Q2 2023 Traeger Inc Earnings Call
Hello, as well trying to second quarter of fiscal 2023 earnings conference call My.
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Good afternoon, everyone. Thank you for joining triggers call to discuss second quarter 2023 results, which were released this afternoon and can be found on our website at investors that trigger dot com.
<unk>, Vice President Investor Relations that trigger.
On the call today are Jeremy address our Chief Executive Officer, Dom Boisseau, Chief Financial Officer.
Before we get started I want to remind everyone that management's remarks on this call may contain forward looking statements that are based on current expectations.
Correct to substantial risks and uncertainties, which could cause actual results to differ materially from those expressed or implied herein.
We encourage you to review our annual report on Form 10-K for the year ended December 31st 2022.
Quarterly report on Form 10-Q for the quarter ended June 32003, once filed and our other SEC filings for a discussion of these factors and uncertainties, which are also available on the Investor Relations portion of our website you should not take undue reliance on these forward looking statements.
Only as of today, and we undertake no obligation to update or revise them for any new information.
This call will also contain certain non-GAAP financial measures, including adjusted EBITDA. Adjusted net income adjusted net income per share adjusted EBITDA margin and adjusted net income margins I believe are useful as supplemental measures. The most comparable GAAP financial measures and reconciliations of the non-GAAP measures contained here at such GAAP measures are included in our earnings release.
<unk>, which is available on the Investor relations portion of our website at investors that trigger dot com.
He said that our definition of these measures may differ from similarly, titled metrics presented by other companies now.
Now I'd like to turn the call over to Jeremy address Chief Executive officer of trigger.
Thank you Nick Thank you for joining our second quarter earnings call today, we'll be discussing our second quarter results.
Our progress on our key long term strategies I will then turn the call over to them to discuss further details on our quarterly financial performance and to provide an update on our fiscal year 2023 guidance.
Today, I'm pleased to be able to announce some better than expected results for the second quarter as expected our topline results were down to prior year as our retail partners continue to destock and worked through grill inventories. However results outpaced our expectations with upside in revenues driven by better than expected.
<unk> consumable sales outperformance in our quarterly sales and the continued benefit of our cost efficiency actions drove better than anticipated adjusted EBITDA, allowing us to deliver $21 million of adjusted EBITDA up from $17 million in the prior year.
Believe our results demonstrate our strong organizational focus on positioning trigger for improved profitability and financial health.
And the outdoor cooking industry. The second quarter is the most critical selling period retail as consumers purchase grills for the summer grilling season.
As always our organization, we remain highly focused on sell through in Q2. Given this is the most important indicator of consumer demand for our products.
As we move through some of the most important weeks at retail in the second quarter. We were pleased to see sell through results that were modestly ahead of our expectations.
As we have discussed over the last several quarters. Following a period of outsized growth in big ticket home related durables during the pandemic consumers shifted their disposable expenditures towards travel and services, leading to one of the largest declines in the history of the grille industry on record last year.
While we believe this shift largely remains in place today and grill sell through continues to be negative in the <unk>.
Second quarter, we began to lap the declines in consumer demand that we experienced last year and we saw continued stabilization and sell through trends with year over year growth in certain key weeks.
Improving sell through along with our retail partners Destocking efforts over the last several quarters resulted in materially healthier inventory position and channel at quarter end.
We believe that channel inventory levels are now sufficiently balance with demand and we expect that replenishment rates in the second half will be closer to normalized levels. Following a period of aggressive destocking.
Right sizing inventories in channel has been a critical focus of the organization and the teams efforts allow us to enter into the second half of 2023 and a substantially improved position.
Given our better than expected results in the first half of the year, we are increasing our full year guidance to $585 billion to $600 billion in sales from a range of $560 million to $590 million.
And to 55% to $59 million and adjusted EBITDA from $45 million to $55 million.
Tom will add further color on our updated financial guidance for the year, However, I'd like to highlight a few points.
First while we are increasing our guidance, we remain keenly aware that the macroeconomic environment and consumer backdrop continues to be fluid.
We'll continue to manage a business with a disciplined approach next our guidance continues to assume a return to topline growth in the <unk>.
Half of the year.
We're not building in any material improvement in consumer demand in the second half, but rather we expect that our sales will benefit from more normalized replenishment rates as channel inventories are now balanced.
