Q4 2022 Conn's Inc Earnings Call
Good morning, and thank you for holding welcome to the Cons incorporated conference call to discuss earnings for the fiscal quarter ended January 31st 2022. My name is Robert and I'll be your operator today during the presentation. All participants will be in a listen only mode. After the speakers' remarks, you'll be invited to participate in the <unk>.
<unk> and answer session.
As a reminder, this conference call is being recorded the company's earnings release dated March 29, 2022 was distributed before market opened this morning and can be accessed via the company's investor Relations website at IR Dot Coms Dot com.
During today's call management will discuss among other financial performance measures adjusted net income and adjusted earnings per diluted share.
Please refer to the company's earnings release that was issued today for a reconciliation of these non-GAAP measures to their most comparable GAAP measures.
I must remind you that some of the statements made in this call are forward looking statements within the means of federal security laws. These forward looking statements represent the company's present expectations or beliefs concerning future events.
The company cautions that such statements are necessarily based on certain assumptions, which are subject to risks and uncertainties, which could cause actual results to differ materially from those indicated today.
Your speakers today are jindra hold the company's CEO and George <unk>, the company's CFO I would now like to turn the conference over to your host MS. Holt. Thank you you may begin.
Good morning, and welcome to times fourth quarter fiscal year 2022 earnings conference call I'll start today's call with a review of the quarter and our strategic priorities before turning the call over to George who will review our financial results.
Fiscal year 2022 was a record year for times and I'm proud of our team's strong execution in a very dynamic operating environment.
All of the fiscal year, we successfully navigated unprecedented supply chain challenges and the ongoing COVID-19 pandemic, including the emergence of the I'm a proud of variant to produce record annual earnings of $3.61 per diluted share and the strongest annual retail sales and five fiscal years.
I'm encouraged by our strong fiscal year 2022 performance and excited about the direction we are headed.
At our January 2022, Investor Day, we announced a new strategic growth plan, which we believe will unlock the significant potential of our expanding retail digital and payment offerings. We also shared our three year financial targets, which include increasing annual consolidated revenues to approximately $2 billion to 2.2.
$2 billion.
And achieving a high single digit EBIT margin by fiscal year 2025.
As we follow our three year strategic growth plan and focus on achieving our long term financial target I want to use my time today to review our recent performance and the progress we're making against our strategic plan.
Fiscal year 'twenty 'twenty three it will be a transformative year as we pursue initiatives to further enhance our competitive position and support our long term growth opportunities.
The strategic initiatives. We are undertaking. This here include launching an in house lease to own platform re platforming, our website and preparing to rebrand our business.
I will discuss these initiatives throughout today's call.
Moving to our fourth quarter I'm pleased with the positive retail performance, we achieved during the quarter as same store sales increased six 2% and total retail sales grew 13%.
This performance is especially encouraging as we offset the demand pull forward from the traditional holiday shopping season that we discussed on our third quarter earnings call.
We also believe the emergence of the omicron variant as well as tightening by our lease to own partners negatively impacted fourth quarter retail sale.
I'm proud of our ability to deliver double digit retail sales growth during the fourth quarter and throughout fiscal year 2022 at our powerful value proposition resonates with more customers and we strengthened our core retail experience.
As I mentioned at our Investor Day, we have a growing segment of customers that are choosing cards because of our fast and reliable shopping experience.
Customer segment represents cash in all credit card sales, including our private label credit card offering and typically you typically consists of customers with FICO scores above 650.
According to FICO U S consumers with FICO scores above 650 represent 75% of the population you are fast and reliable customer segment represented only 39% of our total retail sales in fiscal year 2022.
As you can see the fast and reliable customer segment makes up a large part of the market and we believe this provides us with a significant opportunity for growth.
In fact for the fourth quarter retail sales of our fast reliable customer segment outpaced total retail sales growth.
We are capturing more fast reliable customers because of our white glove next day delivery and in house service capabilities as well as the enhancements, we're making to our product assortment and e-commerce experience.
Yeah.
Looking at our core financial access customer segment in more detail the financial access customer typically has a FICO score below 650 and represents approximately 25% of the U S population.
This customer segment uses our in house financing or at least to own offerings to complete their retail purchase.
Our financial access customer is our largest segment and increased at a double digit rate in the fourth quarter.
We believe there are opportunities to further grow our financial access customer segment, while prudently managing the higher risk profile of this customer.
Historically, we have relied exclusively at a third party lease to own partners to support our efforts and we continue to maintain strong relationships with our existing really strong partners.
