Q1 2020 Earnings Call
Hi, good momentarily.
On your life will again be placed on a musical thank you for your patience.
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First quarter Twentytwenty earnings Conference call today's call is being recorded and Weve allocated one hour for prepared remarks and to keep an eye at this time I'd like to turn the conference where she just close that Investor relations for Casper. Mr. Gross then you may begin.
Thank you operator, I'd like to welcome everyone to Caspers first quarter 2020 earnings conference call before we begin I'd like to remind everyone that this call contain forward looking statements were going to meeting the private Securities Litigation Reform Act of 1995.
Statements made on this call that do not relate to matters of historical that should be considered forward looking statements, including statements regarding management's plans strategies goals and objectives are anticipated financial performance from the expected impact.
Albacore bearish on our business. These statements you need a promise there's no doubt she's been involve known and unknown risks uncertainties and other important factors that may cause our actual results performance or achievements to be materially different than any for from any future results.
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Performance or achievements expressed or implied by the forward looking statements.
Doctors discussed in our annual report on form 10-K for the year ended December 31st.
I was 19 as updated by the risk factor section of our quarterly report on form 10-Q for the quarter ended March 31st 2020, and our other filings.
Securities and exchange Commission could cause actual results to differ materially from those indicated by the forward looking statements made on this call any such forward looking statements represent managements estimates as of the data this call.
We may elect to update such forward looking statements at some point in the future. We disclaim any obligation to do so even if subsequent events calls her views to change. In addition, when they also reference certain non.
Non-GAAP metrics, which are reconciled to the nearest GAAP metrics and the company's earnings release, which can be found in our investor Relations website at <unk> dot cash for Dot com.
On the call today, it's still a crime Chief Executive Officer, Emily <unk>, President and Stuart Brown are becoming interim Chief financial Officer.
And well provide a brief update on the Q1 results as well discuss the current operating environment and actions customers proactively taking to optimize the business model an incremental color on strong ecommerce performance quarter to date, and probably will provide an operational update including the rollout of the company's 2020 matches collection as well as retail reopening plants and Stuart will then provide.
More detail regarding financial performance in the core funded prepared remarks, we'll be happy to take questions I would now ill turn the call over the Kasper as Chief Executive Officer, Joe accretive.
Thank you and good morning, everyone I hope, you're all staying well.
Given the dynamic environment for me Cobot 19, we'd like to spend our time today provides me both we'll look back on Q1 results as well as a view into what we're currently seeing in the business.
Overall, we're pleased with how the businesses performed in 2020, and we believe we're set up to not only whether this pandemic, but actually advance our business and financial goals.
First let's dive into first quarter 2020 results are key financial metrics of net revenue and adjusted EBITDA. Both came in ahead to be expectations. We provided on our last earnings call.
Overall net revenue was 113 million for the first quarter, which represented growth of over 26% from a year ago.
Our direct to consumer revenue grew almost 13% to $90.3 million and we ended the quarter with 59 stores up from 22 a year ago.
Revenue from our retail partnerships grew 142.9% to $22.7 million and we ended the quarter with 20 partners up from 11 a year ago.
Gross profit in the first quarter increased 21.6% to $53 million with the gross margin of 46.9%, a 190 basis point decrease versus the prior year.
Our adjusted EBITDA in the first quarter was better than expected negative $22.9 million.
The launch of our new mattress 2020 collection is resonating strongly in the marketplace and we expect a new line to enhance our gross profit margins in the future.
Finally, we close or IPO in the first quarter and are pleased to welcome many new shareholders to Casper. The IPO raised approximately $88 million in net proceeds putting us in an even stronger competitive position. We ended the quarter with a cash position of $116 million, providing us with a strong balance sheet and cash to operate in this environment.
Now turning to the current environment.
We did want to provide you with a number of updates relating to how the business is operating at performing lately.
First our retail locations in offices have remained closed since mid March and we continue to place the health and safety of our customers and team members as our highest priority.
We have been very focused on developing and implementing new safety and sanitation protocols in advance of our eventful retail and office reopening.
Second the outlook, we shared on our last call around Kasper being well positioned to serve shifting consumer behavior, it's held true.
E Commerce is driving our strong sales performance, both through Kasper dotcom and our retail partners E Commerce website.
To date, we've been pleased with Q2 revenue and overall performance in April preliminary results show Caspers net revenue grew over 15% year over year led by E commerce growth of over 35% and retail partnership growth of over 20% over.