Now I'd like to walk through each of our strategic growth pillars.
Our first pillar is accelerating brand awareness and penetration in the United States. As a reminder, we ended 2022 with three 5% penetration of the 76 million grill owning households in the United States.
We continue to believe that we have a long runway of growth in household penetration as evidenced by the mid teens penetration we have in our more mature markets.
In the second quarter, the energy around the trigger brand continued to build we picked off the grilling season with our annual mothers day promotion with savings across our grill assortment of giftable items for Mam.
Content on social channels, and our website featuring top mothers' day, Brian and breakfast recipes.
Then on May 20th we held our sixth annual Trager day, which we described as our most epic day every year.
<unk> is a celebration of all things trager and is dedicated to bringing our community together to cook outdoors and to share food made on the trade group with friends and family.
Members of the traders that were out in full force and we're engaging with our brand by sharing pictures and videos of their food on social media.
We had nearly 18000 user generated content post <unk>.
In video views more than doubled versus last year straight or day.
Next in June we celebrated father's day with our annual promotion, including discounts on select grills Traeger gift guide for every dad.
Our Influencer network was very active on social media highlighting the great deals available on trager products driving over 6 million impressions.
There is data is one of the most important selling periods at retail and our sell through trends exceeded expectations.
We also leveraged our team of brand ambassadors in the second quarter or.
<unk> conducted live demonstrations of our grilles across the country, which not only creates energy and educate consumers about the brand, but also generate sales in locations, where we may not be able to reach the consumer otherwise in Q2, our abuse focused on special events like county fairs and rodeos across.
As the country.
We had significant growth in sales generated at special events in the second quarter as compared to last year in particular for our higher end Grill Skus.
Our brand continues to receive significant and favorable press coverage, which is another avenue driving awareness of trigger.
The second quarter, our total media impressions more than tripled compared to the second quarter of last year with articles product reviews and mentions in Forbes The Wall Street Journal and the New York Times amongst others.
Our next growth pillar is disrupting outdoor cooking with product innovation.
A key milestone for our organization in the second quarter was winning a red Dot product design award for our Timberland <unk> Grill.
The Red Dot award is the pre eminent award recognizing product and conceptual design with a jury of roughly 50 international experts, who test discuss NSS products for innovation functionality and longevity.
Within the Red Dot award is truly an honor and speaks to the high level of innovation that trigger is bringing to the outdoor cooking industry.
Earlier this year, we launched two new grills are ironwood and new premium griddle flat rock, we've been pleased with the strong consumer reception of both products are new Ironwood has performed well at retail and has garnered positive media attention, including a positive review by Rolling Stone.
The Ironwood is a great example of our strategy to Cascade innovation from Halo products in this case at Timberline Excel, which launched last year.
Other grilles throughout the product line.
<unk> been pleased with sell through trends for our new Ironwood, thus far.
Our flat rock rental has performed strongly as well as we decided that initial distributions flat rock would be somewhat limited we expect to ramp production in the second half to fulfill solid demand at retail and expect flat rock volumes to grow as production accelerates into next year.
In the second quarter, we made a key addition to the team in the area of innovation and design.
May we hired Brendan Welch as EVP of engineering.
Brendan will play a critical role in the product development and technical execution and has extensive experience, bringing amazing and innovative product to market the companies like Sonus and bows make him a great addition to the trigger leadership team welcomed.
Welcome to the <unk> Brendan.
Our next strategic pillar is driving recurring revenues to our consumables business.
In the second quarter, our consumables category continued to be pressured as compared to prior year driven by lower sales at a customer to introduce a private label offering.
However, sell through excluding this customer remains healthy and trended positively to the second quarter of last year, demonstrating the recurring nature of our pellet business, even in what remains a tough environment.
Product innovation in our consumables business continues to be a key strategic imperative.
In June we launched our new state Glenn pellet kit, which includes trager stake blend pellets steak, Rob and Chimichurri source mix, giving the consumer every single need to Cook the ultimate steak. This summer grilling season.
<unk> responded favorably as a kid is a great solution to make what are the most popular meals put down a trigger.
In the second quarter, we continued to make inroads in terms of increasing distribution of consumables in the grocery channel.
