Q3 2020 Citi Trends Inc Earnings Call
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Greetings and welcome to the Citi trends three to 20 <unk> earnings Conference call.
Presentation referred to spend to bring to listen only mode. Afterwards, we will conduct a question at us recession.
At the time, if you have a question just price to one four by the four on your telephone.
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So start for but is there.
At minus costs is being recorded today Tuesday December 1st 2020.
No I would like to current accounts over to a new set of key senior Sofia score at at that.
Thank you and good morning, everyone. Thank you for joining us on Citi trends third quarter 2020 earnings call on our call today is our Chief Executive Officer, David Mckeown, and Vice President Finance, Jason My share.
Our earnings release of sent out this morning that 645 am Eastern time, if you have not received a copy of the release its available on the company's website under the Investor Relations section at Www Dot Citi trends Dot Com you should be aware of that prepared remarks today may during this call may contain forward looking statements within the meaning of the private Securities litigation.
Cash and Reform Act of 1995 management May make additional forward looking statements in response to your questions. These statements do not guarantee of future performance. Therefore, you should not place undue reliance on these statements. We refer you to the company's most recent report on form 10-K, and other subsequent filings with the Securities and Exchange Commission for a more.
A detailed discussion of the factors that can cause actual results to differ materially from those described in the forward looking statements I will now turn the call over to our Chief Executive Officer, Gavin Mckeown David.
Thank you Nita and good morning, everyone. Thanks for joining us today on our third quarter 2020 earnings call.
You are all safe and well.
Despite the uncertain environment for Citi trends, the third quarter was one with many high points.
Register stellar operating results fully repaid our outstanding borrowings under our revolving credit facility.
We reinstated our $30 million share repurchase program, and we repurchased 545000 shares under that program.
Through November 20.
And we appointed of seasoned retail executive at.
Edwards as our Chief Finance, Chief Financial Officer of sector of in January.
Now onto the topics to be discussed during today's call.
I will first provide a review of our spectacular third quarter operating performance and accomplishments I.
I will then discuss our merchandising and marketing initiatives for the holiday season, including our Fabs festive fives holiday campaign.
Notable expanded capabilities of critical business functions.
By this confidence in our model to deliver strong results of the months ahead.
Next I will turn it over to Jason Wash number our VP of finance.
To review, our third quarter results and finance position in more detail.
Lastly, before opening the call of your questions I will close out with a few of high level of confidence showcasing our confidence in our unique and scalable model.
Should be good across the board from our distribution centers juice Savannah to New York end, its 585 stores I could not be more thankful every one of tireless efforts and contributing to the ongoing transformation at Citi trends.
I will reiterate what I stated on our second quarter call, we have a unique and powerful winning culture at Citi trends.
I continue to be impressed.
With our entire organization as we are not all of these successfully navigating.
Unprecedented period in our history.
[laughter] thoughtful innovation use of data analytics and ingenuity, we are truly transforming our operating model positioning Citi trends for many years of profitable growth.
Importantly from an operations of store perspective, we continue to prioritize the safety and well being of our associates our customers at the communities we serve.
As we entered the critical holiday shopping season, which typically garners meaningfully higher levels of traffic during peak days and weeks, we're doubling down on billing associated awareness of our social distancing safety protocols as well as our cleaning regimens.
The dynamics of the third quarter were unique is we like many others.
Spirits to slow start to the back to school season, which resulted in soft sales performance in the month of August that was followed by a meaningful acceleration at our September businesses family's better understood how their children with the churn to school.
Ended the quarter with October registering positive mid single digit comparable stores sales growth.
Looking at a strong third quarter comparable stores sales increase of positive 6.3% and the.
Total sales gain just shy of nine per cent we.
We again achieved substantial growth in our gross margin, which was up 440 basis points compared to last year's third quarter Bill.
Building on the momentum of the second quarter, which was up 390 basis points compared to last year.
All of this driven by healthy full price selling and well managed inventories.
In fact, we achieved a positive 6.3 comp on 33% less comparable store inventory, resulting in an impressive 55% increase in terms for the third quarter.
These inventory and turns accomplishments dovetail extremely well with our long term plan.
Some of your very encouraged by the momentum we are experiencing.
