Q1 2023 1-800-Flowers.Com Inc Earnings Call
[music].
Good day and welcome to the one 800 flowers Dotcom, Inc. 2023 first quarter results conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Andy Miller Senior Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining US one 800 flowers dotcoms fiscal 'twenty 'twenty three first quarter earnings call.
For those of you who have not received a copy of our press release issued this morning. The release can be accessed at the Investor section of our corporate website at Www Dot one 800 flowers, Inc. Dot com.
We will begin today's call with brief formal remarks, and then we will open the call to your questions.
Joining us today are Chris Mccann CEO .
Tom Hartnett, President and Bill Shea CFO .
Before we begin I need to remind everyone that some of the statements. We will make on todays call maybe forward looking within the meaning of the private Securities Litigation Reform Act of 1095.
These statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements.
For a detailed description of these risks and uncertainties. Please refer to our press release issued this morning, as well as our SEC filings, including the company's Form 10-K and Form 10-Q reports.
In addition, we will discuss certain supplemental financial measures that were not prepared in accordance with generally accepted accounting principles.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in the tables accompanying the company's press release issued this morning.
The company expressly disclaims any intent or obligation to update any of the forward looking statements made in today's call.
Any recordings of today's call. The press release issued earlier today or in any of its SEC filings, except as may be otherwise stated by the company.
And now I'll turn the call over to Chris Mccann.
Thank you everyone and good morning.
Before I begin my formal remarks on the quarter I wanted to take this opportunity to congratulate Joe potato on his upcoming retirement this December and to thank him for his more than two decades of tireless commitment to our company during a period of our company's tremendous growth and transformation.
Joe has been a tremendous asset company and his drive and passion to telling a growth story has been invaluable to us.
Wish you all the best upon his retirement.
And good luck Joseph.
I also wanted to take this opportunity to introduce Andy Miller, who joined our company as SVP of Investor Relations in September . So thank you again, Joe welcome Handy.
And now let's review our results as we noted in this morning's press release, our first quarter results were slightly better than our expectations.
For all consumer behavior continues to reflect the significant inflationary pressures in the macro economy that are affecting both discretionary and non discretionary spending.
This reflects the continuation of the trends that we saw beginning last December .
Our first quarter revenues declined one 9% as we saw consumers purchasing fewer everyday gifts, we experienced softness in our consumer floral and gift business, which was somewhat offset by the growth without gourmet foods and gift baskets business.
By adding value.
Joyce to a higher price point gift baskets, we encourage customers to trade up in Assortments and we strategically managed pricing. This resulted in an increase in average order value in our gourmet food and gift basket business.
We are also encouraged by the year over year rebound in our wholesale business by getting ahead of the supply chain challenges from last year, our team was able to build and deliver gift assortments to our wholesale customers earlier than a year ago. This enabled our wholesale business to increase market share.
During the quarter, we added more than 775000, new customers and existing customers represented 70% of total revenue.
Now, let's turn to what we see ahead.
We look forward to the holiday season, and then the balance of our fiscal year. We are cautiously optimistic that consumers will continue to spend on the major gift, giving holiday occasions, but we anticipate that they will remain cautious in their spending otherwise.
During last years holiday season consumers were urged to shop much earlier in the period in response to supply chain constraints, which led to an unprecedented pull forward of business. This year, we expect the consumers will shop later in the holiday and that it will be promotional well.
We're already seeing extremely competitive and promotional environment with many companies promoting black Friday like events in early October .
In contrast to a year ago.
When most retailers struggled to get inventory on containers into shipping ports today, many companies are flushed with excess inventory.
Being highly promotional to sell through that inventory.
Not surprisingly as we look at our customer base customers in the lower income to you appear to be most affected as consumers continue to respond to these macro pressures our platform provides us the ability to offer customers a wide range of attractive price points for gifts to help them build better relationships in their lives. This.
Includes a good better best offerings from one 800 flowers, our attractive entry price points from the personalization mall and adding additional value offerings at Harry <unk> David.
