Preliminary Q2 2021 At Home Group Inc Earnings Call
Second quarter fiscal year 2021 earnings call.
Hi, all participants are any listen only mode. Every question and answer session will all presentation, if any what's your radar systems during the conference.
Sorry.
Thank you.
A reminder, this conference is being recorded.
Now my pleasure to introduce your host Arvind Bhatia, Vice President Investor Relations. Thank you you may begin.
Thank you Michelle.
Thank you for joining us today for at homes preliminary second quarter fiscal year 2021 earnings results Conference call.
On the call today, our chairman and Chief Executive Officer, LIBOR, and Chief Financial Officer, Jeff.
In addition, president and Chief operating Officer piece of course that will be available for the Q. Unfortunately.
After the team has made their formal remarks, we will open the call to questions.
Before we begin I need to remind you that certain comments made during this call may constitute forward looking statements that are made pursuant to and within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act and 1995.
In particular statements about our outlook and assumptions for financial performance for fiscal year, 2021, and our long term growth targets.
That's what I statements about the markets in which we operate expected new store openings real estate strategy potential growth opportunities marketshare competition future capital expenditures future cash flows the impact of terrorism.
The impact to the global outbreak of Cowen 19 pandemic are forward looking statements.
Such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements.
Got it for two and Adams press release issued today and in filings at home makes with the FCC.
Statements made today are as of the data on this call.
That does not undertake any obligation to update any forward looking statements.
In addition, the preliminary results for the second quarter that maybe discuss your in this call are subject to change.
Our management and external auditors have not completed our normal quarterly clothing and related review procedures and there could be no assurance that final results for the quarter, but a lot differ from the preliminary results, including as a result at quarter end of closing procedures or adjustments.
In addition, any discussion during this call up our monthly results for the quarter will be provided to help investors understand and if that's the near term impact to decode 19 pandemic, but are subject to variability in may not be indicative of our adults or trends, where any phone reporting period.
Finally, the speakers may refer to certain adjusted or non-GAAP financial measures on this call such as adjusted EBITDA adjusted operating income pro forma adjusted non-GAAP net income and pro forma adjusted earnings per share.
A reconciliation schedule trying to GAAP versus non-GAAP financial measures is available and at homes prosody issue today.
If you don't have a copy of today's press release, you may obtain one by visiting the Investor Relations page on the website at Investor Dot Dot com.
Addition from time to time I don't expect certain supplemental materials are presentation.
For Investor reference on the Investor Relations page if it's outside.
I would now I'll turn the call orderly leap.
Thank you are in good afternoon, everyone. Thank you for joining us to discuss our preliminary results for the second quarter fiscal 2021.
Before I dive into our performance I'd like to provide some context to the timing of this call.
Six weeks ago, when we shared a Q1 results we highlighted the initial momentum we are experiencing in our reopen stores during Q2.
We also noted our strength was across all departments and geographically broad, including the state touches, Texas and Georgia, they've been reopened the longest.
The early signs were encouraging we wanted to be prudent and a lot more time to read the trend.
The Q2 now behind us and the benefit of additional time to understand the data and given the unprecedented environment. We're currently and we felt it was the right time could provide a business update.
Our goal is to provide even greater transparency and accessibility for our investors during these uncertain times.
I'm pleased to share the business had not only remains strong, but we expect to report the best quarter in terms of comp sales and profitability and the lowest leverage ratio in our history as a public company.
We are emerging from this pandemic stronger and even better position as we believe.
We are gaining meaningful share.
Our Q2 counts were up 42% total sales were 515 million or up 51% and we expect adjusted EBITDA of at least 150 million.
Which a record results for us by far.
Based on industry data available to us we estimate our sales increased at a rate several times faster than the industry and our market share without meaningfully during Q2.
We believe we're benefiting from a contribution of factors.
A combination of factors first as customers are consumers are spending more time at home. They're also spending more money on decorating their homes, creating a home workspace and organizing their kitchen.
