At Home (HOME) 6 Jun 192020 Q1 Earnings call transcript

Greetings, welcome to the At Home First Quarter Fiscal 2020 Earnings Call. At this time, all participants will be in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded.

I'll now hand the conference over to Bethany Perkins, Director of Investor Relations. Ms. begin. now may you Perkins,

Thank you, joining fiscal thank for everyone, earnings Good today for morning, us quarter conference and At results you call. Rob. Home's XXXX first

Chairman Corsa and to open Financial Bird; are Speaking has Officer, the Knudson. the questions. Chief Chief remarks, made Operating Peter Chief call their Officer, Lee formal today Officer, President and After and team Jeff Executive will we

statements At call issued any obligation as opportunities and and both known you remind made our potential The Before are to in makes to Reform today we release which as forward-looking Home Private may estate certain not for could undertake uncertainties made within statements. risks filings and of from differ forward-looking unknown In XXXX constitute our At strategy, does during that and statements cause new need this such in update the date At Securities subject and operate, press statements about forward-looking forward-looking the for provision SEC. targets, made future the that with Home about assumptions forward-looking and and of expected begin, to Such to materially are growth are that real Those this results are and today of call fiscal to statements capital referred as expenditures Safe markets the actual Home's statements. outlook statements. and are any comments pursuant to Litigation meaning well of of I XXXX. we store statements in the Act years performance Harbor financial openings, XXXX particular, growth and long-term the

today. net Home's call, GAAP financial is adjusted schedule and available At may the refer press reconciliation showing at issued income operating such adjusted adjusted versus speakers income, on this measures non-GAAP the certain or per earnings A release adjusted EBITDA, adjusted share. as Finally, non-GAAP to measures financial

If may of do press visiting not release, you Relations you of website page copy the investor.athome.com. by today's one Investor obtain at have a the

At supplemental addition, of the certain provide time-to-time, Investor or from for In reference Home presentations to on Relations page its investor expects website. materials

now will Lee? to over the Lee. I call turn

and everyone. results you, the of a for competitive, fiscal first of faced unusually joining across discuss Thank QX spring challenging across us. most led which morning, the thank to our And good us industry. quarter We promotional you for XXXX. Bethany, was weather a adverse our footprint, for quarter highly to

a deliver a non-comp sales store Favorability us in sales to delivered our XX% X.X%. decrease our solid We enabled in our end of EPS, the guidance adjusted X.X% in well $X.XX puts through as new few the as nearly growth outlook. our net minutes. of low at weeks updated and productivity stores and despite adjusted will the comp store of walk of margin, operating takes Jeff

additional have to we the QX year While over our continue taking full and ensure in industry. on which demand, competitive markdowns swift a net to seasonal of XX% and the due our at the weather in assortment deliver impacted We're to earlier this proactively most related QX freshest QX profitability. we lighter took action we markdowns sales price,

our the continued second business we've Although, with been quarter, rebound the weather into weather pleased the adverse in improved. has as

which decided we've and and to of fiscal tariffs, the recent I'll light shortly, discuss of XXXX. view to industry cautious year the of markdowns, soft recent the impact the start remainder a more take of in However, trends, the related

place everyday our to priorities several making and business potential. and is action this outlook today. we progress our our strategic laser against down to full to on confidence we focused price in and taking we're have take year. the This we're have such, not model disappointed. in are lightly, this we continue As initiatives an But I low driving drive we're growth its

seasonal excited half standpoint, the and a second category I'm about From upcoming our reinventions assortments. merchandising

have our visual we incremental of -- add we merchandising. reminder, year elevate a fresh refreshed As portion portions our and every newness assortment to

reinventions to At is again. there us customers highlight create that buy, exciting about again reason giving fresh something and assortment, more opportunities Home category These to a for the our and always

Our very fiscal and XXXX to start. lamp continue our strong XXXX to reinvention off product outperform QX and reinventions the chain is a

bath The us strength accent reinvented resonating with and we've are window treatments, textiles tells seen rugs, in updated customers.

reinvention will pull assortment stores to be plan seasonal this our about we that, and this also Christmas of Halloween, in result summer. bedding arriving that I'm year. into forward a our As additional for excited Harvest,

XX% five our comp the for customers. their a years, Over solidified We all have and the meeting we've in cumulative our driven year. to decorating forward holiday needs, look this headquarters than past QX as of again more seasonal position

more to is From outreach a in grow driving increased to our members our customers campaign, and program perfect the by continues at early products One brand and confidence and million with at awareness our price. Home of standpoint, loyalty again gives customers traffic our At Perfect engaging marketing very currently. comprehensive We're value, QX, than We're results that selection email find she'll the we ever. our website once perfect and encouraged X.X more which it's the

mix we each our across the highest efforts. channels. advertising return learning loyalty the customers more and digital even With and positive more digital seen about We're of growing we're our reaching traditional our we're the program, we've into and what media out love to from our and of year, works. In the mail direct both return investments day to half refining shift more back channels

first stores very our and We deliver we be pleased very opened to our new to new in store. especially stores, I are the California with also performance XX productivity. QX strong which continue with pleased continue

executed top real and Our earlier estate store quarter favorability. the than planned, opened in first driving new actually teams opening new line flawlessly and stores

versus last open test. important our of year. us quarter fiscal for class QX, And XXXX making our towards track fourth which the finally, back-half on to a we're We're be buy-online-pickup-in-store two-thirds tailwind by should of progress end

level external the support chain store gathered QX to and has identified test. of the early the entire If to of schedule, our anything, out all in to rolled our inventory test our this evaluate partners and QX,ahead visibility weather-related QX strengthened omnichannel and softness requirements in opportunity. We resolve key

