Q4 2023 Sleep Country Canada Holdings Inc Earnings Call
Okay.
I would like to welcome everyone to sleep country's Q4 fiscal 2023 results conference call.
Operator: I would like to welcome everyone to Sleep Country's QFORM Fiscal 2023 Results Conference call. Yesterday, Sleep Country released its financial results for the fourth quarter of fiscal 2023.
Yesterday sleep country released its financial results for the fourth quarter of fiscal 2020 Street a copy of the earnings disclosure is available on their Investor Relations website and includes cautionary language and forward looking statements risks and uncertainties, which also applies to the discussion during today's conference call.
Operator: A copy of the earnings disclosure is available on their Investor Relations website and includes cautionary language and forward-looking statements, risks, and uncertainties, which also applies to the discussion during today's conference call. I would now like to turn the call over to Stewart Schaefer, President and CEO. Please go ahead.
I'd now like to turn the call over to Stewart Schaefer, President and CEO. Please go ahead.
Thank you and good morning, everyone. Thank you for joining US with me today is Greg <unk> our CFO.
Stewart Schaefer: Thank you and good morning everyone. Thank you for joining us. With me today is Craig Pratto, our CFO. I am pleased to report a solid finish to fiscal 2023 with a 5.2% increase in sales for Q4, setting a new watermark record in revenue for the year as we proudly enter our 30th year in business. Despite a year that saw ongoing industry challenges that saw double-digit unit declines in mattress purchases across North America, we delivered strong results as we remain razor focused on executing our multi-year expansion plan. In Q4, we saw volatile swings in demand across all our House of Brands. In October, as geopolitical issues escalated and volatility increased in the stock market, we experienced a pause in sales as consumer confidence dropped and customers chose to defer their larger sleep purchases. In the latter part of the quarter, we saw consumer spending rebound, albeit cautiously, as customers took advantage of seasonal promotions.
Im pleased to report a solid finish to fiscal 2023 with a five 2% increase in sales for Q4, setting a new watermark record in revenue for the year as we proudly enter our <unk> year in business.
Despite a year that saw ongoing industry challenges and have seen double digit unit declines in mattress purchases across North America. We delivered strong results as we remain razor focused on executing our multi year expansion plan.
In Q4, we saw volatile swings in demand across all our house of brands in October as geopolitical issues escalated and volatility increase in the stock market, we experienced a pause in sales as consumer confidence dropped and customers chose to defer their larger sleep purchases.
In the later part of the quarter, we saw consumer spending rebound, albeit cautiously as customers took advantage of seasonal promotions.
Stewart Schaefer: We continue to focus on growing our gross margins, which grew by 20 basis points in Q4 2023 and 50 basis points for the year. This increase was primarily driven by better product costing resulting from continued strategic initiatives across all our banners, including direct sourcing of our owned brands, while also having the ability to lower retail prices and improve product mix for our customers. The back half of 2023 and continuing into this year was also all about unlocking synergies across our banners while preserving the unique brand identities of each, which we are confident will unleash tremendous value for both our customers and shareholders. In Q4, we began shifting our D2C Banner's back-end logistics to our well-established warehouse and distribution network away from some of our inherited 3PL relationships, allowing us to control our inventory better, improve the last- With all our DSG brands under one roof, we will be able to offer customers of all our DSG banners our popular Green Glove delivery service in certain areas.
We continue to focus on growing our gross margins, which grew by 20 basis points in Q4, 2023, and 50 basis points for the year.
This increase was primarily driven by a better product costing resulting from continued strategic initiatives across all our banners, including direct sourcing of our own brands, while also having the ability to lower retail prices and improving product mix for our customers.
The back half of 2023 and continuing into this year was also all about unlocking synergies across our banners, while preserving the unique brand identities Beach, which we are confident we will unleash tremendous value for both our customers and shareholders.
In Q4, we began shifting our DTC banners backend logistics in our well established warehousing distribution network away from some of our inherited <unk> relationships.
<unk> us to control our inventory better improve the last mile customer experience and create cost savings, while leveraging our fixed cost.
With all our DSD brands under one roof, we will be able to offer customers of all our DSC banners are popular green glove delivery service in certain geographies.
Stewart Schaefer: As a reminder, our Green Glove delivery services provide our customers with a heightened personalized delivery experience. Instead of just dropping the product off at your door, our D2C customers will have the additional choice to place their purchase into their bedroom, complete the setup and assembly with the option to remove the old mattress and all excess packaging, allowing our customers to sleep well knowing that all collected products are either donated to someone in need in their community or are fully recycled. We expect to complete the transition to shared warehousing across all our brands in the second half of 2024. We continue to see the in-store experience play a more critical role in the customer's journey as customers initiate their transaction online, visit a brick-and-mortar location, and then have the choice to complete the transaction in either channel.
As a reminder, our green glove delivery services provide our customers a heightened personalize delivery experience instead of just dropping the product off at your door. Our D to C. Our DTC customers will have the additional choice to place their purchase into their bedroom complete this add up and that's fine.
And Blake with the option to remove the old mattress and all excess packaging, allowing our customers to sleep well knowing that all collected products are either donated to someone in need in their community or is fully recycled.
We expect to complete the transition of shared warehousing across all of our brands in the second half of 2024.
We continue we continue to see the in store experience play a more critical role in the customer's journey as customers initiate their transaction online.
Is it a brick and mortar location and then have the choice to complete the transaction in either channel. This quarter. Just ahead of our holidays, we successfully introduced three new brick and mortar concepts, including our first luxury retail brand called the rest which open.
Stewart Schaefer: This quarter, just ahead of the holidays, we successfully introduced three new brick-and-mortar concepts, including our first luxury retail brand called The Rest, which opened at Yorkdale Shopping Centre, as well as two of our beloved digital first brands, Endy, which opened at Sherway Gardens in Toronto, and Silk and Snow, which opened within one of our newest Sleep Country locations in Ottawa. Customers were excited to come in and experience these brands that they had grown to love online in a tactile environment. And while it's still early days, the results are reaffirming our position to expand our DTC brands into a brick and mortar environment. In 2024, we plan on continuing to invest in an elevated in-store experience across our retail store network, including rolling out in Q2 our new and innovative Sleep Country store format.
At York Galleria shopping center as well as two of our beloved digital first brands Andi, which opened at <unk> gardens in Toronto, and silken snow, which opened within one of our newest sleep country locations in Ottawa.
Customers were excited to come in and experience. These brands that they have grown to lab online in a tactile environment and while it's still early days. The results are reaffirming our position to expand our DTC brands into our brick and mortar environment.
In 2024, we plan on continuing to invest in an elevated in store experience across our retail store network, including rolling out in Q2 are new and innovative sleep country store formats.
Stewart Schaefer: As we step into fiscal 2024, we remain focused on three key priorities, growth through innovation, our customer experience, and our operational excellence. Organic growth as we continue to invest in expanding our brands with cutting-edge sleep technologies and products. We will further develop personalized and exceptional customer experiences that will broaden our customer segmentations, expand our basket size, and keep customers for life. And three, we will continue to streamline our operations to maximize our efficiency.
As we step into fiscal 2024, we remain focused on three key priorities grow through innovation, our customer experience and our operational Alex excellent organic growth as we continue to invest in expanding our brands with cutting edge sleep technologies and products.
We will further develop personalized and exceptional customer experiences that will broaden our customer segmentation.
Band, our basket size and keep customers for life and three we will continue to.
Streamline our operations to maximize our efficiencies.
Stewart Schaefer: I am confident that staying true to these priorities, we will continue to create value for all our stakeholders and help Canadians achieve their best night's sleep. Finally, I want to extend my deep and sincere thanks to our incredibly dedicated, driven, and talented teams who proudly represent all our amazing brands and who have worked tirelessly and have collaborated beautifully to help make us better every day and Canada's most trusted sleep partner. With that, I will now turn it over to Craig to discuss our financial results. Thank you, Stewart, and good morning, everyone.
