Q1 2021 Sleep Country Canada Holdings Inc Earnings Call
Good morning, My name is Jacqueline and I will be your conference operator today at this time I would like to welcome everyone to the sleep country, Canada Q1, 2021 results conference call all lines and interest and placed on mute to prevent any background noise.
And the speakers remarks, there will be a question and answer session. If you'd like to ask a question during that time simply press star and the number one on your book.
Pat.
And your question press, the pound and warehouses.
We ask that you limit your time to one question plus a follow up question before cycling back into the queue.
Yesterday sleep country, Canada released our financial results for the first quarter of 2021.
A copy of the earnings disclosures available on their website and includes cautionary language about forward looking statements risks and uncertainties, which also applies to the discussion during today's conference call.
I would now like and the call over to Jane Freedman Chief Executive Officer. Please go ahead Sir.
Thank you very much.
Welcome everyone and thank you for joining us today I Hope you are all staying safe and healthy joining me today are Stewart Schaefer, our newly appointed President and sleep Country, Canada Holdings, Inc, and Craig the Pronto, our Chief Financial Officer.
We are pleased to share the results of another successful quarter building on the momentum of our record 2020 results Q1 continued to demonstrate the power of our Omnichannel ecosystem no matter. The headwinds. It is notable that these results were achieved and mid length. Your store closures due to the COVID-19 restrictions compared to this time last year.
Despite our physical store network being closed for 32.9% of operating days compared to 10, 2% of operating days in Q1, 2020, we delivered powerful growth across our sleep ecosystem further strengthening our position as Canada's preferred sleep partner.
I would like to thank our teams and sleep country, Canada Domingo and Andy as well as our value suppliers landlords and media partners for their continued dedication and hard work, especially considering the ongoing pandemic, which continues to take a toll on individuals and organizations across the country and sleep country is no exception and as a result.
And extended store closures and certain regions. This quarter, we look forward to reopening and wellbeing welcoming our associates back to a closed store ship.
As a result of our team's ongoing commitment over the last past year. It is a great pleasure that I can share our Q1 highlights.
Revenue increased by 27% to $183 million.
Net income grew by 74, 1% same.
Same store sales increased by 19, 6%.
And a 52, 9% increase and adjusted diluted EPS from 17, and Q1, 2020 to 'twenty six in Q1 2021.
Our purpose and sleep country is to transform lives by awakening Canadians to the power of sleep.
We strive to live our purpose every day and in Q1, our branch proudly supported over 175000 Canadians to achieve their best sleep as a pillar of their wellbeing.
In pursuit of this purpose, we continue to chart our business against three strategic platforms.
To achieve sustainable and customer centric growth, one providing a world class customer experience.
To pursuing relentless channel and product innovation and.
Three helping Canadians improve their lives through sleep as a pillar of wellbeing.
The achievements of Q1, clearly demonstrate the power of our strategy to deliver formidable results and we have seen great success. A result, as a result of our efforts across all three of our strategic pillars and it is clear that our customer centric approach is highly effective and establishing new relationships deepening existing ones and ultimately growing our bid.
And as for long term long term success.
Beginning with our commitment to provide a world class customer experience. We are proud to share that E. Commerce drove almost one third of our total quarterly revenue.
In addition, our powerful same store sales growth includes our fourth consecutive quarter of triple digit E Commerce growth.
And these results showcased at our focused investments and our digital and physical sleep ecosystem are resonating with loyal and new customers alike, enabling Canadians to learn trial purchase and deliver on their own terms. We are also pleased to share that our highly impactful dreamliner digital chat and phone capability, which brings the.
Unparalleled expertise of our sleep experts to the digital realm will remain an important channel and part of our customer experience model and the future. We have seen a remarkable 230000 interactions since launching this capability last year underscoring our promise to provide exceptional customer experience at every touch point and <unk>.
And every channel.
Regarding our relentless pursuit of channel and product innovation. Our goal is to be Canada is seeing.
<unk> sleep partner and gateway to the world's best sleep assortment, we are confident that the purposeful sleep ecosystem, we have built including our retail store network ecommerce platforms third party marketplace relationships and exclusive brand partnerships will continue to drive significant growth and serve as a key differentiator for us.
