Q1 2020 Earnings Call
[music].
[laughter].
Ladies and gentlemen, thank you for standing by welcome to a cure rates retail Twentytwenty Q1 earnings calls during the presentation. All participants will be other listen only mode. Afterwards, we will conduct a call.
Question answer session at that time, if you have a question. Please press star one on your telephone.
As a reminder, this conference is being recorded may 7th.
I would now like turn the conference over to coordinate young Chief portfolio Officer, and senior Vice President of Investor Relations. Please go ahead.
Immediately following stepped up government response.
Sharp fall off in the second and third weeks of March across her U.S. businesses, she looks H.C. Lily and cornerstone.
Experienced similar impacts and an international market, but the timing varied from late February in Italy to the first half of March in the U.K. in Germany and mid April in Japan, following the declaration of the National emergency.
We also experienced significant product margin pressure.
Business mix shifted from higher margin fashion products, the lower margin home categories. Additionally, we incurred incremental costs as we adjusted our practices to ensure team member safety and wellbeing.
Since late March after the initial destruction, we saw a rebound in sales.
Tumors adapted to the news stay at home mandates and we adjusted our merchandising programming and marketing to better meet her needs.
Over the product margin pressure to to category mix ships continued and we incurred further covert related costs.
Additional paid for our team reduced productivity standards in our fulfillment centers, which is also leading to increased fulfilling the times, an additional bad debt reserves, partly in anticipation of the deteriorating economic situation.
We have been focused since the onset of the covert crisis on four key priorities.
In our Tuesday.
Adjusting our consumer taking action needs to be relevant this environment.
Are costing balance sheet and supporting our communities.
To ensure the safety and financial well being of our team members.
Two to three prong approach first we enable and required all team members, who could work from home to do so shifting over 10000 office based team members in customer service Representatives worldwide to work from home.
Second for all essential to members, whose work is required to be done on site, which is primarily fulfillment center in life studio teams.
Created aspect and environment as possible.
Significantly scaled back life studio operations strips, social distancing relaxation of <unk> productivity requirements in Oklahoma centres increased sanitation and many other actions.
We also provided additional compensation for all onsite two members as a form of appreciation for their efforts and their dedication.
And third we gave all central onsite team members the choice to stay home indefinitely with no penalty and we provided partial pay option to cushion the financial impact.
Rapidly adjusted our consumer facing activities changing virtually everything we were doing on air and online.
Relevant and meaningful to her.
The scope and piece of these changes or a wonderful testament to the ability of our model the value of real time customer feedback in most especially the dedication of our team in a moment I'll share more detail on these actions.
We could only manage we originally managing our costs structure.
Reducing capital spend and ensuring a healthy balance sheet sort of of prepare for whatever may come our way.
And finally, we'll committed to supporting our communities around the world with the $29 million <unk> really included $90 million, an emergency pay and benefits cartoon members and $10 million for initiatives to support smaller micro businesses, a team member really fun and support for a variety of community programs across.
Global markets and put in a major fund raising initiative in the U.S. for meals on wheels, and no could hungry.
Review the details of these initiatives and our April 23rd beliefs.
Now elaborate in further our efforts to just consumer facing activities.
Focused throughout this crisis has been to engage the consumer in ways that would be meaningful to her.
Knew she was looking to stay socially connected to the world around her even while being physically separated.
Socket speak to her in an authentic way.
<unk> into our homes and our lives in ways that created more intimate connection and shared experiences.
And the shift our programming merchandising and events for the products and the stories she cares most about.
We did not know whether she would be interested in body, but we knew we can offer her a respite from the gloomy 24 hour news cycle.
We want it to be her place.
Thanks for advice.
Payment.
Unity and a source of Joy hope and inspiration.
We moved quickly the tailor content across across her on air online social channels and profit to Santa No. One wants you to businesses, we've cookie sift through the product featured on air to reflect the dramatic swings and the customers interest and buying behavior, we talked about most of our on our program calendar and investing.
New programs that would speak to the moment.
Such as love your home with <unk> excuse is the U.S. and afternoon on Air Mini series, but 11 insights into trending categories of movie viewing pattern.
Increasing afternoon T.V. viewing.
You made significant changes in our online merchandising as well.
V.C.A. sit down and the literally all quickly curated homosexuals checklist for example.
You know new training categories, including home sanitation in storage Cygnus tools Tech resources for distance learning and beautification.
Leaned into our social problems with a variety of creative program.
<unk> close at home Social media campaign.
