Q1 2020 Bed Bath & Beyond Inc Earnings Call
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Beyond the scope.
21st quarter earnings Conference call.
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Thank you and good afternoon, everyone welcome to our fiscal 2021st quarter earnings call.
We're still working remotely and connecting with you today allocation.
Please bear with US if you experienced any minor delays stress today's call.
On the call. That's today, it's president and CEO, Mark Tritan, Chief Financial Officer, a treasure stock at all.
Operating officer, President of Buybuy Baby John Hart.
Chief Merchandising officer.
Harman stores, Joe Heartsick.
Before we begin my prepared remarks, let me remind you that article 2021st quarter earnings release, that's why.
Have you found any investor relations section of our website at Www Dot dot dot com and as exhibits to form 8-K, we filed just ahead of this call.
This conference call and that's why we referred you may contain forward looking statements, including statements about a references to our outlook regarding the company's performance our internal models and our long term objectives. All such statements are subject to risks and uncertainties that could cause actual results to differ materially Oh, what we say John corporate out.
Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including a risk factor section in our annual report on form 10-K.
In the undertakes no obligation to update or revise any forward looking statements.
Additionally, the information we will discuss today contains certain financial measures that word of mouth or subject you would definitely have you factored excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles.
For a reconciliation to the most comparable measures presented in accordance with gap. Please refer to the table in our earnings release available on our website and included as an exhibit chore form 8-K filed today.
It is now my pleasure to turn the call over tomorrow.
Thank you Jenna good afternoon, everyone.
As Jennifer said Weve speaking with each not from remote location I'd like to welcome you all to out coal.
I'm happy to be here in excited for you to hear from some of our new leadership team has just described I.
Our presentation agenda today includes an update on the strategic focus of the business getting I need 10 actions in response to the Coke at 19 pandemic and our approach to story openings.
Next to stop I will review after first quarter financial results.
And John will give us an update on the strategic tuck ins like our operations and Joe who do the same from a commercial perspective.
It will then take question.
The first half of 2020 is be extraordinary by any measure no. One could have been to spud the scale of the impact to Miss pandemic on this global economy.
Yeah, Ryan North American business, a lot in the massive amount of decisions, we would have to make the keep out people customer wins and communities safe.
I'm very proud of how teams came together to assess the risks understand the consequences and take decisive action.
These decisions had not been easy and we're aware of that consequences, especially for those of our associates impacted by the catalog.
But I believe that response with the right one for the short medium and long term health about people and that business.
Throughout the quarter, we remained hypothetical southern showing liquidity and optimizing costs, including actions from crude cash flow generation.
We still we actually implemented various actions to maintaining financial flexibility, including a tight control on operating expenses managing our inventory.
Putting some capital investments and suspending our capital allocation plant to share repurchase debt reduction and quarterly dividends.
Last month after the quarter close we further strengthened our liquidity with a new three 850 means <unk> asset based revolving credit facility.
That confident about our financial position and durability of many Sri these uncertain times.
Well, we have been managing through this difficult environment, if not most focused on the strategic imperative to rebuild else already in the home space.
We continue to make strong program said, even accelerated several elements of that transformation efforts importantly, we onboarded five new senior leaders during the quarter, which was no small feat Gustavo a Nadal chief financial Officer, and Treasurer, John Hoffman, Chief operating office and President of Buybuy Baby.
I think Masood Chief Digital officer.
Finally in home Chief legal officer, and corporate Secretary and Cindy Davis, our new Chief brand Officer President of Decorous.
These five join Joe Hot Freak out Chief merchandising officer, and present Department stores. He joined the much and Greg Melnick, Chief stores Officer, who was appointed to his new role in my previously served as interim Chief Digital Officer.
I spent many months supported by the board meeting tended to have the right skills experience and character to take up business to the next level.
Are the best team at highly experienced Retalix, but is complete.
I'm delighted to find the have them onboard to accelerate the pace of transformation.
Now from the outside of the club at 19 crisis, we prioritize the health and safety that team cost committed and communities. We closed the vast majority about retail banister. It was a much 20 said across the U.S. and kinda, excluding must buy buy baby and hamann tights value stores.
As a result, nearly 90% about locations remain closed during the majority of the quota leading to a 49% decline in net sales.
This is a critical moment and we needed to act quickly. It was an important opportunity for us to pivot towards new model and support changing customer preferences, and our omni always approach.
Now with the vast majority Adestos closed we realigned our network and converted 25% about total store fleet into regional fulfillment center, nearly doubling up fulfillment capacity to handle the dramatic shift in demand to our digital channels and unlock store inventory.
Building on that fulfillment capabilities, we accelerated the pre planned rollout about buy online pickup in store or bought this and curbside pickup services offering in April which is one of the key highlights of the quota, especially crab Buybuy baby better.
As John will discuss in a few minutes. This was a game changer for us as it allowed us to restart operations and says customers that like pensions, but was still close to the public.
By the time, we ended the quarter Inlight money, we will offering buckets and types I pick up at nearly 60% about store location.
Yeah capabilities powered digital sales growth of more than 100% during the month April and May.
Net sales for my digital channels grew 82% in the first quarter and therefore represent nearly two thirds of title net sales.
Digital growth was also favorably impacted by the way, we pivoted, our merchandising and marketing plan and how we engage for that customers, including more frequent updates why website to say caring and relevant.
Joe will talk more about this in a few minutes, but at King Hall that for US with strong growth, we saw in new customer acquisition to add digital channels.
Nearly 40% about online orders were placed by customers, who are new to ordering online.
And I have a 10% of them, while also completely new to bed Bath and beyond.
In late May we begin taking measured steps to reopen stores to the public including the launch about store safety plan to help ensure customers can shop, you know stores confidently.
During the past month, the peso story happenings has accelerated in line with Chinese local and state regulations market data and the why that retail landscape.
Our strong financial flexibility allowed us to implement a market by market approach, while we invest in rebuilding of business and introducing new services for our customers.
I wanted to thank God dedicated teams for helping us resume operations safely and welcoming backout loyal customers.
Proud about teams and how quickly they adapt to the took decisive actions to keep up people Sykes and deliver for our customers.
As of today, nearly all afterwards sebree up into the public and we continue prioritized to help protect give very associates and customers.
We're seeing good results across every up in stores and it's clear from the feedback. We're hearing the customers is delighted to be able to again shopping our stores and taking advantage of the new Butters and curbside services.
The same time, we continued to see gradual recovery weekly sales trends across our digital channels and quite consistently more than 80% during the month of June.
It's still early in the reopening prices and the virus and intact I still unpredictable, but we're encouraged by our customer support and response so far.
[laughter] coated management has provided many learnings that we're capitalizing on as we continue to track against our strategic objective.
As previously stated we have granted as strategic framework in five key pillars.
Product price place promise and people.
You'll hear more about the product price and play spilled today from John and Joe.
With these five killed the that God, we've been priced a commitment to reconstruct and modernize our operating model to drive greater efficiency and effectiveness charting a new costs for our company.