And market and Q1 2021 we opened two new stores, one and Fort Saskatchewan, Alberta, and Collingwood, Ontario, bring our retail store network to 283 stores and growing we continue to enjoy a fruitful relationships with our brand partners and our customers are responding well as illustrated through mattress and accessory revenue grew.
Both of 19% and 27.7% respectfully, respectively. We look forward to showcasing further innovation on this front over the coming months.
Another landmark moment in the quarter was the completion of Andy's contingent consideration payment of $25 million. After the endy team well exceeded their growth and profitability targets established at acquisition and 2018.
And Andy continues to innovate and the E Commerce space as Canada dominant online mattress brand and has enjoyed and meant success of one of the country's fastest growing growing retailers and Andy.
And he is a powerful brand within our sleep ecosystem and their commitment to providing only the exceptional only the most exceptional customer experience closely aligns with the beliefs that have driven the sleep country and Dormie brands for 26 years.
At the very core of our business is our commitment to helping customers achieve their best sleep is a pillar of overall physical mental and emotional well being.
Our unmatched sleep expertise and ubiquitous reach of our sleep ecosystem positions us to help Canadians prioritize and achieve their optimal sleep a role that is now more important than ever within the realm of this strategic platform. We launched a highly successful brand activation on world Sleep day or are my sleep promise cash.
Pain successfully inspire Canadians to prioritize sleep as one of the best forms of self care for a happier and healthier life.
Sleep tips developed in partnership with sleep score, a leading sleep science company results and and scores of Canadians, making their own sleep promise to establish healthier sleep habits.
We enjoyed immense success and this campaign with over 30 million, social impressions, and 50 million impressions and traditional media and media and our busiest sales weak. So far this year, all of which culminated and meaningful advancing our mission of awakening Canadian to the power of sleep, we look forward to championing sleep on behalf of Canadians and the <unk>.
And years to come.
We are still and our growth journey, having only scratch the surface of the value that our sleep ecosystem can deliver we are eager to explore its capacity to sustainably grow our business and capture more market share no matter, how Canadians choose to shop, we are proud to be their sleep partner of choice.
And it gives me great pleasure to announce the exciting news of Stewart Schaefer being appointed President of sleep country, Canada Holdings, two has been a guiding influence and the world of sleep for nearly three decades, as a visionary and chief architect behind much of our strategic growth over the past 16 years, including introduction and exponential growth of our accessories category.
The building of our powerful sleep ecosystem and the acquisition of Andy and his business acumen, and entrepreneurial spirit and passion and have elevated our family of brands to New Heights is a true pleasure to work with you and I am excited to see the phenomenal growth I know he will deliver across our strategic platforms.
I will now turn the conversation over to you Craig to discuss our financials.
Thank you, Dave and good morning, everyone I'd like to reiterate.
Iterate and we were extremely pleased with our very strong Q1 results.
As noted earlier in the call and Q1, 2020, one our retail store network was impacted by the mandate and government closures, and Manitoba, Ontario, and Quebec in Q1, our store network was temporarily closed for 32, 9% of its normal operating days in Q1, 2021 compared to 10, 2% and Q1 and 2012.
<unk>.
Despite the significant challenge to our store network being partially closed our strong Q1 results demonstrated the strength of our business model brands' strategic investments and our associates.
Our Q1 revenues increased by $31.4 million or 27% from $151.6 million, and Q1, and 2000 $20 million to $183 million and Q1 and 2021. This increase was primarily driven by 19, 6% increase and same store sales to new store openings and our wrap stores.
We continue to see significant growth and revenue for E. Commerce platforms 29, 3% of our Q1 revenues were generated from our e-commerce platforms.
Additionally, we saw significant growth and both mattresses and retail I'm, sorry, mattresses and accessories revenue categories.
And our mattress revenue increased by $23 2 million or 19% from 122 million and Q1, and 2020 to $145 2 million and Q1, 2020 one our accessories revenue increased by $8 2 million from $29 6 million and Q1, and 2020 to $37 8 million and Q1, 2020 one are continue.
And focused on bringing the best products and product Assortments to Canadians has positively contributed to our Q1, 2020 one revenue growth across both revenue.
Revenue categories.
