Q3 2020 Sleep Country Canada Holdings Inc Earnings Call
Welcome to sleep called trick Canada's financial results conference call for the third quarter ended September 15 2021.
I will begin today's call with managements discussion followed by a question and up here real opens in Brussels on financial on that.
For your convenience the third quarter earnings release financial statements on Monday, which means discussion and analysis available on the Investor Relations section of the company's website the country don't see.
They are also available on SEDAR.
The results were released yesterday after market close lease.
Note that the remarks on this conference may compete for looking statements about sleep called trick on that does the current and future plans expectations intentions results levels of PBT perform on schools, Oh, our chief men or any other future events all development.
Forward looking statements are based on information currently available to management on on the investments on assumptions based on functional stuff management believes are appropriate on the reason they bought into circumstances.
However, there can be no assurance that such estimates and assumptions will prove to be correct me.
Many football school cause actual results levels of activity there for months achievements future events, all developments to be fell materially from those expressed or implied by default <unk> looking statements.
I see a result sleep tree, Canada cannot guarantee that any forward looking statements fuel must be realized and you are cautioned not to lease on view reliance on these forward looking statements.
Except as maybe required by law, we called tree, Canada has no obligation to update or revise any forward looking statements. We don't see a result of new information future events or otherwise.
For additional information on these assumptions on re lease canceled the cautionary statement regarding the full what looking information contained in the Companys M.B. and he did that Mozambique, nine sweeny Sweeney ive been able on C. dot dot com.
I'll start this because presenter shown there we'd be quick John on on suspicion.
Ask a question during the session you really need to press star one on your telephone.
If you require any further west system needs pricing zero.
I would now like to turn the conference over to Mr., If it's Chris Moore. Please go ahead Sir.
Thank you.
Good morning, everyone and thank you for joining US with me today are Stuart Shaffer, our Chief business Development Officer, and Craig Prato, Our Chief Financial Officer.
We're very proud to announce our third quarter of this year, which was truly an exceptional one on multiple fronts.
Quarter delivered all time records in revenue, which is up 15.4% net income, which grew by 50% and diluted earnings per share, which grew by 50% from 60 cents to 90 cents.
On top of that we were able to expand our gross profit and operating EBITDA margin as well.
These tremendous results showcased the strength flexibility and resiliency of the powerful ecosystem, we have planned been planning and building over these last few years.
In these uncertain times, coupled with an evolving consumer retail landscape, our omni channel infrastructure as did the ultimate test of time as we have proven that we are strategically well positioned to take greater market share now and for years to come.
With our physical store net weren't open for the entire quarter, including our four new store locations. We were delighted to welcome our back our customers face to face while continuing our best in class ecommerce service.
Same store sales increased by 15, 14.5% in the quarter and our ecommerce performance continues its explosive triple digit growth trajectory across all of our sleep country domain and ending websites.
With this quarter's record results, we are thrilled to share that our E commerce channels generated over 18% of our third quarter revenue.
We have never felt more optimistic about the power of our strategy strength of our network and relevance of our brands.
Through the evolution of our sleep, well stay well digital and traditional advertising campaigns, we are connecting with loyal and new customers are our team continues to do a fantastic job leveraging our share of voice to further grow share apart with Canadians.
Store conversion was meaningfully up in the quarter as customers visited our channels with clear purchase intent.
In fact, our mattress assortment saw 15% sales growth driven by strong unit growth across all price bands and sleep accessories sales grew 17.1%.
We are encouraged by our customers response, which clearly highlight the Canadians are choosing us over others as trusted partners in achieving their best night sleep.
Our channel agnostic approach and dedication to a superior customer experience further differentiate us from peers.
Our 280 stores offer a safe low traffic destination for our customers receive personalized surface.
Increasing numbers of customers choose to connect with their sleep experts via web chat or phone and still others are choosing to transact via our seamless Andy C. country indoor maybe websites. However, however customers choose to shop, you're here for them.
I'm also excited to share that we continued to advance our partnership strategy alongside Premier International sleep brands.
During the quarter, we announced an exclusive distribution partnership with leading sleep innovation brand MAMADOU, which brings their stylish in modern sleep products to Canadians exclusively through our stores and websites.
