Q2 2022 Ethan Allen Interiors Inc Earnings Call
Good afternoon, and welcome to the Ethan Allen fiscal 2022 second quarter Analyst Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the presentation. Please note that this conference is being recorded.
It is now my pleasure to introduce your host.
Matt Mcnulty Senior Vice President Chief Financial Officer, and Treasurer. Thank you you may begin.
Thank you Diego good afternoon, and welcome to Ethan Allen's Analyst conference call for fiscal 2020 two.
Second quarter ended December 31, 2021 joining me today is true category, our chairman President and CEO , Mr. Katz, where I will open and close our prepared remarks, while I will speak to the financials midway through after our prepared remarks, we will then open the call for your questions.
Before we begin I'd like to remind the audience that this call is being recorded and webcast live on Ethan Allen Dot com, where you'll find a copy of our press release, which contains reconciliations of non-GAAP financial measures referred to in this release and on this call. A replay of today's call will also be made available via phone and on our website. As a reminder, our comments today will include forward.
Looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings for a complete review of those risks the company assumes no obligation to update or revise any forward looking matters discussed during this call with that I am pleased to now turn the call over to Mr. Katz for it.
Thank you, Matt and good afternoon and please.
Did you have a joined I'm happy to provide a brief overview of our results and focus as we move forward.
As reported we had strong results sales increased 16, 4% to $208 1 million gross margins increased to 58, 8% from 56, 7% and adjusted operating margin rose to 15.7% or is that.
Resulting in adjusted earnings per share of 95 cents of 37.7% increase.
We also maintained strong cash position of $105 2 million and no debt.
Oh.
Also as conveyed in our various communications, we are very pleased to celebrate 90 years of innovation.
And profitability.
After Matt's provides a brief overview of our financial results I will review our initiatives to continue our growth in sales and earnings and also continue with the strong dividends as we have done as you know.
No matter, who was recently promoted to CFO after serving as our VP of finance and Treasurer, Matt Matt.
He has a strong public and private accounting and finance background and I'm very very pleased to have him here can be part of the team with that Matt.
Speaker 1: has a strong public and private accounting and finance background. And I'm very, very pleased to have him here to be part of the team. With that, Matt. Thank you.
Thank you Mr Katz wide.
Speaker 2: As we celebrate 90 years of innovation throughout fiscal 2022.
As we celebrate 90 years of innovation throughout fiscal 2022 we saw acceleration of Internet sales with both wholesale and retail net sales reporting double digit growth as well as an operating margin and diluted EPS during the quarter, while our retail written orders were flat to the second quarter last year orders were up 45% from two years ago temporarily.
Speaker 2: We saw acceleration in our net sales with both wholesale and retail net sales reporting double digit growth as well as an operating margin and diluted APS during the quarter.
Speaker 2: While our retail written orders were flat to the second quarter last year, orders were up 45% from two years ago. Similarly, wholesale segment written orders were up 1.7% to last year, but up 30% compared to the second quarter of fiscal 2020.
Wholesale segment written orders were up one 7% to last year, but up 30% compared to the second quarter of fiscal 'twenty 'twenty. Our order backlog at December 31st are approximately 50% higher than a year ago, but becoming more current and we expect to get caught up caught up during calendar 2022.
Speaker 2: Our order backlogs at December 31st are approximately 50% higher than a year ago, becoming more current and we expect to get caught up during calendar 2022.
Speaker 2: Retail net sales were up 24% and wholesale net sales increased 14.2%. Consolidated net sales were up 16% from increased manufacturing production that led to higher deliveries combined with the prior year being negatively impacted by COVID-19 production delays. The increased production was partially offset by continued supply chain disruptions, which negatively impacted raw material receipts and imported finished products.
Retail net sales were up 24% and wholesale net sales increased 14.2% consolidated net sales were up 16% from increased manufacturing production that led to higher deliveries combined with the prior year being negatively impacted by COVID-19 production delays. The increased production was partially offset by continued.
Supply chain disruption, which negatively impacted raw material receipts and imported finished products.
Speaker 2: Consolidated growth margin increased 210 basis points to 58.8%, primarily due to a change in the sales mix, benefits realized from the ongoing manufacturing and logistics optimization project and a favorable product mix partially offset by higher import and raw material costs.
Consolidated gross margin increased 210 basis points to 58, 8%, primarily due to a change in the sales mix benefits realized from the ongoing manufacturing and logistics optimization project and a favorable product mix, partially offset by higher import and raw material costs.