Our new barbecue sauce portfolio at March and Kroger, with new and improved formulas and a more competitive MSRP.
Sources are packaged in a new easy to use squeeze bottle with the flip top cap.
Portfolio consists of trigger acute apricot, Sweden.
And Texas, spicy sauces, and they rolled out in roughly 2200 Kroger locations.
We also added distribution of three flavors of pellets at 129 release doors.
100, Piggly wiggly locations.
Our last strategic growth pillar is expanding the tredegar brand internationally.
In the second quarter, our international markets continued to be pressured as consumers in our key markets abroad contend with inflation and dealers work through excess inventories. However, similar to the U S dealer inventories ended the quarter in a substantially more balanced position and we are optimistic this will allow.
A more normalized replenishment activity in the second half of the year.
Despite a tough consumer environment in our international markets the energy around the trade or brand continues to grow and the international retail doors, we continue to be focused on driving productivity and awareness through our in store marketing and sales efforts, including merchandising enhancements and product demonstrations.
This year, we refreshed over 1000 points of distribution across Europe , with updated branding and imaging, including signage that explains traders wood pellet system and Wi Fi connectivity to the consumer.
We have also grown our regional demo teams.
These pit masters demo Trager grills and food every weekend from March to July outside of retail locations in key international locations in the U K, Germany and other markets in Europe .
We believe these on the ground initiatives in our core international markets should drive awareness of our brand and we continue to see a meaningful long term opportunity to grow trager outside of the U S.
Overall I'm extremely pleased with the progress we have made over the past several quarters.
Our strong efforts have allowed the company to be in a significantly improved position with balance sheet and channel inventory is now better aligned with demand and the improvement in gross margin and cost reduction efforts driving an expected improvement in EBITDA in fiscal 2023 despite.
Despite the progress we have made we acknowledged that the macroeconomic environment remains uncertain we will.
Continue to manage a business with a focus on navigating the near term while also investing for long term growth and with that I'll turn the call over to Tom.
Thanks, Jeremy and good afternoon, everyone I am pleased with our second quarter performance and with the progress we made over the last several quarters on our initiatives to improve the financial positioning of the company.
Today I will begin by reviewing our second quarter results and then comment on our updated fiscal 2023 guidance.
Second quarter revenues declined 14% to $172 million grille.
Grille revenues declined 21% to $93 million.
Grill revenue was negatively impacted by lower unit volumes as our retail partners continue to destock in an effort to lower in channel inventories as well as a lower average selling price as we lowered pricing on end of life and legacy models.
Despite lower year over year revenue Grill revenue performance was ahead of our expectations in the quarter.
<unk> revenues were $35 million down 17% to second quarter of last year, driven by lower sales of pellets.
Our consumables business continued to be negatively impacted by the loss in volume with a customer who introduced private label pellet last year.
Excluding this customer industrial of pellets is healthy and up over prior year.
Additionally, in Q2, we lapped last year's large loading of food consumables into our grocery channel.
Consumable sales were modestly ahead of our expectations in the second quarter.
Accessories revenues increased 7% to $43 million.
Driven by growth in trigger accessories as well as meter.
Geographically North American revenues were down 16%, while rest of world revenues were up 3%.
Gross profit for the second quarter decreased to $63 million from $73 million in the second quarter of 2022.
Gross profit margin was 36, 9%.
25 basis points versus second quarter of 2022.
The increase in gross margin was primarily driven by one lower transportation costs, which drove 170 basis points of margin benefit into FX favorability of 120 basis points.
Offsetting these margin drivers were increased dilution of 220 basis points and other negative drivers worth approximately 40 basis points.
The other marketing expenses were $28 million.
Compared to $42 million in the second quarter of 2020 to the.
The decrease was driven primarily by lower marketing expense and employee costs.
General and administrative expenses were $52 million compared.
Compared to $31 million in the second quarter of 2022.
It didn't come a $4 million or three cents per diluted share in the same period of 2022.
Adjusted EBITDA was $21 million in the second quarter as compared to $17 million in the same period of 2022.
Second quarter adjusted EBITDA was ahead of our expectations.
Driven by better than expected grills inconceivable sales as well as a shift in the timing of expensive out of Q2 into the second half of the year.
Next I'll review, our balance sheet highlights.
