Q3 2021 La-Z-Boy Inc Earnings Call
For clothing, and we look forward to talking with you soon please hold the line and we'll be right back with you.
[music].
Okay.
Good morning, ladies and gentlemen, and welcome to the La Z Boy fiscal 'twenty 'twenty, one third quarter conference call.
At this time, all participants have been placed on the listen only mode and the floor.
For will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host Kathy Liebmann ma'am the floor is yours.
Thank you Holly and good morning, Thank you for joining us to discuss our fiscal 2021 third quarter results with US today are Kurt Darrow, La Z Boy's Chairman, President and Chief Executive Officer, and Melinda Whittington CFO, Kurt will open and close the call and Melinda will speak to the financials.
Midway through we'll then open the call for questions.
Will accompany this presentation and you may view them through our webcast link which will be available for one year and the telephone replay of the call will be available for one week beginning this afternoon.
Before we begin the presentation I'd like to remind you that some statements made on today's call include forward looking statements about la Z boy's future performance and other matters.
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 these risk factors as well as other key information detailed in our SEC filings.
Also our earnings release is available under the news and events tab on the Investor Relations page of our website and it includes the reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck.
With that and we'll now turn the call over to Kurt Darrow, La Z Boy's Chairman, President and Chief Executive Officer Kurt.
Thank you Kathy and good morning, everyone.
And now following yesterday's close of market, we issued two press releases.
The first release discussed our leadership transition plan and.
Bouncing my retirement, as president and CEO at fiscal year, and with Melinda named as my successor.
And the second release detailed our fiscal 2021 third quarter results.
I'm very excited about the new La Z Boy leadership team.
And what they will accomplish and the future.
But first.
Let's review the quarter, and then I'll circle back to discussions on the transition of a range.
For the quarter.
We experienced strong written trends across the entire La Z boy enterprise as consumers continued to allocate more discretionary dollars to their homes and the environment with travel and other leisure related restrictions.
This continues to translate to a build and a record level of backlog, even as we add more capacity.
Despite the strong written business delivered sales declined slightly versus the prior year quarter due to greater than anticipated impacts from Covid, 19, which I'll detail more of in a minute.
And we delivered strong consolidated non-GAAP operating margin of nine 5% Inc.
And another profitable quarter for Joy bird.
All of this on a base of last year's third quarter, which was the strongest quarter and the Companys recent history.
For both the sales and consolidated operating margin.
In addition, our strong cash generation enabled us to return more than $7 million to shareholders through dividends and share repurchases.
And as declared and we declared an increase and the dividend to <unk> for <unk> 15 per share.
And now I will take them out and to explain the specific COVID-19 impacts of the business.
Along with the rest of the country, we started to experience and escalation of plant employees, leading to be off work to do the COVID-19 following the Thanksgiving and.
And then again following the Christmas and new year holidays.
And with strict safety protocols in place, including contact tracing we experienced a higher than anticipated level of absenteeism, and our manufacturing facilities as and volume as employees quarantine, which limited our ability to increase production of the planned levels.
The impact on sales was further.
As I reiterated by COVID-19, absenteeism disproportionately affecting our most mature U S plants.
Where our most complicated and higher price furniture as bill.
For the quarter with lower than expected units made particularly at our mature U S facilities.
And there was a mix shift and production with fewer sections and other high priced items manufactured even though we have the orders for them.
And because of our lazy boy furniture galleries stores tend to sell a higher proportion of custom product sofas, and <unk> with higher selling prices. Our retail segment was particularly impacted by the shift and mix.
Additionally, we were affected by demand and COVID-19 issues impacting shipping routes around the globe and explain and experienced delays and overseas shipments of finished product to our international and case goods business.
And of component parts to our manufacturing operations during the period, which impacted all of our business.
As an example, we were short of supply of electronic electronic components for our highest margin power units and this two contributed to the shift and mix.
While supply chain challenges affected our quarter, and we will continue to drive uncertainty and the near term.
Will be remediated overtime.
Our backlog remains strong and we are scaling production as quickly as possible and working with our partners and Asia and domestically.
The address disruptions and supply so that we can improve service to our customers and.
And deliver strong financial results as we focus on the health and safety of our employees.
And.
Now in the midst of all of these challenges written sales momentum remains very strong.
Across the La Z Boy furniture galleries network written the same store sales increased six 3% and the quarter for the strongest momentum in January of.