To start we redefined our purpose to make it easy to feel that horn.
This is a defining ball about business place for our customers the North Star The guide all our actions.
To achieve this purpose out mission is to reestablish out 30 and beat their preferred hub destination driven by teams consistently delivering balanced durable growth.
We believe this mission is more relevant today than ever when jaime's, everything and being safe at home with family is essential.
Hey, Bob can be and takes on an even more important role supporting customers and they sent me by making it easy to feel at heart.
In addition to the pill strategies, we're also focused on investing and improving core proficiency the plumbing of a house it is essential to rebuilding the foundations about business.
[laughter] cause environment also represents an opportunity for us to drive strong actions as part about ongoing restructuring program.
We've accelerated the feather alignment at a cost structure without need 10 performance related to the pandemic.
These include among other things our efforts to reduce cost of goods and drive supply chain transformation to address current gross margin pressures related to the substantial ship to sell from stores to digital channels.
Well the mall, we plan to close approximately 200, mostly bed bath and beyond stores over the next two years under out So Stuart network optimization project and focus on other it's gene I expense reductions.
We believe the aggregate benefit from these actions will generate future annualized savings of between 250 and $350 million.
Getting related one time costs.
We're also making additional investments in digital transformation to accelerate and drive cars.
As we previously outlined we've committed to an ongoing review of our non core business concepts.
As of now we have not factored any future proceeds from potential asset sales, including the salad personalization mall dot com into our internal financial model.
We plan to share the details around these actions and other short term among the 10 goals and objectives during investor day of than expected to be held mid to late October of this year.
Due to the uncertainty surrounding pandemic, we've got enough we will host the meeting in person no. That's really better Investor relations team will share more detailed information later this summer.
I'll now turn the call after the Skava true you out first quarter results in detail Gustavo.
Thank you Mark and good afternoon, everyone.
Look forward to continually interaction with our analyst and investor community over the weeks and months to call.
I've been on their job around two month, now, which in pandemic time feels more like two years.
I have been delighted to join bed Bath and beyond steam and look forward to help strengthen a sustainable business model for our company.
We have an iconic brand. So I was attracted by the challenge and the opportunity of transforming the company to restore relevant in the mine and homes of customer.
Things like joining me are team have been intensively focused on ensuring liquidity and driving cost interventions as we manage our operations during the cobot crisis.
This was achieved thus we pivoted the company to a predominantly digital business, while the majority of our stores were temporarily closed.
Let me provide some highlights on our fiscal first quarter.
First it's important to note that our quarter spanned we most critical month to date of the call. It 90 pandemic March April and May.
In response to be situation, our company acted quickly prioritizing interventions to maintain liquidity and took actions to control cash burn.
Keep in mind that by the time, we announced the temporary closure of stores on March 23rd we had already paid monthly expenses, such a stable rent and other operational costs.
So cash management strategies, where into effect in conjunction with the store closure announcement in late March specifically, we follow the majority of our store associate and a portion of corporate absorption.
We started renegotiating with our vendors for extended payment terms and savings related Scoots services and rent.
We proactively managing inventory and cancel purchase.
And we immediately reduced discretionary spending in areas such as business travel advertising and expenses associated with the make going into stores as well as deferred approximately 150 million ending planned capital expenditures.
As a result, we successfully lower monthly cash burn and recorded a strong cash and investment balance of $1.2 billion, but and may.
And in June will bolster our liquidity with a new $815 million asset based lending facility, which provides substantial additional liquidity if needed.
Our net sales were impacted by having the vast majority of our stores closed through most of the quarter.
We operated name yet the digital business during these months.
With this our gross margin was impacted by channel and product mix, resulting from the substantial shift will stay else toward digital channels.
Let's now look at our monthly cash burn.
We ended the quarter in a very strong cash position coming off a yearend balance of $1.4 billion in cash and investments in.
In March we elected to draw down the available 236 million from our unsecured revolving credit facility, which enhance our cash position.
As I said earlier, we have significant cash outflow during the first month.
As we move into April we implemented cash management strategies and carefully managed our inflows and outflows to reduce our cash burn.
As we moving to me, we were cash neutral, leaving us with a quarter and balance of $1.2 billion in cash and investments.
If we consider the available liquidity under the new ABL facility that we entered into after the quarter close.
We have a total liquidity of more than 1.8 billion in available funds.
This is great insurance and provides further financial flexibility as we implement their store, we opening plans and focus on driving important actions under the company for strategic transformation plan.
Now I'll turn to the operational results with a quarter.
On a GAAP basis, we reported a net loss per diluted share of $2.44 compared to a net loss per diluted share of $2. A 91 cents in the prior year period.
Our reported net loss includes an unfavorable impact up approximately 48 cents per diluted share for special items, mostly related to non cash impairments of certain store level assets and trade name.
Our non-GAAP basis, our first quarter net loss per diluted share was $1.96 cents.
Consistent with our prior disclosures the remainder of our quarterly results will be on a non-GAAP basis to better represent year on year performance of the business.
Net sales in the quarter were 1.3 billion a decrease of 49% from the first quarter of last year, primarily due to the temporary store closures.
On a directional basis net sales from our digital channels increased by approximately 82%, while net sales from our stores declined about 77%.
We experienced a strong digital growth each month of the quarter starting in March with net sales from our digital channels up 17% compared to March 2090.
Then during April and May we experience explosive growth across our digital channels with net sales up more than 100% each month compared to the same two month in 29 could.
These strong results were supported by the rollout and subsequent expansion of our BOPUS front curbside pickup service offerings.
Not only for bed Bath and beyond but also across our Buybuy baby Harman and cost plus world market stores.
In June after quarter end, we initiated our based approach to store reopening as Mark discussed earlier.
As of today nearly all of our stores are open and while it's still early days, we're pleased with the customer response.
For the month of June overall, net sales decreased only 7%.
During the same period net sales for more digital channels remain strong with year over year growth in that because of 80% while net sales front store declined approximately 25%, reflecting the gradual reopening during the course of them up.
Moving to gross margin our gross margin was 26.7% of net sales as compared to 34.5% last year.
The 780 basis point decline was primarily due to the unfavorable impact on channel and product mix in connection with a substantial shifting sales through digital channels.
For some context net sales from our digital channels represented nearly two thirds or total quarterly sales compared to penetration of nearly one fifth in the prior year period.
The incremental direct to customer shipping expense represented the bulk of the channel mix impact.
In addition, higher sales of lower margin cobot essential items contributed to pressuring product mix.
Moving to as DNA, adjusted as DNA expense for the quarter declined 15% or $123 million compared to the prior.
This decline reflects the impact from actions taken in response to covert 19, including the associate for low.
Lower discretionary spending and benefits from the care that credits and cost reduction interventions that were initiated at the end of fiscal 2019, such as the corporate restructuring program.
That's a percentage of net sales first quarter SGN, a significantly increased to 55.3% from 32.9% of net sales in the prior year period due to the impact of fixed costs on a net sales base that was about half of the prior year.