In our host lie springing from their homes.
Waging war conversations with fewer than gas.
Tutorials recipe.
And most importantly moments of connection moments of inspiration.
We conducted similar social initiatives across the international market.
<unk> hash tag Q.V.C. always with you can't pain, and a cornerstone Brandon roads hash tag make the door happy campaign inspired households could spread joy.
During their beautifully decorated front doors on social media.
We are highly encourage five the consumer response to do the action.
We believe speaks to the relevancy of our brand the diversity of our product mix the efficiency of our platforms for weeks consumers and especially.
Especially the power of our community.
Oh sure some details and what we've been seeing however, I would caution that these trends should not be viewed as indicative of what we'll see through the second quarter or remainder of the or.
None of us none of us can predict how consumer behavior will evolve and I mean weeks and months.
The economy begins with the reopened.
Now these records refer to the period from late Mark when we first thought and sailed through bound to the end of April.
Well I'll start with audience engagement 'cause always start with engagement up across all platforms.
<unk>.
Reflecting a stay at home consumer spending more time to U.M.T.V. and more time online.
It took safety and impressive growth and the number of homes do in T.V.H.S.N.T.V. networks each day.
10%.
<unk> significant open lives for you and in fact, if you have our live in a result content it over 100% class social problems with programs like coffee talk with favorite example, dry and large audiences.
A traffic for website is especially sprung up over 30% even higher growth rates from non customers.
I think you can U.S. social reaches up over 75% in April and basement over up over 50%.
It really is similar increases with web traffic not really 30%.
And it gives the current o'clock or cornerstone brands on or international markets are equally encouraging.
The tired engagement isn't turned translating into healthy growth in our customer base.
We're seeing increases in total active customer path to update.
That's all of our cornerstone brands and all of our international markets.
Built in both new and reactivated customer is a special encouraging the games across every business minutes that every market.
Looking at the surge in new customers <unk> for example, nearly two thirds of these new customers are coming to us organically reflection of the powerball brands and reach.
Remaining third are discovering us be paid marketing.
And the per cent of these new customers, who are making a second purchase.
Then a 14 day or 20 their window with both the classes from prior years and early but <unk> indicator that these new classes may have a similar lifetime values.
Given a success, we're seeing adding new customers, coupled with declining marketing costs.
Increasing our marketing spend the both attract more new customers.
Increase the retention of those new customers.
We've seen improve efficiency across all marketing channels, including paid social which gives us a pop ups platform to highlight are unique shopping experience.
You know moving quickly to convert these customers into lifetime customers with campaigns that build relationship.
Focusing on what makes sense to me.
Targeted emails digital nurturing retargeting and the piloting of additional social channels and add format.
These high levels of engagement and high levels of preferable grow for translating into consistent sales of the cube steak at every international market.
As Lily.
Cornerstones brands.
<unk> T.V.T. international the biggest driver brokers or off air sales.
It's like you know visually oriented consumer.
Is highly engage with our online property.
Especially Cooper new customers.
Example, I still can't see new customers are twice as likely to buy off their product.
And our existing customers.
And <unk>, 80% of new customers are making their pushed purchase online.
Yeah, I highly encourage by themselves for us to see but we are also experience in a mixture of the lower margin phone categories.
This is most pronounced stick to a page, especially if you see which historically had a relatively high fashion mix.
As a result product margins act to a stage in April ran down 150 to 250 basis points below prior year.
I think we still have a broad range of consumers in the U.S. going around the world.
Multiple businesses from Frontsafe with an average selling fights over $120 for the Lily with the selling price under $20.
We haven't you heard from which we can observe them consumer behavior you just endemic.
And they want us to provide some insight on the sales trends are seen in the late March.
Timeframe.
[noise] consumer of course is doing a lot more cooking at home and as a result, she just the U.S. It makes it then pulmonary demand sales are up nearly 40% you'll have a year and then you pay in Italy or up well over 100%.
Oh really kitchen, where is also a problem.
Food is especially from the costs all markets.
Looks good about 90%.
But the same time, she's trying to stay fit and healthy well stuck at home.
But not too soft Broncos the Fox T.V.C. globally, and then go home fitness equipment, including bikes treadmill and elliptical.
Wellness vitamins and supplements about also on a global scale.
He wants to be productive pure at home.
Strong demand for home office Smart home item.
Laptop tablets printers, and monitors are leaving demand here with people globally, we'll take the fan Lily all the string.