Our gross profit increased by $9 1 million from $41.2 million and Q1, and 2020 to $50 3 million and Q1 and 2021, our gross profit margin increased by <unk>, 4% from 27.1, and Q1 and 2020 to 27, 5% and Q1 2021. This margin increase was primary.
Due to lower product and commissions and costs as well as leveraging fixed cost occupancy and depreciation costs.
These decreases were partially offset by higher COVID-19, PP&E and in addition to costs associated with providing our customers with curbside pickups and areas, where our stores were closed.
This decision to continue to serve our customers put downward pressure on the company's margin for the quarter. As these are these wages were fixed in nature.
Moving onto G&A expenses or G&A expenses for the first quarter increased by $5 1 million or 17, 5% from $29 million and Q1 2020 to $34 1 million and Q1 2021 as a percentage of revenue our G&A expenses decreased from $19 one per cent of revenue and Q1 'twenty two.
20 to 18, 6% of revenue in Q1 and 2021.
The $5 $1 million change and G&A expenses was mainly driven by additional dollar spend and media and advertising and compensation and occupancy expenses for the quarter.
Moving on from G&A, Our Q1 operating EBITDA increased by 4 million or 14, 9% from $26 4 million and Q1, and 2000 $20 million to $34 million and Q1 2021.
The increase was primarily due to strong revenue growth and Q1, 2020 combined with improved gross profit margin and partially offset by additional dollar spend and G&A expenses.
Our Q1 net income increased by $3 7 million or 74, 1% from 5 million and Q1, 2020 J point $7 million and Q1 2021.
Our basic earnings per share was <unk>, two four cents per share compared to 14 cents per share and Q1, and 2020, representing 71, 4% growth quarter over quarter as Dave mentioned earlier.
For the quarter, we experienced a net decrease in cash of $2 7 million net cash flows used from operating activities and 2021 or why were $11 5 million cash flows used in investing activities was $17 1 million and lastly, cash flows provided by financing activities were $25 9 million a law.
And part of the cash used in operations and investing activities related to the completion of the Andes and these contingent consideration of $25 million, which was paid in March 2021.
On the capital allocation front on May 10, 2021, the board declared a dividend of $19 five per share on the company's common shares. Additionally, the notice of intention to the T. S X to pursue and NCI B, which was filed earlier. This year was accepted and March 2021 providing us the option to repurchase shares commencing March 9th.
2021.
Subsequent to the end of the quarter and April 2021 and the number of verified COVID-19 cases surged and Canada. We were required due to government mandates to temporarily close certain stores any attempt to contain the spread of the by.
The spread of the virus.
As of today, approximately 47% of our stores remain temporarily closed.
This completes the overview of the financial results back over to you Dave for closing remarks.
Thanks, Craig building and our powerful results, we move forward with optimism and from a position of financial strength and the future of sleep country, Canada Domingo and N D. As bright as we continue to grow and optimize our enhanced service model and deepen our trusted relationship with Canadians.
And the quarter's results are a testament to our strategy and our team's unmatched ability to anticipate adapt and evolve with Canadians needs meeting them with the perfect solution to suit their sleep and wellness journeys no matter, how they choose to shop I'm continuously impressed with our team's dedication to our customers and communities and have confidence and our continued growth.
We remain committed to meaningfully and positively supporting our environment, our people and our communities. We're proud to be the only national sleep retailer offering a comprehensive mattresses and recycling program and are pleased to have diverted over 35000 mattresses and foundations from landfills in Q1 through recycling and donation in addition.
And the expanded its health care Heroes initiative, and Q1, transforming call rooms, and new Endy mattresses, and an additional six Canadian hospitals, including Scarborough General Hospital in Ontario, and hospital appear Bouchard and Quebec.
To close this call and a celebratory note I'm thrilled to share that sleep country, Dormie Poo and Andy All received recognition from the best Workplaces Institute as best Workplaces, and retail and hospitality. In addition, and he was voted the most trusted mattress in a box brand and Canada, 2020, one by brand Spark all fantastic achievement.
That reflect our best in class brand family.
Looking ahead, we remain focused on executing against our strategic platforms are providing world class customer experiences innovating across customer product and channels to help Canadians achieve their best sleep and wellbeing. We are confident that our business is uniquely positioned to thrive today and tomorrow and remain committed to delivering.
