Q2 2024 Solo Brands Inc Earnings Call
Hello everyone and welcome to today's Solo Brands Inc. second quarter fiscal 2024 financial results call.
Operator: Financial Results Call. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question during the Q&A session, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two.
Bruce Williams: I will now hand the floor to Bruce Williams to begin the call. Please go ahead.
Bruce Williams: Good morning, everyone, and thank you for joining the call to discuss Solo Brands' second quarter results, which we released this morning and can be found on the Investor Relations section of our website. And investors. Solo Brands.com.
Speaker Change: Good morning everyone and thank you for joining the call to discuss Solo Brands second quarter results which we released this morning and can be found on the investor relations section of our website at investors.solobrands.com
Bruce Williams: Today's call will be hosted by Chief Executive Officer Chris Metz and Chief Financial Officer, Laura Coffey.
Speaker Change: Today's call will be hosted by Chief Executive Officer Chris Metz and Chief Financial Officer Laura Coffey.
Bruce Williams: Before we get started, I want to remind everyone that management's remarks on this call may contain four looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, now based on current management expectations. These may include, without limitation, predictions, expectations. Target or estimates, including regarding our anticipated financial performance, business plans and objectives, future events and developments.
Speaker Change: Before we get started, I want to remind everyone that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, not based on current management expectations.
Speaker Change: These may include, without limitation, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance, business plans, and objectives, future events, and developments.
Bruce Williams: Actual results could differ materially from those mentioned. These four looking statements also involve substantial risk and uncertainties, some of which may be outside of our control. And that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties, among others, I discussed in our filings with the SEC.
Operator: These may include, without limitation, prediction, expectations, targets, or estimates, including regarding our anticipated financial performance, business plans and objectives, future events, and development. Actual results could differ materially from those mentioned. These forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control and that could cause actual results to differ materially from those expressed or implied by such statements. You should not place undue reliance on these forward-looking statements. Now, I'd like to turn the call over to Chris.
Bruce Williams: We encourage you to review these filings for a discussion of these risks, including our soon to be filed quarterly report on Form 10-Q, which will be available on the investor's portion of our website and investors. Solo Brands.com. You should not place undue reliance on these four looking statements.
Speaker Change: These risks and uncertainties, among others, are discussed in our filings with the FCC. We encourage you to review these filings for a discussion of these risks, including our soon-to-be-filed quarterly report on Form 10-2, and will be available on the investors portion of our website at investors.solobrands.com.
Bruce Williams: These statements are made only as of today, and we're going to take no allegation to update or advise them for any new information except that's required by law.
Speaker Change: These statements are made only as of today, and we undertake no obligation to update or revise them for any new information except as required by law.
Bruce Williams: This call will also contain certain non-depth financial measures, including net income as adjusted, diluted earnings per share as adjusted, gross margin as adjusted, adjusted EBITDA and adjusted EBITDA margin. Which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and ability with our past requirements, and facilitate period-to-period comparisons of our core operating results and the results of peer companies. Reconciliation of the non-depth measures to the most comparable dot measures and definitions of these indicators are included in our earnings release, which will be available in the investor portion of our website at Investors.
Speaker Change: which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance, and facilitate period-to-period comparisons of our core operating results and the results of peer accompanies.
Speaker Change: Reconciliation of the nine GAAP measures to the most comparable GAAP measures and definitions of these indicators are included in our earnings release, which will be available in the investor portion of our website at investors.solobrands.com.
Bruce Williams: Solo Brands.com.
Bruce Williams: Now, I'd like to turn the call over to Chris.
Chris Metz: Thank you, Bruce, and thank you all for joining us today. I will begin by discussing our second quarter performance and provide an update on our Solo Brands strategic plan and priorities.
Speaker Change: Now, I'd like to turn the call over to Chris.
Chris Metz: Thank you, Bruce, and thank you all for joining us today. I will begin by discussing our second quarter performance and provide an update on our solo brand strategic plan and priorities.
Chris Metz: Lastly, I will turn the call over to Laura to discuss our financial results in more detail in our outlook for fiscal 2024. We are pleased with our second quarter results as total revenues increased modestly year over year for the quarter. By channel, direct-to-consumer declines 0.9%, as this channel continues to generate sequential improvement over the prior two quarters. We were particularly pleased with our wholesale results as revenues increased 4.8%, despite continued difficult comparisons. In addition, we generated healthy, low-double-digit EBITDA margins for the quarter, despite planned investments in people, processes, and capabilities that will provide the foundation that is needed to do our sustainable growth over the long term.
Chris Metz: Lastly, I will turn the call over to Laura to discuss our financial results in more detail and our outlook for fiscal 2024.
Chris: We are pleased with our second quarter results, as total revenues increased modestly year-over-year for the quarter. By channel, direct-to-consumer revenue declined 0.9%, as this channel continues to generate sequential improvement over the prior two quarters.
Chris Metz: We are pleased with our second quarter results as total revenues increased modestly year-over-year for the quarter. By channel, direct-to-consumer declined 0.9% as this channel continues to generate sequential improvement over the prior two quarters.
Chris: We were particularly pleased with our wholesale results as revenues increased 4.8%. While we were pleased with our second quarter results and confident in the long-term growth opportunities for Solo Brands, we recognize that consumers are facing a number of near-term headwinds and demand for large-ticket consumer durables remains challenging. Quarter to date, we are seeing softer than expected traffic through our direct channel.
Laura Coffey: We were particularly pleased with our wholesale results as revenues increased 4.8% despite continued difficult comparisons.
Laura Coffey: In addition, we generated healthy, low double-digit EBITDA margins for the quarter, despite planned investments in people, processes, and capabilities that will provide the foundation that is needed to drive sustainable growth over the long term.
Chris Metz: While we were pleased with our second quarter results, and confident in the long-term growth opportunities for solo brands, we recognized that consumers are facing a number of near-term headwinds, and demand for large-ticket consumer durables remains challenging. Quarter to date, we are seeing softer than expected traffic through our direct channel. As such, we believe it is prudent to update our guidance to reflect the current trends.
Laura Coffey: While we were pleased with our second quarter results and confident in the long-term growth opportunities for Solo Brands, we recognize that consumers are facing a number of near-term headwinds and demand for large-ticket consumer durables remains challenging.
Laura Coffey: Quarter to date, we are seeing softer than expected traffic through our direct channel. As such, we believe it is prudent to update our guidance to reflect the current trends.
Chris: As such, we believe it is prudent to update our guidance to reflect the current trend. Now, we'd like to give an update on the Solo Brands strategic plan that we embarked upon shortly after I joined the company that allowed us to evaluate the full potential of our current business. The results of this in-depth strategic analysis confirm my conviction that our brands have significant opportunities to continue to gain market share within their respective categories and that we have a long runway of growth ahead of us. We have clearly identified several strengths of the company.
Chris Metz: Laurel will share with you shortly more color on our full-year guidance.