We entered the holiday season with clean and current inventories shock for next season buys that we had purchased during the first half of this year, coupled with opportunities based on learnings from last year to capture more market share.
An important where now apparel categories did.
Additionally, at the end of Q3, our stockpile of next season buys.
Adam Smith for selling them at first and second quarter of 2021 were up 37% versus at the end of Q3 last year as our buying cheap debt at lease scoured the market.
Right products of extreme values.
During the quarter, we continued to support our store growth agenda by opening each new Citi trends stores.
Expanding our reach into southeast Texas.
Also returning to meet the needs of our loyal customers and the diverse end.
Important.
Capital is community.
Recognizing the importance of offering a well rounded end curated assortment of.
Home trends, we rolled out our expanded home assortment to an additional 100 stores.
Bringing the total to 200 locations with expanded at home sections.
Moving down the P. at L., we combined rigorous expense control with prudent investments in the business delivered healthy expense leverage in the quarter.
Coupled with our record third quarter gross margin.
Operating margin expanded 560 basis points to 4.7 per cent of sales.
These strong results demonstrate the strength of our brands.
Our on trends apparel assortment at outsized growth at home.
All of which continue to resonate with our loyal and expanding customer base.
Our third quarter high points, we're not limited <unk> operational excellence as we also announced the appointment of our new CFO and Edwards effective January force.
And brings extensive experience of finance strategy and operations.
Cost of variety of retail brands of sectors. Most recently and spent 15 years at L brands as Chief Financial Officer for various divisions of the company, including mask Global Victoria's Secret and express.
Sam as a true leader with a proven track record of success line.
Confident she is the right here for the business and we look forward to benefitting from her experience and expertise in just a few weeks.
I want to take a moment to thank Jason Masha Who's been my go to trusted finance partner and will continue as the vice President of Finance and principal accounting officer of Citi trends.
Let me spend a little time on our third quarter of merchandise performance as well as our position for the holiday season.
Including exciting new marketing strategies, our third quarter performance was broad based.
Positive comps at all five categories led by home mens and womens line.
In line with how many of our customers are living and shopping. These days, we captured significant market share and heading home decor casual coordinating tops and bottoms for him active wear and sleep well at her.
End statement cheese at allowed our customers to express their passion low.
Lastly, our continued relationship building with leading brands gave us the ability to provide an expanded assortment of current trends.
Underserved communities that deserve access to these brands at affordable prices.
We entered the holiday season, with an elevated focus on gifting anchored by our Fabs test of fines marketing campaign.
Sort of it runs the gamut of extreme value of Giftables, such as trends the toys jewelry sets.
Cash roads girls cosmetics sets at a wide range of Bluetooth.
Check so.
Just to mention of Q.
These five gifts are proudly displayed on gift tables located at the front of our stores, creating assessed of holiday spirit in our inviting store experience.
Since joining in March of Twentytwenty I've studied most facets of our business what I can tell you that we have been able to spark some really meaningful transformative actions of results across many functions of the business.
While I referred to the evolution in our business as a reset during our Q2 call I am more convinced that what we're experiences of transformation, we're experiencing a true transformation.
Giddings of sustainable gross strategy.
Central to our growth strategy is the end Nate understanding of our customers.
All of that the weight tools of the trade.
To provide them with the right product at.
The right time.
At the right price.
At the right store.
We are early innings I am delighted at what I'm seeing in the form of demonstrably of progress you in no small part of the quality of our people and the passion, they're applying to our strategic initiatives.
At the forefront of our progress is our ability at some beverage data driven insights across our business functions to inform what we ultimately do for the only thing that matters our customers.
For example, we are for the first time rolling out data tools at a communication technology platform to our stores organization trends.
Transform from an operational only focus too of sales driven culture.
That is actively managing the dynamics of of fluid and fresh store assortment.
Of the buying team.
We are implementing cloud based solutions that enable at that seasonal planning and robust inventory rationalization.
Greatly improve our craft at.
At putting the right stuff.
Part of the right customers.
In our supply chain, we ramped up new capabilities, including truck shipments from vendor to the floor for time sensitive trends into targeted store clusters.
Which gets the hot trends into customers hands.
Much faster than in the past.