Sustainable and profitable growth for our customers associates and communities and shareholders with that we conclude our remarks and open the floor for questions.
As a reminder to ask a question you will need to press star one on your telephone keypad to withdraw your question press the pound or hash key. Please from himself to one question plus a follow up question and your first question comes from Martin Landry from Stifel. Your line is open.
Good morning Martin.
Hi, good morning, everyone and congratulations on your results and congratulations Steward zone on your promotion. Thank you Martin.
So my first question and you know there's lots of discussion on inflation and the economy and I'd like to see how that's playing out and the mattress industry wondering if you can discuss and you know.
Your your lineup of mattresses and if.
Manufacturers have implemented price increases at the beginning of the year.
So Martin.
And our pricing you usually are.
Our partners over the last 26 years is fix and.
And it's very rare that we will absorb any price increases and.
And as people understand there is clearly signs of inflation everywhere and not just and product, but in our logistics and our.
And our labor and.
And there has been some price increases that were discussed and the early part of the quarter and reflected.
And some of our pricing and already and some that will be yeah. That's happening right now that being said I believe very strongly to our pricing powers that in our demographic and on our product mix that we could pass on most of these price increases onto our stores and our products without.
And having any impact on our business.
Does that answer your question, Yes can you quantify what what what price increases you've you've received from manufacturers.
So on average.
The price increases have been minor between 2% to 3%.
And we've seen more and a great more inflation in terms of our logistics through price and sort of containers and.
And transport that's been more of the unexpected and.
Increase that we saw over a period of time and we've already adjusted for that.
Okay, Okay, and maybe just a follow up is I'm wondering if you can bring.
Breakdown.
The revenue drivers and giving us more details on volume versus growth for versus volume versus price for the quarter.
No.
And that breakup of merchandise between mattresses and accessories or more specific.
Mattresses, we can focus on mattresses wondering you know what you know how was your unit volume growth and how is your average unit price I can cover that one real quickly if you want and it's just as we talked about throughout last year. We were excited that we were seeing increases and are below a thousand.
But while while not seeing decreases above 1000, and we continue on that same pattern and so we're seeing a really nice distribution of price.
Parents across all of our price points and so it is you know our U S. P is down a little bit because because we're selling more customers at the lower and but we're still selling just as many or more at the higher end and so we think that is about is.
Healthy as you can get.
And then on your unit price can you talk about that a little bit Ah sorry on your volume growth.
Our volume growth was up significantly.
Okay perfect. Thank you.
Your next question comes from Vishal Street from National Bank. Your line is open.
Good morning, how are you.
Hi, Thanks for taking my questions and congrats on the results I was hoping to draw a little bit on and your claims experience given your significant knowledge of the industry. Just wondering its use scan history and Q.
And you recollect being in a period this strong and maybe if you can comment on the factors driving the strength, obviously triples, and these initiatives are driving the strength as well, but just on the backdrop.
Your interpretation.
Well I think I think it's interesting I think what we're seeing is where our stores are open and they continue to be very busy across the country.
But where we're sitting here today with 47 per cent of our store is not open so.
We are again as we've always said market share is.
It's a backward looking.
Environment, we don't really understand it and tell it is already behind us, but we have every reason to believe from speaking with our suppliers that a lot of our success is coming from taking share and it.
Because we have over the last several years and I hope people are starting to realize it we're not just a bricks and mortar retailer anymore, we're very strong bricks and mortar retailer, but we're a strong omnichannel retailer, whether it be at sleep country Domingo and especially Andy and so.
We're we're open it's busy and where we're not it's where we will catch up.
Okay and with respect to how this period.
That's up versus your prior period's operating periods in history, and just the strongest operating period and sleep country's history as you can recall.
I believe Q4 was stronger because less of our stores were closed.
And there's no question that we're getting and additional share of the disposable income.
The Canadian consumer since Theres other things that they cannot do and.
Also Canadian.
Canadian savings rates as you all note and or at the highest level they've been and years. So that all bodes well I will also add debt. There was a few years. This is an industry that has had a compounded growth of around 5% to 6% annually and.
