Q4 2020 Haverty Furniture Companies Inc Earnings Call
[music].
Good day, everyone and thank you for standing by and welcome to today's Haverty furniture companies and Inc. Fourth quarter and full year 'twenty and 'twenty financial results. Today's conference is being recorded and at this time I'd like to turn the floor over to Richard Hare CFO.
Thank you operator during this conference call, we will make forward looking statements, which are subject to risks and uncertainties.
Actual results may differ materially from those made or implied in such statements, which speak only as of the day. They are made and which we undertake no obligation to publicly update or revise the.
Factors that could cause actual results to differ include economic and competitive conditions and.
And the other uncertainties detailed and the companies reports filed with the SEC.
Our president and CEO and Chairman and Clarence Smith will now give you an update on our results and provide commentary about our business.
And.
Good morning.
Thank you for joining us to 'twenty and 'twenty fourth quarter and full year conference call.
'twenty and 'twenty was of disruptive and wild year for haverty, as our industry and our communities.
And for the closing their stores and the mid March and reopening most of them may one we came back and exceptionally strong and fault to complete deliveries and reduce our record backlog of undelivered sales.
For the second half, we were very lucky and especially blessed to be part of the whole body of economy, where the entire country focused on making the home safer and more comfortable to run through the pandemic.
We broke Q for records with sales of 241 $3 million up 12, 9% and earnings per share of $1 37 versus <unk> 31 cents from 2019.
Several terms come to the forefront.
Higher gross margins due to better pricing discipline fewer promotions and lower markdowns and more special orders and overall trends that we expect to continue.
Lower SG&A of 44, 3% of sales compared to 58 per cent last year with shorter store hours and reduced staff.
Our largest market produced at record levels and we're a major profit contributors.
Internet sales for our highest producing store it for 3% of sales since reopening.
Buy online pickup and store is running at 16% of triple over the past years, which along with significant share increases or new growth and service factors.
Written sales continued to grow faster than on delivered sales with double digit gains.
Undelivered sales backlogs are at record levels due to the suppliers experiencing across the board shortages of materials labor and import containers.
We're very excited about next week's opening of our first store and Myrtle Beach, South Carolina, a market that we've served from surrounding locations, but did not have a physical presence.
And we're opening a store and central Florida, and the villages mid year, and our planning of the additional store and an existing market and the fourth quarter.
We expect to have one store closing and end the year with 122 stores.
We're studying all of our major markets closely to make sure that we're that we're well positioned for growth and the future.
With our strong store position and brand recognition throughout our regions and over half of our stores and Florida, Texas, and Georgia, we are well located and the fastest growing markets and the country.
2021 should be the year for finally reach and exceed our long term productivity goal of sales over $200 per square foot.
For the first time since we began tracking and we've seen consistent sales periods, where we had increases in all three key performance metrics average ticket closing rate and traffic count.
We continue to have very strong increases and our written sales, even while struggling to bring and product to compete complete deliveries.
We believe and staying in front of the supply channel challenges that are playing a part and the inevitable disruption of our industry. The there.
His experience the industry has experienced from across the board.
All of our teams have a very high priority of working closely with all of our suppliers and shippers to expedite deliveries.
We will believe we believe we will come out much stronger and this disruption and.
And with improved service levels over our competitors.
We recognize the importance of the top tier website and are planning significant investments in the coming year to make our site and industry leader.
And we're determined to make it as easy as possible for our customers interact with us any way she wants and we know that our website is upfront bore and we're dedicated to making everything about average dot com the best and the industry.
We believe that one of haverty as major strength as a fully integrated unified operating system.
Which allows our customers and our team members to have better visibility and quicker response on product availability and delivery times and service levels.
We realize the high importance of fast response, and full visibility and are passionate about keeping <unk> at the highest standards.
2020 was wild and extraordinary year.
I am very proud of all of the average team members and the dedication to serve our customers during this pandemic.
I believe we have the best operating teams and the industry.
We have set of standards and operating disciplines that will contribute to higher performance and the years ahead and strengthened <unk> premier position and serving our regions home furnishings needs.