This is on top of last year's third quarter written the same store sales increasing 10, 5%.
And for some and for some additional context.
The stripping out the Canadian stores that were closed at various points during the third quarter due to Covid restrictions written the same store sales would have increased to eight 2% for the network.
Written same store sales for fiscal 'twenty, one year to date increased 18%.
And for calendar year 2020, written same store sales for the La Z Boy furniture galleries network increased 6%.
And the average revenue per store increased to $4 4 million from $4 1 million and COVID-19.
Even with some of the stores being closed for the better part of two months of last year due to the debt.
Okay.
These results continue to demonstrate the strength of our brand and.
And its appeal to consumers during these uncertain times as well as the ability for store teams across the network to provide a safe shopping experience for the consumer.
As I turn to a discussion of our segments My remarks will detail, our non-GAAP numbers, which we believe better reflects underlying operating trends and Melinda will cover the non-GAAP adjustments.
I'll start with our wholesale wholesale segment and and as a reminder, and now includes both our upholstery and our case good companies as well as our international business.
During the quarter, our wholesale backlog grew to over $600 million for five times, what it was at the end of Q3 last year and up another 25% since the second quarter.
However, delivered sales declined 4% to $351 million.
Reflecting the COVID-19 production and delivery challenges and a change and mix as I detailed a moment ago.
Non-GAAP operating margin for the wholesale segment was 10, 2%, reflecting the temporary COVID-19 impacts of our supply chain and increased cost to expand manufacturer capacity as well as for raw materials.
These factors were partially offset by lower promotional activity due to the strong demand environment.
With the surge and product demand and our challenge has been to ramp up capacity at all of our plants and expand overall production capabilities and.
And we have put many pieces in place.
Recall, we have added manufacturing sales and weaken and the third production shift at all of our U S plans.
We have temporarily restarted a portion of our Newton, Mississippi Assembly plant to service select.
Geographics.
And we have also added sales and available for space at our cut and Sew Center and Mexico.
And finally, we opened a new manufacturing facility in Mexico, just south of the human Yuma, Arizona, and San Luis Rio, Colorado, where production started in December with full ramp up extending over the first half of the calendar year, allowing us to tap into a new labor pool.
And we are already and the process of increasing the number of sales and both Mexico and the base locations.
Our supply chain team is ramping production capacity as quickly as possible to shorten lead times, which today stand at an unprecedented five to nine months, depending on the product category.
Our plant teams are working tirelessly to service customers and we sincerely thank them for their dedication and hard work.
Now, let me turn to the retail segment for.
For the quarter delivered sales decreased 1% to $166 million, reflecting the COVID-19 related project delays.
However, written same store sales for the company owned stores increased 9%.
For the strongest momentum and January reflecting positive trends across all sales metrics, including traffic conversion and average ticket by increased upholstery units and design and sales.
For the period delivered same store sales decreased six 3%.
Non-GAAP operating margin for the segment was eight 9%.
Slightly down from nine 8% and last year's comparable quarter.
Primarily related to lower delivered sales relative to fixed costs and higher selling expenses driven by commissions paid on increase the written sales, partially offset by decreased spending for the market for market and given the strong demand environment.
And some lower travel related spending due to COVID-19 restrictions.
We continue to see our furniture galleries as an integral part of our omni channel offering.
Of our investing and robust plans for new stores, Remodels relocations and technology upgrades.
For fiscal 'twenty, one and 2022 each year will include more than 20 projects.
And they will be completed across the network with more than half of them and our company owned retail.
For the broad array of styles and accessories as well as free design services the <unk>.
Stores provide the consumer with our most comprehensive offering and of welcoming and safe and inspiring shopping experience. So it is critical that we keep the store systems up to date and engaging.
Finally, I'd like to spend a few moments on joy bird, which turned in another solid and profitable quarter.
Sales for the second quarter, which are reported in corporate and other increased 30% to $29 million.
Great and the sales increased 79% and the quarter versus the prior year, reflecting ongoing strong demand trends and the strength of the brand and the online marketplace.
<unk> again delivered profitable growth and improving the gross margin and investing in marketing to drive customer acquisition.
And one last note before turning over the call. The Melinda last week, we announced the expansion of our board of directors to 10 members with the addition of Jim Hackett and currently serves as a special advisor to Ford Motor Company and was president and CEO of forward from 2017 to 2020.
