Q1 2022 Weber Inc Earnings Call
Good morning, and welcome to today's Webex, Inc. First quarter 'twenty to 'twenty two earnings conference call. My name is Gemma and I'll be the operator for today, if you'd like to ask a question for the Q&A session. Please press star followed by one no telephone keypad and if you change your mind it staff, but it by Chi.
Speaker 1: Good morning and welcome to today's WebAir Inc first quarter 2022 earnings conference call. My name is Gemma and I'll be the operator for today. If you'd like to ask a question for the Q&A session, please press star followed by one and a telephone keypad. And if you change your mind, it's star followed by two. I'll now hand over to the team.
I'll now hand over to the team.
Please begin.
Speaker 2: Please begin. Good morning, and thank you for joining us today for our first quarter fiscal 2022 earnings call. I am joined this morning by Chris Scherzinger, our Chief Executive Officer, and Bill Horton, our Chief Financial Officer.
Morning, and thank you for joining us today for our first quarter fiscal 2022 earnings call I'm joined this morning by Crusher singer, our Chief Executive Officer, and Bill Hartmann, Our Chief Financial Officer.
I'll start with our forward looking statements disclaimer.
Speaker 2: I'll start with our forward-looking statements disclaimer. As you are aware, certain statements made today, such as projections for Weber's future performance, are forward-looking statements. Virtual results could be materially different from those projected.
You are aware certain statements made today such as projections for <unk> future performance are forward looking statements actual results could be materially different from those projected.
For further information concerning factors that could cause results to differ please refer to our public 10-Q, SEC filings our earnings release, and our SEC filings all of which are available on the company's website.
Speaker 2: For further information concerning factors that could cause results to differ, please refer to our public 10Q SEC filing, our earnings release, and our SEC filings, all of which are available on the company's website.
During the call today the company May also discuss certain non-GAAP financial information.
Speaker 2: During the call today, the company may also discuss certain non-GAAP financial information.
For a reconciliation of these measures to GAAP reporting please refer to the company's earnings announcement, which has been posted on the company's web site at investors that Weber Dot com and can be found in the company's SEC filings a recording of today's webcast will be archived for at least 90 days of Webers Investor Relations website.
Speaker 2: For a reconciliation of these measures to GAAP reporting, please refer to the company's earnings announcement, which has been posted on the company's website at investors.weber.com and can be found in the company's SEC filings. A recording of today's webcast will be archived for at least 90 days on Weber's Investor Relations website. And now I'd like to try to talk about the
And now I'd like to turn the call over to Chris.
Thank you, Brian and good morning, everyone. This morning, I'll touch on three major themes from our first quarter first is our solid sales performance generally on track to our broader objectives, leading into the 2022 season, particularly in the face of acute logistics and supply chain challenges in the quarter.
Speaker 3: Thank you, Brian . And good morning, everyone. This morning, I'll touch on three major themes from our first quarter. First is our solid sales performance, generally on track to our broader objectives leading into the 2022 season, particularly in the face of acute logistics and supply chain challenges in the quarter.
Second is our progress and proactively navigating these inflationary and disruptive market dynamics with a leadership mentality and third its strong momentum and progress on our five key growth strategies, particularly exciting new product innovations recently announced for the 2020 to see them.
Speaker 3: Second is our progress in proactively navigating these inflationary and disruptive market dynamics with a leadership mentality. And third is strong momentum and progress on our five key growth strategies, particularly the exciting new product innovations recently announced for the 2022 season. First, let me...
First let me talk about Q1 performance.
[noise] Weber team worked tirelessly to meet the needs of our customers amid continued strong demand for our products. We generated net sales of $283 million a decrease of 8% from the prior year period, but on a two year stack basis up 74, 6%.
Speaker 3: The Weber team worked tirelessly to meet the needs of our customers amid continued strong demand for our products. We generated net sales of $283 million, a decrease of 8% from the prior year period, but on a two-year stack basis, up 74.6%.
But the first fiscal quarter last year, which was the fourth calendar quarter of 2020, we saw unprecedented retailer restocking of depleted inventories coming out of the first COVID-19 summer when shelves were bare.
Speaker 3: Recall that the first fiscal quarter last year, which was the fourth calendar quarter of 2020, we saw unprecedented retailer restocking of depleted inventories coming out of the first COVID summer when shelves were bare.
This year's Q1 result shows strong sustaining demand in the face of healthier retailer inventories and represent a two year compounded annual growth rate of about 30%.
Speaker 3: This year's Q1 results show strong sustaining demand in the face of healthier retailer inventories and represent a two-year compounded annual growth rate of about 30%. As you know, Weber is a seasonal business and our first quarter historically has been a low volume off season quarter.
As you know wherever it is a seasonal business in our first quarter historically has been a low volume off season quarter. We.
We do believe we're now seeing a return to normal outdoor cooking seasonality patterns and retailer order timing with fiscal Q2, and Q3 being our peak sales quarters.
Speaker 3: We do believe we're now seeing a return to normal outdoor cooking seasonality patterns and retailer order timing, with fiscal Q2 and Q3 being our peak sales quarters.
Like many organizations our results were negatively impacted by the generational inflation headwind, including raw material commodity cost extreme inbound freight cost increases and unfavorable foreign exchange movement. These.
Speaker 3: Like many organizations, our results were negatively impacted by the generational inflation headwind, including raw material commodity costs.
Speaker 3: extreme inbound freight cost increases, and unfavorable foreign exchange movements.
These pressures impacted first quarter margins and led to an adjusted EBITDA loss of $36 million.
Speaker 3: These pressures impacted first quarter margins and led to an adjusted EBITDA loss of $36 million.
Since we last spoke to you the operating environment has become more challenging and costly for our entire industry and we believe these challenges will persist through the remainder of the year.
Speaker 3: Since we last spoke to you, the operating environment has become more challenging and costly for our entire industry.
Speaker 3: And we believe these challenges will persist through the remainder of the year.
Bill will cover this in greater detail shortly as well as the positive financial impact of the significant proactive actions, we're taking to mitigate the drag on near term financial results, while also maintaining investment for future growth.
Speaker 3: Bill will cover this in greater detail shortly, as well as the positive financial impact of the significant proactive actions we're taking to mitigate the drag on near-term financial results, while also maintaining investments for future growth.
Second I'd like to talk about how we are navigating this very challenging operating environment.
Speaker 3: Second, I'd like to talk about how we're navigating this very challenging operating environment.
As I shared with you last quarter, we are intently focused on managing today's cost and logistics challenges with agility and a leadership mindset and I'm confident that when conditions, eventually normalize which they will the weber will come out stronger than ever.
Speaker 3: As I shared with you last quarter, we are intently focused on managing today's costs and logistics challenges with agility and a leadership mindset. And I'm confident that when conditions eventually normalize, which they will, the Weber will come out stronger than ever.
We have the strongest brand in the industry, we have a uniquely diversified global manufacturing footprint and we have a world class team, bringing leadership innovation and value to our consumers worldwide.
Speaker 3: We have the strongest brand in the industry. We have a uniquely diversified global manufacturing footprint. And we have a world-class team bringing leadership, innovation, and value to our consumers worldwide.
Direct container cost inflation, even at 10 times historic rates cannot and will not derail our long term growth vision and success.
Speaker 3: Current container cost inflation, even at 10 times historic rates, cannot and will not derail our long-term growth vision and success.
That said in this moment, we are taking significant actions to combat inflationary pressures.
Speaker 3: That said, in this moment, we are taking significant actions to combat the inflationary pressure.
First we're driving numerous activities in our manufacturing sourcing and transportation operations to manage costs down, including shifting manufacturing for certain product lines to different sites in our network driving mid season supplier negotiations and cost improvement initiatives.
Speaker 3: First, we're driving numerous activities in our manufacturing, sourcing, and transportation operations to manage costs down, including shifting manufacturing for certain product lines to different sites in our network, driving mid-season supplier negotiations and cost improvement initiatives, shifting transportation tactics at both the volume and mix level, and implementing commodity and currency financial management.
Shifting transportation tactics at both the volume and mix level, and implementing commodity and currency financial management instruments.
We also just recently introduced the second 2022 price increase in most key markets.
Speaker 3: We also just recently introduced a second 2022 price increase in most key markets.
In order to address the even higher inflationary cost pressures than we saw six months ago. When we took the first 2022 increase.
Speaker 3: in order to address the even higher inflationary cost pressures than we saw six months ago when we took the first 2022 increase.
We expect to see the impact of these combined pricing actions across the second and third quarters.
Speaker 3: We expect to see the impact of these combined pricing actions across the second and third quarter.
It is a premium brand that does have pricing power in the marketplace on a global basis.
Speaker 3: Weber is a premium brand that does have pricing power in the marketplace on a global basis. If this still requires great partnership with our retail customers to execute, given the difficult timing relative to the season.
It still requires a great partnership with our retail customers to execute given the difficult timing relative to the season.
We are committed to delivering maximum value to our consumers and to building our business and our retail partners' business collaboratively.
Speaker 3: We are committed to delivering maximum value to our consumers and to building our business and our retail partners business collaboratively.
In addition to cost reductions and pricing. We're also aggressively pulling back SG&A expenses in areas that do not impact our demand generation for future growth levers.