A few additional balance sheet items.
Retail inventories were 2.2 billion a cost a bottoms increase versus year end as we took actions early in the quarter to cancel or reduce product purchase orders.
Moving to Capex.
Capital expenditures were 42 million with approximately 55% of the expense related to technology projects, including inventory and warehouse management capabilities, such as advance allocation logic and replenishment strategies to meet the changing customer needs. During this period.
In regard to a capital allocation strategy as a reminder, we have suspended our share repurchase and our quarterly dividend programs as part of our coal that referrals.
The company remains committed to a capital return program over the mid to long term and we'll revaluing when appropriate.
Due to the continued uncertainty related to the impact of the cobot 19 pandemic, we're not providing financial guidance for Twentytwenty.
The situation is still evolving and remain volatile.
We're continuing to monitor the situation closely in relation to our associates customers business partners and supply chain.
Given the strength of our balance sheet, we believe we're well positioned to manage through these uncertain times.
Before closing I want to reiterate some of what Mark stated earlier.
First we continue to half a strong focus on liquidity management, and we'll continue to drive actions to improve cash flow generation.
Second we're pursuing deliberate actions as part of our ongoing restructuring program to reduce cost of goods and dry supply chain transformation.
This will help address gross margin pressures related to this substantial shift with sales to digital channels.
And as part of our store network optimization project, we plan to close approximately 200 stores over the next two years.
Representing about 21% over total bed bath and beyond stores.
And we'll continue to focus on other as DNA expense reductions.
We believe the aggregate benefits from these actions will generate future annualized savings of between 250, a $350 million excluded related onetime cost.
Third is that we're making further investments in the digital transformation to accelerate and drive growth.
I will now turn the call over to John for an update on our transformation progress within our operations.
Thank you Gustavo and good afternoon, everyone I'm happy to participate in my first earnings call with bed Bath and beyond.
Joining the company a little less than two months ago. Unlike my colleagues I have come up to speed rather quickly under these most unusual circumstances.
Mark vision for the future was the major attraction for me to join bed Bath and beyond that I'm excited to be part of the broader team that will together transform this great brand.
Today I'll be speaking about three topics.
First a few comments about how our operations pivoted in the face of the cobot pandemic and store closures empowered the growth of our digital channels.
Second I will provide a few more details about our store network optimization project that was mentioned earlier.
And third an update on the end to end redesign of our global supply chain.
As a cobot pandemic took hold in late March enforce the temporary closure of the majority of our stores.
We rapidly evolved our operations to meet the changing needs of customers.
As our stores closed people across the country and beyond needed us more than ever to deliver essential products to their homes.
To support the increased demand across our digital channels, we rapidly converted about 25% of our stores across the U.S. in Canada inter regional fulfillment centers.
Which almost doubled our digital fulfillment capacity during the quarter.
This allowed us to leverage the vast inventory resources within our stores.
To assign web orders locally and deliver quickly and enabled us to ship online orders in two days or west on average or make orders available for pickup in less than two hours.
Thanks to the extraordinary efforts of our teams we accelerated the launch of BOPUS in contact with curbside pickup services in mid April.
Starting with Buybuy baby in Harman stores that remained open.
In expanding to bed Bath and beyond the cost plus world markets stores that remain close to the public.
By the end of the quarter. These offerings had expanded to nearly 60% of our total stores.
Customer response has increasingly been favorable which shows how important the strategic investment in BOPUS and curbside pickup is to our business into our customers.
As our stores reopen we're expanding the services to these locations and we'll continue to optimize our omni fulfillment capabilities.
In this cobot moment, we believe we can take this opportunity to not just simply close stores, but to pivot and reshape and truly optimize our store footprint.
We continue to believe that our physical store channel is an asset for us as we transform into a digital first company, especially with our new omni fulfillment capabilities in BOPUS It curbside.
As our initial work gets underway we are building off the network optimization project that was completed by the company last year.
Our approach includes a much deeper analysis of both individual store and market data.
Recent geo analytical modeling shows that our bed Bath and beyond banner has lagged the market in store in digital sales growth.
More specifically, we believe that the current physical footprint of our stores only addresses about 80% to 85% of the market opportunity and does not fully aligned to the local market sales demand.
Our immediate goal is to right size, our store network in such a way that reduces redundant stores and supports a digital first platform with the appropriate number of stores in the right locations to serve customer demand and accelerate growth.
We will both lean into store closures and leverage the significant number of lease expirations coming due over the next several years to restructure our bed Bath and beyond store portfolio, while in parallel look at our other retail banners.
Drive cost productivity and accelerate improvements designed to help stabilize the business and deliver long term profitable results.
As previously said, we plan to move forward with about 200 store closures across the country over the next two years.
While we expect the closures to unfavorably impact our top line there is significant EBITDA upside.
As we restructure the real estate portfolio, we will drive cost productivity and continuous improvement efforts to enable investments in operational capabilities to sustain business results.
In the future. We will also test new store format economics and locations with a goal to strategically grow market share profitably.
Next I'll provide an update on our end to end redesign of our global supply chain or easy to eat for short, which is a multiyear initiatives intended to deliver a new supply chain and technology infrastructure to enhance fulfillment drive cost savings improve the customer experience and such.
For the acceleration of Omnichannel enhancements.
The redesign roadmap touches all aspects of our business, including our product assortment vendors fulfillment centers in stores all in support of our customers experience in cost efficiency.
The program is expected to reduce our working capital requirements significantly expand our direct sourcing importing capabilities and further optimize our network routing.
The redesign will facilitate growth in owned brands improvements in lead time for store ordering and support enhanced omnichannel capabilities to drive digital growth.
As part of the program, we plan to realign our network of pool points that replenish our store inventory, which will optimize our in stock numbers and reduce store inventory requirements.
We also plan to drastically reduce by the millions the number of annual vendor purchase orders, we create which our vendors will love.
It will also drive greater efficiencies within our accounts payable area.
And we plan to further optimize our fulfillment network routing to increase one day deliveries from our Dcs and store locations.
Overall the E redesign is targeted to deliver significant savings over the next three years, a reduction in inventory and faster lead times.
Through this initiative, we expect to deliver significant future cost savings, while driving greater efficiencies across the supply chain.
Technology will support the bulk of the redesign work and our teams are creating a more modern technology stack and efficient operating model to serve the company's transformation efforts.
We are currently planning for the migration of our data and computing to the cloud, which will expedite and enhance our technology capabilities.
We look forward to sharing more on this and the progress of all of these operational initiatives in the future.
I will close with a brief update on the performance of our Buybuy Baby banner during the quarter.
On a directional basis, our us in Canadian Buybuy Baby business made up approximately 20% of our company's total net sales in the first quarter compared to about 10% last year.
We remain very pleased with the business and how our teams excelled in creating a positive customer experience and providing the essential items they need to care for their families.
Early on Buybuy baby was deemed an essential retailer and roughly 97% of our U.S stores remained open during the pandemic.
The spirit, our people have shown to fight for our customers and our company has been just tremendous.