Jim spoke most of his career at Steelcase, serving assets CEO for 20 years.
True visionary, Jim will undoubtedly make a significant contribution the lazy boy.
And we look forward to his guidance and perspective as we move into the next phase of growth.
Melinda now over to you.
Thank you Kurt and good morning, everyone as always let me remind you that we present our results on both the GAAP and non-GAAP basis, we believe the non-GAAP presentation better reflects the underlying operating trends and performance of the business as detailed in our press release and and the tables and the appendix section of our conference call.
Excluded from our fiscal 'twenty, one third quarter non-GAAP reporting our purchase accounting charges related to acquisitions totaling $10 $4 million pretax or <unk> 20 per diluted share primarily due to a write up of the joy of <unk> contingent consideration liability.
Based on significant improvements to our most recent financial projections and income of $5 2 million pretax or <unk> <unk> per diluted share for employee retention and payroll tax credits the company qualifies for under the cares Act.
The last year's third quarter non-GAAP results exclude purchase accounting charges of $1 4 million pretax or <unk> <unk> per diluted share.
The charge of $6 million pre tax or <unk> <unk> per diluted share related to and impairment for the line investment and a privately held start up company.
And.
Income of $8 $7 million pretax for 14 cents per diluted share related to the company's supply chain optimization initiative, which included the closure of our Redlands, California facility and relocation of our Newton, Mississippi leather cut and sew operation now.
And now onto our results my comments from here, we will focus on our non-GAAP reporting unless specifically stated otherwise.
On a consolidated basis fiscal 'twenty, one third quarter sales decreased one 2% to $470 million, primarily due to temporary supply chain impacts from COVID-19, and consolidated non-GAAP operating income was essentially flat at 45 million.
Versus last year's quarter, and consolidated non-GAAP operating margin improved to nine 5% versus nine 4%, mainly driven by strong performance by joined break non.
Non-GAAP EPS was <unk> 74 per diluted share and the current quarter versus 72 cents and last year's third quarter.
Consolidated gross margin for the third quarter increased 60 basis points changes and our consolidated sales mix, primarily driven by the growth of Joy break, which carries a higher gross margin than our wholesale businesses throughout the biggest change and margin. Additionally, enjoy very experienced a significant improve.
And in gross margin, primarily resulting from product pricing actions taken and increase and average ticket and favorable product mix.
Partially offsetting these increases were higher costs related to expanding our manufacturing capacity across the company.
SG&A as a percentage of sales increased 50 basis points, primarily reflecting the changes and our consolidated sales and executed growth enjoy berry, which carries higher SG&A costs and our wholesale businesses.
And non operating income in the quarter was primarily due to unrealized gains on investments and contributed <unk> <unk> per diluted share to EPS and the third quarter on both a GAAP and non-GAAP basis.
Our effective tax rate on a GAAP basis for fiscal 'twenty, one third quarter was 27, 7% versus 26% and last year's third quarter.
The increase is due mainly to the increase and the joy bird contingent consideration liability, which is not tax deductible.
Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes for.
For the full fiscal of 'twenty 'twenty, one year absent discrete items.
We estimate our effective cash effective tax rate on the GAAP basis to be between 26 and 27%.
And on a non-GAAP basis, we estimate it will be and the range of 24% to 25% after adjusting out the effects of the non deductible joy <unk> contingent consideration.
Turning to cash year to date, we generated $250 million.
And cash from operating activities we from.
<unk> strong operating performance and a $122 million increase and customer deposits from written orders for the company's retail segment and Joy break.
We ended the period of $393 million and cash more than double our $168 million and cash at the end of last year's third quarter and.
In addition, we held $31 million and investments to enhance returns on cash compared with $30 million last year.
As we have managed the business through COVID-19, we've been conservative with cash and and the process have strengthened our resources to capitalize on future value, creating opportunities to grow out of the pandemic.
Year to date, we have invested $27 million and capital primarily related to investments and our retail stores, new production capacity, and Mexico machinery and equipment and upgrades to our Dayton, Tennessee manufacturing facility, which has now been completed.
As we make investments and the business to strengthen the company for the future, we expect capital expenditures and the range of $35 million to $40 million for the full fiscal year, which will include investments and new manufacturing capacity, and Mexico technology upgrades and improvements to retail store facilities and <unk>.
