retail for sales is on say would written which delivered actually to, up. you’re I what the orders referring Yes, that were

sales State were that hurricane and then the had for orders delivered new production, product the things the production Passport collection. impact the new quarter the Department of part our plans and On and there and first-run sales the products new was on an it the both also during impact of delivered two

wholesale backlog well. mentioned, then that as So shipments backlog the then little also increased, bit increasing retail some as which impact delayed being created the retail Farooq to of as the impact had a on

been sales less then orders it flowed through So would had backlog have retail much not of increased, impact. the have those would a delivered an and

So it’s new both really as combination as of production. hurricane the well product a

Farooq Kathwari

everything delivered I It think in the other difference sales I is else. and hurricanes the will case that our lower. written our that our despite say increased is was business

mind. that So in please keep

Matt Kupersmith

of you quarter think for Can Okay. commented And October? orders I on a at guys last sort real-time July. in you that look provide

Farooq Kathwari

early. bit little a It’s

XX% I the get of do month. well think the because early it’s XX% determine of last business this the how to going We in the one we is do. week is reason unfortunately week to

So a be the so We’ve able get very we’ll end for the month understanding and a strong this some October. programs, got better initiatives of obviously to critical month. is after

Matt Kupersmith

Got it.

thanks, Okay. right, guys. All

Farooq Kathwari

Thanks very much.

Operator

you. Thank

Raymond Bugatch line Our comes from James. the next of Budd from question

Your please. question

Farooq Kathwari

Hello, Budd.

Robert Griffin

bigger down or driving delivered bigger bigger the any Hi. or understand you It’s the help comp, was Budd, the questions. been have everything orders But my of for X% follow-up so delaying quick the collection on what two there comp Passport actually taking impact? impact? filling impact just but the the kind was I hurricane the answered, way about parse to is Bobby the appreciate has delivered the questions. Corey us of Most Was detail in delivered I

Corey Whitely

and the bigger production combination Department was the and orders of State the and was impact the product hurricanes. Passport new impact then Yes, secondary the

Robert Griffin

Okay.

Corey Whitely

Because affected new production everybody.

Robert Griffin

a And of production does impacted it Okay. inefficiencies some expect just take level used that now to a of first-run kind the forward for the or have back quarter moving you than then production one gross basis that or that to from the to you you’re more me of first-run on a that, return last back on so normal terms and to to get efficiency production. everything would in margins,

Farooq Kathwari

is XX% it about will first-run, will go or and But so behind then – about over Bobby, be most XX% next the of in the quarter. to about us.

Robert Griffin

a stores? Is think that year do a kind and X%, today, I number And our the room that base margin see the about couple for still Farooq, XXX you’re comfortable Okay. does that That’s in basis? we comments into your model with helpful. or company-owned about your do you thoughts basis, long-term then being goal estate of how How real guess the play real store kind retail quickly, about on of expansion?

Farooq Kathwari

That’s require Yes, to it business is are do. Bobby, I do. will X% really to something think because it’s covered. got is overheads our we’ve that some incremental What what going

our I XX% top average over As X%. design of centers said, – top our

to fact forward, the more we So centers. now degree that focus great our do XX%, we Because locations, have completed And is we will better stores and pace to have are that going where much, XX% we less. is more but the in change believe stronger teams done, transformation to that’s by a need much have of the volume of that our now be that relocated. of is. we design go as we some objective our be the I acquired we and

to our give have opportunity we So of separate. as give these for And start-up We an don’t us retail. as will them know not that expenses. give you part our them costs

Robert Griffin

new a you apologize asking day the or redesigns apologies, Yes. XXX, the so in anything past I something give terms us touched the of or and kind many relocations have you’ve of of type of might is that last like how statistic much kind of touched this for how if And any in those maybe years But my of you’ve modern do be of to location? out it. of or and style of in sense in couple the on

Farooq Kathwari

I today. the great were things locations. majority stage say Today, stores this will of the it this locations process that foot we’re process the XX,XXX is opening different, opening we said, X,XXX I that’s to need continues. XX,XXX XX% they in square I foot so continue, in would stores – locations. plus would square our be XX, are to back But say As the a XX while is that recession, I great were will before that say years at

Robert Griffin

Okay. of I Best very appreciate going all color, the helpful. additional luck forward.

Farooq Kathwari

right, All thanks. Bobby,

Operator

Instructions]. [Operator you. Thank

is a from Jeremy question of the Hamblin Dougherty from next & follow-up Company. line Our

question please. Your

Farooq Kathwari

Hi, Jeremy.

Jeremy Hamblin

follow-up Hi. Thanks the opportunity. for

those In volumes? XX% terms what better, their margins generating unit are or of top of your are stores that average X%

Farooq Kathwari

It total upon Its look million to depends relative are, of their they to other are they is interesting XX say cost from what their how what expenses. where is, X maybe doing are, I all their something average Corey at it’s can but Jeremy But would it. much they range million. occupancy cost can sales

it is right board. across Right, Corey? the So

Corey Whitely

Right.

Jeremy Hamblin

just fair other And then follow Okay, here. enough. up

it by storms. issues of was that clearly, first-run margins, sounds to logistics impacted gross productions some couple things; Your like a the related

over over your margins a couple given margin you your division gross a to next sales comfortable still as for is and still Do the of bit your solid You XX% generated wholesale towards even feel quarters? those skew target likely of kind pretty headwinds having down a X%. business though gross little

Farooq Kathwari

a That’s good question.

That one our course at fiscal first went XX.X; over quarter gross fiscal of we last is look margins; we year. of a XX.X; take you the had fiscal quarter 'XX, XXXX, XX.X. XX%. 'XX, And If

is healthy higher XX%, XX% So bottom. drives down issue important I really more very having that having line. it a would then margin. That the is say stock gross The to

Jeremy Hamblin

do that margins the going this that to you’re even your business, is wholesale you Right, the point much I’m at have hurricane guess with have impact I’m not better understood. but current operating driving I or a margins business gross next assuming assuming likely lower overall. we bit typically a that skew that relate just the does you’re because have but of higher have one going to unless wholesale quarter more, I’m little to though

Farooq Kathwari

It does.

mind And keep think to right. in absolutely what we margins. I need is the operating really see You’re

Jeremy Hamblin

Right.

Farooq Kathwari

it’s impacted The are gross our that’s also are both operating matter. our of discounts. opportunity. Gross – margins are And really have margins some fine the where even margins but we and special that by offers,

that relevant. just we assume continue have today So we stay to to

giving is customers different. deal to XX% our We special XX% they’re to over because everybody do But should have with. our what to our we got we XX% to always designers there also month else It’s with How every for clients. a when new discount day off have – for easy with for new in thing. used and is that we maintain we to convince give figure that’s our to major would come create people credibility do and – clients, something we not out every us something what

importantly at what looking content healthy we maintaining I think So really I’m have a operating is to maintaining margin healthy but and more gross a really with that margin.

Jeremy Hamblin

luck. Thanks. guys, All right, good Agreed.

Farooq Kathwari

Jeremy, right, right, I right? it, All Jonathan, do think care. take All that should

Operator

sir. Yes,

Farooq Kathwari

Corey. Thanks Any good and call very everybody. questions, please any to comments, to talk much

Operator

gentlemen, thank the your And you. for today’s does Thank conclude ladies participation This you, and in program. conference.

disconnect. may day. now You Good

Farooq Kathwari

Jonathan. you, Thank

Operator

Thank you.