I'll turn it back over to Richard.
Thank you Clarence.
And good morning.
And the fourth quarter of 2020 delivered sales for $241 3 million and 12, 9% increase over the prior year quarter.
Comparable store sales were up 13, 7%.
Total written sales for the fourth quarter of 2020 were up 16, 7% and read the comparable store sales were up 17, 5% over the prior year period.
Our gross profit margin increased 280 basis points from 54, 2% to 57% due to better merchandising mix and less promotional activity.
Selling general and administrative expenses decreased $1 6 million of one, 5% and $107 million and fell to 44 three percentage of sales from 58%.
This was due to reduced advertising and occupancy costs, which were partially offset by increased selling and incentive expenses.
Other income and the fourth quarter of 2020 was $600000 and it included the gain on the sale of surplus property during the quarter.
We recorded net interest income of $61000 and the fourth quarter of 2020 versus interest income of $307 and the fourth quarter of last year.
Income before income taxes, and increased $23 $7 million, the $31 3 million.
Our tax expense was $5 million during the fourth quarter of 2020, which resulted in an effective tax rate of 18, 7%.
The effective rate benefited from the recognition of $1 $5 million of certain state job creation tax credits.
Net income for the fourth quarter of 2020 was.
It was $25 4 billion of.
The $1 $31 37 per diluted share on our common stock compared to net income of $6 1 million or <unk> 31 per share and a comparable quarter last year.
Now turning over to our balance sheet at the end of the fourth quarter, our inventories were $89 $9 million, which was down $14 9 million.
From the December 31, 2019 balance and down $1 million versus the Q3 2020 balance.
And at the end of the fourth quarter, our customer deposits were $86 2 million, which was up $56 1 million from the December 31 of 2019 balance and down $2 2 million versus the Q3 2020 pounds.
We ended the quarter with $200 million of cash and cash equivalents.
We have no funded debt on our balance sheet at the end of Q4 2020.
Looking at some of the uses of our cash flow capital expenditures were $3 7 million for Q4, 'twenty and 'twenty and 10 $9 million for the full year.
We also paid $40 million of dividends during the fourth quarter of 2020 $36 million on the special $2, a share dividend and $4 million on a regularly quarter dividend.
During the fourth quarter, we did not purchase any common shares and our buyback program.
For the year, we purchase of total of 19 million of $19 $7 million.
Our 1 billion and 33165 shares.
We have $16 8 million remaining dollars' worth remaining under our current authorization and our buyback program.
For the calendar year 2020, we've returned approximately $70 million to our shareholders for.
$14 million, and quarterly dividends and $36 million and a special dividend and approximately $20 million and share repurchases.
Our earnings release list out several additional forward looking statements, indicating our future expectations of certain financial metrics I'll highlight a few but please refer to our press release for additional commentary we expect our gross margin for 2021 to be between 55, 3% and 55, 8% we anticipate.
Gross profit margins will be impacted by our current estimate of product and freight costs and changes and our LIFO reserve.
Our fixed and discretionary type SG&A expenses for 2021 are expected to be and the 261% to $263 million range. The slight increase over the 2019 level of $260 million.
The variable type costs within SG&A for 2021 are expected to be in the range of $18 two to 18, 4% based on potential increases and selling and delivery costs.
Our planned capital expenditures for 2021.
Is approximately $23 million.
Anticipated, new or replacement stores, Remodels and expansions total $12 $9 million.
Investments and our distribution network are expected to be $6 4 million and investments and our information technology are expected to be approximately $3 7 million.
Our in anticipated effective tax rate for 2021 is expected to be 24%.
This projection excludes the impact from vesting of stock awards, and any potential new tax legislation.
This completes our commentary on the fourth quarter financial results. We appreciate your participation in today's call operator, we would like to open the call up for questions at this time.
Thank you, Sir and ladies and gentlemen for any questions. Please signal by pressing star one on your telephone keypad and you just make sure and have your mute function and turned off so we can receive that signal.
And Thats star one for any questions at this time.
Alright, and it looks like the first step from Sidoti and company, we have Anthony <unk>.