Peter, strategic on engineering, want price and value Before over the recent impact on mitigated negotiations our to touch price U.S. the without material turn a increases, developments call We I on combination to reductions, tariff China. the a the I in through initial trade and retail XX% of Chinese negotiated imports between business.

increases the With to tariffs assumed to if focus partners we collaborating on have XX%, While an intensify now last were tariffs increase even fiscal with no our XX%, from we cost. prepared year. raised to further are increased approach initial our to product XXXX mitigate to sharper our guidance

be We'll in possible. not Because movement additional we the both cannot price along mitigate. that as will substantial will rate and our the exchange offset to to growth tariff costs there the we our increased leveraging pass as some customers, increases of the much be

unmitigated We our into are that margin today. outlook portion incorporating

always, to we value committed our assortment and the remain freshest, As giving the in customers incredible broadest, industry. an

to our and Peter operational over Corsa, initiatives. the turn Officer Operating Chief President call into of drill I'll to some our Peter? Now,

like in stores support earlier new into inventory opening quarter. to I'd called the Good a growth year. those our plan by step up XXXX, Heading store and inventory fiscal to start-off this first Lee. for morning, Thanks, discussing everyone. our growth in

the pleased have to-date stores. performance As XXXX been we our really shared, and fiscal we with cadence of

to We of the year half a have of that position first in were the also in seasonal year. last begun strategically strong take opportunities advantage under-inventoried

expected. promotional resulting working with the and environment exited weather the both With quarter the us, than we product we against more

the swift actions our additional fourth stores proud in products taking getting and the and through for and that result floor sales out for inventory QX are customers. related Despite challenges, weather DCs margin in distribution the center of before store the the our quickly pressure in markdown to QX will We I'm normalizes teams quarter. to

DC, the pleased DC, the for center of couldn't more our end XXX QX, stores. as by we budget second in of smooth I only to not more be but distribution incredibly launch, with schedule, ramped Pennsylvania second delivering an the our well. than on support Carlisle, team under Speaking

we to our Carlisle Plano efforts continue about we XX% standpoint, be across direct sourcing XXXX, From development a to sourcing. XX% product will our of penetration and few to exit product open We directly progress those signifying stores between around As fiscal centers remain costs. on continue in next excellent years. the on and pleased to with country, freight our purchases, also track allocate approximately to optimize the distribution we new stores journey our

the operational Finally, in organization. in quarter or reduction shrink give of last the This response entire shrink, fourth our to discussion shrink to update In processes recorded a we on we reads our account the more I last improvements. stores. these year our staffing. the of included increased want effort the began the from next preparation, unexpected attention appear increase quick We're update driving be quarter. we field focus overall as efforts and you cohort we'll shrink to efforts Based store again pursue on continuing recent to quarter next and we counts, count to inventory early –

who call that, you QX our the the year. QX both on will With performance our Jeff? I'd our CFO, like update and and Jeff for turn outlook full over Knudson, to to

Peter, morning, and you, good everyone. Thank

the the we encourage results quarter, Investor information in the if reconciliations illustrate as which As earnings our site our to available as in would included supplemental fiscal I is slides, lease you non-GAAP had additional last accounting well today's new review non-GAAP to posted also that in release, been as effective our a XXXX. release standard the to posted reminder, is website. Relations

by in If estimate operating will operating would impacted the million approximately income We that, standard XXXX $XX income year, to $XX have effective adjusted by fiscal impact last it million. had been adjusted $XX it million.

the earnings standard our discounted estate real a cash reduces reported on of flow flows remain both analysis cash the opportunities unchanged. and business underlying the of While basis,

this Our XXXX on the lease-adjusted standards fiscal metrics adjusted impact. will of rest a results on be of to call with the illustrate recast basis discussion

grew our Now, expectations. onto weeks was XX.X% XXXX quarter above line $XXX.X which our favorability results, slightly versus to outlook in to fiscal million, first our store top due

the decreased For sales store X.X%. comparable quarter,

first mentioned, our significantly was XX% in are located quarter. in stores for the the weather Approximately a As Lee areas of half of hurdle us by impacted weather QX. in

the in promotional as weather the improved much as space in didn't intensified. comps Although, expected we and half, activity rebound back

drove XXX margin gross that markdowns unplanned some in nearly took we basis result, pressure of points QX. a As

to Adjusting while Gross profit gross an margin apples-to-apples for decreased lease increased basis margin basis on points new XXX rate standard, million, decreased the $XX.X XXX to gross X.X% points XX.X%. basis.