I am confident that staying true to these priorities, we will continue to create value for all our stakeholders stakeholders can help Canadians achieve their best night sleep.
Finally, I want to extend my deepest sincere thanks to our incredibly dedicated driven and talented teams who proudly represent.
All of our amazing brands and who have worked tirelessly and have collaborated beautifully to help make us better every day and Canada's most trusted sleep partner with that I will now turn it over to Craig to discuss our financial results.
Thank you Stuart and good morning, everyone. As Stuart previously mentioned, we are pleased with our Q4 2023 and annual results. This quarter. We saw an increase in revenues by $12 6 million or five 2% from $243 million in Q4, 2022 to $255 6 million in Q.
Craig De Pratto: As Stewart previously mentioned, we are pleased with our Q4 2023 and annual results. This quarter, we saw an increase in revenues by $12.6 million, or 5.2%, from $243 million in Q4 2022 to $255.6 million in Q4 2023. This increase was mainly driven by incremental revenue earned from new stores, wrap stores opened in 2022, and the incremental revenue earned from acquisitions of Silk & Snow in January of 2023 and Casper Canada in April of 2023. This increase was partially offset by a decrease in our same store sales by 3.2%.
For 2023. This increase was mainly driven by incremental revenue earned for new stores <unk> stores opened in 2022 and the incremental revenue earned from acquisitions of Silicon Snow in January of 2023, and Casper, Canada in April of 2023.
This increase was partially offset by a decrease in our same store sales by three 2%.
Craig De Pratto: From a channel perspective, our Q4 revenues from our e-commerce platform increased by 530 basis points, from 21.1% in Q4 2022 to 26.4% in Q4 2023. Taking a step back and looking at our total revenues over a four-year period from 2019 to 2023, we achieved a strong CAGR of 8.2%. Moving on to gross profit, our gross profit increased by $5.2 million from $91.1 million in Q4 2022 to $96.3 million in Q4 2023. Our gross profit margin increased by 20 basis points from 37.5% in Q4 2022 to 37.7% in Q4 2023 due to higher average unit selling prices coupled with lower product costs and leveraging our occupancy costs. This margin increase was partially offset by higher sales and distribution compensation and delivery costs, which were mainly driven by our growth in our e-commerce revenue during the quarter. Our improved gross margin this quarter was offset by a deleveraging of G&A expenses.
From a channel perspective, our Q4 revenues from our E. Commerce platform increased by 530 basis points from 21, 1% in Q4 2022 to 26, 4% in Q4 2023.
As I step back and looking at our total revenues over a four year period from 2019 to 2023, we achieved a strong CAGR of eight 2%.
Moving on to gross profit our gross profit increased by $5 2 million from $91 1 million in Q4 of 2022 to $96 3 million in Q4 2023.
Gross profit margin increased by 20 basis points from 37, 5% in Q4 2022 to 37, 7% in Q4 2023 due to higher average unit selling prices, coupled with lower product cost and leveraging our occupancy costs. This margin increase was partially offset by higher sales and distribution compensate.
<unk> and delivery costs.
The delivery cost, which were mainly driven by our growth in our e-commerce revenue in the quarter.
Our our improved gross margin this quarter was offset by deleveraging of G&A expenses total G&A expenses increased by $6 8 million or 11, 7% from $57 5 million in Q4 2022.
Craig De Pratto: Total G&A expenses increased by $6.8 million, or 11.7%, from $57.5 million in Q4 2022 to $64.3 million in Q4 2023. Of the $6.8 million increase in G&A expenses, $4.5 million of the increase was driven by advertising costs, mainly due to the incremental spend by Silk and Snow and Casper Canada. In addition to advertising, the increase in G&A expenses was due to an increase in credit card and financing charges, telecommunications and information technology costs, and other compensation costs, net of a decrease in bonus expenses.
$4 3 million in Q4 of 2023 of the.
$6 8 million increase in G&A expenses, $4 5 million of the increase was driven by advertising costs, mainly due to the incremental spend by silicon. So in cost for Canada. In addition to advertising the increase in G&A expenses was due to an increase in credit card and financing charges telecommunication information and information technology costs.
And other compensation costs net of a decrease in bonus expenses. These increases were also impacted by the incremental spend of silicon style in Costco, Canada.
Craig De Pratto: These increases were also impacted by the incremental spend of Silk and Snow and Casper Canada. Our EBITDA decreased by 0.5 million, or 1%, from $50.7 million in Q4 2022 to $50.2 million in Q4 2023, which was primarily due to the increases in G&A expenses, partially offset by an improved gross profit margin. Adjusting EBITDA for LTIP, ERP, and acquisition-related costs, operating EBITDA decreased by 1.6 million, or 3.1%, from 53 million in Q4 2022 to 51.4 million in Q4 2023. And operating EBITDA margin decreased by 170 basis points from 21.8% in Q4 2022 to 20.1% in Q4 2023. Finance-related expenses increased by $17.9 million from an income position last year in Q4 of $15.5 million to a net expense position of $2.4 million in Q4 2023.
Our EBIT decreased by $1 $5 million or 1% from $50 7 million in Q4, 2022% to $50 2 million in Q4, 2023, which was primarily due to the increases in G&A expenses, partially offset by an improved gross profit margin.
Adjusting EBITDA for al tip, ERP and acquisition related costs operating EBITDA decreased by $1 6 million or three or three 1% from $53 million in Q4, 2022 to $51 4 million in Q4, 2023, and operating EBIT margin decreased by 170 basis points from 21, 8% in Q4 2022.
21% in Q4 2023.
Finance related expenses increased by $17 9 million from an income position last year in Q4 of $15 5 million to a net net expense position of $2 4 million. In Q4 2023. This increase was due to higher interest expenses on our lease obligations and senior secured credit facility.
Impacted by the higher interest rate environment and debt levels.
And unrealized loss from our interest rate swap and lower realized gains on our share repurchases under our auto auto share repurchase program. In Q4 2023. Additionally, this change was positively impacted by a $4 $7 million reduction to the harsh redemption liabilities in Q4 2023.
Craig De Pratto: This increase was due to higher interest expenses on our lease obligations and senior secured credit facility, impacted by the higher interest rate environment and debt levels, an unrealized loss from our interest rate swap, and lower realized gains on our share repurchases under our auto share repurchase program in Q4 2023. Additionally, this change was positively impacted by a $4.7 million reduction to the HUSH redemption liabilities in Q4 2023, offset by a $20.5 million reduction to the redemption liabilities that was recorded in Q4 2022 of last year. These adjustments to the redemption liabilities were to reflect the estimated shift in the achievement of the initial EBITDA targets to future years, which are beyond the redemption period. Income taxes decreased by $1.3 million from Q4 2022 to Q4 2023.
Offset by a $25 million reduction to the redemption liabilities that was recorded in Q4 2022 of last year.
These adjustments to the redemption liabilities.
Reflect the estimated shift and the achievement of initial EBIT targets to future years, which are beyond the redemption period.
Income taxes decreased by $1 3 million from Q4 2022 to Q4 2023. This change was driven by a decrease in net income before taxes of $19 3 million from $49 million in Q4, 2022 to $29 7 million in Q4, 2023, and partially offset by an increase in our effective tax rate by 600.
30 basis points from 16, 8% in Q4 2022 to 23, 1% in Q4 2023.
This change in our effective tax rate is mainly driven by the 25 million dollar adjustment in Q4 of 2022 due to the reduction of the Hush redemption liabilities, which was partially offset by a $4 $7 million adjustment at the highest redemption liabilities in Q4 2023 of this year that are not deductible for tax purposes.
Net income attributable to the company decreased by $18 million from $40 5 million in Q4 2022 to $22 5 million in Q4 2023, now adjusting net income for al tip, ERP and acquisition related costs as well as the accretion expenses related to the redemption liabilities for harsh and silicon snow adjusted net income attributable hopes.