And the last few years it lagged a little bit beauty of our business is that there is always that that catch up and where we think that sales get differed. So part is we believe is a catch up over the last few years that people are refocusing back on their home and the wave of wellness that.
Total debt is definitely implemented and in the minds of Canadian consumers. We believe that that will continue as people realize the power of sleep and how important it is to their health and wellbeing.
Okay I appreciate it for that.
Looking at you talked about your successes and Omnichannel retailer and your investments have.
Certainly paid off.
Wondering if you could share some of your.
Some of the differences between your online customer and your in store customer and if youre seeing those differences.
All throughout the pandemic our change.
So what we can tell you that the.
The online customer.
It's very similar to our in store customer and back.
And besides besides one area and I'll leave that to the yen, but.
The journey definitely.
It begins anywhere that they wanted to and but it seems that it does involve the store.
Especially on a price point of above $1000. So the journey may begin on their phone and they are definitely coming into our stores as we do our geo tracking and be able to determine that and they may concluded at the store or and again.
Again on their phone and and.
And we saw that when the stores were closed and then reopened people lining up to get at.
Back into our stores.
The added bonus for us and Dave alluded to it a few moments ago is our focus on driving our below $1000 price point and even below our $500 price point, which we always believe that we didn't have our fair share in that category, which we wanted and with our brand.
And the competence and our brands.
The below 1000 price point and below five and dollar price points has definitely accelerated and that trajectory has not slowed down for us and that zone. We believe a whole brand new category that we're growing.
At a.
And a much more accelerated rate than we ever had before.
Thanks for the color.
Thank you and your next question comes from John <unk> from CIBC. Your line is open.
Hey, John Good morning, everyone.
Good morning.
I wanted to ask about the ecommerce business and and the acceleration Youre seeing there and obviously this is gonna be and Omnichannel business moving forward.
The success of E Com make you rethink capital allocations and all moving forward and maybe you lean more on the online business and more of your investments are flow through.
Through marketing or social media, rather than just building out new stores and we'd like to get your thoughts on that.
Well I think the one thing that I wanted to make sure that we're all clear on it because we're very clear inside our company is that we are we do a lot of tracking and we do a lot of analysis every time, we open a store every time, we do anything and and we want to have the right number of stores. So we don't have an ego about having more stores, we want to have the right.
And so we will get to that rate decision.
As of now, though we haven't seen anything that indicates the stores aren't a successful part of this equation.
We remind people of Q3 last year, where our stores were open and we're in the middle of a pandemic with no vaccine and still are.
<unk> 82 per cent of our business went through the stores. So we'll continue to track it and we will have the right number but the store is still play a big significant role as Stuart mentioned, a minute ago, especially above the 1000 dollar category and so we'll continue to make sure that we are opening stores where required.
I will also add in terms of capital allocation, we're constantly measuring and what is the best return on that investment.
And some of the stores that we opened during the last year during the pandemic and and continued again. This particular quarter had been some of our strongest openings that we've ever had and as.
As of note.
And we've often mentioned the amount of stores that we believe per capita which we think it's one store per every 100000, so still come through I believe we are a long way from that at 283 stores and.
And until we see any signs that e-commerce.
Is.
And in spite of our brick and mortar, which we have seen zero sign of that.
And we will continue down the path of opening stores and hopefully driving our digital ecosystem.
Okay. That's helpful. Thank you for that and then my follow up I wanted to dig a bit deeper on the question about online customers versus in store and I get sometimes there's overlap between the two but.
But do you see any difference on conversion rates on and the mix of matches versus accessories, you mentioned and transaction size is there more spending on returns.
Any color you can add on these items would be helpful.
Well, it's been an interesting year for us and a big learning period.
And COVID-19 hits, our accessory business exploded.
And because people were cocooning and at home and then and as the stores reopened.
And didn't really see much of a slowdown and you continued.
E Commerce continued to grow on the mattress side, because customers were going in and and testing our mattresses and.
And again like I said before partially.
Including this concluding the sale and store and some online.
But.
There's no question that the accessories side of the business is easier transactions.
For the customer to do.
Online, we've seen a lot of our loyal customers coming back and adding to the baskets and made a transacted something in the stores and ever adding to their basket online and a lot of new customers, who we are and who our experience sleep country.
