Q1 2026 The Lovesac Co Earnings Call
Greetings and welcome to the Love Saks first quarter fiscal 2026 earnings conference call.
At this time, all participants will be in listen only mode.
A question and answer session will follow the formal presentation.
If anyone today should require operator assistance. Please press star zero from your telephone keypad.
Please note this conference is being recorded.
Speaker Change: At this time I'll turn the conference over to Caitlin Churchill Investor Relations for Love Sac Caitlin you may begin.
Caitlin Churchill: Thank you good morning, everyone with me on the call is Shawn Nelson Chief Executive Officer, Mary Fox, President and Keith <unk>, Chief Financial Officer.
Speaker Change: Before we get started I would like to remind you that some of the information discussed will include forward looking statements regarding future events and our future financial performance. These include statements about our future expectations financial projections, and our plans and prospects actual results may differ materially from those set forth in such statements.
A discussion of these risks and uncertainties you should review the company's filings with the SEC, which includes today's press release you.
You should not rely on our forward looking statements as predictions of future events. All forward looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation to update them, except as required by applicable law.
Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA.
These non-GAAP measures should be considered in addition to and not a substitute for or in isolation from our GAAP results.
Reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release.
Speaker Change: Now I would like to turn the call over to Shawn Nelson Chief Executive Officer of the Love Sack Company Sean.
Speaker Change: Good morning, everyone and thank you for joining us I'll start by sharing our high level overview of our first quarter results provide an update on our design for life product platforms and touch on our views for the remainder of the year before passing the discussion over to Mary Fox Our president.
Mary Fox: Mary will discuss our tailored customer acquisition engines and key growth enablers.
Finally, Keith Cigna, our CFO will review, our financial results and provide more detail on our Q2 and FY 'twenty six outlook.
Mary Fox: Okay.
Turning to our first quarter.
Overall, we're pleased to have delivered results in line with our expectations and consistent with our plan to capitalize on secular initiatives and returned to growth for.
Mary Fox: For the first quarter total net sales were $138 4 million, reflecting a year over year increase of 4.3%. These.
Mary Fox: These results reflect market share gains despite the ongoing headwinds facing this category, which we estimate declined 5% for the comparable period.
Mary Fox: Total omnichannel comparable net sales increased two 8% for the quarter with additional growth coming from new and non comp touch point contributions.
Notably our results reflect not only top line growth, but also SG&A leverage as we had begun to reap the benefits of previous investments aimed to bolster our core capabilities and accelerate our pace of product innovation as a result, adjusted EBITDA net loss and net loss per common share all in.
Mary Fox: Proved by double digit percentages year over year.
Mary Fox: Our balance sheet also remains very healthy with inventory levels and net cash providing substantial flexibility to weather tariff distractions accelerate growth and enhance returns on capital.
Mary Fox: Now for the exciting part innovation on our designed for life product platforms first with a full quarter of a reclining seat end market. We can say that it has been a huge success backed by the launch of the decline of civilization marketing campaign in mid quarter, we have seen increases in new customer attachment Cup.
Mary Fox: With healthy units per transaction, all while maintaining the strong repeat customer purchases, we spoke of last quarter.
Mary Fox: Our customers love, the recliner and see it as a tremendous value compared to competitor offerings, giving us optimism for continued meaningful contributions for many years to come.
Mary Fox: Second do you ever couch, our first new product platform in over a decade.
Mary Fox: This elegant and sophisticated entry into the armchair love seat and sofa category effectively doubled loves tax total addressable market.
Mary Fox: Ever Couch is a true designed for life product platform constructed to the highest standards out of the best materials.
Mary Fox: We believe that it is the best couch on the market period.
Mary Fox: Ever Couch provides a solution for customers, whose needs differ from those of a <unk> customer deemphasizing modularity, but with more of a focus on style comfort maintainability and ease of use it has a lower price point as a result of this engineering.
Mary Fox: Ever couches beautiful with watchful covers exchangeable arm styles rapid shipping capabilities and easy Assembly with no tools of course, even better is that it leverages loves Saks established brand equity and couches and comfort seating.
Mary Fox: Well after a six week test and learn campaign in suburban Boston, we officially launched ever couch on Lovestruck Dotcom and in 27 showrooms on May 7th initial feedback has been very positive and our showroom team members are excited we have not yet turned on the marketing engine. Since we are refining the sales training based on our learn.
Mary Fox: Next as well as building inventory to support a broader sales bush, but it is selling and we are proud of this new invention from love Sac.
Mary Fox: Marketing expansion into additional showrooms and potentially select use a partner channels are all in the works to bolster awareness and appreciation for this exciting new platform from loves Shaq.
Mary Fox: While we tend to focus on the larger product launches rest assured we expect to have incremental enhancements to existing products on an ongoing basis as well for example, as we reached the anniversary of the launch of our wildly successful pillow sock share in May we added new wood frame colors, including a darker brown.
Mary Fox: Gorgeous black.
Mary Fox: These additions came out of consumer insights and data collected from our current and potential customers. It's a perfect example of how we let research and data inform our innovation to increase our hit rate for success.
Mary Fox: There is plenty more to come along these lines this year and ongoing.
Mary Fox: Last but not least we're making excellent progress on our additional product platforms planned for launch over the coming years, including new rooms of the house beginning in fiscal 2027, which is calendar 2026 by the way.
Mary Fox: Expansion of our addressable markets and expansion of our brand. This should deepen the relationship that we have with our customers and drive expansion of our business and value creation.
Mary Fox: Not quite ready to share all the details yet stay tuned Trust me, we are working on some really exciting stuff.
Mary Fox: We get a lot of questions about the consumer including monthly or even weekly trends to try to glean some insight into a fundamental change in trend.
Mary Fox: It's only been two months since our last earnings call and honestly, it's too early to make a clear call on any trend change from the data that we're seeing today.
Mary Fox: The category got a little better and March weekend, a little in April and the quarter ended right up in line with the average trend since the fall, which is down mid single digits.
Mary Fox: That remains our baseline planning for now, but we'll update you when things become more clear what.
Mary Fox: What I can say is that we remain focused on what we can control just like I said earlier, we aim to leverage our secular growth initiatives to drive growth here at loves that we grew in the fiscal first quarter and as Keith will detail later, we forecast growth for the fiscal second quarter and for the full year even without the.
Mary Fox: Category supporting us.
Mary Fox: As for tariffs, we are actively working to mitigate the potential impact and we believe we can leverage all of the available tools at our disposal to manage that impact.
Speaker Change: Moray will provide more details momentarily, but given our unique model with high product margins geographic redundancy and strong vendor relationships. We believe we can cover the impact within our existing full year guidance barring any new wildcard scenarios of course.
Speaker Change: In summary, we are committed to delivering on our objectives leveraging loves to ask innovative product offerings strong customer relationships and operational excellence to grow irrespective of the category in the near term, while maintaining clarity around long term thinking and value creation, but let me be clear we.