In the opening associated favorable second headwind markdowns, points basis of XXX to or basis with basis XX a points, XXX addition distribution our outlook. points costs or of to incremental center, our

basis points the you expectations with March, transactions. was and balance the the and decline deleverage shared costs in XX our of we due margin with line non-product sale-leaseback In gross of XXXX from nearly to XXXX fiscal QX

SG&A the awareness. increased of basis growing due points expenses in pre-opening expenses XXXX, driven within new by primarily labor fiscal support brand to earlier our timing advertising Adjusted of year, to and XXX stores opening store XX.X% to net increased sales, our the increased

more operating margin Product operating to basis our the advertising offset which to contractions below declined margin $XX.X contracted the I due of adjusted cost X.X% timing in outlook is income and DC in just a to X.X%. favorability expenses; second of mentioned. operating and due X.X% came our lot million to within year. XXX margin than factors Adjusted adjusted to slightly points Overall,

$X.X expense borrowings Interest rates XX.X% and rate. a adjusted tax tax million recognized and million the interest rate higher increased growth. $X.X to with increased due We income of to first to XX% quarter tax effective a effective in support our expense

tax actually QX QX tax In last fiscal of In million expense related $X.X effective our we related X.X% had of non-IPO rate benefit year, exercises. to a adjusted tax nominal stock-based XXXX, awards. included to

we our As IPO. metrics stock tax XXXX. the our first adjusted EPS quarter $X.XX options of the in both and total, of related cost adjusted fiscal delivered a reminder, benefit of to the exclude In

the recent and freight recently our to expected Turning we impact, to higher to higher outlook, and outlook, due industry incorporating start than costs year the revising our year-over-year. announced soft and expected margin QX XX% to reflect their sales tariffs expectations markdowns trends, are a softness, a lower

$X.XX In minus billion net sales terms line, of now XX% full-year $X.XX plus of to to store the XX% billion, sales grow or top including to range of X%. we to comp expect a

two-year year the described. the of the acceleration an drivers comp first and in the back merchandising half between marketing expect due to we and half We

margin second to guidance year X.X% operating points As a XXX reminder, previous our adjusted to points X.X% incorporated to of basis DC, was headwind of margins. otherwise from basis but flat XX prior the

operating year expect now the favorability, a headwind to margin XX $X.XX be we to will of points cost second $X.XX QX the DC EPS. basis of Given full XX approximately or

before of first and the dollar fiscal QX, cost From three preopening standpoint, the the is due XXXX lapping savings. similar benefit across in freight in the realization cadence to its quarters second DC of of a impact SG&A the decreasing

points incremental points before, said expect relates new we XXX to Versus time. the DC revised QX, over impact than X.X% basis primarily fully X.X% efficiencies we've product outlook guide, of in As once we in XXX our and so expected pressure. lower QX transportation and described. second adjusted less operating to About margin the basis QX, that ramped, the our in meaningful generate of approximately of profit reflects previous tariff exposure to markdowns

expected up Fixed freight cost rates balance make the headwinds. of higher deleverage and on the lower sales than expectations

XX% interest of approximately before compensation resulting $XX.X EPS events, million $X.XX of $X.XX. adjusted an million income. We in tax $XX Based of stock-based expense certain of net the diluted approximately and are on assuming XX rate million shares, million impact of to adjusted expect considering we effective tax now $XX to

the last DC, I quarters we and gross As non-product tax new quarter the three costs, mentioned store of XXXX. expect dynamics the stock from cost of be the second fiscal exercises significant margin, our lapping QX award due in in strongest benefits of will that to first timing pre-opening quarter,

approximately generated two-thirds our in will adjusted expect we earnings be result, per a fiscal QX. As XXXX of share

recovery at to last comp second and down in in million comp minus generate tough outlook store trends. subsequent to sales, Drilling growth of X% the two-year year-over-year. and or XX% incorporates $XXX XX nine million beginning We May of year to versus XX% quarter, our the open plan to the weather sales stores net plus $XXX representing

are we standpoint, XXX points. profitability a of gross a basis margin to From assuming decline XXX

estimate the million incremental basis cost or points from approximately First, DC. $X.X XXX of second we

by points points markdowns, XXX of driven months. Second, leaseback increase related seasonal XX basis XX we to product will the expect about inventory. in primarily level basis costs increased prior sale transactions occurred that Store pressure margin occupancy from

by on the of particularly is triggered remainder lower fixed and The cost gross occupancy depreciation. in year-over-year, decline margin sales growth deleverage

expense roughly rates QX We be expect as flat advertising offsets investment. SG&A leverage our to pre-opening

to X.X% X.X% $XX adjusted we in, of adjusted and to All margins million expect net operating million $X.X income.

million approximately Assuming EPS our $X.XX QX outlook shares XX outstanding, adjusted is to $X.XX.

representing our of at XX our and these new the year. now on largest new expect to class store two-thirds Finally, XX% the track XXXX purchases. roughly plan XX we open will mix stores remain locations net and to We gross of to-date be first in second stores, XX% this growth for fiscal we of open half year and generation

our $XXX net a to million. decreased for slightly to capital result, spend $XXX assumptions As million have

and improve pursue and focusing The to the continue and managing procurement lot alternatives, marketing of XXX confidence for terms. depth both profile reduce merchandising our we and capital of to our and opportunities in build-to-suit our longer-term outlay efforts us cash payment financing stores, of store stores. plus give potential free business and spend our strategic buy-to-suit strong We in our pipeline, by and our productivity capital new have new exploring a flow on

now over With turn Lee his to that, back for final I'll remarks. it

Jeff. Thank weren't of pleased we we quarters guidance, and full streak revising store you, comp year our positive I'm broke about sales. of our disappointed XX Overall, consecutive that

the in the assortment. second the and to moving inventory more year freshness deliver in we're half quickly into cleaner position get a However, of

share. foundation of to the fiscal the our making Giving us. necessary and price growth to support We're we customers infrastructure us position ahead for everyday expand what a core investments compelling continue we're of in values to as long XXXX our runway and model we also are, at of our low committed market

and team to to these day. for like their initiatives. our Their every work continued forward thank I'd members Finally, drives hard business dedication support our

please that, With questions. operator, open for the line

conducting be Thank Instructions] now We'll session. you. question-and-answer you. [Operator Thank a