You need to set up all 16 rising demand video, calling devices, such as Amazon Echo Excel and Facebook poodle and she explore new ways to stay connected the family and friends.
Just wants to find ways to entertain herself and her family.
As a plane more and crafting more.
Passes up nearly 200% puzzles, performing especially well and it gives it the global interest and gaming and audio up's going on.
She's taking on home decorating plot project 50 strives to make the faces and spending more time in a beautiful uncomfortable.
Bed Bath, signing and kitchen with strong valid design and interior furniture rose at random loans.
Decor and basic like games at Barnes Hill, and we're also seeing a P.D.C.
Home scored than organization or office profit go see see and it just then.
Or yard or outdoors page that to a refuge right now.
He lives plants in gardening tools across T.V.C.U.S. and it's it's been growing 65% in April.
Category was also you up over 70% in Germany more than 100% and the U.K.
The data is also seems <unk> planters and garden accessories.
Outdoor furniture umbrellas and replacement fixing to also becoming well a friend game.
If you have the pool, she and her family or one of these wouldn't be spending a lot more time in it.
Floated front dater up over 100% than pool toys, Lily up as well.
Well, so focused on you know family safe.
And our house sanitary that's possible.
We really have sold well over a million dollars I don't think breaks they probably since it began sales early April.
You see the right top disinfecting back <unk>.
<unk> most drivers hand so.
When you do don't finish all sold out quickly and we're working to restock these items.
[laughter] globally and make it stands out searches for care and air Purifiers in the U.S.
Being strong sales of shark I robot Dyson, what kind of air Purifiers in Germany demands with <unk> double enjoyable versus the power you.
Indeed.
Finished shift toward self care, while she was interested in polar cosmetics right now she wants to maintain her skin care regimen, and it's also sitting at home hair Salon pot.
Ah Bath and body product also have strongly.
On the flip side. She is much more selective in her bully apparel, and especially purchases and these businesses are generally down Sunday across our company.
Nonetheless, we did see a few bright spots.
In a parallel to continue inputs and ask me here and sleep where.
C.D.C. globally, eight to 10 literally and gone itself.
Launching for me afterward, and casual brand the T.V.C.U.S. than it is going to choose when we continued to lead inside exclusively.
And we we want to be mine last month was a big success and interest in.
So it was also taking advantage of its ability to provide a platform for heroin, especially vendors who have been implicit motor business arose.
Continue to introduce a number of the plans, including motherhood maternity spectral on this mother's day.
Oh closest some initial thoughts on what we expect to see if we moved to the next several months and the economy gradually reopened.
Well there are many potential risk and challengers on the horizon.
Yeah also anticipate the people's adoption of a more digitally driven.
Home lifestyle will continue over many months and to some degree.
The new normal.
Focus.
Capitalizing on our current momentum and strong your customer acquisition delete in when this new normal.
As a leader in both easy and digital.
Abroad, and diverse product range and an AD trial business model, we feel were well position.
Well exploring what opportunities the current environment crepes.
<unk> to the strategic priorities are shared last year and away that positions as well for the future.
For example.
The further our product duration and diversifications gratitude.
Engage with a number of new vendors for easy to find new platforms for their products.
Many interesting possibilities perhaps.
Oh, so could spend continuing to find new often good appeal to get the merging stay at home lifestyles.
Well, it's hard to be a good hardener to our vendors, while others are slashing orders and we believe this will serve as well in the long term.
Drive video reach and relevance.
Quickly to take advantage of the high levels of T.V. viewership.
Example, by significantly expanding our marketing president on Amazon fire in advancing discussions with leading virtual N.B.P.B. partners preparing.
We've never had as many new visitors to our digital platforms until a moving quickly.
Idea of initiatives to optimize the site experience, while continuing with longer term initiatives to encourage daily digital discovering.
To continue expanding in our passionate humidity.
Up in arms that investment in marketing as others pull back.
And learning from the new customers, who are cracking, how we can engage them and we hope convert them for lifetime customers.
It's clear the tools that will ever change.
Tumor and competitive landscape.
Legally will be among the winters.
Those retailers, who are digitally driven and create immersive engaging experiences.
Those retailers, who have an intimate relationship with their oil customers.
Those retailers of the product mix and agility to rapidly.
Cares about at any given moment.
And those retailers who benefit.
Some great financial strength and resources.
Invest to grow Oh, sandy emerging challenges.
Let me close where I started.
With profound gratitude.
<unk> retail two numbers.
