Q1 2021 Joann Inc Earnings Call
Welcome to the first quarter fiscal 'twenty earnings call for Julian incorporated My name is Adrian and I'll be your operator for today's call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session day.
On the question answer session. If you have a <unk>.
Please press star 1 on your Touchtone phone.
Please note. This conference is being recorded and I will turn the call over to Ajay Jain director of Investor Relations you may begin.
Thank you operator and good afternoon.
I would like to remind everyone that comments made today may include forward looking statements, which are subject to significant risks and uncertainties that could cause the company's actual results to differ materially from management's current expectations.
These statements speak as of today and the company undertakes no obligation to update or revise any forward looking statement to reflect subsequent events new information for future circumstances.
To review the cautionary statements and risk factors contained in the company's earnings press release, and recent filings with the SEC.
During the call today management may refer to certain non-GAAP financial measures a reconciliation between the GAAP and non-GAAP financial measures can be found in the company's earnings press release, which was filed with the SEC today and posted to the Investor Relations section of Joann <unk> website at investors <unk> Joann Dot com on the call today from Joanne as Wade.
Miquelon, President and Chief Executive Officer, and Matt <unk>, Chief Financial Officer, I will now turn the call over to Wade Miquelon Wade good afternoon, and thank you for joining us today.
Be remiss, if I didn't start by welcoming a J James for the Joann team AJ will be leading our investor relations efforts and is an extremely talented leader with extensive background in the financial markets. I know you will really enjoy getting to know him as we share the joann story to current and potential stakeholders.
Relatedly is truly gratifying to be part Joann has returned to the public equity markets. Many of you may already be familiar with our company's history going back more than 75 years from its humble origins in a single location job in Cleveland to what has become the nation's largest fabric and crafts retailer.
For those who are new to our story and Joann. Our mission is to inspire the good spirit and each of US the strong legacy as a nation as category leader in selling were also 1 of the fast growing retailers on the arts and crafts category with robust Omnichannel platform.
Our vision is to be the inspirational leader that helps everyone's fine theyre happy place through superior Assortments strong merchandising execution and a relentless focus on customer service and experience.
Our first for full quarter as a public company was successful 1 and exceeded our internal expectations. Our sales trends remained strong growing at 15% over last year's first quarter was that strength spread broadly across our merchandise categories customer segments channels and geographies. We also drove gross margin expansion and controlled expenses.
To increase net income to $15.1 million and expand adjusted EBITDA margins by 570 basis points to 10% of sales, resulting in a $35.8 million or 105% increase in adjusted EBITDA versus last year's first quarter.
Well, Matt will provide more detail on our financial performance I want to also briefly highlight our momentum in debt reduction over the past year.
Driven by our many balance sheet initiatives and $77 million in net proceeds from our recent IPO, we reduced our long term net debt by $570 million from the same period last year to $760 million at the end of our latest quarter and we anticipate further debt reduction to a level of $600 million to $650 million by the end of fiscal 'twenty.
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Over the past several years, we've been on a journey to truly transform joann and define a differentiated customer experience that will lead to sustainable growth and value creation.
While the pandemic Dell all retailers, including Joann many challenges over the past several years, we've been laying the foundation to elevate that joann experienced across several key initiatives.
For us the pandemic crisis was the intersection of opportunity being preparation and this in turn has made US 1 of the fastest growing store and online retailers over the past year.
Our initiatives to refresh our store base continues to show enormous promise as we are literally stepping out of the traditional selling arts and crafts space into 1 that is future relevant and far more experiential we believe the impressive topline and bottom line lifts. We are experiencing in large part is because for many customers. We truly are there.
Disneyland the place they go to be inspired to connect and to create we believe that our extremely strong net promoter scores further validate our success in driving repeat visits and attracting new customers. When we get it right, we expand share of wallet for traditional customers and attract new customers as well.
As it relates to our real estate initiatives. We're now beyond the pilot phase of our store renovation program and a ramp into the execution phase in this new phase, we will be significantly enhancing our assortments and improving our customer experience across the vast majority of joann stores over the next 7 to 10 years and are targeting a for your overall paybacks on total capital and project expenses investing.
As part of our store refresh program. We'll also do a significant number of relocations as part of the overall real estate strategy.