I'm so excited about what's to come I look forward to updating you on our progress on future calls.
With that I will now turn the call over to Jason Marcia.
We will discuss our third quarter financial results Jason.
Thank you Devin.
Total sales in the third quarter increased 8.8% to $199.1 million, including a comp stores sales increase of 6.3 per sub.
The increase in comp sales was driven by a substantial increase in the average ticket size per.
Mostly offset by a low double digit decrease end customer transactions.
We are especially excited about our 6.3% comp sales increase relative to the U.S. census data that reported a sales decrease of 14% for clothing and accessories stores in the third quarter.
We achieved a record gross margin in Q3 of 41.8% an increase of 440 basis points over Q3 last year.
And this follows our Q2 margin rate of 41.2%, which was an increase of 390 basis points over Q2 of last year.
The increase in our quarterly gross margin continues to be primarily the result of strong full price selling and fewer markdowns.
SGN, a expenses increased by $3.7 million or 5.6%.
Prior to the third quarter of last year.
The increase in SGN, a expense dollars was primarily due to higher bonus and equity compensation accrual.
Combined with expected increases from operating more stores.
As a percentage of sales.
SGN, a decreased 100 basis points due to the leveraging effect from higher sales.
Now turning to the bottom line.
Our net income for the quarter was $7 million compared to a net loss of $1.1 million in Q3 last year.
Earnings per diluted share was 67 cents compared to a loss of nine cents per share in the third quarter of last year.
Now turning to our year to date results.
For the first nine months of 2020 total sales decreased 6.9 per sub too.
Two $531.4 million.
And comparable store sales decreased 9%.
With the year to date decline driven by the effect of cope at 19 on our business.
In the first quarter through March seven when.
When we began to see the impact of COVID-19 on our sales we had a comparable stores sales increase of 3.1%.
Then in the second quarter upon reopening our stores, we recorded a 32.2% increase in comp sales for our opened only stores.
Then finally in the third quarter accounts sales increased 6.3%.
Gross margin for the nine month period expanded 100 basis points to 38.4% in the first nine months of the year.
The increase was due to strong full price selling and fewer markdowns in the second and third quarters.
Partially offset by the reduction of more than 1000 basis points in the first quarter due.
Due to the markdowns that we took when we temporarily closed our fleet of stores.
SGN a expenses for the nine month period decreased by $11 million or 5.8%.
Compared to the prior year period.
The decrease was primarily in payroll expense as a result of associate furloughs and reduced operating hours.
Combined with decreases in other expenses during the first half of the year that were primarily related to the temporary closures of our stores and distribution centers.
In addition, we incurred $1.7 million of incremental costs related to cope at 19 for personal protective equipment and cleaning supplies.
As a percentage of sales SGN at expenses for the year to date period increased to 34%.
Compared to 33.6% in the same period of last year.
For the nine months, our net income was $6 million compared to $7.1 million in the first nine months of 2019.
Earnings per diluted share was 57 cents compared to 60 cents.
To summarize our year to date performance.
Our strong operational execution has paid off.
Despite the headwinds we faced from the pandemic, including significant store closures ranging from 35 to 100 plus days.
During the first half of the year.
Our year to date gross margin is 100 basis points higher than last year.
And our year to date operating profit is more than $900000 higher than last year.
That is a powerful statement about the strength and appeal of the Citi trends brand.
We ended the quarter with $97 million in cash.
Compared to cash and investments of $72 million.
At this time last year.
Through the first nine months of 2020, we have generated operating cash flow of $63 million.
Compared to $21 million generated in the first nine months of 2019.
In light of our stellar operating results, our strong financial position and our overall confidence in the business.
In September we reinstated our $30 million share repurchase program.
And to date under this reinstated authorization, we repurchased 545000 shares.
For $15 million.
As to inventory we ended the third quarter in a very clean inventory position with our inventory down 15.5%.
Fair to the same time last year.
As David noted, we ended Q3 with 33% less inventory in our comparable stores.
At 37% more inventory stored in our distribution centers as of next season buys.
This next season by inventory represented 23%.
Of our total inventory compared.
Compared to 14% at.
The end of Q3 last year.
As we continue to navigate through the COVID-19 pandemic, we remain confident in our current liquidity position and disciplined in our approach to running the business.