Overall, our DTC business grew over 15%, despite our retail stores all being closed in April.
While we normally do not break out E commerce performance from our direct to consumer channel given the exact exceptional circumstances surrounding cobank team and the fact that our retail stores are temporarily closed we thought the incremental color would help in understanding the strength of our multichannel platform.
While we are encouraged with our current revenue trends, we are planning for a volatile environment in light of the economic uncertainty and known headwinds from retail closures winding down Europe.
We credit the quarter to date ecommerce performance in part to accelerate the consumer adoption of ecommerce. Following the outbreak of covert 19, antiwar team quickly leveraging our digital experience and capitalizing on decreased advertising costs.
Our digital strength, along with our highly recognized brands continued to be valuable assets as consumer shift to shopping online with brands, They know and love.
Third we remain committed to profitability and cash management, we announced a reduction of our workforce across North America, and Europe over 20% as well its plans to wind down our European operations. This year. These actions amount to a reduction in operating cost by over $10 million annually and we'll start to impact results in Q2.
And as our retail stores have remained temporarily closed we announced the retail employee for low program to minimize our retail operating costs until we're able to safely and responsibly reopen our stores.
We are taking advantage of the variable aspects of our cost structure to ensure we minimize costs when appropriate well, having the flexibility to ramp our team up when we have clearance to reopen.
And we will share more details on the east reopening plan shortly.
Fourth we have experienced only minor impacts to our inventory availability and delivery capacity. During this time, none of which have materially impacted our ability to service our customers.
This is largely due to our strategic onboarding of new suppliers increase sourcing capabilities and efficient monitoring processes for all aspects of our product and delivery supply chain.
So we're closely monitoring our entire supply chain for potential disruptions.
In addition, we believe the impact on commodity prices may provide a tailwind for the business with benefits from declining oil related expenses tied to logistics and manufacturing costs.
Before I hand, the call over to Emily I want to address our path to profitability.
Our flexible business model is built to service our customers no matter, how they choose to shop and this continues to be true even in this dynamic consumer environment as evidenced by our strong E Commerce performance.
Despite the temporary closure of our physical locations, we're delivering growth across the business and we look forward to win all of our channels are seasonally up and running and contributing to our growth.
We have taken decisive actions in order to rightsize, our cost structure and to refocus our business and capital allocation.
We remain focused on executing our numerous ongoing cost reduction initiatives and operational improvements designed to drive financial performance.
This includes reducing transportation expenses as well as Mac mattress production costs implementing effect flexible retail staffing model and lowering customer acquisition costs.
As a result of these actions and the strong performance of our E. Commerce platform, we remain highly confident in our path to achieve positive EBITDA.
I'll now turn it over to emulate to share an update on channel performance, including our retail reopening plan as well as more detail on the launch of our 2020 matters collection Emily.
Thank you fill up and thank you all for joining the call today.
I'd like to begin by discussing channel performance, starting with our direct to consumer channel, which includes our website and our owned retail stores.
In the first quarter of 2020, our direct to consumer sales increased 12.8% year over year to $90.3 million.
Kasper Dot Com performance began accelerating during the second half of March and has continued into Q2.
We saw strong new and repeat customer growth throughout April along with growth in both our mattress and not matter categories.
As Philip mentioned, we've seen significant strengthen our ecommerce performance with preliminary growth over 35% in April.
Fueled in part by favorable media rates as well as strong consumer interest increased traffic and conversion.
On the retail side, we ended the quarter was 59 owned retail stores as of March 31st 2020, an increase of 37 net new stores compared to first quarter of 2019.
Oh and retail stores have been temporarily closed since March 17th.
As physical retail begins to reopen in select areas and as consumer shopping behaviors, an expectation shift we are introducing new ways to shop Casper.
Starting this week, we will began offering virtual consultation some select stores.
Currently thereafter, we will introduce one on one appointments in our stores followed by curbside pickup in each case subject to government regulation and public health guidance.
And as always we continue to offer no contact delivery.
The health and safety of our customers and employees remain are number one priority and we are implementing a suite of covert 19 related operating policies and protocols as part of our reopening procedures.
Moving onto retail partnerships in the first quarter, our retail partnerships channel drove 142.9% year over year growth in revenue to 22.7 million accounting for 20% of the first quarter revenue in 2020 compared to 10% in the first quarter of 2019.
We ended the quarter with 20 total retail partnerships.
Continue to see this channel is a big growth opportunity for Casper.