At the end of the second quarter cash and cash equivalents totalled $14 million compared to $39 million at the end of the previous fiscal year.
We ended the second quarter with $404 million a longterm debt.
At the end of the quarter the company had drawn down $40 million under its receivables financing agreement, resulting in total net debt of $429 million.
In terms of liquidity, we ended the second quarter with total liquidity of $155 million up from $98 million at the end of the first quarter.
Sequential increase in liquidity was driven by the benefit of cash flow generated in the second quarter as we stopped your inventory can collect receivables and our peak selling season.
Inventory at the end of the second quarter was $98 million compared to $153 million at the end of the fourth quarter of 2022.
I am pleased with the continued progress we have made an rightsizing balance sheet inventories and believe we are appropriately position for the current demand outlook.
Importantly in channel inventories ended the second quarter of materially improved position and weeks of supply at retail are now in line with our target range.
As we entered the second half of the year, we believe that channel inventories are more balanced and that retailer destocking is largely behind us.
Next I'll discuss our updated outlook for fiscal year 2023.
Given are better than anticipated results in the first half of 2023.
Increasing our guidance for the year for revenues, we are now getting to a range of $585 million to $600 million or down 9% to 11% to 2022 as compared to our prior revenue guidance and $560 million to $590 million.
An adjusted EBITDA, your guiding $255 million or $59 million up from our prior guidance of $45 million to $55 million and up from $42 million in fiscal year 2022.
Our guidance continues to assume a return to growth in the second half of the year.
Driven by Normalised replenishment racer channel inventories are now in a substantially more balanced physician and as we laughed a large impact your business caused by destocking in the back half of last year.
We are reiterating our outlets your full your gross margins are 36 to 37 per cent.
Which represents 80 to 180 basis points of improvement relative to our fiscal year and 2022 adjusted gross margin of 35.2 per cent.
We expect to see the largest you over your gain and gross margin in the third quarter given the expected improvement in fixed cost leverages, we lack the large sales decline we experienced in the third quarter of 2022.
Furthermore, you're expecting that approximately $4 million of expenses that shifted out of the first half of the year will fall into the second half of the year.
Overall I am pleased with the progress we have made on our initiatives to increase our financial flexibility and to position the company for a return to growth in the second half of the year and beyond.
And there are increased outlook indicates we have growing confidence in or near term strategy.
We will continue to manage the business with a high level of discipline in agility as we navigate the current environment.
We look forward to continuing to execute against a longterm strategy I'll now turn the call over to the operator for questions operator.
Thank you.
If you would like to ask a question and please precious <unk>.
If you change your mind <unk> chocolate shake.
For preparing to ask you a question please be sure to find some mucus 19th.
A reminder, <unk> ask a question.
First question comes <unk>. Please go ahead.
Thanks, Hey, guys. Good afternoon nice job on the progress.
Excuse me.
Did.
[laughter] sorry.
Did you guys call it performance of D Z versus a wholesale domestically.
Could you elaborate a little more on the lower grill a S. P. You mentioned in the press release, maybe the same question for <unk> lower consumables ASB.
And then how you think about ASB for.
Maybe for the next several quarters, sorry about my choking.
Yeah.
Yeah like on the on the on the Grill side with respect to E. S. P.
You know, we we took fairly aggressive pricing over the course of the pandemic to offset inbound transportation costs as we emerge from that environment that macro environment and begin to see.
You know macro tailwinds in transportation that are now reflecting on our P&L not obviously fully but you know in dribs and drabs just driving some some margin expansion. We subsequently decided to begin taking price back down on most of our drills to effectively pre pandemic levels save.
One or two outliers.
One example of that being the fact that we're moving through end of life product on our you know previous generation Ironwood and timber line with you know the new products that replaced.
Those will sit in the market for a period of time, Eddie fairly you know lower price point, then is it normal so that's kind of one time, but the remainder of it really is bringing pricing back to what we believe are more appropriate levels to stimulate the right level of volume, but nothing abnormal relative to where we were pre pandemic.
And I think on the appellate front, it's probably more just a nuance of uhm dynamics around channel mix and nothing's signalling any any changes in pricing strategy.
Awesome and then lastly, nice job on the gross margin Uhm could you <unk> could use elaborate on on the gross margin dilution down in the reference and then maybe how to think about the drivers going forward. Thanks guys.