Craig De Pratto: This change was driven by a decrease in net income before taxes of $19.3 million from $49 million in Q4 2022 to $29.7 million in Q4 2023, and partially offset by an increase in our effective tax rate by 630 basis points from 16.8% in Q4 2022 to 23.1% in Q4 2023. This change in our effective tax rate is mainly driven by the $20.5 million adjustment in Q4 of 2022 due to the reduction of the HUSH redemption liabilities, which was partially offset by a $4.7 million adjustment of the HUSH redemption liabilities in Q4 2023 of this year that is not deductible for tax purposes. Net income attributable to the company decreased by $18 million from $40.5 million in Q4 2022 to $22.5 million in Q4 2023.
Because of the company decreased by $4 6 million from $23 9 million in Q4, 2022 to $19 3 million in Q4 2023.
Diluted adjusted earnings per share decreased by 11 cents or 16, 4% from 67 in Q4 2022 to 56 in Q4 2023.
The change in diluted EPS was mainly impacted by lower operating EBITDA of five <unk> per share higher interest rate expense on our senior secured facility and leases of <unk> <unk> per share higher depreciation and amortization of <unk> <unk> per share, partially offset by lower net income of <unk> <unk> per share.
Shifting to a summary of our annual results our revenues increased by $6 3 million or 7% from $928 7 million in 2000 $22 million to $935 million in 2023.
Revenues generated from our E Commerce platform increased by 310 basis points from 19, 6% in 2022 to 22, 7% in 2023, our annual gross profit margin increased by 50 basis points to.
Craig De Pratto: Now adjusting net income for LTIP, ERP, and acquisition-related costs, as well as the accretion expenses related to the redemption liabilities for Hush and Silk and Snow, adjusted net income attributable to the company decreased by $4.6 million from $23.9 million in Q4 2022 to $19.3 million in Q4 2023. Additionally, adjusted earnings per share decreased by $0.11 or 16.4% from $0.67 in Q4 2022 to $0.56 in Q The change in diluted EPS was mainly impacted by lower operating EBITDA of $0.05 per share, higher interest rate expense on our senior security facility and leases of $0.07 per share, and higher depreciation amortization of $0.03 per share, partially offset by lower net income of $0.05 per share.
To 36, 7% from 36, 7% in 2022 to 37, 2% in 2023, our operating EBITDA decreased by $21 8 million from $218 6 million in 2022 to $196 8 million in 2023.
Moving on to liquidity as of December 31, 2023, our cash balance was $37 $4 million with an additional $98 7 million available to us through our credit facility. This does not include the $100 million accordion also available to us through our credit facility in 2023, we drew $92 3 million of her facility and repaid 30.
$1 million or draws were primarily to fund the acquisition of cast for Canada. The convertible note share repurchases under the NCI be dividends as well as operating activities.
In regards to capital allocation in Q4, we repurchased one 1 million common shares for total consideration of $26 2 million under the NCI under our <unk> and CIB, bringing us to total purchases for 2023 of $1 6 million common shares for consideration of $37 3 million.
Our current NCI expires on March eight 2024 as press released earlier. This morning, we received approval from the <unk> to commence in new and CIB, where we can commence the repurchase of our common shares on March 11, 2024 under this new NCI to be in the next 12 months, we can purchase up to a daily maximum of $15000.
Craig De Pratto: Shifting to a summary of our annual results, our revenues increased by $6.3 million, or 0.7%, from $928.7 million in 2022 to $935 million in 2023. Our revenues generated from our e-commerce platform increased by 310 basis points from 19.6% in 2022 to 22.7% in 2023. Our annual gross profit margin increased by 50 basis points from 36.7% in 2022 to 37.2% in 2023. However, our operating EBITDA decreased by $21.8 million from $218.6 million in 2022 to $196.8 million in 2023. Moving on to liquidity, as of December 31, 2023, our cash balance was $37.4 million, with an additional $98.7 million available to us through our credit facility. This does not include the $100 million accretion also available to us through our credit facility.
127 shares up to a maximum of $2 4 million common shares which is approximately 10% of our public float as at February 29, 2020 for the.
The new NCI it expires on March 10, 2025. The company also established an auto share purchase plan in connection with the NCI B, which will also be implemented on March 11 2024.
On February five 2024, the board approved a quarterly dividend of $23 seven per share, which was paid on February 29, 2024 to the holders of common shares of record as of the close of business on February 21 2024.
Our capex spend for 2024.
We will be opening a minimum of six new stores across our banners, we will be launching the new sleep country door, maybe new store design and select stores in 2024, we will continue to invest in our digital infrastructure to further enhance our digital capabilities and omni channel and customer experience and spend approximately 1% of revenue.
Ongoing on for ongoing store and DC maintenance, Thank you and I'll now pass the call back to Stuart for closing remarks.
Thank you Craig finally, before we close I wanted to invite you to join our hour back pledged for sleep awareness month in partnership with the Canadian Mental Health Association with daylight savings time coming up. This weekend, we are going to be springing forward and that means we are losing an hour of sleep.
Craig De Pratto: In 2023, we drew $92.3 million of our facility and repaid $31 million. Our draws were primarily to fund the acquisition of Casper Canada, the convertible note, share repurchases under the NCIB, dividends, as well as operating activities. In regards to capital allocation, in Q4, we repurchased 1.1 million common shares for total consideration of $26.2 million under our NCIB, bringing us to total purchases for 2023 of 1.6 million common shares for consideration of $37.3 million. Our current NCIB expires on March 8, 2024.
So to help all of our associates prioritized, our health and wellbeing, we will be opening an hour later than usual on Monday March 11th, allowing everyone to adjust to the time change and get the rest they need we encourage all companies to do the same.
With that that wraps our remarks, and we will open up the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear three Tom pump acknowledging your request and your questions will be pulled in knee or did they have received should you wish to decline from the polling Kostas. Please press star followed by the <unk>.
You are using a speaker phone please lift the handset before pressing any key one moment. Please for your first question.
Craig De Pratto: As announced earlier this morning, we received approval from the TSX to commence a new NCIB, where we can commence the repurchase of our common shares on March 11, 2024. Under this new NCIB, for the next 12 months, we can purchase up to a daily maximum of 15,927 shares, up to a maximum of 2.4 million common shares, which is approximately 10% of our public float as at February 29, 2024. The new NCIB expires on March 10th, 2025. The company also established an auto share purchase plan in connection with the NCIB, which will also be implemented on March 11th, 2024. On February 5, 2024, the Board approved a quarterly dividend of $0.237 per share, which will be paid on February 29, 2024, to the holders of common shares of record as at the close of business on February 21, 2024.
Your first question comes from Martin Landry with Stifel. Please go ahead.
Okay.
Hi, good morning, guys.
Hey, Martin good morning.
I was wondering if you could discuss your product lineup for 'twenty four.
Given the challenging economy I was wondering if you've adapted you're offering.
Maybe.
A bigger proportion of lower priced item.
And I was wondering if you could give us maybe the.
Average unit selling price how.
Are your products in 'twenty, four and how it compares to 23.
So I'll start with the latter part of your question Martin for competitive reasons, we don't give out.
Our average unit selling price specifically.
On our mattresses.
But I will tell you in terms of our brand portfolio.
It's a balanced approach.
As we walk into a more economic sensitive environment, we're definitely introducing some new products that are going to be a little bit more price sensitive. We're excited to be introducing 999, Kasper price point that should be coming out shortly as.
Well as a bunch of a variety of different other products and sleep accessories that will be price sensitive at the same time, though we are also expanding on our premium collections because as probably will discuss throughout this call the consumer has depth.