Good morning, and thank you for taking the questions. So firstly I just wanted to look.
And go back for the fourth quarter and so if you could give us a sense as to how the quarter progressed and tons of Europe same store sales.
And now.
The consistent throughout the quarter or was there any one particular month of net saw that.
The sales growth and the others just curious for as far as part of how that.
Progressed.
Sure. Anthony This is Richard so just in terms of the cadence and the fourth quarter in terms of delivered sales.
We were up.
And the and the plus 20% range in October we were actually down mid single digits in November and then up and the.
The plus 20% range and December so that was kind of the cadence of of the delivered sales and the quarter.
Got it okay, and thanks for that color and Richard and then.
In terms of the traffic versus ticket and then and just curious also about the custom order penetration and what are you guys are now.
While our average ticket continues to go up we're doing a little more special order and more custom and I think that will continue to be a big driver as we are able to get more decorators and people's homes.
And also I think when you're selling a more custom product and and.
And just doing a better job of better quality true.
<unk> has been up which is something as you know over the last several years.
It's been a challenge so we're very pleased to see that and our closing rate has been up consistently.
All of the all during this pandemic because I think anybody coming into the store is more.
Focused on buying and not shopping or they've already done the free shopping so all three of them continuing to be consistent and I think we'll see that trend continue probably for this year.
Okay, Great. That's the extra day here and then some of the supply chain constraints and the real.
You talked about the mattress sales a little bit of over.
And while I mean.
And you could call. It maybe you can just kind of go over as far as and which product categories are you seeing the most issues with inventory availability.
Well I mean, we're having we're having challenges both on domestic upholstery.
Primarily due to labor and supplies, but also just as far as important the containers are a huge issue and you know about that I do think that we're now, though and a little better condition with our best sellers and we've been flow on those and and frankly spending some premiums to get that so I think were and better.
Position on our best selling product now than we were let's just say several months ago. I think we are in the best inventory position since last summer.
And I hope that that will improve in the coming months I mean, Chinese new year's here.
We've got a number a good number of containers out, but we still have a backlog and that's the highest we've had and our history. So we've got challenges I think we're doing a good job.
Very happy with our relationships with our vendors and our suppliers and we're paying a premium to get the product to make sure we can sort of our customers.
Yeah.
Got it Okay and then the last a couple of questions from the and so.
And as far as many of you said and just say that you're paying the premiums.
And to get those products delivered and do you think you'll be able to.
I'll start out with higher prices at retail to offset the north of the cost of that and then and then last question as far as the backlog if you could quantify that that'd be great.
Well, we are increasing prices.
And we recognize that.
We're going to be have to we have to recover that.
Freight we think will come back down later in the year, So as Richard pointed out and we're looking at a little bit lower margins because some of that's going to hit us now and this quarter and the second quarter, we think it'll start to.
Alleviate and the back half of the year, maybe sooner so yes, we're going to try to.
Gain those price increases and unfortunately on some of our products. Some we can't.
We know that we've got to recover of that for.
For our investors.
Got it Okay, and then and then.
As far as the backlog is the way you guys can quantify maybe I missed the if you say I know its the record high but did you give a dollar amount for the backlog.
It's a record high we have not given that number out, but it's several multiples higher than last year.
Got it okay well. Thank you for the best of luck.
Okay. Thanks, and then at the bank of the anthem.
And next cash.
And I'll come from Brad Thomas from Keybanc capital markets.
Hi, Good morning, Clarence Good morning, Richard and.
Congrats on strong execution and in our.
And the challenging year and all of them on the incremental Goldman and Cerro Moro.
Thank you.
I wanted to add.
All of it more of that.
Working through the strong backlog and.
How long do you think at this point it may take for the supply chain to catch up with the demand that you've been seeing and that's something and then we should expect to continue through the.
The acute care as well.
Well it will go through the summer I mean, we are already of placing orders that we know that we won't get until summer.
And Chinese new year, we still have product over there that we didn't get out and.
And.
And that's gonna be a challenge.
And as you've seen for the rest of the industry.
And I think that by the fall this should be settling down Budd.