Chris Metz: Now we would like to give an update on the Solo Brands strategic plan that we embarked upon shortly after I joined the company, that allowed us to evaluate the full potential of our current business. The results of this in-depth strategic analysis confirm my conviction that our brands have significant opportunities to continue to gain market share within their respective categories and that we have a long runway of growth ahead of us. We have clearly identified several strengths of the company. Highlighted by one, we have incredibly strong brands with a passionate, loyal, and high-value customer base. Two, our brands are leaders in the premium segments of their markets with the long-term opportunities to grow into additional categories and expand our team.
Laura Coffey: The results of this in-depth strategic analysis confirm my conviction that our brands have significant opportunities to continue to gain market share within their respective categories and that we have a long runway of growth ahead of us.
Chris: Highlighted by one, we have incredibly strong brands with a passionate, loyal, and high-value customer base. And three, we're building the infrastructure to create a highly scalable model that will drive long-term margins and returns on capital. We conducted the most in-depth consumer segmentation analysis that our company has ever done, speaking to over 2,000 consumers. Walking in, I believed that the Solo Stove brand was strong, but frankly, I was pleasantly surprised to see just how strong it truly is.
Laura Coffey: We have clearly identified several strengths of the company, highlighted by one, we have incredibly strong brands with a passionate, loyal, and high-value customer base.
Laura Coffey: Two, our brands are leaders in the premium segments of their markets with a long-term opportunity to grow into additional categories and expand our TAM.
Chris Metz: And three, we are building the infrastructure to create a highly scalable model that will drive long-term margins and returns on capital.
Chris Metz: First, I want to provide a summary of the consumer insight work that will guide our strategic plan and will inform our decisions regarding adjacencies and expansion of our team. We conducted the most in-depth consumer segmentation analysis that our company has ever done, speaking to over 2,000 consumers. Within Stowe, Solostow's net promoter score was incredibly high, putting us in the top 1 percentile in the outdoor goods market and leads in unmated brand awareness compared to our direct competitors. Walking in, I believe that the Solostow brand was strong, but frankly, I was pleasantly surprised to see just how strong it truly is.
Laura Coffey: We conducted the most in-depth consumer segmentation analysis that our company has ever done, speaking to over 2,000 consumers.
Laura Coffey: Walking in, I believe that the Solo Stove brand was strong, but frankly, I was pleasantly surprised to see just how strong it truly is.
Chris Metz: We have a premium customer base as the average household income of our customers is near 200,000, which is two times the outdoor goods market. This consumer insight work will inform our strategic approach to pricing, as well as how to leverage our strong brand characteristics to expand our team by entering into near-term adjacent categories.
Chris: We have a premium customer base, as the average household income of our customers is near $200,000, which is two times the outdoor goods market. However, within Chubbies, we know that we play in a larger but highly fragmented market. However, we are pleased with our share position within our core categories, with ample opportunities to grow. We believe that we have room for growth as we increase our brand awareness and capitalize on our strong net promoter score for the brand.
Laura Coffey: This Consumer Insight work will inform our strategic approach to pricing, as well as how to leverage our strong brand characteristics to expand our TAM by entering into near-term, adjacent categories.
Chris Metz: Within Chubby's, we know that we play in a larger, but highly fragmented market. However, we are pleased with our share position within our core categories, with ample opportunities to grow. Similar to so, we have a premium customer that has a household income of approximately 140,000, that is 1.4 times the menswear market. We believe that we have room for growth as we increase our brand awareness and capitalize on our strong Net Promoter Score for the brand. We believe that executing on our long-term strategic pillars will be a multi-year process.
Speaker Change: Within Chubbies, we know that we play in a larger but highly fragmented market. However, we are pleased with our share position within our core categories with ample opportunities to grow.
Speaker Change: We believe that we have room for growth as we increase our brand awareness and capitalize on our strong net promoter score for the brand.
Speaker Change: We believe that executing on our long-term strategic pillars will be a multi-year process.
Chris Metz: This year, 2024, is about stabilizing the business, particularly in the direct channel in investing in capabilities. At Solostov, we welcomed in a new senior vice president, a direct-to-consumer e-commerce, who brings a wealth of relevant experience, most recently at Shark Ninja. We're also reinvigorating our product innovation engine by laying the groundwork to build out a multi-year product pipeline that will generate innovation across platforms. In Q2, we welcomed in the new Senior Vice President of Product Development for Solostov, who also brings a wealth of relevant experience, having spent much time in innovative companies, such as Helen of Troy, TTI, and Bosch.
Chris: This year 2024 is about stabilizing the business, particularly in the direct channel, and investing in capability. At Solostove, we welcomed in a new Senior Vice President of Direct-to-Consumer E-Commerce, who brings a wealth of relevant experience, most recently at Sharknado. We're also reinvigorating our product innovation engine by laying the groundwork to build out a multi-year product pipeline that will generate innovation across platforms. In Q2, we welcomed in the new Senior Vice President of Product Development for Solostove, who also brings a wealth of relevant experience, having spent much time at innovative companies such as Helena Troy, TTI, and Bosch.
Chris Metz: In fact, this new leader and I just returned from a very productive trip to Asia with our product development team, looking at new product opportunities. Next, we are enhancing our product development ecosystem, which means that each new product introduction will be supplemented by consumer insight research, robust go-to-market marketing, as well as channel distribution strategies. We will have multiple exciting new products in Solostov to launch beginning in 2025. In fact, some of these new product introductions will begin to expand as we innovate into near-Jason categories outside of our core fire pit and teach oven categories within Solostov.
Chris: In fact, this new leader and I just returned from a very productive trip to Asia with our product development team looking at new product opportunities. Next, we are enhancing our product development ecosystem, which means that each new product introduction will be supplemented by consumer insight research, robust go-to-market marketing, as well as channel distribution strategy. We will have multiple exciting new products in SoloStove to launch beginning in 2025. In fact, some of these new product introductions will begin to expand our TAM as we innovate into near-adjacent categories outside of our core fire pit and pizza oven categories within SoloStove.
Speaker Change: In fact, this new leader and I just returned from a very productive trip to Asia with our product development team, looking at new product opportunities.
Speaker Change: Next, we are enhancing our product development ecosystem, which means that each new product introduction will be supplemented by consumer insight research, robust go-to-market marketing, as well as channel distribution strategies.
Speaker Change: We will have multiple exciting new products in Solo Stove to launch beginning in 2025. In fact, some of these new product introductions will begin to expand our TAM as we innovate into near-adjacent categories outside of our core fire pit and pizza oven categories within Solo Stove.
Chris Metz: We believe that the investments we are making in people and infrastructure will position us to return to revenue growth, expand our margins, and begin to introduce multiple new product innovations starting in 2025.
Chris Metz: As part of our strategic plan, we see substantial opportunities to continue to expand our omnichannel distribution. In fact, our consumer research has informed us that about 50% of consumers are purchasing their products in physical stores and not just online. This leads us to believe that our strategy of partnering with the right retailers to expand our overall revenue line is a smart approach. We don't believe this is an either-or. We need to expand both our DTC and retail business. Our research supports this, and you will see us continue down this path.