Stewart Schaefer: Regarding our CapEx spend for 2024, we will be opening a minimum of six new stores across our banners. Additionally, we'll be launching the new Sleep Country Dormezvous store design and select stores in 2024. We will continue to invest in our digital infrastructure to further enhance their digital capabilities and omni-channel and customer experience and spend approximately 1% of revenue on ongoing store and DC maintenance. Thank you, and I'll now pass the call back to Stewart for his closing remarks. Thank you, Craig. Finally, before we close, I want to invite you to join our Hour Back Pledge for Sleep Awareness Month in partnership with the Canadian Mental Health Association. With Daylight Savings Time coming up this weekend, we are going to be springing forward, and that means we are losing an hour of sleep.
Finally, Ben.
Pausing, a little bit, but we're still seeing a healthy environment.
When they do spend so we wanted to make sure that we don't cause.
Deflation within the environment.
And as you know, we prefer always to wait for the customer to buy when they are ready to buy and make sure that they buy the bed that they need for their personal self.
Okay. That's helpful.
You alluded in your opening remarks.
That's your new store model is going to be rolling it out starting in Q2.
Now that we're closing closer to that I was wondering if you can give us some more details as to what is different in that in your model and what you are trying to achieve with that new model.
So it's a heightened.
Operator: So to help all our associates prioritize their health and well-being, we will be opening an hour later than usual on Monday, March 11th, allowing everyone to adjust to the time change and get the rest they need. We encourage all companies to do the same. With that, that wraps up our remarks, and we will open up the call for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by the button. If you are using a speakerphone, please lift the handset before pressing any key.
Experience that we expect for our customers, which will include an expansion of our digital brands into our stores.
And bringing the digital experience into the stores with the introduction of endless aisle into our.
Into the hands of our sales associates.
It is a couple of prototypes that we're going to be doing one in Quebec and one in Toronto, It's been long awaited that we were going to do this.
But it's still a fluid discussion because we're seeing pockets of success in some of the other areas of us testing our business. We're quite excited of what we've seen thus far and still very early days in Ottawa with the introduction of silicon snow into our sleep country.
Operator: One moment, please, for your first question. Your first question comes from Martin Landry with Depot. Please go ahead.
Store and just for clarity, we carved out a part of the store and designated specific lead to silicon snow, which will have a separate entrance onto the street, but also our path.
Stewart Schaefer: Hi, good morning guys. Good morning, Martin. Morning. I was wondering if you could discuss your product lineup for 24. Given the challenge economy, I was wondering if you've adapted your offering with maybe a bigger proportion of lower price items. And I was wondering if you could give us maybe the average unit selling price for your products in 2024 and how it compares to that. So I'll start with the latter part of your question, Martin. For competitive reasons, we don't give out our average unit selling price specifically for our mattresses, but I will tell you, in terms of our brand portfolio, it's a balanced approach.
Our path.
Pathway, a passageway excuse me into their store through the sleep country environment and without giving any specific numbers.
Store, which occupies about 22% of our square footage.
Is transacting approximately 35% of our revenue in that one location and.
Even more exciting to us it's not competing.
Yeah.
Dramatically with our mattresses, because silicon snow does sell mattresses, but the split is more like 70% sleep accessories, which does not require delivery. So that's a cash and carry component at a very high.
Stewart Schaefer: As we walk into a more economically sensitive environment, we are definitely introducing some new products that are going to be a little bit more price sensitive. We're excited to be introducing a $9.99 Casper price point that should be coming out shortly, as well as a bunch of other products and sleep accessories that will be price sensitive. At the same time though, we are also expanding on our premium collections, because, as we'll probably discuss throughout this call, the consumer has definitely been pausing a little bit, but we're still seeing a healthy environment when they do spend. So we want to make sure that we don't cause deflation within the environment. And as you know, we always prefer to wait for the customer to buy when they're ready to buy and make sure that they buy the bed that they need for their personal circumstances. Okay, that's all full.
Transacted margin.
And 30% mattresses and the balance of.
Mattresses is through the sleep country banners so.
Answer to your question.
Very long way, we're excited about.
The expansion of bringing the digital experience into the sleep country network.
But we're also watching very closely.
We should be looking at the silicon snow expansion quicker throughout our 300 store network, but.
We'll talk more about that over the next couple of quarters.
Okay.
That's helpful and maybe last one for me.
No.
Wondering what youre seeing in Q and 24, we got two months of Q1 behind us.
Color you can provide.
That would be helpful. Thank you.
Yes, it's been tough the customers definitely January was a funny month.
Stewart Schaefer: You alluded in your opening remarks that your new store model is going to be rolling out starting in Q2. Now that we're closing closer to that, I was wondering if you could give us some more details as to what is different in that new model and what you're trying to achieve with that. So it's a heightened experience that we expect for our customers, which will include an expansion of our digital brands into our stores and bringing the digital experience into the stores with the introduction of Endless Isle into the hands of our sales associates. There are a couple of prototypes that we're going to be doing, one in Quebec and one in Toronto.
As I noted in my comments the fourth quarter was a funny quarter October was a rough quarter, a rough month excuse me.
We saw really a pause in demand in November and December came back strong.
But the customer was definitely waiting for the promotional events. So.
Even though the quarter finished off.
As well as we had hoped.
The bulk of transactions happened during that promotional period, and then fizzle down in January so.
We are still <unk>.
Stewart Schaefer: It's been long awaited that we were going to do this, but it's still a fluid discussion because we're seeing pockets of success in some of the other areas where we are testing our business. We're quite excited at what we've seen thus far, and it's still very early days in Ottawa with the introduction of Silk and Snow into our Sleep Country store. And just for clarification, we carved out a part of the store and designated specifically to Silk and Snow, which will have a separate entrance onto the street, but also a pathway, a passageway, excuse me, into their store through the Sleep Country environment. Without giving it any specific numbers,
Cautiously optimistic.
We still feel that the customer is healthy but.
Cautious right now, especially on the larger discretionary purchase at the mattresses, our accessory business seems to be growing still healthy health.
Healthy but.
It's been bumpy out there.
Okay.
Okay. Thanks, a lot good luck.
Yes. Thank you Martin Thank you Barton.
Your next question comes from Stephen Macleod with BMO capital markets. Please go ahead.
Thank you good morning, guys good morning.
Good morning.
Lots of great color so far so thank you.
Just a couple of things I wanted to circle back on you mentioned, a little bit about the silicon snow performance.
Stewart Schaefer: The store, which occupies about 22% of our square footage, is transacting approximately 35% of our revenue in that one location. Even more exciting to us, it's not competing dramatically with our mattresses because Silk and Snow does sell mattresses, but the split is more like 70% sleep accessories, which do not require delivery. So that's a cash and carry component at a very high transacted margin, and 30% of mattresses, and the balance of mattresses is through the Sleep Country banner. So to answer your question in a very long way, we're excited about the expansion of bringing the digital experience into the Sleep Country network, but we're also watching very closely if we should be looking at the Silk and Snow expansion quicker throughout our 300-store network, but we'll talk more about that over the next couple of quarters. And maybe the last one for me, you know, wondering what you're seeing in Q in 24. We've got two months of Q1 behind us. So any color you can provide would be helpful.
The store within store I'm wondering if you could give a little bit of color around similarly for endy and the Ross how are those.
How are those standalone.
Formats performing.
Early days.
Sure.
I hate predicting what may or may not happen, but early days and.
Both are also exceeding our expectations and as I noted in my comments.
We're going to.
Carefully thoughtfully.
Accelerate.
Our expansion of our brick and mortar.
Specifically with.
And mine of Endy, Casper and Silicon snow.
The rest we're quite pleased.
For all your investment bankers coming in and buying $10000 mattresses. Thank you for that.
I'm just joking, but.
We are we.
We have already.
We already know in what select markets and what particular locations that we want to be in but again still very early if all go as planned for the rest. The next location will be opening in Montreal.
Probably in.
In the back half of this year Q4, or Q1 of next year, we're going to gather a lot of information on what we're seeing with our customer and we're going to watch very closely.