Subsequent to quarter end, we also shared our exclusive partnership with Purple innovation, a leader in comfort and the creator of the renowned purple mattress since exploding on the scene in 2015, perplexed when accolades, including racking up more than 1 billion views of its bold and entertaining marketing campaigns.
These partnerships strengthen our position as Canada destination with the most innovative sleep solutions from around the world.
We closed the quarter on a note to financial agility with a strong cash position of 54 million any further 144 million and liquidity under our credit agreement.
Bolstered by this quarter's record growth. Our board was also proud to announce the following one reinstate the dividend to 100% pre cobot levels at 19.5 cents per share.
[noise] to reinstate the NC IB program three.
Three restore any though and board compensation, including the payments deferred previously.
We are pleased to have the financial strength to continue meaningfully rewarding our valued shareholders, while simultaneously investing in the long term prosperity of our business.
Throughout the pandemic, we've highlighted our five priorities one keep our employees safe to.
Two continued serving our customers needs.
Three support local communities.
For maintaining business continuity alongside partners and landlords and five ensure the long term prosperity of our company and shareholder value. These are not changed we remain laser focused on executing against these priorities as we continue to chart. Our course through the pandemic with our tremendous results. This quarter, we are optimistic that our growth trajectory will continue.
And allow us to meet these priorities with agility.
Craig I now turn the conversation over to you to discuss our financials.
Thank you, Dave and good morning, everyone I'd like to reiterate that we are extremely pleased with our Q3 record results.
These results have surpassed our expectations and continued its intended to demonstrate the resilience of our business through difficult times, both our retail store network as well as our ecommerce platforms performed well showing positive growth quarter over quarter, thereby validating the success of our ongoing investor investment in omni trend in our omni channel infrastructure.
In Q3, we continue to experience positive revenue growth similar to what we had experienced prior to the onset of the pandemic in March 2020.
We have been able to manage our business a flexibility threat. This pandemic, which is a testament to our highly variable cost model, which allows us to scale up and scale down our expenses as required, thereby providing us with financial agility.
Now onto some of the quarter's highlights let's begin with revenue.
Third quarter revenues increased by 32.4 million or 15.4% from 210 million in Q3 2019 to 242.4 million in Q3 2020. This increase in revenues, mainly driven by a 14.5% increase in same store sales for new stores that opened in July 2020.
And to wrap stores.
Mattress revenue increased by 25 million from 166.7 million in Q3, 2019 to 191.7 million in Q3 2020.
Accessories rate revenues increased by 7.4 million from 43.3 million in Q3, 2019 to 50.7 million in Q3 2020.
During the third quarter gross profit increased by 12.6 million from 71.6 million in Q3, 2019 to 84.2 million in Q3 2020.
Our gross profit margin increased by 8.6% from 34.1% in Q, though.
Q3, 2019 to 34.7 in Q3 2020. This margin increase is probably about primarily due to us leveraging our fixed distribution occupancy and depreciation as well as compensation costs. While also lowering commission costs due to the shift in earn revenues from our retail stores and are E commerce platforms.
These efficiencies were partially partially offset by lower rebates and investment in personal protective equipment purchased to ensure the safety of our customers and associates as a result of COVID-19 pandemic.
Moving on from our moving onto our GNS expenses organic expenses for the quarter decreased by 2.1 million or 5.9% from 36.6 million in Q3 2018 to 34.5 million in Q3 2020.
As a percentage of revenue Genie expenses decreased from 17.4% in Q3, 2019% to 14.2% in Q3 2020. The decrease in DNA was largely due to the decrease in our media and advertising expenses expenses, which decreased during the quarter bye.
$3.8 million. Additionally, during the quarter, we continued to shift some of our Q3 advertising spend from traditional channels towards digital to drive continued E commerce growth.
Moving on from DNA, Our Q3 operating EBITDA increased by 15.7 million or 31.8% from 49.6 million or 23.6% of revenue in Q3 2019.
To 65.3 million or 26.9% of revenue in Q3 2020. This increase was primarily due to strong revenue growth in Q3 2020 combined with improved gross profit margin decreased a decrease in Jena expenses as well as the favorable impact from adjustments related to nonrecurring ERP implementation costs and share based compensation.
Asian expenses.