Acknowledging and upgrades to our Neosho, Missouri manufacturing facility.
Regarding cash returned to shareholders fiscal year to date, we paid $9 7 million and dividends to shareholders and spent approximately $1 million purchasing 22000 shares of stock and the open market since reinstating our program and December under our existing authorized share repurchase program.
Leaving $4 5 million shares of purchase availability and the program and yesterday, our board of directors increased the quarterly dividend to <unk> 15 per share demonstrating its confidence in the strength of our business.
Before turning the call back to Kurt Let me highlight several important items for the upcoming fourth quarter for.
First a reminder, that our expected non-GAAP adjustments for the fourth quarter will include purchase accounting and related tax adjustments for acquisitions to date, which are expected to be a <unk> <unk> per share benefit and the fourth quarter and.
This excludes any further adjustments to the joy of Berry contingent consideration liability, which is dependent on estimates of joy birds ongoing business trajectory.
Second I remind you that last year's fourth quarter included a one time $16 million benefit and cost of sales for the rebate of previously paid tariffs, which was included in both our GAAP and non-GAAP results, and which was mostly offset by of bad debt expense of <unk>.
$13 $5 million due to the art van furniture bankruptcy and the provision for potential credit losses, and the COVID-19 environment also included in both our GAAP and non-GAAP results.
Our net non-GAAP results for last year's fourth quarter excluded a non cash non tax deductible joy bird goodwill impairment charge of $27 million, mostly related to the future financial projections at the beginning of the pandemic and.
And a 6 million pre tax benefit from purchase accounting primarily related to the reversal of the joy of <unk> contingent consideration liability by its full carrying value also based on financial projections at that time.
And now looking at our ongoing business, let me update the perspective previously provided for the fiscal 'twenty, one and fourth quarter. As noted we do not intend to provide this level of forward looking perspective regularly but we think of an important to offer it and the near term given the unusual business trends.
And by the pandemic.
We are of significant order backlog that will have a long tail in terms of production and deliveries. We are expanding output and we will continue to increase production capacity. We are optimistic about our business trajectory and confident we will deliver strong results in the fourth quarter and beyond.
With respect to raw materials, we took pricing on written orders beginning in October to cover cost increases given the slower progress to work through our backlog in Q3, we will experience less of that benefit in Q4 than originally and stacked expected. Meanwhile, with cost for raw materials continue.
On to escalate as well as those for freight we continue to evaluate the need for further pricing actions.
Also as we saw in Q3, we are still experiencing extreme uncertainty with respect to COVID-19, including related shutdowns of the absenteeism affecting our plants hiring challenges impacts of global supply chain and volatility impacting availability and timing of component parts and fin.
<unk> good shipments and most recently weather challenges.
Considering all of these factors, we now expect fiscal 'twenty, one fourth quarter consolidated sales growth of 34% to 39% versus the prior year fourth quarter, which included the month long pandemic shutdown.
We expect non-GAAP consolidated operating margin at the lower end of the 9% to 11% range included and these margin expectations is the anticipation that joy Berry will sustain profitable operations, even as we test investment effectiveness to optimize top line growth.
And looking to next fiscal year with our existing backlog of written orders and the capacity increases we have underway, we will not experience our usual seasonality in Q1, and Q2 and instead, we expect to continue to make moderate sequential improvement and wholesale capacity from.
Q4 throughout the first half of next fiscal.
Further as we increase efficiencies, we will focus on reinvesting a portion of returns back into our business to strengthen our capabilities for longer term results beyond the pandemic.
And of course, we expect the impacts of Covid and the global supply chain disruptions to continue to cause uncertainty and some temporary volatility as we move forward.
And now back to Kurt.
Thank you for Linda.
We feel very positive about our business for the long term.
We have always had one of the strongest brands and the industry and we believe we have further strengthened this over the past year of <unk>.
Showing us to build market share and a more solid foundation from which to grow.
At the same time, we of build the sizable cash position, which provides us the means and flexibility to invest and opportunities that will drive long term growth and return for all of our stakeholders.
Now onto our other news yesterday as our press release indicated last night.
I have made the decision to step down as president and CEO of La Z Boy.
After 42 years associated with this great company and I will remain chairman of the board.
This decision was not taken lightly and it's been in the works for some time.