Stewart Schaefer: It's been tough. January was a funny month. As I noted in my comments, the fourth quarter was a funny quarter. October was a rough month.
How it affects our cannibalize, our sleep country stores or in the in the.
Stewart Schaefer: We saw a pause in demand. November and December came back strong, but the customer was definitely waiting for the promotional events. Even though the quarter finished off as well as we had hoped.
I can actually tell you in the <unk> gardens.
Mall in Toronto, where we had a sleep country store and now have at Casper and Andy's store.
Stewart Schaefer: The bulk of transactions happened during that promotional period and then fizzled down in January. So we are still cautiously optimistic. We still feel that the customer is healthy. Cautious right now, especially on the larger discretionary purchase of the mattresses. Our accessory business seems to be growing still healthy, healthy, but it's been bumpy out there. Okay, thanks a lot.
Not only did we exceed our expectations in both the Casper and the Andy locations, but.
Pleasantly surprising to us because we budgeted for a little bit of cannibalization.
Our sales.
Since those two stores opened at the sleep country location have actually increased.
No.
We are.
Again early days, but very pleased with what we're seeing.
Stewart Schaefer: Yeah, thank you, Martin. Your next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead.
Okay. That's great. Thanks, Thanks, Stuart maybe just along those lines you've guided to.
Minimum of six new stores.
Stephen MacLeod: Thank you. Good morning, guys. Good morning, Stephen. Good morning.
For 2024.
Is there any way to break down how many of those are sort of a standalone city country or dormant locations versus some of the some of them.
Stephen MacLeod: Lots of great color so far. So thank you. Just a couple of things I wanted to circle back on. You mentioned a little bit about the Silk and Snow performance in the store within the store. Wondering if you could give a little bit of color around similarly for Endy and the rest. How are they? How are those standalone formats performing?
The other formats I knew you were going to ask that question Steven.
You can pretty much count that the six stores called those sleep country stores for now.
Confident that.
We already have assigned locations at least for those and count as Craig said six.
Stewart Schaefer: Early days, so I don't hate predicting what may or may not happen, but these are early days, and both are also exceeding our expectations, and, as I noted in my comments, we're going to, carefully, thoughtfully, accelerate our expansion of our brick-and-mortar stores specifically with the thoughts in mind of ND, Casper, Silk, and Snow. The rest we're quite pleased with all you investment bankers coming in and buying $10,000 mattresses; thank you for that. But I'm just joking, but we are. We have already.
A minimum of six.
You will see select stores opening up.
Of the Casper and and the locations in.
In addition to that some of those leases arent completely finalized yet so we don't usually like to call it out unless the leases are finalized.
Okay. That's great and then maybe just finally for me.
And then I'll get back in line.
In the past you've talked you've given color around the consumer price sensitivity.
Wondering if you could do the same on what you saw in Q4 with respect to our.
Strength or weakness in the sort of mid to low to mid to high end for sure.
Stewart Schaefer: We already know in what select markets and what particular locations that we want to be in, but again, still very early. If all goes as planned for the rest, the next location will be opening in Montreal, probably in the back half of this year, Q4 or Q1 of next year. We're going to gather a lot of information on what we're seeing with our customers, and we're going to watch very closely how it affects or cannibalizes our Sleep Country stores. I can actually tell you about Sherway Gardens, a mall in Toronto where we had a Sleep Country store and now have a Casper and Endy store.
October.
We saw softness across all price bands.
November and December.
Our digital brands, which usually are a more price sensitive.
Below $1000 price point, which has been more and more affected than.
And then the rest of our higher price spend throughout 2023 actually saw strong resurgence in their numbers and nice growth year over year and their numbers. So.
It was.
It was a little bit of everything.
Tober as we creep into let's say January and I havent dive deep into the price bands or in February yet, but if you look in January once again, we're starting to see a little bit of softness on the lower end.
Stewart Schaefer: Not only did we exceed our expectations in both the Casper and the Endy locations, Bye. Pleasantly surprising to us, because we budgeted for a little bit of cannibalization, our sales since those two stores opened at the Sleep Country location have actually increased. So... We are.
And the mid seems to be holding okay, and you've probably seen it maybe a minor tick up on.
Stewart Schaefer: Again, early days, but I'm very pleased with what we're seeing. Okay, that's great. Thanks.
On the high end.
Great that's great. Thanks, Stuart appreciate it pleasure.
Pleasure.
Your next question comes from Vishal <unk> with National Bank. Please go ahead.
Stewart Schaefer: Thanks, Stewart. And maybe just along those lines, you've guided to a minimum of six new stores for 2024. Is there any way to break down how many of those are sort of standalone Sleep Country or Dormez-Vous locations versus some of the other formats?
Hi, Thanks for taking my questions given this propensity for the customer to increasingly shop on promo and.
The good gross margin performance that we saw in the quarter.
Stewart Schaefer: I knew you were going to ask that question, Stephen. You can pretty much count on those six stores. Call those sleep country stores for now. I'm confident that we already have assigned locations, at least for those, and count as, as Craig said, six, a minimum of six. You will see select stores opening up in Casper and locations in addition to that. Some of those leases aren't completely finalized yet, so we don't usually like to call it out unless the leases are final. Okay, that's great. And then, maybe, just for me, and then I'll get back in line.
Obviously your peers aren't.
Are aware that the customers more price sensitive as well can you just talk about 2024 and your confidence to hold gross margin and not have to give that away and increasing promo.
Yes.
I'll talk on product and Craig could dive in deeper into some of the efficiencies that were just driving throughout the organization, but specifically vishal in terms of your probably question around holding gross margin on product and a higher promotional environment.
Our business is unique in that we could adjust our product mix to various price points and still maintain the margins.
Stewart Schaefer: In the past, you've talked, you've given color around consumer price sensitivity, wondering if you could do the same on what you saw in Q4 with respect to strength or weakness in the sort of mid to low to mid to high end. Yeah, for sure. In October, we saw softness across all price bands. However, November and December, our digital brands, which usually are a more price-sensitive, below $1,000 price point, which has been more affected than the rest of our higher price bands throughout 2023, actually saw a strong resurgence in their numbers and nice growth year over year in their numbers. So it was a little bit of everything in October as we saw Craig Pratto, Stewart Schaefer, Lynne Feldman, John Zamparo, Martin Landry, Craig Pratto, Great.
Because of the broad selection of products that we have whenever we create to Martin's question earlier on in terms of the selection of our products and how we're thinking about it going into 2024, when we create maybe a more price sensitive.
Mattress, so that we make sure that we're serving all of our customers and in a way and what they want to shop.
With the time, we're not.
There's not a need for us to mark down the pricing, we will just create product.
That's similar to the gross margins that we usually receive.
At a different price point and so I don't.
Stewart Schaefer: That's great. Thanks, Stewart. I appreciate it. Pleasure. Your next question comes from Vishal Sridhar with National Bank. Please go ahead.
C.
The high promotional intensity from other retailers, nor with us at this point in time, where theyre plagued with too much inventory that they need to liquidate remember is still a big part of our business is just in time, So I don't think anyone in lesser mismanaging there.
Vishal Sridhar: Hi, thanks for taking my questions. Given this propensity for the customer to increasingly shop on promotion and the good gross margin performance that we saw in the quarter. Obviously, your peers aren't, and are aware that the customer is more price sensitive as well. Can you just talk about 2024 and your confidence to hold gross margin and not have to give that away? Yeah, I'll talk about product, and Craig could dive in deeper into some of the efficiencies that we've just driving throughout the organization, but specifically, Vishal, in terms of your question around holding gross margin on product in a higher promotional environment. Our business is unique in that we could adjust our product mix to various price points and still maintain our margins because of the broad selection of products that we have.
Inventory are stuck with tons of mattresses, So I think world.
On that side going into 2020 for Greg do you want to talk on the other.