Ensuring we were in the stock on the most essential items like diapers wipes Formula and baby food goes to the heart of our commitment to our customers.
A key highlight of our performance was when our baby stores led the company's pilot and stand up of BOPUS and curbside pickup boosting online sales of toddler food safety equipment playroom items and sleepwear.
Even with stores open Buybuy baby digital business grew almost as exponentially as a total companies digital sales in the quarter.
In response to the rapidly changing customer demands Buybuy baby quickly shifted its marketing approach to support growing online demand through increased digital marketing and adjusted content to reflect customer needs.
For example, we enhanced our baby registry program to support expecting parents. During these challenging times, including a new phone consultation service, enabling customers to ask questions to an expert baby registry advisor.
We also launched design squad on innovative one stop shop for nursery design services and inspiration in partnership with our sister brand Decorous.
With a mission to provide parents everything they need to confidently prepare for their baby. We're reminded during these difficult times, how important are role in their journey can and should be.
I will now turn the call over to Joe.
Thank you, John and Hello, everyone and.
It certainly has been an exciting time to join bed Bath and beyond.
Arriving in March I have learned so much in the really a short amount of time and I have to say I'm incredibly encouraged by how quickly. Our teams have responded in meeting the needs of our customers. During this challenging time.
The opportunity to make it easier for our customers to feel at home has never been Greg.
Today I'll start with some highlights of the quarter from a commercial perspective, and then I'll provide an update on our transformation progress within the merchandising area.
As the impact that temporary store closure became apparent in March we became incredibly agile and pivoted, our merchandising and marketing fresh starting with expense control.
We quickly camper product purchase orders and modify future purchases to reduce merchandising inventory exposure and manage costs.
We converted stores into regional fulfillment centers, and redirected products and closed door, so soma stores as well up to our warehouses to support increased digital demands.
And we partnered with vendors.
The supplier and expedite hiding and product customer needs were changing as well as to optimize what capital.
We also adjusted our marketing plan by minimizing or canceling print programs brand campaigns and events that were focused on driving in store only traffic.
We adapted our marketing communications to better engage our customers online and stay relevant.
Turning our attention to our digital business, we shifted our collective efforts to capitalize on strong online demand as customer sheltered in place.
We create a daily working teams focused on inventory flow and built new reporting to keep top items in stock.
We increased our digital marketing spend to drive traffic to our websites, including increased investments in search paid social and affiliate marketing to reach new customers online.
We also refreshed our website with a more modern book feel invoice aligned to customer insights as well as with our new branding.
Finally, we incorporated key learnings about customer behavior through detailed site metrics from partners like interest to optimize merchandising and messaging.
During the first quarter, we had greater than 200 million visits across our digital properties, which is more than a 35% increase over the prior year period.
We also had an excessive 500000 downloads of our bed Bath and beyond mobile app across Apple and Google play stores, which contributed to strong revenue demand from our mobile channel, which is up 134% compared to last year.
And as Mark mentioned earlier, new customer acquisition through our digital channels was also strong with nearly 40% of our online orders placed by customers new to ordering online, including over 10% there were completely new to bed Bath will be app.
Third party data show that overall that battling beyond saw stronger online engagement rates than our peers during the quarter, including.
Higher conversion derived from first time purchasers.
These are important insights for us to leverage as we further analyze our customer behavior tries to develop more advanced engagement tactics.
These effort and digital marketing merchandising agile fulfillment along with the rollout expansion of BOPUS and curbside pickup services help support explosive growth across our digital channels in the first quarter.
As John described earlier customer adoption of our BOPUS buy pickup serves as an extremely excited.
And our online customer ratings for these Omnichannel services are high.
We have created a great new opportunity to make it even easier for our customers to shop with us and new and sank ways.
We have already enhance the service with a new mobile App experience launched last month that allows customers to place focus orders checking into store and receive curbside orders from their cars all from their phone.
In addition bed Bath will be at stores that are offering Apple pay simplified the transaction process.
From a product perspective, we saw product category trends and our online business. During the first quarter that were similar to broader market trends.
For bed Bath, <unk> beyond kitchen, and food product with the top performing category mine across each of the three months, including sales of kitchen electrics.
Which grew more than 170% as customers prepared remark with at all.
Sales of water filtration system spiked in March and April coinciding with the broader market trends of stockpiling obvious centrals.
Cleaning and homecare with another strong product category throughout the first quarter online sales of vacuums up 129% significantly outperforming compared to last year, the baby and toddler categories performed well on like throughout the quarter, peaking in April due to strong overall demand for baby essentials, and our acceleration of both us and curbside pickup.
In may as customer behavior turn more inward to providing buffer and enjoy the hall, we saw strength in our bedding category beginning to grow driven by basic sheets pillows and computers.
As we commenced story openings in late May early June we haven't seen the excitement in our customers looking to shop or total store across the board again.
It's in electrics like mixers continued the surgeon sales up 75% as customers enjoy looking for their families or gathered at home.
We're also seeing a served and outdoor living categories as customers and best in their home spaces and migrate from the inside for the outside of the house some robots.
At a time when our homes at become the center. Our lives. We're very excited about the work that we're doing on the merchandising team in support of our new customer during the purpose make it easy to feel at home.
We have developed a robust plant on the strategic framework of our five key pillars product price place promise and people to rebuild our merchandising authority in the home space stabilized the business and optimize for growth.
Simply put product is at the heart of what we do our goal is to create a differentiated and curated assortment that appeals to a broader array of customers from gently to boomers inspiring them to shop with us and make it easier to find what they need.
Some of our initiative on underway include creating a new customer driven assortment starting in key bed bath kitchen categories, including which products, we should carry which products, we should add at which we should eliminate.
Developing and expanding our own brand portfolio and to enhance our differentiation in the market next year in fiscal 2021, we plan to launch a number of exciting on brands across multiple categories and integrate preference through our quality brands and products.
Negotiating improved cost in terms from our supplier. So we can increase our competitiveness in the marketplace.
Ensuring higher level in stocks and inventory turns while placing the right amount of product right stores through improvements in forecasting and centralized inventory replenishment logic.
And establishing a vision for a new and improved omni always customer experience both in stores and on our general sites.
Additionally, price as a key driver of our ability to game customer traction frequency as well as long term while.
The goal of this pillar 'cause per bed Bath and got be known as a specialty products retailer by offering clear and compelling values.
Key areas of focus include ensuring we have a competitive everyday pricing by leveraging our new dynamic online pricing engine and testing localized pricing for margin opportunity.
Building, new end to end promotional tools and processes as while optimizing our promotional spending therefore profitability.
Recurring our assortment to ensure we have the right price points and true value representation to better can be with mass market retailers.
And evolving and modernizing our loyalty programs to better engage and retain more valuable customers.
Lastly, we have launched it integrated planning process for our stores and our digital platform that will tie that product and price goers together with Blake some promise rating, a consistent and compelling omnichannel experience for our customers combined with our strategic intent.
We are excited about this new way to create a stronger merchandising marketing plan and look forward to sharing our progress for a review.
