Q4 2020 Haverty Furniture Companies Inc Earnings Call
[music].
Good day, everyone and thank you for standing by welcome to today's Haverty furniture companies, Inc. Fourth quarter and full year 2020 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.
The other uncertainties detailed in the company's reports filed with the SEC.
Our president CEO and Chairman Clarence Smith will now give you an update on our results and provide commentary about our business.
Good morning.
Thank you for joining us to 'twenty 'twenty fourth quarter and full year conference call.
2020 was a disruptive and wild year for haverty, our industry and our communities.
After closing their stores from mid March and reopening most of them may one he came back exceptionally strong in Falcon 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 their homes safer and more comfortable to run through the pandemic.
We broke Q4 records with sales of 241 $3 million up 12, 9% and earnings per share of $1 37 versus <unk> 31 cents from 2019.
Several trends come to the forefront.
Higher gross margins due to better pricing discipline fewer promotions lower markdowns and more special orders an overall trend that we expect to continue.
Lower SG&A of 44, 3% of sales compared to 58% last year with shorter 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 at four 3% of sales since reopening.
Buy online pickup in store is running at 16% up triple over 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 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 in 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 in central Florida, and the villages midyear and are planning an additional store in an existing market in 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 will work that we are well positioned for growth in the future.
With our strong store position and brand recognition throughout our regions and over half of our stores in Florida, Texas, and Georgia were well located in the fastest growing markets in 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 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 in our written sales, even while struggling to bring in product to compete complete deliveries.
We believe in staying in front of the supply channel challenges that are playing a part in the inevitable disruption of our industry.
His experience the industry is experiencing across the board.
All our teams have a very high priority of working closely with all 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 a top tier web site and are planning significant investments in the coming year to make our site an industry leader.
We're determined to make it as easy as possible for our customers interact with us anywhere. She wants we know that our website is upfront bore and we're dedicated to making everything about average dot com the best in the industry.
We believe that one of haverty as major strength is our 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 our passion about keeping haverty as at the highest standards.
2020 was wild extraordinary year.
I am very proud of all of the Harry's team members and their dedication to serve our customers during this pandemic.
I believe we have the best operating teams in the industry.
We have set standards and operating disciplines that will contribute to higher performance in the years ahead and strengthened <unk> premier position in serving our regions home furnishings needs.
I'll turn it back over to Richard.
Thank you Clarence.
And good morning.
In 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 written 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 or one 5% per $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 in the fourth quarter of 2020 was $600000 and is included the gain on the sale of surplus property during the quarter.
We recorded net interest income of $61000 in the fourth quarter of 2020 versus interest income of $307000 in the fourth quarter of last year.
Income before income taxes increased $23 7 million to $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 million.
A $1 $31 37 per diluted share on our common stock compared to net income of $6 1 million or <unk> 31 per share in 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.
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 per 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 a special $2, a share dividend and $4 million on a regularly quarter dividend.
During the fourth quarter, we did not purchase any common shares in a buyback program.
For the year, we purchased a total of 19 million $19 $7 million.
Or $1 33165 shares.
We have $16 8 million remaining $1 worth remaining under our current authorization in our buyback program.
For the calendar year 2020, we've returned approximately $70 million to our shareholders.
$14 million in quarterly dividends, and $36 million and a special dividend and approximately $20 million in share repurchases.
Our earnings release list out several additional forward looking statements, indicating our future expectations of certain financial metrics.
Highlighting 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 in our LIFO reserve.
Our fixed and discretionary type SG&A expenses for 2021 are expected to be in the 261% to $263 million range, a 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 to 18, 4% based on potential increases in selling and delivery costs.
Our planned capital expenditures for 2021.
Is approximately $23 million.
Dissipated, new or replacement stores, Remodels and expansions total $12 9 million.
<unk> and our distribution network are expected to be $6 4 million.
And investments in 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 ladies and gentlemen for any questions. Please signal by pressing star one on your telephone keypad. If you could just make sure you have your mute function turned off so you can receive that signal.