Speaker 3: In addition to cost reductions in pricing, we're also aggressively pulling back SG&A expenses in areas that do not impact our demand generation or future growth levels.
Combined these three action plans will produce substantial offsets to the unprecedented inflation. The 2022 is throwing at us.
Speaker 3: Combined, these three action plans will produce substantial offsets to the unprecedented inflation that 2022 is throwing at us.
That brings me to my third and final topic today before I pass it to Bill which is the exciting progress we're making on the five key growth strategies for Webber many of which are set to take great leap forward in the 2022 season.
Speaker 3: That brings me to my third and final topic today before I toss it to Bill, which is the exciting progress we're making on the five key growth strategies for Weber, many of which are set to take great leaps forward in the 2022 season.
At the risk of being redundant long term thinking has always been one of webers, most defining characteristics and it's one of the key reasons. We succeeded consistently over the past 70 years in good economic cycles and bad so.
Speaker 3: At the risk of being redundant, long-term thinking has always been one of Weber's most defining characteristics, and it's one of the key reasons we've succeeded consistently over the past 70 years, in good economic cycles and bad.
So in the face of today's challenges is in our DNA to keep an eye on the future and deliver the strategies and initiatives that will create shareholder value for many years to come you've.
Speaker 3: So in the face of today's challenges, it's in our DNA to keep an eye on the future and deliver the strategies and initiatives that will create shareholder value for many years to come. You've heard about these five key strategies for me in all of our communications to date. So today, let me focus on how they're coming to life in this moment to drive 2022 growth forever.
You've heard about these five key strategies for me in all of our communications to date. So today, let me focus on how they are coming to life in this moment to drive 2022 growth for Webber.
First is introducing market disruptive new products in January we announced our new products for the 2022 season really breakthrough products that re imagine outdoor cooking and the experience for consumers.
Speaker 3: First is introducing market disruptive new products. In January , we announced our new products for the 2022 season, really breakthrough products that reimagine outdoor cooking and the experience for consumers.
Our all new 2022, Genesis line, including Smart Genesis gas rule with Weber connect built in.
Speaker 3: our all new 2022 Genesis line, including smart Genesis gas rules with WebRConnect built in.
The new stealth edition of our smoked buyer smart wood pellet grill.
Speaker 3: the new stealth edition of our SmokeFire Smart Wood Pellet Grill.
Weber crafted the new outdoor kitchen collection of attachments and grill wear accessories that unlock new food discoveries and cooking methods on your patio to transform your Weber grill into a full blown multifaceted outdoor kitchen.
Speaker 3: Weber crafted a new outdoor kitchen collection of attachments and grillware accessories that unlock new food discoveries and cooking methods on your patio to transform your Weber grill into a full-blown, multifaceted outdoor kitchen.
And lastly, a special 70th anniversary new product to be unveiled later this months, a pretty cool retro throwback to celebrate our heritage and our invention of modern drilling back in 1952.
Speaker 3: And lastly, a special 70th anniversary new product to be unveiled later this month. A pretty cool retro throwback to celebrate our heritage and our invention of modern grilling back in 1952. We are fired up about these products. And the Genesis innovation on our flagship line, well, it's the most significant gas grilling innovation in 15 years. Here's a quick rundown on the new Genesis.
Fired up about these products and the Genesis innovation on our flagship line well, it's the most significant gas grilling innovation in 15 years, Here's a quick rundown on the new Genesis.
To start it's just larger dramatically larger cooked surface area food prep area and built in storage with the largest high heat shear zone in the history of the Genesis.
Speaker 3: To start, it's just larger. Dramatically larger cook surface area, food prep area, and built-in storage, with the largest high heat sear zone in the history of the Jettison.
It has a proprietary lighting system called night vision, the changes grilling after sunset forever.
Speaker 3: It has a proprietary lighting system called night vision that changes grilling after sunset forever. And a proprietary burner design called pure blue that delivers best-in-class high heat even flame and maximum fuel efficiency.
And our proprietary burner design called pure Blue that delivers best in class tighten even flame and maximum fuel efficiency.
Plus integrated Weber connect technology for real time, food monitoring and step by step cooking instructions on your grill and on your phone and.
Speaker 3: Plus, integrated Webber Connect technology for real-time food monitoring and step-by-step cooking instructions on your grill and on your phone, and the built-in framework to turn that one single Genesis into a flat-top grill, a pizza oven, a rotisserie pit, a stir-fry station, and more with the Webber-crafted line of grillware.
And the built in framework to turn that one single Genesis into a flat top grill, our pizza oven, a rotisserie pit surprise station and more with the Weber crafted line accrual there.
Just a few examples of how we're setting a new bar and outdoor cooking and taking our consumers' experiences to new Heights early consumer response has been extremely strong piquing. The interest of current Weber owners ready to trade up as well as owners of other lesser grills ready to move to a Weber experience.
Speaker 3: Just a few examples of how we're setting a new bar in outdoor cooking and taking our consumers' experiences to new heights. Early consumer response has been extremely strong, piquing the interest of current Weber owners ready to trade up, as well as owners of other lesser grills ready to move to a Weber experience.
The second key strategy is to accelerate our direct to consumer and e-commerce revenue or wherever stores and grill academies internationally and our Weber dotcom business across all regions showed strong performance in Q1, representing 12% of sales and we have strong expansion initiatives in place for the 2020 to see them, we opened seven new <unk> stores in the <unk>.
Speaker 3: The second key strategy is to accelerate our direct to consumer and e-commerce revenue.
Speaker 3: Our Weber stores and grill academies internationally, and our Weber.com business across all regions showed strong performance in Q1, representing 12% of sales. And we have strong expansion initiatives in place for the 2022 season. We opened seven new Weber stores in the first quarter alone, bringing our total store count to 200 globally. And we're on track to launch substantial Weber.com site upgrades, as well as new social influencer programming in all global markets in Q2.
First quarter alone, bringing our total store count to 200 globally and we're on track to launch substantial Weber Dot com site upgrades as well as new social Influencer programming in all global markets in Q2.
Third is expanding our retail customer base and new consumer revenue streams, we continue to deliver increased weber presence across retail footprint in all regions globally building on successes like Rei and best buy in the U S. Canadian tire in Canada, Costco and Amazon in multiple regions around the world and many more.
Speaker 3: Third is expanding our retail customer base and new consumer revenues.
Speaker 3: We continue to deliver increased webber presence across retail footprints in all regions globally, building on successes like REI and Best Buy in the US, Canadian Tire in Canada, Costco and Amazon in multiple regions around the world, and many more.
The value building strong partnerships with retailers, who can bring the Weber brand to life in their footprint.
Speaker 3: We value building strong partnerships with retailers who can bring the Weber brand to life in their footprint.
In addition, we have a number of exciting consumer programs going live or being piloted in 2022 to deepen user engagement and drive new recurring revenue streams, such as instructional video classes grill trading events across Australia, as well as warranty and maintenance service programs.
Speaker 3: In addition, we have a number of exciting consumer programs going live or being piloted in 2022 to deepen user engagement and drive new recurring revenue streams, such as instructional video classes, grilled trade-in events across Australia, as well as warranty and maintenance service programs. Fourth is expanding and deepening our...
Fourth is expanding and deepening our presence in emerging markets.
We are seeing great performance from our emerging geographies, where Q1 sales were up 13% versus the prior year quarter. This growth is coming from developing countries in all regions with our most significant growth in the quarter coming from Mexico, Chile, Italy, Eastern Europe and China.
Speaker 3: We are seeing great performance from our emerging geographies, where Q1 sales were up 13% versus the prior year quarter. This growth is coming from developing countries in all regions, with our most significant growth in the quarter coming from Mexico, Chile, Italy, Eastern Europe , and China. And speaking of China, although it represents only a small part of our business today, we continue to see exciting investment opportunities building on the upcoming opening of our first Weber store in Shanghai for the 2022 season.
And speaking of China, although it represents only a small part of our business today, we continue to see exciting investment opportunities building on the upcoming opening of our first Weber store in Shanghai for the 2022 season.
Fifth and finally is executing on value enhancing operational initiatives.
Speaker 3: Fifth and finally is executing on value enhancing operational initiatives.
It may seem a paradox talk about great progress operationally in the face of the current headwinds I discussed earlier, we continue to see great evidence that our multi continent infrastructure is a productivity engine forever.
Speaker 3: While it may seem a paradox to talk about great progress operationally in the face of the current headwinds I discussed earlier, we continue to see great evidence that our multi-continent infrastructure is a productivity engine forever.
As a key competitive differentiator for us and a driver of long term value, our new plant in Poland is yielding outstanding results and exceeding throughput and cost expectations.
Speaker 3: This is a key competitive differentiator for us and a driver of long-term value. Our new plant in Poland is yielding outstanding results and exceeding throughput and cost expectations. In fact, given our early success there, we're already leaning in to add further capacity at the site.
Given our early success there were already leaning in to add further capacity at the site.
Looking ahead, both in the face of temporary but trying near term challenges and with a view to long term growth and category leadership Weber remains exceptionally well positioned with the best brand the largest geographic and consumer footprint. The best innovation engine, the best Global operations and the best team in the industry.