And though the industry has a huge backlog and.
I think we've got a relationship and as I mentioned, we are willing to pay to get the product, where it's necessary, but it's going to carryover of through the summer I would think of.
And in.
And just I know you're not yet.
Given the sales guidance and if we look at the last two quarters, you've delivered over 200 million and this past quarter over $240 million.
Net sales.
Given the backlog that we're working with.
Is it reasonable for us to think we can book backlog and and.
And potentially generate over 200 million and sales. These next couple of quarters.
For the written demand hold them.
But I know youre, not asking you to kind of sales.
Exactly.
Richard and I'll, let you are and how that would just say that we are of a strong backlog, which bodes well for 'twenty and 'twenty one and.
And we're fighting through the supply chain issues.
Like everybody else, but I think were and are.
Compared to some of our other peers I think we're in a good spot in terms of how the panel of the supply chain.
Okay.
Fair enough.
And as we think about some of the gross margin puts and takes and I. Appreciate the guidance you get to the guide that you commented that about time and she's like freight and.
Can you help the thinking about the magnitude and maybe how much headwind and basis points and maybe looking at and you consider freight and.
And.
Perhaps promotions at some time returning to normal.
Yeah I'd say.
And we came in at.
56% for the.
For the total year margins were up to 57 and the fourth quarter, you got the freight headwinds going into 2021, and you've seen the and all of the.
The trade the <unk>.
And all the reports about how expensive freight is now we have contracted freight rates due to volume or having to take additional shipments and those rates or significantly higher than what our contract rates are.
So we factored that into our $55 3 million to 55, 8% guidance for for 2021 and <unk> and.
In addition of those freight issues, but the margins you've also got to factor and LIFO and just as the point of reference back in.
Back in 2019, when we had price pressure on costs due to the tariffs our LIFO hit.
The LIFO reserve changed $1 $8 million and it was the only about a third of that in 2020, So you've got a factor and potential of LIFO hits on that margin and.
And 2021, so I think as we as we progress through the year.
I hope to have that guidance tightened up a bit but right now.
And that's the best we can forecast.
Okay great.
And then just circling back on some of that coming from the mattress category.
And the inventory challenge of their.
What categories of debt and specifically and and.
And what line of sight, you have on that area improving for you.
Well, our mattress business has been challenged with just capacity and supplies.
The improved recently and.
We commented on that.
The steel was an issue and I think there is still a drag there, but it has improved over what it was last quarter.
So we feel that we feel better about it.
It's improving but it is still a challenge to get the <unk>.
Product and the right mix of the right time.
And if I could squeeze one more and just with the topic dominating the news here the of the weather.
And really unusual times.
Can you give us any comments on kind of effects presents much of the risk.
Round.
The President's day weekend in and around the Liberals.
Yes, it hit us pretty hard.
We were down about the third of our stores of 30% of our stores for at least for days.
And they are still down.
And the same thing goes with the deliveries of our deliberate deliveries and we weren't able to get out of about 30%.
Very heavily impacted as you know and Texas and still are we probably can't get open and many of those stores. This weekend.
And it did hit over the most important event of the <unk>.
<unk>, which is the president's weekend, so that hasnt impacted us.
It still impacts us we're struggling.
A lot of our own stores, but were concerned about and our associates. Our team members of the houses they don't have water they don't have heat.
Same thing applies for our customers.
And this next storms coming through now and will hit us and the east.
And the Virginia D. C area. So we are impacted now it's wintertime and happens it's rather the happens like this over the holiday weekend, but.
We mentioned and our comments that.
The written business is up double digit and that includes where we are today. So there is a drag there is an impact where concern, but we feel pretty good about where our businesses.
That's helpful. Thank you so much clients. Thanks Richard.
Okay. Thank you, Brian and thanks for the added.
Yeah.
And ladies and gentlemen, with no further questions remaining in the queue I'd like to turn the floor back to Mr. Richard Haire for any additional or closing remarks.
Well. Thank you for your participation in today's call. We look forward to talking to you and the future of when we release, our first quarter results.
