Q2 2023 La-Z-Boy Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, and welcome to the Lazy Boy fiscal 2023 second quarter Conference call.
At this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation.
Now my pleasure to turn the floor over to your host Kathy Liebmann director of Investor Relations and corporate Communications Ma'am.
The floor is yours.
Thank you Holly good morning.
And thank you for joining us to discuss our fiscal 2023 second quarter results.
With us this morning, Melinda Whittington, Lazy Boy, President and Chief Executive Officer, and Bob <unk> CFO .
Melinda will open and close the call and Bob will speak to segment performance.
Financial Midway through we'll then open the call for questions.
<unk> will accompany this presentation and you may view them through our webcast link which will be available for one year.
And a telephone replay of the call will be available for one week beginning this afternoon.
Before we begin the presentation I'd like to remind you that some statements made in today's call include forward looking statements about <unk> future performance and other matters.
Although we believe these statements to be reasonable our actual results could differ materially the most significant risk factors that could affect our future results are described in our annual report on Form 10-K.
We encourage you to review those risk factors as well as other key information detailed in our SEC filings.
Also our earnings release is available under the news and events tab on the Investor Relations page of our website and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck.
With that I'll now turn over the call to Melinda Whittington with A&P, Vice President and Chief Executive Officer.
Linda.
Thanks, Kathy and good morning, everyone.
Yesterday afternoon, following the close of market, we reported excellent fiscal 'twenty three second quarter results for the total company.
In addition to record consolidated results for sales and profits for our Q2, our company owned retail segment again turned in a stellar performance with all time quarterly record delivered sales profits and non-GAAP operating margin.
These record setting results were enabled by our strong supply chain execution in the period and enabled us to reduce our backlog and improve service to customers and consumers, particularly for our retail business.
Our lead times continue to improve and we are edging closer to our brand promise custom furniture in four to six weeks.
A competitive differentiator for us in the marketplace, all supported by our North American manufacturing footprint deliver.
Delivering on this value proposition is good for us good for our commercial customers and great for our consumers.
While we're pleased with our delivered results in the quarter near term headwinds continued to slow the written trajectory across our industry and we know this challenging environment will require ongoing adjustments and increased agility.
While still up versus pre pandemic levels, our industry is experiencing a slower pace of store and ecommerce traffic versus last year, a reflection of macroeconomic concerns and geopolitical uncertainty weighing on consumer sentiment as well as a shift in discretionary spending patterns post Panther.
And these factors again impacted our written business in the quarter.
For the period total written sales for our company owned retail business were down 5% versus last year's second quarter with same store written sales down 10%.
Versus pre pandemic.
2020 Q2.
These total written results were up 18% and same store written results up 12%.
The entire lazy boy furniture galleries network experienced similar trends with the written same store sales up 9% against fiscal 2020, Q2 and down 13% against last year's strong second quarter.
Joy Bird also comped positively against the pre pandemic fiscal 2022nd quarter up 43%.
But it was down 27% versus last year's Q2, reflecting similar consumer trends as well as the effects of changes in campaign execution with a key marketing partner, which have since been reversed.
Hence the reversal, we are starting to see meaningful improvements in ROI and year over year trends with written results trending more in line with the rest of the furniture industry, but it is too early to draw for conclusions.
In this difficult environment, we are focused on the long term controlling what we can and positioning the company to move through this period successfully.
We are driving agility across the entire enterprise as we adjust go to market strategies and optimize our supply chain operations marketing spend and capital project timelines.
As we proactively aligned our cost structure with the demand environment, we remain committed to making prudent investments to drive long term profitable growth through century vision.
To drive share growth, we are investing in the lazy boy brand and leveraging its equity history and reputation for quality and comfort.
We are using consumer insights to drive brand strategies and true consumer centric innovation investing in technology to strengthen our digital and Omnichannel experience.
Executing a selective promotions on key products to drive traffic to our stores and developing new channel strategies to expand distribution opportunities.
At the recent high point furniture market, we were thrilled with customer feedback on new product introductions across all brands.