We are planning the remainder of the year conservatively given marketplace conditions as a result of the pandemic.
As such we are estimating our fiscal 2024th quarter comp store sales to be approximately flat.
Which is consistent with november's trends.
Due to the continued uncertainty surrounding the COVID-19 impact on customer behavior, and our business. We are not providing further guidance at this time.
Now I will turn the call back to David for closing comments David.
Thank you Jason.
Before I wrap up with a few closing comments I wanted to talk about a few things first off I'm excited to update you on our new partnership with our CD cares platform.
And the boys and girls clubs of America.
Im pleased to announce the first of end of its decline at Citi trends of fund raising event to support boys and girls clubs in select communities.
School closures of created significant hardships from many households, particularly those in our communities and some of which would be the net effect our associates.
Number 20 us through December 20 at select stores will accept donations that will directly benefit the clubs in these communities.
Citi Cares Council work directly with the staff at these centers to discuss their needs programs and the shortfalls created as a result of the current pandemic.
Citi cares powered by Citi trends as a proud partner of the boys and Girls club this holiday.
Let me wrap up with a big shout out to our entire organization of so very proud of our team's ability to adapt and continue to say producer of our customers and what remains of fluid operating environment like.
My confidence in our capabilities to profitably grow the Citi trends brands, while creating positive change in the communities. We serve as only strengthened as this year has progressed.
Our third quarter performance further indicates that we operate a unique scalable model one that is embraced by our loyal customers.
During the second and third quarters, the outpouring of customer support was humbling and something we are so thankful for.
They continue to love, our fashion trends basics and everything in between within our apparel accessories at home categories.
Because of this customer loyalty that Citi trends puts our store experience front and center.
Ensuring we create a warm inviting environment, coupled with an easy to shop layout that features head to toe outfits and coordinating pick ups across the entire spectrum of his per and the kids lifestyles.
What's important to recognize that our stores at and shopping centers that are vital to the black Hispanic and melting pot challenge in neighborhoods across America.
Consider a unique in store experience that showcases broad product choice for the entire family within an extreme value framework should be quote unquote essential for our moderate to lower income underserved customers.
We are optimistic that our model will continue to build on our success to date with continuous improvements in key operational metrics, including inventory turns gross margin at expense leverage over time.
With that we're ready to take your questions.
Thank you very much and if you like to register a question.
Pressed of one probably at a four on your telephone or three tone, probably pick Nash requests.
A question of has been answered thank you.
All of your restoration of that for one for better free using.
Using a speaker phone for five to 10 type of for entering your craft and what's kind of fostering a question of how much may have 50 of one floor and Utah phone keypad. One moment. Please for our first question.
And we'll proceed with the first question on the line from John Lawrence from Baird gross spread of headway the question.
Thank you good morning, guys.
Good morning.
Congratulations on the numbers David could you just give a little bit of a.
Maybe just a little bit of of step backwards. Your comments about the buying team I know one of the things that when you talk about transformation is how.
How do you go to market can you speak to a little bit.
Even though 2020 with the pandemic and everything else but.
Give a little background of of how the vendor community is now looking at Citi trends and is it more of a valuable outlet for their products.
And just what's changed in that process over the last six six segments.
Thanks, John Good question sure I'll add a little color on that.
Really beginning with the onset of at a pandemic in March and April.
End upon my arrival at the time.
Team really rallied around how can we expand our vendor base and attract the right vendors to our stores so to speak and serve our customers with the goods at they're asking for end desiring and kudos to our buying team they went out and really attack the marketplace at all.
All fronts.
Cross things that we source ourselves to private label offerings to nationally known brands and so forth and as as a result, they really developed and opened up new relationships.
That heretofore at really hadn't existed at Citi trends at I'll give a shout out to lease of power.
Chief Merchandising officer, she and her team are really put of yeoman's effort into this.
Plan of how do we expand our vendor base.
How do we bring in more interesting and exciting style and fashion vendors cheap fuel of the exciting fresh assortment that you'll find at at Citi trends at.
Add on any of those new relationships are relationships that we're nurturing and fostering four of our really long term.