I believe of thoughtful and dedicated leader should be responsible along with the board of directors for a well planned and comprehensive leadership transition sort of the company may continue to move forward with this view has bumps in the road as possible.
I believe we have accomplished that.
These types of things out of a timeline of the round of their own.
And for Lazy boy the timing is right.
We're rounding the corner on the pandemic all of the Companys business units are growing and very profitable.
We have a fortress balance sheet, our backlog is at an all time high and our stock price is just about at an all time high as well.
For some perspective and March of 2009, our market cap was around $30 million and now is approaching $2 billion.
But most importantly, we have the right leader and Melinda Whittington, who has earned the respect of our entire organization and the seasoned leadership team that has been battle tested and have successfully dealt with everything that has been thrown at them.
And I want to thank our employees customers suppliers and partners around the globe for their continued dedication to lazy boy and.
And their unwavering support.
And also thanks to all of you who have been on the call who have been on the call was this journey we've been on.
And now it is my distinct pleasure to introduce the new President and CEO of Lazy Boy Melinda Whittington.
Thank you very much Kurt I am honored to have the opportunity to lead this amazing company through the next phase of our journey as Kurt said, we are of great team and a bright future ahead, as we leverage our strong foundation and build our next chapter.
I'm also thrilled today to introduce our new CFO, Bob <unk>, who is joining us for today's call welcome Bob and congratulations.
And while we still have several months of transition ahead of us and I know I can count on Kurt continued Mentorship I would also like to be the first to publicly thank Kurt for everything he has done to build lazy boy into what it is today.
I wish him the very best and his retirement.
Kurt and I. Thank you for your interest and Lazy Boy incorporated and now I will turn our call over to Kathy to provide instructions for getting into the queue.
Thank you Melinda.
And the question and answer periods now Holly. Please review the instructions for getting into the queue to ask questions.
Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pick up your handset of listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions.
Your first question for today is coming from Bobby Griffin, probably please announce your affiliation and pose your question.
Good morning, everybody. This is Bobby from Raymond James. Thank you for taking my questions and congrats on managing and another challenging quarter I guess first Kurt.
Congratulations on retirement, it's been a pleasure to work with you and I wish you nothing but the best.
Happiness and health and retirement.
Thanks, so much for those comments Bobby.
And then.
It's been a long relationship for us with Raymond James and the new for the last number of years as well.
Thank you, thank you and Bob Melinda and Bob and congrats on the new roles look forward to continuing to work with you guys and I've seen with the next chapter of Lazy boys.
Thank you this does flow.
Well.
So I guess first for me and maybe can we just get a quick update with the extended backlogs on any changes and cancellation rates I believe and we talked last time on the last quarter you guys have noticed any really material changes.
But there was expectations for a little bit better capacity coming online this quarter.
Anything changed and how you're servicing customers and keeping them happy.
Happy with the extended the.
The backlog times.
With the Great question, Bobby and <unk>.
And nothing has materially changed.
The.
Out of the demand, we're getting even though we're producing more furniture.
Every month.
And as keeping the keeping.
Keeping the backlog out of lot farther than we'd like and.
And customers are not thrilled with that but that is the state of the industry. So it's not just the lazy boy problem, it's for everybody and.
The demand is still high the starting off of.
And January.
Our demand has been.
Surprisingly strong to what we would've anticipated so.
And let me make a comment about.
All of the little hiccups, we've had.
And with parts.
People and <unk>.
Covid whatever you want.
Individually.
<unk>.
And one of them is not that significant and could be overcome but when you get them come and ask you for six from six or seven different directions. The magnitude of it adds up so.
We.
And I forget what the number was but we could have produced.
Yes.
I don't want to say significantly, but I think of the number was around 30.
And $30 million more of the business, if we hadn't had the disruptions with.
Parts, and foams and freight and.
And things coming in on time, and then make.
And make the corollary, if you want to the car industry without the chips they can't.
And they have the capacity and make a lot of cars, but without the component parts. They have the stall and we ran into that so.
We will continue to hire we will continue to get more capacity, but we don't know what pickup may come at us and the future and so we're just.
We're just cautious on what we are projecting going forward.
Okay. That's helpful and good news that the cancellation rates are and are materially changed if we look at the <unk> sales guidance versus the prior commentary around those elements and a little bit low or is that just a function of the challenges and the supply chain just continuing longer than your original expectations and if.