Speaker 2: The retail sales mix grew to 86.3% of consolidated sales compared to 81% a year ago, which positively impacted our consolidated gross margin. While we are pleased with our consolidated gross margin at 58.8%, we expect our margins to return to approximately 57.5% in the near term due to the impact of rising raw material, labor and freight costs, combined with the return of our sales mix to more historical norm.
The retail sales mix grew to 86, 3% of consolidated sales compared to 81% a year ago, which positively impacted our consolidated gross margin.
We were pleased with our consolidated gross margin of 58, 8%, we expect our margins to return to approximately 57, 5% in the near term due to the impact of rising raw material labor and freight costs combined with the return of our sales mix to more historical norms.
Speaker 2: Adjusted operating expenses were 43% of sales for the quarter, down from 43.8% last year due to our operational leverage along with reductions in certain selling expenses, including advertising costs. We reduced our advertising in various mediums, including national TV and regional radio markets, thereby reducing our overall spend to 2% of net sales compared to 2.8% last year. For the rest of fiscal 2022, we expect advertising to be approximately 3-4%.
Adjusted operating expenses were 43% of sales for the quarter down from 43, 8% last year due to our operational leverage along with reductions in certain selling expenses, including advertising costs, we reduced our advertising and various mediums, including national TV and rate regional radio markets, thereby reducing our overall spend to 2%.
Net sales compared to two 8% last year.
For the rest of fiscal 2022 we expect advertising to be approximately 3% to 4%.
Speaker 2: Adjusted operating margin, which excludes restructuring initiatives and other corporate actions, increased from 13.1% last year to 15.7% in the current year, primarily due to the strong gross margins and cross containment measures.
Adjusted operating margin, which excludes restructuring initiatives and other corporate actions increased from 13, 1% last year to 15, 7% in the current year, primarily due to the strong gross margins and cost containment measures adjust.
Speaker 2: Adjusted diluted EPS was $0.95 and increased to 37.7% due to net sales growth, expanded retail and consolidated gross margins, our ability to minimize operating expense growth and improve production and delivery of products, partially offset by higher raw material and freight costs. Now turning to our liquidity side.
Adjusted diluted EPS was <unk> 95, an increase of 37, 7% due to net sales growth expanded retail on consolidated gross margins, our ability to minimize operating expense growth and improve production and delivery of products, partially offset by higher raw material and freight costs now turning to our liquidity and capital resources.
Speaker 2: We ended the quarter with $105 million of cash on hand, an increase of $11.5 million in the last three months, primarily from $5.5 million of cash from operating activities and the sale of two properties for total cash proceeds of $8 million.
We ended the quarter with $105 million of cash on hand, an increase of 11 and a half million dollars in the last three months, primarily from $5 5 million of cash from operating activities and the sale of two properties for total cash proceeds of $8 million. Our board also increased our regular quarterly cash dividend by 16% and November 2021 reflecting the strength.
Speaker 2: Our board also increased our regular quarterly cash dividend by 16% in November 2021, reflecting the strength of our balance sheet and strong history of returning capital shareholders.
Our balance sheet and strong history of returning capital shareholders. In addition, just yesterday, we amended our credit existing credit agreement to provide the revolving credit line of $125 million and extends the maturity of the facility to January 2027.
Speaker 2: In addition, just yesterday we amended our existing credit agreement which provides a revolving credit line of $125 million and extends the maturity of the facility to January 2027.
Speaker 2: The amended facility also provides the company with a transition to SOFR, improved pricing on borrowings, and enhanced future flexibility over the next five years. With that, I will turn the call back over to Mr. Kethwari.
The amended facility also provides the company with the transition of sulfur improved pricing on borrowings and enhance future flexibility over the next five years with that I will turn the call back over to Mr category.
No. Thank you Matt.
Our unique vertically integrated structure, but maybe focus on one brand from comes to rough idea to design to manufacture our retail and logistics has provided us with strong returns.
Speaker 1: Our unique vertically integrated structure where we focus on one brand from concept of idea to design to manufacture, retail and logistics has provided us with strong returns in a very challenging environment. Our focus continues.
In a very challenging environment.
Our focus continues on five areas.
Of talent.
Speaker 1: service, marketing, technology, and social responsibility.
Serviced.
Marketing technology and social responsibility.
Speaker 1: In the area of talent, I am pleased we continue to make great
In the area of talent I am pleased we continue to make great.
Speaker 1: progress. Importantly, we have strengthened our board of directors. Our newest member, Gina Castor, elected early this week, joined us.
Progress importantly, we have strengthened our board of directors of our newest member G&A costs are elected early this week joined us.