As a home decor category killer, we're in the sweet spot.
Second uniqueness and strength of our business model is resonating strongly with our customers are unmatched breadth and depth of assortment offered a compelling everyday low prices continues to differentiate us from our competitors.
We are experiencing strength across all departments and in stores across the country. We're seeing a strong increase in traffic gaining new customers and our average basket size is up significantly compared to our historical average.
Third we believe the convenience and say social distancing afforded by our large store format self service model and our increasing omni channel capabilities are providing.
And proving to be more powerful competitive advantage for us.
Fourth we believe the successful execution of our key comp driving strategies, including SDLP plus campaigns Reinventions Omni channel and loyalty is also feeling this momentum.
I think example during Q2, our recent reinvention such as decorative accents and sheets generated comps nearly double the company average.
We're also pleased that are increasing omnichannel presence remains above plan in terms of sales basket size and attach rate.
The next few days, we expect to expand delivery an additional 40 stores. This will allow us to offer the service in more than 70% of our stores up from 50% of our stores just six weeks ago.
Our loyalty program insider perks has maintained its rapid growth and now has 7.5 million members.
Up an impressive 2.3 million or 45% year over year.
Many of you remember our discussions last year, highlighting opportunities in product pricing inventory and omni channel.
We challenge ourselves as a team and intensified our focus in these areas and I'm pleased with the outcome in the first got.
Our pricing a sharper than ever and we believe is one of the key reasons for our ongoing success.
Our inventory levels and turns have improved remarkably and are contributing to healthy gross margins and cash flow.
The accelerated rollout of our omni channel business is helping us gain wallet share and provides try some installations in the event there happens to be another pandemic can do shutdown.
Delivering on these initiatives has set us up well for continued success.
We believe we'll continue to benefit from these macro and company specific positives over their foreseeable future.
In addition during Q2, we believe we also benefited from short term factors, including pent up demand stimulus checks and the fact that some of our competitors reopened later than we did.
It's difficult to gauge exact contribution of the short term factors to our Q2 performance and beyond.
However, we are encouraged that business has been very strong beyond the initial reopening pureed.
We're excited about our continued momentum despite competitive reopenings competitor liquidation and the resurgence of krona virus.
Which we are monitoring very closely.
In select markets experiencing a recent surgeon cases, we've seen a moderate impact on sales. However, even in these markets comps have been up solve a double digits in recent weeks.
Looking at recent trends July was a strong month for us with comps in the low fortys.
More consistent with our total comps for the entire quarter.
Turning now to our outlook for the rest of the year, our everyday business, which represents 70% of the mix has remained consistently strong.
July comps for everyday business in the mid Fortys, we're highly encouraged by the momentum during.
The quarter.
And exiting the quarter.
We've been successful in replenishing inventory in this category and in the next 12 weeks expect record risky.
To support demand.
Importantly, this is inherently a less risky category for us and we can flex our purchases up or down commensurate with demand.
We're not providing guidance for modeling purposes, we're prudently assuming comps will moderate few Q3 in Q4.
And the seasonal category, which represents the remaining 30% of our business. Our initial orders for Halloween falling Christmas were placed in late March and April at the onset of the pandemic.
We were cautious in our approach because of lack of visibility on the timing of store reopenings.
George reopen to impressive volumes, we steadily increase the size and frequency of orders for seasonal product.
However, we will still be inventory constrained and expect our back half seasonal inventory to be down mid single digits.
This is different compared to the first half when we had adequate seasonal inventory of Patti own garden to support strong demand post reopening.
That said, we're particularly excited about the quality and freshness that we'll be able to offer and our seasonal Halloween and Christmas merchandise.
With that I'll turn it over to Jeff to provide a few financial highlights.
Yes.
Thank you wait and good afternoon, everyone.
I'm excited to share with you a few highlights from our preliminary Q2 results as a reminder, we plan to release, our full results and host our regular Q2 earnings call in early September.