The dilution specific too yeah. So so yeah right, that's really tight two components. The first being some <unk> some channel mix, where we tend to see coop dollars at a higher rate relative to other channels. So that's that's one component of it the <unk>.
One is the fact that the promotion that we ran are the promotions that we ran in Q2, which are our normal this time of year performed.
Well in excess of our expectations, which stimulated more sell through then we were forecasting which in turn just drives higher gross and net dilution on the piano. So nothing that would signal anything other than our promotions.
We effectively needed them to do and in fact outperformed.
Perfect Yeah, nice shop in progress Sky's best of luck for the rest of the year.
Mhm.
Thank you.
Next question comes from Pizza Bennett take <unk> Pizza. Please go ahead.
Oh, Hey, guys. Thanks. Thank you for taking a question first of all just on the.
The the the guidance for the year you took it up clearly the first episodes of your thoughts how was the second half relative to maybe what you were thinking at the beginning of the year.
Just in terms of <unk> and and practices are kind of consistent or is what you're seeing here. How do you embrace a bit more of a positive give me one second.
No. It's it's consistent.
Like went out a couple of things one.
We you know in relation to top line as we exceeded our internal forecast in the first half of the year, we're taking that full beat and rolling it forward I would note that one that we do expect you know the same rebound to growth in the second half of the year previously we've alluded to this.
Kind of tale of two halves, so that remains consistent I'd say that.
As a component of that we do remain cautious as we proceed through the course of the year. So one underpinning of this of our forecast in the in the back half of the year, which again is consistent with what we spoke to on a previous call is the fact that this isn't driven by sell through growth is driven by.
The com, where we began to aggressively destock in the back half of last year. So we're benefiting from that cough.
So I think that's that's kind of the the main point that I would make is we track into into the second half of the year, but again, we're sort of marrying some some some some some confidence with cautious optimism as we consider some of the macro dynamics that are still a play in the fact that.
This is more a function of the cough and anything else on the EBITDA friends I would just mentioned that it's important to consider the $4 million a timing expense.
They had mentioned on the call. So from an EBITDA standpoint, we did exceed our internal forecast through the first half of the year and specifically in Q2. However, we're not rolling for the entire beat there because of this 4 million dollar expense timing shifts so something to income to consider as you think about modeling the back half of the year.
No. That's helpful. Thanks dominant than just an inventory.
Obviously very nice level here several hundred million dollars.
Shall we thinking about that.
As we move through the balance of the year.
Three Q typically you were thinking it would be similar to to to.
90 days ago is that still the case to restart building inventory Americans or an opportunity to continue to break it down how should we think about the shape of inventory of the balance of your thank you.
Yes, I mean this is a real big win right I mean, we've been really focused on inventory over the last 12 months with inventory levels, peaking Q2 last year and we're really excited to announce that our inventory position and channel was largely where it needs to be uhm, our target weeks on hand.
<unk> R. A line with our expectations, if not maybe a little bit lower than they need to be which provides for some some opportunity and we saw this in queue to have a more normalized replenishment rate in terms of how you think about inventory and Q3 Q for I. Thank you.
Would expect to see some inventory build in Q3 in advance of the holiday period in queue for as well as the fact that meter benefits from much more seasonality and in Q4, so there will be.
<unk> I would expect to see in a moderating a moderate.
Draw down on inventory and in queue for us we sell through that in ending the year strong as we think about the unlock on working capital between 22 and 23 from an inventory standpoint.
Alright, alright, thank you very much.
Thank you.
Thank you.
Our next question comes from <unk> three great can I. Please go ahead.
Hi, guys. Thanks for taking the question.
Wanted to ask you with regard to the the replenishment cycle returning to more normal demand levels I guess I was just wanted to.
Uhm square that with your comment.
That you said that you're not expecting consumer demand to necessarily pick up so I guess I'm curious.
You know is it because you think the inventories just to lean in the.
The channel at this point in retail and so they need to to bring back goods.
But maybe you could square those two comments.
Yeah, just let me, let me step back a bit and talk about or the industry is if you look at sell through in 2022.
It was down meaningfully you know somewhere mid mid eighties.
Year to date, it's still down, but it but it but at a much lower rate, let's say.