Speaker 1: joined us with our directors on this call. Welcome, Gina. Gina has a strong background in management, finance, and ESG.
Joined us with our directors on this call are welcome Gina Gina has a strong background in management finance and E. S. G.
Speaker 1: During the last quarter, we strengthened our boat. In addition to our director, John Dooner, who is our lead director, and Tara Staken, we were joined by a number of new directors. Cynthia Tsai, background in entrepreneurship and finance.
During the last quarter, we strengthened our vote and in addition to our director John Duda, who is our lead director and terrorists taken.
You are joined by a number of new directors, Cynthia Si background, and entrepreneurship and finance John Clark background in management and finance and the President of her love of University had David Sable, a background of a CEO and a strong marketing background.
Speaker 1: John Clark, background in management and finance, and a president of our university here. David Sable, a background of a CEO and a strong marketing background.
Yeah.
Speaker 1: about John Dooner has a distinguished career including as a CEO of a leading marketing advertising company and Tara Statham manages a leading real estate enterprise. So very pleased to have a very strong board of directors.
About John Dooner has a distinguished career includes into the sea of our leading marketing advertising company and terrorists take them manage isn't got leading real estate enterprise. So very pleased to have a very strong board of directors.
Speaker 1: During the quarter, we also promoted a number of our executives. I'd like to mention about Amy Franks, a veteran of 30 years, 33 years, in our enterprise as Executive Vice President of Retail and Business Development.
During the quarter. We also promoted a number of our executives I like to mention about Amy Franks, a veteran of 30 years 33 years in our enterprise as executive Vice President of retail and business development.
Speaker 1: I mentioned about Matt McNulty being promoted to CFO .
I Hope I've mentioned about Matt Mcnulty being promoted to CFO .
CFO .
Speaker 1: We, Corey Whitely, after 33 years of dedicated service
We Corey Whitely after 33 years of dedicated service decided to work for us as an adviser a consultant.
Speaker 1: decided to work for us as an advisor consultant. We thank him for his work throughout this period.
We thank him for his look throughout this period.
The second area service.
Speaker 1: Maintaining about 75% of manufacturing in North America is an important part of our strategy to service.
Men.
Maintaining about 75% of manufacturing in North America is an important part of our strategy to service.
Speaker 1: and almost all of the 75% is custom made when orders are received from clients.
And almost all of the 75% is custom made when orders are received from clients.
Speaker 1: We continue to invest in our manufacturing, including a strong workforce, addition to our plants and investing in technology.
We continue to invest in our manufacturing, including a strong workforce addition to our plants and investing in technology.
Speaker 1: Our national and retail logistics delivers our products.
Our national and regional logistics delivers our products.
Speaker 1: with white glove service at one cost nationally.
The white glove service at one cost nationally.
Speaker 1: This is a great, great advantage which we started close to 30 years back. While we have been impacted with major freight increases internationally and domestically, we have been able to provide good service to our clients.
This is a great great advantage, which we started close to 30 years back while we have been impacted with major freight increases internationally and domestically we have been able to provide good service to our clients.
Speaker 1: Third area is strong and relevant marketing. Continues to convey our differences.
Third area is strong and relevant marketing continues to convey our differences.
Speaker 1: We have utilized strong digital print and other mediums to help us reach.
We utilize strong digital print and other mediums to help us reach.
Speaker 1: a larger consumer base at lower costs.
A lot of their consumer base at lower costs.
Speaker 1: The fourth area is technology. Technology enhancements during the last 12 years or so have been critical to help us sales and improve efficiency through our enterprise.
The fourth area is technology technology enhancements during the last 12 years or so have been critical to help our sales and improve efficiency throughout our enterprise.
Speaker 1: And finally, we continue with strong focus on social responsibility, which includes taking care of our associates, especially in these challenging times, and maintaining strong focus on environmental programs.
And finally, we continued with strong focus on social responsibility, which includes taking care of our associates, especially in these challenging times and maintaining strong focus on environmental programs now.
Speaker 1: Now, with this, I'm very pleased to open for any questions or comments.
Now with this I'm very pleased to open for any questions or comments.
Thank you.
Speaker 3: Ladies and gentlemen, at this time we will be conducting our question and answer session.
And ladies and gentlemen at this time it will be conducting our question and answer session.
Speaker 3: If you would like to ask a question, press star 1 on your telephone keypad.
If you would like to ask a question press star one on your telephone keypad.
Speaker 3: Your confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number 2 if you would like to remove your question.
A confirmation tone will indicate that your line is in the question queue.
You May press the Star key followed by the number two if you would like to remove your question from the queue.