Alright, and ladies and gentlemen, and that will conclude our call for today. We do appreciate you joining US you may now disconnect.
Okay.
And.
[music].
[music].
Good day, everyone and thank you for standing by and welcome to today's Haverty furniture companies and Inc. Fourth quarter and full year 'twenty and 'twenty financial results. Today's conference is being recorded and at this time I'd like to turn the floor over to Richard Hare CFO.
Thank you operator during this conference call, we will make forward looking statements, which are subject to risks and uncertainties.
Actual results may differ materially from those made or implied in such statements, which speak only as of the day. They are made and which we undertake no obligation to publicly update or revise.
Factors that could cause actual results to differ include economic and competitive conditions and.
And the other uncertainties detailed and the companies reports filed with the SEC.
Our president and CEO and Chairman and Clarence Smith will now give you an update on our results and provide commentary about our business.
Good morning.
Thank you for joining us 2024th quarter and full year conference call.
2020 was of disruptive and wild year for haverty, our industry and our communities.
And after closing of our stores in the March and reopening and most of them may one and paid back exceptionally strong and fall to complete deliveries and reduce our record backlog of undelivered sales.
For the second half, we were very lucky and especially blessed to be part of the whole value of economy, where the entire country focused on making their homes safer and more comfortable to run through the cash.
Vivek.
We broke Q for records with sales of 241 $3 million up 12, 9% and earnings per share of $1 37 versus <unk> 31 and 2019.
Several terms come to the forefront.
Higher gross margins due to better pricing discipline fewer promotions and lower markdowns and more special orders and an overall trend that we expect to continue.
Lower SG&A of 44, 3% of <unk>.
Sales compared to 58% last year with shoulder store hours and reduced staff.
Our largest market produced at record levels and we are a major profit contributors.
Internet sales were our highest producing store it for 3% of sales since reopening.
Buy online pickup and store is running at 16% of triple over the past years, which along with significant share increases of our new growth and service factors.
Britain sales continued to grow faster than our delivered sales with double digit guidance.
Undelivered sales backlogs are at record levels due to the suppliers experiencing across the board shortages of materials labor and and for containers.
We're very excited about next week's opening of our first store and Myrtle Beach, South Carolina, a market that we've served from surrounding locations, but did not have a physical presence.
We're opening a store and central Florida, and the villages mid year, and our planning and additional store and in an existing market and the fourth quarter.
We expect to have one store closing and end of the year with the 122 stores.
We're studying all of our major markets closely to make sure that we're aware that we are well positioned for growth and the future.
With our strong store position and brand recognition throughout our regions and over half of our stores and Florida, Texas, and Georgia, we are well located and the fastest growing markets and the country.
2021 should be the year to finally reach and exceed our long term productivity goal of sales over $200 per square foot.
For the first time since we began tracking and we've seen consistent sales periods, where we had increases in all three key performance metrics average ticket closing rate and traffic count.
We continue to have very strong increases and our written sales, even while struggling to bring and product to compete complete deliveries.
We believe and staying in front of the supply channel. The challenges that are playing a part and the inevitable disruption of our industry that has experienced the industry is experiencing across the board.
All of our teams have a very high priority of working closely with all of our suppliers and shippers to expedite deliveries.
We will believe we believe we will come out much stronger and this disruption and.
And with improved service levels over our competitors.
We recognize the importance of the top tier web site and are planning significant investments in the coming year to make our site and industry leader.
And we're determined to make the news easiest possible for our customers to interact with us.
She wants and we know that our website is upfront bore and we're dedicated to making everything about average dot com and the best in the industry.
We believe and one of <unk> major strength is our fully integrated unified operating system.
And which allows our customers and our team members to have better visibility and quicker response on product availability and delivery times and service levels.
We realize the high importance of fast response, and full visibility and our passion about keeping <unk> at the highest standards.
2020 was wild and extraordinary year.
I am very proud of all of the <unk> team members and the dedication to serve our customers during this pandemic.
I believe we have the best operating teams and the industry we.
We have set standards and operating disciplines that will contribute to higher performance and the years ahead and.