Chris: As part of our strategic plan, we see substantial opportunities to continue to expand our omni-channel distribution. A smaller but still important part of reaching consumers where they shop is continuing to selectively open our own retail footprint within Chubby. During the second quarter, we opened three new Chubby's stores. At our new Woodlands, Texas location, we experienced our largest grand opening weekend to date.
Speaker Change: In fact, our consumer research has informed us that about 50% of consumers are purchasing their products in physical stores and not just online.
Speaker Change: This leads us to believe that our strategy of partnering with the right retailers to expand our overall revenue line is a smart approach.
Speaker Change: We don't believe this is an either-or. We need to expand both our DTC and retail business. Our research supports this, and you will see us continue down this path.
Chris Metz: A smaller but still important part of reaching consumers where they shop is continuing to selectively open our own retail footprint within Chubby's. During the second quarter, we opened three new Chubby's stores. At our New Woodlands, Texas location, we experienced our largest grand opening weekend today. Today, we attend Chubby's stores and plan to open an additional two stores by year-end.
Speaker Change: During the second quarter, we opened three new Chubby's stores. At our new Woodlands, Texas location, we experienced our largest grand opening weekend to date. Today we have 10 Chubby's stores and plan to open an additional two stores by year end.
Chris: Today, we have 10 Chubby's stores and plan to open an additional two stores by year end. Additionally, as part of our strategic plan, we see opportunities to leverage our scale across our platform to drive EBITDA margin expansion. Specifically, we will leverage our very strong existing fulfillment and procurement capabilities and scale our supply chain network to further reduce delivery and carrying costs. A few operational examples that help support our increasingly higher margins are one; our fulfillment centers are shipping greater than 99% picking accuracy.
Chris Metz: Lastly, as part of our strategic plan, we see opportunities to leverage our scale across our platform to drive EBITDA on margin expansion. We will leverage our very strong existing fulfillment and procurement capabilities and scale our supply chain network to further reduce delivery and carrying costs. A few operational examples that help support our increasingly higher margins are: one, our fulfillment centers are shipping greater than 99% picking accuracy. Two, our procurement team continues to collaborate with our suppliers to drive net productivity, offsetting inflationary pressures. And three, our fulfillment team just signed a new contract with a leading package goods delivery company that will offer significant improvement in our delivery costs.
Speaker Change: A few operational examples that help support our increasingly higher margins are, one, our fulfillment centers are shipping greater than 99% picking accuracy.
Chris: Two, our procurement team continues to collaborate with our suppliers to drive net productivity, offsetting inflationary pressures. And three, our fulfillment team just signed a new contract with a leading packaged goods delivery company that will offer a significant improvement in our delivery costs. This leverage will only grow as we expand SoloStove into categories beyond fire pits and pizza. In summary, despite the more challenging consumer environment, I couldn't be more encouraged with the progress we are making in returning Solo Brands to stronger performance, consistent with a best-in-class outdoor company.
Speaker Change: Two, our procurement team continues to collaborate with our suppliers.
Speaker Change: Offsetting Inflationary Pressures.
Speaker Change: And three, our fulfillment team just signed a new contract with a leading packaged goods delivery company that will offer significant improvement in our delivery costs.
Chris Metz: This leverage will only grow as we expand Solo Stove into categories beyond fire pits and pizzas.
Speaker Change: This leverage will only grow as we expand SoloStove into categories beyond fire pits and pizza ovens.
Chris Metz: In summary, despite the more challenging consumer environment, I couldn't be more encouraged with the progress we were making in returning solo brands to stronger performance consistent with the best-in-class outdoor companies. We are building out our capabilities, assuring an incredible new talent, investing in much needed systems, and adding robust, repeatable processes. We believe the work we are doing to improve our capabilities and performance will pay dividends and drive long-term sustainable growth. All of this leads me to believe we continue to march down the path to success as we move through our rebuild year of 2024.
Chris: We are building out our capabilities, ushering in incredible new talent, investing in much-needed systems, and adding robust, repeatable processes. We believe the work we are doing to improve our capabilities and performance will pay dividends and drive long-term sustainable growth. All of this leads me to believe we continue to march down the path to success as we move through our rebuild year of 2024. I will now turn the call over to Laura.
Speaker Change: We believe the work we are doing to improve our capabilities and performance will pay dividends and drive long-term sustainable growth. All of this leads me to believe we continue to march down the path to success as we move through our rebuild year of 2024. I will now turn the call over to Laura.
Laura Coffey: I will now turn the call over to Laura.
Laura Coffey: Thank you, Chris, and good morning, everyone. Today, I will walk you through our second quarter results and provide our outlook for the remainder of fiscal 2024. Despite a tough macro backdrop where the consumer continues to face pressures, we are highly focused on the areas we can control. We are working to stabilize our business while investing the strength in our infrastructure. We believe that this ongoing work, as well as executing against our solo brand strategic plans, will position us to drive long-term shareholder value.
Laura: Today I will walk you through our second quarter results and provide our outlook for the remainder of fiscal 2024. Despite a tough macro backdrop where the consumer continues to face pressures, we are highly focused on the areas we can't control.
Laura Coffey: Thank you, Chris, and good morning, everyone. Today, I will walk you through our second quarter results and provide our outlook for the remainder of fiscal 2024.
Laura Coffey: Despite a tough macro backdrop where the consumer continues to face pressure, we are highly focused on the areas we can't control.
Laura: We are working to stabilize our business while investing to strengthen it. We believe that this ongoing work, as well as executing against our Solo Brands strategic plan, will position us to drive long-term shareholder value. Turning to our quarterly results. Second quarter sales were $131.6 million, increasing 0.5% compared to a year ago as sales growth in retail offset lower sales trends in our direct consumer channel. In the direct channel, revenues declined 0.9% to $98.8 million in the second quarter, primarily due to lower site traffic.
Laura Coffey: We are working to stabilize our business while investing to strengthen our infrastructure.
Laura Coffey: We believe that this ongoing work, as well as executing against our Solo Brands strategic plan, will position us to drive long-term shareholder value.
Laura Coffey: Turning to our quarterly results. Second quarter sales were 131.6 million, increasing 0.5% compared to a year ago as sales growth and retail offset foster sales trends in our direct consumer channels. In the direct channel, revenues declined 0.9% to 98.8 million in the second quarter, primarily due to lower side traffic. Retail revenues increased 4.8% to 32.8 million, driven by an increased order volume to the results of continued growth with our strategic retail partners. We are particularly pleased that we were able to generate sales growth against a difficult sales comparison of plus 57% during the favorable period last year.
Laura Coffey: Turning to our quarterly results.
Laura: Retail revenue increased 4.8% to $32.8 million, driven by an increased order volume, which is the result of continued growth with our strategic retail partner. We are particularly pleased that we were able to generate sales growth against a difficult sales comparison of plus 57% during the comparable period last year. Turning to gross margins, our gross margin decreased 60 basis points to 62.8%, primarily as a result of inventory fair value impact from the 2023 acquisition.
Laura Coffey: Turning to gross margin. Our gross margin decreased 60 basis points to 62.8%, primarily the results of inventory fair value impact from the 2023 acquisition. Adjusting gross margin, which excludes this impact, was 63.6% flat to last year.
