LL - Earnings call transcript Q3 2018 | LL Flooring Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the Lumber Liquidators' Third Quarter 2018 Earnings Conference Call.

As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in full or in part without permission from the company. I would now like to turn the conference over to Steve Calk. Please go ahead, sir.

Steve Calk

Thank you, operator. thank joining and everyone, morning, you us. for Good

to Harbor the This the U.S. me are call reference Liquidators. laws future of Safe the subject that performance statements statements. Let operating securities and uncertainties, of provisions for contain forward-looking risks financial significant and may Lumber including conference forward-looking

Investors statements be Although Lumber reasonable, expectations or can the Important no give the of it actual that such any its could expectations to reflected statements forward-looking in materially results Liquidators reflected believes will its factors risk to forward-looking in are in remain Liquidators assurance in included correct. from that are is any forward-looking prove of undertakes that cause statements those differ later accurate at with the Lumber discussed. that information update discussed filings as a Lumber this not statements these call. SEC. should The operative time, assume will call no Liquidators' information and only to contained date this obligation in the

pleased Now, Liquidators. to of Lumber Knowles, Dennis? CEO I'm Mr. Dennis introduce

Dennis R. Knowles

of Thank ability our and the the our good in Chief goals strategy, growth of joined our we us number beginning well and through of year Tyson, remain and and At for drive operational a Steve, Experience out confident strategy top position a to Officer. initiatives that line. on quarters remain through first the business Today, multiyear the long-term. and bottom everyone. the Three to we laid drive both unchanged Officer Financial Charles Agard, Customer by Marty XXXX, I'm the transform our morning, Chief you, growth

in performance, Comparable margins of of over $XXX.X last were X.X%. store quarter QX XX.X% XX.X% third of year. QX gross reported we our of increase year. net X.X% to to Adjusted million, sales up compared last improved an to sales Turning

doing to to corporate of business. hard optimize the than been continue field teams basis work and our our improvement adjusted margin more SG&A, operating points have leverage and We XXX reflects the

in perform we installation sales. installed our Our pro record expectations, to businesses and continue and to quarter posted another

comp the comp, the had to digits September that into on profitability. and an be the we flexibility easy thought specifically for had in might With that we comped momentum July felt month. we result what quarter, mid-single the we to momentum Speaking work good and

So, advertising we slightly some down been to tested initiatives try. tweaked we've and eager advertising

SKUs, In more but debt brought the to addition, last relative we promotions widened down year. across

the also The we arrival and August trimmed September. and resulted pronounced in markdowns. topline mailers traffic than drag lighter We was a a The of reigned anticipated Florence did of low-productivity a business not Hurricane in sales. drive slightly either. more lift field our and on in near-term wasn't significant to lot still said, That we see provide to event runway but negative it

Charles about and intelligence remains optimize tirelessly We promotion. are our pricing some advertising, out, to the working initiatives provide growth our around and more detail go-to-market. the our way we're goal to elements we profitability rolling of improve will but

customer opportunities and on relied at I points. reflect of and customer Lumber the driver strategic the we our is drive direct been begin year-to-date, enhance to the national future that enhancing quarter a way where experience online us all transformation. progress their particularly Liquidators is third As that the on in traffic. to digital growth clear strategy many at media mail heavily engage so to the key touch Historically, through hard path work has Charles forward, digital research. can given It's a we with customers purchase path identifying

we'll a begin outcomes media to of activate different areas website focus business. and as mix, first anticipate We're strategies. marketing our The these are transformations and our digital particularly for about against meaningful two excited our we

and unlock to early identified long-term Charles retention. have expand to we will results, program our shortly. customer opportunities multiple acquisition marketing clear too it's on further increased quantify the it's value, While including

addition with in increasing tariffs which proactively over cost from the subject transportation side exhausting margins business. face options expanded heightened China combination of even of faced gross to improve leveraging aggressively initiatives to and cost margins few XX. merchandise years as mitigate to increases. to XX% the of SG&A. We've continue and impacting acknowledge are expanding the gradually higher next a growth, we're operating the topline costs, macroeconomic that of our consistently we'll and namely and we're conditions, Roughly from our through of We're the September profitability. driving to tariffs, In remain committed all comes XX% We

opportunity terms. unique a and in presented vendors we're our has seeing environment improvements this to reengage with and Importantly, cost

evaluating part of constantly a potential and will key for strategy our building the elements A more sourcing the we're our for this on and long-term suppliers. Charles pricing in capabilities use minute. Additionally, also share sourcing this is we

offset not tariffs sourcing While and our all and seen improve considering will a the effects strategy. we're be overnight strategy of and any our tariffs challenge, to options remain