And again, both mattresses and accessories, but the accessories as noted and this quarter seems to have accelerated.
Quite quickly that being said the stores being closed the 40 odd percent of our stores that are closed this past quarter, we do a very good business on cash and carry of our accessories, which also is a lead into buying mattresses and and we.
We are pleasantly surprised that the accelerated growth that we had despite the fact that so many of our stores were actually closed.
Does that answer your question.
Yeah, and the only thing I'll add to it is that we track it and the second part of your question. We track very carefully our return rate and were comfortable that were well in line with what we want to be on that business.
Okay I appreciate the color. Thank you very much. Thank you.
Your next question comes from Stephen Macleod from BMO capital markets. Your line is open.
Good morning, and good morning, guys and good morning.
And congrats on the quarter and store congrats on your promotion.
<unk>.
I just had a couple of follow up questions you guys have given a lot of great color here.
And maybe maybe just asking.
A question a little bit little bit differently.
E Commerce has obviously been a big driver of growth and has really stepped and during the pandemic leading to a record quarter in terms of e-commerce as a percentage of overall sales.
Are you able to give any color on where you think how you think ecommerce sort of sort of settles in and once once we exit the pandemic and and hard to say what normal looks like but just curious if there's some sort of some sort of a run rate, where you think e-commerce will settle in at.
Well I think.
Historically speaking, we've kind of mentioned that we thought that it might get to and I'm talking revenue somewhere in the 25% over time, but again thats speculation we passed it this quarter, but that's with our stores a lot of our stores being closed I think the one thing.
Good thing is wherever it settles and we think we're going to be the largest we already are and will continue to push on that with not only good offerings, but good expertise I think the one thing we haven't talked about much today is our dream line and our dream chat, which is a really nice addition to being online only so we really kind of we talked and everybody's talked about to chat.
And with online and the store, we kind of created three we have online only we have a lot of support from Green line, which is our sleep expert on chat or the phone and then we have the in store experience and so again, when we say that we want to be where the customer wants us to be and how they want us to be there I don't think we've ever been further along on that and we're just going to.
And continue to push on that.
I'll also add debt.
It will probably never go back to what it was before because we've all become accustomed to actually shopping and the convenience on line and it is definitely been a seamless experience for Canadians, but I guess, the customer will dictate to us Steve and as time goes on and I will add debt.
Just wanted to remind everyone that we are still really early in this runway and which is very exciting for us and as Dave mentioned on the Dreamliner and there's other things that we're working on and that we're really excited about that we haven't even deployed yet but this is really began for us November 19.
And so it's.
Still and our infancy of what we're going to be doing plus R. And D team is unbelievable and and continuing to grow and come up with great ideas and adding some new products to the mix. They just launched a new headboard, which is expanding our basket size. There. So a lot of exciting and interesting things.
Still to come for us.
That's great and then.
And actually does a good segue to my next question and with respect to Andy.
You know obviously when you when you bought and you were several years several years and now but.
And you thought one of the things that you could leverage from from their expertise was there.
<unk> to have a strong online presence.
Would you say that debt.
Having Andy in your portfolio has really helped to drive e-commerce and Omnichannel growth.
In sort of the sleep country <unk> banners.
I would say that and it's been a fabulous collaborative effort and U S.
And there's no question that the team at N D are the leading force in Canada in our opinion are online and they've been a fabulous assets and that taught us a wonderful do's and don'ts along the way.
But I will also give a call out to salary Deckled bomb, who is our VP of E Commerce, who has exploded our business.
And thank goodness for her and her fabulous Fabulous team as well as John and bakery are ahead of it who launched our e-commerce in a timely manner and they've been exceeding all our expectations.
Okay.
Well that's great. Thank you. Thank you so much.
Your next question comes from <unk> Khan from RBC capital markets. Your line is open.
And Morningstar.
Good morning, and thanks.
And I guess just a quick question on the same store sales I got to know whether I think you're indicating that about 33% up to normal operating days of the stores will close I guess, how many stores are and the comp based on how did you go about.
Figuring out which stores to include given the closures last year and this year.
Well I'll, let Craig answer that.