Speaker 3: Looking ahead, both in the face of temporary but trying near-term challenges, and with a view to long-term growth and category leadership, Weber remains exceptionally well positioned, with the best brand, the largest geographic and consumer footprint, the best innovation engine, the best global operations, and the best team in the industry.
I would like to take a moment to thank our team members around the world for their continued resilience their passion and their commitment to our consumers in order to deliver maximum value to our shareholders with that I'll pass it over to Bill Horton, our chief financial officer to discuss the first quarter financials and guidance in greater detail over to you Bill.
Speaker 3: I would like to take a moment to thank our team members around the world for their continued resilience, their passion, and their commitment to our consumers in order to deliver maximum value to our shareholders. With that, I'll pass it over to Bill Horton, our Chief Financial Officer, to discuss the first quarter financials and guidance in greater detail. Over to you, Bill.
Thanks, Chris.
Thank you everyone for attending our call today.
Speaker 2: Thanks, Chris. And thank you everyone for attending our call today. As Chris mentioned, Weber is a seasonal business and our first and fourth quarters historically represent our lowest sales quarters of the year, with only the Australia and New Zealand business being in season for the quarter.
Chris mentioned Weber is a seasonal business and our first and fourth quarters historically represent our lowest sales quarters of the year with only the Australia and New Zealand business.
In season for the quarter.
Overall in the first quarter, we saw strong demand.
Speaker 2: Overall, in the first quarter, we saw strong demand. But due to product availability issues caused by shipping delays, port congestion, and China power supply limitations, we shifted some of our early season trade sell-in to the second quarter.
Due to product availability issues caused by shipping delays port congestion in China power supply limitations, we shifted some of our early season trade sell in to the second quarter.
As discussed here.
Speaker 2: As discussed, Q1 fiscal 2022 net sales decreased 8% or $26 million to $283 million from $309 million last year.
One fiscal 2022, net sales decreased 8% or $26 million to $283 million from $309 million last year.
So they were up 75% on a two year stack basis.
Speaker 2: though they were up 75% on a two-year stack basis.
Well the Americas, net sales decreased 13% or 23 million to $156 million from $179 million last year.
Speaker 2: For the Americas, net sales decreased 13%, or 23 million, to 156 million from 179 million last year. On a two-year staff basis, net sales increased 67% versus Q1 of 2020. Americas net sales this quarter were negatively impacted by supply chain-related shortages of certain components, grills, and accessories.
On a two year stack basis, net sales increased 67% versus Q1 of 2020.
America's net sales this quarter were negatively impacted by supply chain related shortages of certain components grills and accessories.
We expect to make up the sales shortfall in Q2 and Q3.
Speaker 2: We expect to make up the sales shortfall in Q2 and Q3.
As we prepare for our selling season, we progressed on several initiatives, including increasing Io space for our new product launches at key retailers.
Speaker 2: And as we prepare for our selling season, we've progressed on several
Speaker 2: including increasing aisle space for our new product launches at key retailers, adding digital content in store, and enrolling new influencers and ambassadors to our team.
Adding digital content in store and enrolling new Influencers and ambassadors to our team.
For EMEA net sales decreased 4% or $3 million to $63 million from $66 million last year.
Speaker 2: For EMEA, net sales decreased 4% or $3 million to $63 million from $66 million last year. On a two-year stack basis, net sales increased 126% compared to Q1 of 2020.
Two year stack basis, net sales increased 126%.
Compared to Q1 of 2020.
Our ability to expand the Weber brand to develop in European markets has allowed us to continue to achieve strong growth in the region.
Speaker 2: Our ability to expand the Weber brand into developing European markets has allowed us to continue to achieve strong growth in the region.
We are structurally improving our business and expand the rubber stores in all major growth markets targeting 20% to 50% more stores.
Speaker 2: We are structurally improving our business and expanding rubber stores in all major growth markets.
Speaker 2: targeting 20 to 50% more stores in all markets by the end of next year.
All markets by the end of next year.
We are also driving broad scaled distribution up in several developing countries by more than 50%.
Speaker 2: up in several developing countries by more than 50% versus the beginning of 2021. Additionally, we are expanding our regional coverage in currently underserved emerging countries.
Since the beginning of 2021.
Additionally, we are expanding our regional coverage currently underserved emerging countries such as the basket in Andalusia areas in Spain, and the companion area, Italy to get more payback on our national advertising spend.
Speaker 2: such as the Basque and Andalusia areas in Spain and the Campaglia area of Italy, to get more payback on our national advertising spend.
Both examples have focused metropolitan areas of more than 1 billion people.
Speaker 2: Both examples have focused metropolitan areas of more than 1 billion.
In Asia Pacific net sales were $64 million, which were inline with last year's sales on.
Speaker 2: In Asia Pacific, net sales were $64 million, which were in line with last year's sales.
On a two year stack basis net sales increased 57%.
Speaker 2: on a two-year stack basis, net sales increased 57%.
As I mentioned, Australia, and New Zealand, our two largest markets in the region are now in their core selling season.
Speaker 2: As I mentioned, Australia and New Zealand, our two largest markets in the region, are now in their core selling season. It's been very strong.
Very strong overall demand.
Our Asia Pacific team remains focused on brand and channel growth.
Speaker 2: our Asia-Pacific team remains focused on brand and channel growth, with investment in advertising and partnerships to engage, acquire, and retain new generations of webber consumers. Now,
Investments in advertising and partnerships to engage acquire and retain new generations of Webber consumers.
Now turning to our gross margin results for.
For the quarter, we faced unprecedented cost challenges with supply chain and material cost inflation and tariffs at historically high levels.
Speaker 2: For the quarter, we faced unprecedented cost challenges with supply chain and material cost inflation and tariffs at historically high levels.
Profit decreased $71 million or 53% to $64 million from $135 million last year.
Speaker 2: Gross profit decreased $71 million, or 53%, to $64 million from $135 million last year.
Gross margins decreased 2100 basis points to 22, 6% from 43, 6% last year.
Speaker 2: and gross margins decreased 2100 basis points to 22.6% from 43.6% last year.
It is worth noting that although not a year on year call out we continue to be burdened with more than $50 million of negative impact from tariffs.
Speaker 2: It is worth noting that although not a year on year call out, we continue to be burdened with more than $50 million of negative impacts from tariffs, despite being the only major grill manufacturer with a significant domestic manufacturing presence.
Spite being the only major grill manufacturer with a significant domestic manufacturing presence.
We've talked about macro environmental factors impacting our business and I'd like to share. Some examples of what we are seeing today, specifically for inbound freight.
Speaker 2: We've talked about macro environmental factors impacting our business, and I'd like to share some examples of what we are seeing today, specifically for Inbound Trade.
Although we realized continued commodity and purchase goods cost inflation in the quarter.
Speaker 2: Although we realize continued commodity and purchase goods cost inflation in the quarter, the most significant driver of our gross margin rate declines was the result of record spot market pricing for export containers from China. For perspective, in Q1 2021, our global blended inbound cost of container was in the $3,500 rate.
Most significant driver of our gross margin rate declines was the result of record spot market pricing for export containers from China.
For perspective.
Q1, 2021, our global blended inbound cost per container.
The 3500 to $4500 range.
They were paying between $14000 and $16000 on average per container.
Speaker 2: Today, we are paying between $14,000 and $16,000 on average per container, a year-over-year cost escalation of three to four times.
Year over year cost escalation of three to four times.
In Q1, we shipped nearly 3500 containers as we prepared for the coming grilling season.
Speaker 2: In 2-1, we shipped nearly 3,500 containers as we prepared for the coming grilling.
The negative impact to gross margin in the quarter with $31 million, 11% impact on our gross margin rate for 52%.
Speaker 2: The negative impact of gross margin in the quarter was $31 million, an 11% impact on our gross margin rate, or 52% of our year-over-year margin rate decline.
Year over year margin rate decline.
The current situation is driven by multiple factors.
<unk> congestion of outbound shipping capacity in China.
Speaker 2: including congestion of outbound shipping capacity in China, following the power restrictions imposed by the government during our first quarter, continued high demand for shipping due to the Christmas season and the shipping push leading up to the Lunar New Year.
Following the power restrictions imposed by the government during our first quarter.
High demand for shipping due to the Christmas season.
And the shipping push leading up to the lunar new year.
We are not expecting conditions to normalize during this fiscal year and our.
Speaker 2: We are not expecting conditions to normalize during this fiscal year, and our projections currently have inbound freight representing 16% of our full year cost of goods sold, increasing more than three times from two years ago on a percent of sales basis from 3% to 10% of sales.
Projections currently have inbound freight representing 16% of our full year cost of goods sold.
Increasing more than three times from two years ago on a percent of sales basis from 3% to 10% of sales.
This surge in freight creates a $150 million plus headwind on the business, but it's difficult to overcome in the short term.
Speaker 2: This surge in freight creates a $150 million plus headwind on the business that is difficult to overcome in the short term.
In terms of our approach to responding to inflationary pressures. We recently took our third price increase of the past 12 months in most regions.