We further reinforced our relationship with our customers through our data driven digital capabilities customers can interact with our brand whenever and however, they want customers connect with us through our newly redesigned mobile first website joann dot com and our widely used mobile application that has generated more than 12 million downloads to date. These.
Points of differentiation are reinforced by our knowledgeable friendly and trusted team members a significant number of whom are sewing and craft enthusiasts, who offer a service oriented experience for our customers that we believe cannot be replicated by mass retailers or pure play online retailers.
We have invested heavily in on omni capabilities over the past several years and this too has not gone unnoticed by our customers. In fact Joann was recently recognized as the number 1 fastest growing e-commerce retailer among a field of 1000 by digital commerce $360 for the year 2021.
And while we greatly value our 855 stores with nearly 100% of our stores cash flow positive. We continue to robustly invest in a rapidly growing best in class Omni channel business in which we serve our customers the differentiated manner by offering several convenient fulfillment options, including focus curbside pickup and ship to home offerings.
Essentially we never want to give our customers a reason to leave joann ecosystem.
Our Omnichannel platform has now achieved significant scale with over a half of 1 billion sales in the past fiscal year for 70% of sales fulfilled directly by the physical store location and roughly 40% either picked up in store or curbside.
In the latest quarter Omni channel contributed approximately 13% of our net revenue compared to 4% in the same period last year.
Importantly, our omni platform is highly profitable and Leverages central and third party capabilities as well as our efficient in store fulfillment network.
We are currently investing in additional fulfillment capability that will support both omni growth and our overall supply chain network. We expect this additional fulfillment capability to ramp up throughout the fiscal year and be fully complete by spring of 2022.
Our ability to effectively market to our customers is another critical component of our business success.
We've leveraged our robust CRM data to segment and target customers, allowing us to be relevant and further drive customer engagement, we tier our customers based on total sales volume and frequency of purchase.
In the latest quarter roughly 1 third of our comparable store sales were generated by our top 3 million customers. These best customers shop at our high frequency contributed strongly to a positive gross margin trends are.
Our recent success is also being driven by new customers. We're also shop at a high frequency and generate strong average ticket size.
Based on our customer segmentation newer customers account for the second highest rate of sales growth and sales contribution across our customer tiers.
Why are we seeing this broad based customer success, but we believe it's because we appeal to all skill levels, whether youre a novice for an expert we have an unparalleled overall assortment most of which cannot be directly cross shops, and our team members serve as true friendly clever allies, including offering a variety of classes and services that help our customers.
They are selling are crafting journey.
We feel the competitive backdrop remains favorable to Joanne as evidenced by our continued market share gains and strong gross margin trends in the latest quarter.
We are the leader in the vibrant selling category with a 33% market share and we are rapidly growing and the other half of our business, which includes arts and crafts seasonal and decor.
Underlying this momentum is the fact that approximately 25% of our customers make yourself, including on platforms, such as Etsy, Shopify and ebay and those market exchanges continue to grow.
These customers depend on us to provide the supplies that they need at the right price. So they can operate their own successful and profitable businesses.
Encouragingly related to favorable trends, including Joann sales for both selling and crafting machines, which have also been growing even more so in the past year. These.
These machine sales provide a good foundation for the business moving forward as a follow on sales for these customers is significant.
With sewing are reaching an entirely new younger customer demographic and based on the ongoing technical innovations across the craft category. We believe that the rise of technology combined with the coolness factor when looking customized personalized share or even sell will be a major driver in our industry and our company for many years to come.
We also have a series of several exciting growth initiatives in process, which we believe will allow us tap into new and lucrative markets domestically and abroad and I will be sharing more about these overtime during subsequent call.
While there are many things to feel great about we remain vigilant on potential risks and wait and ways to mitigate.
Inflation is certainly a risk but within that the largest issue that we aren't counting on the area of general supply chain disruptions and increases in costs, particularly ocean freight.
As said for Q1, we delivered ahead of our internal plan for the fiscal 'twenty 2 and for fiscal 'twenty..2 we believe we should be able to deliver on the plan for the balance of the year, where these additional supply chain costs should be able to be offset by the continued robust product margin expansion.