Thats Star one for any questions at this time.
Okay.
All right and it looks like first step from Sidoti <unk> Company, we have Anthony <unk>.
Good morning, and thank you for taking the questions. So firstly I just wanted to add.
Look I go back to the fourth quarter. So if you could give us a sense as to how the quarter progressed in terms of Europe.
Same store sales.
No.
Consistent throughout the quarter or was there any one particular month of net saw that.
Greater sales growth than the other.
Just curious as far as how that.
Breast.
Sure. Anthony This is Richard so just in terms of the cadence in the fourth quarter in terms of delivered sales.
Hum.
And the plus 20% range in October we were actually down mid single digits in November and then up in the plus 20% range in December so that was kind of the cadence of the delivered sales in the quarter.
Got it okay. Thanks for that color I, Richard and then.
In terms of the traffic versus ticket and then just curious also about the custom order penetration 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 in people's homes.
And also I think we're just selling a more custom product and.
Just doing a better job with better quality true.
<unk> 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 in our closing rate has been up consistently.
All of the all during this pandemic because I don't 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 are continuing to be consistent and I think we'll see that trend continue probably from this year.
Okay great.
Good day here and then from from a supply chain constraints.
The release, you talked about the mattress sales a little bit, but overall I mean.
Can you just call. It maybe you can just kind of go over as far as you know 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 in a little better condition with our best sellers, we've been flow on those in and frankly spending some premiums to get that so I think we're in better position.
<unk> on our best selling product now than we were let's just say several months ago. I think we are in best inventory position since last summer.
And I hope that that will improve in the coming month, I mean, Chinese new year's here.
Got a number a good number of containers out, but we still have a backlog. That's the highest we've had in our history. So we've got challenges I think we're doing a good job, we're very happy with our relationships with our vendors on our suppliers.
And we're paying a premium to get the product.
To make sure we can serve our customers.
Got it Okay, and then last a couple of questions from me so.
As far as you said and you just said that you're paying a premium.
To get those products delivered or 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 have.
Gonna 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 going to hit us now in this quarter in the second quarter, we think it'll start to.
Alleviate in the back half of the year, maybe sooner so yes, we're going to try to.
Again, those price increases unfortunately on some of our products some we can't.
We know that we've got to recover that.
For our investors.
Got it okay.
As far as the backlog is there a way you guys can quantify that and maybe I missed that if you say I know its a record high but did you give a dollar amount from 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 all best of luck.
Okay. Thanks, and then at the bank debt Anthony.
And next question will come from Brad Thomas from Keybanc capital markets.
Hi, good morning clients good morning, Richard and.
Congrats on strong execution in our.
A challenging year on all the momentum in the business right now.
Thank you.
Hum.
I wanted to add.
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 is that something we should expect to continue true.
<unk> as well.
Well it will go through the summer.
We are already 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.
<unk>.
That's going to be a challenge.
As you've seen for the rest of the industry.
I think that by the fall this should be settling down Budd.
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, but it's going to carryover through the summer I would think.
Yep.
And then.
Given sales guidance, but if we look at the last two quarters, you've delivered over 200 million 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 look to that backlog and.
Potentially generate over $200 million sales. These next couple of quarters.
If they're written demand hold them.
But I know youre not asking about sales.
[laughter] exactly.
Yes, Richard I'll, let you are and how that would just say that we have a strong backlog, which bodes well for 2021 net.
And we're fighting through the supply chain issues.
Like everybody else, but I think we're in a.
Compared to some of our other peers I think we're in a good spot in terms of how the panel 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 did guide that.
Comment to that.
She has like freight can you help us think about the magnitude and maybe how much headwind in basis points, maybe looking at and you consider freight.
<unk>.
Perhaps promotions at some time returning to normal.
Yeah, I would say.
We came in at.
56% for free.
The total year margins were up to 57% in the fourth quarter, you got the freight headwinds going into 2021, and you've seen the and all that.
The trade journals.