Our first proceed the Guggenheim. with of line John question comes with today from Heinbockel question. your Please

of So, couple Lee, things. a

comp before. story, macro lot environment the or a is not know changed seen we this though half has something your environment? don't has I think There's -- Do that than changed detect in last with anything you may more Or and variability the been in year start I me a Let don't right? competitive stores. have

touch that know at? pockets in macro weather air because on looking hit just you're changed don't something if these solely I So it's environment maybe in we or the

was weather big out John, years us a Well, headwind in for three for of four QX. last the

products, you're a And our going so, brick-and-mortar be the issue. we're retailer, seasonal susceptible mix -- as going with well. with That to more was on it be based to more big susceptible product you're to

that in also weather. say pocket We impact I air this. less in in more QX penetration online the that saw We retailers have in with saw QX. would and

So We the We largest issue assortment value our with that think can footprint. we that's an in-store. also is advantage. our footprint, competitive have a but

of ourselves -- helps are the to requirements largest assortment to through necessary find possible think to test business the for in best We though those prices. meet positioning and half that help of the the omni-channel to needs and and the customers what's these what's back at the our able our us situations be year,

We're but We've be still against mindful with the you whether super of got hits industry, pleased our brick-and-motor best the these in this everyone, way. and to prices when especially situations, online, we've got pricing.

felt QX it say that plus have I until mean, five been honestly, comp softer. have hadn't year. recent would also trends QX. industry We last in really a we I

forget So that. don't

with about we're that your X% our was what position but And business. in best And to QX What the recent improved, so QX, do added until this so, now that I player, -- the we're seeing an QX in has want that felt to is, position mindful in that and a puts is pleased I'd the weather that and and I'd situations quarter. would and I'd but in seeing we our say in we be in we is, times it stack that us value realistic in stack now of as say say I'm this. what pleased -- what we hadn't are business trends the the say XX% like

still We and of sharper. and get first from The we're a help in starting opportunity get to we and us our stronger customer of better. loyalty share see to opportunity from to card, XX% we're and it, analytics get just did And there's our taking in lot grow from the still that. and understanding in marketing That credit benefits like business lots our merchandising I better means quarter.

our So still in say you, don't weather very all to and it I was difficult would see opportunities I us. it business. a that I period for weather tell want everything, was but

So our do have we work on well. to as end

and you'd I choppier cadence thinking you because sound bit some And fact rather thought the pricing something you about now? tariff at not least of that's XX% that that change had. is comp year there pricing take a flexibility thought last environment? you that your in there has what's else it been think like, changed was in Is when the little the Or that a

But was leader slight there, the was we as maintained opportunity, change and and look we our month. each took do at whole we did thinking, at competitors far our could, comp look only there monthly, by our took Well, it market. we as because the it in shopping department. And like positioning prices price not for of do wasn't low-price know, where felt a take price but we a do we you we opportunity price first as it. some as teams position. every our And and XX%, we did quarterly so We

can up, we the more price tariffs the gone leader. take that be continue Now don't to believe have low-price to we

position. working get some as with have So within that go to we our help are cost we're even and we're base get have of to directly But we our going to speak of savings to margins to some mitigate going supply maintain to that. that to pinched

assortment we for the to having in -- because too the as felt us a know with industry to do far the lowest could is part as -- long drive we've And and prices like be price, movement. comps. over need sales the our largest on with the decision it's term, in We part we and model certainly we of and the just that gone to the last

thank Okay, you.

you, John. Thank

the of from your The Matuszewski next question proceed Please is Jonathan with Jefferies. line question. with

I questions. based thinking the the or may XQ could help comp assume thanks it but current is better understand Great, quarter-to-date you have I guess, for missed that taking quarter-to-date just, improvement my behind trends? guide. it, an trends does from us on

part similarly up formed? one any thinking late XQ I for course that of in the that one And guide, by down the results. was is annual guess of driven But forecast to revised just how

landscape of Is year? that category color trends Thanks. Any more baking guide assume comp ahead more throughout that the competitive an intensified be even XQ does would the in on and helpful? or persist full-year current kind