Approach of working with these vendors. So we're looking forward to what it holds in the future. We're seeing some of those fruits at our results year to date.
And she and the team will continue to.
Leverage and develop those relationships in the future.
Great. Thanks, Good luck.
Thank you.
Thank you very much look at her next question on the line.
From the line of Alec leg from B. Riley Securities go right ahead.
Hi, Good morning, Hi, David end, Jason first off nice job on the quarter.
My question relates just to the store fleet growth. So this quarter, we opened eight new stores and close to.
What are your thoughts on the long term strategy and growing the store base.
How many new stores do you think you can open per quarter report per year and it looks like you have a lot of white space left.
Hi, Alex Thanks for closing that question something here at gear to our hearts of.
First of all at Citi trends is firmly at a gross spreads Theres no question about it at you hit upon it in the right way, there's a lot of space in the U.S. to support further Citi trends fleet growth and so while we aren't at Liberty to share an exact number or planned today, what I can tell you is in the upcoming.
I see our conference in mid January we attempt to share more specifics at a high level we.
We believe there is a lot of opportunity to serve the African American communities and Hispanic communities that Dr. us and we are serving a relatively small percentage of that today Sue our 585 store network. So we believe there's a lot of upside in key geographies around the U.S. at.
[music].
I'll share more when you join us at IC are because I can tell you. We have some good color to add on that front end kind of elaborate a little bit more of our long range plan, but but but know that store growth is a big part of our agenda.
We're sort of sharing more.
Perfect and then just to follow up on back in first quarter, you mentioned entering into conversation at landlords just regarding rent reduction in negotiations on any update on that have you received any meaningful abatement or long term.
I guess restructuring of of rent agreements.
Good question, Yes, I think to summarize on that front relative to our negotiations of landlords landlords I would tell you that they were gracious and a very opened two stating what made at the fed.
And then Citi trends and what resulted was a healthy basements.
End deferrals, and then a third bucket, which was kind of a renegotiation either of our current deal or the deal might have come up to an expiration date in the last couple of months. They gave us an opportunity to sit down with them and renegotiate a new deal altogether.
Most of the combined turned out pretty much like we planned and of.
Again shout out to our of landlords. They were very a good to work with they understood. The gravity of the situation and like I said of the we achieved a nice mix of abatements deferrals and renegotiations.
Perfect. Thank you.
Thank you good day.
You did.
And look at our next question on the line some of the line of Chuck Grom with Gordon Haskett cover at hedge with a question.
Hey, guys congrats on a great quarter.
Instead of question and maybe you talked about at I hopped on a couple of minutes late just with regards to the that the change in trend.
During the quarter it sounded like.
Some of our in September were pretty strong and then you're calling out November at flat.
Flat. So just wanted to get to discuss the factors that contribute to that and then also if you want.
On the share any any comments on this past weekend Black Friday, how it how apparel for you guys.
Hi, Chuck Thanks for joining yes, no looked at a little bit of color on that.
On the month of November.
Hey, there's a bunch of chapters that make up that book.
One of them was unseasonably warm weather trends that.
Really impacted the first 10 days of the month.
There was some moderation in those weather trends, which caused a nice bounce back.
The second chapter of would be.
We are seeing.
What we believe to be as a more delayed reaction to shopping for Christmas.
Which generally bodes well for us because we're a huge last minute destination. So.
It's in the mix of kind of.
Creating that flattish November and then and then lastly, the Black Friday weekend.
Typified by as you know and and we know a.
Decline in traffic based on macro factors around both from CDC reasons as retail and retail reasons of pale shop on line avoid the crowds avoid interacting with people things like that we think we fared pretty well in light of all of those appropriate safety warnings, but.
But it was out of the chapter of the little bit of a slowdown.
All of that netted together equaled about flat.
Okay, that's great and the end just bigger picture.
Just wonder if you could comment on how you're thinking about the buying environment the availability of product as we move into <unk> and into 2021.
Sure as you as you might know, it's vital to our business well I tell you. This looking back at our accomplishments in Q3, what our buyers really scoured the rest of the goal of so to speak to find the right stuff for selling in Q1 in Q2 of 2021 that at a stellar job at that we don't see that progress abating.