Laura: Adjusted gross margin, which excludes this impact, was 63.6% flat to last year due to higher marketing expenses. The adjusted EBITDA margin was 11.7%. As of June 30th, we had $75 million in outstanding borrowing under the revolving credit facility and $88.8 million under the term loan agreement. The borrowing capacity on the Revolving Credit Facility was $350 million as of June 30, leaving $274 million of availability, and our net leverage ratio
Laura Coffey: Selling, general and administrative expenses for the quarter increased to 70.8 million compared to 63.5 million a year ago. As a percentage of sales, SG&A's expense increased to 53.8% of sales compared to 48.5% a year ago, primarily due to increased distribution expenses related to elevating shipping costs for higher transaction volumes associated with the skew mix to more bundles, higher marketing expenses, increases in professional and information technology investments to support future growth.
Laura Coffey: Selling general and administrative expenses for the quarter increased to $70.8 million compared to $63.5 million a year ago.
Laura Coffey: As a percentage of sales, SG&A's expense increased to 53.8% of sales compared to 48.5% a year ago.
Laura Coffey: primarily due to increased distribution expenses related to elevating shipping costs from higher transaction volumes associated with the skew mix to more bundles, higher marketing expenses, increases in professional and information technology investments to support future growth.
Laura Coffey: Second quarter net loss was $4 million, an adjusted net income was $6.1 million, an adjusted EBITDA of $15.5 million. Adjusted EBITDA margin was 11.7%.
Laura Coffey: Second quarter net loss of $4 million.
Laura Coffey: Turning to the ballot sheet, at the end of the period, we had $20.1 million in cash and cash equivalents. As of June 30, we had $75 million in outstanding borrowing under the Revolving Credit Facility and $88.8 million under the Term Loan Agreement. The borrowing capacity on the Revolving Credit Facility was $350 million as of June 30, leaving $274 million of availability, and our net leverage ratio was $3.3.
Laura Coffey: The borrowing capacity on the Revolving Credit Facility was $350 million as of June 30.
Laura Coffey: leaving $274 million of availability and our net leverage ratio was 3.3 times.
Laura Coffey: We remain focused on disciplined inventory management and are pleased with the composition of our current inventory levels. Inventory at the end of the quarter was $100.8 million, down 11.3% from a year ago.
Laura Coffey: Moving to our outlook, we are pleased with our first half performance and the progress we are making on our turnaround plan. However, the maximum environment remains challenging. Our quarter-to-date trends have softened and will approximately 60% of our business will come in the back half of the year. We believe it is prudent to be cautious in our full-year guidance given our current run rate. As such, we expect fiscal 2024 revenue to begin the range of $470 to $490 million. We now expect adjusted EVA debt margin to be in the range of 9% to 10% as we continue to invest in our capability and infrastructure that will lay the foundation for long-term success.
Laura Coffey: We are pleased with our first half performance and the progress we are making on our turnaround plan. However, the maximum environment remains challenging.
Laura: Our quarter-to-date trends have softened, and while approximately 60% of our business will come in the back half of the year, we believe it is prudent to be cautious in our full-year guidance given our current run rate. As such, we expect fiscal 2024 revenue to be in the range of $470 to $490 million. Turning to the second half, we expect the third quarter to be our most challenging quarter of the year due to very difficult comparisons in our retail channel and current trends in our direct consumer.
Laura Coffey: As such, we expect fiscal 2024 revenue to be in the range of $470 to $490 million. We now expect adjusted EBITDA margin to be in the range of 9 to 10 percent as we continue to invest in our capabilities and infrastructure that will lay the foundation for long-term success.
Laura Coffey: Turning to the second half, we expect the third quarter to be our most challenging quarter of the year due to very difficult comparisons in our retail channels and current trends in our direct consumers. As a reminder, we are laughing in one-time trade credit agreement in which we recognize $7.2 million in retail revenues during the third quarter of 2023. We continue to believe the fourth quarter will be our strongest quarter of the year, consistent with our typical seasonal patterns. This expectation is bolstered by our first full-final marketing campaign, which begins in August, as well as several small product launches.
Laura: As a reminder, we are lapping a one-time trade credit agreement in which we recognize $7.2 million in retail revenues during the third quarter of 2023. We continue to believe the fourth quarter will be our strongest quarter of the year, consistent with our typical seasonal pattern. In closing, while the macro environment remains challenging in the near term, we are focused on our control goals, and we are pleased with the continued strength of our brand.
Laura Coffey: As a reminder, we are lapping a one-time trade credit agreement in which we recognized $7.2 million in retail revenues during the third quarter of 2023.
Laura Coffey: We continue to believe the fourth quarter will be our strongest quarter of the year, consistent with our typical seasonal pattern.
Laura Coffey: This expectation is bolstered by our first full-funnel marketing campaign, which begins in August , as well as several small product launches.
Laura Coffey: In closing, while the macro-environment remains challenging in the near term, we are focused on our controllable, and we are pleased with the continued strength of our brand. We are making progress on our initiatives and are confident we have the strategies in place to position us for long-term growth.
Laura Coffey: In closing, while the macro environment remains challenging in the near term, we are focused on our controllable and we are pleased with the continued strength of our brand.
Laura: We are making progress on our initiatives and are confident we have the strategies in place to position us for long-term growth. With that, I will now turn the call over to the operator to begin the Q&A.
Operator: With that, I will now turn the call over to the operator to begin the Q&A.
Speaker Change: With that, I will now turn the call over to the operator to begin the Q&A.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two.
Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Our first question comes from Chasen Bender at Citi. Please go ahead.
Speaker Change: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. Our first question comes from Chasen Bender at Citi. Please go ahead.
Jason Bender: Our first question comes from Jason Bender at City. Please go ahead. Great. Thanks. Good morning, everyone.
Chris: Great, thanks. Good morning, everyone. Chris, just to start, thinking about the risk of a sharper macro turndown in the U.S., which has become more topical in recent days, I was curious if you think you can still drive this new long-term strategic plan in a hard landing scenario, and if so, what really gives you that confidence? And related to that, are there parts of the portfolio in a hard landing scenario, either from a brand standpoint or a product standpoint, that you see as being more at risk in potentially places where you would need to make more meaningful changes?
Chris Metz: Chris, just to start thinking about the risk of a sharper macro turn down into US, which has become more topical in days of late, I was curious if you think you can still drive this new long term strategic plan in a hard landing scenario. And if so, what really gives you that confidence? And related to that, are there parts of a portfolio in a hard landing scenario, either from a brand standpoint or a product standpoint, that you see as being more at risk in potentially places where you would need to make more meaningful changes?
Chasen Bender: Great. Thanks. Good morning, everyone. Chris, just to start,
Chasen Bender: Thinking about the risk of a sharper macro turndown in the U.S., which has become more topical in days of late,
Chasen Bender: Are there parts of the portfolio in a hard-landing scenario, either from a brand standpoint or a product standpoint, that you see as being more at risk and potentially places where you would need to make more meaningful changes?