Pleased to report that energy throughout market was high customers, we're engaged and positive for the long term.
Further with the core lazy boy consumer preferring to shop in store, we are expanding and improving the lazy boyfriend ensure galleries footprint with new and remodeled stores to provide consumers with an extraordinary end to end experience.
During fiscal 'twenty three we're working to open seven new stores and remodel or relocate another 30 across our furniture galleries network.
In Q2 alone we opened two of these new lazy boy furniture galleries, and remodeled or relocated five stores within our own retail business.
And in September we closed on the acquisition of one store and distribution center in Spokane, Washington, and have recently signed an agreement to acquire another store from an independent dealer in West Virginia.
As always these store acquisitions are immediately accretive and allow the company to benefit from the integrated wholesale retail margin.
Throughout the supply chain as we reduced our backlog back to pre pandemic lead times, we are optimizing staffing levels across our manufacturing facilities to align with current demand. Additionally, we've made a series of changes within our plants that provide us with the ability to flex production to better service the order book driving.
<unk> and improved execution.
At <unk>, we continue to invest in the business to drive brand awareness and consumer acquisition.
In this environment, we are restructuring our marketing campaigns in terms of advertising channels and messaging to improve returns on advertising spend.
We are also investing enjoy bird retail stores opening in high traffic urban markets, where we continue to experience great results.
Our retail showrooms combined with our strong mobile optimized web platform provide consumers with a true omnichannel experience to engage with the <unk> brand.
We opened our new Manhattan store in November and we'll open three stores, Seattle, Philadelphia, and Los Angeles in the first half of the calendar, bringing our total to 10 <unk> stores to date.
While our long term plans include additional joy bird retail locations, we will align the pace of store openings with the overall business environment.
Importantly, AR.
A key differentiator for Joy Bird is that we are uniquely positioned as an online retailer that makes our own upholstered products.
This vertical integration provides us with margin opportunity to keep investing in the brand.
While we have some near term challenges to optimize the joy of our business, we remain bullish on the long term.
Overtime, the execution of Central vision will change the complexion of lazy boy incorporated over the next three to four years, we expect to be over half direct to consumer as our company owned retail enjoy very businesses grow at a faster rate than our traditional wholesale business.
This shift will contribute to consolidated operating margin enhancement as we grow.
And as we tackle this.
What is immediately ahead, we are starting from a position of brand and financial strength, our business remains larger than pre pandemic levels as consumers continue to place a value on the comfort of their homes and interests lazy boy incorporated to deliver it for them.
We are confident we will navigate the environment well built for the future and emerge even stronger.
Now, let me turn the call over to Bob to review, our second quarter results in more detail Bob.
Thank you Melinda and good morning, everyone.
As a reminder, we present our results on both the GAAP and non-GAAP basis.
We believe the non-GAAP presentation, better reflects underlying operating trends and performance of the business.
non-GAAP results exclude items, which are detailed in our press release and in the tables in the appendix section for our conference call slides.
On a consolidated basis fiscal 'twenty, three second quarter sales increased 6% to $611 million versus the prior year quarter.
Pricing and surcharge actions and the positive effects of product and channel mix offsetting lower unit volume.
Consolidated GAAP operating income increased to $62 million.
Our non-GAAP operating income increased to $61 million.
A record for our second quarter, and an increase of 19% versus last year's second quarter.
Consolidated GAAP operating margin increased to 10, 1% from nine 4% and non-GAAP operating margin increased to 10% from 9% in last year's second quarter.
GAAP diluted EPS increased to $1 seven for the fiscal 2023 second quarter versus 89 cents in the prior year quarter.
non-GAAP diluted EPS increased 24% to $1 five in the current year quarter versus <unk> 85 in last year's second quarter.
Over the 12 months non-GAAP diluted EPS was $3 68, a 22% increase versus the year ago period.
In the second quarter, we delivered disproportional disproportionate profit group as we shifted supply chain capacity towards servicing our retail business.
We have discussed.