As Lee mentioned, our Q2 comps were up 42% total sales were 515 million for up to 51% year over year, and we expect adjusted EBITDA of at least $150 million.
To put our Q2 adjusted EBITDA in context for the full fiscal year 2020, we generated adjusted EBITDA of 175 million.
So we're not only pleased with a record top line results, but also with the flow through.
These results help demonstrate the underlying strength of an operating leverage in our business model we.
We expect strong gross margins driven by leverage on the occupancy costs and we expect significant improvement in our SGN a ratio driven by operating leverage on our fixed costs.
As a result of our strong second quarter results. Our first half total sales were up 9% and our comps were up slightly a remarkable achievement given the disruption and store closures in Q1 in Q2.
Looking at our Q2 comp trends by month May was the most impacted month due to store closures, but still generated low double digit comps on the other hand June was our best month and July was in line with our overall comps for the quarter.
We are most encouraged by our July results. Given we are faced with increased competition liquidations renewed concerns related to the surgeon chronic virus cases, and the amount of time elapsed since reopening.
When looking at reopen stores alone our comps were up 62% for the quarter and up 74% for the month of May and June combined.
As a reminder, all of our stores reopened as of June 19.
Switching to the balance sheet, we estimate our liquidity at the end of Q2 was more than 280 million, including cash on hand, and availability on our ABL facility.
Included in this estimate our net proceeds of approximately 33 million from sale leaseback transactions, we completed recently.
The transactions involve three of our stores in Grand shoot, Wisconsin, Cincinnati, Ohio, and loot, Florida.
As a reminder, we still have nine owned properties available to provide potential liquidity in the future.
Also as we mentioned on our Q1 call we filed for approximately 25 million an income tax refunds under the care Zack.
This amount we received 7 million refunds during Q2 and expect to receive the remaining balance in the near future.
We expect our inventory level at the end of Q2 to be down substantially versus last year and our inventory turns have improved meaningfully.
Lastly, we anticipate our leverage ratio, which we defined as net debt to adjusted EBITDA at quarter end was approximately one and a half times on a trailing 12 month basis.
Record low for us as a public company.
Said another way our leverage ratio improved nearly four turns in the second quarter compared to 5.4 times at the end of Q1 as we used our cash flow to eliminate all borrowings on our ABL facility.
With strong liquidity a record low net debt to adjusted EBITDA ratio and continued business momentum we are well positioned.
We remain focused on opportunistically exploring ways to optimize our balance sheet and capital structure.
With that I'll now turn the call back over to Lee for final remarks.
Thanks, Jeff with our stores fully opened in business firing on all cylinders. When most gratifying aspect has been the ability to bring back our furloughed employees.
In addition for the 60% of home office employees that took pay cuts we've been able to restore salaries to pre cobot levels.
We've also been able to institute merit increases and lifting the hiring freeze put in place due to cobot 19.
When it personally thank our employees for their extraordinary Grace and endurant during a tough period.
To our investors I'd like to emphasize we remain excited about our current positioning and the vast untapped untapped opportunity in front of us.
We continue to believe our total addressable market includes at least 600 stores over the long term repo.
We're focused on managing the business prudently and strive to remain excellent stewards of your capital with that operator. Please open the line for questions.
Thank you we will now be conducting a question and answer session.
That's the question. Please press star one telephone keypad confirmation Telenor indicate your line is in the question can you May press star to if you'd like you move your question from the Q for participants using speaker equipment may be necessary to pick up your hands that before passing the sarkies one moment. Please.
Question.
Our first question comes from the line, that's Simeon Gutman with Morgan Stanley. Please proceed with your question.
Hey, everyone hope everyone's good nice results I wanted to ask first about inventory you mentioned, it's in a better position and you know turns will be a better.
Can you talk about well inventory or the lack of it constrain you in anyway and the next couple of months toward the next quarter or too.
Hey, Simeon this is Jeff.