Speaker 3: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Speaker 3: Our first question comes from Brad Thomas with KeyBank. Please go ahead.
Our first question comes from Brad Thomas with Keybanc. Please go ahead.
Hello, Brad.
Speaker 4: Hi Farouk, hi Matt, how are you two doing? Very good Brandon, yourself?
Hi, Farooq Hi, Matt how are you doing very good brand and yourself.
Speaker 4: I'm doing well, and let me add my congratulations, Matt, for the record here on your promotions. Congratulations. Thank you very much.
I'm doing well and let me add my congratulations Matt for the record here on on your promotions. Congratulations. Thank you very much.
Yeah.
Speaker 4: Well, I had a couple of questions. I wanted to first ask a bit more about the cadence of the business.
Well I had a couple of questions I wanted to first ask a bit more about the cadence of the business still running from an order standpoint, it really really exciting levels from a company perspective in a historic perspective, but I was just curious.
Speaker 4: still running from an order standpoint at really, really exciting levels, you know, from a company perspective and a historic perspective. But I was just curious, Farouk, what you've been seeing lately in orders and how you plan the business for the quarters ahead and think about the outlook for the furniture industry. Yes. The last year.
<unk> Farooq, what you've been seeing lately in orders and how you how you plan the business.
For the quarters ahead, and think about the outlook for the furniture industry.
Yes.
Last year was exceptional Brad.
And.
Yeah.
Speaker 1: And that, of course, created its own opportunities and challenges with tremendous amount of backlogs. It also resulted in substantial increase in our written sales, as we have declared. And of course, it also resulted in a great impact on our profitability.
And that of course created its own opportunities and challenges with tremendous muddle backlogs. They didn't create this also resulted in increase substantial increase in our written sales as a as we have.
As we have declared and of course. It also resulted in a greater impact on our profitability now the impact on the region. We while we had very very strong retail.
Speaker 1: Now, the impact on the, while we had very, very strong retail orders.
Orders the impact really was on the delivery side on the cost structure side I wish we have rich, which really impacted everybody in our industry and in fact, everybody else. So we were able to manage it because of the high sales that we were able to deliver that took care of some of the.
Speaker 1: The impact really was on the delivery side, on the cost structure side, which really impacted everybody in our industry and in fact everybody else. So we were able to manage it because of the high sales that we were able to deliver that took care of some of the major increases that we saw on the wholesale side. Our wholesale side margins were impacted.
Major increases that we saw on the wholesale side, our wholesale side margins were impacted if it wasn't the fact that we had a strong business in our retail I mean, we really would have been if all our visitors was wholesale I think we would have been severely impacted.
Speaker 1: If it wasn't the fact that we had a strong business in our retail, I mean, we really would have been, if all our business was wholesale, I think we would have been severely impacted.
Speaker 1: I think that last year, and in fact last
I think that we have lost yeah and in fact last.
Speaker 1: this last quarter. As you can see, our orders were pretty much somewhat flat compared to the previous year, but if any people take a look at it.
This last quarter as you can see all our auto orders lost pretty much somewhat flat compared to the previous year, but it got much if any caves would take a look at it two years.
Speaker 1: Two years back, it was up how much, Matt? 45%. 45% from the quarter of the previous year. So flat is good, because we had very, very strong orders. And I see, as we move forward, from an orders point of view, I think if we maintain flat, or even a little bit lower, we still have very substantial orders coming in.
It was up how much that that 45%, 45% from the quarter of the previous year. So flat is good because we had very very strong orders and I see as we move forward from an orders point of view I think if he maintained flat or even a little bit lower we still have a very.
Very substantial orders coming in.
Brad.
Yeah, that's great and then just on the question of capacity.
Speaker 4: And then just on the question of capacity, you know, you were able to deliver more than we would have expected this quarter, some encouraging execution on your part. Can you just share with us what the outlook is for capacity and how much you think you could generate in the quarters ahead?
You were able to deliver more than we would have expected. This this quarter some encouraging.
Execution on your part.
Can you just share with us what the outlook is for capacity and how much you think you could generate in the quarters ahead.
Speaker 1: Yes, you know, because of the fact that 75% of our products are made in our plant in North America, that has been a great help. Although, Brad, we have been impacted by COVID, employees being out. We have been impacted by, in some cases,
Yes, you know.
Because of the fact that 275% of our products are made in our plants in North America that has been a great help although we have been impacted by COVID-19 employees being out or.
We have been impacted.
By in some cases.
Speaker 1: by cost increases. So what we did was in North America in the middle of last year
By cost increases so what we did was in America in North America.