Jeff Sure. the Jonathan, QX cover full I'll guide. year cover let and I'll

For QX, the won’t of back. we had that weather in month, the first get we May, few -- we weeks

weather during that's since of weather that have for seen we May, since assumed seasonal tough then, disproportionate been half It's a rebounded. time. QX and nice weeks few gone. we've that really of of the Honestly, us. for the the and season we really So first first just then a expectation But have just progress

weeks first in that. trends of nice assumed the continue get encouraged What rebound our seen we will May, quarter. is, we guidance have our don't recent two the back, the business. but by we've in that end Since it of But we're till

overall, realistic where just where were Jeff? has wanted things then, about but do about And we I the When quarter. the think been rebound year, like the be lately, for I to

back the full year on And our as then, basis, stack in acceleration we an performance we two-year Yeah. half. do said, a in expect

our prepared part in very of mentioned have year play entertainment, Lee then textiles his in and we reinventions also holiday also the fall in back and confident the are assortment that in We strong in remarks. lamps, the

into QX trend So Jonathan? the there would and in that be some QX guide two-year acceleration implying slight

think I BOPIS pilot is do we you of assumption coming things XQ, for overall your maybe as then that kind comp and anything just guess out and that's baked when of test. year, more trends next Okay, consistency kind there it up quick potentially the how a And impacting that to like gets for rolled in that? into Thanks. follow-up foresee helpful and

and the are any it's test associated costs Sure. We're the and about a assuming with XX All small not built upside, test. we guidance part are in the our roughly into of back it's a talking stores QX.

for it's impact topline, into built not an So are being prepared with the cost that on associated the already but our guidance.

What we customers really just want from that's store weather We more seamless our buy online help our do. from us product. is to for prudent thing it pickup bit a even a in think might and access a insulate for little

said earnings But is, access that sure business not and thing this It's actually better going -- it's our help helps and as to do only a will we business low want be way reason is play, this going a for protect creates actually harm the the -- doesn't we're still that make revenue to tease us prices. test and just we've we it we're for our to our and and because out before, also this going model? deliver earnings would customers good

environment to in want a be treasure whether even protect stores still -- and that'd create financial our online hunt returns. We or

for we something up years coming this. the past the in tracks This suddenly we're number not just So, laid with. is of

early. online. quite our this actually products recommendations out inventory earlier out rolled year, of Over demand three online. put all put years product We ago, visibility Put we there, the platform

and test see. all has and been has invested pre-work guidance the we'll in the done, that's in been So

We'll how first the do, next know goes year. then going we from customer and our going results out. watch roll we're so we're appreciative then you and like we'll is part to that We'll of it, test if for let the it to the think know what of it we test

Helpful, thank you.

Thanks, Jonathan. bet. You

from Our Brad your with with the is line next KeyBanc. Please proceed of Thomas question. question

done great an gotten for morning. last be thinking question. my to have taking doesn't you a does It I ask guess, sales. the guys I job lot Home years, five about of has softer. good just At the driving really about just seem Thanks feel wanted Hey, This to like same-store just industry a comps. issue.

how make positioning But my do spend? think I you is, about you question decisions? you business How maybe you make? investments and how you guess Lee, the How change the

consistent If the perhaps the slightly past. we've more than comp story investments the change decisions to How over slightly negative At new the normal for seen term positive is Home might in near story you're day? every than rather that, and that comp making

Sure. Well, same quarter say out. to quarter to would we're what low-single be delivering business first growth I our to give revise continuing wanted seeing prudent the to is, only in We guidance with sales outlook. what focus and store and digit on you we're our in

for the And as we're based transparent on we've always had us. weather can, as I emphasize facing. tried to be we situations Well, can't over the that impact

that tell I year. to of you'll we though, QX than back help of at our the us. the the the the see more and you for have that. part years, than In five of that you it's year, There the last half over work four QX sensitive choppy year been would can comps weather is rest Overall, more do the if look first or

focused we on So are that.

in industry We have industry effort seen think the around intensifying is an and we that promotions getting the softer.

But maybe we grew actually where at XX% softer. was the industry time a

-- may growth focused are industry. gaining there industry share. taking world a on we in less gain. We're it's a may in be And So share less be where share the the

our explained only we're reasons always leveraging We're we've refining do be the that, media we've that And we in place. past. model focused so remember to digit to that things the assortment, can committed do on low-single program still put a all that is our but we for -- the comp reinvention, mix, there loyalty and in the --

a about not it I industry very there's thoughtful be letting this put the if the as to economy that going being know don't would We're guidance. we bit to promotional little you see us you -- and of that of seen. I'll share from would say, just be be the mindful way, is less want But we and that. that, our the in more And because about to take prudent result offense, and certain, We it's think we're during were going than that. to that be stop industry softer going ever that, to time. more we're we've on about

purchases housekeeping might III year, tariffs. right And if this and under the to what then you go your are tariffs to just that way enacted? just on think percent now up for List exposed what Could us remind is Great. of List you IV

We -- externally along I impacts of said thus the that of what been didn't said way is, to covered slight is We've we've no far customers our our increases. through those You the was the in on more big are imported. each obviously we margins. of in -- ourselves know or This tariffs of products XX% a build to and since into than move we round have that want pass it we price our shared we've what round tariffs tariffs. XX% when first that to shared

progress of made mentioned sourcing. faster, at actually our sourced we of into competitive. also is, price textile the few help in to half remarks that fact pull thing say be in that too Those of of to us top items and -- us because direct back increases these the will my is go reinventions we've the One lower I I'm reinventions places direct some in pleased a progress That's that of assortment some with cost are would on a sourcing our into direct I for our year. prepared come help sourcing. the on What offset other that

and are that we're this that to that do. XX% know going let mindful working guidance tariffs we in year. as the XX% our our had to try footprint. you of as We're possible, So thoughtful you from performance be margin with to on the our mindful of for to XX% clip We're -- what