Many of our wholesale customers and warehouse constraints that limited their ability to take delivery of new products during the quarter.
Short term dealer constraints once again allowed us to pivot and increased deliveries of our owned retail backlog during the quarter.
Improved service to consumers and drive strong operating margin as we leverage the benefits of selling through our company owned retail business.
As I move to the segment discussion my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise.
Starting with our retail segment delivered sales increased by 31% to an all time record $252 million as we improve service to consumers and made progress towards returning to our pre pandemic lead times.
For the quarter delivered same store sales increased 25% versus year ago.
Retail posted record high non-GAAP operating profit dollars and non-GAAP operating margin increased to a best ever 16, 5% versus 12, 5% in the prior year quarter.
These results were driven primarily by higher delivery sales relative to selling expenses and fixed costs.
Our retail teams focus continues to provide an incomparable consumer experience and we congratulate them on their outstanding performance.
As Linda noted earlier growing the La Z boy furniture galleries network as a central element of central vision.
Proportionately growing our company owned retail will allow us to provide more consumers with a full end to end brand experience and will serve as a key driver as we shift our consolidated business mix to be more direct to consumer driving sales and operating margin expansion in the process.
For the quarter delivered sales in our wholesale segment grew to $446 million, a 2% improvement compared with compared with the prior year period and a record for our second quarter.
The growth was driven primarily by pricing and surcharge actions, coupled with a favorable channel and product mix.
The increase was partially offset by lower volume, primarily the result of dealers delaying receipt of finished goods due to warehouse constraints.
non-GAAP operating margin for the wholesale segment was eight 6% versus nine 1% in last year's second quarter.
Pricing and surcharge actions were more than offset by increased raw material costs plant inefficiencies due to lower unit volume and an increase in marketing spend to pre COVID-19 levels.
I'll now spend a few moments on Georgia, which is reported in corporate and other.
<unk> delivered sales decreased 5% to $38 million versus the prior year second quarter and written sales were up 27% against the comparable period, reflecting slowing ecommerce trends and the effects of changes in campaign execution with key marketing partner, which have since been reversed.
As a result, <unk> posted a loss for the quarter for the period, primarily reflecting lower volume and unfavorable shift in product mix and a lower return on advertising spend.
To improve performance in the current environment, our team is making changes to our marketing platform and social media mix with a focus on building brand awareness, while tailoring messages to better resonate with post Covid consumer and we are beginning to see improvement.
We are also optimizing marketing spend and costs in all areas of the jewelry business as we navigate this post COVID-19 e-commerce consumer market.
For the full fiscal year, we now expect driver as opposed to loss, reflecting the impact of external headwinds and continued prudent investments in marketing and retail locations to drive long term growth.
We are making improvements across all areas of the business model and it will and will balance.
<unk> and growth with bottom line performance and expect it will take several quarters for the business to return to profitability.
For the full enterprise consolidated non-GAAP gross margin for the quarter increased 380 basis points versus the prior year period, and increased 250 basis points sequentially from Q1 <unk>.
Primarily driven by price mix and better plant performance.
<unk> and gross margin versus year ago was driven primarily by the change to our consolidated business mix with retail, becoming a larger portion ensuring a higher gross margin than our wholesale business as well as favorable pricing in surcharge actions, partially offset by the combination of higher raw material and plant costs.
Consolidated non-GAAP SG&A as a percentage of sales increased 280 basis points versus last year's second quarter again. This primarily reflected changes in our consolidated business mix driven by the growth of retail, which carries a higher level of SG&A expense as a percentage of sales than our wholesale business.
SG&A as a percentage of sales was also higher due to restore and marketing investments to pre COVID-19 levels to drive written sales.
Our effective tax rate on a GAAP basis for the fiscal 'twenty three second quarter was 25, 8% versus 26, 6% in last year's second quarter.
Our effective tax rate varies from 21% federal statutory rate, primarily due to state taxes.
Continue to expect our effective tax rate to be in the range of 25, 5% to 26, 5% for fiscal 2023.