Extended family event with partners in debt.
They have responded to the worst circumstances in the best way.
I mean together at the key.
Supporting each other.
Firing our customers.
<unk> every new development agility and resilient.
And living in our principles to out.
I'm so proud.
Inside them every day.
<unk> alternate overt gesture.
Thank you my can get morning, everyone.
Mike mentioned <unk> pass on each real business studies.
Our net revenue for the quarter declined 5% and was impacted by approximately $55 million.
Related changes and sales trend.
Chain destruction closure of retail stores and constrained in some capacity, which delayed shipments of customers borders and talk to choose.
Adjusted or the decline 17%.
In part due to actions, we took the tech 13 numbers and suppliers and to respond laboratory to change and custom educators.
What a quarter.
But it affected interested organized.
By approximately $40 million.
The family do sales trends low profit margin.
Why are they caught speech a category ships into home product.
<unk>.
Baghdad customer returns and lower productivity standards for 10 percentage.
Elaborate more each business Phoenix, because I get through my discussion.
That's news to business segments results.
Qxh.
What a quarter net revenue without 4%.
80% smaller units on them and 1% lower A.S.P.
The estimated impact of code it on his Avenue.
$20 million.
This was due to the combination of the late shipments of customizable it isn't a cute too.
Partially offset you'd cut smolders late into court.
On the fly to take about financial presentation, Yeah speed that we had more closely aligned on discussion on adjusted all the bad and it's contributing factors to the piano.
I guess, they pointed out the on 17% and adjusted margin climb cheap hundred and 60 days.
And we provide more detail contributing factors.
Gross margin.
This marching decline of based on.
<unk>.
Margins was relatively flat increase Margie January February largely all specified deterioration in March.
Merrily from the product mix ship them higher margin fashion category.
<unk> own category.
Second cut them.
Which is comprised of warehouse and great.
<unk>.
From 25 basis.
Driven by our investments in network optimization and higher frequencies to drive eight increases increased drop ship penetration.
Each factors, partially offset by favorable can check it out philosophy.
<unk>.
Teaches induced entry level.
Moving the operating expenses Bush were flat on a dollar.
That increased 20 days, which doesn't for spending.
Narrowly from headwinds from higher credit card schemes.
Conditions associated with it so D.T.V. distribution contracts find and cheap land 2000 mine too.
East carriage conditions were partially offset by lower variable conditions associated.
Higher airspace.
And finally S.G.M.S.
<unk> increase hundred and 40 basis point as per cent of Avenue.
The nation cut administrative costs.
Yeah and marketing.
Ministry <unk> increase 65 basis point <unk>.
Of which has is associated with incentive compensation and cool and the remainder we've sex sells the luggage and outside services.
Actually asked that by reduce trap.
Bad debt and C. 50 basis points as per cent of that.
Of which 40 basis point is related to increase reserves as he bolstered by these are this is called a true that changes.
Economic condition.
We expect to encode elevated level get bad back from the shift in our customers a day and product mix it might get match.
Manage future charge off expatriate closely monitoring customer payment performance and utilizing fraud and credits new filters.
Finally, marketing increased 25 basis points of for some of that.
Lucky performance marketing you acquire new customers.
However, current marketing spend is still relatively modest.
Less than one intact.
<unk>.
Yeah.
In summary.
The estimate the coldest compacted choose one just just like Fox and $25 million.
<unk> product mix ships changes his best friend.
Adjustment to Baghdad customer return.
On our last call you indicated metaphor optimization and other for some experiments can't which would continue to.
<unk> increase our first energies and improve our market the second half the time.
<unk> installation on the move where half management system.
Can be achieved.
Things associated with a rocky Mount North Carolina, and Ontario, California. So.
Well over a wall fully functional or new Bethlehem facility is currently expense experience in reduced <unk> enough living under social station constraints applied is crazy.
The call.
We expect these situations to continue until restrictions on listed on team member and it's quite contract to travel.
<unk>.
Yeah, They took Q.V.C. international.
Ah constant currency basis.
Revenue for the quarter was down like.
On 4% Lovely Unix though.
3% gain in A.S.P.
This performance respected continued straight than Japan, which was partially offset by declines in Germany, you pay and get away.
The progression of reporters performance resembled that of Qxh with a split of code that fighting in February.
The client in apparel accessories, and jolie, partially offset by increases and now.
So it impacted net revenue by approximately $13 million.
Fairly from lower demand.
Suggested or get out the down 3% and adjusted.