In summary, our strong first quarter results should set the foundation for exciting year ahead as a newly public company. Our team members remain true to our mission and vision to inspire creativity and ourselves and our customers and to help our customers find theyre happy place.
The Joann leadership team has never been more enthusiastic about our future.
Thank you for all of your support along our journey and with that I'd like to turn the call over to Matt to discuss our first quarter results in more detail.
Thank you Wade <unk> truly grateful for the efforts of our entire organization collectively our field distribution center and corporate teams unwavering focus on serving our customers and communities resulted in strong first quarter results for Julien.
Now, let me share highlights of our first quarter fiscal 'twenty, 2 performance, which exceeded our internal plans on top line sales performance operating margins and bottom line profit.
Net income was $15.1 million in the first quarter of fiscal year 2022, compared to a loss of $23.6 million last year.
Diluted earnings per share was 38.
Compared to a loss of 68 in the same period last year.
Adjusted diluted earnings per share was <unk> 46.
Compared to an adjusted loss per share of 31 in the first quarter of last year.
As Wade mentioned adjusted EBITDA increased 165% to $57.5 million compared to the same quarter last year.
That growth was driven by the sustained momentum in sales and customer engagement, we experienced last year adjusted.
Adjusted EBITDA as a percentage of sales expanded by 570 basis points to 10% driven by strong growth in gross margin and our ability to manage growth and expenses well below our increase in net sales.
I will now provide more detailed color on our quarterly results.
Net sales for the quarter increased 15% to $574.4 million compared to the same period last year with total comparable sales also increasing by 15%.
Driven primarily by an increase in customer transactions.
Our omni channel also remained strong and important part of our business, reaching $76 million for the quarter, representing 13% of total sales.
As the economy rebounded in COVID-19 restrictions have lessen throughout the country. We saw broad based sales growth across all geographic regions.
Gross margin expansion was a key driver for our significant improvement in.
Net earnings for the quarter.
Gross margin dollars increased 23, 1% compared to the same period last year to $302.7 million.
Reflecting a gross margin rate of 52, 7% compared to 49, 2% from last year's first quarter, a 350 basis points improvement.
This was driven by several factors, including reduction in average cost per unit driven by our ongoing strategic sourcing efforts.
More optimal levels of promotional discounting and.
And improvements in our inventory quality that have had a direct impact on reducing shrink and clearance markdowns.
These gross margin gains were partially offset by higher import freight costs that have impacted a variety of U S retailers.
First quarter SG&A expenses increased by 3.2% to $249.9 million, primarily due to slightly higher selling costs, given the first quarter strong, 15% sales growth as well as from higher incentive compensation accruals.
Growth in expenses was partially offset by a reduction in costs incurred in the first quarter last year relating to our response to the COVID-19 pandemic that did not fully recur this year.
As a percentage of net sales SG&A expenses for the first quarter were 43, 5% an improvement of 500 basis points compared to last year's first quarter as we have leveraged fixed cost against our sales growth and continue to identify and implement operating efficiencies.
Depreciation and amortization expense was $20.4 million for the first quarter of fiscal 2022, an increase of $600000 compared to the first quarter last year, driven primarily by investments in information technology.
Store pre opening and closing expenses totaled $1.8 million for the quarter consistent with the prior year.
Interest expense for the first quarter was $13.2 million, a $9.5 million or a 42% decrease compared to the first quarter of last year.
This decline in interest expense was primarily driven by a 38% decrease in average debt levels versus last year's first quarter.
Our blended interest rate also declined as we utilized as we utilized IPO proceeds to pay off our highest interest tranche of term debt in March.
I will now highlight a few selected balance sheet items.
Our long term debt.
With $760.4 million as of May 1.2021, a decrease of $569.5 million from May 2.2020, and a further decrease from the $786.3 million as of January 32021, or.
Our $77 million in net proceeds from our initial public offering were used to retire debt primarily our term loan due in 2024, which has been repaid in full.
Merchandise inventories decreased by $75.1 million or 12, 2% in the first quarter of fiscal 2022 compared to last year.
We've continued to improve inventory turn and quality of our overall inventory, which has generated strong year over year improvements on shrink reduction and a lower penetration of clearance inventory and markdowns.
We continue to be pleased with our ability to maintain healthy in stock positions and our store locations and online at a slower overall inventory investment.