However, after a comprehensive review of our lease to own strategy, we identified a unique opportunity to acquire a technology platform that will enable us to originate and service we are still in transactions in house.
Well it will take time to fully transition to a full in house. We've shown offering we are excited by the growth opportunities today's announcement represents.
We expect to begin originating leases under our in house bluestone offering during the fourth quarter of this fiscal year and to be originating the majority of lease to own transactions with our in house offering next fiscal year.
The transition will take approximately three years to be fully reflected in our financial statements and we believe that our in house. They still offering will add approximately $25 million to annual operating income once the program is mature helping us achieve our fiscal year 'twenty twenty-five revenue and EBIT margin goals.
We are excited by the opportunities this transaction will have on our business and the value. It in house at least don't offering will have for our customers.
Turning back to our fourth quarter retail performance good double digit growth from both our fast reliable and financial access customer segments drove robust sales growth across our top product categories.
Within our appliance category sales remained strong during the quarter as same store sales increased 13% over the prior year.
Sales growth continues to be driven by our expanding assortment are favorable in stock position rapid ecommerce growth and our next day delivery capabilities.
In fiscal year 2022 appliances was our largest and fastest growing category and we achieved record sales.
As a top 10 appliance retailer in the U S. We are doubling down on our efforts to drive growth within the category and expect to further expand our assortment both in store and online in fiscal year 2023.
Furniture, and mattress same store sales increased two 4% over the prior year more than any other category, we have pivoted the furniture assortment through creative sourcing actions to maintain a consistent flow of product and ensure a broad range of next day delivery options for our customers.
Greatest bought our first private label brand continues to exceed our expectations and remains our number one selling mattress brands in both units and dollars.
In addition, our expanded mattress in a box assortment continues to drive our online growth in the category.
During fiscal year 'twenty 'twenty three we are focused on increasing our furniture and mattress assortment online and introducing a new private label furniture brand.
Same store sales within our consumer electronics category increased two 3% over the prior year, driven primarily by higher television home theater and gaming sales.
I'm pleased with the positive trends, we experienced within this category, even as consumers pulled forward some of their holiday purchases into our third quarter and its supply chain concerns.
Yeah.
The performance of new stores is also contributing to our retail growth for.
For the quarter and full year recently opened new stores added six 8% and seven 4% to total retail sales growth respectively.
We opened 12 stores in fiscal year 2022 primarily within the state of Florida and ended the fiscal year with a total of 158 stores across 15 states.
For fiscal year 'twenty to 'twenty three we plan to open 13 to 16, new locations all within existing markets, which will leverage fixed costs.
Looking at our supply chain in more detail. We are pleased with our domestic logistics capabilities as approximately 80% of our products are currently available for next day delivery.
Over the past year, our distribution centers provided the flexibility to maintain a high level of in fact, merchandize and supported our leading next day white glove delivery offering.
However, ongoing global supply chain disruptions and elevated international freight costs had a greater impact than expected on our retail segment in the fourth quarter.
While global supply chain issues in freight costs have stabilized they have not improved and we expect challenges will continue throughout fiscal year 2023.
We continue to pursue actions to offset these impacts to margins by diversifying our sourcing base boxing, our assortments and reducing promotion.
In addition, while we remain focused on providing our customers with compelling value. We are closely monitoring market conditions and margins across our categories and expect to continue to prudently pass along price increases to mitigate higher costs.
Our unique supply chain capabilities support many aspects of our business, including our fast growing ecommerce business.
Commerce sales for the quarter increased to 132% to a record of $24 $1 million.
For the year e-commerce sales exceeded our expectations and increased 171% to an annual record of $71.3 million.
The ecommerce growth we've experienced over the last year as a result of our investments to improve the functionality of our website. While also leveraging our best in class next day White glove delivery capabilities.
As we discussed at our Investor day, we have a large opportunity to increase conversion on our website and expanding our online assortment will be an important initiative to achieve our conversion goal plans.
Plans for fiscal year, 'twenty, twenty-three, including adding depth to our appliance category, including new colors and sizes as well as adding new categories, such as outdoor living lighting and smart home.
In fact by the end of the first quarter, we expect to double our online assortment.
Our digital customer experience is another important driver to improve conversion and grow ecommerce sales.
During the current fiscal year, we are upgrading our digital infrastructure by re platforming our website.
This transformation will occur in phases and is expected to start in the second quarter.
We expect the bulk of the transition to be completed by this fall.
Once finished our customers will see a modern enhanced website with improved functionality across their online journey.