Recognizing the strong consumer response to our bundled offerings, we've launched additional bundles. This year that combined some of our best products like our famous Royal Riviera, Pears and share those holiday Cookie collection.
We are pairing our award winning Harry <unk>, David wines with flowers from one 800 flowers cookies from Sherwood's cookies, 'n' wild caught seafood from vital choice.
Personalization mall following the successful Easter bundles, we've developed food products to bundle without personalized Halloween trick or treat bags and Christmas mailbox teams.
Additionally, we are always looking to expand our reach into new categories, where we have identified customer trends one of our goals as we grow our better for you selections is to have more options available for a wide variety of customers with dietary preferences or restrictions such as our expanded organic and gluten free.
Elections. This includes a new line of Chevron's vegan cookies.
From a marketing perspective, our efforts are focused on developing and growing our multi category customer cohort to increase purchase frequency and define our company as to the preferred destination for all of our customers' gifting needs as could be expected net sales per customer are highest among our multi category.
Estimates followed by our celebrations passport members.
We are utilizing innovative social and mobile technology to engage with our customers, including the use of video and engage in creative content and we've expanded our content and influencer partnerships as it is.
<unk> of these efforts we are much better positioned to engage with our customers and be top of mind for the holiday season.
This also enables us to reduce our reliance on more expensive forms of advertising and allocate more of our marketing dollars to the other areas of the funnel that provide a higher return on investment.
Speaking of cost containment efforts in addition to reducing our marketing spend on a dollar basis. We also expect ocean freight and commodity costs declining throughout the year.
In fact ocean freight rates are already significantly lower today than they were during the second half of fiscal 'twenty two.
We have also taken strategic actions to partially offset our labor and shipping cost first we increase the automation of our distribution facilities in Medford, Oregon.
Even Ohio and more recently Atlanta, Georgia.
Which increases throughput at those facilities, while reducing our reliance on seasonal labor.
Second as part of our efforts to optimize logistics. We are also strategically reduced shipping zones by shipping products to facilities that are closer to recipients, enabling us to use a lower cost shipping method without impacting the speed at which we can deliver those smiles.
We are also strategically built inventories of nonperishable items to get ahead of the global supply chain disruptions, ensuring that we have the products that are needed for the holiday season.
As we sell through that inventory this fiscal year, we expect free cash flow to improve more than $135 million. This year compared with last year benefiting in large part from the working capital reduction as well as lower capital expenditures.
While the current macro environment remains uncertain I'm extremely proud of our team's efforts to address and influence the areas within our control.
As we look ahead, our entire organization is focused on executing our key strategic priorities that position us as a leading gift giving ecommerce platform.
We have made significant strides in transitioning our company and our all star family of brands into a platform that is focused on inspiring our customer community to give more connect more and build more embedded relationships.
We have proven our ability to identify execute and integrate accretive acquisitions that benefit from being on our platform, which drives accelerated revenue growth and enhanced profit contributions from those businesses.
And in turn we have created a highly scalable platform that enables solid top and bottom line long term growth and expanding market share positions.
We expect our margins to begin to improve in the second half of this year and even more so next year.
As these costs continue to decline and our margins returning to their historical levels over the next few years, we expect to see a substantial increase in EBITDA.
Looking beyond the current horizon, we are confident that we are positioned to emerge a bigger better and stronger company and in turn build shareholder value over the long term.
Now, let me turn the call over to Bill to his review of some of the key financial metrics for the quarter Bill.
Thank you Chris.
As Chris noted, our first quarter performance was slightly better than our expectations.
Revenues declined one 9% as consumers continue to adapt to this inflationary environment.
When comparing our first quarter results to the year ago period is important to remember that we face a difficult margin comparison as the year ago results had not yet been affected.
But the global supply chain challenges and a surge in shipping commodity cost labor and fuel, which began to escalate and impact our fiscal second quarter last year.
As we head into our fiscal second quarter, we expect our margins will begin to stabilize and then improve during the second half of the fiscal year.
This expectation reflects the lower year over year Ocean freight cost we are already seeing.
Commodity costs coming off their highs.