Thank you. luck. good Lee, Got you, and

so Thanks much, Brad.

the Fadem question Fargo. your is of The Zach question. Please with with Wells proceed next from line

morning. Hey, good

talk the doing respect the chain then to the impact level the shrink and gross store also but any the for of impact for mitigate curious you're rest Peter, the for versus what of in Whether QX with you on baking at to could margin more the supply specific provide the the the was year? numbers, question just there's guide drivers shrink, can what then to in forward. appreciate First the you're going level if update issue. the about and you impact on clarity And

encouraging inventory I'll Yes, is contributed that analysis cross-functional that saw. start We're sure that extensive drivers and Zach. really organization focus our we we and see is elevated seeing past. with to and the doubled added and in counts, We ready the we're to and what the a back both processing getting working. preferred done We we've analysis. team field field than organization and we more so shrink down brought suspected went still we the there no across our did put that effort did. be We corporate overall obvious and in added operational our but to we processes, accounts recent seems an

outlook, from the on our Jeff. call. is outlook our last And then on changed shrink this hasn't Zach, Yeah,

we that outlook counts year. for with with said, fiscal elevated Peter a expectations counts the -- consistent our consistent took sales sales about counted feel stores were remains percentage -- XX as shrinkage in good those in as and that for year of last the and QX So we still we our over full year XXXX. QX that percentage of once of And the

touched And drag. execute on are without if this there? indication the your on again, category, BOPIS on pilot, Okay. thoughts Whether once And there's customers something could picture that think a could that evolution actually curious more curious online, any there? any if even just is then, the you you margin talk pivoting you bigger you about then, the logistics

Sure.

to entire commit in-store BOPIS the driver that way store margin swing and pre-shop our how our commit it. order That's and to to but online way we're can in-store, going the we're And and and the time test, having operate that on shop and is be dollars. time the our pick intention an revenue help some more assortment, operating up. as a to by we'll that then execute that's customers access they it expecting because to have We're margins gross this model. not intention, Zach, hurt measuring So our and that to without

dollars come to And even it want -- create do we that that the We store to dilutive be protect would with the picking up. then the saying would it we're downside will revenue. the more product that and the pick the Our will them either. store that incremental won't labor for labor to essentially be our margins extra as way in we'll and that the won't visits but intention will then hurt. hope and We be that have and be accretive, reserve is, what create believe

customers we grew I'll about think first online, the in the is If choppy advent of quarter. right taking XX% now, I share. pivoting we're industry remind When you,

the grew comps industry were, negative our X.X%, grow. still slightly and and maybe were, overall So, they XX%, didn't we

slightly slightly are other From our was the probably traffic overall indicators in -- industry could maybe the have XX%. been indication, the traffic industry we when certainly what was But but down. down -- and to flat the down down, from know have industry. we we the itself grew from indications our We to industry

share. grew we people customer other do do pre-shop why is assortment players. they our position we our -- I research, competitive versus That's online. online. all So, why that know We That's like and

in an discounters an don't of Some other have our space online They assortment. assortment. even in-store have the just

don't So, you can't know even even what's there. you --

so Now, it we they trip. inventory to is the worth there have how visibility, much make know their

positioning. pleased really I'm with our competitive So,

see harm will customers more help any us our our shareholders. if test I the we to value add to without think

the Got thoughts. it. Appreciate

Zach. thanks, Yes,

from is line Chuck the of question from Gordon with Please question. your next The Grom Haskett. proceed

Hey, thanks, morning. good

up now the guide low to change to flattish. the of on singles Just topline

that there. the you still to get to step-up play a year on know advocate, implies pretty devil's two Just big

there So, Lee, supporting just because wondering the just lot positive. you into of can factors -- are some than macro that improvement, I'm dive if there negative out drivers if certainly more a

just as to then, follow-up for Jeff. a that And

margins? now, can that modeling the Just you point what the on -- to for comp you're with the a below come year? us what in So, help if were can guy sensitivity do to margins

And then gross is, to regards second the just question total guide. my with margin

change? XXX basis also what by what from impact expectations it between changed and the in Can you points. took going X and You dissect first XQ, you Thanks. to your then be XQ is the are for quarter markdowns the that and the about List

Chuck, that's a Okay, lot.

out among parse our team answer here Let question. we'll me -- to the it

you. Thank

The know let first we and them, if then sure get the right answer us one we -- make on we'll if them we now. call just miss

on QX, first in the and in part I that, gives that, for us the guide comp year one was QX right of confidence right? be first based confidence what will if the the there comp acceleration, that trends. So, get get acceleration I an did

perfect. that's Yes,

in at us, would I we're look what and that what is the assumed of behind weather is, the than be right for the we outlook Okay. the is now. now What different experiencing trends much rest the year say the outlook we've won't

looking So, for the we're hockey trends big overall. of not so our back inside half stick, this business

We loaded the got there. things around in reinventions the also for back have for of us half year

half. in the more we the back have in first than had we So, half

holiday well, weather as That's we that less sensitive headquarters Harvest sensitive as of less for products and year. time Christmas. We also the are know known Halloween weather

back the far. marketing next from in think nice of going efforts we effective of really how make got us the in improve Jeff, to part believe of the adjustments we're question? the we'll where the year. and half performance areas first some the part we've what traction to of versus will that in be That's some of prove outperform thus our in that we've those we help know also first the We said year to year