On 40 based on.
Merrily from.
70 basis point increase in classes failed.
Led by lower margins and unfavorable inventory off too much.
In this way obsolescence reflected.
I'm a favorable reserve adjustment.
A year.
The combination of these factors that partially offset by just like.
Inversely ordered a marginal supported by 40 basis points in the D.S.G.N.A. from lower administrative costs associated with friends, which was closed in March 2019.
The estimate coded impacted Q1 adjusted pointed out.
<unk> $8 million, primarily from lover demand supply side.
Margin.
And mix chips.
And bad debt Caesars.
It is evil.
<unk>.
<unk>.
Revenues is down 20%.
I'm, 21% lower volumes and a 1% gain <unk>.
Duly experience.
His code of him back as it's trying to supply chains disruption.
Early February.
Supply chain challenges are largely as well.
Largely results by the beginning of March.
Really experience.
Further segregation.
Teacher declines in consumer demand driven by coated in addition to the underlying precious disgusting or calls.
This is exacerbated by the closure of many domestic suppliers, which further have to deal with limited.
<unk>.
Yes made a beach coveted related events, you do sales by approximately $9 million.
Disappointed declined $15 million and adjusted.
The crime 370 basis.
Merrily due to 160 spaces point decline gross margin.
First.
Increase warehouse costs.
Ignition as Americans, we pay Pal.
And reduced productivity and lower and.
And second.
Lower pack March.
[noise] over there was additionally, pressured by 200 and basis.
<unk>.
Mhm.
Coffee leverage an additional expenses to sanitize.
And there's an office building.
Yep Yep I reduced marketing.
There was a modest only modest impact budget desperately that.
From the disruptions in China.
And finally cornerstone brand.
The the fourth quarter net revenue declined opera show.
Prior to the aren't that occurred at all brands and delivering what except on it yeah.
Electing a challenge and appear on the bond.
That was designed it front gate tools.
<unk>.
You have to make revenues were in passive approximately $2 million from coded related to changes in customer demand and school age.
Just supported us with a period, where the loss of $2 million, reflecting six classes.
<unk>.
Later complete related.
<unk> marketing expenses from the timing of expense recognition catalog deduction.
Increase digital spent.
This was partially offset please product March.
We estimate <unk> impacted by.
Approximately $6 million.
Made any capital expenditures free cash flow and the quality.
Capital expenditures with $45 million for the quarter.
As a precaution to preserve food cash where you live taking actions P.D.F.'s non essential 2020 capital span like 30 million to $50 million.
You are I generated $75 million treat cash flow in the corridor.
Either buying free cash flow net cash.
By operating activities.
Some of the phone.
Temperatures.
Expenditures for T.V. distribution right.
Estimate the loans to cost them equity investments and dividends pay to mom controlling interest.
We'd cashwell increase mostly she's on at last year married from lower T.V. distribution right.
Prove working capital.
Reduced fat that.
As a March 31.
We have $555 million cash in cash cuisines and $2.4 billion total capacity under Q.V.C. too violent credits whatsoever.
Which 1.6 billion until the day, which soon to cover the threshold.
This revolving credit.
Matures can 2020 spring.
In February T.V.C. access hi, good marketing completed a registered that offering to $575 million for 4.75%.
In your secured notes do 10 2027.
Proceeds we use the partially prepaid lifting indepth coverage.
I mean, it's revolving credit.
We are in compliance with all decked covenants as defined on the T.V. speech.
Dated revolving credit agreement and all other senior.
Cared notes.
And if March 31 this year.
Leverage ratio, which to think for.
A net or next schedule maturity senior secure with no. It's a $500 million and it comes due in 2022.
We anticipate the page marriage available cash on hand.
Cash falls, Barney and goes to the relevant credit facilities.
Or refinancing in the public debt smart.
Finally, while we generally update the busiest fixed cost structure that only 10%.
Of annual net revenue.
Q R.G.
And fixed cost of less than 10%.
Daniel net revenue at G.S.H.
Maintaining.
Disciplined approach to manage and our costs and then on certain environment.
And constructive huh.
Rigidly hiring travel anywhere.
Summary of navigate and I'm certain environment, you continue to track coconut faxed basically mindful than an extended play that could create long term effects.
If any emerge we will continue to address the issue.
<unk> approach.
At a bar healthy balance sheet and equipment position.
Canal turn it over the great.
Thanks.
Let me start by also thinking jury employees in management.
Dedication perseverance.