Finance related expenses increased by 8.1 million from 5.3 million in Q3, 2019 to 5.4 million in Q3 2020.
Our Q3 net income increased by $10.7 million or 50% from 21.5 million in Q3 2019 to 32.2 million in Q3 2020.
The significant increase our net income was driven not only by the increase in revenues, but our additional focus on cost controls both in cost of sales and DNA. Our adjusted net income increased by 11 million or 49.2.
Sad from 22.4 million in Q3, 2019 to 33.4 million in Q3 2020.
Adjusted diluted earnings per share increased by 30 cents or 50% from 60 cents per share in Q3 2019 to 90 cents per share in Q3 2020.
On a year to date basis, we increase we experienced a net increase in cash of 10.7 billion net cash flows provided by operating activities year to date 2020 was 123.3 million in cash flows used in investing activities were 9.1 million in cash flows used for financing activities were 103.5 million.
As mentioned previously our cash position at the end of Q3, 20, 2020 was 54.8 million compared to 48 million in the same period of last year.
In addition, as at September Thirtyth 2020, we added 144 million and liquidity available under our company's credit facility during the quarter, we repaid $60 million towards our long term debt readers, reducing our debt balance from 175.8 million instead as of September Thirtyth 2019 to 100.
15 million as of September Thirtyth 2020.
We are pleased to have a reduced we'd have to have a reduced our net debt position on our senior secured senior secured credit facility on a year over year basis by $66.8 million.
As the current environment evolves. The company continues to moderate monitor its operations as well evaluate the risks and uncertainties associated with the pandemic and the impact on the business. Accordingly in May 2020. The decision was made to temporarily suspend the dividend payment. The NCD program as well differ the cash portion of board compensation and the deferral of 20.
5% to 50% of Neo base salaries.
On November nine 2020, the board approved and restored the company's dividend. In addition to declaring and 19.5 cents per share dividend on the company's common shares which is consistent with our pre <unk>.
Our pre dividend free to the or pre cobot I'd said that are pre carbonite team.
Additionally, the board reinstated the NC Ivy program, which frees up provides us the option to purchase common <unk> common shares for cancellation well the company does not intend on making any purchases under the JV. At this time, we believe it is prove it prudent to retain access to the program in the event, we do see compression in our multiple or the macro environment creates an opportunity for us to purchase.
There's finally, the board reinstated all cash compensation to the neo and to the board. In addition to improving the payment of all amounts previously deferred.
Going through through these unprecedented times, we attribute overall success to a multiple factors, including the commitment hard work and quick action from our associates partners and vendors, we look forward to sharing additional updates with you on that front in the coming months.
That completes my overview of our financial results back over to you Dave for closing remarks.
Thanks, Craig.
In closing it is gratifying to see that even in these most uncertain times Canadians continue to choose the country during <unk> and indeed.
We have built trust with Canadians over the past 26 years by consistently delivering superior experience.
Knowledgeable service and quality sleep solutions, we are pleased to see loyal and new customers repeatedly turning to our family of brands as trusted partners in achieving their best nicely.
From safe in person visits with associates at one of our 280 stores to connecting with our sleep experts via web chat or phone too quick and convenient self serve shopping across our Andy do I mean, we wouldn't see country websites, our seamless omni channel in marine infrastructure in serving Canadians however, they choose to shop.
Today more than ever we are proud of our extraordinary culture and team.
I am pleased to share that in Q3, and he was certified as a great place to work matching sleep country certification earlier this year.
This award is always an honor and its true Testament to the positive collaboration and innovative spirit that characterizes our family of brands.
On the topic of team I would like to again welcome Mandy Chawla to sleep countries Board of directors Mandeep isn't respected finance executive with over 20 years of experience in large and complex organizations and is currently the chief financial officer of Celestica Inc. his strategic leadership and extensive background in business technology and innovate.
Nation will serve as a board there.
Company in all of our stakeholders, well as we execute our strategy and grossly country together.
Looking ahead to the final months of 2020 and beyond we remain committed to expanding our leading market share position delivering profitable growth and building value for our customers employees communities and shareholders.
Bolstered bolstered by our omni channel infrastructure financial flexibility stable supply chain and exceptional employees, we're confident that our family of brands will build on the tremendous results achieved this quarter with.