Turning to cash.
Year to date, we generated $31 million in cash from operating activities versus $15 million in the fiscal 2022 six months period.
The slightly negative operating cash generation in the second quarter was due primarily to a decrease in customer deposits.
We reduced our retail backlog.
In addition inventory increased slightly reflecting the timing of the receipt of certain components in case goods and the Florida finished goods to our consumers.
Excuse me customers.
We have plans in place to proactively work down inventory in the back half of the year.
We ended the period with $208 million in cash and no debt and held $19 million in short term investments to enhance returns on cash.
Year to date, we have spent $40 million in capital primarily related to lazy boy furniture Gallery store projects and new retail stores as well as upgrades at our manufacturing and distribution facilities.
In the first half, we returned $14 million to shareholders through dividends.
Subsequent to quarter end, demonstrating its confidence in the company's long term growth prospects. The board of directors increased the regular quarterly dividend by 10%.
Given the uncertain macroeconomic environment, we have temporarily paused share repurchases other than to offset dilution to enable prudent capital investment in the business and maintaining a strong balance sheet.
We have seven 3 million shares left in our existing authorized share repurchase program.
Our capital allocation strategy over the long term is to invest roughly half of operating cash flow back into the business via Capex and M&A and return the remainder to shareholders via dividends and share repurchases.
The near term that mix will skew towards business investment as we manage through an uncertain economic environment and strengthen our internal capabilities.
Before turning the call back to the lender, let me highlight several important items for the third quarter and full fiscal year.
Please keep in mind that fiscal 'twenty, three will be a 52 week year and comparisons will be against the 53 weeks fiscal 'twenty to the.
The extra week fell in the fourth quarter of last year.
The fiscal 'twenty three third quarter will include 12 production weeks versus 13 in our just completed quarter due to shutdowns over the holiday period.
We expect to work down our backlog to pre pandemic levels during the third quarter and as such we will begin delivering sales at levels consistent with what we write and consistent with our historical seasonality.
While we maintain our long term commitment to steady sales and margin growth, we expect external headwinds to weigh on results throughout the back half of the year.
Against Covid driven demand in Q3 last year, we expect written sales will compare favorably unfavorably for our direct to consumer businesses as well as for our wholesale customers as they manage fluctuating consumer demand and adjust their inventories accordingly.
We still have a number of larger customers, who have delayed receiving product you'd warehouse constraints and this will continue to impact delivered sales in our wholesale segment in Q3.
We expect these delays to normalized during Q4 <unk>.
However, as we start to anniversary a slowdown in written sales that began in the early part of calendar 'twenty. Two we expect written comps in the back half of fiscal 'twenty three will begin to improve relative to written comps in the first half of this fiscal.
The combination of inventory working through the system and backlog returned to pre pandemic levels will shift our distribution channel mix back to pre pandemic levels by the end of Q3.
We will continue to invest in marketing to drive traffic demand and long term brand equity during this challenging period.
As a result, we expect delivered sales for the fiscal 'twenty three third quarter to be in the range of about $525 million to $535 million down versus the third quarter of fiscal 'twenty, two but higher than pre pandemic levels.
Consolidated non-GAAP operating margin in a range of about 7% to seven 5%.
The fourth quarter is expected to be similar to the third quarter.
We expect non-GAAP adjustments for purchase accounting changes charges for the year to be in the range of $1 <unk> per share.
Given the demand environment, we have extended capital project timelines and now expect capital expenditures for fiscal 'twenty three to be in the range of $75 million to $80 million.
We will continue to make prudent investments to strengthen the company for the future consistent with our central vision strategy.
And now I will turn the call back to Melinda.
I.
I am extremely optimistic about the future of lazy boy incorporated while being realistic about the near term economic environment and then it will be challenging for our industry.
We have a long history of being prudent and cash conscious, earning us the financial strength to manage through this period.
We are honing, our marketing messages and investing in consumer insights and innovation to drive disproportionate growth even in this environment.