Despite some of our retail partners being closed a retail partnership revenue growth in April was over 20%.
We've experienced strong weekly performance during the month of April with many of our key partners, such as Cosco target and Amazon.
We're also starting to see several partners reopened state and local governments ease shelter in place mandates.
At the end of March we introduced our 2020 mattress collection, the new collection of eight mattresses designed to cater to more sleeping preferences and price points.
Similar to our need new TV advertisement, we see families on boxing Catherine mattresses for the full family. The new line is meant to expand their audience and broaden our customer base.
We're pleased with how the collection has been received by our customers and our retail partner as evidenced that positive reviews, and a healthy sales mix.
We're also pleased with the smooth commercial execution for the previous line.
This successful launch reinforces kasper as a trusted destination for sleek solutions, especially in today's rapidly evolving consumer landscape.
Lastly, Lisa <unk> has joined Cafritz Chief marketing officer. He says the season leader with over 20 years of marketing experience. She joins the company falling senior marketing roles at the cost HSN and Ralph Lauren We're thrilled to welcome Lisa.
With that I'll turn it over to Stewart to walk through a more detailed financial update.
Thank you Emily we appreciate everyone joining us on the call today.
Then we haven't given you color on the strong sales performance, let's shift to the rest of the financial results.
Casper and $53 million in gross profits in the first quarter of 2020, an increase of 21.6% from last year's first quarter.
Gross margins were 46.9% in the first quarter 190 basis point decline year over year.
The decrease in gross margin was driven by both a.
Hundred 30 basis point charge associated with the change in logistics providers.
As well as discounts associated with clearance sales of prior models in advance of our new mattress launched at the end of the first quarter of 2020.
The new lineup is meaningfully higher projected gross margins and that lineup began shipping in earnest in the first quarter. The first week of April.
Well, we expect to change in logistics providers to reduced transportation costs, beginning in the second quarter.
We have a large number of other supply chain initiatives underway aimed at reducing product unit costs, including qualifying new suppliers and counter sourcing components and and packaging of our mattress and non mattress products.
As Philip mentioned earlier, we also believe we may see potential benefits from declining oil prices impacting our freight and logistics as well as our phone production costs.
We haven't experienced team focused on taking costs out of our supply chain and are confident we will continue to see progress on a gross gross margins this year and beyond.
Moving to sales and marketing expense sales and marketing expense as a percentage of sales was essentially flat year over year, the first quarter of 2020.
This reflects our disciplined approach to the efficiency of our spend even as we increased our overall investment in sales and marketing year over year.
Importantly, our performance marketing dollars, which represent the vast majority of our marketing dollars continued to be used to profitably acquire ecommerce customers.
Additionally, there's relatively minimal incremental investment needed to support our owned retail stores in our retail partnerships driving natural leverage in sales and marketing as a percentage of revenue.
As Phil mentioned, we have seen multiyear highs in E commerce marketing efficiency in the beginning of the second quarter, that's and capitalize on favorable media reach and increased consumer demand.
Moving onto contribution margin, which is a metric we used to evaluate the business and is defined as gross profit less sales and marketing expense.
Contribution margin is effectively the profit after we acquire a customer and sela product.
Sure decent margin dollars dollars increased 10.9% to 15 and a half million dollars in the first quarter of 2020 contained in the first quarter of 2019, driven by higher revenues and disciplined marketing spend.
Oh for contribution margin as a percentage of net revenue decreased 190 basis points in the first quarter compared with the year prior.
Impacted by cost associated with the change in logistics providers and the clearance sales, which I mentioned earlier.
We expect contribution margin will benefit going forward from the logistics change and the new mattress collection.
General and administrative expense in the first quarter of 2020 was $48.3 million increase of $17.4 million from prior year.
General and administrative expenses increased as we invested in to support our growing business, particularly with the operating costs of 37, net new retail stores compared to the first quarter of.
2019.
As we.
As well as additional investments in software and product development and new public company costs.
General and administrative spend as a percentage of net revenue was up one 820 basis points in the first quarter of 2020 compared to prior year.
Adjusted EBIT dollar loss was $22.9 million in the first quarter of 2020 in adjusted EBITDA margin, which we defined as adjusted EBITDA divided by revenue was negative 20.2% in the first quarter, a decline of 420 basis points compared to the prior year period impacted by lower gross margin year over year an increase.
Our investment in June expense.
However, based on our growth outlook and the cost actions, we have implemented as Philip mentioned earlier, we remain confident in our path to achieve positive EBITDA in the middle of 2020 consistent with previous outlook.
