Q1 2021 La-Z-Boy Inc Earnings Call
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Okay.
Good day, ladies and gentlemen, and welcome to the Lazy Boy Scouts 2021 first quarter.
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Please standby.
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Thank you for the ladies and gentlemen, good day and welcome to the La Z Boy fiscal 20 or 21, the first quarter conference call.
All lines have been placed don't listen only mode and the floor will be opened for your questions and comments following the presentation.
This time it is my pleasure to turn the floor, but your host for today Ms. Kathy Liebmann ma'am the floor is yours.
Thank you Jess and good morning, everyone. Thank you for joining us to discuss our fiscal 2021 first quarter results with US. This morning, our Kurt Darrow, La Z Boy, Chairman President and CEO.
And Melinda Whittington CFM, Kurt will begin in close the call in the Linda will speak to the financials midway through well then open the call to question slides will accompany this presentation and you may view them through our webcast link which will be available for one year and a telephone replay of the cloud will be available for one week.
Beginning this afternoon before we begin the presentation I'd like to remind you that some statements made in today's call include forward looking statements about lazy boys future performance. Although we believe these statements to be reasonable our actual results could differ materially the most significant risk factors that could affect.
Our future results are described in our annual report on form 10-K.
We encourage you to review those risk factors as opposed to other key information detailed in our FCC filing.
Also our earnings release is available under the news and events tab on the Investor Relations page of our website and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call Jack.
With that I'll turn over to call to Kurt Darrow, La Z Boy's Chairman, President and Chief Executive Officer Kurt.
Thank you Kathy and good morning, everyone.
Following yesterday's close of market, we reported our fiscal 2021 first quarter results.
While still in the midst of coal that 19 pandemic, we're pleased with how our business is progressing with strong written order trends.
To put the quarter in context, let me remind you of the pandemic related retail and plant closures and the subsequent ramp up time line for La Z Boy.
As a result of pandemic furniture retailers, including our La Z Boy furniture galleries stores were closed for the tail end of March.
All of April and most of May.
With some still close in June depending on local guidelines.
Related to lead the majority of our plants closed for four weeks and restarted in late April at reduced capacity.
With our Joy Bert do you Wanna facility restarting about a month later due to colder 19 challenges in Mexico.
When we restarted our plants, we initially worked off the pre pandemic backlog.
We then had to wait for order flow as our retailers opened throughout May and June and in concert with that we increased production accordingly.
Well because of the lag from order entry the written the sale.
Two building and delivering the product and recognized the delivered sales.
We essentially lost the majority of the month of May in terms of delivered sales.
As we expected when we commented last quarter.
We have continued to increase our rate of production production weekly and are now operating at about 90% of prior levels.
But our lag time is currently running at about double our normal rate given strong demand during the quarter.
And the challenge of hiring additional workers.
The real good news is that our written order trends across the business are strong.
The entire La Z Boy furniture Gallery network, which accounts for about half of our wholesale business.
Written same store sales increased 14.8% in the first quarter.
And just to provide some additional perspective on the quarter the cadence or written same store sales by month was a decline of 13% in may.
Increases of 30% in June and 32% in July.
So now it's a matter of catching up on moving higher than expected written orders through our production cycle.
Deliver sales revenue as we continue to increase production.
Now it's too early to tell for certain what's driving the strong written sales whether its pent up demand.
Which will eventually tail off.
Or sector rotation with consumer shifting discretionary spending.
Through their homes in an environment of no travel and limits on other leisure related activity.
Probably a bit of both.
These cold at 19 related closures and re olberding transferred to a 31% sales decline versus a year ago to 285 million for the quarter.
With GAAP operating income declining to 4 million and non-GAAP operating income Tonight.
We are still however, we were still however, able to generate $106 million, an operating cash supported partially by strong customer deposits and ended the quarter with a balance sheet that remain strong.
The remainder of my remarks will detail, our non-GAAP numbers and Melinda will cover the non-GAAP adjustments in her mark Red her remarks.
I will start with our wholesale segment, which now includes both upholstery and case goods.
On a sales decline of 30% to 224 million non-GAAP operating margin was 9.4%.
Principally the result of the decline in production for the period and the consequence, lower absorption of our fixed cost.