And keeping our focus on the long term, we are making proactive and selective investments in century vision to bolster our brands and build our underlying capabilities to drive the future we.
We believe that even with consumers spending more discretionary dollars on travel and other experiences. They will continue to prioritize comfort in their homes, which will provide longer term opportunities for growth.
We are confident we will continue to navigate whatever challenges come next and deliver custom quality furniture fast for our customers and our consumers now and in the future.
I'd like to thank our amazing team for their hard work and dedication and for delivering excellent results yet again this quarter.
I. Thank you for being on our call. This morning, and I'll turn it back to Cathy.
Yes.
Thanks, Melinda will begin a question and answer period now Holly will you. Please review the instructions to get into the queue to ask a question.
Certainly ladies and gentlemen, the floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that will posing your question you. Please pickup your handset listening on speaker phone to provide optimum sound quality. Please.
Please hold while we poll for questions.
Your first question for today is coming from Bobby Griffin at Raymond James.
Good morning, Thanks for taking my questions.
Good morning, Bobby.
I guess first question is more a little bit high industry level questions and maybe some commentary on what youre hearing from the wide range of your kind of wholesale customers, but when they think about their inventory situation and trying to work through kind of this excess inventory that you have in the channel are you hearing any type of timeline on it couple of quarters into 2023 calendar year 'twenty.
Or anything just.
Kind of help us get a sense of when we might get the industry back to more of a normal inventory position.
Yes, Bobby.
It obviously it varies it varies by customer and it varies by.
All of their sources of products those that are more heavily.
Balanced toward towards some Asian manufacturing in their mix.
Probably are suffering the most for us that that catch up of orders that they put in on the books a longtime ago that finally containers freed up and showed up so we're talking about general dealer type folks sitting on a lot of stock inventory as opposed to custom.
We tend to hear it's kind of for the ones that are still backed up is three to four months, but if honest. It's perpetually three to four months here, we've been saying that for a bet.
But I can tell you is we do see progress and certainly for custom orders, we're seeing that movement and within our own retail.
We're able to we're able to move through that and we're seeing lead times come down and we're intentionally bringing our in stock levels back up getting close to where they were pre pandemic. So if the consumer doesn't want to come in and out and buy something and have it delivered not custom but have it delivered.
In the near term and we're getting back up to levels in our own warehouses to be able to support that as well.
Okay. That's helpful. Appreciate it.
And Bob I guess, when I look at the implied.
<unk> per week of production here in the third quarter coming out of it steps down a little bit from from T. G. I think $47 million versus 44 is that just a function of that that inventory aspects of millennials is talking about or is there something else.
That would cause the weekly production.
The weekly delivered sales.
For production week to dropdown I think you guys did mentioned you still have a good bit of the backlog is still trying to deliver in the third quarter.
It's a function of the fact that during the third quarter that backlog will be gone. So during Q2.
We were able to use that backlog all throughout the entire quarter to drive those sales at $47 million of which you just mentioned during Q3 that will end up.
Going away during the quarters and Thats why the average per week is going to end up going down.
Okay that makes sense and then to take that a step further given where we are and the demand side.
How does the.
Flexibility inside the plants and stuff going to look going forward on if we're in kind of a new demand environment now that we've worked through this backlog.
So as we've talked because our product manufacturing is so inherently manual.
It's mainly about people and flexing down is in many ways easier than flexing up right. So we had over the last several years had people working really significant levels of overtime.
And we've slowly back that off and are actually.
Have people working hours that they like now in reasonable amounts of time, we've backed off the over time, we've backed off in a few places like a second shift.
We're actually seeing seeing efficiencies go up as we're doing that and then we're because we're just not working people quite as hard as we head to a while back and we appreciate the fact that our folks stuck with us and work through that time. The other thing. We're taking advantage of is just natural attrition and manufacturing environments, particularly those.
<unk> still have a fairly fair.
Daily.
Meaningful amount of attrition that happens naturally and we're letting that happen just sort of downside as we go those are really the main the main drivers to date on how we've downsized.