Speaker Change: Believe that when the replacement cycle for comfort seating ramps up in housing turnover re accelerates, we will be ready to capitalize on it immediately.
Speaker Change: We're thrilled to have our new Chief marketing Officer, Heidi Cooley now on board.
Speaker Change: He is already working closely with our teams developing plans to support our ambition to be the most loved home brand in America by 2030, while driving profitable sales growth simultaneously.
Speaker Change: We look forward to sharing more in the future.
Speaker Change: Finally, I must thank our entire loves shaq family for their adaptability their creativity and commitment to this mission.
Speaker Change: Launching new product platforms requires extra effort from every single team member from our touch points to HQ and that's in addition to navigating tariff uncertainty and a challenging category to say the least.
Speaker Change: Every one of you is essential you're reshaping the home category with products that are designed for life, and thereby creating long term value for all stakeholders with that I'll hand, it over to Mary to cover our strategic priorities and progress in more detail Barry.
Speaker Change: Thank you Sean and good morning, everyone I'll now focus on our second superpower, a customer acquisition engine that are uniquely tailored to each of our designed for life platform as well as our growth enablers, including our advantaged supply chain.
Barry: Beginning with customer acquisition engines, all superpower really lies in our ability to leverage different mixes of brand and performance marketing digital configurations really loved back dotcom incredible show, where it makes sense and efficient partnership.
Speaker Change: Ultimately affect by product platform.
Speaker Change: Lightly we can efficiently generate customer awareness.
Speaker Change: That's a one customer and ultimately build long term relationships and brand love.
Speaker Change: Before I dive into each of these components I'd like to start by highlighting third quarter's growth as an example of the advantage that derive from our unique mix of customer acquisition engine options.
Speaker Change: We were pleased to see the return to growth in the business through that cost a lot.
Speaker Change: <unk> quote conversion and all showrooms in particular, we made a conscious decision to lean into our chevron's marginally at the expense of our Internet business for two reasons first we leveraged the strengths of our product to drive appreciation for new innovations such as the <unk> lineup.
Speaker Change: Second and similar to the end of the fourth quarter, we were able to come back aggressive discounting by competitors.
Speaker Change: The continued effectiveness of highly relevant personalize all that.
Speaker Change: We continually refine all makes letting data drive us towards optimal performance and with that backdrop, let's spend a few moments on each of the components, starting with brand and performance marketing as Sean said, we have tremendous momentum with one of our newest innovations the reclining seat supported by the kind of civilization.
Speaker Change: <unk> campaign in quarter, one it was developed to be social campaign, languishing, influencers and content creators to create that cultural moment.
Speaker Change: But naturally grow new customer awareness and it what the campaign generated 5 billion AD impressions and over 600% increase engagements across all digital channels and almost 700 PR articles.
Speaker Change: In quarter, one we also adjusted our marketing allocations and harvesting our top of funnel awareness program, especially through search and social media.
Speaker Change: Let's start with mid and lower funnel conversion tactics.
Speaker Change: It's also having produced a strong 25% increase in traffic to the website just customers thought that discovery basketball products and investment we believe will pay off over time is that the witness Michelle as.
Speaker Change: We'll continue to test and learn throughout the funnel and in particular, our new awareness tactics as we concentrate on building the loved that brands and introducing new innovation.
Speaker Change: On the first quarter's momentum with new customers in quarter, two we launched our latest TV commercial featuring a recliner and action beyond the watch for more of these cultural moments in the upcoming months pillow J Jill Tech and our newly launched platform ever couch to name just a few.
Speaker Change: C. P. V. Also continues to be a strong leg that we plan to optimize over the course of the year with efficiencies in linear television offsetting some of the inflationary pressure and such.
Speaker Change: That can give all digital configurations, and how we bring loves to life online as we continue to invest in optimizing the dishes and expand both in technology and improving the customer journey, we're seeing return on our investments at all phases of our flywheel I'll re platforming to Adobe actually helps us improve our S T O bringing.
Speaker Change: Qualified visitors to the website and allowing us to reinvest marketing bundles with organic search visits to the website growing almost 40% he wrote the gaming quarter Walton.
Speaker Change: Our customer Reengagement centre my hub is being progressively improved always with the goal of being a frictionless omnichannel experience for new and repeat purchases and of course, the bond repeat purchase is the increased over 20% to last year with over 40% more customers accessing their accounts.
Speaker Change: More importantly, these platform investments enable us to launch new products and platforms effectively and I don't mean, only under the skin, but rather customer facing of a couch lithium puts us for the newly designed homepage and the updated web site navigation.
Speaker Change: As of May customers cannot more quickly and intuitively find a category specific products, they're looking for with a distinction between sectional couches and Chet early.
Speaker Change: Early indicators show a more engaged customer converting at a higher rate with improved customer satisfaction overall, and we will learn more as we ramp up investments in the customer acquisition engine throughout this year, including a formal ever catch marketing campaign launched in the second half of this year.
Speaker Change: Third is all show really experience the physical brand amplifiers about design for life products. The linchpin of our Omnichannel model with the product platforms conveniently accessible in real life.
Speaker Change: A few weeks ago, we evolved our product demo to accommodate the ever couch. This continued evolution of our thinking at your selling process allows our customers to experience all of the features and the benefits of our product platform and drive the conversion improvement My Shadow Eylea, Sean and I spend a lot of time in the field listening to our teams and we will do.
Speaker Change: Just together in the field fine tuning the demo to incorporate all the great feedback from our soft launch well any showroom can sell of a couch already we plan to scale physical inclusion of Minerva couch product to approximately 100 showrooms later this summer, allowing every major DMA to showcase this platform.
Speaker Change: I'd also like to highlight the recently launched updates our performance based compensation model for all field teams knowing faces of the blend da Vinci visualized metrics. In addition to the long standing company wide metrics, we're already seeing benefits coming through in quarter, one and it was just great to see how motivated L teen thoughts drive that isn't it.
Speaker Change: And the brand potential.
Speaker Change: Finally, complementing our showroom, it's a partnership model, including Costco and best buy.
Speaker Change: Recently completed a detailed strategic planning with you that considers the optimization of our customer acquisition engine options coming out with this review we made the decision to end all best buy partnership after five successful years together when.
Speaker Change: When we began this partnership in 2020 loves that had less than 100 showrooms across the country and bestbuy helped us quickly expanded distribution points and establish credibility in home audio and tech.
Speaker Change: All while we also helped to reinforce our leadership in tech enabled product categories.
Speaker Change: Fast forward five years and.
Speaker Change: All showroom footprint has trickled, providing convenience accessibility for all current and future customers to experience Love second style Tech.
Speaker Change: We have immense confidence in our ability to provide an excellent customer experience and deliver more profitable growth through our owned digital and chevron ecosystem as well as with Costco partnership.