With that we conclude our remarks and open the floor for questions.
I see reminder, to ask a question you will need to press star one on your telephone. So we draw your question press the pound all husky lease time by why we called part of the Q on Erosnow.
The first question comes from Martin Landry off she fell GMP. Your line is open.
Good morning Martin.
Hi, good morning, everyone and congratulations on an impressive quarter.
HM My first question is on your organic growth rate its its impressive in its one of the highest in recent years.
And the question that most are trying to figure out is how much pull forward of demand are we seeing right now due to covidien instigation now I'd be curious to hear your views on that.
Well I think when you I think when you look at our business I think we are in Q3, particularly I think we we believe very comfortably that we took market share. We also believe that there was some pent up demand because of you know Q2 closures and we also do think that people are investing more in their house at the moment.
And some of that could be pulled forward being able to really quantify that is not possible and we will continue to do our best to understand it and we will continue to do our best to continue to take market share as you move forward. So we think that we're really winning very nicely right now and now we are our plans are in our marketing plans and our growth plan.
Fans are going to continue to push towards that same outcome in the future, but it is hard for us to understand how much of its pull forward.
Yeah, No that's fair enough.
And so what the industry is doing well and wondering how how is the competitive and promotional environment right. Now you know what's your approach from a from a discounting standpoint are you are you slowing down promotional activities right now or not at all.
Well as you as you know we're in a very promotional industry and we're leading up to Black Friday, which is a very promotional timing of promotional industry and we you know in a lot of ways were seeing the market react very similarly to how it's always Dan and you know, we really expanded our messaging to talk you know even more about.
Sleep, and being well sleep, well and stay well, but as part of that we are also going to be promotional to make sure that were top of mind to come in today.
Okay.
And my last question is on on supply chain, you know we've heard some industry participants talked about supply chain issues and difficulties accessing some some raw materials.
Are you seeing a longer lead times than usual from from someone of your manufacturers at this point and is it having an impact at all.
I skews going to handle that Stuart will handle that one.
Good morning, Martin how are you.
I'm good thank you.
The Oh, yes, we have seen some disruptions in our supply chain.
Certain vendors at lease lead times have extended past one to two weeks, but in general the diversity of our our collection on the floor has allowed our sales associates and our customers to be able to navigate and choose products that are readily available. We also.
Geared up.
In terms of our inventory to be able to supply our our customers. So that we could get the goods out quickly, but nothing that we believe has been detrimental to our business.
Okay.
That's it for me thank you.
Thanks Mark.
Your next question comes from Mouse Bank, all see IBT. Your line is open.
Good morning, Matt good.
Good morning.
Can you share anything in terms of how sales trended through the quarter and comment on your momentum entering entering Q4.
Oh, I would say that the quarter was very strong from beginning to end and Ah. There was no we probably did feel a little bit of a lesser.
Lesser written business near the end of August simply because we normally back to school is very big time for us.
And you know that obviously didn't happen to the greatest extent this year, but.
But that was a very small period of time and and big came back nicely.
Okay and the deal.
E Commerce growth, you reported and that where the E commerce and the penetration numbers that you reported seems to imply that in store sales were up year over year. So that's I mean, that's that's an impressive number considering traffic traffic was.
It was obviously down one so I mean, you did talk about higher conversion, but maybe you just add a little bit more in terms of how you were able to get in store sales up.
Well, we first of all we were we were happy with our business across all of our channels and so you're right. We are happy with stores. You know I think we'd traffic was down into our stores, which is not surprising the end. It was down for a couple of reasons. One it was it was up in our other channels. It was up in our website. So that was part there was a shift there but.
As also because I think people were doing a couple of different things, we noticed very much so that families weren't coming into shop like they used to so.
Sometimes it would just be the couple instead of the kids and you know and that would change our traffic numbers and secondarily.
Also people were very intent on purchasing so when they came in you know very likely they weren't going to come back and visit us on the weekend to finalize the transaction. So it was happening much more so.
So our conversion was up nicely you know we were surprised at how quickly customers came back to our stores. After we opened them and we continue to be happy with it you know we are being a specialty retailer gives us a safe environment and I think we've been hearing back from our customers that they are appreciative of that and if they do feel safe.