Chris Metz: Jason, it's certainly a relevant question, an insightful question, and something that we've given an awful lot of thought to in terms of scenario planning. So I will say first, we are in the deepest part of our turnaround. And we've guided to a business that is still generating historically high gross margins in the low 60s, which I think puts us in the best company within our peer group. And we're still generating EBITDA margins of 9 to 10%. And although our leverage ratio has increased a bit, we have an incredible amount of free availability and a balance sheet that allows us to continue to invest while we generate returns.
Chris: Yeah, Jason, it's certainly a relevant question, an insightful question, and something that we've given an awful lot of thought to in terms of scenario planning. So I will say, first, we are in the deepest part of our turnaround. And we've guided to a business that is still generating historically high gross margins in the low 60s, which I think puts us in the best company within our peer group. And we're still generating EBITDA margins of 9% to 10%. And although our leverage ratio has increased a bit, we have an incredible amount of free availability and a balance sheet that allows us to continue to invest while we generate returns.
Speaker Change: Yeah, so Jason, it's certainly a relevant question, insightful question, and something that we've given an awful lot of thought to in terms of scenario planning. So I will say first, we are in the deepest part of our turnaround.
Speaker Change: and we've guided to a business that is still generating historically high gross margins in the low 60s which I think puts us in
Chris Metz: So the focus of our team on the strategic plan is to one, create some innovation and excitement to compel consumers to buy products, and some of these new products station are going to be, you know, at price points with features and benefits that will allow people to lean in where we haven't had that newness to date. Part of our consumer research has also shared with us that we have some price setting and some price getting that we feel like has been left on the table, if you will. So a lot of, you know, what we've uncovered in our insight work is not just strategic intents that we want to lean into that we feel like we'll grow our margins and our top line, but it's also, frankly, just better execution.
Chris: So the focus of our team on the strategic plan is to... first, create some innovation and excitement to compel consumers to buy products. And some of these new products, Chasen, are going to be at price points with features and benefits that will allow people to lean in where we haven't had that newness to date. Part of our consumer research has also shared with us that we have some price setting and some price getting that we feel like has been left on the table, if you will.
Speaker Change: create some innovation and excitement to compel consumers to buy products and some of these new products Jason are going to be you know at price points with features and benefits that will allow people to lean in where we haven't had that newness to date.
Jason Bender: that we have some price setting and some price getting that we feel like is been left on the table, if you will. So a lot of you know, what we've uncovered in our insight work is not just
Chris: So a lot of what we've uncovered in our insight work is not just strategic intents that we wanna lean into that we feel like will grow our margins and our top line, but it's also, frankly, just better execution. So although we're seeing down traffic, as an example, on our online direct-to-consumer website, we know that our website needs to be refreshed. It doesn't give the shopper the experience that we need it to be.
Jason Bender: strategic intents that we want to lean into that we feel like will grow our margins in our top line, but it's also frankly just better execution.
Chris Metz: So although we're seeing down traffic as an example on our online direct-to-consumer website, we know that our website needs to be refreshed. It doesn't give the shopper the experience that we needed to be. We know that the marketing campaigns that we run over the past couple of years hasn't been as effective as they should be. These are all the fixes we're putting in place that would suggest that we don't need just a rosy environment to show improvements. A lot of this is just down to us executing better and growing our business.
Jason Bender: We know that our website needs to be refreshed, it doesn't give...
Chris: We know that the marketing campaigns that we've run over the past couple of years haven't been as effective as they should be. These are all the fixes we're putting in place that would suggest that we don't need just a rosy environment to show improvements.
Jason Bender: The shopper, the experience that we need it to be. We know that the marketing campaigns that we've run over the past couple of years hasn't been as effective as they should be. These are all the fixes we're putting in place that
Chris: A lot of this is just down to us executing better and growing our business. Now, the other thing that I'll say that Consumer Insight supported was, as I mentioned, we talked to over 2,000 consumers. And in that research, it came back and said, Hey, your brand is so strong, your net promoter score on a double-blind basis puts you in the top 1% of all outdoor products brands. That allows you to expand into near adjacency.
Chris Metz: Now, the other thing that I'll say that the consumer insight supported was, as I mentioned, we talked to over 2000 consumers. and in that research, it came back and said, hey, your brand is so strong; your net promoter score on a double-blind basis puts you in the top 1% of all outdoor products brands. That allows you to expand into near-adjacencies. Those near-adjacencies that you expand into, consumers suggested that we could and should be the number two, number three players in those categories. What this does is expands our tam by four to five times. We've got a much bigger area in which we're playing to grab share than we've had in the past.
Jason Bender: Now, the other thing that I'll say that the Consumer Insights supported was, as I mentioned, we talked to over 2,000 consumers.
Jason Bender: And in that research, it came back and said, hey, your brand is so strong, your net promoter score on a double-blind basis puts you in the top 1% of all outdoor products brands.
Chris: Those near adjacencies that you expand into, consumers suggested that we could and should be the number two, number three players in those categories. What this does is expands our TAM by four to five times. So we've got a much bigger area in which we're playing to grab share than we've had in the past. So listen, we're not predicting big changes in the macro environment, but we are building a business, and we feel like we've got the tools around us to succeed regardless of the macroeconomic conditions.
Jason Bender: Those near adjacencies that you expand into, consumers suggested that we could and should be the number two, number three players in those categories. What this does is expands our TAM by four to five times. So we've got a much bigger area in which we're playing to grab share than we've had in the past.
Chris Metz: We're not predicting big changes in the macro environment, but we are preparing a business, and we feel like we've got the tools around us to succeed regardless of the macroeconomic conditions.
Jason Bender: So, listen, we're not predicting big changes in the macro environment, but we are preparing a business and we feel like we've got the tools around us to succeed regardless of the macroeconomic conditions.
Jason Bender: Got it. That's a helpful color.
Chris: Got it. That's a helpful color.
Jason Bender: And related to that, and also the software quarter-day trends you're seeing in 3Q, could you give us an update on the promotional environment? Obviously, you've leaned more heavily into bundling, but we've heard from some other companies that the promotional environment, in general, is increasing. Some retailers are still over inventory to be stocking.
Speaker Change: got it that's a that's helpful color in related to that
Speaker Change: and also the softer quarter-to-date trends you're seeing in 3Q.
Chris: And related to that and also the softer quarter-to-date trends you're seeing in 3Q, could you give us an update on the promotional environment? Obviously, you've leaned more heavily into bundling, but we've heard from some other companies that the promotional environment, in general, is increasing. Some retailers are still over-inventoried in de-stocking. So, curious what you're seeing, one. But two, given the macro backdrop and the quarter-to-date trends, how is that informing your decision not only to drive bundling but also potential peer discounting and what the depth and breadth of that looks like embedded in your outlook for the second half? Thanks.
Jason Bender: So curious what you're seeing one, but two, given the macro backdrop and the quarter-day trends, how is that informing your decision not only to drive bundlings but also potential peer discounting and what the depth and breadth of that looks like embedded in your outlook for the second half? Thanks.
Chris: Yeah, Jason, you can see this in our gross margin line. You know, we have used bundling to help offset some of the promotions and discounts that maybe you're seeing from others in the space. And so, you know, we've mentioned that bundling has increased our fulfillment and some of our shipping costs, and we have ways to improve that.