Speaker 2: In terms of our approach to responding to inflationary pressures, we recently took our third-place increase of the past 12 months in most regions, one in fiscal 2021 and two in fiscal 2022, and the impact will improve gross margins sequentially over the next several quarters.
In fiscal 'twenty, 'twenty, one and two in fiscal 2022 and the impact will improve gross margin sequentially over the next several quarters.
For example, <unk>.
Speaker 2: For example, in Q1, we realized 530 basis points of pricing impact, which we expect to grow to 1,240 basis points in Q2.
One we realized 530 basis points of pricing impact, which we expect to grow to 1240 basis points in Q2.
Selling general and administrative costs for Q1 of 2022 increased by $34 million or 30% to $148 million year over year.
Speaker 2: Selling general administrative costs for Q1 of 2022 increased by $34 million, or 30%, to $148 million year over year and increased 1,540 basis points to 52.3% from 36.9% of sales last year.
And increased 540 basis points to 52, 3%.
From 36, 9% of sales last year.
This increase was primarily driven by noncash stock based compensation expense.
Speaker 2: This increase was primarily driven by non-cash, stock-based compensation expense of $21 million, higher one-time business and transformational costs of $6 million, related primarily to our global SAP project, and $5 million in additional costs related to the 2021 June life acquisition.
$41 million higher one time business and transformational costs $6 million related primarily to our global SCP project.
$5 million in additional costs related to the 2021 June life acquisition.
Excluding the impact of noncash stock based compensation and other nonrecurring costs S.
Speaker 2: Excluding the impact of non-cash, stock-based compensation, and other non-returning costs, SG&A as a percent of sales was 39.9% vs. 34.4% flash.
SG&A as a percent of sales was 39, 9% versus 34, 4% last year.
For the quarter net income decreased by $79 million or 1626 basis points to a net loss of $75 million from net income of $5 million in the prior year.
Speaker 2: For the quarter, net income decreased by $79 million, or 1,626 basis points, to a net loss of $75 million, from that income of $5 million in the prior year.
As previously discussed the decrease was primarily driven by $21 million and higher noncash stock based compensation expense.
Speaker 2: As previously discussed, the decrease was primarily driven by $21 million of higher non-cash, stock-based compensation expense and $71 million of lower gross profit as a result of higher costs and inflation and lower sales over the prior year.
$71 million lower gross profit as a result of higher costs and inflation and lower sales over the prior year.
Adjusted EBITDA decreased 196% to a loss of 36 million or 12, 7% of net sales compared with $38 billion or 12, 2% net sales last year again, the variance was primarily driven by higher cost of goods sold for the quarter and the return.
Speaker 2: Adjusted EBITDA decreased 196% to a loss of $36 million or 12.7% of net sales compared to $38 million or 12.2% of net sales last year. Again, the variance was primarily driven by higher cost of goods sold for the quarter and a return to normalized seasonality patterns.
To normalized seasonality patterns.
For Q1 of 2022 net cash used in operating activities increased to $188 million from 161 million for the three months ended December 31 2020.
Speaker 2: For Q1 of 2022, net cash used in operating activities increased to $188 million from $161 million for the three months ended December 31, 2020, an increase of $27 million, or 17%.
The increase of $27 million or 17%.
The increase in usage was driven by global supply chain challenges, leading to increased inventory levels.
Speaker 2: The increased usage was driven by global supply chain challenges leading to increased inventory levels, inflationary cost increases in raw materials and inbound freight, and an unfavorable impact of higher prepaid expenses and other current assets primarily for income tax.
Inflationary cost increases in raw materials and inbound freight.
And an unfavorable impact of higher prepaid expenses and other current assets primarily for income taxes.
This was partially offset.
Speaker 2: this would partially offset favorable timing of payments impacting accounts paid.
Favorable timing of payments impacting accounts payable.
As you are aware our credit facility includes a revolving credit facility and a term loan.
Speaker 2: As you are aware, our credit facility includes a revolving credit facility and a term loan. As of December 31, 2021, we had $132 million of available borrowing capacity under the revolver, and our last 12 months average net debt leverage ratio was 4.2 times and is compliant with our credit agreement. Keep in mind that we look at our leverage and our net debt leverage ratio ratio. We will work with some fault Explorers please consider not Nile delicious 33.0tsd we one muscle coach,honor please 2019 board members
December 31, 2021, we had $132 million of available borrowing capacity under the revolver and our last 12 months average net debt leverage ratio was four two times and is compliant with our credit agreement.
Keep in mind that we look at our leverage on an average basis, given our usage of the revolver to fund working capital during Q1, and Q4, which also happened to be our lowest cash flow and EBITDA quarters due to the seasonality of our largest markets.
Speaker 2: given our usage of the revolver to fund working capital during Q1 and Q4, which also happened to be our lowest cash flow in EBITDA quarters due to the seasonality of our largest market.
Based on our growth plans, we believe our cash and cash equivalents position.
Speaker 2: Based on our growth plans, we believe our cash and cash equivalence position, net cash provided by operating activities, and availability under our secured credit facility are currently adequate to finance our working capital requirements, plan capital expenditures, and debt service. In the future, we may allocate additional capital toward strategic acquisitions, and we may opportunistically assess options to strengthen our balance sheet and ensure the most efficient capital structure.
Cash provided by operating activities and availability under our secured credit facility are currently adequate to finance, our working capital requirements planned capital expenditures and debt service in the future. We may allocate additional capital towards strategic acquisitions, and we may opportunistically puts us options.
To strengthen our balance sheet and ensure the most efficient capital structure.
These may include additional debt financing vacuum facilities and other potential financing options.
Speaker 2: These may include additional debt financing, staffing facilities, and other potential financing options.
I would like to wrap up my prepared remarks by providing updated guidance for fiscal year 2022.
Speaker 2: I would like to wrap up my prepared remarks by providing updated guidance for fiscal year 2022.
Previously guided net sales in the 6% to 8% range above 2021, and continue to anticipate sales within that range on a constant currency basis.
Speaker 2: We previously guided net sales in the six to 8% range above 2021 and continue to anticipate sales within that range on a constant currency basis.
However, when taking into account the negative headwinds from foreign exchange rates, particularly with the strengthening U S dollar against the Euro.
Speaker 2: However, when taking into account the negative headwinds on foreign exchange rates, particularly with the strengthened US dollar against the euro, we now expect net sales to increase 4-8% on an actual currency basis for fiscal year 2022.
Now expect net sales to increase 4% to 8% on an actual currency basis for fiscal year 2022.
In addition, while we are aggressively pursuing cost savings opportunities and substantial price increases to offset inflationary challenges and we'll continue to do so.
Speaker 2: In addition, while we are aggressively pursuing cost-fitting opportunities and substantial price increases to offset inflationary challenges, and will continue to do so, we no longer have certainty that those initiatives can fully offset the cost-fitting opportunities.
We no longer had certainty that those initiatives can fully offset the inflation headwinds, particularly in the first half of the year before all the pricing actions take hold in full.
Speaker 2: particularly in the first half of the year, before all the pricing actions take hold in full.
In view of the continued external headwinds and our updated cost assumptions.
Speaker 2: in view of the continued external headwinds and our updated cost assumptions. We are now lowering our full year adjusted.
We are now lowering our full year adjusted EBITDA expectations.
Could be between $275 million and $325 million.
Speaker 2: to be between $275 million and $325 million.
Nevertheless, we remain highly confident in the long term outlook for Weber and remain laser focused on executing on our five key strategic initiatives, which will yield both short term and long term benefits for our stakeholders.
Speaker 2: Nevertheless, we remain highly confident in the long-term outlook for Weber and remain laser-focused on executing on our five key strategic initiatives, which will yield both short-term and long-term benefits for our stakeholders. And with that, I'd like to conclude my presentation.
With that I'd like to open up the call for questions.
Thank you very much and as a reminder, if you would like to ask a question. Please press star one if I wanted to kind of think keypad and then if you change your mind. Please press star followed by Chase.
Speaker 1: Thank you very much and as a reminder if you would like to ask a question please press star followed by one in the telephone keypad and then if you change your mind please press star.
We have our first question from Simon Siegel.
Speaker 1: We have our first question in from Simon Seagull of BMO Capital Market. Please go ahead.
Capital market. Please go ahead.
Hey, Good morning. This is Dan stroller on for Simeon. Thanks for your time here and bill Thanks for the specifics on that.
Speaker 4: Hey, good morning. This is Dan Stroller on Persimian. Thanks for your time here. And Bill, thanks for the specifics on the freight train impacts. That was very helpful. Chris, on the call today, you mentioned the capabilities in Poland starting to really come to fruition. I think previously we were expecting it to start impacting the P&L in either late 2Q or sort of the back half. Just wondering if those impacts may start to be realized earlier now or anything. And then I went on inventory. Thanks.
That was very helpful.
Chris on the call today, you mentioned the capabilities in Poland are starting to really come to fruition. I think previously we were expecting to start impacting the P&L in either late <unk> or sort of the back half just wondering if those impacts may start to be realized earlier now or anything and then I had one on inventory.
Sure. Thanks, Dan.
Speaker 3: Sure, thank you. Poland is going really well, as I mentioned in the remarks.
Poland is going really well as I mentioned in the remarks.