Yes.

coming parts what third was and gross you the the point on the basis I XX basis basis of and rate. profit I change our deleverage points leverage is, come from XXX think margins, on freight coming points was if I'll XXX because a remaining increased piece in Chuck, XX adjusted point, there. cost in points fixed about would think So, say operating your about back in The is remainder about the domestic question that basis that

think you at can single-digit give deleverage points two about, XX the leverage where about midpoint, if comp we you on that So, that we a of point change that a good sensitivity drove basis low so should then at comp. had that

say points that the On it side, by the that pretty that roughly the and the on half QX. XXX as into the piece QX, impacted be taking basis basis XXX full QX seasonal that's the the as between tariffs XXX see basis then points points impact about of of I well the margin would equally the on about is XX remaining year markdowns we'll and in we QX split the is is then XX points basis

-- And pre-market, saw of it May that lend more a of you? bit That's the I'm guys could I half mean then it's the and what very some frame and stock exactly then granular to confidence out June weeks you couple you help get if to -- back maybe first to you're just might want seeing what helpful. sure Lee, here. for little on into just with not doing doing But talk now, you in on May and what

of reports. I I the can Yes, read part weather. was mean tell you you weather May first tough can that just

large in have Washington State Midwest. in we to only footprint. You opened can our store We our first and California months. three people talk whole Midwest past Remember, around a this very first store the in Southeast and

when is. and stack. we we where year, to what the So, we are, one-year of that had flooding, same what first it's since whole are we middle think the the of country weather, perform of couldn't half and the as about is like the trends all levels. time, two-year We ourselves like a tell And we you rest and weeks check where got of -- just May about May QX. tornadoes ablate at the check on the few lot that, experiences footprint; about And the our performing all it the I first of was those would expect a

Okay.

Okay, very Thanks guys. much.

Thank you. Thanks, Chuck.

with Please of The your America is Merrill question. from the Bank Lynch. Curtis next proceed Nagle line with question of

Good my question. morning. for taking Thanks

Good morning, Curtis.

Good morning, Lee.

better face you guess, you results would -- curiosity, in of I me this continue? can out that, about Just guys? does if Sorry volatility hear

can. We Yes.

Okay. Great.

growing overall the guess would yeah, back given if results my leverage, what's growth? does is I with store in cutting continue, industry given going -- So -- volatility on growth, just so consider question given you yeah,

Obviously, is morning, we're about it's this is and quarter and a sales isn't got the That's Curtis, talked of you to consecutive Yeah, what a lot left. year mid-year disappointed think -- year. negative. of quarters school, I our say the and grade. same-store We've This this it's XX would it X.X% I break about if growth. like a one Peter full

-- we've on on ourselves measure to only comps felt waning saw we interim -- measure years performance and a was we we got and -- updates meeting on we lot expected our And is and give performance if -- store ourselves that year We that new The I store quarters of same time if would doing be fantastic. the It's different. choppy, at were new go. I that expectations.

up are outperform help our opening how stores in earlier. to on able teams even that area we're to sales missing Our the That's offset line comps. the

brand thinking stores. -- We like measuring We you have on This that like years very going not hope non-linear to biggest going flow X.X%, in quarters, around and also -- to be of that, stores us a about We their in So, and to help we we our performing ROI marketing on one only told for to investment. it's investments the some to this on not is our we -- in cash DC. investments and on well. drive was non-linear are those. year that the opportunity. put going being were worse negative new is like than be but multi-years. quarter We're year awareness, a those put and some paybacks you We because our had

stores the that. and from want XXX to we're three you'd take this that was us and biggest to of and of said XXX business to that this stores business opportunity one do doing We grow areas

disappointed take that to about just more comp for us that the X.X performance. that the term years, Obviously, and short the anybody, I've this personally. quarter our I bad. short-term first Me been here think been it's with the want than at same I we're is You'd long-term time. mean

we does. I been the have take this and longest, here personally. team very Peter Our and

next given would good updating business. We guide into more is We look realistic you but really one quarter. feel more it. we're our to today. year a was thoughtful, with on be the year you to spending our are along But to still time really working way, course about you over tough We've a see So you, where of like forward this to it deeply the It the helping the we performance. tell I new quarter. more store trends

then at realistic the that And of see year we'll if and course we'll we about thoughtful multi-quarters the we then decisions. something look course point review that. it and over continue obviously of thoughtful And of to the we'll so the it. be don't to those like We'll be more over the year, more about

capacity Got it. guess, this of the expect I point? ABL end what's the we And year? And by be where to your leverage should at

availability. expect It will to is a EBITDA, from times. the than later where any the above The down the demonstrably where of at different and But And at, been just would in a obviously it's capacity Q toward today. not well, tick-up it's that bit three it consistent the will it -- ABL the we're take end standpoint, year, then leverage with we but still year. slightly end of be in little with be

Thank much. you very Okay.