I've led multiple digital transformation throughout my career and I've learned short term disruptions occur even during successful implementation as a result, we expect the growth rate of E. Commerce sales to temporarily slow in this year's second and third quarters before re accelerating in the fourth quarter and beyond.
Ultimately the digital initiatives, we are pursuing support our vision for a unified commerce, we believe unified Commerce will drive the next digital opportunity for retailers, because it streamlines engagement across channels and customer touch point.
Cars is uniquely positioned to deliver on unified commerce, because our back end supply chain is the same for both stores and ecommerce.
We recently took a significant step forward in our pursuit of becoming a leading unified commerce retailer by enabling our store associates to add online only items to in store transactions.
Our digital transformation and unified commerce initiatives support our vision to achieve over $300 million in e-commerce sales by fiscal year 2025.
Having a robust digital offering is critically important and supports our strategy to serve both our core financial access customer and are growing fast and reliable customer.
To accelerate our growth and further enable our transformation, we have decided to introduce a new brand that will better position us to bring to life our value proposition.
Our branding efforts are underway and I look forward to updating investors in the coming quarters.
We are confident in the direction of the business is headed and our ability to achieve our fiscal year 'twenty 25 financial target.
However, we expect a softer first half of this fiscal year as we lap government stimulus lot more difficultly stone comparisons and invest in our growth initiatives growth initiatives that we expect to benefit sales in the second half of the year.
Growth initiatives that we expect to benefit the second half of the year include credit related initiatives that are currently testing and expect to roll out during the second quarter.
The significant expansion of our online assortment and the re platforming of our web site, which we believe will improve the customer experience and increase online conversion.
Turning to our credit segment growth strategies and performance pursuing growth opportunities across the spectrum of payment options has derisked, our business and enhanced credit segment performance.
As a result for fiscal year 2022 we achieved an annual credit spread of 11.7% representing the highest spread it over five years and helps drive record annual credit segment profitability.
Cause optimizing our credit strategy higher credit quality customers represent a greater percentage of cards in house finance sales.
This is occurred even as these in house finance sales having have increased.
In addition, these newer higher credit quality vintages are outperforming older vintages.
Our disciplined approach to risk has helped to proactively manage our 60 plus day delinquency and re aged balances both indicators of portfolio health remained well below pre COVID-19 levels.
As a percent of the portfolio. The 60 plus day past due balance was 10, 4% compared to 12, 4% for the same period last fiscal year.
The balance of re aged accounts as a percent of the portfolio was 16, 8% compared to 25, 9% for the same period last fiscal year.
We continue to believe delinquency and charge off trends will remain below pre COVID-19 levels based on our enhanced credit strategy and current economic outlook.
As a result, I believe we are well positioned to target an annual credit spread of approximately 1000 basis points going forward.
With a stable credit platform in place, we are well positioned to pursue credit strategies that enable retail growth within both our financial access and are fast and reliable customer segments.
This includes providing both customer segments with a seamless online credit transaction through the digital transformation actions, we are pursuing this year.
In addition, we believe bringing we used to own transactions in house will allow us to deliver a more seamless experience capture a greater number of customers and financially benefit from the vertical integration or at least tell him business.
Yeah.
To conclude my prepared remarks, we are excited by the strategies, we are pursuing to create sustainable value for our shareholders and December the board authorized a $150 million share repurchase program, reflecting the positive momentum underway across our business and the confidence we have enough future.
As of March 25th 2022 we have repurchased five 9 million shares of our common stock at an average price of $21.41 per share, which equates to approximately 20% of the company's outstanding shares as of October 31 2021.
We are committed to creating value for our shareholders by continuing to prioritize initiatives that support our growth strategies maintain flexibility to pursue inorganic opportunities and return capital to shareholders.
Since I joined times, we've established and communicated the new vision and strategy for the company. We've also focused on attracting developing and retaining a strong and motivated team, while adding significant diversity to our leadership team to better align with the diversity of our organization our customers and the communities we serve.
Sure.
And now with our leadership team in place, we're executing on our strategic plan.
Our strong fiscal year 2022 result, and exciting vision for the future is possible because of the dedication and resilience of our over 4000 associates.
I want to thank our entire team for their commitment to our company our customers and our local communities now let me turn the call over to George to review our financial performance.
Thanks Chandra I'm encouraged by our record fiscal year 2020 to earnings and our strong position headed into the new fiscal year.
On a consolidated basis total revenues were $402.5 million for the fourth quarter, representing a 9.4% increase from the same period last fiscal year.