In no small we they were able to adapt quickly environment.
It's been amazing to see the response from our customers and maintaining.
I'd like to reiterate a few points made by Mike.
First we <unk> very uncomfortable about.
This is a business to generate is free cash flow.
We have not drawn on or a ball or.
Quarter or too cold in Christ began and back to obtain down revolver.
As we know we currently have a revolver 2.4 billion towing capacity, which what pages billion.
<unk> something to our current coven threshold.
Covenant thresholds three and a half times, we're currently about 2.4 times.
We didn't use cash to repurchase 49 million identifying shameful bugs in the core.
But we since she's repurchases of those bottles decreases your price.
Yeah.
And and changing <unk> under the care there.
That will no longer be use account.
Planned to reduce callback spending.
Or budgeted amount by $30 million for the balance of this year.
Despite our you know what it came from time to be server.
We are encouraged by the trends we've seen in the second question as might notice positive grows engagement in cars.
Sales growth.
Excellent.
We appreciate your continued interest injury retail.
Oh, you all season down with that operator, I'd like to over the other questions.
[noise] hi cute.
As a reminder to suppress tower, one traffic across channels and we will take our first question from.
Oliver Wintermantel from every corner piece go ahead.
[noise]. Thanks, Thanks very much.
<unk>.
It is a good can you may be talk a little bit about what you expect into second quarter from <unk> pressure is how much if that will they lingered to into the second quarter.
The mall, James or safety or precautions ticket taken and.
<unk>.
<unk> Oh, so a quarter today is that but that means sales are currently trading positive.
Thank you.
That's begs the question almost a couple of comments on margins in sales growth in the current over 10 to death on the margin titled I'm, just coming on the product margins, because I didn't and check and cover the rest I mentioned, we mentioned the downturn and product margin late in a cue.
One, but a reminder that product Martin's work slap the full border and then in April I mentioned, a got 150 to 250 basis points product margin erosion at cute <unk> not due to make shift I would say that that <unk>.
Range got kinda better from the beginning April today, So we were running towards the higher end about earlier in the months and have been trendy downs consent as we've taken actions to try to moderate that margin pressure I won't predict what it'll be going for other than to say, it's been trendy and and they better direction towards the lower end up.
Range, we also have somewhat easier comparisons in May and June.
The fashion mix is not as high.
Oh go May June as it was in April so little bit easier comparison, you a little bit improving trend, but yet you still expect aggregate product margin pressure due to just make shift on sales growth, yes, we're seeing a consistent positive sales growth.
<unk> every week since late March two two today, we've seen it in every business unit every market every brand.
System positive sales go.
I just want to comment on the other aspects of the margin profile.
After that.
So in addition to the product marching if you one of the segments that we had as as a result of that that shift you know some or fashion categories and too.
On categories are are drop ship penetration was much much higher some of those categories. So that that is.
<unk>.
The other elements and that will continue going into q. too too expensive, we have that same type of.
Mixing <unk> as all categories.
Other component that confessions are experiencing you know their houses from a fulfilling and faces shoes, which was out of having the central space and the new juice sort of productivity as a result of some bizarre attendance levels that is also creating some precious fast with respect to the sea fishing to attend.
And the.
Societies.
The one thing that.
<unk>.
The presentation that we do we show that you know.
<unk> about 125 basis.
Force.
And you know about half of that those prejudice.
Mentioned about half of that lives as a result, I'm so half of them is fake.
Because it says.
The house.
The.
If the challenges that we will have gained Ford also as it relates to.
Are execution.
Our network optimization, we had talked about where in the we were expecting to continue to hit on my things could get.
Some some opportunities to help you do some of the pressure we would have the former in the car.
But margins if you go and it would help us from she'd freight impact factor.
As a result of having triple A.'s and that meant that optimization then it's an installation that over their house management, because we believe that we're going to be from a tiny perspectives are going to be delayed and they're not going to have send it back improvement I'm going into the second quarter of it either anticipated.
So so just just to summarize the sales.
Trendy positive, but <unk>, maybe a little bit better than in the first quarter, but but not not positive.
Yes, the the margins wouldn't be trendy and.
But I think with left on Mike was indicated that in the second in the latter part of the corner first quarter. We saw a some some significant heads and it would have a product margin such as out of the mixed and product mix that while he's still.
The product mix impact, we we're improving dot product mix margin as we were coming through the credit card of April and maybe even continue to work towards that says we moved to a quarter.
But I say much.