A more stable labor market.
As well as the initiatives that we've implemented that Chris highlighted.
These initiatives include the increased automation of our warehouses to offset higher labor rates.
And our logistics optimization initiatives that have enabled us to partially offset higher shipping rates, while maintaining delivery speed to customers.
As we have described in the past in response to the unprecedented supply chain disruption a year ago and to ensure that we had the appropriate inventory on hand for the current fiscal year, we made the strategic decision to invest in working capital and increase our inventories of nonperishable items.
As the global supply chain has improved and as we sell through that inventory. This year, we expect to bring inventories down and generate more than $75 million of free cash flow in the current year.
Representing an improvement of more than $135 million as compared to a year ago.
Longer term.
Benefiting Felicia <unk> initiatives, we believe that we are well positioned to gradually improve our gross margins and leverage the significant top line of the past few years to drive Bottomline results.
Now, let's review our key metrics for the first quarter.
All comparisons will be to the prior year unless otherwise stated.
Total net revenues declined one 9% to $303 6 million as compared to revenues of $309 4 million in the prior year.
Excluding contributions from vital choice analysis table, which we acquired in October and December 2021, respectively. Total revenue for the quarter declined three 6%.
Gross profit margin for the quarter declined 720 basis points from 46% to 33, 4%, primarily reflecting significantly increased year over year cost labor shipping and commodities.
Operating expenses were 47% of total sales as compared to 47, 1% in the prior year period, reflecting lower marketing costs, partially offset by higher depreciation associated with our automation and technology projects.
As a result, our first quarter adjusted EBITDA loss was $28 million compared with an adjusted EBITDA loss of $5 3 million a year ago.
Net loss was $33 7 million or <unk> 52 per share compared with a net loss of $13 2 million or <unk> 20 per share and adjusted net loss of $12 9 million or <unk> <unk> per share in the prior year period.
Regarding our segment results.
Gourmet food and gift baskets segment revenues grew 11% to $108 2 million compared with $97 5 million in the prior year.
Revenue benefited from the inclusion of vital choice and improved wholesale sales.
This segment's gross profit margin declined to 23, 2% from 35%, primarily reflecting increased labor commodities and transportation costs.
<unk> associated with perishable inventory write offs as.
As well as product mix, reflecting the sharp sales increase in our lower margin wholesale channel.
The segment's contribution margin was a loss of $18 7 million compared with a loss of $7 7 million a year ago.
In our consumer floral and gift segment.
Revenue decreased 10, 5% to $162 2 million compared with $181 2 million a year ago as consumers pulled back on everyday gift giving occasions.
Gross profit margin decreased to 38, 2% compared with 41, 9% in the prior year period, primarily due to increased transportation and commodity costs.
Segment contribution margin was $10 8 million compared with $19 2 million in the prior year.
<unk> segment revenue for the quarter increased eight 2% to $33 4 million due to an increase in our wholesale channel.
Gross profit margin decreased to 43, 4% compared with 50% in the prior year period, primarily due to product mix and higher shipping costs.
Segment contribution margin was $9 5 million compared with $10 9 million in the prior year period.
Turning to our balance sheet.
Our cash and investment position was $9 4 million at the end of the first quarter seasonally low as we prepare for the holiday period.
Inventory was $342 6 million compared with inventory at $282 4 million at the end of last year's first quarter.
As a result of the factors we discussed.
In terms of debt, we had $158 million in term debt and borrowings of $140 million under our revolving credit facility in preparation for the upcoming holiday season.
Borrowings under the revolver will be fully paid during the fiscal second quarter.
Regarding guidance for fiscal 2023.
While the highly unpredictable nature of the current macro economy makes it difficult to forecast in this environment. We wanted to share our current outlook for the balance of the year.
After growing revenues, 77% over the last two fiscal years, we expect revenues to decline in the mid single digit range in fiscal 2023, and lower consumer confidence and cautious spending behavior.
We expect to mitigate the impact of the revenue decline on our earnings through our strategic pricing programs, a moderation of cost inputs and the investments we have and continue to make in our business platform.