We reported fourth quarter net income of 26 cents per diluted share compared to net income of 85 cents per diluted share for the same period last fiscal year.
On a non-GAAP basis adjusting for certain charges and credits we reported net income of 33 cents per diluted share for the fourth quarter compared to 91 cents per diluted share for the same period last fiscal year.
As a reminder earnings last year benefited from lower cost as a result of the COVID-19, pandemic and a discrete tax benefit as a result of tax burden in connection with the cares Act, which impacted the provision for income taxes by $12 $4 million and benefited earnings by 42 cents per diluted share.
Reconciliations of GAAP to non-GAAP financial measures are available in our fourth quarter earnings press release that was issued this morning.
Looking at our retail segment in more detail total retail revenues for the fourth quarter was $333 million, a 13% increase from the same period last fiscal year.
Our retail revenue was driven by an increase in same store sales of six 2% of new store growth.
Those children mentioned, we experienced strong double digit growth rates across both our financial access in Boston, a reliable customer segments during the fourth quarter, reflecting our success attracting customers across a larger addressable market.
Retail gross margin for the fourth quarter was 35, 8% a decrease of 160 basis points from the same period last fiscal year.
The larger than expected year over year decline in retail gross margin was primarily driven by the impact of increased product and pretty cool.
Higher retail sales continued to help leverage retail SG&A expenses during the third quarter.
As a percent of retail sales SG&A expenses were 31, 6% for the fourth quarter compared to 30, 242% for the same period last fiscal year.
Retail segment operating income was 10, four $9 million compared to $12 $7 million for the same period last fiscal year. It was higher retail sales and improved SG&A leverage were offset by lower retail gross margin.
Turning to our credit segment finance charges and other revenues were $16 $5 million for the fourth quarter.
The four 9% decline from the same period last fiscal year was primarily a result of the 10, 2% reduction in the average balance of the customer receivable portfolio.
Our strong credit results continue to show that our receivable portfolio is performing well.
For the fourth quarter net charge offs as a percent of the average portfolio adults were nine 8% compared to 14, 1% for the same period last fiscal year.
For the year net charge offs as a percent of the average portfolio. Those were 11, 1% compared to 16, 3% last fiscal year.
During the fourth quarter, the credit provision for bad debts was $28 $2 million compared to $25 $1 million last fiscal year.
The year over year increase was primarily driven by an increase in the change in the allowance for bad debts, partially offset by a decrease in net charge offs of 16 for $9 million.
We reported a $1.1 million loss before taxes in our credit segment compared to credit segment income before taxes, a full point $4 million for the same period last fiscal year.
The reduction in credit segment income before taxes was primarily due to lower credit segment revenue higher SG&A expenses, and a higher provision for bad debts, partially offset by an improvement in interest expense.
As our portfolio begins to grow we will continue to focus on controlling risk limiting portfolio volatility and achieving approximately 1000 basis points of annual credit spread while supporting our long term growth opportunity.
Consolidated SG&A expenses for the fourth quarter were $142.5 million.
The $14 $2 million increase from the prior year period was due to higher variable operating expenses associated with sales growth additional new stores and an increase in advertising costs as we lap prior year reductions due to the COVID-19 pandemic.
Turning now to our balance sheet and capital position.
We ended the fourth quarter with a strong balance sheet and capital position as we continue to benefit from significant year over year growth in costs and third party from yourselves and robust cash collections on our customer receivables portfolio.
This is produced meaningful operating cash flow over the past eight quarters.
We ended the fourth quarter with $483.4 million in net debt compared to $549 $3 million at the end of the fourth quarter of last year.
In addition, net debt as a percent of your ending portfolio balance.
Along to approximately 42, 8% at the end of the fourth quarter compared to approximately 44.5% at the end of the fourth quarter of last year.
I am pleased with our success strengthening the balance sheet derisking, the business and executing our growth initiatives.
These efforts have built underlying strengths in our business.
Before we open up the call to questions I want to review the impacts of our recent technology platform acquisition and emerging you know we used to own strategy as well as our expectations for fiscal year 2023.
Jordan go at least to one transition.
Back to begin originating leases under our in house, we still own offering by the fourth quarter of fiscal year 2023.
From an accounting standpoint in our consolidated financial results revenue from sales made through our in house Keystone offering will be reported as lease income recognized over the life of the lease rather than as a retail sale recognized at the time of sale.