Yeah, no for sure Hi, Vishal.
The.
When we looked at 2022 coming into 2023, we we indicated that we felt seasonally we would hold margins fairly consistent.
2021, where we saw a fairly decent expansion in our margins.
Going off of 'twenty three into 2024.
Any kind of expect the same from a from a baseline perspective.
With that being said, we continue to drive efficiencies through our network through purchasing power across all of our brands and banners.
Vishal Sridhar: Whenever we create, to Martin's question earlier on in terms of the selection of our products and how we're thinking about it going into 2024, when we create maybe a more price-sensitive mattress so that we make sure that we're serving all our customers in the way and what they want to shop for, at the time, there's not a need for us to mark down the pricing. We will just create. Prada, that's similar to the gross margins that we usually receive at a different price. And so I don't.
In addition, we continue to drive more products through direct sourcing to Steve's point earlier during during the script and lastly, as also as do.
Indicated we are looking to control our inventory market, our four walls and so we will continue to.
Move down that agenda, so I'd say from a baseline perspective, you can expect.
Stewart Schaefer: Free, the high promotional intensity from other retailers, nor with us at this point in time, when they're plagued with too much inventory that they need to liquidate. Remember, still, a big part of our business is just in time. So I don't think anyone, unless they're mismanaging their inventory, is stuck with tons of mattresses.
The margin profile, just adjusted seasonally for sales because its occupancy is the fixed costs, there that really drive that variance and then.
To work hard to continue to drive efficiencies through the network and.
Stewart Schaefer: So I think we're okay on that side going to 2024. Craig, do you want to talk about it on the other? Yeah, no, for sure. Hi Vishal.
And then try to deliver.
Some expansion, but from a baseline perspective, I'd kind of expect the SaaS <unk> and 'twenty four.
Okay and.
Craig De Pratto: When we looked at 2022 coming into 2023, we indicated that we felt seasonally we would hold margins fairly consistent to 2021, where we saw a fairly decent expansion in our margins. Going off of 2023 into 2024, I think you can kind of expect the same from a baseline perspective. With that being said, we continue to drive efficiencies through our network, through purchasing power across all of our brands and banners. In addition, we continue to drive more product through direct sourcing, to Stu's point earlier in the script. Lastly, as also indicated, we are looking to control our inventory more within our four walls, and so we will continue to move down that agenda. So I'd say from a baseline perspective, you can expect the same margin profile, just adjusted seasonally for sales, because occupancy is a fixed cost there that really drives that variance.
With respect to efficiencies.
How should we expect that to evolve and the efficiencies that youre talking about is that specifically related to <unk>.
Your warehousing that you talked about earlier, that's one and number two.
The marketing and advertising expenses, if you could.
Just give us some thoughts on how we should contemplate that into 2024 as well.
Yes.
You are correct as I would say that.
The second half of the year is when we think we will start.
<unk>, which is consistent with what we said previous calls.
We feel that those efficiencies in the work that we're completing.
Well, we will look to benefit us on the on the back half of the year in terms of marketing expense.
The D to C had a or that online component of our business had a significant uptick in Q4 to 26% is the highest we've ever achieved.
There is a higher.
Advertising costs, driven by that that mix shift from brick and mortar to online.
Craig De Pratto: And then we're going to work hard to continue to drive efficiency through the network and then try to deliver some expansion. But from a baseline perspective, I'd kind of expect the status quo. Okay, and with respect to efficiency, how should we expect that to evolve? And the efficiency that you're talking about, is that specifically related? Your warehouse that you talked about earlier. That's one. And number two, marketing and advertising. Give us some thoughts on how we should approach that. Yeah, you're correct.
In addition to that we had the incremental spend year over year from a dollar perspective absolute dollar perspective of silicon So in Casper.
And Casper.
We have.
Released the new lineup, we've taken a step back and now we really are starting to push promotions and advertisements.
Round around that brand. So there was a little bit of an uptick I think we landed in the 11 11 and change percent.
Four for marketing spend in Q4 that is a high Mark I.
Craig De Pratto: I'd say that the second half of the year is when we think we'll start, you know, seeing which is consistent with what we said, you know, on previous calls. We feel that those efficiencies and the work that we're completing will look to benefit us in the back half of the year, in terms of marketing expense, because the DTC had a D or the online component of our business had a significant uptick. In Q4, to 26%, the highest we've ever achieved, there was a higher, you know, advertising cost driven by that mixed shift from brick and mortar to online. In addition to that, we had the incremental spend year-over-year from a dollar perspective, and absolute dollar perspective, for Silk and Snow and Casper. And Casper, we have released a new lineup, we've taken a step back, and now we are really starting to push promotions and advertisements around that brand. So there was a little bit of an uptick; I think we landed in the 11th. 11. and change percent for marketing spend in Q4. That is a high mark.
I think we will settle down.
As we've discussed previously more so into that kind of 999 ish to nine 5% range.
There is different promotional periods in quarters that do drive.
Additional spend.
And we will continue to take advantage of that because it does drive topline and margin but.
Would say that this was the high mark in terms of <unk>.
Some of those elements that came through in some of the incremental spend from the acquisitions in Q4.
Vishal I would also.
AD and I've said this in the past that investing in our brands has served us well in recessionary past.
So that when the customer is ready.
Two.
Come back to that larger discretionary spend.
We are top of mind, our life LTV as we think out eight to 12 years not on a quarterly basis.
And when markets slow usually creates opportunity for us.
Craig De Pratto: You know, I think we'll settle down, as we've discussed previously, more so into that kind of nine-ish to nine-and-a-half percent range. Again, there are different promotional periods and quarters that do drive additional spend, and we will continue to take advantage of that because it does drive top line and margin. I would say that this was a high mark in terms of some of those elements that came through and some of the incremental spend from the acquisition.
I appreciate that color. Thank you. Thank you.
Thank you.
Your next question comes from Andrew Lopez with TD Securities. Please go ahead.
Hi, good morning, congrats on the solid quarter.
A lot of my questions have been answered here, but I just want to circle back on the.
What are you seeing kind of to start the year on the same store sales growth Brian.
Understand that.
Youre still kind of cautious on the consumer but are.
Are you able to see just kind of.
The same store sales growth youre expecting that to kind of decelerate and if we may be reaching an inflection point here.
Stewart Schaefer: Vishal, I would also add, and I've said this in the past, that investing in our brands has served us well in recessionary times, so that when the customer is ready to come back to that larger discretionary spend, we are top of mind. Our life LTV is, we think out eight to 12 years, not on a quarterly basis.
Where we're lapping some softer comps.
Andrew.
I wish I had that answer so I can't speak specifically, because we don't give guidance as the color that I gave to Martin earlier about January being a little bit softer coming off of November and December which were a little bit stronger is probably is as much.
Stewart Schaefer: And when markets slow, it usually creates opportunity for us. Appreciate that. Your next question comes from Andrew Lopez with TD Securities. Please go ahead. Hi, good morning.
<unk>.
I'm comfortable to say at this moment.
That being said.
Okay.
Andrew Lopez: This is on the solid quarter. A lot of my questions have been answered here. But I just want to circle back on the way you're seeing in kind of start the year on the same store sales growth front. Understand that you're still kind of cautious on the consumer, but are you able to speak just kind of to the Stamps for Sales growth if you're expecting that to kind of decelerate and if we may be reaching the inflection point here where we're lapping some softer calm. Andrew, I wish I had that answer, so I can't speak specifically because we don't give guidance. So the color that I gave to Martin earlier about January being a little bit softer coming off of November and December, which were a little bit stronger, is probably as much as I'm comfortable to say at this moment. That being said,
The consumer responding right now we're all we're all guessing the same thing that you're guessing.
And the bank of Canada going to pivot our interest rate is going to come down there is no question.