Speaker Change: In conjunction with our decision we estimate booking a nonrecurring charge of approximately $2 million in the second quarter, partially offset by improved profitability in the second half.
Speaker Change: And regarding Costco it represent the sizable share of our partnership model with Kafka has more than 120 million members strong traffic. All road show model allows us to activate pop ups and at clubs, while owning 100% of the customer data and relationship with.
Speaker Change: We will continue to expand our assortment with Costco to shape and we plan a 15% increase in road shows over the last year further demonstrating our unique ability to sell premium products and approximately 100 square feet.
Speaker Change: When combined these four elements of our customer acquisition engines creates an unmatched customer experience that drives brand love.
Speaker Change: Again to reinforce our brand experience and customer satisfaction further by launching customer facing services and we are excited to share that loved by loves that new resell platform is officially live in Texas.
Speaker Change: The first date launch marks a significant step in our long term commitment to sustainability, the circularity and innovation and home furnishing by giving Preloved products the second life.
Speaker Change: Not just reducing waste we are reinforcing our promise designed products that all built to law designed to evolve and they loved again.
Speaker Change: It is also a critical foundation for us to launch trading services, which we are planning for later this year, which will help unlock those trade in and trade up for our new and loyal customers and this represents an important milestone in our journey towards a more responsible and resilient future for loves that.
Speaker Change: And key to us sustaining all of this profitable growth over the long term our growth enablers and I'll just briefly mention all supply chain are critical components of our financial success and one belt for scalability in advance of new product and platform introductions.
Speaker Change: Over the past few years, we have transformed all network strategy and carry a muddle, including implementation of both transportation and order management systems.
Speaker Change: Now well underway with our work on optimizing our warehouse and the outbound logistics program consistent with what we've shared previously.
Speaker Change: Regarding tariffs as we mentioned back in April we have four key levers to help mitigate our exposure and we have made significant progress on each the first is focused on working with our long term vendor concessions and we have received sport from every key vendor. The second is the work to further diversified manner.
Speaker Change: Factoring away from China, we remain on track to be about 13% for the full fiscal year, but with an exit rate substantially lower than that.
Speaker Change: Good given the strength of our brand and the fact that our last price increase with a narrow one in 'twenty to 'twenty three we executed some surgical and strategic price increases last month and are pleased with the performance since being implemented we feel very good about our value proposition as many other brands have taken multiple.
Speaker Change: Increases in the past two years.
Speaker Change: The final initiative with looking at other cost efficiency and the teams have continued to drive this to work with.
Speaker Change: We're currently leveraging all of these levers at differing degrees with flexibility to refine them further depending on the final outcomes of tariff implementation.
Speaker Change: Combined with the flexibility gained by building higher than normal inventory ahead of this potential we failed at all four pronged approach should mitigate the majority of the current tariff pressure.
Speaker Change: With that I will hand over to Keith to share more on our financial performance and outlook.
Speaker Change: Keith.
Keith Cigna: Thanks, Mary, let's jump right into a quick review of first quarter, followed by our outlook for the rest of the fiscal 'twenty six as we begin with performance metrics. Please note that all references to the first quarter refer to fiscal 'twenty six unless otherwise noted.
Speaker Change: Net sales increased $5 8 million or four 3% to $138 4 million in the first quarter compared to the prior year period showroom net sales increased $14 9 million or 18, 2% from $96 5 million in the first quarter compared to the prior year period, driven by an increase of two 8% in omni.
Speaker Change: Channel comparable net sales and the net addition of 21, new showrooms Internet net sales decreased $3 3 million or eight 9% to $33 3 million in the first quarter compared to the prior year period.
Speaker Change: Other net sales, which include pop up shop shop in shop, and open box inventory transactions decreased $5 8 million or 45% to $8 6 million in the first quarter compared to the prior year period. The decrease was primarily attributable to the companys decision not to engage in any barter transactions during the current period.
Speaker Change: Byproduct category in the first quarter, our sectional net sales increased four 5% back.
Speaker Change: <unk> net sales increased six 4% and our other net sales, which includes decorative pillows blankets and accessories decreased 17, 1% over the prior year period.
Speaker Change: Gross margin decreased 60 basis points to 53, 7% of net sales in the first quarter of fiscal 2006 versus 54 three in the prior year period, primarily driven by a decrease of 230 basis points in product margin driven by higher promotional discounting partially offset by decreases of 130 basis points in inbound trends.
Speaker Change: As per patient cost and 40 basis points, and outbound transportation and warehousing costs.
Speaker Change: G&A expense as a percent of net sales was 48, 5% in the first quarter of fiscal 2006 versus 51 six in the prior year period.
Speaker Change: The decrease percentage is primarily related to lower professional fees credit card fees computer expense and other overhead costs and iron itself.
Speaker Change: The decrease in selling general and administrative expense dollars was primarily related to decreases of $3 $8 million in professional fees and insurance matters.
Speaker Change: Zero point $9 million in credit card fees zero point $7 million and computer expense and <unk> 3 million and other overhead costs, partially offset by increases of $2 2 million in payroll $1 3 million in equity based compensation and <unk> 9 million right Brett.
Speaker Change: <unk> increased $9 million related to $1 million of increase in rent expense from a net addition of 21 showrooms, partially offset by a point 1 million reduction in percentage rent.
Speaker Change: We estimate nonrecurring incremental fees associated with the restatement of prior period financials were approximately zero point $6 million in the first quarter.
Speaker Change: Advertising and marketing expenses increased 0.6 million or three 3% to $18 6 million for the first quarter compared with the prior year period advertising and marketing expenses remained relatively flat at 13, 4% of net sales in the first quarter as compared to 13, 6% of net sales in the prior year period.
Speaker Change: Operating loss for the quarter was $15 million compared to $17 9 million in the first quarter of last year driven by the factors, we just discussed before.
Speaker Change: Before we turn our attention to net loss net loss per common share and adjusted EBITDA. Please refer to the terminology and reconciliation between each of our adjusted metrics and the most directly comparable GAAP measurements in our earnings release issued earlier this morning.
Speaker Change: Net loss for the quarter was $10 8 million or negative <unk> 73 per common share compared to net loss of $13 million or negative <unk> 83 per common share in the prior year period during.
Speaker Change: During the first quarter, we recorded an income tax benefit of $3 8 million as compared to $4 million in the prior year period adjust.
Speaker Change: Adjusted EBITDA loss for the quarter was $8 4 million as compared to $10 3 million in the prior year period.
Speaker Change: Turning to our balance sheet, we ended the first quarter with a healthy balance sheet that provides substantial flexibility for <unk> to invest in growth to enhance long term value creation for shareholders. We reported $26 9 million in cash and cash equivalents, while retaining $36 million in committed availability with no borrowings under our recently amended credit facility.
Speaker Change: <unk>.