In the middle of a lot last year.
Speaker 1: towards the fall, we decided, I was actually visiting Vermont, our plants were there, and we saw that, you know, we had to get people. So we decided to increase our base wages, and we started getting people in. But still, in our manufacturing, while we have produced well, but it ran impacted by COVID. So going forward, I believe that we have the opportunity to continue to increase our capacities.
Towards the towards the fall, we decided that was actually who are visiting Vermont our plants over there and we saw that you know we are we have to get people. So we decided to increase our base.
Wages, and we started getting people in but still in them and.
Manufacturing all are while we have produced well, but it has been impacted by Covid. So going forward I believe that we have the opportunity to continue to increase our capacities in all.
Speaker 1: in our manufacturing because we have invested a great deal in technology and we continue.
All in on manufacturing because we have invested a great deal in technology, and we continue to technology in our wood manufacturing technology.
Speaker 1: Technology in our wood manufacturing technology in our upholstery with the newest technology if we had not done that on The manufacturing side I'll talk a little bit about on the retail side too, but that has really helped us, so I think
Upholstery with the newest technology, if we had not done that on the manufacturing side I'll talk a little bit about on the retail side too, but that has really helped us so I think.
Speaker 1: We do not know where this COVID is heading, but at this stage, we have the opportunity to continue to increase our capacities and production. 25% of our products do come from offshore, and of course, as we know, they were impacted.
We do not know we have discovered is heading but at.
At this stage, we have the opportunity to continue to increase our capacities in production.
25% of our province, do come from off shore and of course as you know they were impacted with the issue of Covid and in a major major transportation costs. Fortunately our.
Speaker 1: issue of COVID and major, major transportation costs.
Speaker 1: Fortunately, we have very, very strong partners. And the interesting thing is that we have a fairly large number of containers.
We have very very strong partners and the interesting thing is that we have a fairly large number of containers are.
Speaker 1: coming in. So our overseas is not too bad as well because we have only 25% of our, which is still a bit large, but if we had, you know, 80-90% which most folks do, it would, I don't know, it really would be a major problem.
Coming in so our overseas is not too bad as well because all we have only 25% of all we just feel a bit light, but if he had you know 80, 90% of which most folks do.
I do know that it really would be a major problem.
Very helpful. Congrats on the great quarter and thanks.
Speaker 4: Very helpful. Congrats on the great quarter, and thanks again for taking my question. All right, thanks, Brad.
Thanks for taking my question all right. Thanks, Brad.
Speaker 3: Thank you. And our next question comes from Andrew Applemoth with KeyBank. Please state your question.
Thank you and our next question comes from Andrew Apple Moss with Keybanc. Please state your question.
Hello, Andrew.
Speaker 2: Hi, good afternoon, Brooke and Matt. Thank you for taking my questions. I wanted to start off by following up on Brad's capacity question. You mentioned that you continue to plan for significant capacity increases in the quarters ahead. But at the same time, this quarter saw, for the first time you saw delivered revenue outpaced written revenue.
Hi, good afternoon, Farooq and Matt. Thank you for taking my question.
I wanted to start off by following up on Brad's capacity question.
You mentioned that you continue to plan for significant capacity increases in the quarters ahead, but at the same time. This quarter saw the you know for the first time you saw it delivered revenue outpace written revenue.
Speaker 5: And so I'm just wondering, a little bit more clarity, do you expect to slow down the rate of capacity increases that you are doing, or how should we think about that for the coming quarters? And finally, how should we think about how that translates to delivered revenue? In this last quarter, for example, you saw about, you know, a pretty significant
And so I'm, just wondering a little bit more clarity do you expect to slow down the rate of capacity increases that you are doing or or how should we think about that for the coming quarter and finally, how how you know how should we think about how that translates to delivered revenue and in this last quarter. For example, you saw.
You know are pretty significant.
Speaker 1: about 26 million dollars of delivered revenue growth on a sequential basis. Do you expect to see that level of magnitude in the quarters ahead or do you expect that magnitude to slow down? Well, you know, there are two factors. First is, Andrew, that we do have still...
$26 million of delivered revenue growth on a sequential basis do you expect to see that level of magnitude in the quarters ahead or do you expect that magnitude.
Just slow down.
Well you know there are two factors first as Andrew that we do have still a strong backlog.
Speaker 1: So that backlog is going to enable us, certainly in this quarter, and maybe in the following quarter, to be able to maintain strong shipments, provided, of course, that we don't have any major issues on the supply side. I don't think so, but we always have to keep that perspective in mind.