So would you expect kind of make that up that difference up and basically the first quarter. Just as you know the the improvements had been shifted out further and the future basically.
That's exactly right Bobby we will continue to increase raw production capacity.
And we've been doing it month to month here since basically since we opened up again back of it.
The beginning of May and that March will continue on through the end of this coming summer even.
But at any given time.
Kurt said with a variety of of input challenges that we're managing through it just keeps holding us back from getting to that Max number on any given month that said the underlying the underlying capacity continues to increase that the only thing I might clarify a bit is the catch up factor.
And is a challenge because we are every day is setup to Max out everything we can possibly make so if you lose the couple of days because of yeah.
I saw on ice and snow all over the majority of the United States.
You don't you can't just run and extra Saturday or run and evening shift to make that up and in near term because those extra shifts were already planned to continue to work against the existing backlog.
Understood. Okay. That's very helpful and I guess lastly for me just kind of a two part question on the written business. So if we look at the trends for the 350 ish.
You know network galleries, and LIBOR and network galleries was there just some was there some weird ebbs and flows during the quarter because even on the on a two year stacked basis. It does look like it slowed.
A good bit, but then reaccelerate it and in January was there just some timing on industry or kind of customers coming in or any weather or anything like that and then the second part of my question is when you look outside your lazy boy distribution hour of the written trends for the non lazy boy side of of your net of your distribution network.
Yeah.
Yeah, I would say similar to what we heard around most of the industry.
November and December.
<unk> to slow again.
We're at and the.
And industry that generally grows 2% to 3% or 18% year to date written same store sales.
But November and December I think most of our industry saw some slowing still growth right, but those rates slowed by the time, we got to January and we're back up and the.
No near double digit kind of numbers across virtually all of the businesses. So we don't we don't track written and the same way.
On the businesses that we don't sell direct to consumer.
Due for our for our furniture galleries, but really we continue to see that growth coming in across all of the businesses and that's why you see even with making more furniture each quarter, we still had our backlog grow from Q2, the Q3 by like over 25%.
And so that demand continues to build and that is not all of furniture gallery demand. Another another fact, Bobby the kind of.
Gauge, how we're doing the numbers that we've seen so.
We told you today that are the same store sales for calendar <unk>.
<unk> were up 6% and I think the latest industry numbers. We've seen was the industry was down 1% for for the calendar year, So and remember all of those numbers are.
And sometimes a month for longer.
The stores being shutdown and so.
We are.
I think I think we gained some share of last year and if we.
We don't have it.
Who knew.
Supply and Covid problems I think we have the opportunity again this year.
Understood understood well. Thank you again for taking my questions and Kurt and and Melinda and Bob Congrats again on on on the announcements and Kurt your accomplishments. During your tenure, it's been fun to watch.
Thanks, Bobby Thanks, Bobby.
Your next question is coming from Anthony <unk>. Please announce your affiliation and pose your question.
Yes, good morning.
The <unk> from Sidoti and company and thank you for taking the questions.
And congratulations Melinda and Bob on your promotions and the Kurt the congratulations on the sort of pending retirement and it is certainly it's been the pleasure working for you and this certainly looking forward to working with you Melinda and Bob.
So first I just wanted to follow up as far as the January Reacceleration and.
The store sales certainly encouraging to see.
Is this.
Would you say this is partly maybe attributable to the stimulus checks. The that went out of our as you think there's other factors at play here and if you could maybe comment on the and what you saw over Presidents' day weekend.
Well I can't give you an exact.
Data on what caused the uptick.
Was it.
Vaccine and started to be given to people and they felt more comfortable shopping was was it.
Mild January the people out.
On the stimulus checks probably had some.
The impact although I don't.
Not sure of how what proportion of our customers will receive the stimulus checks, but all of those things all of them.
Those things.
Figure into the the momentum and.
And the.
President's weekend was heading and it really and the strong direction.
Until the snow came on Monday and.
And kind of put a damper on Monday, which is the biggest day of the weekend. So.
On that.
That was not helpful, but it did show that and.
On the Friday Saturday Sunday, leading up to what the demand was still strong the customer was out shopping and and.
And we were pleased with what we saw but the biggest day is.
As Monday, and we certainly did achieve last years numbers.
Got it okay. Thanks for that.
Troll of the weather for sure.