Strength in <unk> premier position and serving our regions home furnishings needs.
And I'll turn it back over to Richard.
Thank you Clarence and.
And good morning.
And the fourth quarter of 2020 delivered sales for 241 3 million and 12, 9% increase over the prior year quarter comparable store sales were up 13, 7%.
Total written sales for the fourth quarter of 2020 were up 16, 7% and rig the comparable store sales were up 17, 5% over the prior year period.
The gross profit margin increased 280 basis points from 54, 2% to 57% due to better merchandising mix and less promotional activity.
Selling general and administrative expenses decreased $1 6 million of one 5% and $107 million and failed of 44 three percentage of sales from 58%.
This was due to reduced advertising and occupancy costs, which were partially offset by increased selling and incentive expenses.
Other income and the fourth quarter of 2020 was $600000 and it included the gain on the sale of surplus property during the quarter.
We recorded net interest income of $61000 and the fourth quarter of 2020 versus interest income of $370000 and the fourth quarter of last year.
Income before income taxes, and increased $23 $7 million for $31 3 billion.
Our tax expense was $5 million during the fourth quarter of 2020, which resulted in an effective tax rate of 18, 7%.
The effective rate benefited from the recognition of $1 $5 million of certain state job creation tax credits net.
Net income for the fourth quarter of 2020.
And was $25 4 million of.
And $1 $31 37 per diluted share on our common stock compared to net income of $6 1 million or <unk> 31 per share and a comparable quarter last year.
Now turning over to our balance sheet at the end of the fourth quarter, our inventories were $89 9 million, which was down $14 9 billion for.
From the December 31, 2019 balance and down $1 million versus the Q3 2020 balance.
At the end of the fourth quarter, our customer deposits were $86 2 million, which was up $56 1 million from the December 31, 2019 balance and down $2 2 million versus the Q3 2020 pounds.
We ended the quarter with $200 million of cash and cash equivalents.
We have no funded debt on our balance sheet at the end of Q4 2020.
Looking at some of the uses of our cash flow capital expenditures were $3 7 million for Q4, 2020, and $10 9 million for the full year.
We also paid $40 million of dividends during the fourth quarter of 2020 $36 million on the special $2, a share dividend and $4 million on a regularly quarter dividend.
During the fourth quarter, we did not purchase any common shares and our buyback program.
For the year, we purchase of total of $19 million of $19 7 million.
Or $1 33165 shares we have $16 8 million remaining of $1 worth remaining under our current authorization and our buyback program.
For the calendar year 2020, we've returned approximately $70 million for our shareholders for.
$14 million of quarterly dividends, and 36 million and the special dividend and approximately $20 million and share repurchases.
Our earnings release list out several additional forward looking statements, indicating our future expectations of certain financial metrics.
Highlights of few but please refer to our press release for additional commentary.
We expect our gross margin for 2021 to be between 55, 3% and 55, 8%. We anticipate gross profit margins will be impacted by our current estimate of product and freight costs and changes and our LIFO reserve.
Our fixed and discretionary type of SG&A expenses for 2021 are expected to be and the $261 million to $263 million range of slight increase over the 2019 level of $260 million.
The variable type costs within SG&A for 2021 are expected to be in the range of 18, 2% to 18, 4% based on potential increases and selling and delivery costs.
Our planned capital expenditures for 2021, this is approximately $23 million and <unk>.
Dissipated, new or replacement stores, Remodels and expansions totaled $12 9 million.
Investments and our distribution network are expected the $6 4 million and investments and our information technology are expected to be approximately $3 $7 million.
Our in anticipated effective tax rate for 2021 is expected to be 24%.
This projection excludes the impact from vesting of stock awards, and any potential new tax legislation.
This completes our commentary on the fourth quarter financial results. We appreciate your participation in today's call operator, we would like to open the call up for questions at this time.
Thank you, Sir and ladies and gentlemen for any questions. Please signal by pressing star one on your telephone keypad. If you just make sure to of your mute function and turned off so we can receive that signal.
And Thats star one for any questions for this time.
Alright, and it looks like the first step from Sidoti and company, we have Anthony lead and zinc ski.