Low shrivel low mid single digits and so the industry is you know a high ticket durable discretionary items are still challenge and and we're hearing that we're here that's.
In the industry.
Cross product category. So it's.
Feels like we are nearing a trough.
And in terms of recovery looked that's a good question.
<unk>, we're doing everything we can to understand the environment to model replacement rates, but but I think we are getting to the end of this period of pull forward that we've been feeling the last sort of 18 months and you know, but but but the <unk>.
<unk> recovery.
Well see I think there are a variety of factors that goes into that what we're really benefiting from right. Now is combination with few things number one sell sell through his skull, it's spelled stable and it was not stable for a long period of time second is this destocking effect I mean it was it was.
A real drag out our top line the back half of last year was very painful for that reason that that is largely behind us in schadel inventories are healthy.
We are feeling we're feeling good about inventories in our balance sheet. So.
The confluence of these events in markets, although there's that there's not a tailwind in terms of the category or in terms of.
The broader economy relative to high ticket durables.
Because the inventories under control.
And because we are internally, just managing expenses and a very lean way inventory and a very lean way.
And really starting to trade out some of the high cost inventory all of these things are leading to better performance, but there's there's not an industry tailwind that's that's driving this.
Go ahead and that that's really helpful. Thanks, Jeremy and then if I could fault, but more just.
You know the Unconceivable side, you know the the rollout to Kroger.
<unk> I I guess.
There's always hope we would love to see you guys rule it out everything faster to everywhere. So.
I guess could you share more thoughts about kind of the the strategy over the next maybe <unk>.
Six to 12 months, how you're gonna rule things out.
And consumables absolutely Sir.
Yeah. So so let me let me first address pellets, we talked about <unk> fell through as being healthy.
We have we've been aggressively pursuing the grocery channel four pellets and we're seeing nice growth. There. We believe that although the grill is already considered purchase consumers will go to a destination after doing their research the pellets and other consumables needs to be convenient purchases. So we're seen <unk>.
<unk> nice sell through and grocery.
You know in terms of the other consumables.
We highlighted sources rolling them out in an improved packaging configuration as well as at a lower price point that was just more appropriate for groceries the market receive that very well.
We had a lot lot of R and until.
Until that rollout a lot of our consumable sort of rub and sauce business. It really started in specialty retail where larger a higher price points are sold through and groceries just more competitive so.
Feeling good about the the uptake of.
This new this new packaging and no no question will be rolling out methodically overtime and grocery grocery but early indication is February positive.
Great. Thanks, guys and good good luck with the third quarter.
Okay.
Thank you.
How does it remind that's all the questions <unk> one <unk>.
Next question comes from <unk> from Jeffrey <unk>. Please go ahead.
Hey, guys how are it's <unk> call it a little late so.
I guess, maybe Jeremy let me get some perspective from you I know this flat rock pronto has done very well maybe I don't know if you discuss this but maybe give us a little more more perspective on the reaction from I guess your customer base you know from the the account is not necessarily actual customers, but your wholesale accounts.
Given that success are they asking you to produce other types of gap product just wanted to get some perspective, there on how you're thinking about the future going Florida from a product category perspective. Thanks.
Get ready to write question timely a few of US were out market last week, we spent a couple of days.
Seattle had a chance to walk into a number of retailers security flat rock.
There is good and bad news. The good news is is that it's selling through well the bad news is inventory and channel is really light and that that's not a surprise to US you know we the intended lodge was <unk> it.
It was to be constrained has to be it was to be limited.
And part part of that is selling a product outside of our core wood pellet grill category.
The other is you know if you think back to when we started building knees inventory was a dirty word and so we built a very disciplined constrained lodge and get his by far exceeded our expectation I was in a specialty retailer last week.
Had received three units they sold through in 24 hours and is still waiting to get more nowadays they knew by through.
A distribution center.
I was in at other retailers, it actually pretty booked a meaningful number and they had sold more than 30 units.
And they were out of inventory as well so.
The good news is there's a lot of demand and I would much rather fix a supply problem than a demand problem.
We are ramping up production.
On that and we should be we should be caught up to her existing channel by the fourth quarter, but but the goal is to really it's two increased distribution next year in terms of the broader category question that you ask are.