Okay, and then could you had a little bit more detail on this on this purple partnership. So you know how the how that relationship works purple as far as I can tell has been selling directly within Canada for some time and and has spent quite a bit advertising in this in this market.
As how does the split of kind of responsibilities evolve.
So we're very excited about this relationship with purple, we've been chatting with them since 2018 and as you noted there are already in the Canadian market and Fabulous marketers and two two big <unk> requirements that we look for when we're choosing our partners is a that the product is innovative and so we incur.
Urge people to come in and lay down on the purple that they're famous purple grid. It definitely has a different feel than other mattresses that we carry and b.
They're advertising, which has been fabulous I mean, they're they're very creative in terms of the advertising. So this relationship is a 100% exclusive relationship both in store and online the the beds have been rolling out over the past two weeks and this is pretty much the official day.
That we're launching the product with in store and advertising campaigns will follow as well as our online a relationship with them there will be a new site that we'll be launching hopefully within the next few days.
That will be powered by sleep country, but managed by our friends at purple. So they will manage all the creative in the digital expertise and we are the backend logistics in terms of the partnership.
Thank you.
Thank you Matt.
Your next question comes from Patricia because Oh Scotia Bank. Your line is open.
Good morning. Good morning. Good morning, everyone. You referenced the fact that you that sleep country takes a channel agnostic approach to you know where the customer shops and like to explore that a little bit more particularly in the context.
Context of the fact that you had an 18.1% penetration in Q3, which is probably a number that if we we asked you. This time last year you would have given a number that was below that so just thinking about your capability and capacity are there sort of what what what.
Currently how it stands how much how high penetration could do accommodate with your existing infrastructure number one number two.
You take a philosophy that you're going to let the market determine what that penetration will be overtime, and then thirdly, what kind of experience do you have.
In the digital channel when you open a store in a new market.
I'm good morning, Patricia So let me start by saying we are very excited about the growth that we're seeing across all channels in terms of our ecommerce and these are really unique times because a lot of the testing.
That we were hoping to experience over the next year has been happening eating and hyper speed over the last three months interesting for us to watch the journey of our customer and two two you were highlighting the term we use channel agnostic.
Where the journey begins online where it may continue as we watch our customers come into our stores and possibly transact in our stores or as they leave the stores transact afterwards and that has definitely changed our perspective in terms of how we advertise our shift of advertising as we move more.
Towards digital because we've been known for many.
Years as a traditional marketer and that has definitely been a wonderful learning experience for us as well. These partners that we've created between CYMBA and purple and others that we are talking to to be able to learn from their phablets digital experience and on top of that obviously the ndtv.
As best in class in Canada that we believe they are the leaders in this space so with that five of this team and all the experience that they have.
We've gone through in three months, probably what we expect it to learn over the next year in terms of the overall market.
The market will dictate and where the consumer will dictate directionally, how they want to shop Dave's point. It was quite amazing to see how quickly customers came back into our stores during that this pandemic, we put a lot of.
Of precautionary things.
Things in place so that our customers were safe, but we also were very surprised to see them returning in droves. So.
I think.
Everyone knows in retail that's the the cobot has accelerated the need for E commerce, but for right at the end of the day, the customer's going to choose how they want to shop, when they want to shop and when they want it when they want to transact.
Does that answer that question, but they're very very helpful. Just one specific thing started maybe it's difficult to answer this but your current it infrastructure could support a higher I certainly a much higher penetration and the exceptional one that we saw in Q3.
Yes keep in mind, we are in very early days of our our digital evolution of our business them to remind everyone.
Everyone, We launched E commerce.
Full digital transactional website after sleep country indoor may do a year ago November and the the acceleration in such a short period of time. The team has done such an amazing job and we're gearing up and building out that team to match the growth that we're seeing.
I will say that the one area that we are.
That we felt a little stress, which is a wonderful stress. The field is not only did our business grow by north of 15% this quarter, but our units grew over 20%. So if anything we've had a little bit of stress operationally, which we are adjusting right now as we speak and planning for the future.
So to answer your question, yes, we have lots of room to grow in terms of capacity and these are still very very early days.
Excellent thanks for that over you Stuart.
Pleasure. Thank you Patricia.
Your next question comes from Stifel, <unk>, Oh, Yes, All Cup told markets the binding open.