Cash and cash equivalents were $22.7 million as of May 1.2021 down from $147 million at the end of the first quarter last year.
The figure from last year reflected additional cash the company carried on the balance sheet from a drawdown on our asset based revolving credit facility, which was repaid during the second quarter of last year.
As of the end of the first quarter. The trailing 12 months adjusted EBITDA reported under our credit facilities was $363.6 million, resulting in a reported leverage ratio for net debt less cash to adjusted EBITDA of $2.1 tax.
On May 21, 2021, our board of directors declared a quarterly dividend of <unk> 10 per common share the.
The dividend is payable on June 25, 2021 to shareholders of record as of close of business June 11th 2021.
The first quarter dividend will be the company's first since we listed on NASDAQ on March 12 of this year.
In summary, we are very pleased with our strong financial performance this quarter driven by sustained growth in our top line sales trends and gross margin improvement.
This momentum was broad based across our retailing operations and reflects continued improvement in consumer sentiment.
As we had mentioned in his prepared remarks, while we expect to incur higher supply chain cost based on the current operating environment. We are very comfortable in our ability to contain these near term headwinds through a variety of margin enhancing initiatives.
With that we'd be happy to take your questions.
Thank you we will now begin the question and answer your question.
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You keep from Bank of America. Your line is open.
Great. Thank you can you just walk us through the biggest drivers of that gross margin this quarter and I guess for either quantify or rank order the impact of the strategic sourcing efforts and promotion activity and strength or any other good guys to gross margin.
Sure This is Matt.
Happy to do that primarily driven by what we would quantify internally as product margins. So I would say the primary driver of that being our ability to optimize discounting relative.
So what we were able to do a year ago I would say pretty closely followed by what's been ongoing success of our direct sourcing.
On.
In terms of being able to go direct to factory in many cases are negotiated better terms with existing vendors.
After that I would say.
On the shrink initiative has been.
A big win for US again, just the lower all overall inventory carrying values is helpful. There, but we've also implemented a number of controls in our stores over the last 12 to 18 months that are starting to really bear fruit.
And then 1 I would put us shortly after that but I think longer term. It is something that we're quite excited about is just the.
The overall lower penetration.
Clearance to our total inventory and if you look at sales of markdown goods to our total was down about 100 basis points, we actually fill for the coming quarters, thats actually going to be 1 of the.
Nice for tailwind for us going forward.
Great and it seems like a lot of those benefits would theoretically continue and this is the king subsequent quarters. I mean is there anything of a 1 time on temporary nature that we should think about or are a lot of these benefits likely to continue.
I mean I'll jump on here I think these benefits will likely continue again on 1 thing we're seeing now is really.
Primarily these massive ocean freight increases and these are.
I'd say.
The bad news is they are probably unprecedented in their nature, but the good news is they are not sustainable at some point theyre going to be and will go back to normalcy.
Yes, I think the rest of it kind of a tailwind.
Talk to we do feel there are sustainable certainly the promotional environment.
Could change I think thats a portion of the benefit we're seeing but I would also attribute much of that to just our own analytics and <unk>.
Really reading of the unprecedented number of new customers, we have coming in to the space and really understanding their sensitivity to promotions and our ability to leverage our high ROE model against assets, we do feel on most of that is sustainable.
Great. Thanks very much.
Net.
And our next question comes from Paul Kearney from Barclays. Your line is open.
Hi, everyone. Thanks for taking my question and congrats on for.
Good quarter out of the gate.
Thank you.
Can you talk a little bit about what what what.
Categories drove some of the sales growth and where youre seeing continued momentum.
Yes.
R R.
Our results for a broad base really all of our core divisions.
We're up and growing.
Sure.
<unk> nicely, especially on.
On the stronger side was really our arts and crafts from seasonal was was a bit stronger than balance but.
Broad based.
So it wasn't as strong, but 1 of the things, even though selling selling is up.
Nicely and nicely on a 2 year stack, but.
We're pretty optimistic about as some of our biggest businesses and selling is actually are actually still how much right now.
Our things like our fashion apparel, our special occasion.
And then Theres, obviously sales that come with that in terms of its when we talk also in construction.