That there is an impact of these higher interest rates that are having an effect on the Canadian economy. There is no question that the Canadian government is trying to slow down the pace, but the pace of the healthy consumer and unemployment as low as it is and job growth is strong as it is.
Yes.
It's we're in funny times, it's hard to predict.
We're putting our head down we're focusing on our strategic initiatives, we're going to continue on our path of growing out our brick and mortar in our digital and drive the efficiencies in and what we said that we're going to do in previous slowdowns and recessions, it's always created opportunities for us to take.
Stewart Schaefer: The consumer is funny right now. We're all guessing the same thing that you're guessing. Is the Fed and the Bank of Canada going to pivot? Are interest rates going to come down? There's no question that there is an impact of these higher interest rates that are having an effect on the Canadian economy. There's no question that the Canadian government is trying to slow down the pace, but the pace of the healthy consumer and unemployment as low as it is, and job growth as strong as it is. We're in funny times.
Market share.
And we are investing in the future and we will be cautious where we can be cautious and we're going to be opportunistic where we think we should be opportunistic.
Okay fair enough.
And then just on the repositioning.
Repositioning of Casper.
I know you kind of spoke a bit on the marketing cadence.
Stewart Schaefer: It's hard to predict, so we're putting our heads down. We're focusing on our strategic initiatives. We're going to continue on our path of growing out our brick and mortar and our digital and drive the efficiencies and what we said that we would do in previous slowdowns and recessions. It's always created opportunities for us to take market share, and we are investing in the future, and we'll be cautious where we can be cautious, and we're going to be opportunistic where we think we should be opportunistic. Fair enough.
But just if you are able to just maybe speak to.
SG&A leverage just in general this year.
Kind of the cadence of that.
As your acquisitions going.
Again to mature over the year.
Yeah.
On our G&A spend I mean, I think when we take a step back on.
The main buckets that drove some incremental spend this year. It was really around the the advertising expense as a percentage of sales, which we kind of discussed in that nine ish nine and a half range, we landed full year at nine 3%.
Craig De Pratto: And then just on the repositioning of Casper, so I know you kind of spoke a bit about the marketing cadence, but just if you're able to maybe speak to SG&A leverage just in general this year and kind of the cadence of that as your acquisitions begin to mature over the year. Yeah, on our G&A spend, I mean, when we take a step back on the main buckets that drove some incremental spend this year, it was, you know, really around the advertising expense as a percentage of sales, which we kind of discussed in that nine-ish, nine and a half range. We landed full year at 9.3%. So you know, we expect that to level off in that same range. This year, we also had incremental spending that put pressure on, you know, wages and salaries because of those incremental investments.
So we expect that to level in that same range.
This year, we also had incremental spend that put pressure on wages.
And in salary because of those incremental investments. So we do expect that to settle a little bit as well into a bit of a new norm.
And then credit card and financing charges have ticked up a little bit over the year, just because the consumer has been.
Going to more.
Financed.
And we are in the process of reviewing those rates with their vendor.
So but at the end of the day I think.
Going into next year, we're going to continue to see a little bit of pressure at that G&A, because we continue to invest in some of these initiatives around the store of the future technology customer experience. So.
Craig De Pratto: So we do expect that to settle a little bit as well into a bit of a new normal. And then, you know, credit card and financing charges have ticked up a little bit over the year just because the consumer has been going to, you know, more financed orders. And we are in the process of reviewing those rates with our vendor. So I think, you know, going into next year, we're going to continue to see a little bit of pressure on that G&A because we continue to invest in some of these initiatives around the store of the future technology customer experience. So I'm not going to promise that we're going to see a bunch of leverage there, but, you know, more so in that similar range with, you know, some likely. Andrew, I'll add a drop more color on that because one of the exciting things about the Casper acquisition for us is that it didn't come with a huge back office, team, and distribution center and all the things that weigh down expenses of our business, and And I believe as we ramp up Casper to the sales that this coveted brand deserves, you will see on a contribution basis that the Casper component is delivering exceptionally well. That's great! That's a great color.
I'm not going to promise that we're going to see a bunch of leverage there but.
More so in that similar range with.
Some likely efficiencies in those in those buckets I discussed around wages and and a little bit on that on the advertising side potentially.
Andrew I'll add a draw more color on that because one of the exciting things about the Casper acquisition for us.
Didn't come with a huge back office team and.
Distribution center and all of the things that weighed down.
Expenses of our business and a lot of the <unk>.
Repositioning of this brand is happening.
By the leaders of our organization and our teams across the country, who are supporting this brand and I believe as we ramp up.
Casper to the sales that this coveted brand deserves.
You will see.
On a contribution basis that casper components delivering.
Exceptionally well.
Okay, that's great that's great color.
Stewart Schaefer: I'll leave there. I'll jump back into the queue. Thank you. Thank you, Andrew. Your next question comes from John Zamparo with CIBC. Please go ahead. Hey John. Hey, good morning.
I'll leave it there I'll jump back.
Do you.
Thank you Andrew Thank you Andrew.
Your next question comes from John <unk> with CIBC. Please go ahead.
Hey, John Good morning.
Alright, good morning.
John Zamparo: I wanted to start on the e-commerce number and the percent of sales coming from e-com. And you gave some color there on the strength of your DTC brands and accessories. But that's a really marked step up from both Q4 last year and also Q3. I wonder if you could add a bit more color on what's driving that.
I wanted to start on the ecommerce number the percent of sales coming from E. Com and you gave some some color there on the strength of your DTC brands and accessories, but that's a really market step up from both Q4 last year and also Q3 I Wonder if you could add a bit more color on what's driving that number.
Well, our Fabulous partners.
Silicon snow and the harsh.
Stewart Schaefer: Well, our fabulous partners, Silk and Snow, ND, Hush, definitely, and Casper, I mean, early days, but definitely kicked it into gear in November and December. And as a consumer, and I mentioned earlier, that promotional period, Black Friday, Boxing Day leading up to, and a little bit after, Cyber Monday. They had strong year-over-year growth, which proves out our model that we have been putting into place over the last few years because we're agnostic in terms of where the transaction transacts. The customer will dictate that to us. So we've seen the pendulum swing one way, really only one way, during COVID.
Kasper I mean early days, but.
Definitely kick.
Kicked into gear in November and December and as the consumer and I mentioned earlier.
That promotional period, Black Friday boxing day, leading up a little bit after cyber Monday.
They had strong year over year growth.
Which proves out our model that we are.
Putting into place over the last few years, because we're agnostic in terms of where it transact the customer will dictate that to us so.
We've seen the pendulum swing one way.
Really one way during Covid, we saw that pendulum swing back brick and mortar when COVID-19 ended and we're seeing a new norm I think.
Stewart Schaefer: We saw the pendulum swing back to brick and mortar when COVID ended, and we're seeing a new norm, I think. And we're set up for that new norm beautifully, which is why we're really excited about the future with the balance of our entire Omni network. Yeah, that's why you saw that tick up.
And we're set up for that new norm beautifully which is why we're really excited about the future.
With the balance of our entire omni network. So.
Yeah.
Why you saw that tick up I think.
Okay interesting.
Craig De Pratto: Okay, interesting. That's helpful. On the efficiencies... here, particularly reducing the use of 3PLs and layering in your recent acquisitions onto your logistics network and your suppliers, I wonder if you're willing to give us any sense of the magnitude of those savings or a range, and if not, could you say what percent of those savings will fall within 24%?
That's helpful on the efficiencies for this year, particularly reducing the use of three pls and layering in your recent acquisitions onto onto your logistics network and your suppliers I wonder if you're willing to give us any sense of the magnitude of those savings or a range and if not could you say what percent of those savings will fall into.
<unk> 24 versus 25.
Okay.
Yeah.