Good morning, and thank you for taking the questions. So firstly I just wanted to add.
And go back for the fourth quarter and so if you could give us a sense as to how the quarter progressed and tons of Europe.
Same store sales.
And what are the consistent throughout the quarter or is there do you want the people a month of net so all of that.
<unk> sales growth and the others.
And just curious for asphalt.
And progressed.
Sure. Anthony This is Richard so just in terms of the cadence and the fourth quarter in terms of delivered sales.
We're up.
And the and the plus 20% range in October we were actually down.
Mid single digits in November and then up and the.
Plus 20% range and December so that was kind of the cadence of of the delivered sales and the quarter.
Got it okay and thanks for the color of Richard and then.
In terms of the <unk>.
Traffic versus ticket and then just curious also about the custom order penetration and where you guys are now.
While our average ticket continues to go up we're doing a little more special order and more custom and I think that will continue to be a big driver as we are able to get more decorators and people's homes.
And also I think we're just selling a more custom product and.
Just doing a better job of better quality traffic has been up which is something as you know over the last several years.
Has been a challenge so we're very pleased to see that and our closing rate has been up consistently.
All of the all during this pandemic because of hurting anybody coming into the store is more.
Focused on buying and not shopping or they've already done the free shopping so all three of them continuing to be consistent and I think we'll see that trend continue probably for this year.
Okay great.
Thanks for the here and then in terms of the supply chain constraints and <unk>.
The least you talked about the mattress sales all of a little bit, but overall I mean.
And you could call. It maybe you can just kind of go over as far as some of which product categories are you seeing the most issues with inventory availability.
Well I mean, we're having we're having challenges both on domestic upholstery for them.
Early due to labor and supplies, but also just as far as important the containers are a huge issue and you know about that.
And think that we're now, though and a little better condition with our best sellers and we've been flow and those in and frankly spending some premiums to get that so I think we're and better position on our best selling product now than we were let's just say several months ago I think we're the best inventory position.
Since last summer.
And I hope that that will improve in the coming months and then Chinese new year's here.
Got a number a good number of containers out, but we still have a backlog and that's the highest we've had and our history.
We've got challenges I think we're doing a good job very happy with our relationships with our vendors and our suppliers.
And we're paying a premium to get the product.
And to make sure we can sort of our customers.
Got it Okay and then the last.
All of questions from me and so all of it.
As far as you said and you just said that you're paying the premiums.
And to get those products delivered and do you think you'll be able to.
I'll start out with higher prices at retail to offset the cost of that and then.
And then last question as far as the backlog if you could quantify that that'd be great.
Well, we are increasing prices.
We recognize that we're going to be have to we have to recover that.
Freight we think will come back down later in the year. So as Richard pointed out we're looking at a little bit lower margins because some of that is kind of hit us now and this quarter and the second quarter, we think it will start to the.
Alleviate and the back half of the year, maybe sooner so yes, we're going to try to.
Again, those price increases and unfortunately on some of our products. Some we can't.
We know that we've got to recover of that.
For our investors.
Got it Okay and then.
And as far as the backlog is the way you guys can quantify the maybe I missed the if you'd say I know its the record high but did you give a dollar amount for the backlog.
It's a record high we have not given the that number out, but it's several multiples higher than last year.
Got it okay well. Thank you for the best of luck.
Okay, Thanks, and if the thank you Anthony.
Okay.
And next question will come from Brad Thomas with Keybanc capital markets.
Hi, Good morning, Clarence Good morning, Richard and.
Congrats on strong execution and.
And a challenging year and all of them on the incremental Goldman and Cerro Moro.
Thank you.
Q.
Ask of it more of that.
And working through the strong backlog.
And.
How long do you think at this point it may take for the supply chain to catch up with the demand that you've been saying as a company and we should expect will continue through Q.
For <unk> as well.
Well it will go through the summer I mean, we are already and placing orders that we know that we won't get to summer.
And Chinese new year, we still have product over there that we didn't get out and.
And.
And that's going to be of challenge.
And as you've seen for the rest of the industry.