These businesses are in large bids for Tommy because there haven't been letting Scott play events Kinsey areas there hasnt been.
So those kinds of things and as we see different geographies and the ZIP codes open up we're seeing those businesses now start to blossom, but we see that that's going to be actually a nice little tailwind for us too as we get back to the new normal.
Great. Thanks, and just a quick follow up maybe on the storefront on.
On the refresh plan, if maybe you can just remind us how many projects do you plan for this year, what would be the expected timing and just broadly what kind of.
Returns do you see on our store refresh program in terms of comp lift or current profitability. Thank you.
That's a great question. So this is Matt.
We will have a fairly modest number of projects. This year somewhere between 10 to 15 that will be complete as we've talked earlier.
A bit of.
An impairment in our ability to play on those projects. This year just given the pandemic.
Ability to have construction crews and our stores in many markets. We are we.
We've just completed a thorough review of our cold chain in terms of our strategy for those refresh projects.
Well on our way to ramping up to full rollout mode starting.
Really at the end of this fiscal year and moving into early next that will result in about 60 to 70 projects per year.
We endeavor to have blended return on those projects of about 4 years payback on the.
<unk>.
Total investment into those into those projects some of them will blend a bit longer than that a lot of them more quickly where we're getting.
Pretty healthy lifts on those projects for a relatively modest investments.
Thank you very much.
And our next question comes from Steven Forbes from Guggenheim. Your line is open.
Hi, Good evening wait maybe a follow up for you you mentioned machine sales right. During the prepared remarks here, but just curious if you could provide some color on the quarterly performance any update.
Your thoughts on how you expect machine sales to trend this year versus last.
Youre Holistically and then.
Any sort of change in those year, 1 or year, 2 spending trend to call out or relatively consistent to what we've talked about before.
Gain on the machine.
Unit sales across the board have been very strong I think.
I think around 200 per cent or so versus on a 2 year stack basis and they continue to be strong.
Days of selling from AST, making our long on I mean that kind of stopped in September October so.
On that side of the house, we feel very very good and we're still seeing a lot of young consumers come in and and learning the art and evolving and we're seeing experienced consumers continue to trade up on the other.
Side of the house the craft machine hours for very strong very good pipeline of innovation still coming.
Customers are engaging and we're seeing very good follow on sales, we're running the metrics now to keep it the same as historic slowing again, I think is a little bit distorted because a lot of these major events that do a lot of selling of our not happening yet, but they're starting to and so we're seeing good life for that is happening.
We're pretty optimistic that these trends on our year to date.
And that we're not going to see.
Big drop off on this we're still seeing.
Did some tracking of our newer customers recently, we're still seeing their frequency of visit at about twice what our average customer is in their average ticket about 15% to 20% higher. So we're still seeing very good follow on activities and those customers that bought their first machine last year.
And then maybe just a quick follow up on on.
On the expense side of the P&L.
And any sort of update on how you're tracking relative to those indirect spending saving targets that you laid out.
Because it does it did seem like you sort of.
Beat on expenses here relative to the internal plan, so was that something specific to call out.
Or just broad based achievement against those goals goals.
Yes, that's a great question, it's a little of both I would say, we definitely have seen.
Some good traction.
On bids on projects that we've run this year I would also say we are seeing nice.
Ability to be more efficient on our lower inventory carry that provides some nice labor efficiencies for us in our distribution centers as well as our stores.
Done I think a pretty good job.
Leveraging those I think thats also a bit of.
Potential tailwind for us as we can.
Continue to be able to manage pretty well on it.
On that lower inventory investment.
Thank you.
Thank you Steve.
And our next question comes from Peter Keith Piper Sandler Your line is open.
Hi, good afternoon.
Congratulations on the first quarter out as well.
Maybe just a follow up on Matt's from your most recent comments off of Steve's question with new customers.
I know in the past we've talked about the 2020 cohort of customers that bought either a sewing machine or a cricket machine and so I'll, let the sales view for for 2021 was based on retaining about 65% of those customers and that those customers on average we see about 66% increase in spend from year, 1 day or 2 all along.
With historical measures.
Is that something now as we're getting into Q2 and we're lapping. These compares that you guys are still continuing to see hold true.