Chris Metz: Jason, you can see this in our gross margin line. We have used bundling to help offset some of the promotions and discounts that maybe you're seeing from others in the space. We've mentioned that the bundling has increased our fulfillment and some of our shipping costs. And we have ways to improve that. But we've historically been pretty promotional. And I think part of the opportunity for us is to create an environment where we're frankly less promotional and not every day low-low discounting. So, you know, we have factored in kind of business as usual from a discount and promotional environment, which has been heightened this year.
Chris: But we've, you know, historically been pretty promotional, and I think part of the opportunity for us is to create an environment where we're, frankly, less promotional and not everyday low, low discounting. So, you know, we have factored in kind of business as usual from a discount and promotional environment, which has been heightened this year. That's all factored into our back half guidance. But I honestly believe that we can improve by offering a better shopping environment and better value to our consumers in ways that don't necessarily create an erosion of our margin line.
Jason Bender: That's all factored into our back half guidance, but I honestly believe that we can improve by offering a better shopping environment, by a better value to our consumers in ways that don't necessarily create an erosion to our margin line. Got it. Appreciate that detail. I'll pass it on from here.
Chris: Got it. I appreciate that detail. I'll pass it on from here.
Anna Gleskin: Our next question comes from Anna Gleskin from B. Riley. Anna, please go ahead.
Operator: Our next question comes from Anna Glaessgen from B Reilly. Anna, please go ahead.
Anna Gleskin: Good morning. I think it is my question. I'd like to touch base on chubbies. You know, wholesale or distribution gains have been, you know, a big driver of growth over the past few years, I believe. Could you speak to appetite and retailers to take on the brand or expand the brand into more of the store fleet at this point? Yeah, so Anna, you've heard me in the previous earnings calls. I've highlighted the fact that Shubbies is one of the most exciting young men's brands, apparel brands in the US today. I continue to believe that. And that's echoed by our key customers.
Chris: Hey, good morning. Thanks for taking my question. I'd like to touch base on Chubbies. Wholesale or distribution gains have been, you know, a big driver of growth over the past few years, I believe. Can you speak to appetite from retailers to take on the brand or expand the brand into more of the store fleet at this point?
Chris: Yes, Anna, as you've heard me on previous earnings calls, I've highlighted the fact that Chubbies is one of the most exciting young men's apparel brands in the U.S. today, and I continue to believe that.
Speaker Change: <unk> is one of the most exciting young men's brands apparel brands in the U S. Today I continue to believe that and that's echoed by our key customers. So as you've rightly pointed out we've grown with door count gains with some of our key retailers the Pos that we.
Chris: And that's echoed by our key customers. So, as you've rightly pointed out, we've grown with door count gains with some of our key retailers. The POS that we've seen from these retailers year to date continues to be strong. And we supplemented that with, obviously, our direct-to-consumer efforts, which is really how the brand started. So we really, really like the position that Chubbies is in.
Chris Metz: So, as you've rightly pointed out, we've grown with door count gains with some of our key retailers. The POS that we've seen from these retailers year to date continues to be strong. And we supplemented that with obviously our direct to consumer efforts, which is really how the brand started. So we really, really like the position that Shubbies is in. It's grown as, you know, first and foremost, as a swim trunk brand. We've expanded into shorts, and now we're expanding into other categories where we're starting to see some initial success with our key retailers. So you'll see our key retailers like Dick's Sporting Goods being a good example, where if you walk into their House of Sports concept, which is a fast growing concept.
Speaker Change: We've seen from these retailers year to date continues to be strong.
Speaker Change: We supplemented that with obviously, our direct to consumer efforts, which is really how the brand started so we.
Speaker Change: We really really like the position that <unk> has in its grown is.
Chris: It's grown as, first and foremost, a swim trunk brand. We've expanded into shorts, and now we're expanding into other categories where we're starting to see some initial success with our key retailers. You'll see our key retailers like Dick's Sporting Goods being a good example where if you walk into their house of sports concept, which is a fast-growing concept. We've got a wall of chubbies. That is the envy of a lot of other vendors, and We've partnered with them in a very strong way, as we have with other key retailers like shields and others and some of the specialty retailers that are so important to us. We've partnered in such a way that we fully expect to continue to grow the chubby brand both through our core assortment as well as through our extended assortment given the initial success. We're starting to see
Speaker Change: First and foremost as a swim trunk brand, we've expanded into shorts and now we're expanding into other categories, where we're starting to see some initial success with our key retailers. So.
Speaker Change: Youll see our key retailers like Dick's sporting goods being a good example, where if you walk into their houses sports concept, which is a fast growing concept.
Chris Metz: We've got a wall of Chubbies that is the envy of a lot of other vendors. And we partnered with them in a very strong way, as we have with other key retailers like Shields and others. And some of the specialty retailers that are so important to us. We partnered in a way that we fully expect to continue to grow the Chubby brand, both through our core sortment as well as through extended assortment given the initial success we're starting to see.
Speaker Change: Got a wallet chubby that is the envy of a lot of.
Speaker Change: A lot of other vendors and we've partnered with them in a very strong way as we have with other key retailers like <unk> and others and some of the specialty retailers that are so important to us and we partnered in a way that.
Chris: All right, thanks for that, Chris. And then turning back to Solo, a helpful call out from Consumer Insights, as you look at the quarter-to-date performance, are you seeing shifts within the mix? Are people trading down, or is the lower end underperforming as consumers who gravitate toward the premium are naturally less impacted by inflation and other consumer headwinds? Any color there.
Chris Metz: And then turning back to so, so helpful color from the consumer insights as you look at the quarter-to-date performance. Are you seeing shifts within the mix? Are people trading down, or is the lower end underperforming as, you know, consumers gravitate toward the premium or naturally less impacted by inflation and other consumer headlines. Well, it's an interesting question, and what we're seeing every day is that our average order value, or AOV, continues to be strong and it's not reducing, which is somewhat counterintuitive given, you know, what we're seeing in the economy and given, you know, your comments about the consumer being pinched.
Chris: Well, it's an interesting question, Anna, and what we're seeing every day is that our average order value or AOV continues to be strong, and it's not declining, which is somewhat counterintuitive, given, you know, what we're seeing in the economy and given, you know, your comments about the consumer being pinched. And the reason for that is because we're offering value in the bundles. So, it creates a win-win situation.
Chris: We create some value for our consumers, but we're also able to drive a higher average order value that doesn't compress our margins as much as, say, a discounting or promotional environment. So, it's something that we want to continue to refresh, to create newness in these bundles as we go forward. And I really anticipate that, given some of the newness you'll see from us over the next 12 months, it's only going to enhance our ability to drive value to the consumer through bundling and novelty of products. But, you know, no question. I mean, it's a weakening of the environment. We saw that in July and the beginning of August, but we continue to drive bundles as a way to create value.