Craig De Pratto: Yeah, I mean, Like Stu said, we don't want to provide guidance, and I think from a baseline perspective, our margins are in a very healthy spot. I think we'll provide more color as we solidify some of the timing of the 3PL integration. We're actively working on moving and centralizing different groups that make sense within the organization, finance, HR, and IT. So I think we'll probably provide more color on this and maybe some ranges more towards Q2 and Q3. I think we'll have more confidence and can give some additional color that will help us. And John, we're not even trying to be evasive here because there is.
Like Steve said, we don't want to provide.
Guidance and I think.
From a baseline perspective, our margins are in a very healthy spot.
I think we'll provide more color as we solidify some of the timing of the <unk> integration.
We're actively working on.
Moving and centralizing different groups that makes sense within the organization finance HR.
It.
So I'd say, we'll probably provide more color on this and maybe some ranges more towards.
Q2 into Q3, I think we'll have more confidence and can give some additional color that will help out.
And John we're not we're not even trying to be evasive here because there is.
Stewart Schaefer: There's going to be a double expense for a very short period of time as we roll over because we will not interrupt the service to our customers. So we will be juggling both as we transition over into the Sleep Country hubs. So that's why in the second half, it'll be a lot cleaner and smoother once the 3PLs drop off and Craig can have a clear vision.
Theres a.
There's going to be a double expense for a very short period of time as we rollover because.
We will not interrupt the service to our customers. So we will be juggling, both as we transition over into.
The sleep country hubs.
So that's why in the second half it will be a lot cleaner and smoother once the three pls drop off.
And Greg can have a clear vision, we have a pretty good vision, but we rather not.
Stewart Schaefer: We have a pretty good idea, but we'd rather not give you the exact numbers until we close out those relationships. Right, understood. Okay, I think we're all excited about the new store design, but it sounds like we're going to have to wait a couple more quarters to really get a sense of what that's going to mean. I wonder, how does that impact CapEx for this year, or does it? Is that likely to be a 2025 and onward spend?
I'll give you the exact numbers until we.
We closed out those relationships.
Right understood Okay I.
I think we're all excited about the new store design. It sounds like we're going to have to wait a couple more quarters to really get a sense of what that's going to mean.
I Wonder how does that impact capex for this year or does it is that is that likely to be a 2025 and onwards spend yes.
Stewart Schaefer: Yeah, it'll, it'll depend on, you know, the Sleep Country Network stores are beautiful stores. The beautiful, nice thing about our business is that we don't get, I'd love to have thousands of people walking through our doors every day, but we don't. The reality is we don't, nor do we need them because of the transaction.
Yes.
It'll depend on.
The sleep country network stores are beautiful stores, the beautiful the nice thing about our business.
Is that we don't get.
Thousands of people walk I would love to have thousands of people walking through our doors every day, but we don't get that.
Reality is we don't nor do we need it because of the transaction. So there's not a need to renovate the stores unless the new stores perform and drive up what we believe in certain categories, we see huge opportunities and so.
Stewart Schaefer: So there's not a need to renovate the stores unless the new stores perform and drive up what we believe in certain categories where we see huge opportunities. We're going to do this thoughtfully and watch to test. At the same time, before we decide to accelerate, one is the new concept stores that we're talking about, and two, what we're seeing with Sleep Country, Silk, and Snow combined. A big part of that will be the growth of our accessories side of our business, too, I truly believe. The CapEx may ramp up more towards the back half of the year rather than the front half, so you should think that way.
We're going to do this.
Thoughtfully and.
And watch two tests.
At the same time before we decide to accelerate one is the new concept stores that we're talking about and two at what we're seeing with the sleep country Silicon Snow snow combined.
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A big part of that will be the growth of our accessory side of our business also.
I truly believe so.
The Capex may ramp up more towards the back half of the year.
Rather than the front half so you should think that way.
And.
Stewart Schaefer: We are actively looking for locations for some of our D2C brands, and we are going to carefully procure those fabulous pieces of real estate to make sure that we're doing it with a long-term thought process rather than just for immediate growth. Yeah, and I just add that, you know, as we run through these tests and launch the new store design, we will, you know, look to guide on the outlook section around CapEx like we do every quarter. To Stu's point, I think right now we're being conservative in terms of the leases that we've locked in, but we'll update accordingly as the year progresses. The last one for me is on the international side.
We are actively looking for locations for some of our D to C brands.
And we are going to carefully procure those fabulous pieces of real estate to make sure that we're doing it with a long term thought process rather than just for the immediate growth.
Yeah, and I'd just add on that.
As we run through these tests and launched the new New store design, we will.
Look too.
Guide on the outlook section around Capex like we do every quarter to Steve's point I think right now there is.
We're being conservative in terms of.
Leases that we've locked in but.
We'll update accordingly, as the year progresses.
Okay. Okay understood and then the last one for me is on the international side and you've talked in the past about expanding your international business you have got a very modest presence now but for some of the brands you have on a wholesale basis I wonder where does that rank in terms of your priorities has anything changed there or is that something you might move forward.
John Zamparo: You've talked in the past about expanding your international business. You've got a very modest presence now, but for some of the brands, you have on a wholesale basis. I wonder where that ranks in terms of your priorities?
Stewart Schaefer: Has anything changed there? Is that something you might move forward with? I won't tell you where it ranks, because we have a top ten list of our priorities, of which we talk about in big strokes three of our key priorities for this organization, but we are pleased with our growth in our accessory business that we are seeing through a couple of our digital brands, and we will continue to invest in that. It's not material enough to really break out.
With in 2024.
I won't tell you where ranks because we have a.
Top 10 list on our priorities.
And of which I mean, we talk about in big strokes three of our key priorities of this organization.
But we.
We are pleased with.
With our growth in our accessory business that we are seeing through a couple of our digital brands and we will continue to invest in that.
It's not material enough.
Stewart Schaefer: I don't know if we'll ever break it out or talk about it. I think at a certain point when it becomes more material, we'll talk about international because there will be a currency component. I'm sure of that also that we'll have to discuss. We're in a difficult environment. We're pleasantly pleased with the reaction we're getting, and the growth of this small base continues to grow double-digit. That's all I'll show you. Okay, that's great. I appreciate the color.
To really break out I don't know if it will ever break it out or talk to it I think at a certain point when it becomes more material, we'll talk about international because there will be currency component and I am sure of that also that we will have to discuss but.
We're.
In a difficult environment.
We're pleasantly pleased with the reaction, we're getting and the growth of this small base continues to grow double digit that's all I'll sure.
Okay. That's great I appreciate the color I'll leave it there. Thank you.
John Zamparo: I'll leave it there. Thank you. Thanks, John. Be well. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by 1. Your next question comes from Stephen MacLeod with BMO Capital Markets. Please go ahead. Sorry, Stephen, you have used up your questions. Well, actually, you have already answered all my questions, so I don't have any more.
Thanks, John B well.
Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the one.
Your next question comes from Stephen Macleod BMO capital markets. Please go ahead.
Dr. Stephen you used to ask your questions.
You already answered all my questions.
Okay. Thank you.
Yeah.
Stephen MacLeod: Thank you. There are no further questions at this time. I will now turn the conference over to you. Well, thank you, everyone. Uh, maybe a little bit bumpy out there with the consumer, but, uh... We're actually more excited about our positioning than ever before, and we're going to focus on doing what we do well, which is putting our nose down and focusing on executing flawlessly throughout our organization, and we'll be ready when the consumer returns. We appreciate all of your support, and we'll be chatting with you soon. Be well. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your line. The Ultimate Parody Site! Holdings, Inc. The Ultimate Parody Site!
Okay.
There are no further questions at this time I will now turn the conference over to Stuart.
Well, thank you everyone.
Maybe a little bit bumpy out there with the consumer but.
We're actually more excited about our positioning than ever before.
And we're going to focus on doing what we do well which is.
Putting our nose down and focusing on executing flaws flawlessly throughout our organization and we will be ready when the consumer returns and we appreciate all of your support and we'll be chatting with you soon be well.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Yes.
Oh.
Yes.
Okay.
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