Partially offset by temporary cost reduction actions related to our covert 19 action plan, which we announced in March.
Written sales for the wholesale segment were up.
To the half percent for the quarter was the decline of 38% in May.
More than offset by increases of 29% in both June and July respectively.
Throughout this unusual and unpredictable period, we are managing our marketing investments with fiscal responsibility, but at the same time, we're very mindful of the increased interest in home furnishings, and decor and the power of our Brad.
In the spring, we did a soft launch of the second wave of the live life comfortably campaign featuring Christian belt.
This way focus is on lazy boys design and customization capabilities, one of our brand pillars, and we are planning for the TV spots to be more frequent and if more frequent rotation.
Getting this month as we move into what is typically the stronger fall selling season.
Additionally, we continue to invest in virtual capabilities as we increase our focus on offering consumers.
An omni channel experience and providing seamless integration between our website and our stores.
From a product perspective, our Modulars section <unk>, while the wireless hand remote option on our power products continued to be in high demand.
On the manufacturing side, we continue to hire and train people to meet the unexpected demand surge Wow following all cobot related safety protocols.
Now, let me turn to the retail segment.
Written same store sales for the company owned stores increased 11% for the quarter.
Even with the majority of stores closed for the month of May and some still closed in June.
A good for perspective on how the quarter played out by month written same store sales for the company owned stores were down 27, 26% in May.
But up 29% and 37% in June and July respectively.
For the quarter delivered sales declined 36% to 91 million and non-GAAP operating margin for the segment was a loss of 6.8% due primarily to our inability to increase our production.
Fast enough to meet the unexpected momentum in demand.
As we've discussed over the last several quarters, our retail business has become a core competency for the company that has been poor performing at a very high level greatly contributing to the value of the La Z Boy enterprise.
The first quarter loss was an anomaly given the dynamic a store closures and the impact of their written and delayed delivered sales.
Encouragingly.
On the temporary decline in traffic, we saw conversion and average ticket improvement as consumers used our website to conduct research before shopping in our stores and our store teams continued to execute at a very high level to close sales.
Additionally, we were pleased to see positive traffic trends in July.
After declines in May and June.
In this environment, we are deploying new ways to engage with our store guess enable safe and healthy shopping experiences.
These ranged from the ability to book personal shopping appointments masquerading by all team members.
And store capacity management.
Well, the queuing system, depending on location condition ordinance and needs.
Feedback has been very positive from our store teams and customers in terms of creating a safe place to shop.
I'll now spend a few minutes on Joy bird.
The quarter toy sales reported or put another declined 22% to 13.4 million.
However, written sales increased 38%.
The deliveries expected to catch up in the later part of the second quarter end of third due to the Joy bird plant not fully reopening until June.
To covert 19.
Balancing sales growth would bottom line performance Joy bird reduced its quarterly operating loss on a year over year and sequential basis.
We expect quarter to delivered revenue rate to be restored to more normal levels, but anticipate it will continue to lag the strong written demand due to the short term labor constraints.
I'll now turn things over to Melinda.
Thank you Kurt and good morning, everyone.
As always let me remind you that we presented results on both a GAAP and non-GAAP basis as we believe the non-GAAP presentation better reflects underlying operating trends.
As detailed in our press release and then the tables in the appendix section of our conference call slides excluded from our fiscal 2021 first quite a non-GAAP reporting are a pretax charge of $3.5 million or six cents per diluted share related to the company's business realignment announced in June which included a 10 for.
That reduction of our global workforce and the closure of our new Mississippi manufacturing facility.
And a pre tax purchase accounting charge related to acquisitions completed in prior periods totaling $1.2 million or two cents per diluted share.
[noise] last year's first quarter non-GAAP results excluded a pretax charge of 1.5 million a two cents per diluted share related to the company's supply chain optimization initiative, which included the closure of our Red Bend, California facility.
And a pretax purchase accounting charge of 1.5 million or two cents upregulated share.
Additionally, I would play not every vision to our segment reporting beginning this quarter due to simulate a financial structures and customer channels, we aggregate and the former upholstery segment with the former case goods segment to find the newly combined wholesale segment.
And now onto our results my comments from here I will focus on a non-GAAP whiting unless specifically stated otherwise.