<unk> the reports about how expensive freight is now we have contracted freight rates due to volume or having to take additional shipments in 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 2021 and.
In addition to those freight issues with the margins you've also got to factor in LIFO and just as a point of reference back in.
Back in 2019, when we had price pressure on costs due to the tariffs our LIFO hit.
Our LIFO reserve changed $1 $8 million and it was only about a third of that in 2020, So you've got to factor in potential LIFO hits on that margin.
In 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.
That's the best we can forecast.
Okay great.
And then just circling back on some of that coming from the mattress category its assets.
Listen inventory challenges there.
What categories as debt and specifically and and.
What lines that you have on that area improving from here.
Well, our mattress business has been challenged with just capacity and supplies.
Has improved recently.
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 we feel better about it.
It's improving but it is still a challenge to get.
Product and the right mix of their lifetime.
If I could squeeze one more in just with the topic dominating news here of the weather.
Really unusual times.
Can you give us any comments on kind of effects presents much of a risk.
Round that.
Presidents' day weekend and around delivery.
Yes, it hit us pretty hard.
We were down about a third of our stores with 30% of our stores for at least four days.
And they are still down.
And the same thing goes with those deliveries are delayed deliveries, so we weren't able to get out about 30%.
Very heavily impacted as you know in 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 has impacted us.
It still impacts us we're struggling.
A lot of our own stores, but were concerned about our associates. Our team members their 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 in the east.
The Virginia D. C area. So we are impacted now it's wintertime it happens it's rather than happens like this over a holiday weekend, but.
We mentioned in our comments that.
Our 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 that day.
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 in the future when we release, our first quarter results.
Alright, ladies and gentlemen that will conclude our call for today. We do appreciate you joining US you may now disconnect.
Okay.
Yes.
[music].
[music].
Good day, everyone and thank you for standing by welcome to today's Haverty furniture companies, Inc. Fourth quarter and full year 2020 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.
The other uncertainties detailed in the company's reports filed with the SEC.
Our president CEO and Chairman 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 a disruptive and wild year for haverty, as our industry and our communities.
After closing our stores from mid March and reopening most of them may one we paid back exceptionally strong in 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 body of economy, where the entire country focused on making their homes safer and more comfortable to run through the pandemic.
We broke Q4 records with sales of $241 $3 million up 12, 9% and earnings per share of $1 37 versus <unk> 31 from 2019.
Several terms come to the forefront.
Higher gross margins due to better pricing discipline fewer promotions lower markdowns and more special orders an overall trend that we expect to continue.
Lower SG&A of 44, 3% of sales compared to 58% last year with shorter 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 at four 3% of sales since reopening.
Buy online pickup in store is running at 16% of triple over past years, which along with significant share increases our new growth and service factors.
Written sales continued to grow faster than on delivered sales with double digit guidance.
Undelivered sales backlogs are at record levels due to 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 in 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 in central Florida, and the villages mid year and are planning an additional store in an existing market in 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 aware that we are well positioned for growth in the future.
With our strong store position and brand recognition throughout our regions and over half of our stores in Florida, Texas, and Georgia, We are well located in the fastest growing markets from 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 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 in our written sales, even while struggling to bring in product to compete complete deliveries.
We believe in staying in front of the supply channel challenges that are playing a part in the inevitable disruption of our industry.
<unk> experienced the industry is experiencing across the board.
Our teams have a very high priority of working closely with all 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 from a top tier website and are planning significant investments in the coming year to make our site an industry leader.
We are determined to make it as easy as possible for our customers interact with us.
She wants we know that our website is upfront bore and we're dedicated to making everything about average dot com the best in 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 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 extraordinary year.
I am very proud of all the average team members and their dedication to serve our customers during this pandemic.
I believe we have the best operating teams in the industry.
We've set standards and operating disciplines that will contribute to higher performance in the years ahead and strength in <unk> premier position in serving our regions home furnishings needs.
I'll turn it back over to Richard.
Thank you Clarence.
And good morning.