As a result, the transition from third party lease to own sales to in house, we still in revenue will negatively impact revenue and profitability in the first two years of the transition beginning in the fourth quarter of this fiscal year.
We also expect to incur additional costs associated with the lease to own platform beginning in the first quarter fiscal year 2023, as we assume the costs associated with the lease to own acquisition and begin investing in our new in house, we used to own capabilities.
For fiscal year 2023, we expect the combination of the different revenue accounting and incremental costs associated with the lease to own business to reduce operating income by $15 million to $20 million.
As you know we used to own sales grow in fiscal year 2024, we expect our operating income to be negatively impacted by approximately $25 million to $30 million driven by these two factors.
However by fiscal year 2025, we believe our in house, they used to own offering well out approximately $25 million to annual operating income.
As a result, the acquisition and transition to offering an in house, we used to own product will help us achieve our fiscal year 2025 financial targets.
Additional information on our lease to own acquisition is available in our fourth quarter investor presentation on our Investor Relations website.
Looking at our expectations for the year in more detail. We are excited by the progress, we're making and the opportunities we have for growth, but as Trevor mentioned several items are expected to impact our quarterly results during the year.
For fiscal year 2023, we expect low single digit total revenue growth with mid single digit retail revenue growth and high single digit decline in finance charges and other revenue driven by an increase in promotional financing programs.
We expect operating margin for the fiscal year to be between 5% and 6%, which includes an approximately 100 basis point impact from lease to own platform acquisition.
We also expect interest expense to be between $25 million and $30 million.
Yeah.
Given the ongoing issues related to the global supply chain, we expect fiscal year 2023 retail gross margin to be down from fiscal year 2022.
G&A expenses are expected to increase in fiscal year 2023, primarily driven by the opening of new stores and continued investments in our growth initiatives our provision.
It is expected to be up versus the prior year, driven primarily by portfolio growth and a smaller decline neuro allowance for bad debts.
While uncertainty remains high our guidance reflects a macroeconomic outlook consistent with recent trends and lower consumer spending, particularly for our financial officers customer driven by inflationary pressures and lapping last year's government stimulus programs.
Lastly, our guidance reflects a softer first half of the year as treasurer and all have discussed throughout todays prepared remarks.
I'm excited about the direction, we were headed as a business transformation accelerates and we execute against our fiscal year 2025 financial targets.
Finally, I want to share my thanks to all our team members for their continued hard work service and dedication.
So with this overview Cheddar and I are happy to take your questions. Operator, Please open the call up for questions.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
My first question comes from Rick Nelson with Stephens. Please proceed with your question.
Thanks, a lot.
So good question I guess Oh.
Let's turn to tier customer appeal kudos has held.
Health care that are experiencing higher inflation gas food private suits.
Stimulus.
It was wound down now.
How do you see the customer.
Good morning, Greg. Thanks for the question. Yeah. You know there are a number of factors as you mentioned influencing consumer health right now from what we're saying from a collection standpoint, we still see consumers I'm being prudent and paying their bills, which is a great thing for our business but.
But they seem to be more cautious on discretionary spending right now as we overlap some of the stimulus from last year.
Yeah.
Can you talk about what you're seeing from the sales.
Standpoint.
What's.
What's the retail our guide implies for same store sales growth.
Sure going into this year, we expected Q1 to be our most difficult quarter for the year and we're facing two major headwinds first the government stimulus overlap from last year and tightening by R. L. T O partners, we expect the impact of the government stimulus to lessen in Q2.
And we will have easier LDL overlap starting in Q3.
To date Q1 is down four comp and you can see the impacts of the headwinds that I mentioned when you look at the monthly results February for example was a positive eight comp while March to date is down 13 com and we expect the comparisons for April to be the most difficult in the quarter.
That said, we have a number of initiatives that we're rolling out this year that should give us tailwind in the back half of the year specifically within E. Commerce, we are making a lot of progress expanding our assortment online we should have our assortment doubled by the end of Q1, and we're also re platforming our website, which should be completed by this fall.
And give us upside and conversion on our website.
Within credit we have a number of initiatives that we are working on including.
Digital I'd verification and in line optimization that will give us tailwind in the back half of the year.
And can you.
Cause clubs.
Your ability to pass on.
These higher costs higher prices.
The consumer what categories now are more challenged.
Hum.
Where we're better able to pass on those higher costs.
Yeah in terms of gross margin pressure, we really see it in our furniture category is that that is where international freight costs are impacting cost of goods and so we're consistently modern or monitoring what our margins are and what the market looks like so we're able to.