Q, we run out take our next question from had their vows ski Bank of America.
[noise] Hi, Thank you purchased my question I was just wondering I'm a sales fronts first could you put some perspective, especially for qxh.
<unk>. Your overall sales are trendy for the fact that stare April and then also.
Marketing to help which <unk> customers, you're tracking can you talk a little bit more about what else you're carrying to ensure that the customers. The engagement anything right now that you can <unk> <unk> <unk>.
Hi, Thanks for the question.
Not going to put specific numbers around the sales friends, just because it's the handful of weeks and.
Along the way to go and in the quarter, but you know I would characterize it as you know very solid positive sales growth and and again, we're encouraged private.
The consistency the growth mean, we've seen it every week since late March we've seen it across new customers reactivated customers occasional customers in court customers, we've seen at across a range of home categories, and what kind of categories beauty categories learning place only place we're not seeing it yeah.
Carol accessories and draw it so you know I'd characterize it as consistent.
Broadbased sales growth.
You know terms of the customer engagement.
I would say were were highly encouraged to see growth and every project customers. It was really accelerated growth in the new and reactivated customers. So as I mentioned in my comments, what we're doing a lot to engage all customers, that's really does new and reactivated customers true yeah.
Marketing programs for <unk>, you know are we targeting marketing food continued investment and social marketing all the places where you know she is continue to speak to her to continue to.
Demonstrate a range of our product offering welcome cats that that help should introduce her to the story financial incentives for second purchases. So I would say very broad approach based on her behavior to target I, we would get her to continue that behavior. We are.
Really encouraged.
Given the increase in the customers were seen the natural expected that on average the quality of those new customers with wood that cut down even if the absolute numbers are strong but at least our early metrics of quality are suggesting that it says she's ever is that sort of thing for the good life.
Time value as well or classes, because you get a pretty good window on crack was lifetime quality is <unk> or a V.P. rate in the first 14 day she's with US in the first 28 days she with US are pretty good indicators of lifetime quality and so for the week so new customers.
What we can measure either a 14 day or 28 days repeat rate, we've seen same or better performance penalty. Historically scene. So you think we're attracting a good quality customer were actively engage in her to try to secure that and make sure. She keeps coming back to us and in the final point I guess that would make but we feel good about it's just.
You know we know there's actually a long lag time in a normal environment. Some kind of experience in Q.V.C. for the first time on T.V., let's say or through a paid marketing.
Program, and then actually making a purchase to the fact that we are seeing so many new viewers and occasional viewer spending time watching our programming something which is also translated into immediate sales.
The visibility all our platforms engagement across all those platforms is is that a different level. We think that is in of itself of value. Because we know that when we can get people to engage with us they become lifetime customers and so I think this is a special moment, where our team has been an amazing job, telling our story and it's awful way on.
They are online we're seeing that engagement I think that will help things into the forest the amount of more currently I see.
[noise]. Thank you very much.
Thank you some kind Tonight, we've run I'll take my next question from <unk> Some key bank.
Hey, good morning, Thanks for taking my question I guess, just keep harder first on the <unk> are you starting to see behaviors and then easy pay that underpin you're you're changing bad debt assumption that you seem kind of delinquency or higher charge off and then to I know, they're all has seen a mixed away.
You know other retailers taken <unk> I I guess.
I think you're ending for obsolescence was are actually went down I, just kind of walk us or will be quality of and then for that you're talking about truth. Thanks. So much.
My guess.
Absolutely so we saw that that that.
Perspective, we have not seen.
Relation in the quality of customer trim, it says with yet, but we do know that the combination.
Purchases them they are more concentrated into some of the home categories over time they have.
Level of the default rate as well as the longevity of the cup or search yeah customer who was a new customer. This is one that's reactivated or audits of whiskey longer about New York customer is just one city screens that has a higher charge off experience.
Combination new customers in this new customers.
The first purchases and some of those higher categorically it from this category.
That's true issue as we thought of this isn't too I suppose expecting that and how we speak about always searching for.
<unk> inventory levels are actually down every year and then working day.
Try and adjust the speech, where we could comment you were going through this process. We did increased I'll check them too so a little bit as a result of make the the shifted listing and categories botch, but for the most fun to be for 30 days.
Based his point improvement and overall obsolescence was like is that as a <unk> met adjustment that we made for.
The categories shift diversity and some of these these the the heavier than than towards that we think we might need to have mostly look would come up with it but.
Do you.
Hives pipe in the data in the corner.