As noted on a consolidated basis fiscal 21 first quarter sales declined 31% to $285 million, reflecting the continued impact spend that covered loan team turned garlic.
Consolidated non-GAAP operating income was 9 million versus 26 million in last year's Claire and consolidated non-GAAP operating margin was 3.1% versus 6.3%.
Non-GAAP EPS was 18 cents per diluted share in the garden current quarter basis 42 cents in last year's first quarter.
Consolidated gross margin for the first quarter increased 30 basis points improved gross margin was driven primarily by targeting cost reduction actions, including the closure, if I Redlands, California facility about a year ago as well as those temporary actions associated with our code <unk> action plan announced in March.
Gross margin also benefited from improved performance enjoy right.
As soon as a person that sales increased 350 basis points, reflecting the decline in sales relative to fix cost partially offsetting the increase in S.C.N. expense were temporary cost reductions taken as part of our <unk> action plan.
On a GAAP basis, our effective tax rate for fiscal 21 first quite <unk> was 19.8% versus 22% in last year's first quarter.
Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes.
Absent discrete adjustments the effective tax tax rate for fiscal 21 first quite I would have been 26.1%.
For fiscal year 21, absent discrete items, we continue to estimate our effective tax rate on a GAAP basis, well be in the range of 25% to 26%.
Turning to cash we generated $106 million in cash from operating activities in the quarter, including a $61 million increase in customer deposits from written orders for the company's retail segment enjoyed very.
We ended the quarter with $337 million and cash, including 50 million in cash proactively John and the company's credit facility to enhance liquidity in response to coordinate team back in March.
Compared with 114 million in cash at the end of last year's first quarter.
We also have 16 million and investments to enhance returns on cash compared with 33 million last year.
During the quarter, we repaid 25 million of the original 75 million drawn against our credit line based on business performance and I'm going to liquidity.
Also during the quarter, we invested 10 million in capital primarily related to machinery and equipment upgrades to our Dayton manufacturing facility and investments in our retail stores.
We expect capital expenditures to be in the range of 40 to 45 million for the fiscal year other spending will be largely dependent on economic conditions continued business recovery and liquidity trends.
Spending for the year, we'll prioritize essential maintenance projects already underway, including plant upgrades to our upholstery manufacturing facilities technology upgrades and improvements to several retail stores.
[noise] as part of our carbon 19 action plan in an effort to preserve cash in the near term and provide for financial flexibility, we eliminated our expected Jim dividend and temporarily suspended opportunistic share repurchases were pleased to announce we have announced that we are pleased to announce it yesterday, our board of directors elected to.
Reinstate irregular clearly dividend to shareholders of seven cents per share.
This is 50% of the quarterly dividend amount paid prior to the pandemic as we continue to monitor current business trends and remain vigilant with respect to the ongoing macroeconomic uncertainty.
Over time, we will continue to evaluate our dividend level and management I also had its discretion resumed share repurchase is based on an assessment of business trends.
There are currently 4.5 million shares and purchase availability under our authorized program.
And finally before turning the call back to Curt Let me highlight several important items for fiscal 21.
Just a reminder that are expected non-GAAP adjustments well continue to include purchase accounting adjustments for acquisitions to date, which are estimated to be in the range of four to five cents for the full year.
And we anticipate pretax charges of one to two cents per share in the second quite as it related to the completion of our recent business realignment, which included the closure of the Newton Assembly plant and the 10% reduction I global workforce.
Total charges for these actions is coming in slightly later than anticipated due to lower severance benefits than originally forecast.
And relative to business trends, we're pleased with the progress we've made in Q1 and written sales and restarting our manufacturing facilities, but we remain cautious on future sales trends given ongoing economic uncertainty and hand Democrats.
Further we continue to aggressively manage our caught cross cost structure across the business, but our ability to return to or exceed pre pandemic margins is largely dependent on increasing I production rates.
And if demand continues at the current pace and then I'd twist I challenge won't be sales velocity and will be more about how much. We can make during this period of time based on our ability to hire to support demand.
And finally I note on tariffs the exclusion on tests that provided two years of care rebates received at the end of fiscal 20 was not renewed so we will have that expense going forward, but similar to most quarters in the last two years.