As far as Joy bird of just wondering if theres any of you feel there's room for additional synergy of movements and you talked about gross margin of improvements. So just wondering how we should think about the space.
So the the sustainability of the.
Joy Behar the profitability improvements.
Yeah. So.
I'll take that and two pieces of it certainly the gross margin improvement.
We've been working for a long time on on.
A lot of individual pieces that are all really coming together and our plan is that that gross margin improvement should stay very sustainable going forward.
Of course, obviously subject like any business now right to ongoing increases in input costs and ability to price against that.
Relative to the the true bottom line, though on operating margin. What we've always said is that we will we will test what does the return looks like on investments and marketing to really grow that business and our goal on joy bright isn't necessarily to.
And maximize margin right now, but to get a prudent margin and grow that business and that's why we were so pleased this quarter.
And being able to leverage that gross margin and leverage great returns on our marketing investment to still deliver of prop profitable quarter.
But also deliver a 79% written sales growth for the quarter compared to last year. So I think for I think we're figuring out of that model.
Got it okay.
Great and then last question from me here, so as far as the record high cash balance.
And what would you say would be the top priorities for for usage of the cash.
Going forward here.
Certainly.
And certainly a healthy chunk of our focus well I'll start by saying, we will continue to be conservative because of this pandemic thing isn't over yet.
And that's always been our nature, but no doubt we are building a really.
Significant.
Chest.
And with that it provides us an opportunity to look at investments and our business and we're already starting to do that recall at the beginning of the year, we basically stopped all capital investment until we knew what was going to happen with the business. So as we turn that valve back on.
Obviously, we're investing and our new locations and additional capacity.
And Mexico, and a craft or our production network.
And have turned back on the remodel of our knee other shell our second largest facility.
And that we had temporarily pause there we are investing in our retail stores and an increased pace both in remodeling to represent the the.
On the fashion of our brand.
But also the technological capabilities to help both are our employees, but also the consumer experience when they are and our stores and.
And technology upgrades for our own company and Corporately to increase our efficiencies and capability. So I think you'll continue to see us doing more of that and really.
Leveraging the benefit of of the increased sales that we've been able to experience with the pandemic.
And that then of course, we increased our dividend this quarter.
And which shows the board support of this as well and we did as you know turn on our share repurchase back in December it didn't get a lot by because we turned it on and the middle of the of the quarter, but and <unk>.
Back in the market on share repurchase as well.
Got it okay. Thank you very much and best of luck.
Thank you thanks Anthony.
Your next question is coming from Brad Thomas Please announce your affiliation and pose your question.
Hi, Good morning, it's Brad Thomas with Keybanc capital markets and first of all Kurtz congratulations to you on.
On a tremendous career and all of your leadership.
Leadership of Lazy boy, and Melinda and Bob Congratulations to you both on your promotions on.
Very well through the route.
And so we wanted to.
And follow up on the J D.
The comments and <unk>.
I'm wondering.
Wonder if you could give us a little bit more color on how you think about what the right growth rate should be for joy for going forward I still think of it as being a young business with a tremendous amount of opportunity.
Both both in terms of its online opportunity as well as its opportunity to start getting its own stores.
And how do you think about what the rate of growth rate is for this business and and what are the plans to add stores as the world starts to get a bit more normal here and the future.
So Brad I think.
Obviously, one of our interest and Joy bird when we when we bought them was we felt it was a business that could grow faster than our core and we still believe that.
And.
We don't we don't know and any of the businesses were in deep and Joy Bird what is the Covid factor right now for volume and how long is that going to stay.
So some of that is and these these calculations, but I think <unk> got a great trajectory.
And I think it.
It's got the.
A new a new website and it's been up for a few months the connection to the customers.
Very pleased with the 79% same store quarter and.
So you know.
We bought the business when it was around $40 million, we will do and excess I believe of of 100 million this year and.
And it's.
It's a profitable business, which was one of our goals, but as Melinda just said earlier and we're going to balance of the fact between.
Reinvesting and the marketing to grow and being sure that does have a reasonable return and it may not have the same return of the all of our other businesses, but if it has double the growth we would accept that.
So we think we think theres a lot of growth to give you the number now it would be.
The guessing on on our point, but.
It will grow faster than the the.
The based on enterprise and.
I think youll see a great acceleration here in the future.
That's helpful. Thank you on.