Good morning, Stephen.
Thank you good morning, good morning, guys.
Congratulations on a.
I snapped back quarter.
Just just you give is given a lot of great color. So thank you, but I just wanted to follow up on a couple of things is there any way you can just give a little bit of sensus to route as to how sales trended exiting the quarter and into Q4, and then I know you don't give guidance I'm. Just curious if you can give a little bit a sense around momentum.
I get well I I kind of talked a bit about it earlier, but we were we only felt that growth had been going down a little bit during the back to school season, but then for after that it came right back up to the last day of the quarter.
Okay. Okay. That's that's great. Thank you.
It's really way you can quantify a little bit sort of what what bricks and mortar in store sales looked like in the quarter. I know you gave some incremental color around E commerce, but just wondering if you can give a little bit a directional indication around in store sales.
Again, we were when you look at our channels across they all performed very well I mean Stewart kind of was addressing the digital on the last comment, but you know you look not only did our existing stores performed well, but we opened a new region of London and it performed well, so not London, I'm, sorry, Windsor and it performed well.
And so our store performance is great and what we're seeing is.
When you put all of our channels together Stewart's talking about increasing units. The nice thing about it is our increase in units below a thousand was very nice which is something we're happy about and when you look at our other a higher price bands. They were strong too. So we don't feel like we're trading down at all we think that we really hit it we're hitting a sweet spot as far as customer selection on all of our channels.
Yes.
And I'll add Stephen that the only thing that we might have seen in our stores that was a little bit different what the walk by traffic.
That that.
That appeals to our accessory part of our business. So we are definitely a destination shopping theres. No question that there is a component to our business within our stores, especially within the downtown cores, Montreal, Toronto, and Vancouver, where it was where everyone knows that traffic is down substantially so that.
Additional impulse walk by traffic for a pillow.
She said was down a little bit in those regions, except our E commerce more than cover that as as Dave mentioned in <unk> are numbers that are accessories were up over 17% for the quarter.
Right. Okay. So that's great I'm, just looking at the AD spend outlook I mean, I know your media spend has changed a lot over the last 12 months and even further than that can.
Can you talk a bit about how you expect that to ramp back up and how you think about the you know the digital versus traditional media and ad spend.
Craig did you want to just talk about our yeah, Yeah, I know for sure I'll give some color just on how we see that spanned a you know flowing through in some of the shifts we have seen and then maybe if I do want to add some additional color. He can you know through the quarter, we did see some rate efficiencies and.
Some of the marketing channels that rolled out of Q2. So we did have some better pricing on some of our marketing investments through channels like TV and radio I'm actually we did see some efficiencies there as well as the I'd business did see you know some shift more towards digital and a less of a you know.
On on on Street, or a you know a at a house a marketing said, we did see a shift down there as you roll into Q4, we.
We still think that we will end the year you know similar into the range of a percentage of sales for Q4 that we would've last year, we do think that where we have seen the marketing rates start to come back to more normal levels to what we're seeing pretty co bid, but we are seeing a shift.
More towards digital and I'll, maybe pass it over to Steve you want to add any color as to the strategy around that the shift a little bit more from that traditional into into digital as we continue to grow.
Grower ecommerce sales.
The only thing I'll add is that obviously, we're watching that consumers patterns and habits very closely and as I mentioned before the downtown core is of all major metropolitan cities in Canada.
Well or not travelling there in their cars as much as they have before so as this pandemic shifts and hopefully one day comes to win and the patterns in the <unk> and the habits of consumers may change back to what they were or two or maybe that.
Never to the same extent, so that will definitely play on our positioning around radio television and digital but I will say that digital has definitely been very transactional clear analytics in terms of.
They've been manage our business and a wonderful way for us to test a lot of our our AD spend and creativity to see what works and what doesn't work. So I would I would suspect that over the coming year that we will continue down the path of growing our digital exposure.
Okay. That's great. Thank you guys per day.
You too Steve.
Your next question comes from Vishal Shreedhar old National Bank. Your line is open.
Hi, Charles for ticket.
Hi, Thanks for taking my question on the.
On the insights that you gained from COVID-19, as you've gone through this you know tumultuous kind of curious.
Wondering if there's any.