Speaker Change: First our total merchandise inventory levels are in line with our projections somewhat higher than necessary given our intention on build ahead of tariff uncertainty.
Speaker Change: We expect to begin reducing excess inventory levels in the second quarter, which we estimate will help offset working capital requirements for building ever couch weeks of stock through the second half of the fiscal year, we feel very good about both the quality and quantity of our inventory and our ability to maintain industry, leading in stock positions and delivery times.
Speaker Change: Second consistent with our strategy to allocate excess capital Opportunistically with a focus on long term value creation and enhancing returns on capital.
Speaker Change: During the quarter, we repurchased approximately 306000 shares of our common stock at an average price of $19 57 for approximately $6 million. This leaves approximately $14 $1 million remaining under our existing share repurchase authorization.
Speaker Change: Please refer to our earnings press release for other details on our first quarter financial performance. So now for our outlook as Sean mentioned, while there is weekly and monthly variations such as a better March but a weaker April the underlying category trends generally seem to revert towards negative mid single digits on average for the last seven or eight.
Speaker Change: Months.
Speaker Change: As such we prudently maintaining our assumption and our plans for a 5% full year category decline.
Speaker Change: Additionally, we have many secular tailwind, helping counter that category outlook and providing optimism. These range from annualized nation that fiscal 'twenty five major product launches our recent launch of ever couch reboot of our marketing strategies under new leadership growth in physical showrooms, new tools for relationship management and more.
Mary Fox: For the full year fiscal 'twenty six we are reaffirming our guidance. Please note that as Mary outlined we have many arrows in our quiver with respect to managing tariff impacts we're actively pursuing some combination of all of those four options that you outlined and we believe we can manage tariff impacts within the full year range.
Speaker Change: That said the exact amount of each mitigation option, we deploy will depend on the ultimate specific tariffs implemented. So as you think about the full year guidance. There is potential for an upward bias to net sales and a downward bias to gross margin getting us to the same adjusted EBITDA net.
Speaker Change: Net income and diluted EPS levels again, depending on the ultimate tariff outcomes.
Speaker Change: Please also note that both our full year and second quarter guidance metrics include the impact of the write off associated with the ending of the relationship with best buy which we currently estimate to be approximately $2 million pretax.
Speaker Change: This nonrecurring onetime expense increases SG&A and reduces net income and EPS, though does not impact adjusted EBITDA in our guidance given its nonrecurring nature.
Speaker Change: Specifically for the full year, we estimate net sales of $700 million to $750 million, we expect adjusted EBITDA between $48 million and $60 million.
Speaker Change: This includes gross margins of approximately 59% advertising and marketing of approximately 12, 5% as a percent of net sales and SG&A of approximately 41% as a percent of net sales. We estimate net income to be between 13% and $22 million, we estimate diluted income.
Speaker Change: Per common share in the range of 80 to $1 36.
Speaker Change: And approximately $16 3 million estimated diluted weighted average shares outstanding.
Speaker Change: For the fiscal second quarter, we estimate net sales of $1 57 to $1 66 million, representing low single digit revenue growth at the midpoint and fully representative of all of our near term plans for tariff mitigation, we expect adjusted EBITDA loss between two and $7 million. This.
Speaker Change: Includes gross margins of approximately 55% to 56% advertising and marketing of approximately 15% as a percent of net sales and SG&A of approximately 47% as a percent of net sales, we estimate net loss to be $8 million to $12 million, we estimate basic loss per common share to be 58 cents.
Speaker Change: To 83 cents with $14 6 million weighted average shares outstanding.
Speaker Change: In summary stabilization of the category and an eventual return to category growth are ahead of us even if that timing remains unclear at the moment.
Speaker Change: All in this category fog, we are balancing prudent and efficiency with our belief that it's essential to stay focused on the big picture. That's the massive long term opportunity for tremendous value creation for all stakeholders.
Speaker Change: Stakeholders.
Speaker Change: We are building loves that brand investing in new product innovation, that's been style function in new categories to support a powerful multiyear secular growth outlook with macro upside exposure is icing on the cake with that over to you operator.
Speaker Change: Thank you well now be conducting a question and answer session. If you'd like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone indicate your line is in the question queue.
Speaker Change: You May press star two if he like to withdraw your question from the queue.
Speaker Change: So that instead of using speaker equipment. Please pick up your handset before pressing the star keys.
Speaker Change: One moment, please where we pull for questions.
Speaker Change: Thank you and our first question today is from the line of Michael Baker with D. A Davidson. Please proceed with your questions.
Speaker Change: Okay. Thanks.
Speaker Change: Wanted to ask you about the promotional environment.
Speaker Change: You referred to gross margins being a little bit less than expected.
Speaker Change: Because of what Youre seeing promotion really so if you could talk about what you're seeing from competitors.
Speaker Change: And if correct me, if I'm wrong, but I think I.
Speaker Change: I think the gross margin was lower than expected in the first quarter relative to the guidance you gave last quarter, yet you've maintained the full year gross margin outlook. So what is what is I guess better or what gets better later in the year on the gross margin such that you'll be in line.
Speaker Change: <unk>.
Speaker Change: Hey, Mike It's Larry I'll take the first part just around the promotional environment and then I'll, let Keith talk a little bit more on that gross margin. So I think you know very similar to what we had shared back in April we still see discount levels to the category to be incredibly high they still didn't come down from the peak and they're up here.
Speaker Change: As the year by at least 400 basis points, we have seen many competitors that kind of 40% to 45% and I think as we've always said in the past as long as we have a three in front of key promotions I think telecom moment.
Speaker Change: We see a lot of success I think the second thing as I had shared is that we.
Speaker Change: We're also getting a lot sharper around personalized promotions.
Speaker Change: Really allow us to understand kind of what our customers find what they're looking to do drive them to the showroom. So they get to do a demo that way, we actually get to really unveil a lot more around the innovation, we have in and see quite a bit of a trade up. So you know we plan so within the guidance that kind of continued competitive.
Keith Cigna: And then from a promotional point of view and then I'll hand, it to Keith.
Keith Cigna: A bit more about the gross margin.
Speaker Change: Sure thing, Thanks, and Mike really what it boils down to is the timing of all those different levers that you've been married and I talked about just a couple of minutes ago. So when you think about for example, what our geographic reliance's on REIT starts off much higher than it ends the year, averaging 2% to 13% there has been long.
Speaker Change: <unk> been no tariffs on China, so that piece mitigates. Another one is vendor contributions we've been working with them that started the year off with none but as the terrorists stuff has come into picture. We've worked with them on plans that develops through the year. Another one this pricing two yeah. We've been doing a lot of work as Mary mentioned in thinking through our.
Speaker Change: Relative pricing positioning within the market in ways that we could put ourselves into a proper position where the value proposition that we represent remains extremely strong.