Chris Metz: And the reason for that is because we're offering value in the bundles, so it creates a win-win. We create some value for our consumers, but we're also able to drive a higher average order value that you don't see compress our margins as much as, say, a discounting or promotional environment. So it's something that we want to continue to refresh to create newness in these bundles as we go forward. And I really anticipate that, given some of the newness you'll see from us over the next 12 months, it's only going to enhance our ability to drive value to the consumer through bundling and newness of products.
Chris Metz: But, you know, no question. I mean, it's a weakening of the environment. We've seen it in July and the beginning of August, but we can chin you to drive bundles as a way to create value.
Anna Gleskin: Thank you. Great. That's a nice thing.
Chris: Great, that's amazing!
Chris: Thanks, Janice.
Ryan Sigdahl: Oh, next question is from Ryan Sigdahl from Craig Hallem Capital work. Please go ahead, Ryan. Hey, good morning, guys. I want to start with that survey, did of 2000 consumers. Were those past buyers or of an existing customers of Solo, or are they a random sample of just general people? I guess the reason I ask is from what I can tell is everyone that owns the Solo product pretty unanimously loves them. There's a wide audience that doesn't know about it. So that's, I guess, we're curious what the sample size was.
Chris Metz: Yeah, Ryan, it's a really good question. So I'll start first by saying our customer service team, our customer experience team has always measured our net promoter score. And that comes in the form of talking to our people who have just literally bought a solo stone within the last 60 days. Well, of course they're going to be happy most likely, right? So our net promoter score has always been high. This is the first time we've gone out to a sample of 2,000 consumers across a broad array of demographics. They had no idea who we were. And we talked to existing consumers, the laps consumers, brand new consumers, and consumers that weren't even frankly interested in the category itself.
Chris: Yeah, Ryan, it's a really good question. So I'll start by saying, our customer service team, our customer experience team, has always measured our net promoter score. And that comes in the form of talking to our people who have just literally bought a solo stove within the last 60 days. Well, of course, they're going to be happy, most likely, right?
Chris: So our net promoter score has always been high. This is the first time we've gone out to a sample of 2000 consumers across a broad array of demographics; they had no idea who we were. And we talked to existing consumers, lapsed consumers, brand new consumers, and consumers that weren't even, frankly, interested in the category itself. So we call it a double-blind survey, if you will.
Chris Metz: So we call it a double blind survey, if you will. And the number was over 2,200 consumers, and what came back was a net promoter score that was incredibly high. I knew we had a strong brand when I walked in the door. I just didn't realize how strong our brand is. And that was one of the pleasant surprises coming out of the research, which really informs us that we do have permission as we continue to ask questions in these research discussions. We have permission from consumers to move into near Jason categories where either one, they already think we're in the category or not, or two, said, Hey, if you were to get into those categories, we think you ought to be a number two or number three share player.
Chris: And the number was over 2200 consumers. And what came back was a net promoter score that was incredibly high, I knew we had a strong brand, when I walked in the door, I just didn't realize how strong our brand is. And that was one of the pleasant surprises coming out of the research, which really informs us that we do have permission as we continue to ask questions in these research discussions, we have permission from consumers to move into near adjacent categories where either one, they already think we're in the category and we're not or two said, Hey, if you were to get into those categories, we think you ought to be a number two or number three share player.
Chris: So very, very exciting. And it was done in the best way you possibly could; we hired one of the best consumer research firms to help us make sure that as we gathered the consumer insight, we could really hone in on who our core consumer is, who our secondary consumer is, who our tertiary consumer is, you know, everything about them so that we have a persona that we know how to develop products against and how to market against that persona.
Chris Metz: So very, very exciting. And it was done in the best way you possibly could.
Chris Metz: We hired one of the best consumer research firms to help us make sure that as we gathered the consumer insight, we could really hone into who our core consumer is, who our secondary consumer is, who our tertiary consumer is, where, you know, everything about them said that we have a persona that we know how to develop product against and how to market against that persona.
Ryan Sigdahl: Helpful. For my follow-up question, just curious if you're seeing any new or outsized competition, namely from China, and you see TeamU and others out there with kind of knock-off, very, very cheap product. But how much of that is impacting you guys right now versus just general macro concern as you look at the back half of the year?
Chris: Helpful. For my follow-up question, just curious if you're seeing any new or outsized competition, namely from China and you see Timu and others out there with kind of knockoff, very, very cheap products, but how much of that is impacting you guys right now versus just general macro concerns as you look at the back half of the year?
Chris Metz: Yeah, Ryan, it's much more macro. I mean, if you walk into all of our retail channels, we are the market, if you will. You know, you go online where you can have an endless aisle. You got some of the marketplaces that will bring in some of the less expensive Chinese product or what have you. And, you know, clearly they're getting a small portion of the market, but, you know, frankly, they're expanding the market; they're driving more consumer interest into the market. And I think as people start to find out the differences in the products with online reviews and postings and product reviews and what have you, I think it almost helps us.
Chris: Yeah, Ryan, it's much more macro. I mean, if you walk into all of our retail channels, there's, I mean, we are the market, if you will. You know, you go online where you can have an endless aisle; you got some of the marketplaces that will bring in some of the less expensive Chinese products or what have you. And, you know, clearly, they're getting a small portion of the market. But, you know, Frankly, they're expanding the market; they're driving more consumer interest into the market.
Chris: And I think as people start to find out the differences in products with online reviews and postings and product reviews and what have you, I think it almost helps us more than it hurts us. Given, you know, what we're seeing in the marketplaces. But we still predominantly are the market. You know, we created the market when we introduced the product as the Solo Stove years ago. And I think what you'll see from us in 2025 and beyond is that we're going to continue to reinvent the market and give consumers a reason to purchase a new fire pit or a new pizza oven or what have you.
Chris Metz: More than it hurts us, given you know, what we're seeing in the marketplaces, but we still predominantly are the market.
Chris Metz: You know, we made the market when we introduced the product as Solosto years ago. And I think what you'll see from us in 2025 and beyond is we're going to continue to reinvent the market and give consumers a reason to purchase a new fire pit or a new pizza oven or what have you. Much like golf companies will give, you know, their consumers a reason to go buy a new driver because you can hit it five or 10 yards further. We're going to give our consumers, for the first time ever, a reason to buy a new fire pit because we're going to create newness in the category, something that we haven't done.
Chris: Much like golf companies will give their consumers a reason to buy a new driver because you can hit it five or ten yards further, we're going to give our consumers, for the first time ever, a reason to buy a new fire pit because we're going to create newness in the category. Something that we haven't done or, frankly, needed to date, but we do need as we move forward.
Speaker Change: Great newness in the category is something that we havent done where frankly needed to date, but we do need as we move forward.
Chris Metz: We're frankly needed to date, but we do need as we move forward.
Ryan Sigdahl: Thanks, Chris. Good luck, guys.
Chris: Thanks, Chris. Good luck, guys.
Speaker Change: Thanks, Chris Good luck guys.
Brian: Thanks, Brian.
Brian McNamara: Our next question is from Brian McNamara at Cannicle Genuity. Please go ahead, Brian. Good morning.
Brian: Our next question is from Brian Mcnamara Canaccord Genuity. Please go ahead Brian.