Mathematically because he's the expert there, but I thought I would just I really want to point out we're trying to deemphasize same store sales and we know we have to talk about the number but we really think the total growth is the best way to measure it but craig over to you.
Yeah. So David we really did when you see the total sales and then you see our same store sales youll notice that they are quite close and.
And the reason is is that we did just treat it as a normal same store sales bucket for the total activity between both e-commerce and our stores for the quarter.
We did this because if we if you go back to Q2 of last year, where we have material closures.
It was it was treated almost as an abstract to say that we couldnt.
The results were too materially different and we didn't feel it was a fair assessment of the activity of the company. This year with the strong results through E Commerce, and and the stores that were open and when the stores did reopened in March.
We felt comfortable that treating it similarly to the way we've done in the past and not excluding it.
<unk> made the best sense.
And it really points to that the whole omnichannel approach of when one piece of our business is down or has closed temporarily and we see significant increases and shifts to two other lines of business and that being E Commerce, and our dream line and a quarter.
Okay. So if I understand that it's pretty much the kind of the entire store base this year versus last year's same quarter crack.
Correct, yes.
And is that kind of a similar approach you'll be using for Q2, I guess, given I guess and store closures are much larger.
Well I think again last year, because we had such a material impact.
And we'll just decide what's the best way to best explained to the market because it's going we're going to be leaping over really really weak com.
Comp obviously in Q2, so it will be it will just continue to be transparent around how we're measuring measuring these items and the quarters to come as there will be a little bit of noise, just given the pressures from the store closures on our on our network year over year.
Okay, great. Thanks for that and just last question from me I guess.
And I guess the takeoff for the e-commerce side of the business and still expanding the store network and are you still looking to kind of expand into the mall channel or is that something you'll figure out once we're kind of beyond the pandemic and traffic trends normalize just want to understand.
Where we could expect some of the future stores to go as you expand.
Well we're still.
Definitely looking at the malls right now they arent.
In the meat in the immediate focus because a lot of the malls.
Are still closed down and but as we look towards the malls, we're looking for better opportunities.
In terms of.
Our cost of rents and as well as.
And that throughout the entire Canadian landscape is as the market shifts as some of the retail shifts.
And as happy and excited we are about our business. There has been unfortunately, a lot of companies that have not done well and part of the repercussions of that or the fallout of that is that there is a lot of them.
Stores that had been closed.
That being said and we look for opportunities and AAA real estate.
Wherever we can find it at which will be infill stores, because there's still areas that we have to add stores and.
And tertiary markets, which had been doing really well for us as we open up into new markets. The Windsor was a whole brand new market for us that we opened up and continuing to excel. So we still see a lot of pockets all around Canada that we haven't yet explored.
Alright, great. Thanks for the color.
Thank you.
Your next question comes from Meghan and that's from TD Securities. Your line is open.
Good morning Megan.
Good morning and Suntrust.
And following up on on store sponsors looking at potential areas to continue to.
And market share and the.
Pendants I believe were prior to the pandemic a fairly large piece of the market in Canada. So are you seeing those players really exiting the markets are more meaningful expenses at this point and how do you see that unfolding in terms of opportunities over the next year or so.
In terms of Megan our competition you mean other retailers.
Yes, yes.
Yes, no it seems that the.
The the one area to be since this pandemic has begun and is in the home furnishing section.
So.
And I can't say that we've seen and.
And the challenge is for other retailers closing or.
And or foresee them disappearing that being said and I do believe we do believe pardon me, we do believe that.
And there's been some disruption in supply chain disruptions across Canada for certain retailers that we've been fortunate enough and our teams have been fortunate enough to plan properly with.
By increasing our inventory and being proactive and so.
And that we could exceed our customers' expectations and have the goods and stock and I and we are aware that others may have had some challenges with that so.
But for now and I don't see that landscape changing.
And secondly, can you provide and update on the implementation of the ERP and what's in place currently and what kind of and a question for you do you envision that changing this year and beyond that.
Yes, so just a just an update on the ERP.
We are running out of the two systems in parallel and and so we've just actually cut over our first.
Our first DC, so we cut over each day across the country and all of the stores underneath.
And then so some of the tools that this will start putting and places of warehouse management, our supply demand chain planning tools to help optimize the flow of product across the country.