Speaker Change: The values are really compelling to those customers that plays out through the year.
Speaker Change: Potentially even at greater levels, depending on where those tariffs end up so when we think through what that total planning is you get the cost associated with all of this stuff first before you get the benefit which to which kind of deal.
Speaker Change: Fold into the mix over the course of the year. So.
Speaker Change: There's a lot behind us that builds up to this but we feel very good about that and hopefully that makes some sense.
Speaker Change: So it does it does makes sense if I could ask one more just if.
Speaker Change: Possible any more color on ever coach which is been in stores for five weeks I think the language you said his feedback has been very positive but.
Speaker Change: I'm wondering if you're willing to share anything on sales or anything surprising.
Speaker Change: What the customers are telling you about that product.
Speaker Change: Yeah. Thank you it's too early too early to comment too much on sales other than we're really.
Speaker Change: Pleased with it and in our internal goals are being exceeded we feel really good about the product.
Speaker Change: I think the main headline with it because it's only been a few weeks and obviously in sort of a test phase and only a few showroom physically.
Speaker Change: Is that are you know it.
Speaker Change: It's a whole new platform introduction I know it seems like a strange thing for a company that has kind of famous for couches, Yeah. Craftily speaking, we actually only sell sectional here before and so to have this so far.
Speaker Change: Love seat chair solution.
Speaker Change: That operates very differently than sectional.
Speaker Change: Which is of course the product we've been selling for a couple of decades and have it come in with a zero quality issues no concerns on construction design. Because this is a platform will sell against for the next few decades as we as we do things that look back so too early to share much color other than to say, it's well received it's absolutely selling.
Speaker Change: Real time, it's a part of our product mix now it's going to be for a long time, and we're really excited about how it changes the profile of what's offered in our showroom, which what I mean by that is you.
Speaker Change: You know when we do our own research as you know where where research.
Speaker Change: Where our research led organization as opposed to a merchandise or led organization.
Speaker Change: Uh-huh style and comfort are the main table stakes for comfort seating.
Speaker Change: And the actuals are fantastic, but obviously have their limitations in terms of what's offered to the customer in a in a style profile so ever couch radically changes that.
Speaker Change: And we're really pleased with the results, but we will have a lot more data to share on the next call I'm sure.
Speaker Change: Great Fair enough. Thank you.
Speaker Change: Thank you. The next questions are from the line of Maria Rips with Canaccord Genuity, Let's proceed with your questions.
Maria Rips: Great. Good morning, and thanks for taking my questions first could you maybe expand on your decision to exit your partnership with best buy and does that mean that you will be relying more on costco to grow with kind of your presence outside of your showrooms and maybe more broadly can you talk about just sort of a broad approach to distribution partnerships.
Speaker Change: Now that you have set up a much wider.
Speaker Change: At present.
Speaker Change: Yeah, I'll start and Maryville will chime in as well.
Speaker Change:
Maryville: We are really excited about new opportunities for new channels for love sack and as we broadened our product our product offering those opportunities are more available to us than ever.
Maryville: And we are in a partnership making mode and so and so it's a really exciting time.
Maryville: Couch, especially opens up opportunities for us given their logistical simplicity to sectionalize in many respects, even even back through.
Maryville: Things like Pos considerations delivery considerations et cetera.
Maryville: And.
Maryville: We're really are also excited to continue to expand the Costco relationship both through new products as well as new sales opportunities and so this will be.
Maryville: The next year and beyond will be a time of.
Maryville: The testing.
Maryville: Testing and learning and great diversification.
Maryville: Not just from a product perspective from a channel perspective for loves Shaq. Meanwhile, you know, we're really grateful for the best buy partnership that we just wrapped up.
Maryville: And it was a fantastic way for us to get exposure to time, when we had very few showrooms as a SaaS path to more touch points and especially important to launch the stealth tech product in a way that really bought love socket ton of credibility in the homebuyer space you know sell tech as a main.
Maryville: Day of our product.
Maryville: Offering and will become even more important.
Maryville: As we branch into new categories, and new room, as we've discussed and so you know.
Maryville: We feel like we got everything we need it out of that relationship at the same time, we have a great relationship with best buy and the team there and and it's actually in our long history, our second foray.
Maryville: In and out of best buy at times that were useful to both brands and so life is long and loves sacks are meant to be here for decades, and so we look forward to continue to cultivate partnerships.
Maryville: Out there as they are useful to the brand and our strategy.
Maryville: Yes.
Speaker Change: Just to add I think you know with with so clear and sharpen our plan and I think with all the analysis. We did you know as you think back five years ago with 91 showrooms and we're now treble that number.
Maryville: You know it was just a really clear opportunity for us.
Maryville: And to the best buy locations that within a 25 mile radius of our showrooms and we're going to continue expanding the showroom because we looked at those today and the future. It was very clear that for us to be able to bring to bring the brand to life. The new platform. All the things that are a couch that really through all showrooms in the Costco partnership it was really the best way.
Maryville: I think that is.
Maryville: Engaging with customers, but also from a profitability point of view because they are obviously.
Maryville: Expensive to staff and operate with low volumes in all showing so we havent been confidence I think one of the big advantages that we do have all the data on our customers. So we're able to target any customers, they're already bought at best buy.
Maryville: Loved back and that obviously that CRM engine will be very powerful for us as well as local targeting.
Maryville: To let customers know Intel themselves.
Speaker Change: That name is show where it made sense. Obviously you know the website that we continue to get sharper and better and you know we shed some of that Eylea just enabled omnichannel seamless experience and in such a great way. So I only thing hits the confidence of a plan that actually made it very clear now was the right time to make that decision then as Sean said, we you know, we're very grateful to best buy in.
Speaker Change: And feel very good about the plan going forward and in particular, the partnership with Costco. They would just with us in the office.
Speaker Change: Just a week or so ago.
Speaker Change: Really looking at our plans going forward in the future and really caught me together so feel good there.
Speaker Change: Got it that's that's very helpful. Thank you and then secondly, sort of I just wanted to ask about sort of tariffs in China, and just sort of how does this recent agreement between between the recent sort of framework between the U S and China sort of influenced the likelihood that you will exit China altogether, and if you're still considering that sort of what how.
Speaker Change: Should we think about a possible timeline for that.
Speaker Change: Yeah.
Speaker Change: Look we have a long and storied relationship.
Speaker Change: Her manufacturers in Asia, China in particular of course.
Speaker Change: There's no question that the current tariffs the current tariff situation there as is.
Speaker Change: It's really.
Speaker Change: Not a viable and I think that is.
Speaker Change: You know I I read that I think that's the point of the tariff situation there at least for consumer companies like ours, and so we are grateful to be already diversified out of China for us.
Speaker Change: We can see a path.
Speaker Change: Even in the nearest future to essentially manufacturer nothing in China.
Speaker Change: Nothing and get our.