I would say we started that we started up in October .
Speaker 3: I would say we started up in October , and so we have a full quarter under our belt, and we continue to expand different product lines over time. And so I don't think it'll be fully maximized in terms of its impact on the P&L.
So we have a full quarter under our belt and we continue to expand different product lines over time, and so I don't think it'll be fully maximized in terms of its impact on the P&L until the Q4 timeframe to be honest in full but but it's sort of growing linearly from here until there and so.
Speaker 3: until the Q4 time frame to be honest in full, but it's sort of growing linearly from here until there. And so generally things are going really well.
Generally things are going going really well and because of the dynamics that I talked about relative to the.
Speaker 3: because of the dynamics that I talked about relative to...
The freight markets in particular, but commodities as well, we do see advantages to accelerating our investment there.
Speaker 3: the freight markets in particular, but commodities as well.
Speaker 3: We do see advantages to accelerating our investment there and to increase and shift more volume into that facility as it's able to handle it.
The increase in shift more volume into that facility as it's able to handle it and as we're able to you know to qualify new lines and new product skus to be produced there. So.
Speaker 3: and as we're able to qualify new lines and new products.
Speaker 3: FKU is to be produced there. So I don't know if Bill, if you want to add anything in terms of when you would see that hit the income statement and the margin line. But from an operational standpoint, it's going extremely well.
I don't know Bill do you want to add anything in terms of when you would see that hit the income statement in the margin line.
But from an operational standpoint, it's gone extremely well and you said it I think Dan that we're <unk>.
Speaker 4: Yes, Chris, you hit it. I think, Dan, that we're certainly seeing the benefits on the P&L today.
Seeing the benefits on the P&L today.
Because that plant is producing product that is from a margin standpoint accretive versus kind of old world. If you will but certainly as Chris mentioned, it will sequentially improve and be more significant but as we get into the kind of the meat of the season. So what Chris said will by Q4, and you'll get full run rate on Poland.
Speaker 4: because that plant is producing product that is, from a margin standpoint, a creative versus kind of old world, if you will. But certainly, as Chris mentioned, it will sequentially improve and be more significant as we get into the meat of the season. So like Chris said, by Q4, you'll get full run rate on Poland, and as he mentioned, we'll be adding the additional lines in Poland that also brings more scale and productivity to that facility.
And as he mentioned, we will be adding the additional lines in Poland, but also brings more scale and productivity to that facility.
Got it thanks on inventory anything you can give in terms of composition notes either in transit or what the.
Speaker 5: Got it, thanks. On inventory, anything you could give in terms of composition of either in transit or what the growth looks like on a unit basis versus cost?
Growth looks like on a unit basis versus cost. Thanks.
Let me there's a number of factors in play, but certainly our increased inventory was was.
Speaker 4: There's a number of factors in play, but certainly our increased inventory was...
As you saw it in the financials as a driver of our operating cash flow in the quarter.
Speaker 4: as you saw in the financials, a driver of our operating cash flow in the quarter. Q1 inventory was in 2020. One thing you have to remember, it was abnormally low, if you will, given the strong POS season last year and low retail inventory. So you definitely see that dynamic as we're now replenishing. Last year we were replenishing well into Q1 and Q2, and I think you're seeing Mel return to more normalized inventory levels.
Q1 inventory was in 2021 thing you have to remember it was.
And normally low if you will given the strong season last year and low retail inventory. So you definitely see that dynamic as we're now replenishing.
Last year, we were.
Replenishing well into Q1, and Q2 and I think youre seeing that will return to more normalized inventory levels.
Second significant factor in our in our inventory is capitalized variances.
Speaker 4: Second significant factor in our in our inventory is capitalized variances on higher cost of goods from q4 So obviously if your inventory is is more expensive if you will, you know, given what we're seeing in inflation right now You've got that variance that was sitting in q4 that's now being rolled off But that's that's sitting on the balance sheet right now And as you mentioned the longer transit times that we're seeing, you know, generally two times
The higher cost of goods from Q4. So obviously if your inventory is is more expensive. If you will given what we're seeing in inflation right now you've got that variance that was sitting in Q4 that now being rolled off but that's that's sitting on the balance sheet right now and as you mentioned the longer transit times that we're seeing.
Generally two times from a from call. It two years ago, what we're seeing in transit times is having an impact.
Speaker 4: from a, from call it two years ago, what we're seeing in transit times is having an impact.
And then another part of the excess inventories.
Speaker 4: And then another part of the excess inventory is a conscious buildup of product coming into the season. So we're seeing, as Chris mentioned, still really strong demand for product globally. So we're protecting against the upside in sales, so we're bringing that product in so that's on our balance sheet as well. And then finally, as Chris mentioned, the Poland plant, we have a full raw material investment in finished goods built in Poland in parallel with our existing facilities. So as does dual supply...
Conscious buildup of product coming into the season. So we're seeing as Chris mentioned still strong really strong demand for product globally. So we're protecting against the upside in sales. So we're bringing that product in so that's on our balance sheet as well and then finally as Chris mentioned.
Poland plant.
We have a whole raw material investment in finished goods build in Poland in parallel with our existing facilities. So as this dual supply.
U S built EMEA grills and the Poland plant startup you you'd have a bit of a double counting there on inventory because we're starting up the Poland plant and just from a safety stock levels. We wanted to make sure the Poland plant was executing on plan.
Speaker 4: of US built EMEA grills in the Poland plant startup. You have a bit of a double count in there on inventory because we're starting up the Poland plant and just from a safety stock level, we wanted to make sure the Poland plant was executing on plan. So I'll kind of pause and see if that helps with your question. Yeah, that's great. Thank you both, appreciate it.
I'll kind of pause and see if that helps with your with your question.
No that's great. Thank you both appreciate it.
Yep. Thanks Deb.
Our next question online comes from Meghan.
Speaker 1: Our next question on the line comes from Megan Alexander of JP Morgan. Please go ahead with your question, Megan.
<unk> of Jpmorgan. Please go ahead with your question Megan.
Yeah.
Hi, Thanks very much.
Speaker 6: Hi, thanks very much. I was hoping you could talk about how your forecast is built out for the rest of the year in the Americas. Absent the shift you talked about 2Q, are you assuming normal seasonality going forward? And if so, does that kind of mean we should cut our sales estimates, given the base of 1Q did come in a bit below?
If you could talk about how your forecast is built out for the rest of the year in the Americas, you know absent the shift you talked about two two key where he was giving you know normal seasonality going forward and if so does that kind of mean, we should cut our sales estimates given the base of <unk> did come in at that below.
No I think.
Speaker 4: No, I think great question. You know, I wouldn't recommend cutting your forecast. Certainly, you know, we've provided our guidance both on net sales and there's no dynamic within region, you know, that we purposely widened the range.
Great question.
I wouldn't recommend cutting your forecast certainly we provided our guidance both on net sales and there's no dynamic within region, you know that we purposely widened the range.
On guidance for a few reasons first of all as we've discussed Q1 is is by far our lowest quarter of the fiscal year and given the uncertainty in the supply chain and some of the things that you've heard about will it be transit time increases et cetera.
Speaker 4: on guidance for a few reasons. First of all, as we've discussed, Q1 is by far the lowest quarter of the fiscal year. And given the uncertainty in the supply chain and some of the things that you've heard about, whether it be transit time increases, etc., we've got now 65 to 70% of our full year sales volume still in front of us.
Got now 65% to 70% of our full year sales volumes still in front of us. So it just dimensionalize is even through Q1 and into January that we still have.
Speaker 4: So it just dimensionalizes even through Q1 into January . And we still have the biggest part of our season, the TOS season still in front of us.
Big part of the biggest part of our season.
F season still in front of us. So we've decided that until we get into our P. O. S season, we're going to hold a wider range on the sales outlook. The other piece in the Americas.
Speaker 4: So we've decided that until we get into our POS season, we're gonna hold a wider range on the sales outlook. The other piece in the Americas, your question might relate to this Q1, Q2 dynamic.
Your question might relate to this Q1 Q2 dynamic that we've talked about on the last call that with the complexity of the supply chain and with the load of our Genesis, our new <unk> product line launch there could be some shifting between Q1 and Q2.
Speaker 4: that we talked about on the last call that with the complexity in the supply chain and with the load of our new Genesis product line launch, there could be some shifting between Q1 and Q2 because of trade load for our new Genesis line. So you might be seeing some of that in our actuals.
Because of trade load for our new Genesis line, So you might be seeing some of that internationals.
Hello.
Yeah, that's really helpful.
Speaker 6: Yep, that's really helpful. I just had a follow-up, you know, in the prior guidance, you were, I think, assuming 80% of that 68% growth was coming from price and the rest from units. Can you just talk about how that, you know, maybe has changed given you are taking an additional price increase this year?
Just as a follow up on the prior guidance you were I think assuming 80% of that 68% growth was coming from price and the rest from units can you just talk about how that maybe has changed given you are taking an additional price increase this year.
Yes, So let me give you some.
Speaker 4: Yes, let me give you my perspective on the full year pricing. We expect pricing to be in the low double digit from a year on year growth standpoint. We expect foreign exchange as we mentioned in our press release and our prepared remarks, low single digit impact of foreign exchange.