Now back to credit for his concluding remarks.
Thank you Melinda.
As noted we are pleased with our written order trends and believe there is still some pent up demand in the marketplace. Given a long period of time retails were closed as well as some shift in discretionary spending with more money going into the home category.
Millender noted because we are mine for the pandemic is still there's still upon us we are cautious in our optimism on demand and our ability to flex our workforce as we move into the fall selling season.
As we manage the business tightly day to day, we are focused on providing great service to our customers and maintaining fiscal conservatism through this uncertain period.
I'm confident we will emerge a stronger company on the other side of this crisis.
I'm quite pleased with the how well the company is fairing as we move through it.
We will continue to capitalize on the strength of our well known and trusted brand.
Our vast distribution network, including the vibrant lazy boy furniture galleries store system.
Our world class supply chain.
And our strong balance sheet to deliver long term value to all stakeholders.
We thank you very much where your interest in lazy were incorporated and I will turn things over to Kathy to provide instructions for getting into the Q.
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Thank you Kurt will begin the question and answer periods now Jeff. Please review the instructions for getting into the Q.
Thank you ladies and gentlemen, if you have a question or comment as star one on your telephone keypad at this time again that I star one for any questions or comments.
Well take our first question from Bobby Griffin with Raymond James. Please go ahead.
Good morning, everybody. Thank you for taking my question, while everybody still stays unhealthy.
Good morning, Bobby warning.
So putting on a person I just wanted to talk about capacity and just making sure. We understand it correctly is is the issue getting back to 100% from call. It the 90% that you ended the quarter with mostly on labor or is there some raw materials shortages or anything else, it's happening inside that capacity inside the manufacturing facility that.
It is lemonade getting back towards the under <unk>.
Bobby It's primarily labor, we have not had any meaningful hiccups in raw materials are supplies and.
You have to think about.
May wasn't.
Maybe was not that long.
Long ago, and we furloughed a lot of people.
And they came back.
Enthusiastically, but.
I'd like a retail store, where you just turn the key in sales start coming in you don't go from one to 60 miles an hour or when you start up restart of plants.
And so we everybody is coming back there are some you know issues with the.
It has to unemployment benefits and things that nature, but but our constraint now is we as we ramp up and we've been working a lot of overtime.
Our country and it's just making sure we can find people that we can train and bring into our system.
And to continue to increase our production and that all three of our facilities. There's also just realities Bobby of keeping people safe in the middle of covered 19, so no keeping folks appropriately socially distances someone has been exposed outside making sure that we're doing the appropriate contact chasing Keith.
I think people home so given our focus on safety for our employees throughout this or just some reality is to add from time to time and how many folks you can have have working as well.
And the enamel into a probably limited throughput in this environment, even even when you get the labor back is that correct.
To some extent we've managed to meet our team has done a fantastic job today, and we really we've had very fairly limited impact, but I'm just with their realities of watching what you need to do that someone comes in and they fill they've been exposed to be able to keep the other safe and number of people you're sending home you do have you do have a bet if eliminated that well.
Well on until we we have this pandemic solved but Bobby I would add to that this is this is not.
Solely a la Z boy problem. This is a wide range industry problem the demand after things reopened.
Exceeded everyone's expectation and.
Everybody that I know in the industry is working real hard to catch up with a demand.
Lead times are out for everyone and if you're if you do import a lot of product is probably even worse. So this is not unique to us but.
We're glad we have the challenge and we're going to do our best to meet it overtime.
That makes sense, yeah, yeah, I agree Kurt I think the demand surprised all of us on our side of the studies as well how quickly it came back.
When you look at.
I wanted to have though [laughter] high class problems I guess he said when you when you look at lead times.
Are they remind me I'm trying to think back in my mind, you know when things are more warm or they normally college that 68 week range and we're now kind of in the 12 13 week range or kind of opus frame that up where we can think about the potential delivering June July strong order growth and to Q or whether or not that order growth will have to shift.
Little bit into Threeq you.
Good question. So our our lead times are a little different by upholstery group and goes a little different and La Z boy enjoy bird a little different but essentially a at lazy boy, we were able to deliver most everything and four to five weeks and we worked real high.