have a of initiatives place, first the the of flooring. we hard-surface ahead, look number we As strategic of goal customers' being in choice

high-touch and their offered journey effective floor with consultative by customers be omni-channel selection, functionality, guide fulfillment capabilities. Our anchored sales environment capabilities tools, and through in a will of transaction envisioning breadth product and that engage

can can quarter, goals, we but our the be we end-to-end capabilities assortment you by line localized our to To nationwide with out, promotional where stores our as such marketing, advancing margin our key program see behind visibility Given with and cover results and the we to goal conclude, rolled areas be And activities. implementing fully improving topline. this technological from customers' XXX will XXXX, into installation management, inventory in of want were on journey. our now

need this quarter, growth expectations, bringing store we XXXX Marty our As for range through will comp fourth reset topline down the operating slightly. to in our we margins detail. project and more full-year cover

does said long-term our them. in earlier, confidence However, remain goals as as achieving I unchanged, our

out. the with to much digital we of have comp a We opportunity to the have a experience of near-term, our contributor our our assisted augment an both as with lot given not rolled installations improved positive equally outstanding a that outlook contemporary continue be to on fully excellent store In is business. experience, But, technologies. growth will large service

Additionally, the ways are exciting deliver innovative looking choice This to coming are expansion year strategic and We're first customer trends keep bottom-line tariffs. time and managing our to hard-surface team. customer we mitigation careful to believe flooring. team to customers' assortment mission committed is and and drive make experience drive and the we pace we're I actively with laser-focused The an continue traffic. become margin through to our our and to can for our we our for forward cost on enhance investments management to

identifying established of and are We building track areas Liquidators. for record Lumber improvement stronger, a a more-competitive have

As day. for our associates to always, of particular, around care customers on I every the want those thank country the want our Florida. in I In good the frontline and to thank Carolinas taking

people the storms our at everybody. the resilience Charles testament Charles? it to over experience have I'll great we dedication Your Liquidators. a during Lumber digital Great and job, customer discuss to are initiatives. recent to and here And now, hand

Charles E. Tyson

the being excited Thank now business. Dennis. five that more you, for I'm ahead past When Liquidators, the And very Lumber excited company. joined the laid I months, even gotten learn for flooring after the here about I that I've to opportunities potential first was

that potential in new I online, know out sales market their something both as part for XX% growth. is customers of We we've customers. ideation store opportunities, play most capabilities, which in our of and a many omni-channel review lies vehicle driving greatest of a digital start as believe our the the traffic flooring the I critical seen As project growth our expansion with of

website easy process two dynamic, in enable their store and it the regardless our them that We've every that their of Given is either we our of ideation needs, location. find flooring for best on the experience. make the to work customer crucial suits on launched streams solution or customer

marketing and senior team hired First, second, be e-commerce performance; the digital build enhancing and the benefits team, leader experience for marketing digital first web XXXX. and with We've delivering platforms early of and plans recently our to site in a out strategies. quarter to digital our

data development technology new cost mail. allowing strategy, We've direct improve to Ultimately, website. with of are and point improvements. understand to lower adding advertising, inherently make to the optimizing our will users social which a a us Our at site focus customers. We helps experience leveraging meet needed web A/B and than opportunities identify capabilities testing customers intelligence, how our robust with been start enhanced capabilities are and media on help shopping customers' dialog and identification quick new This and display us capture, our coupled experience e-mail, begin via with needs. shopper existing with will measurable analytics our around us the enhancing this

presence. relevant web around to stores the building marketing We focus quality to a of our local is area data that improvements content demand Another each location, and store will making plan highly we're individual deliver more means local customers. differences believe

of area is deliver second the and our marketing digital higher aggressively traffic. elements Our focus advertising refine quality to spending mix optimize in to

sports as migrate relied our Lumber investments. and series as some of well the must develop This like less-effective strategy of marketing of spend direct primary newspaper traditional and mail of As television. the a as as take to both Dennis mentioned, to digital traditional the we has Liquidators advertising Part lead other analytics. form predominantly will this the after on part will technology of time

traffic initiatives are of trends traffic media our and to put driving are our us brand solid to trajectory changing, on rapidly accelerate plan attract the best to and However, habits growth and We spend actively new we reviewing for increase awareness. marketing help store mix customers continuously a digital know consumers' XXXX. optimize we

our QX. of to We number optimize to brand install On most have for work marketing and to expect segments. inform drive our customer both and revitalization deep underway discuss this into DIY a our program, and awareness effectively depth in late how marketing are more in help we tests

affects is and very that sourcing behind offering our piece Another our it. important product customers

delivering a capabilities worldwide America, hired Europe, value for Central His who has work of in our retail have expand to experience Head be South organizations. new sourcing large Sourcing Asia. will and sourcing across Global and We significant