Okay I appreciate the details I'll jump back in the queue, but thanks again for answering my questions. This morning. Thank.
Thanks, Bobby.
Your next question is coming from Anthony <unk> at Sidoti <unk> Company.
Good morning, and thank you for taking the questions.
So first just curious what's coming off of Black Friday can you just comment on.
So what you saw in your stores in terms of <unk>.
<unk> and written sales for the.
I think you guys talked about that before that the industry overall as well.
Returning to.
Just people buying more furniture around the holidays. So to just curious to get your input as to what you saw over Black Friday.
Yes, good morning Anthony.
Start by saying if you look at year on year comparisons for like our furniture galleries, we ask.
We saw some improvement in pace.
Q2 versus what we were seeing in Q1.
So that and Thats over three months, that's a little more of a trend.
As far as over this last holiday Black Friday, Cyber Monday, we're actually generally pleased with our performance in both our furniture galleries and for Joy Bird right, which are real consumer businesses, where we have some on the pulse on what the consumer is doing.
We saw continued strengthening thus far in November of sort of that pace year on year.
Too early to call a trend right, but in general we've seen a trajectory of improvement.
Got it okay. That's good to hear and then in terms of dealers delaying the receipt of finished goods because of warehouse constraints.
Are those mostly firm orders or is there maybe potential risk that some of those orders could be canceled or how should we view that.
Mostly firm orders and to be clear some of that sits in if you think about.
Some of our case goods and all where we're importing finished product that's a driver where.
Where we're manufacturing in some cases that just slowing the pace of the manufacturing to get those things out the door as well as we're communicating with our customers on the timing they will take.
Got it Okay and then.
Terms of the demand level is increased advertising the main tool that youre using.
Perhaps you will need to be more promotional given the current demand environment.
We'll likely end up in doing both the marketing piece is important for the retail stores to drive traffic and once we get them in the store, we're able to do a great job converting them and upselling them with design sales.
<unk>.
On the promotion side, we haven't seen.
A very large we're looking we're watching we're waiting for somebody to go out there and start doing some crazy things to get.
Moving off their floors or out of their warehouses, we haven't seen that yet we'll be keeping our eye on that we continue to say that we don't want to leave down crazy amounts of discounts, but we also want to make sure. We maintain share. So we will ensure that we remain competitive as we move through the holiday period into.
And your presence today, and we see what happens with the economy with the consumer.
With what our competition is doing.
Got it Okay, and then lastly, how should we think about segment profitability near term and long term.
If you could just give us a different puts and takes us how we should think about that.
We made a number of comments, we continue to make a number of comments.
Our goal as part of century vision is to reinvigorate that lazy boy brand. The biggest part of that is really disproportionately growing our lazy boy retail network.
And Thats new stores Thats, some new formats.
As well as remodeling our stores and getting more out of the current format. So that we have.
Yes.
That coupled with the <unk> growth, we expect the business.
Prior to.
If you go back two or three years, we were more of a kind of a 40 low 40% direct to consumer.
Nearly 50% 50%.
Wholesale and we expect that to kind of flip flop over the next call. It three years to four years to where we're close to 60% direct to consumer.
With over 40% for wholesale and thats not going to be the wholesale business.
Shrinking its going to be more just growing that direct to consumer business at an accelerated rate.
And that's as part of central vision that will be.
Higher profits, because we have higher gross margins get higher fixed cost leverage so that will be a key part of how we drive our operating margin into that double digit.
Range on it on a more consistent basis over time.
Got it thank you very much and best of luck.
Thanks Anthony.
Your next question for today is coming from Brad Thomas at Keybanc.
Hi, good morning, Thanks for taking my question.
I was hoping to talk a little bit more about about joy burn in.
I was wondering if you could talk a little bit more about.
How much some of that.
Marketing dynamics.
<unk> sales.
Your underlying enthusiasm for the business and if you could talk a little bit more about it.
Maybe putting on some kind of onetime issues.
Sort of underlying unit economics.
Sure.