Part of delivering custom orders quickly was one of our strategic advantages.
Right now lobby that strip is stretched out eight to 10 weeks. So it's nearly double of what we were.
I'm used to doing and and its a.
And though the order trends are.
Two new wing in August to mirror, what we see in July.
So we will have a we will have an extended backlog for some time.
Okay, let's be honest, but on that but on the positive side, where are we are making more units every single week.
Okay I appreciate it until it's good news on August trends as well and I guess lastly from me and I understand the high level of uncertainty with unemployment and kind of the buyer still being out there, but if we were to be in an environment, where the industry is experience kind of a secular shifts the consumer spending that's going to last for a while what type of stuff.
Pasadena do do you have right now from a from the plant side of things could you get back to prior peak revenue without having to add.
Absolutely facility or help us think about that limitation.
Bobby our issue isn't isn't space or facility. Our issue is people. So that's always been yeah. That's always been the case. The this square footage where finite and that's why we continue to get more efficient and even how we think about.
You know square footage of plans, but it's really about labor and then making sure. Those plans are in the right places to efficiently service consumers find the transportation standpoint.
Okay very helpful. Appreciate all the details of congrats again on managing very difficult or.
Thank you.
Thank you.
Well move next to Brad Thomas Keybanc capital markets. Please go ahead.
Hi, good morning, everybody.
Congrats on the momentum and the business and a strong execution here during.
Difficult time I wanted just follow up on on some of the Bobby's question about how to think about.
You know the production Yeah, I think the way you characterized it was that your operating in about 90% of prior year levels.
Basically means that demand level that you're able to me.
Would be what you did did in sales.
Last year.
But only 90% to that so you right now a run rating still with revenues down 10% year over year is that the right way to think about it and how do you expect capacity to improves in the months ahead as you as you try to find more.
Got to qualified people tire.
A couple of I mean, directionally, yes, you're right, but I put a couple of different pieces. It just speaks to the fluidity of this situation where it 90% today two weeks ago, we were less than that two weeks from now will be better than that as we continue to focus on on hiring and inefficiencies. There I know they as I noted earlier, there's always started at the question Mark on.
The the impact of covert at any given weak, but in general that trajectory is moving up a you're right. We did say as of today worried about 90% of year I go. The other thing is I would point out is that that's a ballpark number for our lazy blade in a branded.
Manufacturing business, there's obviously some play on how much of that is going to our you know to our own retail division how much that is coming through we've also got the K. you know the case goods business or England business. So those are rough ballpark, but to give you a sense of how we're ramping up and where we stand I know on throughput as of today.
And how to think about the future I mean, yeah, you know it with demand as long as demand is staying high will continue to try to increase that throughput and increased hiring.
But there are there are both our own internal factors and then there are the macro factors that were working again.
That's helpful. And then so says we're trying to triangulate this to our to our forecast I know you all don't provide guidance, but but would it be reasonable for US then to infer that you know the month of August.
May have GAAP revenues being down somewhere in the neighborhood of 10% just given what's happening with productivity and production here today.
No I don't want a handicap any one month, Brad but you know, it's obviously our plan and we're not that far away.
In the.
Again.
So with cobot outbreak in our ability to continue to higher.
We plan to get above last year's production levels at sometime in the fall no. That's a prediction that takes a lot of things to go on but we're not going to stay at this 90% level for the balance of the year.
We're continuing to.
Make progress our people are working.
Incredibly hard they're working overtime, we're doing everything we can to to meet the demand but.
It's going to take awhile before we.
Get to that level.
And so and so it's it's it's hard it's hard to handicap just.
How much improvement we make month to month given all the other circumstances that are involved in that equation.
[noise] gosh, that's that's helpful. Kurt I'm just trying to.
Keep everyone's expectations and in check so that everyone doesn't flow a 30% revenue per into your upcoming quarter here, given how strong ready [laughter]. So that that is a that it's certainly our intention and and balancing again, it's good news on where we are on demand right now, but there are realities in servicing that.
Yeah, all their written orders won't be delivered tomorrow.
[laughter] like right.
[laughter] <unk> one last one for me if I could I know you don't have all the answers in terms of.
How much of the strong trends there tend to command and how sustainable might they be but I'm curious if you've had a chance to analyze any of the data on.