I think right now the merchant team and <unk> on our buying teams have done a great job you know weve flips a weekly open to buy and they're chasing right now and everyday side I think as Lee said when you. We look at the next few months, we've got record flow coming into our distribution centers and we feel good about where the everyday image.
Tory will be in the near future. When we look at the seasonal side you know because we had to make those decisions in the late March in early April timeframe, we will have some constraints from a seasonal standpoint, but if the demand is there we would expect better full price selling and really nice margin from our seasonal so.
In the back half.
Okay and my follow up it's maybe two parts. It's it's just confidence around retaining customers I think we've heard from a bunch of retailers who've done really well.
And made comments around it and so curious what you know what gives you confidence in that and then you mentioned in the release you know gaining share and you know the numbers would be hard to refute that but do you have other data points of what the physical brick and mortar home furnishing companies are growing up.
Yeah, and <unk> on the retaining customers, we've seen a really large repurchase rate from our customers. So they're not only the returning more often but about size is bigger we have that data because of our loyalty program. So we can see that they're coming in we can see that they're coming in more often and what they're spending within their basket. So we're thrilled.
With that that's the benefit of a loyalty program and all that data that we've been in and that time, we've been investing in that program and we look forward to actually having an upgrade to that program in the next few weeks.
So that'll continue to add more value for them in the future. We're also seeing new customers, we're seeing new customers that are engaging the brand that havent before that a joining the loyalty program. They see the value when they come in in their first visit right in that time, they see the flash find it the first table. It shows the flash find pricing. It shows that had there's value in joining the loyalty program.
So we're having increased.
Membership growth, there and new visits from new customers, So I'm thrilled with our existing customers coming in more often I'm really excited about new customers engaging their brand for a variety of reasons and we talk about how we're gaining market share or how we what we see in terms of market. We've got it we have data like other people do and what you do as you take pride.
Terry information and you look at it and you you read the data a lot of you have all sorts of data out there from the that's why we said with the data that we have we're able to see how other players are doing in this category any than other retailers in other categories. So we can see overall consumer trends in behavior and try to read and react accordingly.
And would that data, we can see that we've more than two times or even greater than the industry average.
Okay. Thanks, very much guys be well.
Thank you.
Thank you. Our next question comes from the line of John Heinbockel.
Hi. Please proceed with your question.
Hey, Lincare curious.
Customers are engaging with curbside pickup and stores reopened and the the degree to which that's that's an opportunity going forward incrementally.
Yeah, well, obviously, when we close towards March 22nd we had to offer a way in which they could engaged with us and byproduct and so we did not only rollout byline pick up in store to all stores almost all stores and then we added curbside pickup at the solution as well and that was the primary way in which there.
Or buying photic once the stores reopened some customers just went into the store and picked up their orders and some people never even didnt buy online pick up in store anymore.
We would what I would say is even curbside pickup orders until our much from an absolute orders are still much higher than we had ever expected. We're pleased with that the order sizes bigger.
We do like them to come in the store because when they do come in that the add on rate is even better for us, but what we're trying to do going forward as we continue to try to enhance that curbside pickup and make it more and more contact list and we'll have some upgrades in the next few weeks around that as well to make it even better for them.
And we'll continue to evolve our omnichannel strategy and our enhancements going forward. We told you we were going to do a multiyear strategy and there would be more to come into future.
And then secondly, obviously these results.
You should do two things right you know should make the.
The the new bank facility.
You know could facilitate that what's the thought on a pace.
You know timing and cost of that a number one and then secondly, you should be in a position I would think to restart 10% unit growth.
Early in 2021.
That's fair.
Can you state that first question again.
I will just in terms of new Bank facility right. You know that was going to be a priority between now and yearend and they should obviously helped that significantly.
Yes, John I mean, this Jeff we actually you know on our last call. We're really happy when we got to file a gun and you know we're able to tap the sale leaseback market.
In the month in July.
Sell three properties you know, we don't have anything to announce right now as it relates to a new debt deal, but it is a priority for us. We're obviously very mindful of the maturity and you know as we said in her prepared remarks, we'll opportunistically take a look at that when Wyndham.