the to compliance manufactured margin to in opportunities able new us and costs As we've to mitigate to flex of with speed targets refine our the to gone to we solid style-focused quality wood expansion We stated, expand our business. we've leveraging give means past a our is needs Marty to Dennis sourcing step to have processes already the to offerings, investments need on and our tariffs. our our greater be in drive as and in meet both supplier we referred gross drive believe calls, a categories, relationships work and market. assurance to This and

importance helping Finally, of stores. our we in drive our conversion understand critical the sales team

first the of the store in design conversion innovations have several experience quarter increased underway on-tread believe the We'll with reviewing these displayed. and drive enhance our are around and easily customer We the will experience. merchandise tests network

I As financial us the excited With as build Marty? planning, look capabilities turn to forward doing over that, our promotional marketing XXXX, analytics work our improve call discuss both Marty we're help I'm effectiveness for effectiveness. the will as to and well I digital our to to to performance.

Martin D. Agard

Thanks, more everyone. about Charles, topline. and morning, with start a specifics few I'll good the

Third transaction and The pro higher driven the sales were in to net an stores value the of X.X% This overall size an a average $XXX.X The decline were which was quarters of in increase its larger the customers a comp which comparable of last been installations by in quarter to increase affected jobs. million, sales of recent tend have by has of growth down net the in to over sales, merchandise X.X% transactions increase X.X%. shift mix in slightly transaction and consists double can up in sales offset by value X.X%. installation again X.X%. attachment who X.X% XX% from year, transaction, number QX and of with

things number here. worked the few On transaction a decline, us against

register into in This same may activity to the has by for the a that our out feel rings. several project, or in sales but shoppers. a draw consistent have second, involved individual fit This focus and month value periods that value transaction to a customers single same definition transaction trips a our we not it of promotional been our our to are represent repeat reflection plays And or aggregates reduced natural purchases be on for could reduced reported our store a pro better proposition. years. process, try all customer more of do-it-for-me First opportunistic the

stores in it in grow comp a this the is Going back to those to service just the expansion of growth installation for the this see XX% business, heavily has function in XX% in we at late that but were of over business was stores been XXXX, pleased also year. a completed offered

quarter made expected as and in store-level and July, merchandise to but the in margins, we to discounting sales promotional On effort strong tactics in expand adjustments an our were August than started the side, softer we September.

of category innovation, category, categories. garner products remain from share continued performance, particularly show wood strong In where terms to vinyl we the manufactured focused our bamboo and and growth on

pro customer quarter, of three merchandise also represented sales Our We chain the to year-end. new to well stores us bringing of grow and in quarter. almost our a year-to-date we and XX% opened segment continues opening by above the in the XX total anticipate XX stores average

was credit, and points the resulting last in in from duties and margins, the year in $XXX,XXX gross since increase increase the basis million periods, increase expense a to XX% periods' last related above-average press release of the $X.X was before cases quarter, margin. million The identified finishing year, gross versus to quarter we've at as is sales basis discussed million an in compared settlement, XX-Q, costs from year-to-date Adjusted QX up obsolescence negative smaller generally $XXX,XXX XX.X% in credits year to for expense third gross reduce occupancy by legal year's year, countervailing got and higher lower from QX and the excluding lower XX%. points, SG&A in the by our modest higher last favorable than and was we've balance of was included inventory quarter's to last last in in the carry quarter million second by year. $X.X quarter accrual the to quarter driving in antidumping of with the was XX.X%, basis higher The a due XXX less approximately adjustments, and in in items, periods, adjust million, opening SG&A for to the adjusted the margin $XXX transportation quarter's of from financing ongoing the to net costs, from last antidumping points $X.X compared products mix was elements. costs in increase for are leverage approximately in the related activity. last installation were primarily from an reduction about production second year. quarter last line second reduced margin little a of included XX.X% we $X both out reflects tabled SG&A payroll promotional the of incremental nearly onto of newspaper basis charge offset advertising. year, which adjusted offset margin, the included we advertising lower adjusting in we ruling increases, quicker If to manufactured compared to staffing XX the and at of XX year's only Comparing this again the ago SG&A basis Toano funded activity benefit points offset sales. assess of Total fees approximately in this this transportation quarter. impairment sequentially dilution in the of flat like incremental MDL mix, prior spend mix was quarter, promotional of these in Moving for XX-Q. assets. some effect rates a points XX increases, increased million a XX.X% million. incentive The spend came points basis and the XX.X% marketing out a we call, tabled increased the in that while recent items XXX to third of costs mix year's management absence in on related Both stores the basis quarter and $XX.X changes an the been both with effective out XX legal as margin an and our points costs other impairment $X consistent final duty quarter and impact. quarter reduced effective areas ago. last with Installation of $XX million the gross minor Similar expansion newly an XX the to XX When in XX.X% the accrual promotional from QX