He hasn't put a business, we look out a little bit longer term. Thanks.
Good morning, Brad.
Joy, but two things are happening I think if you look across E com.
And youre, starting to see that consumer growth more broadly look like.
The broader furniture industry right. So I think theres, some pacing there than that.
We'll take out execution right.
Over perform and we're still very bullish on what the <unk> brand can deal in this quarter as you alluded to we had sort of a <unk>.
A one time effect as well that we're still still out working our way through and it's just a matter of when you think about marketing mix modeling that you've done over the years now it's more technical write and involves more algorithms and artificial intelligence and so forth and as we move to <unk>.
The more automated solutions, we just.
<unk> the traffic that we had coming to are coming to our site. So that's been reversed and again too early as I said in my prepared comments too early to claim complete victory, but we're certainly seeing improvement.
As we back that out but that said I do think that consumer is going to say the movement and the growth I expect that's probably going to look a little bit more like like the rest of the industry like are more brick and mortar type of businesses. So what that says for US is one it takes out execution. It takes a great brand and it also says we need to.
He need to optimize costs and sort of the structure of the business to prepare for that type of that type of execution.
So with all of that kind of round. It out we still feel great about the brand, it's still resonates very well with consumers our stores are doing well as I noted, we're going to be up to 10 stores by this summer and our path is we have 25 identified.
We may.
Manage pace Tibet <unk> 10 open here by this summer.
And we're going to continue to invest on that brand even some of the honing we've done over the last quarter on the messaging to make sure. We're really enticing that that consumer with fresh fresh fresh post pandemic messaging just like we're doing across the rest of our brands.
Looks to be resonating. So we still feel good about the long term not thrilled about some of the challenges in the near term, but we'll work our way through that.
That's really helpful Melinda.
And if I could just ask a follow up about kind of the state of promotions in the industry is one that.
Obviously always says promotions over the holiday weekend.
It feels like a number of.
Brands.
Trying to kind.
Still stay disciplined on promotion and not do kind of blanket store wide discounts, let me give you some slower selling items.
But every month that goes by Joseph we're seeing more and more promotions as we do our checks I'd be curious what youre seeing out there and how much you think that might be a risk to.
Do you all need to do more promotions.
Over the next 12 months.
Yes.
Brad as you. We started so think of think of Labor day from Labor day, all the way through.
Presidents' day.
The promotions kind of continue to increase over that period, because you see some over Columbus, when you see a lot of black Friday, but youll see more.
New years, and then finally the biggest one is of the year for everybody who is going to be Presidents' day. So just to seek increased promotions promotional activity like that is not unexpected generally speaking.
Very few things are sold on a <unk>.
Non promotion basis in their price they are priced that way so that they can be they can do with 30% off for 35% off and hit the margins that we are delivering in the marketplace. What we're keeping an eye on is people doing 50%, 50% 60% off.
Those types of items, that's where folks are getting desperate trying to get rid of inventory trying to generate cash from their inventory if they're running into if they're running at their cash flow problems et cetera. So that's what we have our eye on we are again, we continue to.
Uh huh.
Look look at that we are working with our sales force to understand what's happening out there and we are making sure that we are putting out promotions as we do our planning for the back half of the year that will ensure that we stay competitive.
I would just add that.
Input costs overall.
While while they're mitigating some lift from all time highs, we're not seeing dramatic relief beyond sort of containers for ocean freight.
And so they tend to see a little bit more.
<unk>.
Asian import kind of products, where there is more room in the cost deceleration.
As Bob said, we can keep our very much keep our thumb on the pulse of what the consumers how the consumers acting and what Theyre looking for.
But we also believe that quality quality, certainly deserves a little bit of a <unk>.
<unk> premium, but it's got to be within the right range no doubt.
Really helpful. Thank you all so much.
Thanks Brent.
There appear to be no further questions in queue I would like to turn the floor back over to the management team for any closing comments.
Thank you everyone for your time today and thank you for your interest in Lazy Boy incorporated.
Have a great day.
Yes.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.