My perspective on the full year, our pricing, we expect pricing to be in the low double digit from a year on year growth standpoint.
We expect foreign exchange as we mentioned in our press release.
Our prepared remarks, low single digit impact of foreign exchange and so therefore, if you're if you've got a back into the 4% to 8% guidance range on the top line volume would be flat to down low mid single digits. That's our current range guidance as we see it right now, but again as we head into R. R. P. O S season, we're gonna.
Speaker 4: And so therefore, if you kind of back into the 4% to 8% guidance range on the top line, volume would be flat to down, low, mid, single digits. That's our current range guidance as we see it right now. But again, as we head into our POS season, we're going to get much more insight into consumer demand once we get into the peak season.
We're going to get much more insight into consumer demand once we get into the <unk>.
Susan.
Got it thank you.
Yeah.
Thanks for the question.
Well beyond from Bank of America Global Research. Your line is now open. Please go ahead with your question.
Speaker 1: Robby Oms from Bank of America Global Research. Your line is now open. Please go ahead with your question.
Hello, Good morning.
Speaker 7: Well, good morning. You know, a couple of follow-ups on that. With the wholesale, you know, growth that you talked about, Best Buy and REI, can you, you know, give us any kind of update on, you know, how things look from your accounts regionally? And do you see any cannibalization or pushback from your wholesale partners when you're opening up these new accounts?
A couple of.
Follow ups on that.
With the wholesale.
<unk> growth that you talked about best buy and Rei.
You give us any kind of update on.
How how things look from your accounts are regionally and do you see any.
Ive cannibalization or pushback from your wholesale partners when you're when you're opening up these new accounts.
Hey, Ravi it's Chris Thanks for the question, we haven't seen that I think it's it's all it can it be a tense moment when when you expand distribution.
Speaker 3: Hey Robbie, it's Chris. Thanks for the question. We haven't seen that. I think it's going to be a tense moment when you expand distribution.
But we've been we've been partnering very closely with our core distribution partners as well and I think our business has really helped really healthy there in fact, if you take a customer like ace hardware and the co op and hardware channel.
Speaker 3: But we've been we've been partnering very closely with our core distribution partners as well And I think our business is really healthy really healthy there in fact if you take
Speaker 3: you know, a customer like Ace Hardware in the co-op and hardware channel, they've been one of our top performing customers. And so I think there's room for us to grow.
They've been one of our top performing customers and so I think there's room for us to grow with new points of distribution that reach different consumers and different geographies that don't cannibalize. The core if you think about the entry into Rei as an example, that's primarily focused on our portable grills and specifically the Weber.
Speaker 3: with new points of distribution that reach different consumers and different geographies.
Speaker 3: that don't cannibalize the core. If you think about...
Speaker 3: the entry into REI as an example. That's primarily focused on our portable grills and specifically the Weber Traveler. And so that's a little bit of a different type of shopping experience, a different use occasion for the consumer, and so it can be complementary to what goes on in our core channels. But we certainly want to drive strategies with our core retailers as well as new retail partners.
Traveler and so.
That's a little bit of a different type of shopping experience a different use occasion for the consumer and so it can be complementary to what goes on in our core channels.
But we certainly want to drive strategies with our core retailers as well as new channels, new retail partners to grow to grow the business for them and for us and our partnership in a collaborative way and that's been successful for us in recent years and is still successful this year.
Speaker 3: to grow business for them and for us in a partnership and a collaborative way. And that's been successful for us in recent years and is still successful this year.
No Ravi that's helpful and the other point.
Sorry, Ravi this is bill the only thing I'd add is if you go back to two back to 2018, when Chris Chris and I started this business was a 1.3.
Speaker 4: Sorry Robbie, this is Bill. The only thing I'd add is, you know, if you go back to...
Speaker 4: back to 2018 when Chris and I started, this business was a $1.3 billion business. We'd grown north of $2 billion and candidly it's...
$1 billion business, we've grown at north of $2 billion and candidly. It's when you look across $250 million of that growth has come from new customers, whether it be Costco. If you go back a few years and then you go into when we launched <unk> Dot Com Canadian tire in Canada, and now what you just mentioned.
Speaker 4: When you look across $250 million of that growth has come from
Speaker 4: new customers whether it be Costco if you go back a few years and then you go into you know when we launch Webber.com.
Speaker 4: Canadian Tire in Canada, and now what you just mentioned with Best Buy and others. So, we feel like we can manage through the complexity as well and have done so and will continue to do that.
With best buy and others. So we feel like we can manage through the complexity as well and have done so and will continue to do that.
Yeah.
That's really helpful and maybe maybe this is for Chris.
Speaker 7: That's really helpful. And maybe this is for Chris as well. Chris, can you remind us the acquisition strategy and what you're working on or looking at these days?
Well.
Can you Chris can you remind us the acquisition strategy and what you're working on or looking at these days.
Yeah.
Yes, so thanks, Robbie we did create.
Speaker 3: Yeah, so thanks Robbie. We we did create a new entity subsidiary entity within Weber called 1952 ventures that's named for our founding year.
A new entity subsidiary entities within Webber called $19 52 ventures, that's named for our founding year.
When George Stephens, founded Weber, and 1952, and and with the spirit of sort of reinventing the barbecue category or frankly, inventing the barbecue category and that's the that's the the strategic mindset that we go into with 1952 ventures, we named Troy Shea, who is our chief Chief growth Officer also the CEO of 1052 ventures and <unk>.
Speaker 3: when George Stevens founded Weber in 1952 and with the spirit of sort of reinventing the barbecue category or frankly inventing the barbecue category.
Speaker 3: And that's the that's the the strategic mindset that we go into with 1952 ventures. We named Troy Shea, who's our chief chief growth officer, also the CEO of 1952 Ventures and Troy is
<unk>.
Currently focused on and in the process of evaluating a lot of different opportunities and so.
Speaker 3: currently focused on and in the process of evaluating a lot of different opportunities. And so, as it speaks to either capital allocation strategy or the strategic intent behind different places where we would look to invest for disruptive and inorganic innovation, we would bring to bear the same strategies that we have for the core business, where we wanna drive growth by extending into new segments, we wanna drive growth by...
As it speaks to either capital allocation strategy or the strategic intent behind.
Different places, where we would look to invest for disruptive disruptive and inorganic innovation.
We would we would bring to bring to bear the same strategies that we have for the for the core business, where we want to drive growth by extending into new segments, we want to drive growth by.
By dialing up technology as a lever for the business much like we did with the July acquisition, a year ago, which has been really really exciting for us.
Speaker 3: by dialing up technology as a lever for the business, much like we did with the June Life acquisition a year ago, which has been really, really exciting.
And then there are other high margin initiatives like let's say accessories. As an example, where we can drive favorable gross margin mix and incremental consumer engagement in terms of purchase frequency and purchases and engagement with the brand in between grill purchases sequentially and there was a kind of a strategic pillar is I would say.
Speaker 3: And then there are other high margin initiatives, like let's say accessories is an example, where we can drive favorable gross margin mix and incremental consumer engagement in terms of purchase frequency and...
Speaker 3: purchases and engagement with the brand in between grill purchases sequentially and those are kind of the strategic pillars I would say we look very diligently at Potential candidates and are looking at potential candidates they have to be creative out of the gate and they need to be attractive from a mixed standpoint and then I would add we also like the idea of candidates that would
We look very diligently at potential candidates and are looking at potential candidates.
To be accretive out of the gate and they need to be attractive from a mixed standpoint, and then I would add we also like the idea of of candidates that would benefit from the the great infrastructure that we built at Weber, particularly around our global footprint and so with presence in 78 markets around the world doing.
Speaker 3: benefit from the Great infrastructure that we've built at Weber particularly around a global footprint and so with presence in 78 markets around the world doing more than half of our business outside the US in particular now with the network of
More than half of our business outside the U S. In particular now with a network of.
Of 200, Weber stores and grill academies around the world, we paved a pretty exciting road to drive additional cars down so we're.
Speaker 3: of 200 Weber stores and grill academies around the world, we paved a pretty exciting road to drive additional cars down. And so we're not going to do anything rash or foolish. We tend to be disciplined and very financially minded in terms of return on invested capital. But we do think there are opportunities for us to grow. And I'll be one of our first phone calls when we nail down something. That sounds great.
We're not going to do anything.
Anything rash or foolish, we tend to be disciplined and very very.
Financially minded in terms of return on invested capital, but we do think there are opportunities for us to grow and I'll be.
One of our first phone calls when we when we nail down something.
It sounds great. Thanks, so much.
Thanks Robert.
Our next question is from the line comes from <unk> <unk> of UBS.
Speaker 1: Our next question on the line comes from Artine Cocker-Iron of UBS.
Please go ahead with your question Hi, Thanks. This is <unk>.
Speaker 1: Please go ahead with your question, Altine. Thank you. Hi, thanks. This is Altine. I was wondering if you could talk about demand. I think in the release you highlight sustained high consumer demand. I was wondering if you have any POS commentary. I understand you aren't in high season POS yet, but anything you could share. And then my quick follow up. Could you give us some detail on what the retailer inventory situation is in terms of weeks of inventory? That would be helpful. Thanks.