Moving down the P&L profit. to operating

QX we compared an of in profit our last $XX.X of If $X.X exclude X.X% the X.X% adjusted X.X% results million XXXX. to For we XX-Q to had $X.X operating profit. was in X.X% as of recorded release, quarter, million $X.X impacted compared margin the year-to-date quarter items year. last year's income and to in loss operating and to unusual shown press of adjusted that compared similarly we these operating Adjusted compared is million million sales operating an the last year of operating

and Looking cash flow. at liquidity

As of had September the the $XX facility borrowings million of revolving under million, total we credit liquidity $XX which to quarter. of had borrowings of million our we and $XXX beginning XX, compares at in

of Our and I'd make at combined $XXX driven like of inventory stores. of the ended up tariffs million, our business. items the potential stocked quarter, from comments to a breadth on at beginning in by quarter $XXX the the in of to few million increases stores new effect our financial the impacts

and across vendors points by We're estimate, mitigate working success we to as chain to we're XXX September through partially Dennis diligently actively XX% are XX. to these our As already costs from seeing for of only and costs. XX% XXX tariffs in by received These fourth inventory subject margin, tariffs our basis will approximately shipments merchandise lowering entire managing our roll points. are quarter's basis gross China indicated, the we supply of with and as our speak, affect

own in where alternative longer-term pursuing our options. price sourcing evaluating we're necessary adjustments several Additionally, and cases

as the the sequential net result our For guidance basis in roughly we gross like of year. on XXX in can such of for in fourth impact margin mind, an basis points walk mitigate that we half updated tariffs, believe range should points With quarter, QX from I'd through basis. to these the the now to adjusted erosion XX

at sales quarters. X.X% For we were growth, three store comp through

and changes. between QX, consumer find and promotional other's optimal we activity time, mix potential to assess same to price at and management an the to at continue Looking ours work price the reaction

As for XX these day about days one for only and about on stores the Michael a average, recent with four storms, eight Florence impacted each reopened. stores just having of

expect a All the we the While best, post-storm at that we would offset benefit and from October single-digit of the be range, year. lift in to to year comparing in slight from the put think this the low year, fourth comps range. later X.X% achieve in can Harvey's tailwind that looks in Houston in these last against quarter the said, that will, we QX and headwind in X.X%

our operating revised guidance. also margin adjusted We

We X.X% and operating are QX higher. or adjusted QX slightly in at that see margin range through

try two we the that the the transportation increased gaps the have growth. point costs leverage full points X.X% basis continue the reduced real been The points caused are we the XX XXXX, by year. SG&A from an to now XXX lower in to year began to bit year XX-basis from basis forecasting of where the range, original increase below our minimize So, for comp store X.X% but target and and a we

$XXX range November payment of year remaining and to the the million in inventory impacts fund we settlement early the cash year. liquidity, generally million this and the $XXX MDL contemplated through related and will decline In end in XXXX, we of terms to million tariff $XX.X expect planning, to

past and is front, SEC we to funding is legal next to with cash the The customers distributed in that vouchers have material on no disclosures DOJ year. consistent update and investigations. QX MDL early Lastly the

to continued the of efforts up, also To but bamboo Gold early with in opportunities plan see for feel Thank this them. plenty around the to continue also it for to a hand On that, I'll over back it have work And for and strong we in some have case, wrap moderator for trial the all to do, morning. company your you we but mediation, we questions. place the have time certainly prepare XXXX. realize

Operator

session. Thank this you. we'll be time, a conducting question-and-answer At

Seth Securities. first with Wedbush is Please with question. Basham from your Our question proceed

Seth M. Basham

a and Thanks good lot morning.

Dennis R. Knowles

morning, Seth. Good

Seth M. Basham

traffic. seems around you My traffic first question recently. challenge a is like has been It guys for

number impact declines advertising issues traffic of it You as why about do strategies turning the and you meaningful expect tweaking the in think price the near-term? around and called be, out might have to but a in you going promotion forward, a