Based on these items, we do expect to gradually improve gross margins and bottom line results during the latter half of the current fiscal year.
Our guidance also assumes the restoration of a 100% bonus payout in fiscal 2023 compared with the limited payout in fiscal 2022.
Based on these assumptions, we expect adjusted EBITDA to be in the range of $75 million to $80 million.
Additionally, we expect free cash flow to exceed $75 million.
I will now turn the call back to Chris.
Thank you Bill to recap our performance for this quarter, our results were slightly better than our expectations. However, consumers continue to be challenged by inflationary pressures. We believe that the macro environment will remain challenged through the remainder of the fiscal year and are proactively addressing these trends with strategic.
Pricing and compelling high value bundle assortments that appeal to a wide variety of customers.
Our core customer remains loyal and we continue to deepen our relationship with them through our innovative marketing and engagement efforts.
We believe as we enter this holiday season, we are well positioned to engage with our customers and drive sales with our cross category and cross branded merchandise programs. As we look forward, we know that the macro economy remains uncertain, but we have been diligently focused on reducing costs throughout our business.
We have reduced our labor requirements by improving efficiency in our facilities.
Partially mitigating shipping costs by optimizing logistics and strategically building inventory to avoid supply chain issues, particularly for this holiday season.
As a result, we are confident that overtime, we will see our cost declined further, particularly shipping in commodities and we expect to see our margins normalize back to historical levels over time.
We are proud of what we've built which is a strong unique e-commerce business platform supported by a very experienced team.
Over the past 10 years, we've tripled our business through organic growth and strategic acquisitions today.
Today, we have emerged out of dependent Eric a bigger better and stronger company, providing an all star family of brands and advanced technology stack strong manufacturing distribution and logistics capabilities extensive digital marketing experience.
And then expanded customer file and loyalty program. We believe our future is bright and that we will grow our business and improve our profitability and build solid shareholder value over the long term.
And now I'd like to open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Anytime you question has been addressed and you would like to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Yes.
Yes.
And our first question will come from Michael Kaplinsky with Noble capital markets. Please go ahead.
Michael.
Matt We can't hear Michael.
First of all I wanted to say Joe Congratulations on your retirement.
Greatly enjoyed working with you over the years youre going to be greatly missed so please keep in touch.
I've got a couple of questions here can you give me the number in terms of what was the contribution from Baidu choice in the quarter.
Could you just give me the same store revenue for the gourmet food and gift.
Sure Michael I'll ask bill to provide that vital small but yes.
Yes.
Basically volatile item I really don't breakdown individual brands, but because it's related to the first year, we kind of gave that with our guidance both the revenue.
With and without imputed anyway, but basically around $5 million or so in the quarter again, it's a small acquisition it did about $25 million or so annually fly on the.
The last year prior to the acquisition.
And I understand that there are suppliers that have decided not to plant given the price of energy prices I was wondering if you've noticed any issues with your suppliers with flowers or any disruptions given.
Issues with energy prices that sort of thing if you can just talk a little bit about that Tom do you want to take that net we have not seen any disruption with our suppliers we've had.
<unk> relationships with for decades.
Very stable and we haven't seen any challenges at all with loyal supply, yes, Michael I would add even last year. When there was a little bit of challenge, we will find because of the relationships that Tom referenced in all but even though overall, we have we're not aware of any issues in the flow of supply chain side of things got you I appreciate that and then can you.
Talk a little bit about you mentioned $75 million of free cash flow can you talk a little bit about capital allocation at this point.
Sorry, yes.
I guess as we look at capital allocation and business you know really haven't changed much I mean, it's.
First and foremost we look to invest in our business to use the capital that we're raising to invest in the business. We've done that over time and I think we've done very well through strategic acquisitions, and how we integrate those to allocate the capital in appropriate for integration as well as the cost of the acquisition itself. Then you see us doing things like we've done in the last year.
Two and adding automation into the facilities, where we can really automating some of our distribution centers and gaining traction there.
And then we'll always be looking to see what other opportunities are there for us to return shareholder value.