In the fourth quarter of 2020 delivered sales were $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 written 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 or one 5% per $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 in 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 in the fourth quarter of 2020 versus interest income of $370000 in the fourth quarter of last year.
Income before income taxes increased $23 7 million to $31 3 billion.
Our tax expense was $5 8 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.
It was $25 4 million.
Or $1 $31 37 per diluted share on our common stock compared to net income of $6 1 million or <unk> 31 per share in 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.
From the December 31, 2019 balance.
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 per 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 a special $2, a share dividend and $4 million on a regularly quarter dividend.
During the fourth quarter, we did not purchase any common shares in a buyback program.
For the year, we purchased a total of $19 million.
$19 7 million or $1 33165 shares we have $16 8 million remaining $1 worth remaining under our current authorization in our buyback program.
For the calendar year 2020, we've returned approximately $70 million through our shareholders force.
$14 billion in quarterly dividends, and $36 million and a special dividend and approximately $20 million in share repurchases.
Our earnings release list out several additional forward looking statements, indicating our future expectations of certain financial metrics.
Delight, 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 in our LIFO reserve.
Our fixed and discretionary type SG&A expenses for 2021 are expected to be in the $261 million to $263 million range, a 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 in selling and delivery costs.
Our planned capital expenditures for 2021, this is approximately $23 million.
Dissipated, new or replacement stores, Remodels and expansions total $12 9 million.
Investments in our distribution network are expected to be $6 $4 million and investments in our information technology are expected to be approximately $3 7 million.
Our 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 ladies and gentlemen for any questions. Please signal by pressing star one on your telephone keypad. If you could just make sure to have your mute function turned off so we can receive that signal.
Again, Thats star one for any questions at this time.
Alright, and it looks like 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 add.
And go back to the fourth quarter and so if you could give us a sense as to how the quarter progressed in terms of your same store sales.
Were they consistent drop in a quarter or was there one particular month of net so that.
Greater sales growth than the other it's just curious.
How that.
Progressed.
Sure. Anthony This is Richard so just in terms of the cadence in the fourth quarter in terms of delivered sales.
We were up.
And the plus 20% range in October we were actually down mid single digits in November and then up in the.
The plus 20% range in December so that was kind of the cadence of the delivered sales in the quarter.
Got it okay. Thanks for that color and Richard and then.
In terms of the traffic versus ticket and then just curious also about the custom order penetration 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 in people's homes.
And also I think we're just selling a more custom product 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 in 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 are continuing to be consistent and I think we will see that trend continue probably from this year.
Okay great.
Good day here and then in terms of the supply chain constraints.
At least you talked about the mattress sales a little bit better.
Well I mean.
Can you just call. It maybe you can just kind of go over as far as 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.
Early 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 are now though in a little better condition with our best sellers, we've been flow on those and frankly spending some premiums to get that so I think we're in better position.
<unk> on our best selling product now than we were let's just say several months ago. I think we are in best inventory position since last summer.
And I hope that that will improve in the coming months I mean, Chinese new years here.
We've got a number a good number of containers out, but we still have a backlog. That's the highest we've had in our history. So we've got challenges I think we're doing a good job very happy with our relationships with our vendors on our suppliers and we're paying a premium to get the product to make sure. We can serve our cuts.
Yeah.
Sure.
Got it Okay, and then lastly.
Couple of questions from me so.
As far as you said, you just said that you're paying a premium.
To get those products delivered or 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.
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 going to hit us now in this quarter in the second quarter, we think it will start to.
Alleviate in the back half of the year, maybe sooner so yes, we're going to try to.
Again, those price increases unfortunately on some of our products some we can't.
We know that we've got to recover that.
For our investors.
Got it okay.
As far as the backlog is the way you guys can quantify maybe I missed that if you say I know it is a record high but did you give a dollar amount from the backlog.
It's a record high we have not given that number out but it is several multiples higher than last year.
Got it okay, well, thank you and best of luck.
Okay. Thanks, Nathan Thank you Anthony.