One final note given the evolving economic landscape, we will not be providing full year guidance, but we.
Well, we do want to provide some incremental information around our new store plans in capital investments.
We are reducing the number of plan news new retail openings in 2020 based on this updated store growth outlook, we expect 2020 capital expenditures to be below $15 million.
I'm excited to be part of the Kasper team Caspers built an enviable branded a short period of time and I see a great opportunity to continue the growth trajectory, while simultaneously executing on our path to profitability.
It is energizing be part of an organizational focus and fashion and I look forward to contributing to the delivery of Kasper strategic growth plan.
I'd like to turn the call back over to fill up for a few comments before we open it up to you and I look.
Thanks, Stuart we're happy to have you onboard.
In closing we were pleased with our Q1 results and our strong performance to date in Q2.
While we continue to look at a variety of scenarios for how the rest of the year might play out we believe we're well positioned to outperform our competitors. Our DNA is reviewed in digital and we pioneered E. Commerce for this industry. We believe ecommerce adoption has been accelerated for consumers within our industry during the cold bid 19 pandemic and that Casper.
Continued to be a trusted destination for sleep solutions in this rapidly evolving consumer landscape.
Our flexible business model will continue to serve customers. However, they would like to shop.
Further our award winning sleep products, an incredible brand resonate well with our happy and engage customers, who are now focus more than ever on getting the best way to sleep possible.
We will also continued to make deliberate decisions to reduce cost and ensure a strong cash position.
We are executing our plans with a focus on achieving profitability, while investing in growth and providing better sleep for our customers over the long term.
That ends the formal remarks for today and we'd like to now open it up to Q and a we're Greg Macfarlane will also join US operator, I'll turn it back to you.
Thank you at this time, we will be conducting our question and answer session in order to ask your question. Please press Star then the number one on your telephone keypad in order to allow for as many questions as possible. We ask that you. Please limit your questions to one question one relates to follow up you May then reenter the queue for any additional questions north.
First question comes from light of Peter Keith with Piper stand there Peter Your line is open.
Hi, Thanks, good morning, everyone.
Congrats on the new mattress launch.
I did want to dig into the E. Com channel as you pointed out fill up that that he comes in your DNA and so a two part question on this it when you look for do you thinking about perhaps allocating more capital to E. Com just to leverage that the change in consumer shopping behavior and secondly.
The E comm growth of 35% wild well very strong and impressive it is a bit below some of your other peers in the space and whether the Oh My home furnishing space. So it's or anything that's maybe hindered the growth on the last month or do you feel like maybe left some sales on the on the table would the advertising strategy.
Hey, Peter good morning.
Great questions. So the nice thing about having digital core to our DNA in ecommerce strength is that this is all very natural for us and what anybody that as we look at allocating dollars to marketing spend into our ecommerce channel on a day by day week by week basis, and it's something that that we control with.
You know really find knobs and levers as we look at the business and we're constantly looking at the data of what we see and we're learning more everyday about consumer demand and and the channel shifts and that's something we feel totally comfortable dialing up or down based on whatever we're seeing and so as it relates to allocating more capital in the future you know, it's something that we're going to come.
We need to look at the data and make the decisions based on kind of real time insights and it's something that we feel.
Very comfortable doing and that we have a great deal of expertise at the team leveled doing that.
And to your question on the 35% growth.
For US again, we felt that there was room, where we could have taken up spend but we don't need to drive volume to keep a manufacturing line open or solved for certain volume thresholds. We felt that if we kept its been conservative it would allow us to learn about what was going on in the consumer marketplace. We felt very good about the.
35% in growth in April ER, and we don't need to push volume in order to see real improvements to the bottom line, which is what we've been very focused like we said profitability and cash preservation, especially as a throughout April we saw the land beneath that settling in and we got more clarity about what consumer what the consumer picture would look.
Like Ah So we felt good with what we achieved the big question. When you benchmark against others will be marketing spend and that was something where we took a conservative view on what we wanted to do with marketing and not trying to chase growth really focused on the bottom line improvement.
Okay. That's that's helping feedback or maybe a question for Emily just on on store opening so it looks like there's protocols on sort of.
We'll call it a slower store openings with appointment only I guess, just thinking about memorial day, selling period coming up or do you think you'll have any stores that are that are fully open and what are the discussions like with some of your retail partners that are close right now.