Dennis R. Knowles

discount more category. deal-focused have the the dynamics price are to advertising in install. changing pro still And seen I traffic, say, not that over over to really the say, traffic the it I kind if hard with impact, promotions really at but wide of remarks, some really quantify, does and and impacted we're course impacting opposed that I that's hard as we it's looked – by And and across been kind deep an mentioned we would haven't as last, and our Two business, you traffic. as historically, the quarters. pro we've pull influence would so year ago, it's not if last mentioned as can and has as If We we about how we make would grow we the XX% this promote. Marty now approaching just margin. mentioned we was a multiple that's Marty his as we you of XX%. of in think have but he typically I the into before, traffic Typically, pro, out. three those trips, guess, they dynamics The happy what approaching their call breadth, had we've just

big two sales an doing installed So somebody's attach is higher. those Number business are merchandise have We If actual impact. then less Marty grows, sale. our installation mentioned, trips. on – our some as And there tickets impacts. more; one, it as are has the higher

is there know that we So, trips. less

Charles initiatives things two to run, change So, to us I we – digital mentioned and we working have got those are that two on we dynamics to the it But sourcing know are long that our are that help traffic. think go-to-market diligently the in as we relates way then going the playing against technology.

marketing we've mentioned, direct entered a we've As play. mail traditional

So got just we've got can't to blanket a to have the with strategically, to market now, customers directly meaning reach flooring. way. reach to interested we've more our – better customers that afford know mailers. got We we the be that we need are able in the to in We've that to customers hard-surface target

So, that's a digital whether that's kind hired an Charles television, entirely of e-mail well work. e-commerce perspective digital as our on marketing, team focused new social. be has from as our digital or marketing that

expand So, into a that bit, turn sure want something to he a with. profitable concerned traffic our really to we're saying – traffic but we're might can that on quality make that we're trying We're little stores sale. definitely into is we driving not not

Seth M. Basham

around Fair question the tariffs. And enough. my is follow-up

in guys but impact do you how the that tariff might if rate be about tariffs the be then, would XX%, impact we quantified You And goes what at think what XX%, basically think in XXXX? stay impact? fourth to quarter, counting that

Martin D. Agard

here. of Seth, Chinese-sourced tariffs the get Yes. a inventory, By That's the we product. they through XX%, of stay level got to full of rate run time current the view coming on kind a Marty XX%. at

now from So different that between results a X.X%. think we're the vendors supply all we we've working approaches be basis is some something simple our across We're have and margin our on and three there, slightly probably on of that seeing sort to will different chain working talked a that's cost the standpoint about. from They effects, and of of quickest. out we're long-term ramp-up math a mitigate

sourcing. We as are that see is promotions were mitigate. That sticks more there seeing the set, XX%, a that looking degree when say sourcing. be if And next alternative over then term, and alternative from go so the have at price adjusted course that that's get modestly a year, If At that's one in would term tariffs I probably much of so to of aggressive we're from and we'll pricing fairly slated, but out alternative how went quickly something that on XXXX. if there can standpoint longer that it's half some into play back necessary. that little pretty is and or into we next of watching time probably more well, But XX%, we'll already takes that. we the about in as and would year XXXX sourcing longer

certainly we'll would margin here have sit our We and no certainly margin. impact can year towards that XX%, expansion be I the we've and working that next on say want we to goals on we've at reaction a consumer and margin But, we're how to depending operating market strong so the it's how had. expansion sort to remains continuing So, there drive little of get going unclear even had forth.

Seth M. Basham

right. much. you All Thank very

Operator

is Please Nagel Brian with next question with Our question. from your & Co. Oppenheimer proceed

Brian Nagel

Hi, good morning.

Dennis R. Knowles

morning Good Brian.

Brian Nagel

at other you seems you're doing, being until your place? get the going right these with reconnecting with to is, with the some probably a connect offset by do see it customers. your lot – reason whether doing you're just it Seth's competition out bigger big I'm I on all customers follow-up just a with extent my I so some going be whether mean some there that significantly be is to near-term that as of So the be question competitor, initiatives things specialty, to another – really there? other but upon on stores, that whether weighing ability going of to respect factors to that's it lot – it company, – like traffic, the there's questions, type regard to have But, we is listen in

Dennis R. Knowles

haven't Brian, that. still flooring I retailer Well, almost mean, own I the half share. seen independent of market the

example, categories of and think is, Particularly I how I again, Seth balance think us, right was space. that of twice everybody's do finding our still sales a need about history gotten surface are for think of just price deep that look flooring you you – to our say But And we what our and So in sharp as would with across promotion deep sales think customers. our they talking To that to kind to long evolve, normal price. that merchandise going that go a how as customers merch product. as right competitive is. And for promotion I pretty we're the and space. in of have And give it's sharper hard I balance and to mixing on gotten categories our finding up that I I with balance much at if continued with ticket their promotion always have we trying broad an everybody's ticket are installation, threat. the merchandise in manufactured find and