Thats available to us.
Okay, and the expansion and then restart yep, yeah, and the expansions as you know we opened seven stores. This year once covidien, we stopped all construction on existing projects, we will restart those at the beginning of the year, we intend to open up seven to 10 stores next year on this will be a time in which we can focus.
On improving our overall capital structure and liquidity or and then the following years when we'll go back to 10% unit growth.
Okay. Thanks.
Thank you.
Thank you. Our next question comes from the line.
Adam.
Please proceed with your question.
[noise] Hi, this is Eric on for Zack I was just once you until about the new customers that you're getting.
Anything in terms of the over indexing versus in store versus omni channel.
Oh, Hi, Eric This is Lee, but I would say is up as the quarter progress.
People felt more and more comfortable in the store and and less.
You know needing the curbside pickup.
What I would say as the majority of the customers came in the store joined the loyalty program in the store, but we saw we still saw a lot of sign ups and the loyalty program in a online as well through that process.
But I would say it with the store experience that help them feel most comfortable engaging with us and maintaining relationship thereafter.
Yeah.
And you guys mentioned just strong top line, you're seeing good as you know leverage.
All the employees back are you finding opportunities to be more efficient cost wise, we can only be operate lower cost structure.
We we already have a very tight cost structure I would tell you had branded stores. It's 25 to 30 employees total for the entire store to cover 100000 square feet and so it's not that we're going to run leaner. There we've actually had to because of these record sales results of end to add employees.
At the home office, we brought everyone back from furlough that had been furloughed and we feel like we needed everybody there given all hands on Dec requirement, when you're up 40% comps and 50% total revenue growth and you see the momentum all the way through July is much help as you can but it's it's a lean team it's already probably one of the most efficient retail.
Operations I've ever seen if not the most efficient I've ever seen from home office support standpoint.
Thank you. Our next question comes from the line of Daniel Hofkin with William Blair and company. Please proceed with your question.
Good afternoon, just wanted to see if you could provide maybe a little bit more color on the.
The margin dynamics that you're expecting I recognize it's still preliminary and then.
I had one follow up question as well.
Yeah, Dan I I mean, this is Jeff so when we look at.
The adjusted EBITDA of 150 million.
That would imply that with the sales a 29% adjusted EBITDA margins, that's up over over 1500 basis points.
So what we saw last year a lot of that is going to come from leverage on our fixed expenses just given the tremendous sales volume that we saw so occupancy and depreciation within gross margin will leverage very nicely as well the fixed expenses at the home office.
Okay.
And then you talked sort of and I apologize if you addressed this I didnt catch up but about fairly broad based growth across categories and.
<unk> is is there anything.
Right all the call out just in terms of things that were especially strong you know category wise.
Some of the reinvention, you mentioned, but any additional color about things that.
Were especially strong are not quite as strong as the overall average.
Sure Dan. This is Lee the strength really was broad based everyday infusion over equally strong Q2 for us we feel like the assortment in their pricing our sharp pricing is resonating on the fees outside patio was very strong we're pleased with that and within patio patio furniture category, with especially strong which was it.
Reinvention, which once again gives us confidence in our approach to reinvention on it with a real focus on lower price points, our sling and we did a value engineered version of our wicker furniture and no sort of some of their best sellers.
And so that's that tells you that that lower prices are resonating for actually all demographics, but I think about the everyday business.
The Reinventions were particularly strong I mentioned that in our our call nearly double the company.
Comp performance, so think of decorative accurate accents and she those first particularly strong fraud and even if you think about non reinvented categories like office furniture food prep betting living room outdoor shade I mean, just across the board all of our 14 department for worst strongly positive. So we're pleased but some out.
Performed even those.
Got it and it sounds like.
You talked about not just merchandising, but also a pricing being kind of sharper for you guys relative to kind of last year kind of reestablishing the value that's kind of fair to say.