Was wondering if you could talk about demand I think in the release you highlight sustained high consumer demand I was wondering if you have any.
Commentary.
Understand.
Hi, Stephen P O S yet, but anything you could share and then my quick follow up.
You gave us some detail on what the retailer inventory situation is in terms of weeks of inventory that'd be helpful. Thank you.
Sure. Thanks, Chris.
Chris I'll comment first and then bill if I Miss anything chime in to follow me up generally speaking one of the concepts we talked about during.
Speaker 3: Sure, thanks, Artino. Chris, I'll comment first and then Bill, if I miss anything, chime in to follow me up. Generally speaking, one of the concepts we talked about during the, even back during the IPO, but over the last couple of quarters is this idea that the pandemic in the outdoor cooking category and the behaviors that fell out of the pandemic, particularly around
During the even back during the IPO.
But over the last couple of quarters is this idea that the pandemic in the outdoor cooking category.
And the and the behaviors.
Fell out of the pandemic, particularly around.
Collyn locked down behaviors or work from home behaviors those home oriented behaviors. We felt like had basically all that all the tea leaves we felt like that had good chance to last and sustained over time and as as consumers are more oriented around their homes and spending more time at home even if work from home is not working all five.
Speaker 3: call them lockdown behaviors or work from home behaviors, those home-oriented behaviors, we felt like, based on all the tea leaves, we felt like that had a good chance to last and sustain over time. And as consumers are more oriented around their homes and spending more time at home, even if work from home is not working all five days from home during the week, but working...
Days from home during the week, but working two or three days from home during the week, which I think is a.
Speaker 3: two or three days from home during the week, which I think is a
Associates are social dynamic that's even still play a it does create more engagement with cooking at home and more engagement with grilling and that's been generally a positive tailwind and the way that I'd characterize it.
Speaker 3: a social dynamic that's even still...
Speaker 3: It does create more engagement with cooking at home and more engagement with grilling. And that's been generally a positive tailwind. And the way that I characterized it over the last couple of cycles is it creates a new floor for the category. And so as you think about, you know, I mentioned in the remarks.
You know over the last couple of cycles is it creates a new floor for the category and so as you think about you know I mentioned in the remarks, we were down in Q1, 8% for the quarter from a demand standpoint, but the two year stack was plus seven 5% and so what we feel great about is the <unk>.
Speaker 3: We were down in Q1 8%.
Speaker 3: for the quarter from a demand standpoint, but the two-year stack was plus 75%.
Speaker 3: And so what we feel great about is the higher level of consumer engagement with grilling does appear to be sustaining. And it's been, you know, we're coming up on now two years since the break of the pandemic. And that sustained sort of new floor if you follow me down that pathway.
Higher level of consumer engagement with drilling does appear to be sustaining and it's been you know we're coming up on now two years break of the pandemic.
And then that sustained.
Sort of new floor. If you if you're if you followed me down that pathway.
Does continue to be holding and it bears out in our Q1 results. It bears out in the point of sale that we're seeing I would say Q1 point of sale was.
Speaker 3: Does continue to be holding and that bears out in our q1 results it bears out in the point of sale that we're seeing I would say q1 point of sale was like single digit soft, but up
Like single digit soft but up.
No.
Mid double digits I don't know the right way to put it but are you up you know apartment.
Speaker 3: you know, mid double digits. I don't know the right vague way to put it, but, you know, up, you know, up on the, you know, on the order of 50% over a two year basis. And so even though the first quarter that that October through December period is a really low point of sale quarter and the peak season for us has always been and will continue to be in the northern hemisphere hemispheres, at least when warm weather hits.
On the order of 50% over a two year basis, and so even though the first quarter that October through December period is a really low point of sale quarter and the peak season for US has always been and will continue to be.
In the northern Hemisphere hemispheres at least when warm weather hits.
And as I mentioned were return it we see a return to more traditional seasonality and I think that the dynamics around the favorable dynamics around staying at home.
Speaker 3: And as I mentioned, we see a return to more traditional seasonality, and I think that the dynamics around, the favorable dynamics around staying at home, both related to the inflationary impact on eating out and some of those dynamics historically forever over our 70 years, have driven a more home-oriented cooking behavior among consumers.
Both related to the the inflationary impact on eating out and some of those dynamics historically for Weber over our 70 years have driven a more home oriented cooking behavior among consumers.
There's a lot of positive factors there that give us reason to believe that the trends that we're seeing now can continue the other thing I would add is one market. That's in season during that during that first quarter is our Australia, New Zealand business, which is a really healthy and attractive business for us and because it's in the southern hemisphere their peaks.
Speaker 3: There's a lot of positive factors there that give us reason to believe that the trends that we're seeing now can continue. The other thing I would add is...
Speaker 3: One market that's in season during that first quarter is our Australia-New Zealand business, which is a really healthy and attractive business for us.
Speaker 3: And because it's in the southern hemisphere, their peak season tends to be in Q1. That business was up significantly for the quarter and even from a point of sale standpoint was growing year on year, low to mid single digits, without any pricing benefits. So from a volume standpoint, a positive volume quarter in that market. And that would suggest that that probably portends well for northern hemisphere markets going into the northern hemisphere season in Q2 and Q3.
<unk> intends to be in Q1.
That business was up significantly for the quarter and even from a point of sales standpoint was growing year on year.
Low to mid single digits.
Without any pricing benefit so from a volume standpoint of positive volume quarter in that market and that would suggest that that portends well for northern hemisphere markets going into the northern hemisphere season in Q2 and Q3.
Sure.
And gentlemen, thank you for all that detail and really quick on weeks of inventory at retail or do you have do you have that color.
Speaker 8: Thank you for all that detail. Really quick on weeks of inventory at retailer. Do you have that column?
Yeah, our opinion I don't have the weeks.
Speaker 4: Yeah, Arpenia, I don't have the weeks in front of me, but what I can tell you is generally, and I'll speak to both the Americas or the US in particular, and then I'll give you some color around Europe .
In front of me, but what I can tell you is generally I'll speak to both the Americas or the U S. In particular, and then I'll give you some color around Europe , but generally in Q1, we were up about 22% at our five major retailers, where we actually can get inventory on hand data and that was.
Speaker 4: Generally in Q1 we were up about 22% at our five major retailers where we actually can get you know inventory On-hand data and that was up 22% versus last year at the end of Q1 Our target was to be up about 4% So we came out of Q1 a little bit lighter on trade inventory just driven by the supply chain challenges that I referenced so as we work through Q1, we were up about 22%
Up 22% versus last year that at the end of Q1, our target was to be up about 40%. So we came out of Q1, a little bit lighter on trade inventory just driven by the supply chain challenges that I referenced so as we work through Q2.
We feel really confident maybe a little bit more delayed versus where we expect it to be but but once we get all the containers and it out the door, we should be close to about 30% up year on year now that's both just lapping last year, where you were still at low inventory levels and additional we've got higher base.
Speaker 4: we feel really confident, maybe a little bit more delayed versus where we expected to be. But once we get all the containers in and out the door, we should be close to about 30% up.
Speaker 4: year on year. Now that's both just lapping last year where you were still at low inventory levels and additionally got higher facings with our new product launches this year. That gives us just the ability to kind of have more inventory itself, if you will. From a European standpoint, I would say generally what we're hearing from our retailers, again, we don't necessarily get hard and fast data, but generally trade inventory is where we want it to be, or quote, you know, normal, if you will.
With our new product launches this year.
Thats just the ability to kind of have more inventory at shelf. If you will from a European standpoint.
I would say generally what we're hearing from our retailers again, we don't necessarily get no hard and fast data, but generally trade inventory is where we want it to be or quote normal. If you will with the exception of again similar to the comments on supply chain. One example would be just at the end of Q1, we had $30 million of <unk>.
Speaker 4: With the exception of again similar to the comments on supply chain, one example would be just at the end of Q1, we had $30 million of entry into the inventory for Europe that was waiting literally on the water to be shipped out to the trade. So you'll see that course correct as well in our inventory in Q2. So that's just what I would add there.
Trains as inventory for Europe that was waiting.
On the water to be shipped out to the trade. So youll see that course, correct as well too in our inventory in Q2. So that's just what I would add there.
Thank you very much that's helpful.
Yeah.
Thank you.
A final question on the line comes from Chris Carey of Wells Fargo. Please go ahead.
Speaker 1: Our final question on the line comes from Chris Carey of Wells Fargo. Please go ahead.
Hi, good morning, it's a wide EBITDA range I know you've kind of talked to various puts and takes but can you just made.
Speaker 9: Hi, good morning. It's a wide EBITDA range. I know you've kind of talked to various puts and takes, but can you just maybe help us understand what might get you to the high end versus the low end.
Maybe help us understand what might get you to the to the high end versus the low end.
Yes, Thanks, Chris.
Speaker 4: Yeah, thanks Chris. So on that, you know, as we discussed Q1 is our lowest quarter of the fiscal year. I mentioned that, you know, it's also happens to be bearing, you know, a much higher percentage of the inbound freight cost headwinds that came out of Q4 and certainly into Q1.