Customer behaviors that you think will be more sticky and they're just a result, you may change your approach in future quarters and I'm thinking about.
The mix between investments and online and in store or perhaps multi store or something of that nature, you you've already given some indications.
Yeah, I would I would say that generally speaking we will continue to assess the data as it comes in on a daily basis I will say that in the early days as we've already said in the call. We were surprised at how quickly people came back to the stores you know when during the heart of the when the store closure was happening in early days people thought that.
You know retail was done for that with some of the commentary that was made the bricks and mortar retail excuse me and certainly we haven't seen that but we will continue to evaluate where we invest our money to get the most value out of it but right. Now. We're we're very excited that we are everywhere the customer wants to be in a very strong way and we're.
Going to continue to push all of those channels, because there's more customers and all of them that we can gather.
Stuart did you I will yeah, I was going to add that the one thing that did come out of this is definitely a higher awareness around health and wellness and we are really well positioned because sleep is a huge component of that and as trends continue evening out of this pandemic the focus around health and wellness I think.
We will continue to explode and we are positioning ourselves very well in terms of our marketing campaigns, our internal initiatives the culture within our organization as well as the message that we will share with Canadians over the coming months.
Okay. Thank you for that and.
It's the country, obviously, you indicated that it gained market share in this quarter, but that's been a consistent comments on for CEE countries through the years in terms of its market share gains wondering if.
Which is obviously impressive.
Impressive statistic wondering if see countries looking at the market and thinking there's opportunity for further acquisitions, either here or Canada or abroad.
So first of all let's I just want to be very clear on something marketshare is a lagging indicator. So we won't have a really good understanding of what happened to our market share and tell you know the statscan numbers and other data is out.
But every indication we have to just period, there where we're gaining share. So I just want to make sure we're very clear on that and not at all.
Being opaque they're having.
Having said that now to answer your question.
We still think there is a lot of market share to gain in Canada, and we're going to continue to focus on that but we are also looking at another I think I think we've shown especially over the last 18 months or so that we are very agile organization as far as adding partnerships as far as adding channels and we're going to continue to do that and if an acquisition is something that makes sense and if you.
Sure we would take it in in Canada, or we would consider outside of Canada as well.
Thank you.
Your next question comes from Michigan, and that's all TD Securities. Your line is open.
Good morning Megan.
Thanks, Good morning, just a couple of follow up questions, so going back to the.
Media and advertising spend just wondering if you can talk about what kind of returns you're see from the focus on digital advertising relative to traditional.
Are you asking in terms of our ROE last on our spend Megan.
Yes, or specific so we don't see them.
For for competitive reasons, we don't share that I will say, though unlike a traditional D to C player where the ROE asked is very clear in terms of the digital spend and the acquisition online. The based on the fact of where we are and where we are.
Spend across all channels. The return as you could see based on our numbers. This quarter was was quite exceptional so if.
If anything what we've definitely seen over the last three months six months as we enter into or a little bit more into our digital arena. The the the agility of our business to be able to ship and change at our AD spend to see what's working and what's not.
Working is definitely a lot more efficient than some of the TV or radio that we put in that has to be put into market with huge production costs and a longer lead times. So I think the agility of our business will be a lot more effective as we move forward as we experiment more and.
More in the digital area.
Does that answer your question.
That's perfect. Thank you and just another little follow up on the digital growth. So just looking at the the partnerships that you've been undertaking over the last couple of years. So what's been the contribution there on the digital side, how does that factor into this triple digit growth up at all.
We don't break down and any of our channels, but I will say that it is clearly that it in terms of our entire ecosystem, which is important but what's more interesting and and what we hope the markets are paying attention to.
Is the.
Customer segmentations that it's expanding into Walmart has done a fabulous job for us in terms of exposing us to one level of customer segmentation or our own websites is done something differently also I will tell you that transactionally online one of the resurgence of our bar below $1000.
Price point, which is a very important part of our business is definitely been aided by that RC country dorm, either web sites and the symbolism. The purple also appeal to a different type of customer segmentation. So.
I would say that that's been one of the biggest benefits as we expand our brand throughout the entire Canadian landscape.
And by the only thing I would add to that is that do you. Just you just didn't mentioned Andy and any Oh other.