Yes, I think definitely as I mentioned earlier the frequency in the basket value from that customer.
Is.
At least as strong as we've seen historically and what we have hoped I would say on the <unk>.
On the retention piece was also talking with our chief customer officer, a bit on this earlier in the week and probably a little bit early to tell if we're going to be kind of in that mid 60% to 70% retention rate just because some.
Some of these customers were added in the fourth quarter last year, but certainly we're on trend for that and expect to be able to achieve that.
Okay, Alright and.
I guess there is there is no formal guidance for the second quarter, but at least where the consensus number sits would have your sales growing on a 2 year basis.
At about 15%.
And that's coming off of Q1, where sales on a 2 year basis grew.
11%. So is there anything nuance with Q2, where on a 2 year basis, we could see some acceleration or or Conversely, do you think maybe the 2 year trend will hold steady or decline coming off of Q1.
So what I would say about the 2 year trends for second quarter is the thing you probably need to think about with that and what we look at is that to the.
For the year or 2 years ago that second quarter was a pretty weak quarter for us and actually our first quarter of that year was by far our strongest quarter. So some of this is really the trends in that 2 years ago time period.
We actually feel like our kind of quarter to quarter trends in terms of sales are going to somewhat normalize. This year I think maybe the 1 piece that would go against that as Wade mentioned, we did reduce saw some businesses that have been shut down due to COVID-19 things like our celebrations category special occasions, and so on.
We're hopeful those will pick up some steam as we move through the year.
Okay, Great maybe 1 last question just thinking forward as well.
I believe when we were looking for some ongoing gross margin expansion year on year through the rest of the year you are highlighting now freight costs as a headwind and you expect to offset those does that imply you think gross margin will probably run more flattish year on year or do you still expect to see year on year gains in the coming quarters, yes.
Yes, so we're really speaking to being able to offset relative to our expectations. So we had expectations to grow margins, we still have expectations to grow margins while.
What we're really saying is we have some tailwind that maybe would have had us even more optimistic those are going to be soften a bit for supply chain costs I mean for perspective on the on.
On the Ocean freight what we're seeing now on some of that.
Brokered.
Containers that we're getting is as high as 10 times as wounds historically paid.
So again thats going to ultimately subside I know others, we're seeing similar issues, but that's probably the 1.
Anomaly and that didn't hit us very much in the first quarter that really is is the thing that hits us throughout the balance of the year and then ultimately we would expect to return to normal. So we grew gross gross margins by 350 basis points in the first quarter.
We don't expect to give all of that back but certainly.
Not be that strong on a year over year basis for the balance of the year.
Yes, Okay very helpful. Thanks, so much.
Sure.
And your next question comes from Dax, Steven from Wells Fargo. Your line is open.
Hey, good afternoon.
Again on the tougher compare in Q2 is there any color on on your May trends you could talk about and then on the SG&A side could you walk us through the deleveraging impact on on your modeling to what extent you are able to flex down any of the SG&A costs to better manage the profitability.
Yes.
For someone who might be newer to the company. The Q2 compares last year had not only this kind of huge PPE surge, which has been long on it also had.
From our largest competitors in our space such other stores on for a while so that's part of that really anomalous Q2 that we're up against.
But for me we feel good I mean, I was just kind of a lull on the middle of the month.
But we finished really.
Really strong and there is nothing that makes us feel that these underlying trends that we've been able to enjoy in these incremental customers.
Our meeting.
Yes, I think on the Delevering point.
On the.
On the SG&A side.
Q2 is historically, our slower quarter, we do.
Try and control costs, even absent.
On the unusual trend we're up against from last year. The 1 thing I would say is we.
We also make a lot of our.
Hi.
Our earnings in the back half of the year and a lot of what we need to do to prepare for that occurs in the second quarter. So.
We're going to be able to manage at or below our internal expectations on what we may have share earlier around SG&A. We are also not going to.
For the back half at risk by trying to cut cost.
Costs that allow us that are allowing us to be ready to do the stronger business on the back half I guess, 1 thing I would say too is as we've really spared no expense to make sure that we are standing strong in our in stock positions and our seasonal and being able to really run through the year. So.
We feel good about that versus the opposite of trying to save cost and not being able to to be as relevant or as strong to our customers. So it's a choice. We've made and we think it's going to serve us well.