Who your customers are and can you tell if these where individuals that had been.
Shopping the stores back in January and February and we're just delayed purchases. If these are new customers on any insights are tidbits that you're able to share would be greatly appreciate it.
Brad Let me give you our overall point of view without going too granular but.
Without.
The ability to travel to to go on vacations too.
Go out to each go to sporting events, all those things.
There's been a shift on where to discretionary money is going and.
You can see by the results of home depot and other people one of the big shift has been to the home people I spent a lot of time at home people feel they're going to speak spending more time at home.
They want to reinvest.
And so we believe the main driver of this is sector rotation and that.
Probably until there is some light at the end of the tunnel.
About the.
The medical.
Cures or.
Medicine to help with this.
Pandemic.
I think the demand will probably stay at a.
Decent level, but.
Never thought that.
The industry never thought that we would bounce back after closures to this level and.
And we always have to remind everybody were at these levels in what is the slower part of the year the summer historically seasonality in the industry.
So nobody was prepared for it nobody could have taken their risk to keep everybody working and all the inventory that it would take.
But everybody's climbing out of that everybody is improving.
And but I do think the home category not just furniture, but you look at paint sales you look at all this other stuff.
Right now it's a category that's.
[noise], capturing a higher percentage of discretionary income.
And I think no doubt I mean, there there you have some level of people couldn't shop for a month or two and you know we saw people. We saw a lot of evidence of folks spending time on our website and researching well they couldn't be in store higher buying you know this is even during April higher higher orders placed.
Online, but probably more so when they walked into our store they were ready to buy so there's definitely some level of pent up demand from that near term closure. The other piece it probably gets to your question. It also is.
Is there some level of share gain and it's really too early to tell that but we do know.
Early consumer data broadly not specific to lazy blade, but the indicates that it consumer right now in a very uncertain time is a indexing back to safety to brands. They trust to the familiar and so between that our high quality products and our Christian Dalzell campaign.
Oh, we're hopeful that we will see some some share gain overtime, but it's really too early to tell if any of this has to deal with that.
Really helpful. Thank you Miss so much.
Thanks, Brad.
Well go next to Anthony Lebiedzinski at Sidoti and company. Please go ahead.
Hi, Good morning, everyone and thank you for taking the questions on the hope everyone as well unhealthy.
Just wanted to follow up a couple of things is I think you mentioned that conversion was up in the quarter as well as average ticket can you help us get a better understanding of the level of improvements there.
We don't.
We don't share that data, but you know given.
Givens people given people desire to to improve their there.
Home at all the the conversion was.
Higher than normal.
Normal and it and on the traffic side our traffic.
It was good but it didn't beat the previous year.
Until July.
So we were doing.
In June forget, 27% more business was less traffic.
So you can kind of equate the two and say that conversion was up to be able to do that.
Got it Okay, all right and then that's always the average ticket.
Yes.
Okay got it okay, all right that's fine so as far as the challenge of hiring additional people I mean, do you think you'll have to pay more.
Incentivize people to come back.
Come that challenge.
To get to 100% capacity or close.
City.
Well do we have a number of options and a lot could have the depend on what happens if there's another stimulus package and what does that due to workers mindsets, but.
The other thing I would I would just caution everybody hiring is is one part of the problem.
Getting them efficient getting them up to be.
Oh skilled worker and archive of business takes some time, so there's a there's a little bit lag time from the time, we hire them to the time that they're fully capable of meeting the expectations that we have and so there. There's a there's a lot going on in our supply chain team is just.
Looking at every angle and if it's paying people was the best option to be able to get more we would do that so we're looking at everything weekend to.
To try that.
Get this backlog down over time.
And then every week, we we make a little more than the previous weak, but our order flow hasn't slowed down. So so the problem is not decreasing.
The good problem is not degree.
Sure, Okay and then.
Aggressive with cutting.
Expenses, obviously so.
Come back so can you give us a better understand perhaps.
As business comes back.
How much.
The expenses will come back and how much of the expenses.
<unk> expense cuts.
Permanent in nature.
Meanwhile, we took the reduction of 10% a crossed our workforce in June that obviously was about to rightsize the business for the long time in what we still expect at some point I would expect some level of economic contraction in downturns. So that 10% was I crossed all expense.