To return value to the shareholders.
Stock repurchase.
Doing that to make basically mitigate share creep over the past couple of years and I think that will continue.
Got you and just on the wholesale business.
I know that business has kind of been.
Pretty wide.
Fluctuations year over year, given whether or not.
Product has been in soon enough into the marketplace.
Whether or not there has been demand for that type of product can you just kind of give us a sense of what your thoughts are in terms of wholesale business this year versus <unk>.
Last year, maybe the years before and whether or not and how you see that business shaping up this year versus some of those periods in the past.
Yes, just a reminder, Michael wholesale still.
Relatively small piece of global business represents only around 5% 5% of all.
Revenues, but we have a good book of business with wholesale this year.
We got that going into it that.
Going into the year, you saw some of that benefit.
Q1, and that the challenges of the global supply chain that we had a year ago.
Youll kind of deferred all wholesale into the second quarter and a little bit into the third quarter and if you were able to ship some of that.
In Q1, this year, but we have a strong book of business on wholesale.
I'll, let others ask questions. Thank you so much thank you Michael.
Our next question will come from Anthony <unk> with Sidoti and company. Please go ahead.
Yes, good morning, and thank you for taking the questions and likewise.
It's been certainly a pleasure to work with you for a long time as the best of luck in your pending.
Pending required.
Retirement here so I.
I guess first.
Just in terms of the bonus payout headwind Bill maybe can you quantify that how much you think.
That will be for the year.
Yes, so a year ago basically executives got zero bonuses, we did limited payouts too.
The non executives.
We obviously hope to pay.
Pay bonuses at 100%, it's probably about a $12 million year over year impact and it's only if we before.
Of course.
And it was then.
The crude in the first quarter or not yet.
No we accrued on a straight line basis so.
At.
Okay right now.
Got it okay perfect, Okay and then.
Did you guys quantify how much the wholesale revenue I may have missed this but the wholesale revenue.
Up in the first quarter here.
If you did I apologize for missing that but if you could just.
No.
But it was.
It was the driving force of the of the growth in the gourmet food and gift basket, the 11% growth.
And not only due to wholesale.
Okay got it Okay and then.
In terms of the automation efforts that you guys have done a lot there.
Of.
Upgrading your infrastructure.
Is there more to do there or the terms of those efforts.
Should we expect that additional automation initiatives.
There's always additional automation initiatives that we'll be looking at Anthony fulfill you put a good.
Expectation together on that over the next year or two right. So.
We completed.
The automation of the Atlanta facility.
This first quarter on slightly into the second the second quarter here.
Overall, we're taking our capex down around $20 million so.
Last couple of years, we had $55 million and we had $66 million last year and this year, we're going to be more than that in the mid 40, So the big efforts on automation.
All behind US now as we grow into the future, there's always going to be need for.
Further automation, but where we're at we're at a good spot right now and again, we continue to look to automate the customer contact center.
How we're doing that utilization of AI technologies.
<unk> voice recognition technologies et cetera. So.
So we'll continue that type of automation as well.
Got it Okay, and then lastly in terms of.
Export.
Membership.
Just overall behavior are you still seeing a passport members spending more than twice as much as the non members.
Yes. This is Tom.
We continue to see passport members.
Purchasing a two to three times the amount of non passport members were.
Happy with the membership growth we saw in the quarter grew over.
Beginning of the year and on an everyday basis, we're seeing.
20% of our revenue coming from our passport customers. So.
Good stuff there.
Got it alright, well, thank you and best of luck.
Thank you Anthony.
Again, if you have a question. Please press Star then one our next question will come from Alex <unk> with Craig Hallum Capital Group. Please go ahead.
Hey, guys. Thanks, very much for taking my question.
Wanted to ask about the big push that you saw last year really across the industry to get orders in early given a lot of anticipated supply chain problems.
Have you seen any sort of repeat of.
That behavior.
Just wondering how you think about that for that must be a challenge from a forecasting standpoint, given that a lot of orders that might have already come in last year are probably going to be trickling in here over the next couple of weeks.