So while we're busy transforming for the future we remain very focused on our store reopening plans on capitalizing on the momentum we have a particular business.
As an example, we'd have overhaul and elevated back to college Gorgon this year, which brings to life greater even affordability.
With core value oriented portable options combined with the ease and convenience of our signature College registry.
And pack and hold services, we can help them make often stressful college transition experiences that much easier overall, we're very encouraged about the progress being made to rebuild our already within the home space with our customers.
While we are in the early stages of this transformational work in merchandising, we're confident that our initiatives such as refining and elevating our assortment for a customer subject glass strengthening a better integrated value and modernizing our online store expenses for the Bill Omnichannel brought by the REIT strategies.
Our teams are embracing this change and leading into the new strategic direction with excitement I'll now turn the call back over to Mark.
Thanks, Joe.
In the last few months. Despite the crisis, we continued to accelerate it make strong progress against that strategy delivering significant growth in digital wallets tools remained closed.
We have a strong new management team with extensive retail transformation expertise and you had three of them Tonight.
We have maintained a strong liquidity position, including recent initiatives around cash preservation and the new ABL facility and believe we can continue to manage for these uncertain times.
And multi transformation is underway with cost interventions in investment capabilities to reestablish our authority in the home space.
We expect to deliver future annualized savings between 250 and $350 million.
And our strategic growth agenda is customer inspired omni always and design to live a feature market share and margin growth.
At a time when one hundreds and become the center about lives at Boston beyond is rapidly evolving to meet the everyday needs of our customers and making it easy to Peel that hard.
We're now ready to take your questions.
Thank you we will now begin the question and answer session.
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We have a question from Seth Sigman from credit Suisse.
Hey, guys. Thanks for taking the question welcome everybody up My first question is just on the improvement that you talked about in June reducing pleased with the trends that you're seeing I think you mentioned that stores were still down 25%, but obviously that was impacted by.
Some of those stores being closed throughout that period I think the math would imply that stores that were reopened could be positive are you able to confirm that is anymore color on.
Some of the in store trends and behavior that you're seeing as you reopened.
Yes, thanks Sigmund.
With that the 25% reflects a week by week changed the doors that were actually open.
But we are seeing is that about 50% of our open doors that way.
Comping why all having slight improvements so we've been really pleasantly surprised by the early response, we've seen now there is in that the pent up demand pace that could be the checks from a compliment that affected the outcome, but overall, we're seeing good patronage good traffic.
And the trend signed stabilize and what's not against that as those tiles climb inside the stores, we're still seeing strength in our digital channel that is not changing saw nice mix. There and also a transfer to a great have mentioned dots mix rosin whiting into that early covered period in essential to positive.
And is that what kind of continue to track missing that throughout June and July.
Okay. That's helpful. Just to confirm you said, 50% of the stores that are opened or positive just clarify that data point.
Yes, 50% of the stores that are open approximately flat or have an increase on al why now this is exceeding our expectation because we went into the ambiguous opening moment with some conservative plan. So we're pleased with what we're saying.
Got you. Okay. My follow up question is on the longer term outlook really it's really early for the team there but.
Can you give us a sense of at least the timeline how are you thinking about the margin progression here.
And I'm wondering is everybody's got enough the speed on the business is there a view that you do need to invest more upfront here to drive change or do you feel like.
Through some of the savings that you've identified you can effectively offset that to deliver margin expansion, how should we be thinking about that.
Yes. Good question segment I think that we are looking to offset some of the cost to mid built solvency drop capex expectation, but we'll continue to review going for a large chunk of it is really responding to already pre planned transformation around supply chain to cycles on on the old wise channel were in slight with that and we'll continue on that Paul.
So first part of your question again laws.
Seeking the best how did your question can you just reiterate.
I think I've lost you there.
I think the operator coming off can you hear me Oh, Yeah Canadian out thanks.
The question was really around other line cards my progression yet I know you I could give us an exact target at this point, but.
Is it a hockey stick it with the investments of front door should we start thinking about some stabilization in the back half just any color on how to think about that progression.
We'll talk more at the October.
And this styles led to stop add some color there.
Yes, Hi set. Thank you for your question a nice talking to you just to comment I mean, one into as Mark said, when we get together and over for investors day, we will lay out a progression of margin improvement.
You are out of one and the other thing is I think we should think as Q1.
Okay, the worst quarter in terms of marketing and from we will improve.
Okay.
Thank you. Our next question comes from Seth Basham from Mitch.
Thanks, a lot and good afternoon welcome to everybody.
My question firing on assets Sigmund question thinking about the cash right that dynamics here.
Hit here store sales trends any online sales trends persist through the balance of the year lowered your cash flow look like for the full year.
Hi Tech savvy, if you look we're not a fixed we said in the prepared remarks, we're not going to provide guidance on the year, but I can tell you that we feel very confident on our ability to generate cash flow. We obviously had a significant cash.
From during the first quarter, which we manage as they claim quarter with our marketing month out.
During the month to come we should not be seen that drain.
And I could say preliminarily the month of June.
Not close the books, yet, but our cash products will be.
Ahead of the close of me.
That's helpful color. Thank you and then secondly, if you could provide some more color around the fulfillment changes that you're planning going forward will you continue to fulfill online orders out of stores.
How do you think you might approach that.
Over the medium term.
John revenue.
Thanks, Mark so thanks for your question. So it's very interesting to see the breakdown of our fulfillment in the first quarter with with BOPUS.
Representing 5% of art, our fulfillment total.
Our regional Fulfillments, the stores that we ramped up representing 30% and a 41% coming out of our warehouses with the balance 24% coming directly from our vendor partner. So we've learned a lot in this in this quarter around our digital our digital response to the customers demand in the context of cobot.
And these lessons will be applying in the in them in the month ahead, so more to come on our end to end.
Our end and supply chain transformation and we'll have further detail for you at our Investor Conference in the fall.
Yes, just sat in the area.
Got a day that digital.
Fulfillment pace focus was very.
Within the quarter, what we're seeing has a much higher right fulfillment three buckets, which is going to assist afrezza.
Okay.
Understood. Thank you very much and good luck.
Thank you next question comes from Jonathan Matzke from Jefferies.
Hey, guys. Good evening, thanks for all of the color so far.
Question on the new customers you've been seen during the past quarter you indicated.
10%.
We're placing orders.
For the first time brand new to bed Bath would love to hear just a little bit more about the profile of that new customer that you welcome.
Predominantly in the digital channel and if you could parse out any differences in the profile of that customer versus your your core bed bath customer in a pre coded that thanks.
Yes, so that customer is younger and profile.
And so headstones to.
Spending power.
We're seeing them across buy buy baby Bakken beyond in the same white.
But overall, Jonathan what we're seeing year drew fat.
Pending patents on the digital customer in total with their competitive from a price to a customer all the new or their omni channel.
The spending really great baskets.
Conversion rights of very very strong and we're really forging a new deep relationship with them. So.
