Q3 2021 At Home Group Inc Earnings Call

I heard this right I think you talked about with the exit rate was for comps here in the quarter, how they trended overall for the last month and then if you could just clarify what the everyday business has been running at.

Great.

Okay.

Sure as you know we have two different rhythms in this business Youve got the everyday business, which is not inventory constrained like seasonal is everyday continued really nicely with strong comp.

Above the company average for the entire quarter it exited in the 30.

At the end to end of Q3, and Q3 seasonal comps were above our expectation for sure as we mentioned before.

They were in the low twentys for the quarter, but at a moderated later in Q3 because of the sell down and in Halloween and fall and.

And and now as we go into Q4, we as we said that we expect to deliver.

Overall positive comp in Q4, and seasonal but everyday will not be inventory constrained.

And Brad I would just add we also have.

Heavier seasonal mix as we move into Q4, and we would expect that that mix of revenue to be around 60, 40 between everyday and seasonal in the fourth quarter and that's what we've historically seen in the business.

Of course, okay very helpful and.

And normally this is a business that posted its strongest quarter for sales in the strongest quarter for earnings in the fourth quarter.

Do you think that seasonal trend should hold this year.

Work is it possible that lower sales in the fourth quarter than what we got to treat acute because of perhaps some of the seasonal.

Inventory dynamics.

Yes, Brad I would say you know obviously were really pleased with the sales that we have been able to generate in the second and third quarter and I would say that we would still although we're not guiding anticipate the fourth quarter being our strongest sales volume quarter of the year.

Okay, Great and then just.

Just to follow up on the incentive comp comments I think you mentioned 10 million went through to another term loan for two just as we're calibrating 2021 versus 2020.

Jeff is there an easy number to think of as may be.

Reversing as a starting base for you as a as a good guy and you have seen on airline as we look out to next year.

Well I would say so the way to think about it is that.

We'll we'll have 10 million incremental year over year on both the third and the fourth quarter and last year as we moved through the year. There was very little incentive compensation expense in the piano last year in the back half and all of the catch up this year will be in the third and the fourth quarter. So.

So we weren't accruing incremental compensation expense in the first half of this year.

All of that incremental expenses in the back half of this year.

Gotcha. It really appreciate all the qualifications. Thank you so much guys and good luck with pharmacies.

Thanks Brent.

We will now take our next question from Soc State from Wells Fargo. Please go ahead.

Hey, Good morning first question for Jeff on on the Ftn, a 20% of sales which would imply.

Ill about a $30 million sequential step up from Q came into Q3 I have 10 million. It is incentive compensation. If you could talk about what the other 20 million is and whether that 20 million, we should consider as as a run rate in into the business as we go forward into next year.

Yeah sure Zack so when you think about Q2, I'm I would just remind you that Matt.

Matt was we were still going through a period when our stores were closed and so we had the impact of.

Furloughed employees in our home office in our stores and our Dcs, we had cut advertising expense.

Bare bones and other discretionary expenses were caught so yes. If you go back to the Q2 time period.

I was a quarter, where revenue grew almost 50% and SGN $8 were down year over year. So that really wasn't I don't think indicative of a run rate X gene a that's sustainable moving forward. So when you think about Q2 in Q3 sequentially you have a big uptick in store labor.

As our stores were fully opened in Q3, we had record demand record received flowing into the stores. We have the the home office Labor you know returning to be fully staffed no furloughs middle tier salary reductions and then you also have advertising in your other Ics discretionary expenses returning to normal run rates and those would be.

I'll be drivers.

That sequential increase in the third quarter over second quarter, which again was a very anomalous SDMA quarter for us.

Got it that's helpful and for we just given all the changing dynamics today, both internally with your initiatives being externally with growing home goods demand I'm curious if you changed any of your thinking around the long term model for this business, particularly with respect to top performance.

At a normalized rate your margin profile or a long term store target.

Yes, yes, we're super pleased with our performance I.

I would tell you that we continue to see that business, having a 600 plus store unit potential those stores service the business in that market, whether that be buy online pickup in store ship from store.

Next day delivery.

And on other solutions like that those stores are warehouses, we can efficiently support that business because our cost per per square feet in rent for that store is lower than a lot of our competitors large DC expenses and then it's easy to return. So 600 plus stores is still the potential that we see.

We still see this businesses, having huge comp potential over time, the average revenue per our store, it's about $7 million, but in our mature markets, where we've had our business operating for over 20% to 30 years those stores do 10 million per store. The only difference is brand awareness. So we've got an opportunity to continue to build brand awareness across the country.

For our brand and so what would happen is now you can take those 600 stores times, what potentially 10 million per store yet the $6 billion business that this company can be and I would tell you as you do that you continue to run the business efficiently beautiful.

Unifill EBITDA margins like you've seen.

With us over the past five years on average and I would tell you that that's how we view this company as what the potential is which ends up being a fantastic consumer solutions and are great shareholder value for for everyone.

Got it thanks Les I appreciate the time.

All right. Thanks.

It appears there's no further questions at this time Mr. Li prior to I would like to hand, the conference back to you for any additional or closing remarks.

Hi, Thanks, Lisa Thanks, everyone for joining us this morning and for your interest in the company.

I hope you can sense, how excited and optimistic we are about AD homes future and we look forward to speaking with you in the coming days.

This concludes today's call. Thank you for your participation and you may now disconnect.

Okay.