Are excited about that in addition, it's now going to be connecting the Pos to our e-commerce to all the different channels across the business and just a greater clarity from a from a customer journey perspective, and so we're excited too.
Kickoff.
Stronger connectivity with our with our customers and how we frequently speak with them because it's something that historically, we've not had the.
And place to do is as good a job as we would've liked.
Those are some of the things that would be more and the product journey and the customer journey side of things. It also is allowing us the opportunity, which we've just started to do and things like endless aisle and so.
Providing our customers with.
A drop ship program, where they can order some more a fashion accessory items different colors that we don't need to necessarily inventory and our store from a working capital perspective and so.
And just excited to see some of the different opportunities that these tools will start putting in place, but the biggest thing that we're excited about is to have the data to have a little bit more certainty and comfort around the decisions that were that were making and communicate with our customer more frequently.
And.
Thanks, Craig the only I'll add to that and it's just it's a real time event, that's going on right now which is we rolled over our first distribution center on May the force.
And and while.
Theres always.
Things that need to be tweaked, we're very pleased with the way.
Cutover and it's quite stable, so we're going to continue to progress and.
And and monitor it for the next few weeks and then we'll continue the rollout across the country.
Thanks for the color.
<unk>.
And again, if he would like to ask a question. Please press star one and you tell us and <unk>.
Next question comes from Patricia Baker from Scotiabank. Your line is open.
I was wondering if you very much and good morning, everyone.
One of the things that's key differentiator for you and definitely a driver of market share gains and the exceptional sales trends that you've seen.
And what you referred to with your enhanced customer service model and that's underpinned by the very strong expertise that you have with your sales force and of course that was so important that you tried to replicate that with the dreamliner for online and.
I'm, just curious with 47% and new stores close and that means that you have a lot of those.
And there.
Our experienced and knowledgeable sales people, who are not working right now what is what are you thinking about.
And do you foresee any challenges with you now.
Maybe some attrition and not being able to get those people back and what are you doing too and the name.
And to keep them engaged so that you don't lose that talent pool.
Yes.
Thank you that's a great question and Patricia while we spend a lot of time thinking about this and communicating with our people.
And to keep them engaged.
<unk> done a lot during the whole pandemic as far as mental health, we've done a lot with Linkedin learning, we're starting a heavily on that to keep people engaged and different things.
I will say that we feel confident that our team is raring to go and waiting to come back and so the nice thing about this.
And Thats, a very weird way to say it but this is not the firsthand and they've been through this and they realize that after we close the first and the second time when we reopened the stores were quite busy so they're there they're confident that when they come back theyre coming back to a very vibrant environment, that's going to challenge them and allow for them to be catch up and so bye.
And large we think they're really excited and ready to come back.
Okay, that's quite helpful and and a good way to look at it and Stuart and Keith just a little bit by suggesting that there's a lot of exciting things to come and the second half and you referenced.
And the Dreamliner and they said that their stuff that's coming in.
And in addition to the streamline and probably you can't really get more and answer because you will unveil innovation when you want to but I'm. Just curious whether you think some of that do you think about it coming down the pipeline would be as exciting and interesting will streamline and.
Patricia you know, we don't give guidance.
But.
But I will reiterate that we are still very new.
And very young and very early days and a lot of the things that we're working on so.
And what we hope to deliver on is some of the things that we've already delivered on and continuing to expand our markets and our partnerships driving and building our communities and through our advertising and driving our efficacy and return on AD spend and bringing more relevant brands.
And to all Canadians and growing our brick and mortar footprint.
And grow and as many channels of distribution wise through our digital ecosystem. So all the things that the team had been.
Executing on for the past couple of years.
We hope that youre going to see a lot more of that is as we continue down this path.
Okay. Thank you so much look forward to it thank you.
It is taking.
And there are no further questions at this time I will turn the call back over and its presenters.
Well, we're very happy to share. This news with you. We always look forward to giving you updates on our business and we look forward to doing that for our Q2 results I hope everybody stays safe and debt when we meet again, our stores will all be open and our team will be fully engaged but take care of yourselves.
And <unk>.
This concludes our conference call.
Sustaining you may now disconnect.
And.
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