Going to come into the post credit period is very fresh company with barter and curbside intact, but a whole new set of customers and a new way of working in omni channel why such an exciting contract.
That's helpful. And then just a follow up question actually on on that in them.
How are you guys thinking about customer retention going forward and and how I hear your plan for kind of converting these newly acquired customers.
Into kind of more longer term lifetime loyal lift.
How do you think about that dynamic what do you what are you going to be doing differently going forward versus.
Maybe retention marketing that you've done in the past and and.
What's the opportunity there.
Yes, I think there's been an immediate change in the way that customers have been receiving messages and I've been to engagement. That's more direct so we blend into existing customer and then you customers with.
Takata messages and model personalize response on a more macro scout Jonathan what we're doing a Cindy Davis, our chief brand officer and backing on a full review of loyalty and we look to kind of address the number of the dishes and we'll be sharing more of that as we sit with you in the Investor community day in October.
Great. Thanks, so much.
Thank you. Our next question comes from current Nicole from Bank of America.
Great. Good evening, thanks, very much for taking my question.
So I guess is starting off.
It sounds like comp exit rates.
And digital should liar are quite strong.
Yes, the store basis open.
Generated positive cash flow June if I heard correctly lapping a bunch of.
Headwinds in the back half year, and maybe even starting to trim some.
Some decent number of unproductive stores. So in theory I guess at least two do you think it's possible that could grow core bed Bath EBITDA.
During the year.
Hi cut makiya.
When theyre going to give any forward looking statement on EBITDA.
As you know add but what we do see is your math somewhat right. We are key realty, putting together, some very strong headwind to be outlets.
To Tailwinds to support is for an increase in profitability in Q1, such a strange anomaly, but the building blocks that transformation as well as the acceleration missing.
Can you customers a digital and there were 10 stores can provide.
I think a knock the outcome for us no prediction or deliverables that will share today.
Okay fair enough.
And then maybe just if possible forgive me if I business, if you to clarify a little bit more at least directionally the composition of.
The two to start to 250 350 savings in terms of.
How much of that address you may some of that.
Gross margin whats the timeline.
Think about Reinvestments.
And yes, just kind of market maybe.
As of early color in terms of.
Some other things we've talked about in the past in terms of.
Some of the bigger gross margin initiatives like sourcing in private label and kind of how to extends back half year and into next year.
Yes. Thanks.
Again, as we outlined that losses, but the brand piece of it will really materialize into Q1 on woods event that were really add value to our progress not to mix. We have been as you said very active at a number of buckets and we didn't stepper.
But we are giving kind of on aggregate there, which is quite substantial on an annualized basis that will be type SG. Nine. So we are we I'd have negotiated substantial savings in our Cogs line, where refreshing our assortment to lean into brands, which will have a supplementary bit benefit to margin we are transforming now.
In general infrastructure costs with great savings.
We are going to look at the store rationalization program, which will add.
Dollar to the EBITDA line.
And we were fortunate enough to in October 28 to already get back on a very storm 85 billion dollar cost reduction, which was for two would have added the cause of climate. So only seeing collectively will represent and another 250 to three PFT.
But we do look towards kind of laying the more in pockets for you.
At the Tobey this to community die some more color.
Okay Thats terrific, thanks very much.
Our next question comes from Christopher Horvers from JP Morgan.
Thanks, Good evening.
My first question is that nursing disclosure in the queue about some reece reclassification of some costs and lead out of cost of sales in into M&A can you talk about adding.
At the disclosure that you gave.
Is that inclusive of the change or did you restate last year that it seems like it probably helps you by about 300 basis points year over year.
Hi, Chris Gustavo here.
These did not have any impact on the total company.
And now or EBITDA, it's only as you know for GAAP rules, we need to record from up ARPU field and distribution costs.
Into.
Gross margin costs of goods and with the explosion that we saw in digital growth in Q1.
We took the opportunity to revisit some of the assumptions.
And.
With that we updated that Rick application.
The impact of 300 basis points in Q1, it'll be bigger than it would be on a going basis, given that the press level of sales in the quarter.
Now we wanted to be transparent on that and that's where we disclosed in the queue. We do not think the Matt to reality of these.
Warrants the restatement of prior periods or anything because again it was only refining the assumptions.
We are putting our business model into a digital first I hope that helps and we can follow up separately.
If needed.
Okay.
In terms of the two on the to 200 closures.
How many of those you envision being the quarter bed Bath versus.
Christmas tree arm and.
Prior to coded can you talk about how many of those were.
Four wall negative.
On an EBITDA basis.
Chris for John here. Thanks for your question.
The approximately 200 stores that we've referred to in our prepared remarks.
And.
In our report, our or primarily bed bath and beyond stores.
But I don't have any further detail for you on this call today about about the four wall performance of those stores.
Understood best of luck.
Thank you.
Thank you. Our next question comes from Kate Mcshane, Kate Mcshane from Goldman Sachs.
Hi, good afternoon, thank for taking my question.
With regards to the canceled purchases I wondered if that had any negative implications with regard to what you are carrying for the back half of the year.
Related to that with the credits just inventory before cobot you had plans to reduce inventory can you talk about how you're thinking about inventory through the year and could you still see inventory come in below 29 came out.
Hi, Kate this is Joe I'll take that so thanks for your question and it's a good one.
I think as you know we've been on a multiyear journey to reduce inventory and increase turns and Gustavo made some comes about inventory position at the end of Q1. So we feel very good about that in our Jody to reduce reduce receipts.
So as you think about restarting our stores, we've been able to turn our supply chain back on and we are being very mindful of balancing the outlook for.
With the Covance situation to hand in yet being opportunistic in terms of where we want to be investing and in areas of growth. So we're doing a lot of work on inventory management.
In terms of centralizing inventory planning, we're using new tools and processes to manage efficiencies for inventory.
We will be more purposeful for in terms of where we put products as I mentioned.
And we're doing things around category line reviews to optimize our assortment and make sure we're efficient where we where we have skew investment so doing a lot of good work on inventory. It's our intention right to continue on the goals that we outlined before and I think we're well on our way of doing that.
Thank you.
Thank you. Our next question question comes from Bobby Griffin from Raymond James.
Good afternoon everybody.
I just wanted to talk a little bit more to high level, but mark when you think about the store closures on that you've announced or targeted and you look back at some of the closures done in the past have you seen any notable change in your ecommerce sales in those markets over the years I've heard companies talk a little bit about weakness in some markets on ecommerce once they close the store.
I'm just curious how its work for bed Bath.
Yes, I can't quite a lot about the private data Bobby good to talk to you.
I think what we've done it.
Market by market analysis, denim micro level of store overlap.
Digital fulfillment and understanding what that looks like for the upcoming either we feel really confident that the closures that we are projecting we're going to be after absorbing and retain our level of the prior revenue.
Naturally through stores into 15 mile radius, and 20 mom righties hub as well as through the digital channel I think you gain coming out of the cause environment and the customers reliance and strength with digital and so I think that provides us an even greater access to engage the customer and then provide them with supplementary services. So I think it front.