Speaker Change: Get our manufacturing club completely out of there we've mostly done that in real time now and so we have full redundancy and other geographies spread throughout Asia and now increasingly moving toward America. Our point of view is actually not even tariff driven our point of view it loves that just to remind.
Speaker Change: So to come.
Speaker Change: Come in and out of a following us.
Speaker Change: Yeah.
Speaker Change: Is to manufacture closer to the users of the product you know we want to be.
Speaker Change: Resources over shorter distances.
Speaker Change: Turning them into finished product more sustainably and shipping back to customers over shorter distances and so we're driven by that vision, regardless of what happens with tariffs and we are on a path to do exactly that in fact as we.
Speaker Change: We revamped even our current product line.
Speaker Change: And it's happening behind the scenes and explore a.
Speaker Change: Manufacturing to a lens that I just offered.
Speaker Change: We believe we have a path to.
Speaker Change: More manufacturing closer to the consumer Meanwhile.
Speaker Change: We as I said, we can be completely out of China and feel very confident in.
Speaker Change: And our ability to maintain a contiguous supply chain with no breaks or anything like that and so in the near term we have a few items that were.
Speaker Change: Still.
Speaker Change: Manufacturing there just isn't a transition mode, but it's diminishing quickly towards either.
Mary Fox: Got it. Thank you so much John Thank you Mary.
Speaker Change: Okay.
Speaker Change: Our next questions are from the line of Brian Nagel with Oppenheimer. Please proceed with your questions.
Brian Nagel: Hi, good morning.
Speaker Change: Good morning.
Speaker Change: First of all.
Speaker Change: I mean, recognizing it.
Speaker Change: Solid environment, but as you talk about.
Speaker Change: The initial successes with these new products.
Speaker Change: Should we then to what extent.
Speaker Change: As I say I guess, you would use the word upside upside from these new products baked into the guidance for the balance of the fiscal year.
Speaker Change: So I'll kick this one off.
Speaker Change: The point of our guidance.
Speaker Change: In this particular year.
Speaker Change: Let's call it cloudy macro period is to not overly burden any one particular item with some heroic assumption.
Speaker Change: Like I talked about in my.
Speaker Change: In my remarks earlier.
Speaker Change: We have a lot of things working for us.
Speaker Change: And to be totally tourists that we can achieve the full year guidance.
Speaker Change: With the core products basically being flat.
Speaker Change: Don't really need to see growth in our core products, you know and we can.
Speaker Change: And we can hit those levels set differently, if the new products do very well.
Speaker Change: You know, we could we could even see declines in the core products. There's a lot of different ways, we can get there.
Speaker Change: And that's an essential element to how we're running the business during this period and keeping ourselves in a position of strength keeping that business help healthy living to fight.
Speaker Change: Another day, we are ready to go.
Speaker Change: As soon as that.
Speaker Change: Housing turnover reaccelerate the replacement cycle picks up all of that stuff Sean talked about.
Speaker Change: Our whole goal here is to be pragmatic and objective managers of this business maintaining profitability cash flow strength.
Speaker Change: And growth.
Speaker Change: But retain any upside for the macro as well we are ready for all of that so.
Speaker Change: Our balanced approach many different scenarios can get us to the full year guidance across existing and new products.
Speaker Change: The macro picks up hopefully, we all do even better.
Speaker Change: That's helpful. Keith I appreciate it and then my second question I guess bigger picture, maybe more philosophical, but you guys were thinking about tariffs and I think Barry you mentioned, maybe some price adjustments you've taken.
Speaker Change: Think about the price adjustments needed to potentially offset at least in part.
Speaker Change: Versus what remains a.
Speaker Change: <unk> backdrop within the space.
Speaker Change: Yeah no. Thank you Brian I think you know the first thing you know we're always looking at all of that.
Speaker Change: And I think you know what it's clear to US is that people haven't that down in terms of promotions. You know they are in the $40 $50 60 existing top sell is going into clearance and then coming back up again. So we know we must have that three in front of us and that you know we continue to test and and keep on learning. So I think we're very clear that I think than we think.
Speaker Change: From a pricing point of view.
Speaker Change: For us given the strength of the brand the last price increase we think that's just a narrow one back in 2023, when we really step back and look at our overall price positioning you know we look at price quality you know we looked at our unique features and benefits which were.
Speaker Change: Wei.
Speaker Change: Superior to many others.
Speaker Change: And we also saw many other brands taking multiple price increases in the last few years as well as just very recently so.
Speaker Change: We saw the opportunity sets and surgical price increases.
Speaker Change: We'll continue to assess it we were always very.
Speaker Change: You know focused on making sure we have that competitive price positioning and most of all very very strong value. So you know and you know because we said before 40% of our customers don't even cross shoppers with anyone.
Speaker Change: So the strength of the brand the continued investments, obviously with Heidi coming onboard and the brands are paying off.
Speaker Change: Because you obviously see that people value the brand and just be on price, but you know it is a key advantage for us will continue to review at that time.
Speaker Change: We've baked in what we know about tariffs at the moment and as you know that's just one of the levers that we can take and you know we're very happy with our great vendor partnerships I think the last piece that you know a structurally higher gross margins than many of our competitors means that the effective price increase that we need to take is relative.
Speaker Change: The smallest of that and so on.
Speaker Change: Great luck team surgically review this all the time.
Speaker Change: We don't take MSRP price increases very often they're very strategic to us so more.
Speaker Change: More to come but we feel confident in being able to use that lever if needed.
Speaker Change: Thank you Mark I appreciate it.
Brian Nagel: Thanks, Brian.
Speaker Change: Our next question is from the line of Eric go on Air with Craig Hallum. Please proceed with your questions.
Eric: Great. Thanks for taking my questions.
Speaker Change: So first one on me.
Speaker Change: Just on ever couch.
Speaker Change: Turning on the marketing engine can you just expand a bit on what you expect that to look like should we expect pretty strong.
Speaker Change: Our marketing investment behind this launch sort of out of the gate or would this be a more gradual overtime and then I think you mentioned you plan to expand ever couch distribution 200 showrooms in the coming months pardon me, if I'm wrong, there, but I just.
Speaker Change: Help us understand how you're thinking about.
Speaker Change: Further distribution gains after that 100. Thank you yeah. Yeah. Thank you for the question. So yes, I think first for them you know as we said we're in 27 showrooms at the moment you know a big part of that was really making sure we really take the learnings around the demo experience, we really can affect that.
Speaker Change: Because you know showing always says you know we've long term intent to sell this product for many many years to come. So I think that first I think very important pillar and youre right.
Speaker Change: During the summer will expand out to.
Speaker Change: 100, showrooms and then the teams have plans kind of beyond that.
Speaker Change: And I think cat.
Speaker Change: Very good on that obviously, we havent nationally available on the website and that as I had said at eight weeks, we can take it and redesigned the website both in terms of homepage as well as all the navigation and seeing great results from that then it turns out from a marketing engine point of view, we will start throttling back up.