So that backlog is going to enable us certainly in this quarter and maybe into <unk>.
Following quarter to be able to maintain strong.
Shipments provided of course that we have that we don't have any major issues on the supply side I don't think so but you know we always have to keep that perspective in mind.
So.
Speaker 1: The capacities that we have increased and we plan to increase will cover the backlogs we have. And then, of course, we also have very strong programs in products and in marketing to continue to grow our business so that any increased capacities should be there for us to grow our business.
The capacities that we have increased and we plan to increase will cover the backlogs. We have and then of course, we also have very strong programs and products and marketing to continue to grow our business. So that any increase capacities should be there for us to grow our business.
Understood and and you mentioned that you you're seeing a little bit more COVID-19 disruption on the labor side, if I heard you correctly in that and that makes sense given the heightened omicron wave where we're in currently.
Speaker 5: Understood. And you mentioned that you're seeing a little bit more COVID disruption on the labor side, if I heard you correctly, and that makes sense given the heightened Omicron wave we're in currently. But wondered if you could give us a sense for how...
But but wondered if you could give us a sense for how.
Speaker 5: how that increased COVID disruption may impact delivered revenue for the next quarter or so.
How those.
That increased Covid disruption may may impact delivered revenues for the next quarter or so.
Speaker 1: Yes, it's a good question, Andrew. Right now, we do see some impact.
Yes, it's good question Andrew is right now.
We do see some impact.
Speaker 1: However, I think that in some areas, it's impacting more than others. That looks like that we'll be able to maintain fairly close to the production levels that we had in the second quarter.
However, I think that in one in some areas, it's impacting more than others.
It looks like there will be able to maintain fairly close to the production levels that we had in the second quarter.
Okay, that's very helpful.
Speaker 5: And and then on written sales, I know that.
And and then unwritten sales I know that.
Speaker 5: You gave some commentary, but just wanted to follow up here. You know, while written sales were flattish for the quarter, it was good to see the acceleration on a two-year basis, at least for the retail written orders. Could you talk about what drove that acceleration? Or if that was more because of the timing of the membership model actions you had about two years ago? Just any color there would be great.
You gave some commentary about just wanted to follow up here you know while written sales were flattish for the quarter. It was good to see the acceleration on a two year basis at least for the rate or the retail written orders.
Could you talk about what what drove that acceleration or if that was more because of the timing of our the membership model actions you had about two years ago I'm, just any color there would be great.
Speaker 1: You're talking about the increase from not the last quarter but the previous year.
Yeah, I do you're talking about the increase from a phone from not the last quarter, but the previous year.
Speaker 1: And yes, it had a number of factors. Of course, first is that consumer interest in the home has continued to be strong, and that to me is the main factor.
Yes. It had a number of factors of course first is that consumer interest in the home has continued to be strong.
That to me is the main factor.
Speaker 1: The second is that our competitive advantage.
The second is that our competitive advantage of having about close to 1500 interior designers in our network.
Speaker 1: of having about close to 1,500 interior designers in our network.
Speaker 1: who have been empowered with technology.
Who are who are who have been empowered with technology.
Speaker 1: You know, I would tell you, Andrew, that if we had not in the last eight and 12 years invested in technology with our designers, training them to be able to work virtually.
I would just tell you Andrew that if we had not in the last eight.
At 10 12 years invested in technology.
With our designers training them to be able to work virtually.
Speaker 1: from home, from the design center, working with clients.
From home from the design center working with clients, we would not have the business. We have so today combining the professional work off our designers with technology is critical.
Speaker 1: we would not have the business we have. So today, combining the professional work of our designers with technology is critical.
Speaker 1: to not only what we have done, but critical to the future. And I think that will be very important as we move forward.
To not only what we have done what's critical to the future and I think that will be very important as we move forward.
Understood.
Speaker 5: And I guess for my last question here.
And I guess for my last question here.
Speaker 5: In your prepared remarks, you noted that you plan to take some additional selective price increases to further counter the rising costs you are seeing.
In your prepared remarks. He noted that are you planning to take some additional selective price increases to further counter the rising costs you are seeing.
Speaker 5: I know that you have already implemented some price increases and some reduced discounts to offset the higher prices previously, but I was wondering if you could...
I know that you have already implemented some price increases and some reduced discounts too to offset that the higher prices previously.
But I was wondering if you could if you could share if you're if you have it if you could share how much higher your average prices are currently tracking versus pre pandemic levels and going forward how much how much more do you expect to increase that to fully offset the cost inflation impacts.