We think theres plenty of availability and end momentum on the part of our team went down those attractive buys that we can start stocking of wafer later in the year next year. So.
Pretty bullish and optimistic about that Chuck.
We won't let our foot off the pedal on that front.
That's great to hear and then just of just if you could just comment just remind us the mix of what your home businesses today, and I guess, given the strength of that category and the strength of the housing complex today, if you're if you're thinking about leaning into that category, even more over the next couple of years. Thanks.
Sure Yes, no. Good question that Weve, certainly mentioned and of minute on our interest in growing our home business that really kicked off at mid 19, and we've been seeing some great momentum from at including the recent expansion into 100 more stores of a broader and deeper home assortment I tell you at the forefront of.
Home business is relatively small still at our mix.
And therefore, there is a lot of upside for it to become a greater penetration of our mix in the end.
Total sense at.
And we see that 2021, two and three being of some pretty big years to further develop the home business, Jason you want to add something there.
Yes, Hey, Chuck good morning, I could that that's something that we break out in our Q2 in our in our revenue footnote that will break out the distribution and what the makeup of our categories, but I can tell you. This quickly just looking at the last few quarters, it's grown from.
4% of the business back in 2015 to most recently in Q3, it was 8% of the business.
And it really just consistently posts.
High double digit comps at 22% up in Q3, so like David said not the significant.
Portion of the business, yet, but consistently growing and consistently comping.
Very helpful. Good luck. Thank you.
Thanks Chuck.
Thank you very much.
And as a reminder to register any questions or comments you may have free today's presenters you may do so by pressing the of one how about the four I'm just kind of funky pad.
And looking at our next question on the line from Alex Silverman from end to be on investing.
Investment grade ahead.
Hey, good morning.
Okay.
Morning gearing at great.
Most most of my questions have been asked and answered though couple last questions.
Having said that the.
The size of the basket.
Given your at your improved.
Assortment.
Good question.
The short answer is its increased pretty considerably.
Since may.
Now it's important that day, there's some dynamics that we need to understand here.
We do believe there is some loading up per trip that's happening based on the you know the macro impact of the pandemic and flow.
Folks his desire to maybe make less trips and when they do make a trip they spend a bit more to make that trip or work flow.
So as Jason commented, we are seeing a softness in traffic to our centers, but when they do visit by we're seeing some very healthy gains at our basket amounts, which of course of driven by higher units per transaction, which is great to see.
They are slightly improved at.
Average unit retail so those trends, we love seeing Alex but.
But it's important to recognize that some of that is driven by that macro impact of less trips and desires to spend more per trip does that make sense.
It does yes, absolutely.
Second question. This is the second quarter of.
Greater than 41% gross margin is this a.
Good new level to be using on a go forward basis.
Or are there some unusual dynamics, we should consider you know over the last last couple of quarters.
Yes, good question at all.
Answer it and the way, we think about it internally, which is the last six months have been like nothing we've ever experienced at.
And in many ways the transformation of those metrics so to speak.
Within our business model in context of those accelerated.
And so while at what had were thrilled to see those numbers were not yet ready to say we can.
Sustain them forever, but I think what I would give you to takeaway is it's a maniacal focus of our teams.
To see numbers like you've seen in Q2 and Q3.
I think once once things normalize more end, we reach perhaps more of a normal way of shopping and so for us in 2021.
I think we'll see some dynamics and some of those those those calls of reasons changed derived at to determine or at what.
As of resulting in a gross margin rate, but at the end of the day, we're making at our number one focus at a and we're optimistic that we can continue to deliver some really healthy high levels of gross margin.
Very helpful. Last question for me you guys.
You guys.
Bought a lot of inventory to put away for next season.
This a unusual dynamic that there were a lot of opportunities to buy inventory.
Or is this a.
Strategy that we should think about on a go forward basis.
Well book.
Yes, no good question I I.
Probably say the latter point you make is the most important point from a strategic lens, we need to always focused on.
Finding the right next season buys of.
In them at our hands and making sure we have the deliver of future great seasons. So I would say at bats that big take away out so thats, how we speak about internally as part of our ongoing strategy more seriously than in the past.
Is to determine and have the relationships with the right folks.
To deliver.
Delivery or deliver a constant stream of next season buys.