– So that would say an we're spot And but in has good that's traffic. on I standpoint, competitive our impacting we with – from a installation. that bit a of do know impact a

to the in right making we're that, those but is and Our market things make kind to everyday on us install got got pro tell promotional that I call, the traffic. grow. good we've customers, two that our working sure appropriate as balance We're And to business position balance the what on. for that of competitive is we've where pro would continues And would I strides the as well. you as find in are well depth

space. goes, I competition anything add? Charles, know hard you as think I to good if the in far surface have the don't everybody's As gotten

Charles E. Tyson

think Brian, things. couple Yes, I of there's

historically demand marketing that customers what a at back same look what standpoint customers. marketed, done actually was you strategic to the and generally If customer And we've that from is we've is the segment at how looking driving. all sent communication

whether we're product in those through Florida and our e-mail, put appropriateness that region more customers of so even relevant we QX make buying do through customer messages customers and is vinyl testing that that And in thinking of how the Boston customers. of front digitally, and it or waterproof given wood whether whether of need television, of and through expect digital that both drive customer to solid we whether obviously our local start the the marketing actually about in in to to are plan media direct in it's effectiveness the mail messages, customize our some the it's we region, So it's part markets.

productivity as returns, performance, improve improve well that feel will both traffic. as we so, And our ad that

service start around The fourth need not tests other we been both we spent in and DIY is focused something from business a one our our to significantly marketing driving That focused capability. on. the segments installation that through an on is the marketing high segment amount around quarter have of running are seeker We've we perspective. the some

So gives that little hopefully Brian more you a color.

Brian Nagel

does. question some we I conference have, or shape, in I form. appreciate tariffs the follow-up way, it. call It talked I've on, I every second been about And think

pricing enacted, to – not as the exploit better, in to and power. laid the obviously do You – and out, tariffs with tariffs you at tariffs business regard you along? Maybe just be with guys the you it's the but which about well. is as as what have them to obviously Not your try will want not answer are you've look but pricing these talking power to products question maybe do you have consumers to just situation you a pass some may and of

Dennis R. Knowles

you're To make retails, what raising sure you question, mean understand is I Brian, that saying? the

Brian Nagel

correct, yes. That's

Dennis R. Knowles

Well, – fair we do to of I a that. amount expect mean

team already this week. we cost. a speak. raise we Charles on mitigate got we'll to we've last expect people I that, And had moved call, said countries will ways. heading as take going we We've we've it's couple alternative been next and to We'll and we has In sourcing, and for those the we in three last sourcing of this areas, of got work have sourcing all in and in fact, negotiate doing better the alternative we'll choose – think three in as weeks over all our ground. retails, we're

we'll lanes, moving cost sourcing. this in pricing, three So, and all out, manage

Marty kind we thing for one our as us of of given us get – with happy the and that have helps lot has year, out a about in we're is this an have year opportunities. And work. and margin mentioned, we and this was the accelerate talking that to you accelerate next a that. opportunity We've expansion – know, been this to last go to plan So, we half, opportunity cost think is over our

impending the we've an categories, gives this these of tariffs. So, affected across while those our not got just headwinds, all tariff product us opportunity by

those all lean three we'll of areas. So, into

Charles E. Tyson

to other of is remember the categories – our one we think thing China. I is Brian in major

out is of product. coming For obvious laminates Europe; business quality our reasons, great

that more working are suppliers category. Our to in aggressively with to share market want gain us

than out a producing marketplace category are that in China. actually So, deleverage have less that of there is laminate slightly we others the the

Brian Nagel

you. Thank it. Got

Dennis R. Knowles

Brian, I would – I'd just add one final point too.

of One you is has performance-wise the the big been the majority the categories vinyl. capacity I manufacturing And in tell would Asia. of

everybody's kind that in I So, same of kind boat. of think

Brian Nagel

appreciate it. Well, Yes.

Dennis R. Knowles

bet. Thank you. You

Operator

with Champine Laura from is with Capital. your question Loop next proceed Please Our question.

Laura Champine

It's product Thanks bringing question. from you're China. on in taking morning. Good also for my that

the not looked talked think might bringing it I year, next when in earlier more be year, you in like we less.

been this you're sitting a time, from where now, for and if would today, XX% have year where So, ex-tariffs? goal be would it at your

Charles E. Tyson

think good – morning. I Yes, Laura,

going it's perspective, picking up at what you year. to North share it will in look we it EVP a EVP right, to product China. next think most if categories of on Dennis America And today in grow one is expect said, penetration. of continue continue the industry. I'm the But category, to – not natural from into fastest-growing mix coming the our I of out

we to from begin whether based what pricing move depending categories, going January demand do calls, on tariffs we maintain. Obviously to the to across the least will XX% discussion in mix XX%. industry at of expect previous what's So and sale going happen as watch be to on the around balance that we're impact on to that