Speaker 5: if you could share how much higher your average prices are currently tracking versus pre-pandemic levels, and going forward, how much...
Speaker 5: How much more do you expect to increase that to fully offset the cost inflation impact?
Yeah, Andrew first of all our values of our projects are an excellent because we really haven't taken the price increases to take care of all of the increases, especially from a transportation to raw materials to everything else.
Speaker 1: Yeah, Andrew, first of all, our values of our products are excellent because we really haven't taken the price increases to take care of all the increases, especially from a transportation to raw materials.
Speaker 1: I would say that we have done it selectively, in the sense that many of our product programs coming from offshore had to be increased first, and that's what we did.
I would say that we have we have done it selectively in the sense of many of our product programs coming in from offshore had to be increased first and that's what we did and in those increases were fairly large anywhere from 15% to 25% based upon the cost of a container has gone from.
Speaker 1: And those increases were fairly large, anywhere from 15 to 25 percent, based upon the cost of a container has gone from $2,000 to $24,000.
$2000 or $24000.
Our.
Speaker 1: I also mentioned, which is a very unique setup that we have, which really helps our retailers, both our company operated and especially our independent.
Also mentioned, which is very unique.
Set up that we have which really helps our retail is both our company operated and especially our independence, which is that we deliver our product at one cost to them, whether you're out in Seattle, or Texas or wherever so we have also had to absorb.
Speaker 1: which is that we deliver our product at one cost to them, whether you are in Seattle or Texas or wherever. So we also have to absorb.
Speaker 1: domestic cost increases in transportation, which while not being at the level of the international still have been high, maybe 8 or 10 percent.
Domestic cost increases in transportation, which while not being at the level of the international still a bit high maybe 8% to 10%. So we've absorbed that and that is why our retail margins. In addition to the fact, we had very high sales, but the fact is they are costs did not increase like any I would think of any other REIT.
Speaker 1: So we have absorbed that, and that is why our retail margins, in addition to the fact that very high sales, but the fact is their cost did not increase like any, I would think, any other retail in the country. So going forward, I think we'll be able to maintain this advantage that we have of a vertical integration. We will take some more selected price increases, but I would say that if you have to average it out, it's about a 10% price increase.
And the in the country. So going forward I think we'll be able to maintain a disadvantage that we have of our vertical integration.
We will take some more selected price increases, but I would say that if you have to average it out it's about a 10% price increase.
Understood that's helpful and great to hear thank you.
Speaker 6: All right.
All right Andrew.
Speaker 3: Thank you. Our next question comes from Christina Fernandez with Telsey Advisory Group.
Thank you. Our next question comes from Cristina Fernandez with Telsey Advisory Group. Please go ahead, Hello, Hi, Hi.
Speaker 7: Hello, Christina. Hi, good afternoon. And congratulations on a good quarter as well. I had a couple of questions. I wanted to see if you could talk about, you know, as you've been able to increase manufacturing and deliver more goods.
Hi, good afternoon, Farooq, a map and congratulations on a good quarter as well I had a couple of questions I wanted to see if you could talk about you know as you've been able to increase manufacturing and deliver more goods.
Speaker 7: I mean, are customers seeing shorter order to delivery times or is it too early?
I mean, our customers are seeing shorter order to delivery times or or is it too early.
Speaker 1: No, for us, that's a good, that's a really good comment because our advantage.
No for us that's a good that's a really good comment because our advantage.
Is the fact that our let's just take upholstery, which represents about 50% of our total business.
Speaker 1: are upholstery, average upholstery delivery time, and this is custom.
Our upholstery average upholstery delivery time and this is custom.
He is about eight to 10 weeks.
Speaker 1: And I would think, now because, again, it might be a little bit larger if it goes to Seattle or it goes to some other places because our poultry is made in North Carolina and in Mexico, Sinaloa, Mexico. I would think that...
And I would think now because again there might be a little bit larger if it goes to Seattle or it goes to some other places because of our upholstery is made in North Carolina and in in.
Mexico still on Mexico.
I would think that more.
Speaker 1: most folks have a much, much larger lead time.
Most folks have a much much larger lead time.
Speaker 1: Same thing in our wood products, it's a little bit larger because of the backlog that we have.
Same thing in our wood products, just a little bit larger because of the backlog that we have and keep in mind.
Speaker 1: Almost 100% of the products we made in North America is custom when we receive the order.
So almost 100% of the products that are made in North America as a customer when we receive the order.
Speaker 1: So there I would say that our delivery time in our wood products ranges from anywhere from 12 to 15 weeks.