Sure.
Alex I'll start with that answer a little bit turn it to bill and Tom.
No I think if we look at coming out of Q1 again, we're pleased that we exceeded the expectations that we had going into Q1 and keep in mind Q1 is as we've been stating where we've seen softness from the consumer has been in those everyday occasions and that's all Q1 is there are no holiday occasion.
So we're cautiously optimistic as we move forward into the holiday season.
What we saw last year business being pushed forward, we're not seeing as much of that this year and we're expecting business to come in more like a.
Closer to the holiday more like.
Consumer behavior from the pre pandemic.
<unk> excuse me pre pandemic.
Time, so and so we're expecting that to shift a little bit later, but.
But I think we're in really good position that well received from our customer file what we see from the products that we've that we've added to the physician.
We're in really good position to handle that especially with the automation that we're just talking about bill or Tom you want to add any color to that.
No I think just.
The investments that we made in inventory we have the inventory a year ago. There was challenges with the global supply chain. So.
That created operational challenges from a labor perspective, we've seen a moderation of labor rates and access to labor.
Is much more available this year than it was a year ago, plus as Chris mentioned the automation advertisers.
Needing less less seasonal labor. So we're in a very good position operationally to execute this holiday season.
Great. That's really good to hear and then I could just touch on the $75 million.
Free cash flow I think last quarter, you were saying.
Being better than breakeven. So obviously, a huge jump I don't know if maybe you're just being a little bit conservative before but it would be is the decline in freight and labor I mean is that really the bulk of where that free cash flow coming from over the past couple of months.
I think with us with respect to.
Last quarter, we really didn't give annual guidance right. So.
We just we're giving kind of the message that it's going to be positive we were coming off a year, where we made a big investment in working capital and that's what created the negative cash flow last year and we just wanted to make sure. The message got out that cash flow would be positive now that we've shifted.
A little further along.
We had a little more visibility into some of the macro macro trends we wanted to give.
Annual guidance and state really where we believe.
At this point in time.
Where the year will turn out from both the top and bottom line perspective, and where cash flow a big driver of the cash flow and $135 million.
Related to kind of the working capital swings, where it was an investment last year and this year, we will be taking inventory down year over year, the global supply chain.
Has improved as we sell through this inventory, we're not going to have to keep it at these these type of these type of levels.
But certainly.
The overall guidance with.
With EBITDA being between.
75% and $80 million, you saw where Q1 was right that that was the.
That was the quarter where.
We took debate, where we took the big hit so our guidance implies that work.
We were relatively flat from an EBITDA year over year basis going forward and the consumer is still tough top line.
To be a challenge we have.
Guided at that down.
Mid single digits, So we got to get it back on.
From a margin perspective, and from an Opex perspective, and certainly some of those things.
Great great coming down labor stabilizing all helping too.
Improve our gross margins and that's why it works.
We've kind of stated that we think we.
We believe.
Gross margin stabilize in Q2, and then actually improving.
Second half of the year.
Okay. That's really helpful. Thank you and a big congratulations to Joe Thank.
Thank you Ralph.
Our next question will come from Dan <unk> with the benchmark company. Please go ahead.
Great. Thanks, Good morning, Joe Best Suspenders by far across all of the industry.
Wish you the best in your in your retirement obviously.
Pleasure working with you all these years.
Thank you.
Industry.
Yeah.
Chris.
I don't want to I don't want to frame it this way.
What gives you the confidence.
Hum so as we as we look forward I think you know again, we're we're cautiously optimistic because we look forward Ah clearly as consumers continue to respond to the broader economic pressures our platform provide disability to have a wide range of price points and that's why I. Even you know what we're saying was we see weakness more weakness in the.
Lower tier end of our customer file, but yeah, we need to make sure we have a wide range of products to satisfy that customer why we're seeing the bundle that we talk about take off without higher end customers and helping to drive the higher is working for us.
I think you're right, we're seeing mixed signals of you know.
Amazon certainly with all these black Friday events that were seen already so we received promotional activity try to move business earlier, we don't see that happening to the extent that had have certainly to the extent that it happened last year.