Apples and oranges minded but.
But.
We don't have a water closure background and our digital wasn't performing to the strengthens whether the it is now so I think we're really looking at new game plan.
Okay, and I guess lastly from me based on some of the June commentaries about cash flow and assuming some of the margin pressures continued because the ecommerce I get that would imply that you are coming back all with a much lower X gene a structure is that true in kind of how are you bring it has seen a back on and what do you allocating to in terms of.
Employees or in any other type of cost versus.
Pre cobot structure.
Hi, Bobby and several of you look as Mark has said we will continue looking at opportunities on NCCN, a and part of that $250 million to $350 million going savings will come from SDMA not only for real estate plan that.
John talked about but has DNA in general and we're not waiting we're not waiting to take auction. Some actions. We're taking in February as Mark alluded to and we all know and some actions will continue to be taken shortly.
Right.
Q1 is DNA was down 15%.
And that was really after intervening in the last two month of the core.
So we do even really in those two month the reduction was above 20%.
And.
We will continue driving as ginny reductions throughout the year.
But we had just add ins I appreciate it.
When snapshot in time.
If you look at the gross margin right that we could not that heavy heavy digital perspective is also where we didn't have a capability is key to really offset does cost effectively and then we had the double dip margin of a large amount of lower margin product filtered through potential as we've come through into the June July period both.
Saying is now buckets and still fulfill taking up to 30, 40% of our mix and changing our cost structure. We're also seeing on natural margin mix across the board come into play.
I think that Q1 is indicative of anything much it's really trapped in time, we see good upside nights from our actions, but just the natural reflow of what customers are buying away, they're buying a trial.
Thank you best of luck a second quarter.
Thank you.
Thank you. Our next question comes from Brad Thomas from Keybanc.
Hi, Thanks for taking my question.
You emphasize the importance of price going forward and I just wanted to circle back to that topic.
What is your latest work show you in terms of how your scoring for our price perspective today and what the customer perception. As then and how are you thinking about the importance of those coupons going forward. Thanks.
Hi, Brad This is Joe again, so I think as market mentioned.
Price is one of the five key pillars that we're focused on and so when you think about pricing promo that all comes together undervalued.
Values important to our customers if something were taken dairy seriously.
As a new management team, we're spending a lot of time talking about this and evaluating formalizing our strategy. So we can evolve it.
Coupon as you all know is a big part of our mix today.
What we're doing work on baseline pricing like Inge.
We launched dynamic pricing late last year, I think you've seen some some more competitive price gaps to market over the last six months, which is something we wanted to effect and we're continuing to evaluate more category that we would look to put into dynamic pricing, but overall pricing is it.
Basic and promo is something we're again, we're spending a lot of time on and it's come into play in a few different ways, one where we're establishing category roles, where we want to better guide our pricing strategies. So we are more focus on where we want to put make price investments to we're activating therell line reviews, where we can affect pricing.
In conjunction with supplier discussions.
We're using owned brands.
We will be more proactively in the future to address opening price points and good price points.
And then we're also looking at new promotional tools to optimize promotion. So that we can make sure when we do invested promotions.
That promotional spend is very effective and efficient so and then lastly, I would say over the long term but were.
We are studying new ways to again evolve our loyalty programs, because we think that theres, new ways and more importantly ways to retain our customers.
I hope that helps.
Thats very helpful. Thank you so much and good luck.
Okay. Thanks.
Our next question comes from Michael Lasser from UBI, Yes.
Good evening. Thank for taking my question. So you're you nearly have 100% of your stores opening. So if you look back same.
Store has the open.
Aggregate although.
The opening what would your same store sales would be.
50% upper.
Collateral for what in aggregate is.
Force.
Hi, Michael can several here.
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The comparable sales performance per store during the month of June on average would be a negative low single digits with a pickup in the last two weeks of the Mark as Mark alluded to.
Okay. Thank you and my second question is.
You are closing 200 stores.
As she may per store is about $2 billion to $2 billion solely closer to $2.5 billion.
Okay.
You are going to save almost half a billion dollars in SDMA costs just from closing those stores.
Why wouldn't your ultimate cost saving the.
Much larger than the $250 million to $300 million that you outlined today.
Yes, So we will give you more detail of that as we get together in the fall but.
Got that not only were not thinking of visa event as DNA intervention. We're looking at this holistically as the change in our business model put in digital first and therefore is not only above the DNA, we think those four walls, but what.
Revenue.
And now they generate and the program the Johnny meeting.
Going to be focused on.
Value creation and as you said there may be some lost revenue, but certainly a pickup on profitability will give more details on the piano components.
I understand the concept of your question and SDMA view, given will be going back later, but.
I'd, rather stay at the content of the program and value creation.
Planet requirement at this point.
So just.
Just to clarify.
We expect some expectation.
Sales for those stores that you'll be closing.
What does that number.
Mike you were cutting off a little bit can you repeat.
Do you have an expectation a percentage of sales from those stores that you expect to retain.
Yes. It is part of the plan, we're not going to share that now we will put together a.
Sales recovery as we close stores.
And Mark will simply question that will will lose the tonight, but we will lose or transfer some of the sale. So the net net it that is what we successfully the cost savings not just this and I exercise. So again as 'cause tavis had more to follow in October.
Got it thank you very much and good luck.
Thank you. Our next question comes from Simeon Gutman from Morgan Stanley.
Hi, everyone. Welcome. Thanks for taking my question.
And I'm going to try to that one more time mark.
Level on the sales maybe transfer rate are realized.
In a lot of math around it but based on your answers to the prior question. It sounds like that you may be assuming a higher sales transfer it Mark I. Appreciate you may be the apples to oranges through the tricky moment in time and I do think this moment suggests that that may be more can be retain digitally.
Than ever before.
But with regard to prior numbers in retail we've heard twentys thirtys over time, maybe even a little lower than that.
When the realm of expectations in that ballpark, what you're thinking are you thinking higher or lower.
Okay.
Okay Simeon.
So I'm not going to get specific but look I mean, yes. It's in the realm I think you've got we're looking at 2019 numbers and clearly 2020 is going to be a different bowl game in the index.
Like what we see is slightly different.
Issue too a lot of that competitors, because we'd be happy to establish market density overlap and therefore duplication of the market. So we've got maybe to store was addressing one market that we could kicks in clots higher level filed into we've done the algorithmic math on this very very carefully we will see some side.
Degradation.
We'll see some move into digital we'll see some transfer but the net net of what we will achieve will be a really strong posted at the bottom line certainly EBITDA.
And then we can set about filling in some of the market price gaps that we see maybe ridiculous format store or repositioning some of that fleet to really director total market.
And Scott.
It to.
Reprising and reshape.
Not at the heart of it is a net net benefits EBITDA along the way again, we'll map out that sequential bye.
The impact of it will begin in Q4 2020, but the majority of it will be over the next two years and would afford share more details the math, but that was there.
Okay and my follow up it's regarding the next quarter little bit on the back half.