Speaker Change: And later in the summer and into the back end of the year and you know we.
Speaker Change: We'll build that over time.
Speaker Change: And we have the teams that with a great campaign launch as well as many other levers that will take within the marketing engine. So you know when we next talk in September for the next round of finding something to say, we'll have more news to share with you.
Speaker Change: I think the key thing is showing us that is the initial feedback is people love the product they love the style. They love to comfort her teams are super excited.
Speaker Change: You know they often are the greatest level of feedback for us around what customers want and what they like so you know look forward to sharing more with you.
Brian Nagel: Alright, great. That's very helpful. And then just one more from me probably for Keith here.
Brian Nagel: I'm just wondering if you can help us understand a bit more or you see any changes in working capital.
Speaker Change: The rest of the year, obviously kind of a use of cash this quarter you gave us some inventory.
Speaker Change: Kind of highlights if you could just kind of walk through a bit more of a.
Speaker Change: Analysis on expected changes in working capital for the rest of that that'd be very helpful. Thank you.
Speaker Change: Yeah sure thing so it's actually pretty straightforward through the rest of the year, given we had the big build in the fourth quarter on inventory and giving them great payment terms, we have with most of our vendors the payment for that inventory build occurred in the first quarter. So that's you saw that flow through dramatically reduced sequentially accounts payable accrued expenses.
Speaker Change: And lower cash so that puts us in a good position.
Speaker Change: Even with some build into the second half forever Couch, we should probably end up at slightly lower you know again take all this as estimates but ended up with slightly lower inventory than right now by the end of the year, even with the addition of the ever couch. So aside from that.
Speaker Change: Capex, we're still sitting around $25 million for the full year is our current estimate.
Speaker Change: And but everything else should be relatively straightforward you know we're not we're not a heavy working capital business gives me, we don't really have to accounts receivable our customers pay.
Speaker Change: They really quickly so it should be relatively simple other than that new watch whether the inventory we just discussed.
Speaker Change: Awesome very helpful. Thank you for taking my questions.
Speaker Change: The next questions are from the line of Matt Koranda with Roth Capital. Please proceed with your questions.
Matt Koranda: Hey, guys good morning.
Matt Koranda: Just wanted to make sure I understood on the gross margin commentary that you gave if we selectively took price last month, but we and we likely have non tariff and back to the inventory we are selling in the second quarter I guess, what what in particular is the headwind to the gross margin is it a product mix shift or promotional headwind that we're factoring in and then.
Matt Koranda: For the rest of the year case like maybe.
Matt Koranda: For the implied improvement.
Matt Koranda: I guess it will be probably selling some tariff impacted product that there is some pricing benefit, but maybe you can help us understand a little bit more about the.
Matt Koranda: The positive drivers there in the second half.
Matt Koranda: Yeah, So a couple of things.
Matt Koranda: It made it really is just nuance around what I talked about before so we have more tariff related costs in the inventory in the quarter into Q. Then we will later in the year because theres more China. So China has even before with the inventory. They brought in ahead of all the April 2nd stuff had tariff on it whereas a bunch of the other.
Matt Koranda: Countries did not.
Matt Koranda: More reliance on China as number one.
Matt Koranda: Number two a.
Speaker Change: We're not going to get full benefit of vendor concessions in the second quarter, which ramps through the year number three the price increase was put in place during the quarter, but that doesn't mean, that's the only price increase will take this year. That's just a price increase taken this year there could be more and you can see how that could flow through.
Speaker Change: Another one is with the launch of ever Couch. You know this is a brand new product platform for us and there are different approaches we could take the headline discounting on it you know, especially on something brand new like this with early adoption excitement that exists out there. Our initial goal would be to have less promote less heavy promotional.
Speaker Change: Cadence on ever couch, so as that ramps ramps up there is an effect there so.
Speaker Change: There are quite a few things that drive this and we're happy to get into more of the specifics offline, but <unk> sort of as the perfect storm of more of the costs with less of the benefit.
Speaker Change: I Didnt mentioned, the general efficiency efforts and other things like that that we're working on as well.
Speaker Change: The benefits from things like for example, Mary mentioned before outbound logistics and warehousing efforts that we have that are kicking in as the year progresses. All of those different factors just kind of work around this idea of a perfect storm and <unk>.
Speaker Change: Okay very clear I appreciate that Keith.
Speaker Change: And then.
Speaker Change: Maybe just curious or Mary if you could share anything on memorial day performance as a barometer for the second quarter demand trend.
Speaker Change: And then maybe also just curious about sort of how the pricing actions that you guys have put in place. Thus far have been received and how that might inform sort of future pricing action.
Speaker Change: Yeah, no. Thank you, Matt Yeah, I think I mean, obviously as Keith said, our guidance for close to two point to our underlying performance.
Speaker Change: But growing gaining market share in the Silversea practice in Memorial day performance, which we were happy with.
Speaker Change: This overseas building on close to one where we're gaining share.
Speaker Change: So you know we feel good obviously, we're only partway through the course that we have the tempo.
Speaker Change: <unk> mother went ahead with us with the July the full CIT bank.
Speaker Change: As we continue to say, we think people excited by innovation, whether it be pillows accent chair.
Speaker Change: China.
Speaker Change: The other thing is that we have shed some very similar dynamics I'm you know, it's still choppy as Sean has shut in.
Speaker Change: Some of them like the Catholic rate dynamics, but feel good on memorial day and I. Appreciate you know the teams are really sharpening the communications testing, even more around kind of different promo tactics different communication tactics. So more.
Speaker Change: More to come over and say, we need to get through the July 4th events and you know.
Speaker Change: Overall, the guidance indicates growth for the quarter, which we feel good about I think then in terms of your question on the price.
Speaker Change: Pricing actions.
Speaker Change: You know, we took that surgically and the assortment, where we really identified where there was opportunities looking funds silversea and the benchmarking competitively you know, we're always very focused on having a very strong value proposition. So.
Speaker Change: So the teams did a great job great communication out to our field teams.
Speaker Change: And you know since then so really good in terms of on the execution front last and it just goes back to the strength of the brand.
Speaker Change: As I said earlier, so many customers just they come to us because our friends at tell them. This is just a great product until they tried it out at that time.
Speaker Change: The strength of the brand, obviously really helps us ensure that we get the right balance of the value proposition so more to come as we go through the year and obviously the latest news on China, Paris yesterday, you kind of have baked into our guidance. So I'm hopeful that are interesting.
Speaker Change: We can see some relief at some point later this year maybe two.
Speaker Change: I appreciate all the detail guys I'll leave it there.
Speaker Change: Yeah. Thanks, Matt.
Speaker Change: Thank you. Our final question is from the line of Thomas Forte with Maxim Group. Please proceed with your question.