Excellent.
Another comment on on inventory and so it was just said we were pleased with a position or in this inventory down overpower year as all healthy inventory, we've made a strategic calculation to generally reduce the amount of risky food, having the fashion categories.
Fall given the current situation, but not to eliminate them into one of the things that also gives us some encouragement about sustaining salesman. Then is that you know most retailers of canceled most follow orders and I will be trying to take a big backlog of spring summer merchandise and end up with two.
Their system, we'll be having fresh orders relied on.
New concepts new products in the fall and and holiday time period that I think we'll be differentiated from what would be broadly available leak out because there's a little bit of a within that are that we don't get all the sales yeah, but we feel good that we struck the right balance of distant towards clean, but also half pressure speaks those out.
Really relevant for the customer in fall.
Great. Thanks, so much that.
But even though take our next question <unk>.
Great. Thanks for taking my question are making team I'm glad to hear that everyone as well and it sounds like it is a wonderful job navigating just <unk>.
Very challenging environment.
So the question and it seemed like if they want to know if you could telling me the financial mindset.
<unk> International customer I know historically things that have affected it has been home values and you know stock market level.
I'm just wondering what are your thoughts are today.
It's gone appreciate your comments.
You know it we've been.
It's really been encouraged by their friends in pattern thing I'm not sure how to exactly the link that people are financial mindset, yeah, certainly in the surveys we do she.
You know concerned about the economy as you would expect you're right that you typically most sensitive.
He's in stock market value, both of which probably help it better.
Dates and maybe we would have expected a month or so ago. So we're encouraged by her behavior is that you know she's investing in her home right now and just the really strong performance across every cornerstone brand and those services are highest income customers.
Along with the high performance across a cue and eight says, but you know.
<unk>, okay, she's willing to make investments to make her whole life more comfortable for herself and her family clearly she's not going to be buying apparel right now or by my flux of it but that's not a priority to her but for those things that are a priority for for making a home like better at this current moment.
Clearly investing in product investors quality.
And and there's no sort of trade down phenomenon that Bush thing. So I think for now are lucky streak has concerns about this a tough environment where in at least in the way she.
Engaging with us I think she's.
She's too surprising is only and I guess, that's how I would characterize.
Thank you might say well.
It's tough.
Making some kind of <unk>, we will know tick our last question <unk> chasing back Tonight piece go ahead.
Just had a question for Mr. George if you had to offer.
Offer up by talk us as for the main driver to top line improvement.
Quarter written machine acquitted today.
What would that'd be.
I think they said they sort of question I Yeah to me. It's a it is a combination of we know we have a consumer who is.
Home and D. is much more engaged in computing T.V. much more engaged in.
Springtime online and so the power of our class them to be present for her again, we're seeing a lot of movie yours, and new consumers and me traffic to our website. So it's not just dogs, but then customers. So I just think the fact that we have very powerful platforms blog reach both T.V. top forms and online platforms.
That at this moment in time, when she's engaged in that universe, where there were there in a big way in new there and it really differentiated way.
Always believe that if you get I think similar to spend a little bit upon engaging with a two part to spend a lot of time and Dave.
And you have a sort of a reinforcing positive effect.
Think what we're seeing that that's been couples yes.
So much higher level.
And they can put this at home and I would say if there's a story of yeah, <unk> factor, especially q. and H. over the last couple of years, it's been math.
Benefit from a fairly strong fashion cycle and I prefer home cycle.
Fashion cycles, and moderated over the last year, but we didn't see the homes five <unk>.
That was really with positive that kind of pushed on point decline over the last year, if we had over simplify a.
Historic growth of fashion and beauty that softened didn't rebound now we're in a mode, where the customer taking much definitely better homes and actually walking back and back home and you have a wonderful away a product for the foam across all of our business units.
And now that she is much more focused on that aspect, they're benefiting from that so you then try to fast forward again, none of us can predict the future of this <unk> dynamic, but just the fact that so many people have been exposed to heart ecosystem that might not have been exposed to it in a normal time.
<unk> some aspects of the digital lifestyle will certainly continue the fact that some aspects of the stay at home lifestyle and appetite for investment in the home will likely continues I think we can be strong beneficiaries of both of those trends.
Thank you very much.
Thank you.
And I didn't that's the last call. So thank you everyone for your and per cent support as it's really a tough times. We appreciate it like you all stay safe and well thanks very much.
Hey, these intention that will continue today's conference call. Thank you for your participation you may know disconnect.
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