So on that you know as we discuss Q1 is our lowest quarter of the fiscal year I mentioned that it's also happens to be bearing a much higher percentage of the inbound freight cost headwinds.
That came out of Q4 and certainly into Q1.
But given the uncertainty in the supply chain at this moment in time and the reality that as I mentioned earlier, 65%, 65% to 70% of our annual sales are yet to yet to be booked from February through September and the inflationary impact that were that are really impacting every consumer category out there not just.
Speaker 4: But given the uncertainty in the supply chain at this moment in time, and the reality that, as I mentioned earlier, 65 to 70 percent of our annual sales are yet to be booked from February through September .
Speaker 4: and the inflationary impact that are really impacting every consumer category out there, not just in our space. We've decided that until we get well into our POS season...
In our space, we've decided that until we get well into our season.
We're going to hold a wider range, both our topline and our bottom line impact obviously the top line results in third quarter, which will drive drive us towards towards the higher end of that range.
Speaker 4: We're going to hold a wider range on both our top line and our bottom line impact.
Speaker 4: Obviously the top line results in third quarter will drive drive us, you know towards towards the higher end of that range Assuming all of our sell-through, you know a new product etc So that's why we chose to go with a wider range at this time. I would think I could add Chris
Assuming all of our sell through of new products et cetera. So that's why we chose to go with a wider range at this time.
I can just add Chris.
I would.
And partially related to bill's comment around just having our lowest quarter behind us and having so much in front of us for the year.
Speaker 3: partially related to Bill's comment around just having our lowest quarter behind us and having so much in front of us for the year.
I think we felt like when we saw container rates at this at this I think maybe.
Speaker 3: I think we felt like when we saw container rates at this, I think maybe highest cost ever in October , you know that they were automatically done but no, we are still giving, in these days even techniques like holds for what is affordablygun,
Highest cost ever in October at least.
From my recollection over my 30 years container costs that could go up from there and they went up from there and they went up from there like almost 50% in December January and so the container costs.
Speaker 3: container costs, we didn't think could go up from there, and they went up from there. And they went up from there like almost 50% in December , January , and so the container costs.
Our crystal ball on container costs, where I might have felt like as a business leader.
Speaker 3: you know, a crystal ball on container costs where I might have felt like as a business leader, how could it possibly get any worse than this and then it gets worse than that. It's just difficult to pin that down. And so, you know, I don't know exactly what's going to happen with container costs post Lunar New Year. My hope is that they'll course correct and modulate or to moderate rather. ButBrokerFor
How could I, possibly get any worse than that and then it gets worse and that it's just difficult to pin that down and so you know I don't know exactly whats going to happen with container costs post lunar new year.
My hope is that they'll they'll of course, correct and modern modulator or to moderate rather.
But but rather than than.
Speaker 3: But rather than hanging our hat on that, so to speak, we're taking the approach of covering a range of options here. And so I think what you can expect is, I mentioned in my remarks, we're taking very proactive actions on literally every front of the business to course correct this. And so within that window of range, the more that we can impact our freight tactics, the more that we can impact our supplier negotiations and cost improvement initiatives with our suppliers.
Hanging our hat on that so to speak is we're taking the.
Cover a range of options here and so I think what you can expect as I mentioned in my remarks, we're taking very proactive actions on literally every brought to the business to course, correct. This and so it within that window a range.
The more that we can impact our freight tactics the more that we can impact our supplier negotiations and cost improvement initiatives with our suppliers more than weekend I mentioned earlier shifting more manufacturing into Poland.
Speaker 3: the more that we can, I mentioned earlier, shifting more manufacturing into Poland, the more that we can get the price increases sort of accepted and out into the marketplace and producing the way that we would forecast those to produce, those things increase our certainty and reduce the variability and that would be the kind of action that would narrow in that range as we get more, just more months under our belt, I think. So I would expect that.
The more that we can we can get the price increases sort of accepted it out into the marketplace and producing the way that we would forecast those to produce those things increase our certainty and reduce the variability of that would be the kind of action that would narrow in that range as we get more.
You're just more months under our belt I think so I would expect us to have a much more certain at a much higher level of certainty.
Speaker 3: to have a much higher level of certainty, a quarter down the road from where we are today based on just living through the post lunar new year container dynamics.
A quarter down the road from where we are today based on just living through the post lunar new year container dynamics and also implementing a lot of the actions that we've called out in today's call to go after improving the situation and that's the kind of thing that will steer us in a good direction.
Speaker 3: and also implementing a lot of the actions that we've called out in today's call to go after improving the situation. And that's the kind of thing that will steer us in a good direction.
Yeah.
Sure.
Very helpful quick follow up just on the outlook for cost I think containers. You may have said is it's half of the Cogs inflation that you're expecting for the full year. Please correct me if that's not.
Speaker 9: Very helpful, quick follow up just on the outlook for cost. I think containers, you may have said, is half of the COGS inflation that you're expecting for the full year. Please correct me if that's not the case. If you just provide some perspective on what else you're factoring into the inflation outlook as far as the COGS go and what you're gonna be pricing against.
The case.
Can you just provide some perspective on what else you're factoring into the inflation outlook as far as the Cogs go and what are you going to be pricing against thanks. So much.
Generally in the in the first quarter because you are correct that the freight was more than 50% of the headwinds on Cogs represented.
Speaker 4: Generally in the first quarter, Chris, you're correct that freight was more than 50% of the headwinds on cogs represented.
Call it 54% of our of our inflationary challenges.
Speaker 4: you know, call it 54% of our inflationary challenges on cost of goods.
Cost of goods and then the bulk of the rest of the inflationary headwinds between commodity and purchase grill cost so.
Speaker 4: and then the bulk of the rest of the inflationary headlobery commodity and purchase grill costs. So collectively those combined to be almost 24%
Collectively those combined to be up almost <unk>.
24 percentage points drag on margin, where we see that progressing throughout the year again, I mentioned that inbound freight represented more than its fair share if you will.
Speaker 4: Dragon margin where we see that progressing throughout the year again I mentioned that inbound freight represented more than its quote fair share, you know if you will of Cost impacting q1 because you're bringing in all this free
<unk> cost impact in Q1, because you bring it all the spring it sits on the balance sheet in Q4 and into Q1 and it gets rolled off to the P&L.
Speaker 4: It sits on the balance sheet in Q4 and into Q1 and gets rolled off to the P&L. The bulk of that hits in Q1 when it's also, as Chris mentioned, your lowest selling.
The bulk of that hits in Q1.
It's also as Chris mentioned your lowest selling season. So we expect that to normalize that because we are being overly aggressive on rates, we're actually assuming that the freight rates that we're seeing in the market that are four times historical averages essentially stay where they are today, so we're not being optimistic in or out.
Speaker 4: So we expect that to normalize not because we're being overly aggressive on rates, we're actually assuming that the high freight rates that we're seeing in the market that are four times historical averages essentially stay where they are today. So we're not being optimistic in our outlook on where container rates are going to go.
Look.
We're container rates are going to go.
Across the year, we would expect that about.
Speaker 4: But across the year, we would expect that about
Roughly 40% of your gross margin impact is coming from inbound freight and closer to 60%, 65% coming from commodities and purchase grill cost.
Speaker 4: Roughly 40% of your gross margin impact is coming from inbound freight and closer to 60-65% coming from commodities and purchase grill costs being inflated.
Being employed.
Okay. Thanks Serge.
Yeah.
As a reminder, if you would like to ask a question. Please press star followed by one and kind of thank you Pat.
Speaker 1: As a reminder, if you would like to ask a question, please press star followed by 1 and a telephone keypad.
As you have noticed that the questions registered I'll hand back over to the team.
Yeah.
So thank you all for joining US today, we are very we continue to be very optimistic about the business and the long term prospects. We're very excited about the innovation that I mentioned earlier and the advancement of our of our direct business, our Weber stores and grill academies, and certainly our progress in emerging markets, which we didn't we didn't talk about a lot in the Q&A here.
Speaker 3: So thank you all for joining us today. We continue to be very optimistic about the business and the long-term prospects. We're very excited about the innovation that I mentioned earlier and the advancement of our direct business, our Weber stores, and grill academies, and certainly our progress in emerging markets, which we didn't talk about a lot in the Q&A here, but that's all going very well also. So there's a lot of positive
But that's all going very well also so theres a lot of positive.
Positive infrastructure being built and a lot of great opportunities for us going forward. The strategies that we have in place are working we're going to battle our way through this.
Speaker 3: positive infrastructure being built and a lot of great opportunities for us going forward. The strategies that we have in place are working. We're going to battle our way through this, I would use the word generational headwind from a transportation cost and commodity cost standpoint and I'm confident that it will come out strong on the back end of that. So thank you for your time today and look forward to speaking with you again soon.
I would use the word generational headwind from a transportation cost and commodity cost standpoint, and I'm confident that we will come out strong on the back end of that so but thank you for your time today and look forward to speaking with you again soon.
Yeah.
Thank you very much for joining us today, ladies and gentlemen, you may now disconnect your lines have a good afternoon.
Speaker 1: Thank you very much for joining us today ladies and gentlemen. You may now disconnect your lines. Have a good afternoon.
Speaker 10: Necronautics you
No.
Okay.
Yes.