Yes, Hi, Peter we're going to continue to obviously pay attention to state and local guidance as we think about the opening of our stores, both small and street locations and like I said in the remarks, we're going to have a phase reopening plan focused on the health and safety is our employees and our customers that.
We'll include virtual appointment curbside pickup one on one appointments in the store and then eventually official opening and that includes Humana demand increase sanitation and safety protocols for both customers and our employees I think as we think about memorial day I'm will continue to to look at the end buyer.
And how our retail partners and our own retail stores are ramping up and it's really it's going to be a day by day decision as we think about that.
Okay sounds good thanks, very much guys. Good luck.
Thanks Peter.
Your next question comes from the line of Alexandra <unk> with Goldman Sachs Alexandra Your line is open.
Good morning, and thanks, so much for taking the question here. My first question is so fill up on the advertising market you shed some detailed comments I'll Miss on the loss Colin I Wonder if you could update us on what that's hanging thinking.
You know where are you seeing how if media rates trended through the quarter, where are you seeing the biggest increases in efficiency and any thoughts on how this could play out over the next few months.
Yes, Hey, Alex Good morning, So we continue to see a very positive.
Positive landscape in the advertising and marketing world for Casper. So we continue to see Cpms and media rates.
Well below where they were prior to covert 19, and where they were in 2019 and before that.
We have seen some increase from the the bottom with Cpms in the online world, but we continue to see big dislocations in the offline world and as you know kasper spend across all channels of media were able to flex in and out having that kind of fungible approach and portfolio based approach to our marketing spend allows us.
To exploited different media efficiencies and opportunities as they come up and so again. This is an environment to kasper can play really well.
We believe that the media landscape will continue to be dislocated throughout the rest of the year and a an area that will be a good tailwind for us as we look to game sales and marketing leverage in the business. So we continue to see AD rates below where they were in and strong viewership in channels like TV and and online streaming video services as well.
Yeah.
I'm tactics it declare and then my second question is on.
Clarence and Promotionality weighed on the first quarter gross margin I wonder if that was greater than anticipated impact and I Wonder if you could talk about how you should how you're expecting promotionality and the impact on gross margins to progress going forward.
Yes, great question the promotional period in Q1 did extend the little bit longer than we had initially expected as we sold down our inventory in our previous line up and ramped up building a the mattress 2020 lineup as we talked about them. After 2020 launch has gone exceptionally well that's a higher.
Margin line up.
And part of the promotional strategy in Q1 was to sell down the old inventory, which we did very effectively and that did weigh a bit on the margins in Q1, but in Q2 and going forward given the mattress 2020 launch and what we see today and going back to our traditional kind of promotional playbook.
We think that margins normalize back above that 50% gross profit margin range that we had talked about.
Back in February and March.
If I can jump into high Alex its Greg one additional benefit of the additional promotions that we ran to wind down. The line 19 model line isn't it does help us with buyers remorse. So when a client customer buys one of our older match since right before the new mattress changeover and then they see the new mattress line up be offered we have historical data suggest that there is.
A little bit of an increasing returns, but by putting it on discount you actually discourage that behavior. So that's an.
David We had historically, we continue to experiment on that but that's something we also think will benefit gross margins here in the next couple of cycles as returns works through the system.
Very interesting and typically thanks, guys and all that.
Thanks, Alex.
Your next question comes from the line of Randy Konik with Jefferies. Randy's. Your line is open.
Yeah, Thanks, a lot and a good morning everybody.
I guess a question for felt how do you think about you know what these are.
Lasting changes of consumer behavior are likely to kind of young going a little bit longer than we would imagine and you're doing great job in on the E. Com side, how do you think about.
Distortion of of capital.
Channel over let's say the next three to five years does it stay the same as you previously thought or you kind of you kind of pull the gas pedal back a little bit on store wholesale partner shifted development in favor of.
Direct to consumer through E. Commerce, just curious on how you're thinking about the next few years versus in the next few months.
Yeah, Good morning, Randy.
No I don't know that my Crystal ball is better than anyone else is in that regard, but I would say.
You've heard across a variety of industries that.
This pandemic is going to pull forward digital adoption E commerce adoption, even in you know b to B enterprise TACTRESS, just moving to the digitalization of everything.
And I think the amount of that pull forward will be dependent on.
Industry by industry and segment by segment.
My best belief and again too early to have any data behind this but my best belief is that this will continue to accelerate ecommerce within this industry. You know as we talked about E. Commerce was fairly nonexistent before Kasper started we really helped popularize it and we think that E. Commerce adoption is going to accelerate the did.