We see you know <unk> and others talking about.
Business coming closer to the holiday all the retailers that we talk with the same similar trends, but really what it gives us a confidence again as the platform. The good better best offerings that we have the health of our customer file the operation operating more efficiently seeing what we are the benefits of the investments that we made the bill just spoke about.
On the automation front and again, the fact of what we've seen really since last year is the consumer weakness that we're experiencing as in those everyday occasions, we saw the consumer come back at Valentine's Day last year, we saw the consumer come back a mother's day last year.
We saw what we saw this quarter really worth it.
Decent Halloween business, and we've seen accustomed responding to Halloween. So all of those factors al capabilities, plus I read on the market gives us confidence that we can see the consumer.
Take care of what they need to take care of with the gift giving needs. This holiday season.
And I think Dan also if you remember back to a year ago. Every media story was about the global supply chain challenges in that inventory may not be on the shelf.
For Christmas So we kind of.
Force the consumer to buy to buy.
By early and we saw a very strong October and November sales last year, and then we saw a drop off in.
In December this.
This year is just the opposite scenario everybody. It is a promotional environment out there, but everybody has inventory and there is no talk of a inventory not being on the shelf.
At Christmas time, so the consumer can we try and get the best deal, but the consumer can wait and buy and violate and that was the trend we saw basically.
For years, leading up to last year.
<unk> will supply chain challenges that push it forward.
Yeah. That's helpful. I mean, hopefully the consumer doesn't wait until until Q1, when they can get really great deal with a lot of it.
But I I think that's another question is <unk> I think.
And I assume you guys are trying to highlight this you meet a lot more positive commentary missed around the Martin trajectory in general.
The future I think you guys got the message that that's sort of a concern and you guys have given some good color around sort of the near term or 12 months plus trajectory, which is which is really helpful. I guess just.
Sort of nitpick on your comment or highlight your comment.
<unk> <unk>.
Getting back to you know.
Oracle margin levels.
Given everything that you're seeing in the market now like I mean are we still Amy over time, it was sort of like 10% loss was kind of the the goal with everything that you put in place and sort of getting a better handle on what you think happens with a labour market and everything else is that still the.
The target is there upside from somebody automation and sort of incremental efficiency.
Or you know not to say that high singles is anything to see that is that more a realistic target overstate. The medium term just given everything that's going on in wonderful show.
So then I think that clearly that is our objective and I think it didn't think it is achievable as we look at some of the reductions in the you know starting with the gross margin right getting the gross margin back to where it needs to be.
Starting to see some of the.
Input costs on shipping afraid you know commodities et cetera start to show some signs of recovery certainly in the shipping.
And it was saying that in addition to that as we look to continue to improve our operating efficiencies that helps us get through it gross gross margin or to the net margin that we're looking to get to as well. So I think we have all confidence said you know in time, we'll get back to do sturrock levels that we've been Ah.
And then if you look at.
Any year in the last 10 years up until last year, you wouldn't see our gross margins in that 42%.
Last year obviously.
We were down 500 basis points on it but no matter, we bought and sold companies over the years, but we've always been pretty consistent with that gross margins in it.
42% means so.
Again over the longer term and.
The consumer is always a challenge in this macro environment is.
Certainly a challenge, but over the longer term and we expect to get back to.
Historical margin spend if we can get gross margins back up to those levels. There's no reason, we can't get the the download and tobacco.
Okay I appreciate all the teller guys. Thanks, very much and again best of luck.
You just.
This concludes our question and answer session I would like to turn the conference back over to Chris Mccann for any closing remarks.
So I'd just like to thank everyone for their time this morning, and clearly as you see our business is performing well and we're well.
Well positioned for the upcoming holiday season holiday season starts with Thanksgiving.
And I urge all of you you know, giving this as a gift so I urge all of you to make sure you're taken care of and thanking the appropriate people in your life for.
This Thanksgiving season uncertainty, we know a few brands that can help you in a platform that could help you do that so thank you very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.