And next cash.
<unk> will come from Brad Thomas from Keybanc capital markets.
Hi, Good morning, Clarence Good morning, Richard and.
Congrats on strong execution.
The challenging year in all of the non incremental Bolton from.
Thank you.
I wanted to.
Ask a little bit 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 is that something we should expect to continue true.
<unk> as well.
Well it will go through the summer I mean, we are already 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.
<unk>.
And that's going to be a challenge.
As <unk> seen for the rest of the industry.
I think that by the fall this should be settling down Budd.
I know the industry has a huge backlog in.
I think we've got a relationship and as I've mentioned, we are willing to pay to get the product, where it's necessary, but it's going to carryover through the summer I would think.
Yes.
And I know you're not.
Given our sales guidance, but if we look at the last two quarters, you've delivered over 200 million in this past quarter over $240 million.
Sales.
Given the backlog that we're working with.
Is it reasonable to think you can or backlog in.
And potentially generate over $200 million sales. These next couple of quarters.
If they're written demand hold them.
But I know youre not asking you to guide.
Yes.
Exactly.
Yes, Richard I'll, let you are and how that would just say that we have a strong backlog, which bodes well for 2021.
And we're fighting through the supply chain issues.
Like everybody else, but I think we're in a.
Compared to some of our other peers I think we're in a good spot in terms of how the panel the supply chain.
Okay.
Fair enough.
And as we think about some other gross margin puts and takes nine I appreciate the guidance.
That you commented that how about issues like freight can you help us think about the magnitude and maybe how much headwind in basis points may be looking at and you can see their freight and.
Perhaps promotions at some time returning to normal.
Yes, I would say.
We came in at.
56% for the free.
The total year margins were up to 57% in the fourth quarter, you got the freight headwinds going into 'twenty.
2021, and you've seen the and all that.
The trade.
Journals. The reports about how expensive freight is now we have contracted freight rates due to volume or having to take additional shipments in those rates or significantly higher than what our contract rates are.
So we factor that into our 55, 3% to 55, 8% guidance for for 2021.
In addition to those freight issues, but the margin you've also got to factor in LIFO and just as a point of reference back in.
Back in 2019, when we had price pressure on costs due to the tariffs our LIFO hit.
Our LIFO reserve changed $1 $8 million and it was only about a third of that in 2020, So you've got to factor in potential LIFO hits on that margin.
In 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.
That's the best we can forecast.
Okay great.
And then just circling back on from your comment.
And from the mattress category.
From inventory challenges there.
What category from debt and specifically and.
What lines that you have on that area improvement plan.
Well, our mattress business has been challenged with just capacity and supplies.
Has improved recently.
We commented on that.
This deal 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's improving but it is still a challenge to get.
Product and the right mix of their lifetime.
If I could squeeze one more in just with the topic dominating news here of the weather.
Really unusual times.
Can you give us any comments on kind of effects presents much of a risk.
Round that.
Presidents' day weekend and around delivery.
Yes.
It's pretty hard.
We were down about a third of our stores with 30% of our stores for at least four days.
And they are still down.
And the same thing goes with those deliveries are delayed deliveries, we weren't able to get out about 30%.
Very heavily impacted as you know in Texas still are we probably can't get open and many of those stores. This weekend.
And it did hit over the most important.
<unk> of the quarter, which is president's weekend, so that hasnt impacted us.
It still impacts us.
We're struggling with.
A lot of our own stores, but were concerned about our associates. Our team members their houses they don't have water they don't have heat.
Same thing applies to our customers.
And this next storms coming through now and will hit us in the east.
The Virginia DC area. So we are impacted now.
Wintertime it happens, it's rather than happens like this over a holiday weekend, but.
We mentioned in our comments that our written business is up double digit and that includes where we are today. So there is a drag there is an impact where concern.
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 that day.
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 in the future when we release, our first quarter results.
All right, ladies and gentlemen that will conclude our call for today. We do appreciate you joining US you may now disconnect.