It is we went back and repriced and number of our furniture that those are the ones that were most affected think about all the tariff effected categories would based product. So we had increased prices as we mentioned last year following our competitors, but weve had crossed some artificial price barriers. So over the December period, we strategized the price adjustments we made those.
In January and February and you can see on our website, you'll see now lower prices on those categories and those particular items in furniture, an accent furniture.
And ER and I would tell you in our price checks. We do every other week comp shopping we can tell that we are the sharpest we've ever been in terms of pricing. The most competitive when we compare ourselves versus everybody and every department has at least five competitors they compare themselves who obviously the mass players ecommerce players and then a particular competitor.
For their department and where the most competitive in the sharpest we've ever been.
Great. Thanks Best of luck, obviously, a rest of the summer.
Thanks, Dan.
Thank you. Our next question comes from a line of Jonathan.
Jefferies. Please proceed with your question.
Hey, guys. Thanks for taking my question, a nice nice quarter.
A follow up question on the new customers you've acquired.
Thank you talked about much higher baskets that you're seeing our relative to pre kogut level.
Did these you know new customers look any differently from those.
Our core customers pre co bad weather that are on the base the household income or any other measure or is it.
Pretty much the same customer you've seen historically anything to call out there.
Well I would say look a lot like our existing customer the growth was across all income demographics.
And as well as all age groups. We saw that we've obviously been focused on a younger customer for years and tried to make sure that are product assortment addresses a younger customer from the time that they go off to college to the time that they get their first home and thereafter, we saw growth in the millennials we saw growth.
As well as from the income standpoint in both under 30030 to 50 50 to 70 70 to 100 and above 100, we saw growth across all income groups, which was promising you can see that the pricing was resonating across all of that there's people that are trading down in that typically happens when you have a recession and we're in the military.
Session and where value player in value players win in a recession, so I love, our positioning of our pricing and ER and what I would tell you is we saw that maintain itself across the across the quarter.
That's great and then just a follow up.
You know how are you guys thinking about the a you know back to back to school and especially back to college dynamic Theres still a lot of I'm still a very fluid situation a lot of uncertainty.
Your parents in college students and obviously you guys have a number of categories.
You know oriented towards the a the college student dorm decorating and whatnot.
You know what are your read dawned on.
How some of those categories. There are doing if youve seen kind of outperformance in terms of early shopping for that occasion.
And what are your expectations.
For that that type of the assortment. If if we do you see kind of more about a hybrid or virtual learning model.
I guess more sand for you guys have to college level.
Sure.
I'm, particularly close to this because I have two undergrad and now a Phd student going back to school. This fall, so I'm well aware of what's going on and and Jeff has the incoming freshmen college as well. So we're we're attuned to that but I would say what as a company. We learned last year as we were too literal with Baxter campus in calling it back to campus.
Versus its a time in which people are actually in a life change whether they've finished school and they're getting their first department out of college or they're going to college or they're moving our they're changing apartment. It's a time where people actually are in a life change and so we actually dial down the language around back to campus looks and just focused on trend.
And and antenna solutions, selling and so our to our front tables that we dedicate to two that season is back to campus season.
<unk> is now the most productive we've ever seen for this category.
Really pleased with its performance I think it's because we focus on what's trending and and made sure. We had accessible price point and we offered full solutions that included bedding and she but also included items for their living room, and a and their kitchen and what we found was it's been very successful for us, but not as literal.
And so maybe people aren't going back to campus and they're going to stay at home, but then they want to update where they're staying where they're going to find an apartment with some friends and still do online classes, but near campus.
And the like either way that life chapter and those life changes are supported with product that's on trend at the lowest price they can find.
That's great really helpful. Thank you.
Thanks, Jonathan.
Thank you. Our next question comes from the line of Brad Thomas with Keybanc Capital markets. Please proceed with your question.
Hi, good afternoon. Thanks for taking my question quite a quarter here I mean, EBITDA approaching what you did call last year and EBITDA on more than what used to do in four years really something to the whole my my question.