So to one happen driver, mix. to what's going that's

not of give sourcing. I'm and believe for move China our is mix, one actively out product us country impact going I that second we there alternative us. looking will to that's potentially for and will to that number. a And you The That's places a are work-in-progress why be at

to in to where Asia, it's start parts it's at products, we we whether As would whether the of of look move want or Asia, world. in other parts other

Laura Champine

you. thank Understood,

Operator

Our Wintermantel proceed next Please Oliver your MoffettNathanson. is question. with with from question

Oliver Wintermantel

comparisons quantify regarding down that and I months? July. Can versus September question slowed morning. in have comps you what your the August said in Good thanks. Yes, – a were you that for these please, us

Martin D. Agard

we were or the of then would bit And and quarter we a to guess I it of had July, of dropped digits for around next couple that led in little the those I anyway. then that single the year. mid-single and part as guidance sort low Yes, some off certainly zero around say in the to was digits In of months.

Oliver Wintermantel

into average is quarter Got more is it driver pick the transactions guidance the or of of year, X.X%, think full of year? And fourth do the in up then what again it. Thanks. you can think for forward you do the this, the the sale, end the for X.X% your to looking actually back

Martin D. Agard

digital hold same to business. pro adjustments December, we last made a its certainly, and happens will is more weather-related, will we We matter some year, with trend forward, wildcard. in some Well, believe for is the the to feel that of a but so forth uncertainty slow and about got a fourth the a the install and up. consumers of and and how around usual. our we also – tariff uncertainty, with continue this believe and pending a that of up average think down the there's less quarter to the mix slow is I do tariffs generally trying go. reasons it's slow continue traffic they to bit transaction begin cloudy really back price then then hit thing if Whereas bit that you of certain I'd we around reasons as wildcard is concerns the total because finish. a the there its whole have them does and was little it's we've a say the it there XX% a momentum get the trend the we run What ticket finish. year, through And of more just Particularly we move guess month size than of continue traffic to choppy for in work the But size comps little

Oliver Wintermantel

very Thanks luck. much. it. Got Good

Dennis R. Knowles

you. Thank

Operator

Geoff with Please proceed next is Small Our from your Citigroup. question question. with

Geoff R. Small

Good you questions. morning, my gentlemen. taking for Thank

if quarter, fourth curious quarter? comp also and cadence understand You into – how comparable the just sales third sales trended through just can mentioned I'm quarter. us understand how you merchandise have curious the overall the through of evolved sales help the early

Martin D. Agard

of fairly Yes. The been third steady contribution quarter. through installs has the

sale. that's the we So, in single-digits say the solid month the I would We're comment generally you merchandise – I we that as in but expect single-digits low a I yard good about November that that and be certainly part range, cadence and to-date think only fourth think the apply is that for plenty had And to total so-so for on our again we're and in quarter, to pattern. tell would guidance – October. we a would so the think visibility But October and of we uncertainty the go. about – of of as low as December and

Geoff R. Small

if appreciate line there's margin your regarding just you wide fourth outcomes. fairly please? of puts for associate margin And deal implies fully year additional the takes Understood. topline guidance great understand and full tariff, of the cost item I'm the growth. a curious And terms I a EBIT and for that uncertainty range can in quarter us help

Martin D. Agard

question in well bit both little little of the of SG&A margin, topline range guess add question gross hold I'd a total how a our prices I Yes. bit don't of terms around say bit predictable. the will have do as SG&A. to manageable reasonable on be up – risk it's the of okay. of margin mix SG&A there I else the decent that that our have install. around we is in we visibility from overall just And of then the of merchandise I I the tariffs a in it, And gets think together, spend somewhat leverage combination just gross leads the to when guide sort mix gave and And characterize be versus know and should there. we how a those both a that and leverage little come

know don't yes. out split that, than much that I So, so more I items the risk

Geoff R. Small

the again best in Thanks luck helpful. That's of fourth and quarter.

Dennis R. Knowles

Thank you.

Operator

with your question next with Research. David question. from Longbow Our Please is MacGregor proceed

David S. MacGregor

everyone. good morning questions. Yes, Couple of

were color First the of country? all, was or uniform across you of any can color, the it geographic on there just traffic, if fairly any kind give disparities, regional

Dennis R. Knowles

That and QX October. having struggles third the to North and continued QX in the talked We've or behind about North into country. the of the the the across some rest quarter lagging in – actually division over uniform improve fairly company. It's

back. other than maybe kind Houston bit kind of we've the really the say where that I traffic some similar of in exacerbated Florida, a saw hurricane, across that we some year markets would started where But benefit bounce the was we decline but storms that country. So, the seen last to from Southern from pretty see it's in North of