Great to that acceleration.
Those we'll see.
But I do think that omni channel is still going to be very important I think offline is going to be an important part of our business our strategy in the industry.
Going into two Koby 19, I think it was something in the 70% of the industry. So do I think that goes down to 20, 30% no definitely not and I think it's going to be a part of customer journeys going forward, but I do think it was going to be a bit of a share shift in an acceleration into ecommerce and so as we think about capital allocation.
And you know, we're just going to look at it and it's really too early to make any any serious calls because we need to see what happens as we open up retail both within our owned and operated channel as well as watching what our retail partners do as they reopen and so we'll learn a lot over the next couple of months and and you don't need to make any any kind of longer term decisions on.
On the Capex, but you know our eyes are wide open. This is something we're able to look at data in real time.
And control, how we invest dollars a across our business now focus in the North American markets, but across all three channels that we computer.
Helpful and then lastly.
Yeah. The one thing that when we look at the numbers the the S.G. I came in much better than anticipated you know when I think that will go a long way in terms of the market.
You are getting more confidence in the path to profitability. So maybe kind of expand upon the dynamics around us yet how we should be thinking about that in terms of these yardage markers towards getting towards that goal of Ah you know profitability in the coming quarters, just want to get some more color. There have you appreciate it. Thanks.
Yes.
Yeah, you know two levers to drive conversion and interest in our business or spending on sales and marketing as well as discounting and promotions we.
Extended the discounting and promotions that we were doing in Q1 as part of the model lineup shift and as part of that we were able to to keep SGN a lower than expected. These are levers that we're getting very good at using within our business to drive for different business outcomes I would say that the playbook is varied.
Different now in the.
Covert 19 time.
And so we're really looking at exactly what the playbook is.
Just like everyone else in our industry very focused on what the right playbook is for Memorial day weekend, and we'll see how big of a.
Kind of event that is for the industry, but but there are multiple levers that we have to drive efficiency. We do think we can continue to get leverage out of our SGN. A line. We believe you'll continue to see leveraging our DNA line given some of the cost reductions we've made there even in a world where growth is well below what we had anticipated again because it could.
19, so we're very focused and getting operating leverage throughout RPL and we think that we can continue to make a big improvements and that's why we have.
Continued confidence in our path to profitability and I think.
So were might have said mid 2020, but I think we're still guiding for mid 2021. So you know we feel very confident in the timelines that we had originally outlined in and believed that we have multiple levers throughout the piano to continue to drive operating efficiencies.
Helpful. Thanks, guys.
Thank you.
Your next Gen comes from the line its current Nagle with Bank of America. Kurt Your line is open.
Good morning, Thanks, very much for taking my questions. The first one.
Well I was just remind us I guess what are the biggest levers in terms of.
Gross profit from the product lines I think part as it is a better.
Part of cost, maybe some mix shift mix up a U.S.P. oh.
Acceleration could you just clarify kind of even with the pieces.
Sure.
One comment on mixes.
It's been interesting as we've seen our ecommerce business grow a in Q2.
Actually been very consistent across our models, we see a relatively consistent mix from pre covert 19, and we're we're seeing strength across different customer segments across all geographies across all product models.
And that said, we believe that the gross profit margin lift so it's coming because we had margins expand with the launch of of mattress 2020, which was a complete relaunch of all products. So we were able to cost engineer some of the products so that hits on cost of goods sold.
We also have logistic savings given some contract renegotiations that have taken place in Q1 and there are some other supply chain optimization that have been hitting in 2020 will continue to hit in 2020 in the it pretty meaningful way into that as we talked about.
Managing our supply chain deep through our supply base, that's something that we do both to make sure that we have availability I'm, giving you a certain factories, having issues in Kobin 19 time, but it's also gives us visibility and how we can meticulously get costs out of the supply base and so we're looking at multiple levers.
And kind of the overall cost of goods sold side and logistic side for the business.
Okay.
Then just.
A follow up just curious if you've got her shopping or perhaps an acceleration.
New customers you know given that's a you know.
We're seeing out you know big push from.
Retail shop online and you just curious what that's that's done for your Ah.
I guess customer demographics.
[noise], yes. It was a we've seen real strength from previous customers coming back to buy from us or buying mattresses, but they're buying our accessories as well our pillow business has been super strong a lot of that's from new customers, but a lot of that's from previous customers and then we are seeing growth in new customers and I think the interesting thing is it.