Chris: Good morning, this is Madison Cowan, and I'm on behalf of Brian. Thanks for taking our questions. I know we already talked about Chubbies and Wholesale, but do you have any additional color on Solo Stove and Wholesale? Are you losing any partners or partner doors? Or are retailers being hesitant with orders?
Madison County: Good morning, This is Madison County on for Brian Thanks for taking our questions.
Madison Callinan: This is Madison Callinan, on for Brian. Thanks for taking our questions. I don't already talked about chubbies and wholesale, but do you have any additional color on full of stove and wholesale? Are you losing any partners or partner doors for our retailers being hesitant with orders? Thanks. Sure. Now, we still have a lot of runway in front of us, Madison, and wholesale are what we call our retail channel. So the retail channel has been a lot about partnering with retailers and expanding those doors. But if you think hard about some of the retail channels we're not in today, like call the homeware or hardware improvement center channel, we're not even in that channel today.
Chris: Thanks.
Speaker Change: And I've already talked about Tony's and host wholesale but do you have any additional color, it's almost oven wholesale.
Speaker Change: Are you, losing any partners or partner doors or are retailers being hesitant with orders. Thanks.
Chris: Sure. No, we still have a lot of runway in front of us, Madison, and wholesale, or what we call our retail channel. So the retail channel has been a lot about partnering with retailers and expanding those doors. But if you think hard about some of the retail channels we're not in today, like all of the homeware or hardware improvement center channels, we're not even in that channel today. So there are channels that we don't participate in.
Speaker Change: Sure No we still have a lot of runway in front of us Madison and wholesale or what we call. Our retail channel. So the retail channel has been a lot about partnering with retailers and expanding those doors.
Speaker Change: But if you think hard about some of the retail channels, we're not in today like call. It the home where hardware improvement Center channel, we're not even in that channel today. So those channels that we don't participate in those doors as some of our key customers that we don't participate in and so there is.
Chris Metz: So there are channels that we don't participate in. There's doors to some of our key customers that we don't participate in. And so there's a clear runway for continued growth, continued growth. Now, I mentioned in my prepared remarks that the consumer insight research informed us that about half the market products are purchased in retail stores. So we know we're over indexed; we know we need to continue to expand into the retail format. But again, as I've said before, we don't think this is an either or; we think we can stabilize our D to C business, and you've seen it with a sequential improvements quarter by quarter that we've made.
Chris: There are doors to some of our key customers that we don't participate in, and so there's a clear runway for continued growth. Now, I mentioned in my prepared remarks that the consumer insight research informed us that about half the market for products is purchased in retail stores. So we know we're over-indexed. We know we need to continue to expand into the retail format. But again, as I've said before, we don't think this is an either/or choice.
Speaker Change: A clear runway for continued growth continued growth now I mentioned in my prepared remarks that the.
Chris: We think we can stabilize our D2C business, and you've seen it with the sequential improvements quarter by quarter that we've made. And we think as we move into 2025, we should be able to grow both simultaneously with better plans, better execution, and I think as we move into 2025, even better results.
Chris Metz: And we think as we move into 2025, we should be able to grow both simultaneously.
Chris Metz: Now, one of the things that we've made, I talked a lot about talent, capabilities, processing systems that we're investing in. One of the areas that we've invested in, frankly, is retail sales team. We didn't have that because we grew so fast over the last 18 months in retail. We didn't have the support network to sit down with our big retail customers and be planful with the products that we bring in, making sure that we bring in maybe channel-specific products to avoid channel conflicts. We tied together, sell through marketing campaigns with those products and those customers.
Chris Metz: And we just much more thoughtful and planful. It's hurt us a little bit this year because we didn't have that plan walking into the year. And as soon as I discovered it, we started building against that. So I think what you'll see from us on the retail wholesale side is better plans, better execution. And I think as we move into 2025, even better results.
Madison Callinan: All right, that's super helpful. And then any additional color on, I know you talked a little bit about marketing being ineffective, but any color on the new marketing agency or things you're excited about to get BTC sales stronger outside of the macro. Thanks.
Chris: Great, that's super helpful. And then, um, any additional color on marketing being ineffective? I know you talked a little bit about marketing being ineffective, but any color on the new marketing agency or things you're excited about to get DTC, DTC sales, you know, stronger outside of the macro?
Chris Metz: Sure, Madison. Yeah, so we've started to make adjustments to our marketing mix to spend on a broader set of channels and what the different set of tactics could drive better efficiency of our media spend. I mean, this new approach is enabling us to be more nimble in managing our marketing spend as the external environment continues to be more challenging to navigate. Now, I mentioned the Snoop campaign that we're starting. I mean, this campaign is what I would call a true 360-degree marketing campaign. It will fuel into our website, our marketplaces, our retail stores. And so there's dramatic differences between this year's approach and last year's approach.
Chris: Sure, Madison. Yeah, so we've started to make adjustments to our marketing mix to spend on a broader set of channels and with a different set of tactics to drive better efficiency in our media spend. I mean, this new approach is enabling us to be more nimble in managing our marketing spend as the external environment continues to be more challenging to navigate. Now, I mentioned the Snoop campaign that we're starting. I mean, this campaign is what I would call a true 360-degree marketing campaign. It will fuel activation plans across different creative communications. It'll feed into our website, our marketplaces, and our retail stores.
Chris: And so there are dramatic differences between this year's approach and last year's approach. So last year we began in kind of that November timeframe. This year we're beginning in August. So on August 20th, you'll see us start to feed the top of the tunnel, or funnel, rather. And as we start to move into September, our key selling seasons into October and November, you'll see us start to migrate down that funnel and create more of a conversion-focused plan during our key selling season in Q4.
Chris Metz: So last year we began in kind of that November timeframe. This year we're beginning in August. So August 20th, you'll see us start to feed the top of the tunnel or funnel, rather. And as we start to move into September, our key selling seasons in October and November, you'll see us start to migrate down that funnel and create more of a conversion focus plan during our key selling season in Q4. So we made a lot of changes, and you'll start to see this come to fruition here as we move into the fourth quarter.
Chris Metz: Now, one of the key changes that I mentioned before is our consumer shopping experience online is not where it needs to be, particularly with our website. We said when I first walked in that we made a choice to change platforms to Salesforce.com, and we're working very, very hard to bring that online next year. In the first, hopefully in the first, the second quarter, it'll be fully online. It'll create a much, much easier, much more exciting shopping experience for our consumers. So continual improvements in the marketing area, you know, we brought in a cadre of just wonderful people with great talent, great experience that are just starting to come up to speed and they'll be hitting stride as we move through the end of this year.
Chris Metz: So excited about some of the green shoots that I'm seeing in that area.
Madison Callinan: Great, thanks so much.
Operator: Just a reminder for any further questions, please press star one on your telephone keypad.
Chris Metz: We have no further questions on the call, so hand the floor back to management.
Chris Metz: Well, thank you everyone for attending this morning's call. We appreciate the time. We appreciate the questions, and of course, we appreciate the continued interest and support. And we'll look forward to talking to you on our next earnings call.
Operator: Take care.
Operator: This concludes the conference. Thank you all very much for joining.