Pass up prudently pass on price increases as we see cost elevate while still staying staying competitive with our competition our competition, but.
Generally speaking in addition to tenders comments, Rick I would say that there's we have more pricing power for a non discretionary goods that we do discretionary goods and so to Cheddars point in the furniture category, specifically as we're seeing costs rise or stay high as a result of our international freight costs we have.
Somewhat less pricing.
Power in our in the furniture category.
Okay.
Hum.
Oh, Thanks, and good luck.
Thanks, Rick.
Our next question is from Kyle Joseph with Jefferies. Please proceed with your question.
Hey, good morning, Thanks for having me on and taking my questions.
Just wanted to dig into the virtual at least or the wheatstone in housing you know give us a sense for your transition partners I believe it was last year.
And you know what was really the impetus for bringing this in house you know how big was the acquisition and is there any sort of portfolio associated with the acquisition or is it just the technology platform.
Yeah. Thanks for the question, we are very excited about our lease to own technology platform that we acquired them within the acquisition, we acquire the tech data for underwriting and people and so where you really see this as the next step to enhancing our credit.
And we're excited about what that the tech and in our people and the data will bring the cons.
And Kyle just to add to that it did not include.
The acquisition of any lease to own assets.
The best way to think about this is effectively it accelerates our timeline a timeline to bring at least one in house by our by 18 to 24 months or so, thereby acquiring the technology data and people necessary to to start this business.
Okay got it and then George on credit obviously, you guys talked about how you know repayment activity, it's pretty pretty strong still but you expect the provision to be up can you give us a sense for maybe Directionally you know how you see N C o's and the a triple L. A as we go through.
2023.
Yeah, I mean, I would say consistent with our guidance call, we expect provision to be up year over year and that implies that the charge offs will be more normal this year than they were this past year, but yeah beyond that obviously the macroeconomic.
Environment remains.
Really fluid right now so we're not going to provide any more specificity I will say as we're thinking about where we sit today. The portfolio has you know.
It's been a long time as the portfolio has been in as good of a position as we are today with reagent PDR balances.
We haven't seen in five years as a percent of the portfolio and delinquency is still well below pre COVID-19 levels. So we're we're feel.
Feel good about the position that we're heading into the year and our guidance reflects the the outlook forward for the balance of the year.
Got it thanks and last one from me I'm just you know for the for the credit segment, you know weighing the guidance in terms of the revenue contribution, but also kind of your outlook for sales mix shift what are what are your expectations for the for the size of the portfolio going through 2023.
We our guidance implies that the portfolio will grow modestly throughout the year, but obviously that's.
Dependent on how much of our originations our on balance sheet or not but yeah. We expect to see on our cards credit financing to stay between that 50% to 60% over the long term and closer to that 50% here for the balance of the year.
Got it thanks very much for answering my questions very helpful.
Thanks Carl.
Our next question comes from Brian Nagel with Oppenheimer. Please proceed with your question.
Hi, This is William Dawson on for Brian Nagel.
So we're taking a question.
Good morning, good morning.
The first question, we wanted to ask about the sales deceleration in Q4.
And you discussed some likely pull forward into Q3.
What's the sales slowdown more of a factor of you know.
This waning demand in Q4.
Or was there likely an element of support supply constraints and cost potentially weighing on sales.
Yeah. Good question. So so we saw a couple of things happened in Q4. So first we did experience some pull forward into Q3, which we discussed on our last earnings call and then later in the quarter when the Omicron variant hit we did see some consumer slow down during that period and then.
The other thing that happened during the quarter was or at least on partners tightened, which also impacted the lease to own business. We did not see a significant slowdown from in stocks or or other factors outside of those three for that for the most part.
Okay. Thanks, that's helpful.
And this is a bit of a follow up to a previous question but.
What youre seeing now.
Within your customer base.
Any indications of weakening credit as we move further past the effects.
The effects of physical stimulus.
So what we're seeing right now is that customers are still currently paying their bills. So we are overlapping some of this but you know from a tax season perspective, we feel that customers are still using those tax returns to pay their bills and so we felt confident in that.
That space, what we are seeing from a stimulus standpoint is a pullback in discretionary spending and what you were saying and anticipated for Q1 of this year for our business.
Thanks, a lot.
Yeah.
We've reached the end of the question and answer session I would now like to turn the call back over to Jindra Holt for closing comments.
Thank you for attending today's call I look forward to continuing to update investors on our progress towards our strategic plan in the coming quarters and hope everyone has a great day.
Okay.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.