Some of that new customer growth is coming from segments that were new we're kind of emerging segments of customers for us as opposed to kind of some of the existing segment I guess the way I would boil that down is it doesn't feel like our retail customers are who came online in or buying from password actually feels like there's a slightly different customer base.
Buying from Casper and that the retail customer who has generally been a more affluent customers slightly higher ASV customer might be waiting a bit more for retail to reopen still going to rely on that channel and that the E. Commerce growth is actually coming from a slightly different customers in kasper previously seen so that all fits in the new customer bucket, but it.
Goes back to kind of the overall headline of of just broad based strength in the business and it not coming from any particular, pricepoints fewer customer segment or geography.
Okay very good picture it's for questions.
Thanks Kurt.
Your next question comes from the line Michael Lasser, We keep yes, Michael Your line is open.
Good morning. This is a ministry onto Michael Lasser, Thanks, a lot for taking your questions.
My first question is on the cadence for April what trends are especially on the ecommerce site what trends consistent through the month or was there any meaningful variability become week.
And along those lines to do you notice any spike in since.
The time the stimulus checks for distributed.
Good morning.
We saw consistent strength throughout April so.
As we talked about the ecommerce business kind of accelerated at the end of March and April was consistently strong I would say, we saw a slight uptick when stimulus checked hit but it didnt feel like it was a big anomaly to the consistent trends that we saw overall and so the strength continued throughout the end of April.
So and so it was was pretty broad basin and consistent throughout the month.
Got it that's helpful and the second question is certainly in the profile of ecommerce customer.
It was transacted with cash for over the past six weeks.
Is this so is this dislocation in the into market needs to really giving you an opportunity to attract new type of customers that you simply weren't doing before you have any insight on that.
We do we see strength and this is early data. So we're going to dig into this a lot, but our data analytics team provided us insight that we're seeing a little bit over indexing coming from customers that previously had an over index in our ecommerce business.
So I don't want to get into too much detail, just because it's still kind of newer data, but it does feel like there are some emerging customer segments that we can lean into and and build out and continue to.
Development within our ecommerce business that was a bit of a shift free April.
That's very helpful. Color last question is on your gross margin. So what it would be the fantasies of the new logistics deal Oh, I know you mentioned in North transportation, but do you have any additional color on the new beam and then along those lines. So do you have any quantification on Paul on the extent that transportation cost would be more.
[noise]. So it is an ongoing benefit that will start here really in Q2, I don't think we're going to break out the specifics just yet, but it's a it's a fairly meaningful benefit for us on the overall gross margin and does take logistics costs down for us as we look at that on a on a unit coffee.
So on a.
Coal company piano.
Thank you and good luck with the rest.
Thank you.
Your next question comes from the lineup Lauren Castle with Morgan Stanley Lauren Your line is open.
Great. Thanks for taking my question I guess.
First any additional color you can give around the retail partnership gratifying to on a sort of same store basis. So excluding new partners year over year, how is how cigarette smoking and and the same accounts every year and then just following up on on a couple of data earlier questions. I guess, how are you thinking about.
2021 store openings when would you have to commit to that number and then any change in sort of the thinking around the long term stores fleet size that we talked about during the IPO. Thanks.
Good morning, Lauren great questions I'll I'll turn it over to emulate to talk about that I don't think we want to get into like specific partner level a year over year growth, but we're certainly happy to give you a bit more color on what we're seeing within our retail partnership business them and we can also speak to kind of just how we've been approaching things with our landlord and retail.
Partners.
Yeah, Hi, Lauren good morning, so for US the majority of our business on the retail partnerships side.
Done through partners have been opened during this entire period and their business continues to be very solid we're starting to see the rest of our partners start to open up as state and local guidelines you know east South are in place.
Friction and so we'll continue to see how fast those partners ramp across the country and so we feel good about that there as we think about store openings. You know we've been in touch with our landlord and mid March and continued to have conversation about what this looks like on a day by day week by week basis, you know, it's going to be different.
Hi state by mall by outdoor location until we're staying very close on those conversation and we'll continue to.
I think through how we're approaching the rest of 2020 and 2021 in terms of store openings.
Okay, great. Thank you.
Your next question comes from like a Bob durable Guggenheim popular Chris open.
Hi, Good morning, guys I guess just.
Two questions for me really I think the first one is can you talk a little bit more on maybe an update on the glow light and just sort of your ability to sort of meet the demands and I guess tying that with the second question is in terms of like the mattress plus like add on items can you maybe talk a little bit about shopping patterns that you are.