Everything is fluid right because you have stimulus pent up demand how could you I can you help shape youre right back to college plan at this point meeting and actions that you've taken recently what are you doing and then have you ever shared can you share how much of the second quarter sales.
Our impacted by back to college and back to school.
So now we've got be sharing the portion of the cycles, but what I would say to you is that we actively agreed to pivot heavily into the back to college my minutes Fs Major change point. This was in the pre close.
And we're very pleased we data when we really monitor whether we should proceed now we should proceed.
And we've launched back to college Ali tip pumping stores over the full month of July though between August and we've been active in digital digital several weeks.
We are very pleased with.
Double digit gains we've stayed both in store and our mine.
And the result of by engagement.
And sales.
It off and running now it did bright lights.
These changes that we several months ago.
Carl lighting as John mentioned with companies like interest and we establish that people what peeling back to college I'd is very LTM still very relevant in the consumer line fit with Lansing, we have shop, a price value, we have clean store a digital setups that unique and aligned we really have a very comprehensive program. It's.
Often running and it's on a quarterly on that so we see that profiling through the rest of the quota.
Depth penetration has not going to share, but positive I would love with the already positive indicated that we've had on the rest of our assortment. So bullish about the quarter in full beltway positive about progression that we thing.
In a separate two second clarification, if I can I'm sorry for this for good Staubo, you said down low single digit of justice the comparable stores that stores only that's not including digital just to clarify.
Correct.
Thank you.
Thank you. Our next question comes from Carla Casella from JP Morgan.
Hi, and one question a follow up on the tire Holler <unk>.
Back to school back to dorm College type business, you talked about how much that typically represents the second quarter.
Okay.
The biggest seasons.
It's not one of that because they know it is a good season.
You mean actually asked that question than we declined to actually specify the the proportion of the quarter the represent.
But it is an area that we.
It is one of our seasonal promotional events that engagement with customers. We think it represents not only great sounds opportunity, but its part about likeminded connective tissue with customers to go from the college experience with pick off and you'll be onto a movie experience, we pick off and beyond two a.
Wedding registry baby Ed beyond beyond so trusts, we believe that in pulmonary late in Q I'm very happy with the early response.
Okay, Great and then on the new credit facility is it 236 million drawn initially at the age is transferred over from the revolver onto the new HDL.
Hi, Carla, yes that was simply a rollover into the IPO, that's where we set the provides a net of additional $600 million of liquidity not the fully 5600.
Okay, Great and then are you there does it have any restrictions on your ability to buyback bonds.
No.
Okay.
Great. Thank you.
Thank you. Our next question comes from Anthony to combat from capital.
Good evening, Thanks for taking my question I appreciate it.
Warner secure.
Our target.
Sure.
Both personal.
Correct.
You get broader color in terms of gross margin.
Headwinds work that was very helpful, but if I'm on your website like literally right now.
And our select adding currency.
50% hotels and Ron.
And our backlighting and I, just don't recall that seamless level promotions I guess my question is.
First our were increased promotions a factor on terms the gross margin degradation in the first quarter and then second or.
Mike or breeding insert into tumor candidates or that we made and sort of.
In terms of promotional strategies next year.
Hi out you I'll take that so.
Promotions will continue to be part of our our marketing mix and merchandising mix.
What we learned a lot about promotions over the last I'd say eight months I would say.
But we are investing as I mentioned and tools to make sure when we do promotions, we get a stronger lift on the investment that we make.
I would say back in March we dialed back the promotions pretty significantly because we didnt see them working I think recall that out before.
And and we Didnt.
Didnt have all the right processes and tools, probably two to understand divested the of lift that we need to to drive our effective promotional strategy going forward. So we're making those changes and improvements.
And we'll be select and what we do so I wouldn't read too much into what you're seeing on the web site, we will do some promotions, where we need to clear out inventory.
And work through our resets.
Yeah and put out just studies like you're looking at the website stride. After July 4th file weekends, and we've adjusted our website you seeing greater clarity on pricing and Prama, but had not an increased at all we've actually scout back so.
Yes. Thanks.
Okay, and just aggregate sort of related follow up.
Have you come to any I mean, I guess, where are you in terms of 12 month I know thats part of the holistic.
Promotional pricing strategy to work through any any update there are still sort of sort of firm.
Playing with that.
Yes, I think it's fair to say that the coupon is absolutely part of that the.
And we want to use it more strategically enlist surgically going forward during the period, we didn't lean into it as much we actually normally have a low rated redemption of coupon on the digital business, rather than a store base business and with stores closed up with a natural outcome, but as we've opened up as just mentioned we pulled back on coupon.
And we pull back on.
Promotions and we seeing.
Very good business as a result, it will not disappear product too we are which is going to be more strategic management of it as we look at a price pillar and our promise pilla, we'll be looking at the intersection between price value coupon and loyalty and unpacking that more we Cindy and Joe what the Hell.
So more to following that.
Got it thank you.
Thank you we have talked for one more question. It comes from Mr., Peter Benedict from there.
Hey, guys.
Thanks for sneaking me in pressures on here most of my questions have been addressed by the other guys but.
One thing on the fly that had the rebuilding merchandising authority.
Theres the category profits part of that.
And it kind of speaks to assortment optimization reviews and supplier profitability actions I was just curious if you could maybe expand on that.
What's the timeframe for those those efforts what.
What form do they take just trying to maybe understand a little bit more what youre going to be doing with your with your vendor base.
Yes, Hi, Peter this is Joe again.
Some of the work started back in the fall last year, we'll look at some of our our destination categories and embedding in Bath and we employed some work.
To look at how we would improve our Cogs.
Through different ways of sourcing we've been pretty effective on that but again, we're working through a lot of transition inventory and I won't remark on the benefits yet maybe not but the market was double pine on that but I would say we're pleased with some of the work that's going on and we are rolling into the next phase of that with a second and third set of categories. So.
One other things Thats real promising for US is is.
Using data and.
External data internal data much more effectively to do outlined reviews. So the teams are embracing this with a lot of excitement and worse. We're really pleased so far with some of the results that were getting out of this.
Mark, Yes pit or decide that the general assessment is we were paying too much.
We were ordering in a decentralized light, which is creating until the costs.
We weren't focused enough are now key winning categories rooms, and shopping patients and we didnt leaning to.
Margin rates, but also a differentiated allied brand programs. We are doing all of the above concurrently started last year. They have different times of hitting the benefit to the bottom line.
But they are ongoing they reach a really excited about that curations Joe's step, Dan, but that previously and it's great work again part of our overall roll up to the bottom line that we see because of EBITDA benefit, but truly work in flight that we'll see ongoing benefits again.
Okay terrific that that's helpful. Thanks, and good luck.
Thank you beta.
Thank you and now I would like to turn the call back Thomas for any other remarks.
Thank you Hilda. Thank you all for participating on our call today feel free to contact me, but any additional questions or comments have a good night stay safe.
Thank you ladies and gentlemen. This concludes today's conference. Thank you for participation you may now disconnect.
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