So there is I would say that our delivery time in our wood products are ranges from anywhere from 12 to 15 weeks.
Speaker 1: which is still much, much lower than what we have, what the industry has.
We just still much much lower than what we have with the industry has.
Speaker 7: that's helpful. And then, you know, what's the supply chain going on with your manufacturing capacity? Are there any other are there any other product categories that you might consider, like bringing back to North America?
That's helpful.
And then you know what the supply chain going on at least in your manufacturing capacity are there any are there are there any are there product categories that you might consider bringing back to North America.
Well, yes, it's a good question we are looking at it but keep in mind V against all odds we maintained manufacturing in North America, both in the United States, But then we decided that.
Speaker 1: Well, yes, it's a good question. We are looking at it, but keep in mind, we, against all odds, we maintain manufacturing in North America, both in the United States. But then we decided that.
Speaker 1: We also had to go south of the border, and that was a very important move for us. Mexico we went about 20 years or so back, and Honduras we went about 10, 11 years back, so we invested a great deal.
We also had to go south of the border.
That was that was a very important move for US one Mexico of around about 20 years or so back in Honduras. We went about it those are 10 11 years back so we've invested a great deal.
Speaker 1: I would say over $100 million in those facilities to be where we are, otherwise we would not
I would say about $100 million in those facilities to be where we otherwise we would not be.
Speaker 1: So we have the opportunity, certainly in furniture, but we're also looking at the opportunity on non-furniture products being more made in North America.
So we have the opportunity suddenly and furniture, but we're also looking at opportunity on non furniture products being more made in North America.
Okay.
Speaker 1: Yeah, and then last question I had and the SG&A had a step up this quarter, maybe it's more for Matt, to about 90 million and they have been trending lower. Is this, I guess, more structural driven by higher wages and cost or is it just due to the higher sales? Maybe you can help us think about SG&A going forward. Yeah, I'll say what Matt can follow up because Matt is pretty smart on this, but I tell you this, most of it is good news. It is based on...
And then a last question I had and D. S. CNA had a step up this quarter. Maybe this is more for Matt to about 90 sales than they had been trending lower.
This I guess more structural driven by higher wages and costs.
Oh, just due to the higher sales maybe you can help us think about SG&A going forward.
I'll say red Mascara and follow up with the Madden really smart on this but I didn't hear this most of it is a good news. It is based upon the recent sales in our retail.
Speaker 1: Our designers have done an excellent job, and they've been rewarded with a fair amount of money. And that's where most of it is, and some in transportation.
Almost all of our designers have done an excellent job and they have been and they've been rewarded.
Fair amount of money and that's where most of it is in some in transportation.
Speaker 2: You're making my job a lot easier, but as a percentage of overall sales, our SG&A was actually down a little bit, right, from 43.8 to 43 flat. And most of the overall dollar increase, though, was exactly what Mr. Casselari said, driven by increased sales, higher freight costs, so delivery fees are included in there, as well as compensation to our interior designers.
Yeah I have to go ahead to your deal.
Making my job a lot easier.
But yeah as a percentage of overall sales our SG&A was actually down a little bit right from 43, eight to 43 flat and most of the the overall dollar increase though what's exactly what Mr. It. That's why I said driven by increased sales higher freight costs of delivery fees are included in there as well.
Compensation to our interior designers, so yeah, we want to see.
Speaker 2: We want to see that designer comp going up means there's more written and more sales going on. So that is why you saw that come up to about $90 million.
And that designer comp going up means so theres more written and more sales going on so that that is why you saw that come up to about $90 million.
Okay.
Thank you.
Thank you.
Speaker 3: There are no further questions at this time. I'll turn the floor back to Mr. Kastewari for closing remarks.
There are no further questions at this time I'll turn the floor back to Mr. Qaswarah for closing remarks.
Speaker 1: Well, thank you, and again, I'm very, very gratified at the work that our people have done. Our teams have done an amazing job, and we'll continue to maintain our focus.
Well, thank you and gain that would be very very very gratified at the work that our people have done our.
Teams have done an amazing job and we will continue to maintain a focus I mean do you need to make sure that we focus on providing great quality, great service and maintain and continue to improve all of our net retail network plus also are.
Speaker 1: focus on providing great quality, great service, and maintain and continue to improve.
Speaker 1: to improve our retail network plus also our manufacturing in North America.
Manufacturing in North America, So again, thanks very much.
Speaker 3: Thank you. This concludes today's conference. All parties may disconnect. Have a great evening.
Thank you. This concludes today's conference all parties may disconnect have a great evening.
Yeah.
Yeah.