My first question was going to be about just understanding demand in the current trends obviously, there's a lot of crosscurrents for the consumer right now, but at least I was hoping you can speak to your assessment of how much pent up demand.
It was a tailwind in the strong results in this quarter.
And then secondly, how much you think nesting and the consumers sort of inability to travel and pull back that they've had on things like riding on airplanes. You know could continue to help your business as you look forward here.
Sure Brad Thanks, Thanks for the commentary about the quarter. We we've we feel that too it's nice to have to deliver some records and have some profitability that is really going to curious to the whole year. It's feels good but I would tell you from a comp standpoint. The initial strength was we felt like as we mentioned in the previous call was pent up demand since.
Stimulus checks competitors weren't fully open but as the quarter continued we saw our performance continued to be strong as we mentioned that the July comps were consistent with the total quarter Khan.
So and we saw strength across all our markets and all of our categories, both tracking traffic and ticket or both up and were up meaningfully through the quarter. So it wasn't just during a time, where there was some extra money and People's pocket and they were just finally getting out of their home. We do believe that this category is going to benefit.
From the situation consumers are spending more time at home to spend more money on their home many of US had our vacation plans change and Staycation is now the.
One of the common phrases that people are using and for US we're able to be able to be differentiated in this time, where our selection makes it easy because were one stop shop and people are very careful about their trips now if they're going to leave their home there to make sure they're going to go and it's going to be worth the trip. So we've got a full assortment our prices are winning in a value.
Player wins into recession as you all know and they they've got greater access to compare prices and they can see that are prices are very sharp and so we're seeing and experiencing very high traffic and very high conversion.
And that the store environment creates a space in which it.
Safe social listening and you've got two cards to part one way or else, we clean our registers. After every transaction in our cards. After every time, a customer touches them and so and people know that we've been very clear about save shopping at home.
And our customers are pleased with that are grateful for that we require mass in our stores and our employees are weighing Matt.
And so.
You take all that together, but then all the effort we've done in the past year those that SDLP plus that campaign driven approach when we highlighted category. Those campaigns are working all of our campaigns drove strong positives in the second quarter I'm as we mentioned in Q1 three of our for drove positive comps will all of our campaigns in Q4.
Delivery great outcomes.
And our Reinventions those categories or just you know off the charts doing great as we mentioned the decorative accents and sheets doubled the company average when your company averages 40 in the low Fortys then you know those how big those numbers are so we feel like the work that we've done over the past little while coupled out with omnichannel, making it.
Safer to shop and easier to access product and then that benefit to the loyalty program are now gaining traction on our work from a year ago, which we started then.
That's that's very helpful.
How should we think about the outlook for expenses in the balance of the year coming off of.
Sorry conservatism on your part early in the year, followed by this nice momentum and you're seeing right now.
Yeah, I would say.
Rather we're really looking at returning to normal levels. So obviously with store labor marketing spend returning you know as we mentioned all of our furloughed.
Employees have returned to the home office the tiered salary reductions that we put in place those have abated. So it's really up as we look into the back half from an expense standpoint, kinda back to normal levels across all those large buckets of spend.
Gotcha very helpful. Thanks, so much.
Thank you. Our next question comes from the line of Curtis Nagle with Bank of America. Please proceed with your question.
Oh good afternoon, thanks very much.
A quick question on.
Sales split so.
She is no is about 30% so sitting here, what's the split for the fourth quarter.
We normally we've averaged about 70 525 split in Q3.
Our current the last couple of years and then the back half as blended closer to 70 30.
Okay got it.
Just a couple of quick.
<unk> cash question so.
How big a what do you feel borrowing before you hit it often should be still be thinking 40 million in capex for the year ironed out.
Right now we ended Q1 with 228 million drawn on the ABS, though and so bad amount a was fully paid off with the cash flow generation. The five of the sale leaseback proceeds.