Curtis. Thanks,

the Chukumba your from of proceed is with line question next The Capital. Anthony Please with Loop questions.

question. my taking for morning. Thanks Good

you're that my stores impacted about XX% was but those -- Thank comp was even you So guess, XX% performance people in just I in that us of your I'm weather. you. those what assuming talking color think terms talked and were if of fact question any stores not that affected weather only about of positive, of not directionally of unaffected you did can be would the by comp were Were the those, weather? the bad give helpful. the by those I stores magnitude, comp the

were -- data can were which hundreds was of stores points we the Hey, this by for weather region, -- and more can stores by thing retail of not improvement of hundreds where versus saw we where see a weather year. you basis versus is affected of by the points weather stores at were that is the better performance and look There lot time and have the appropriate nice weather that area see stores in Lee. by Anthony, we and were and improvement basis affected we that

Got much. Thanks it. helpful. That's so

you, Thank Anthony.

Please question your next is from Our Sharma with the Sumit with line of proceed Berenberg. questions.

question. for my Hi, thank you taking

on question Just my your main are of basis clarifying is mentioned Demand say a that last the regards pre-shops Ware but hundreds BOPIS, with to your lot. you you and Did I products comment. customer guess points,

some guys know share of your peers. a also of visits higher get site We that than you

from and I'm logistics trying the on what what So, your program just be concern out? the you or it BOPIS the out, ruling figure could test? operations aside, stop biggest could to

Sure.

Okay, Sumit.

first the plural one, improvement. hundreds, point of basis it's On hundred,

sorry we I'm if us, On because we BOPIS, to So transact we're essentially wasn't it could I that going demandware knew long us love that. on do platform. the clear and ago, for our for test We bought a later. time

great lot website and website. a people spending in are We have our interest of on our seen time

great, the is is and So visitation page amount great. views the of

device, that see if came loyalty for number then people actually to turns and at a to transaction. will actually confidence number come to and a device see So we pick so phone and you that and we a that store helpful us the for see comparing spending bought, up if all us has site have going not phone in online for mobile then that viewing you -- mobile if on location mobile it store, the data. that data our items, turns then on and and they're visitation, time actually item, super gives we can just to buy been review your looking are site number has is can we then That they're because store that in there can that device up

this say lifetime customer spends way and say, customer comes $XXX going of a with at a the year we put make looking she buy-online-pickup-in-store. value customer let's four the the in up Bethany the us -- and second average for our year. I'm we're -- customer What is, something at this it at stores for say, let's on times to

a IR, other times Now online with her of and year, in but but BOPIS, watch times the three bought by we'll Head $XXX, and came picked she not and spent $XXX Bethany, we'll our year transactions and see that three during swung the store up.

So we'll was was us. then of picked and now transaction a that look the profitability the labor revenue it $XXX required and at and up that transaction see accretive we compare that in to an for

hey accretive is this If us, with wallet and of a want $XXX Bethany used find only that's Bethany, and an that visited online to spends more make transaction who then for once at But three that to store out spend to and best from without buy-online-pickup-in-store times do $XXX than outcome. if are heart now capitalist know thing. got a financial share and thing obviously we normal, us the We're bought you that. and smaller we buy-online-pickup-in-store you a good and, so the wasn't those do going to other to want transactions and we're good wouldn't

our And buying she met obviously, have before. now was she less we than must is not expectations because

the for for customer, a our a So disappointment that been it was shareholders. would disappointment have

in test nice if -- We those to at you looking test test area, check retail, how to have It's let you good thing it it. be all want and multiple we'll it. can it and a feel these We'll we're going check it. how know stores tests that you test you you that's ourselves can out. test, should try part be be so We'll live roll markets. store then personally that it that So of and are a out about about can it's you thoughtful about if out you out. we'll in it we'll you it certainly a if let know good out and goes, we'll where and The something

squeeze increased you you well was deleverage increased squeeze because as costs, the in, Thank mentioned XX cost know margin that. If for freight of another that with costs. freight the to one bps could of I as I regards

much another something of cost -- cost fully the operational? increased opening freight the With once mitigated way of how how could be in with the versus logistics asking of offset the DC gets DC, the inflation second this or freight much or just that second that has mitigated is, of is

Peter. is Yeah, this

most out our say were XXXX, we I'd year. to as floor the third-party with loading. freight pleased really if that the rising the costs we in affected and last not we what both So well stayed leverage is, like able spot as of fiscal all increasing our We're mitigate volume market because industry volume initiatives

So continue to side our see however, in of between primarily inflation the stores. longer specifically run domestic on and we some outbound our Plano do transportation DC

on new footprint higher per Based stores, than we thought. in of our are shipment and location rates coming

to of So but freight we're unfortunately floor continuing and second see increased our to those benefits the outpace loading rates DC, continue savings.

stores to term, we So our our new distribution miles. over expect center DC benefit closer second adding the that will stem to from longer having the by do minimize

Plano the our sure incorporated years, we'll between those going all stores optimizing Carlisle and them add been stem to forward. that's are we and we allocate new make guidance As couple of And into miles. of that next

you much. Thank so

thanks Sumit. All right,

you. Thank

to the of remarks. I'll now question-and-answer end session. management the call turn closing the over reached have We for

look We're in to again the forward Take well, we as this and weeks growth us talking excited coming and business as All long-term right, us for this forward. long-term Look potential of morning. the front to the the well. and thanks care. of you joining opportunities in about days potential,

concludes This conference. today's

at your this Thank you lines participation. may You your disconnect for time.