At B always plus plus plus versus our line hard to tell and predict but I can tell you. It's a key pillar of our strategy.
Great. Thank you guys congratulations great quarter.
Thanks, Alex of a great day.
Thank you very much.
The next question on the line from Dana Telsey from Telsey Advisory Group correct had.
Good morning, everyone and David Congratulations on the nice progress in the result.
As you think about the gross margin, which is still impressive and continuing the sequential improvement when you think about full price selling and fewer markdowns, where did you see that the biggest delta how we the merchandise margin and is there any particular categories, where this trends is coming from and then on the season on the EPS DNA side.
Todd how are you thinking about that going forward, how much of their cobot expenses wrapped in there and how do you see those playing out thank you.
Thanks, Dana Thanks for joining thanks of the kind words on the on the gross margin front similar to our general top line performance across our key categories of business. We saw improvements in gross margin basically in every one of our important categories, mainly meeting apparel accessories home.
Footwear and so forth. So that's a really good thing. So it was definitely broad based at there wasn't any one particular hero so to speak but what I would comment on line is where we saw even more outsized improvement in margin.
It was in the apparel area and in particular, we had some really nice traction in the men's business.
Which is a business that we think we can garner even more market share down the road.
It's a business that we saw just explode during during the last six months, but all at all margin improvements really across the board reflective of better end fresher merchandise less reliance on markdowns.
And the faster turns that you heard me talk about all contributed to that on.
Yes gene a fraud.
It's you know whats nice about this model is I'll call below the gross margin line, we're trying to keep it pretty simple.
And I preface my comment with that because we focus on a couple of key metrics and really the number one metric is our store labor line since as you know we operate nothing book stores. So that's a very very important one at and we look at our DC expenses at cost of Texas to bringing in processes and get it out.
Of the stores at.
And those two areas remain a primary focus within those two operational functions our head of stores in our stores team as it has been I actually focused on rationalizing store labor haven't.
Kind of in the right people a lot of people and the right people.
Hi stores at the right time of serve the customer the band and that sort of DC perspective, we're we're focused of more and more of using data and technology to understand how do we continue to improve productivity and speed of takes some of the vendor to them or to the customers has not.
That's how we think about associate at really at at a broad level.
Total net expenses.
Knock on wood day, they won't be a huge contributor or kind of any of state, where we're able to get them reliably at good rates prices of come way down on a cost per unit basis for all pp. So you know, it's probably regular as of probably part of our regular life now for the foreseeable future.
But well cause a huge swings in our SG, it's really more about managing the labor and energy and productivity, our Dcs that makes sense.
Yes.
And just as you think about this holiday season NBC.
Getting getting goods to stores is the flow at all different than what it had been in past holiday seasons as you think about it.
Yes, somewhat it is we were getting better although we're not there yet, but we're getting better at Ics.
Doing some shipments into stores that are a little bit more just in time.
So our big shift this year as we we didn't load up stores as much as we did in prior years in early October.
Because it didnt make sense to fill the stores to the gills that early with holiday goods. So this year, we've definitely pivoted to be a bit smarter and a bit more agile in terms of how we deliver goods in a bit more of adjusted PTI matter, which which means for example, we're taking some typically late.
In the season gifts that folks just don't buy at till December 15th stocking Stuffers and such and we're we're shipping that end now in the old days, we would have shifted in at October.
So we definitely have made some logical wise improvements to how we flow our merchandise and it's paying off at it. It allows our distribution centers to to plan better too.
To smooth out some of the spikes out at and then lastly, we're getting better by the day at our distribution centers with as I mentioned earlier, some data and technology just to get stuck to the stores faster, which means we can ship at a little later because of all got there a little faster and at all is good in the stores when the customer.
She's at fresh and new at that time so.
Making headway on that front.
But.
Best of luck for the holiday season. Thank you.
Thanks, Dan at you tube of I.
Thank you very much.
And Mr. Mcewen, we have no further questions on the line I'll turn it back to you for any closing remarks.
Very good Tommy Thanks to everybody, who joined the call stay safe and healthy happy holidays see you next quarter Bye bye.
Thank you very much end that does conclude at the conference call for today. We thank you for your participation of street disconnect your lines have per day.
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