During the quarter and as we look at Capex right now I think one of the things as you know, we've obviously started a number of projects that we pulled back on and we had anticipated reopening those store opening those stores up next year I do think some of that spend will move into this year into the back part of this year. So.
Probably you know from a growth standpoint, probably closer to 60 million on a gross but then obviously you know we completed the sale leaseback transaction. So still net Capex you know sub 30 closer to 27, probably.
Okay great.
Thanks very much appreciate it.
Thanks.
Thank you once.
The question. Please press star one on your telephone keypad for participants using speaker and then maybe necessary to pick up your hands that before passing the Starkey. Our next question comes from the line Anthony Chukumba with <unk> capital markets. Please proceed with your question.
Thank you are correct from the strong results. So a question I heard.
I know, it's still relatively early but I was wondering if you could give us any early learnings from your.
Oh, Yeah ship to home program to third parties, yes, a sort of ecommerce car orders that are on therapy.
Shipped or delivered to our.
Customers' homes through a third party or remarks about or early read on that thank you.
Sure. Thanks, Anthony on as you know we started the beginning of the here with the 20 store pilot and then we accelerated our timetable and went.
What we thought was going to be an 18 month plan to rollout BOPUS and delivery and in 60 days, we rolled it all out we're really pleased and Super Grateful for our leadership team executed those actions on and our whole leadership team and store team delivered on those I would tell you we rolled it out at a fraction of the time in the.
Costs. It helped preserve jobs when the stores were closed which I'm grateful for and now curbside is available in a curbside in BOPUS available in 96% of our stores I mentioned now delivery is at 70% of our stores with increase of 40 more stores and you specifically asked about delivery.
We're pleased with as are our delivery partner pickup took the challenge that we fit we gave them which was we used to have we had in part we have a partnership with them, but the price starting price point was $49, which was just not an attractive price point and we knew people wanted to have a deliberate at their home. So we challenge them to say can we need to started tender.
Others.
And obviously it will scale on based on what they put in the basket when they put in there in the vehicle to deliver to their home, but at least they know that they're the ones, adding those things the basket and as you know those to charge that we get from pickup is just passed through to our customer.
And we saw very high take rate initially and we continue to see a large number of orders are being delivered.
Each and every day, we're pleased with that we made it instead of same day, we made it next day to make it more efficient for our delivery partner from a cost efficiency standpoint, they appreciated that our customers still is getting a lot faster than they would from India are out there and.
What I would say that's going to continue to improve.
Our capabilities over time and during the quarter the actual number of delivery.
I went down a little bit as you would expect because then the store with open then it could come in but the ticket remained very big really nice size ticket for delivery and it with the items that you would expect that people need help getting home. So think about furniture and think about patio furniture. All the large items, we found a solution for them and since our prices are below everybody else's.
Prices out there even with shipping they found it was still a much more cost effective solution to buy from us than anywhere else.
Got it and then just one clarification.
Yeah. So so how is that they always are quite buy something online and having it since my home.
The story court that <unk> has that number.
Terrible store sales efforts are comparable store sales rate cuts comparable sales because it includes going like because as I work. Yeah. It's all sales go through the store. They are the ones that do all the work, they're the ones, who fulfill the order and work with pickup to have it picked up and ER and delivered so everything runs through the store because that's the center REIT universe, that's that's where the inventory is coming from.
As well.
Okay. So comparable store sales also include sales to works deliver to the whole it'll include delivery BOPUS curbside pickup all of our sales go through the store and that is included in our same store sales number yes got it. Thank you.
Thank you Anthony.
Thank you we have reached the I never question and answer session I'd like to turn the call back over to Mr. Berg for any closing remarks.
Hi, Thanks, so much hey, thanks, everyone for joining us this afternoon and for your interest in our company I Hope you can sense, how excited and optimistic we are about at homes future prospects.
We look forward to keeping you updated along the way take care and be safe.
Thank you. This concludes today's teleconference. You may disconnect your lines fine. Thank you for your participation and have a wonderful.
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