It's items, including S. DNA.
But also in SGN air selling expense and when we're selling while you're gonna have more commissions and so forth you're going to have more AD spend so <unk>. There's a lot of moving pieces within that so certainly I, 10% head count reduction was intended to be a longer lasting item, but majority.
Over other expenses are going to I'm going to you know grow with a growing business overtime proportionately.
Got it all right well, thank you and best of luck.
Thank you. Thank you.
Once again, ladies and gentlemen out West Star One if you had a question or comment we will go next to Rueben Garner at the benchmark company. Please go ahead.
Thank you good morning, everybody.
Good morning Rubin.
So.
Apologies, if I repeat anything I had some technical difficulties or early in the call, but maybe I kinda Wanna hit on I guess geographical Paul out is one of the big trends we've seen in the home construction industry is is the you know the suburban flight I always thought of late.
Why is being stronger in those markets is that that's something that you guys have seen do you view that as an as an opportunity is that folks are moving out of the city's into into you know single family bigger homes in the suburbs.
Well we've always.
Had a higher share in the suburbs, we don't have.
A number of locations in the and the cities like in Manhattan, or downtown L.A. or anything we're not representative so the suburbs have always been a strong point for us, but what I would say.
Some of our ups and downs in sales trends as little bit more to do with what's going on with that individual area or state and there and they're evolution through this cobot James.
Obviously.
Use the northeast of an example, they were behind a the recovery or the rest of the country.
And as soon as they recovered our business started to pick up but then you had all the southern States, The Texas, Florida, California have a second wave. So there's ebbs and flows on this it's not dramatic but that isn't effect on.
People's willingness to go outside and do things and so we watch those trends pretty carefully as well.
Okay, and then maybe enough I guess it similar question, but the.
Viruses, driven a lot of folks to spend money outdoors and.
And and creating home office environment are those two areas I guess can you talk about what exposure you have to them I know joint bird broad.
Maybe a little bit that as well can you just talked about the growth you've seen in there and you have any capacity constrained to serve those two markets, which I assume are faster growing then then everything else.
Well, we we are in the home office business and in our case goods the portfolio, but we're not in the outdoor business specifically, although we do have a.
License agreement with the company that provides la Z boy outdoor furniture, but.
The other thing that they're going to be I think some future benefit.
The more people remodeled the more they put on additions to more work. They do there. If you model. If you remodeled part of your home of your old furniture doesn't look quite as good as in the new remodeled spot as it would if it was news so.
The more activity that it's happening in the home and more the people want to with best in their home. There is a there is a residual benefit to home furnishings at that trend continues.
Yeah, No makes sense and last one for me and again apologies if you already touched on it but any material input costs.
Inflation or deflationary buckets that that you'd call out if you haven't already and I think you guys for the time.
Yes. Thank you for the interest today from a cost standpoint, raw materials looks to be fairly stable right now to maybe a maybe a slight tailwind, but really pretty stable year on year.
You know our people costs and man both in the <unk>, primarily in the manufacturing side, but really and as soon as well to the previous question, we didn't do a 10% reduction across our workforce and including the closing of their nugen plant, but at the same time with green.
Im folks back and and as we spend a lot of the time in the call talking about just said the hiring challenges that will be a better they abeta. They.
I had one and a tailwind as we go through the current couple and the next couple of quarters.
The other thing I'd just point out is and we've had this these Chinese tariffs that have been with US right now it two years Plas and Oh, we've had a lot of activity around that but we had really good news at the end of Q4, when we had a healthy amount of those tariff expenses rebated to us and we receive that in.
The fourth quarter. Unfortunately, those those tariff exclusions were not continued by the governmental authorities. So we'll be back to having that expense on a going basis.
Recorded a quarter or.
There's two and three at least that would look very similar it'd be a headwind in Q4, because we ran a bet if I have a hiatus from those tariffs in Q4 last year.
Thanks, again and thanks everybody.
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Thank you.
And with no other questions holding I will now turn the conference back to management for any additional are closing comments.
Thank you very much for joining our call today. If you have any follow up these band touch have a great day bye bye.
Thank you ladies and gentleman that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.
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