Seeing.
The repeat customers or you know this should or size of the the items in the card that sort of thing in on E. Commerce on that would be helpful. Thank you.
Sure Good morning, Bob on the globalize. The goal light demand continues to be there you know, it's a relatively small revenue item for us and so we've seen strengthen our non mattress products, what I would highlight that strength as really being in our pillow business and in our bed.
King business as well the go like continues to take a long, but that wasn't kind of what was providing the outsized strengthen our non mattress business.
But the goal light does have sourcing from overseas and we were able to keep the supply chain there intact. So.
So we will continue shipping glow lights for the rest of Europe, and don't see any impact coming on that product specifically.
For mattress and add ons actually maybe I'll turn over to emulate did just talk about some of the strength, we're seeing in our non mattress business and as well as what we're seeing on the attachments with our mattress orders.
Yeah. Its Phillips said earlier, what we're excited about as we're seeing a great makes it both new and repeat customers really coming to the E com side over the past month and seeing a big uptake in non mattress sales as Phil said the majority of that is coming from Telo and from seating both in our new and repeat customers.
Great. Thank you.
Thanks, Bob.
And again, if you would like to ask a question.
Please press Star one your next question comes in light of fashion with Wedbush Securities.
Your line is open.
Thanks, a lot on good morning.
Hi, good morning.
My first questions around here, you mattress lineup and looks like you said to remove the central mattress firm on your website, but it's available for sale at time here retail partners online can you provide some more insight into how you're thinking about.
Structuring when you lineup [noise].
Sure Emily do you want to talk about some of the testing that we're doing there.
Yes, so we as we had mentioned earlier launched our new portfolio at the end of March and as when we launch new products and as we do promotions and many things in our business. We do a lot of AB testing and so we started with an AB tests testing two different minus against each other and on Friday went into a new tests.
What we did remove the elements from the site you can still purchase it and you can sell purchase it at a lot of our retail partners, but it is just part of our ongoing testing protocol that we used to maximize the assortment for a customer and far profitability.
Got it okay. When do you think you'll have a decision made as to what the right lineup is on a go forward basis and when you consider offering nash's at your retail partners that you don't offer on your on what Craig.
We are in constant evaluation and let the assortment will look like between our owned retail stores, our retail partners and our E Commerce site and we'll continue to evaluate what the right assortment is at the right time for the customer.
Fair enough and separately as it relates to your sourcing plans I know you're now sourcing Sameer mattresses.
On Vietnam.
There's potentially terrorists or duties that are going to be slapped on action is coming out of that country. It's not like others in southeast Asia, what does that mean for your sourcing plans going forward, what you shifted and the plan. So you put in place.
[noise] Yeah, great. Great question, our sourcing approach has always been to build redundancy of suppliers across all of our skews and we have that within our masters lineup. We have been working with some Vietnamese based manufacturers, but we have redundancy across every skew with.
Our mattress lineup. This allows us to implement competitive bidding, which is one way that we're able to get cost of goods down from our supply chain. It's also a way to make sure that if there any supply chain disruptions, whether that caused by regulatory shifts terrorists anti dumping et cetera that we're able to.
Have plans to make sure that that doesn't impact us into material of way and I think this just speaks to the beautiful part in my mind about our business model.
About having a third party manufacturing base, where we can be really nimble. We can build redundancy of supply chain, we don't need to solve for a certain amount of volume going through our factories.
And all of this sets us up to really focus on gross margin expansion and making sure that we always have availability.
For our customers.
Wonderful.
It's clashes just around gross margin toxin improving outlook going forward, but when we think about the indications from a channel mix standpoint, how much could that benefit.
Second quarter margins, if we see that run rate sales mix shift in April Christian through the quarter.
So as we've talked about our DTC business has higher gross profit margins in our retail partnership business, both DCC and retail partnership businesses were up year over year in April and so we'll see exactly what the mix.
Ends up with for Q2, and obviously will be tracking very closely what the retail store reopening does for our DTC channel, but the margins are consistent in those channels and what the exact mixes for Q2, we're not we don't have visibility into yet and we're not going to provide guidance on.
Great. Thank you very much and good luck.
Thanks.
This concludes our question answer session I will now turn the call back over to fill the <unk> for closing remarks.
Thank you for all the time today and the interesting Casper, we look forward to updating you on our second quarter results on our next earnings call. We hope you and your family stay healthy unsafe. Thank you everyone Bye bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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