You know I know Andy is just another great example of customer segmentation differences that are driving more and more people to you know one of our channels.
That's great. Thank you very much.
Our pleasure.
Your next question comes from sub <unk> Com of RBC capital markets. Your line is open.
Good morning.
Uh huh.
I was wondering I think goes I'm, sorry, I'm on mute there. Good morning, Okay. Good morning, I guess.
Just a strong ecommerce penetration during the quarter you know I guess, what's your outlook as we head into next year and as we think about you know some of the savings that you realized a little bit on the head count or wages in store no do you expect that to maybe moderate at a somewhat lower level and maybe even then you could still see some savings on the storage side just trying to think.
Okay, and how you balance out your costs in store versus continuing to invest on the E commerce side or what color over the next 12 to 24 months.
Well I would say that we certainly don't plan to grow our business by saving money in the stores I mean, our sales associates at a level of expertise and value to our consumers and we want and that is something that has been a hallmark of our success and will continue to be a we were very excited over 18% of our business is done online.
Don't forget that means that my math is just under 82% is done in our stores and so you know and we don't we don't see that changing dramatically over time I mean, it may but we want to make sure that we have the best offerings. In every area. You know we did experience some marketing savings in Q3 based upon the market and in Q2.
But we're also seeing some other expenses on the other side of the P.P. acne and so on you know, we're very excited about selling more mattresses, especially at below a thousand dollars, but let's not forget that it cost the same amount to deliver an $800 mattresses. It does a 2000 dollar mattress, so where there is a lots of puts and takes but we're excited about where we're going because we're.
We feel we are gaining share and we certainly are gaining revenue growth and unit growth.
Okay. Thanks, and then I know, there's quite a bit of discussion on the advertising spend and Craig quite a little bit of color, where they expect to expectation for Q4 as we head into 2021 should we expect the spend to normalize perhaps on a percentage basis versus what it was pretty cool there. It looks like you guys had a bit of money there over the course of the first three.
Quarters here I'm, just trying to get an idea for next year.
So so interestingly enough, we'll have we'll have to give you more color on this when the year is over because we don't know how it's going to end, but if we go back in history. What we had said was that that by the end of this year, we kind of felt that the run rate for our marketing spend for both sleep country door may view as well as Andy would be more stable like we'd be at that point.
Because over the last few years, we've been ramping up and see country as well as it Andy and.
And so we and we don't feel it's going to be that far off of that even though we're in a pandemic year, but we'll have to give more color on that once the year is final.
Okay, and then I guess, just a housekeeping item or you know we have a model here towards the end you are not to be paid on in Q1 of next year I'm not sure. If you provide any color whether we sell all that I may have missed but is that still on track for I think the initial indication was I guess early 2021 for that is that still the idea that it will be Q1 or.
Future.
Yes, no I'm, sorry, Craig, but yeah, no I was just going to confirm yeah. We it's it's still on track you know as a reminder, we did bump up the accretion last quarter and a it would be paid out in a in quarter one.
From a cash flow.
Great and then just one last one for me I know you guys don't talk a lot about specific brands, but can you maybe give progress on Randy likely benefit over the recent period, but since the acquisition you know how has that come along and maybe the outlook for that platform. As you kind of look forward just thinking in terms of any further investment or any other major changes you're looking to make there given.
The E commerce ship for consumers over the last for a while I'm.
I'm, sorry, I'm, sorry are you talking about Andy I, just tell you that Andy Okay Randy.
By the way Andy is was doing very well prior to the pandemic and they have they have really taken the opportunity of the pandemic I mean, I'm sorry to say it that way, but these are hardships for all of us, but they have performed exceptionally well throughout the team. There is is on point and doing very well.
Dave also seen increases in units of course, there are growing business. During a time when supply chain is is challenging and they've managed exceptionally well through that and we'll continue to invest in them and they will continue to invest in themselves as they grow and we're just very very pleased with the growth there as well as the opportunities in the future.
Great. Thank you. Thanks.
Thank you.
There are no further questions at this time I'll turn the call back over to the presenters.
Thank you very much everyone as always we look forward to talking to you again at the end of the next quarter. We hope you all stay safe Haven enjoyable ended the year and thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
[music].
[noise] Oh.
[music].