I think the by the fall this should be settling down.
I know the industry has a huge backlog and.
I think we've got a relationship and as I mentioned, we are willing to pay to get the product where it's necessary.
It's going to carryover of through the summer I would think of.
And in.
And then.
Given the sales guidance and if we look at the last two quarters, you've delivered over 200 million and this past quarter over $240 million.
Of sales.
Given the backlog that we're working with.
Is it reasonable for us to think we can book backlog and and.
And potentially generate over $200 million sales of these next couple of quarters.
For the written demand hold them.
But I know youre, not asking you to kind of sales.
Exactly.
Yes, Richard and I'll, let you and just say that we have a strong backlog, which bodes well for for 2021 and.
And we're fighting through the supply chain issues.
Like everybody else, but I think were and are.
Compared to some of our other peers I think we're in a good spot in terms of how the panel of the supply chain.
Okay.
Fair enough.
And as you think about some of the gross margin puts and takes and I. Appreciate the guidance you're the guy that you commented that back.
And she has like freight can you help me think about the magnitude and maybe how much headwind and basis points and maybe looking at and you consider freight and.
Perhaps promotions at some time returning to normal.
Yes, I would say.
We came in at the.
56% for the.
For the total year margins were up to 57% and the fourth quarter, you got the freight headwinds going into 2021, and you've seen the and all of the the.
The trade the.
<unk> the reports about how expensive freight is now we have contracted freight rates due to volume or having to take additional shipments and those rates or significantly higher than what our contract rates are.
So we factor that into our $55 3 million to 55, 8% guidance for for 2021 and and.
In addition of those freight issues, but the margins you've also got a factor and LIFO and just as the point of reference back in.
Back in 2019, when we had price pressure on costs due to the tariffs our LIFO hit.
For our LIFO reserve changed $1 $8 million and it was the only about a third of that in 2020, So you've got a factor and potential LIFO hit zone that margin and.
In 2021, so I think as we as we progress through the year yields and I hope to have that guidance tightened up a bit but right now.
And that's the best we can forecast.
Okay great.
And then just circling back on some of that coming from the mattress category packed with the debt.
And the inventory challenges there.
What categories of debt and specifically and and.
What line of what you have on that area improving for you.
Well, our mattress business has been challenged with just capacity and supplies.
The improved recently and.
We commented on that.
The steel was an issue I think there is still a drag there, but it has improved over what it was last quarter.
So we feel that we feel better about it.
It is improving but it is still a challenge to get the.
Product and the right mix of the right time.
And if I could squeeze one more and just what's the topic dominating news here of the weather.
The really unusual times.
Can you give us any comments on kind of if that presents much of the risk.
Round that out.
The President's day weekend and around delivery.
Yes.
It's pretty hard.
We were down about a third of our stores of 30% of our stores for at least for days.
And they are still down.
And the same thing goes with the deliveries of our delivery deliveries and we weren't able to get out of about 30%.
Very heavily impacted as you know and Texas and still are we probably can't get open and many of those stores this weekend and.
And it did hit over the most important of.
And of the quarter, which is president's weekend, so that hasnt impacted us.
It still impacts us.
The struggling a.
A lot of our own stores, but were concerned about and our associates. Our team members of the houses they don't have water they don't have heat and <unk>.
Same thing applies for our customers.
And this next storms coming through now and will hit us in the east and.
And the Virginia DC area. So we are impacted now it's wintertime and happens it's rather the happens like this over the holiday weekend, but.
We mentioned and our comments.
The written business is up double digit and that includes where we are today. So there is a drag there is an impact we're concerned, but we feel pretty good about where our businesses.
That's helpful. Thank you so much comments thanks Richard.
Okay. Thank you, Brian and thanks for David.
And ladies and gentlemen, with no further questions remaining in the queue I'd like to turn the floor back to Mr. Richard Haire for any additional or closing remarks.
Well. Thank you for your participation in today's call. We look forward to talking to you and the future of when we release, our first quarter results.
Alright, and ladies and gentlemen that will conclude our call for today. We do appreciate you joining US you may now disconnect.