And the next topic I wanted to talk about a bit is from what.
And what Youre seeing on the raw material from you know this is the question that comes up a lot with investors about how much risk there is off and the economy from inflation and you talk a little bit about what youre seeing.
From a raw materials standpoint, what youre passing through at this point any more color on the degree of price increases the ear.
And passing through and how youre thinking about that debt Oh.
The handler.
Yeah.
Melinda and handle that but I didn't I failed to mentioned we are going to continue to open stores and stores enjoy bird to we've we've got a couple of we're just making a final decision on here near term.
I don't believe they will ever have of 100 stores and all but they will have stores and the key markets where there already.
On the online business and so we truly have that omni experience and the stores to date.
And in most cases of exceeded our expectations. So getting joined word more stores as part of the growth strategy and whether.
And you can talk about the raw material challenge sure. So.
Obviously, given demand, we're seeing pressure on raw material input cost and honestly all supply chain costs, including freight pretty much across the board back in October we announced pricing.
And and that of course was only on new written orders and so it's going to be we're in the fourth quarter before those written orders are starting to become delivered orders and we're starting to see the benefit of that even though the cost pressures are already there.
We are evaluating continued to evaluate if you look kind of around the industry and youll see that another round of price increases starting to show up and a lot of a lot of the industry and in general our industry Youll see these b to your to your point on order of magnitude Youll see them in the.
And a low to middle single digits over the last year I think it was probably the right kind of planning number.
And so the good news about our industry is that it has always been pretty resilient to the pricing when there are real input cost of pass through.
On freight.
As I said is and is another one that you have to continuously evaluate but we have been able to generally pass that through and the past and.
And we're trying to be fair with our customers, it's a little painful and we've got this long backlog of two only price on new written orders and not on existing backlog, but we also are striving to be very good partners with our customers and these challenging times and not essentially pinch them by by increasing.
Prices on orders they've already written.
And to their to their customers.
So it is fluid and death.
There is.
Cost headwinds and <unk> and we continue thus far to be able to experience.
Pretty positive ability to price there is no doubt at some point that might that have some impact on.
And the consumer demand.
And that could be the case, we certainly have not seen that thus far.
Very helpful. If I could just squeeze one more in for you.
For the fourth quarter and the guidance implies that you would do about I believe about $20 million to $40 million more on revenue and your April quarter. Then you just reported and your January quarter.
And obviously.
This implies that you'll be getting productivity.
Expanding during the quarter to meet the.
And those levels.
I presume, it's fair to say that that you guys are ramping up and feeling like youre seeing that productivity and that run rate.
And prove at this point.
We are making progress every single month, and our ability to make furniture since since the monthly opened up back in May and we expect that progress to continue all the way through the.
Back end of the summer.
But you know again, what we found this quarter and what we expect.
Lanning for at this point is that they will continue to be challenges and either.
This past week, it's been weather right and that is shut down either of the ability for our employees to get some plants or for our suppliers employees to get the plants or for trucks of suppliers to get the plants.
And you know the.
And certainly the holidays is curt's comments I alluded to in his comments of the holidays were really tough for keeping employees safe and folks having to self report and stay out of work for a while.
We've had challenges and are.
The shipping lanes to get.
The finished goods products and some of our international businesses the case good products and.
Cereals in.
For for our component materials and for our part so it just seems like the world stage right now is right with a lot of challenges and so.
And what we can control is continuing to make that pipe the bigger on the number of units we can make each month.
And plan to be as agile as possible, but yes, no doubt your opening comment is right. We do intend to be able to make more furniture each month and we did the last month and that has that has been true thus far.
Another input for you, Brad and what Youre kind of look at the fourth quarter has calendar wise more production days and the third quarter, because you have the holidays and the third quarter and.
So typically we have more production days, although we lost a couple of yesterday and.
Monday.
The snow the.
The impact on the southern part of the country and with the.
Freezing and the snow and the power outage and everything.
And that's where we have most of that.
Where we have all of our domestic plants.
That's the suspended things for a few days, but.
And when the magnitude of the quarter, we kind of took that into consideration, but there is.
And we Jacob.
Take.
Good Friday off and we take Thanksgiving off and we take the week between Christmas and new years off and other than the other than good Friday and Theres no holiday dates on our plants arent working so that's a net of factor as well.
Very helpful. Thank you both so much.
Thank you.
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