Are they are they asking for other other products.
Right now, they're just asking for more flat lax and so we we certainly see within the griddle category and opportunities first to win it.
Flat rock, but there are some other.
There's some other products in that category that we think makes sense then we're contemplating those but beyond that we just feel like you know between grid all the size of the griddle category Wood pellet grills that are 3.5% household penetration.
There's a balance between introducing new products and staying focused and going really deep at what we're good at and I would say for now what we're here. It is we'd like to brand we liked the position that retail <unk>.
Give us you know.
Give us more grills.
And I I think that certainly has plenty of runway for the next couple of years for us.
Super helpful and again I joined late so I don't know if you went over this but you guys can you give some perspective you haven't given it yet on how you know the pilot or trager looks relative to the broader category of grill like it's gas at the moment like what do you see.
Each verses in the U S vs internationally I'm trying to get what I'm trying to get at is where are we in the bottoming process.
These you know pilots.
Gas at the moment thanks.
So it's sort of step back and look at the broader outdoor cooking category I would say that.
Sharpless flat.
Pellet is gaining modestly.
<unk> has gained aggressively.
And gas is declining.
And so.
No I I I think <unk>.
<unk> the grill category gained aggressively partly because it was new it.
It it caught a lot of excitement.
The growth currently in the growth in the future. It is going to be it is going to be riddle and it's going to be wood pellet and it will be at the expense of of gas.
<unk> Chuckles interesting, it's you can sort of delineate charcoal into into to consumer segments. Those by really inexpensive almost disposable consumable low price charcoal grills for Briquettes and then those more.
The the enthusiast by higher end <unk> solutions.
The charco category seems to be pretty pretty flat over the last couple of decades, and it probably stays there, but gas still occupies still still owes.
Greater than 50%.
Of of the dollar share wood pellets up to about 20 per cent and growing.
If you look at unit chair would tell it is significantly lower.
And notably Trager, because we sell a much higher Aspie then then gas.
Let let let me let me <unk>, let me add.
Oh God, Yeah of course of it and I'll just add <unk>. Yeah. Just just one follow up thought on that which is you know if you look at this category over time.
This category recently it does recover always has always will there are 76 million households that don't grills and my guess is that number will be.
Will be higher two or three years from now.
And so it's really a question of what is the trough looked like how long is that one does it begin to recover it so it's a little bit more of a when that an F.
And I think all of the historical data suggest that we think we're getting closer to a trough in the broader category. So we.
We see we sort of see our objective is number one stabilize the business be lean and as we generate a return on our spend drive gross margin and then start to lean back into investment in Tampa funneled to take share of a category that should begin to grow again soon.
Alright, thank you so much Jeremy.
Okay.
Thank you.
Final question comes from <unk>. Please go ahead.
Good afternoon, guys. Thanks for taking the question and congrats on the improved results I wanted to dig a little deeper into channel dynamics, particularly your competitor channel inventories.
Is there anything to call out there or any significant improvement whether it be by fuel type of the like with a small unit chat, presumably triggers not there wasn't a problem to begin with so did you guys feel box out having to wait for your retail partners to clear all of this all other stock for your groceries and.
I would say there's there's there's no question in.
The back half of last year.
It wasn't just a trager battle. It also wasn't just a category battle. It was an inventory battle and you know every retailer was was pushing on this there were certainly moments where we.
We had a skew level at a retail at a distribution center level low inventory that we'd have to sort of aggressively push our retailers to bring back up to reasonable weeks on hand.
But but I would say.
It's really more of a it's a <unk> it's been a broader category challenge.
It I I don't I I wouldn't I wouldn't characterize the.
The back half of last year as being a problem getting inventory to retail it's it's really.
It's just for US it's just focused on.
Normalizing inventory levels. Fortunately every retailer did it and retailers are getting healthier. So we feel good about where we are we like we liked the declines that were seen in terms of how they are moderating.
We're currently looking at trading 12 months.
You know on mute it it is it's meaningfully below pre pandemic levels and all that suggested as we catch up to replacement cycles. The category is going to grow but two original question I.
Was there some impact at the margin of trying to get the inventory into retail <unk>, maybe some but that's not really the driver of revenue as much as just general Destocking.
Got it thank God.
<unk>. Thank you.
Thank you.
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