Thomas Forte: Great. Thanks.
Thomas Forte: Shawn Mary Keith Congrats on the quarter, so I'm going to ask both my questions at once since the call is getting long here. So.
Thomas Forte: Can you talk about new products, bringing new customers to the brand the pillows accent chair recliner and while it's very early to ever Couch and then my second question when I think about best buy.
Thomas Forte: It came around the initial launch of stuffs Tech.
Speaker Change: So Sean what gives you confidence in your ability to sell consumer electronics type products in their physical showrooms and Costco.
Thomas Forte: Yes.
Thomas Forte: Yes.
Thomas Forte: Yeah.
Thomas Forte: Sorry, the first half of the question Tom.
Thomas Forte: I broke up for the ability of the new products to bring new customers to the brand a pillow such accenture, the recliner and while it's very early to ever couch.
Thomas Forte: Yeah. Thank you.
Thomas Forte:
Thomas Forte: Yeah. This is the the obviously the point of of these.
Thomas Forte: Launches and our strategy and product to begin a more broadly is to bring new customers to the brand and especially be able to convert.
Thomas Forte: More effectively so so if we back up and look at.
Thomas Forte: We love sockets had success.
Thomas Forte: Hum loves Shaq.
Thomas Forte: God factional for a long time.
Thomas Forte: And had some success in grew before we turned on the marketing machine that you see today and one of the most important pieces of that marketing machine for us.
Thomas Forte: We're simply.
Thomas Forte: Mass advertising, whether it be T V.
Thomas Forte: Especially obviously now that's transition to over the top end and.
Thomas Forte: Digital social et cetera, So we're reaching.
Thomas Forte: Really the entire country, we have a focus on our core demographic typically you know more affluent households between 35 and 45.
Thomas Forte: <unk> household formation that sort of thing.
Thomas Forte: But and strongest actuals are as what we think the best selling sectional in the United States of America. There are many reasons that people choose not to buy.
Thomas Forte: And these new products mitigate have been.
Thomas Forte: Look to mitigate those those reasons and we know specifically what those are through our ongoing research with our customers and so taking them one at a time.
Thomas Forte: Let's work backwards ever couch it has Uh huh.
Speaker Change: A markedly different profile and style and scale cause actuals are in.
Thomas Forte: In fact, you know, we're very heartened by how it's performing and more urban markets where spaces are just smaller.
Thomas Forte: And it still has the advantage of getting up elevators and through staircases and shipping directly to the home and that sort of thing and so that's a perfect example of how we're able to not just reach new customers, but importantly, convert new customers more effectively that we're turning us down before at this.
Thomas Forte: Same time, you know it's a it's a.
Thomas Forte: Photographic game, it's an image driven game today, especially on social media.
Thomas Forte: And do you ever catch provides us kind of a whole new profile.
Thomas Forte: In terms of the way, we're shooting at photography wise style wide.
Thomas Forte: So it's influencers what used to reach people and then that way again reach more people reach new people people that are suited.
Thomas Forte: And for that product, especially based on lots of different.
Thomas Forte: Points of data.
Thomas Forte: The recliner.
Thomas Forte: Again this has been a quarter of the sectional category motion and we've just been locked out of it you know people would walk into our showroom and say do you have a recliner.
Thomas Forte: We've heard a lot in fact brand we see your ads really cool do you ever kind of our answer is no and we are off their shopping list that has now changed and it's become a very important part of the mix. Obviously, it's another really stealthy invention for US you know it looks exactly.
Thomas Forte: Like a typical loves that exceed that people might have seen her own for a long time, but all of a sudden that comes to life moves and that makes for a great.
Thomas Forte: Imagery makes for great motion.
Thomas Forte: Imagery performs very well in social media and to help us reach new people and to open up the quarter of that category that we were not participating in before and so we're.
Thomas Forte: This is the reason it looks like is growing at the end of the day. This category has been under duress now for three years straight and while it is.
Thomas Forte: Not our most banner growth years, it would be a really difficult.
Thomas Forte: Path to growth, where it now because its innovation and then and then the pill effect share frame has just been crushing it on social media and its really just help us a lot of people through it.
Thomas Forte: You know what slightly viral.
Thomas Forte: Launched onto the scene and it's.
Thomas Forte: Propel pellets out to be our best selling sac. So it's a really exciting prada.
Thomas Forte: Product as well, Meanwhile, I'll wrap up with itself.
Speaker Change: You asked what gives us confidence to totally thrown showrooms.
Thomas Forte: It is amazing to us.
Thomas Forte: Because it was controversial the print.
Thomas Forte: Loves back on the side of the sound bar.
Thomas Forte: You're not seeing I don't know if Samsung Sony you're saying the name loves Shaq as the prominent name on the side of that sound bar for stealth Tech, which is the only piece of it you see because the rest of it is hidden away right inside of inside of our sexual et cetera.
Thomas Forte: And we see no resistance when we do the research when we talked to customers. When we talk anecdotally to our showroom managers, who are interfacing with people day to day, we are very confident in our ability.
Thomas Forte: To become a major player in home audio and beyond home audio and in technology in General we have Dell Tech innovations coming.
Thomas Forte: That are not home audio.
Thomas Forte: And will.
Thomas Forte: Again high technology away in this space that we provide on around underneath your couch and other products.
Thomas Forte: And we.
Thomas Forte: We see no resistance in those showrooms and our own showrooms and so while best buy was extremely useful in helping us establish that credibility.
Thomas Forte: I think based on that.
Thomas Forte: Look at all the way back our mass advertising television ads that have been reaching people now for years.
Thomas Forte: The idea of surround sound built into the couch underneath that film underneath a fabric that can provide strong audio of course people are our best to go experience it for themselves because it's so good so much better than you think it could be and that's where we really see a future for our brand and technology why.
Thomas Forte: Because there's no one in the mall any more doing it.
Thomas Forte: Period.
Thomas Forte: And are the only few.
Thomas Forte: A few places that you can go to experience anything anymore.
Thomas Forte: They are having their own.
Thomas Forte:
Thomas Forte: Changes in that industry and in customer behavior and whatnot, so loves shaq.
Thomas Forte: He is going to be the place to experience.
Thomas Forte: Technology firsthand.
Thomas Forte:
Thomas Forte: Home audio firsthand and of course in ways that are completely unique plug socket is gonna be a mainstay of our brand. We're very confident we're really excited about it you're going to see a lot of innovation and style to tack over these next couple of years.
Speaker Change: Thank you Sean.
Speaker Change: Thank you at this time, we've reached the end of our question and answer session I'll hand, the floor back to management for closing remarks.
Speaker Change: Thanks, so much for joining our first.
Speaker Change: First quarter fiscal 'twenty call. Thank you so much to all of our investors who support this company and of course through our hashtag loves that family who are the reason, we wake up every day and make it great.
Speaker Change: This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.