Got it that makes sense and then.
On the E com mix, taking a little bit of a step down in the quarter I assume that that has to do with customers returning to stores.
Maybe you could talk about whether there was any mix impacted.
Gross margin compared to your plan and then as we move through the year.
Whether you expect that E comm mix to step back up and should we expect any offsetting gross margin get back.
As a result.
On the E Comm the thing to remember is as we got into April last year, and then as we move forward. We had many of our stores that were shut down completely to visitors entering so the only way we could serve them.
Was.
On line.
But now we're at a point this quarter is much more of on a normalized quarter. If you will I am not 1 of our higher for E com, but the numbers you see now on all of our stores are fully open the customers are coming back. So I think you're getting a good view of what.
On a normal looks like as we grow from here.
Yes, so we think that 12% to 15% penetration on an annualized basis is a healthy place for us to be we certainly have some initiatives where that may grow in the future.
But it is seasonal so we do typically even with a normalized pans.
Pandemic environment.
Economy, we would typically have a bit higher penetration from ecommerce in the back half of the year relative to what we see in the early part of the year. There is a little bit primarily related to freight direct to consumer free that it has on our margins, but I would say it's relative to each other things we've talked about it's pretty minor.
Our econ business is now very profitable and we've got a couple of very big levers that we can make it even more so from a cost perspective, and as well as the top line now that we're kind of at the new normal moving forward. So.
I encourage by that.
Got it that all makes sense I appreciate the time Tonight.
Okay.
And just as a reminder to enter the queue. Please press Star then 1 on your Touchtone phone and your next question comes from Cristina Fernandez with Telsey Advisory Group. Your line is open.
Hi, good afternoon, and congratulations on a go.
Quarter.
You did mentioned the government stimulus day on your prepared remarks, do you think it had a benefit during the quarter.
And perhaps could you quantify any benefit from that.
And I would probably never seen that we didn't have any benefit right but.
If we did it very hard to measure.
For purchases under.
Under $30.
On the kinds of customers we have.
It's very different than I'd say automotive appliances from alike. So.
There's nothing there that we think distorts the quarter versus a normalized 1 on any meaningful way.
Also for this quarter specifically.
Those occurred in what was already expected by us to be the strongest part of the quarter. Its when we are on a year on year basis, It's when we're up against the kind of the worst.
Store Covid shutdowns last year, we also had an earlier Easter this year, which is beneficial to our business.
So again, I think thats a ways that makes it even a little muddy or for us to really kind of sort out how much of that strong period of the quarter was due to the stimulus.
Yes.
And then.
Follow up question on promotion can you comment on what youre seeing across the industry.
This industry traditionally has been promotional so to the extent that some of your competitors, bringing back promotions did you feel compelled to follow them or do you think with your.
Thank you Dan sort of differentiation of your product on.
On a lower level versus your historic historical pattern.
Maybe I'll throw in my opinion, a Mac and thrown at us, but I think we're seeing it.
A pretty rational environment out there and.
We still promote we're always going to promote but I think we're getting smarter and smarter of how and when and why we promote.
Our customers seem to be with us.
Both our historic customers with us, but I think importantly, we do give great value even when we promote the way we promote now and a lot of the new customers.
Or maybe you haven't been with us for a long time there.
<unk> of our value proposition, we think is still very robust so I don't see that personally.
Changing I mean, I'd never say never but I think right now it's a good environment.
To do so for some time.
Totally agree.
And we have no further questions I'll turn the call back over to Mr. Wei Milacron's for any closing remarks.
Well look I just want to thank all of you. It's been a it's been on I'm sure for all of you and your families has been.
A crazy year.
But here, we are and hopefully we're all moving forwards brighter times a lot of the good results we're seeing.
Really feel is really because of this transformational journey. We started several years ago here raising our game on all aspects of Assortments for our store experience, our omni digital market our capabilities talent.
We've got our 27000 and change employees, who work very hard every day and it takes it takes every single 1.
Doing their part and I'm grateful for all of them as well.
For those of you that our stakeholders.
And it will possibly be I, just want you to know that we're working as hard as we can every day on your behalf. We think we've got a great company here and we're really committed to take it to even iron units.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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