David S. MacGregor

go on of competitors' which already? loaded of through end about, to I a to application kind as Can more a it importantly, tariff and with becomes you're to as this maybe just talk to year over XXXX, maybe that industry? pre-buy happening maybe that, of if seeing a are few up expectation guess follow-up, to lags step-up you freight, inventory? the And across the the guess, extent first and a guess traffic everybody's the I XX% real, the be do weeks more you year fairly anticipate you what substantial given And next are that's of Or seaborne of as the Okay. just I end I we the into head of involved the quarter we the guess? into the

Dennis R. Knowles

Yes.

the industry I They multi-department in think The as seen lot fair other tariffs. imagine. implications pre-buying. that's are a And filling we've exactly some in there's enormous our tariff across amount of on, across retailers, all that you to traffic suspect retailers. a going and not place. what's shipping but just susceptible can tariff particularly more is XX% product what There I the in have happening. lanes is The up, industry

pricing to suspect on and the all – on doing I – are our made appropriately, business as some retail. pre-buys. moving appropriately. sure there said, and making manage that our making that sourcing have out And I three some continuing are We're we're there some sure we appropriately, that probably focused so, are focused business are And we there we're areas,

So end of to that throughout I the think fourth going quarter. see the some you are probably of

your kind point, sourcing XX% going into pre-buy. changes you of you aggressiveness of as anything have that like might And I tariffs to the think act at place. do to this impacts well as

the It's So cost for company. of parts lot into us, the coming there's times, moving for a lead of goods the that.

least So But at to things think to in all that appears are probably have I apparel. seeing think see be of in. like fair you food you'll it that, I – everything amount a from factored those

David S. MacGregor

way people you are any two the of product? worth the think they're extra think to picking industry of an there an months' quantify or across Is kind Do month extent pre-buying? you what you up extra

Dennis R. Knowles

wouldn't. really I idea, an have wouldn't I

David S. MacGregor

Right.

Okay. very you Thank much.

Operator

Our next Please question with is from proceed Peter question. your Jaffray. Keith Piper with

Peter Jacob Keith

Good guys. morning,

Dennis R. Knowles

Good morning.

Peter Jacob Keith

is right Presumably your other pivot had assuming China tariff the in I around the guess pricing countries. I best dynamic of there now, the but because fluid forced to there. quite is was XX% are the the But want disruption gross to Certainly, margin. think the know XX% I in to mix longer you if tariffs in, you're near-term. term go you

does So, add tariff exposure with years? at just to over XX%s one two target this margin become achievable XX%, that full less maybe gross upper

Martin D. Agard

just aside, seeing like We into mean, our Setting set and of so. tariffs we're our big there but really think of do trend we favor. building we sourcing there. the and products sort opportunity I moving in capabilities a aside, mix of that's the that don't is

obsolescence ways some to on that We year had some not they're sit that sitting think heavier basis we have issues some to We're promotion headwinds headwinds. at here second going with can't given We of We've be continue transportation in quarter, say go and – of we transportation was or up the around today and effective. to and of XX been facing XX some to we will points we But back. those the again, work year-over-year. away. bring had

disruption still haven't think, sight two point of or very from today, of to up near XX% is are we we we So, set that in, go the where around lost were whatsoever. realistic a and before tariffs

Peter Jacob Keith

the call-outs and out potentially remodel like overall any you pulling you're industry guys' it here certainly on around you perspective Marty. trends around on sounds But some company-specific that there? And your Do have just back Thanks slowing. on there's I'm debate perspective seeing Okay. promotions. had on curious the backdrop, flooring sales demand

Dennis R. Knowles

from been said there's in I was more earlier, to it's as that maybe I It's growth seem low of of – our there's is drives When on And really against we out refis; this Marty on the almost new And out not I've what lower or many would tell picks kind what I that, new successful. we and but back they've going tier, interesting housing business. do-it-for-me. year. this interesting October pro just this Peter, how business. of up, play need of like – the pull – our kind to so of pullback, But up activity market. it don't there drive this mentioned, it is closely installation down, that remodel our to a we – different remodel be coming seen homes home if does activity deal. kind cash in seeing what's sales sale of kind tried maybe we ways. like towards it see just I in think when provided watch that anything particularly Dennis. this see kind us, where watched And business the the equity. for mirror But in necessarily a like things you But for to a sale seems slowed improvement know, as slowed really And we are is and April our for see was in strong the we

been remodel kind activity. are plays the horizon. watch strong be continue to really looks it's and in And for and out homes activity the there's it intently still still they but correlation, strong particularly the of kind so But forecast this – new remodeling far, no do of how on be really we to seeing with

So, any the we activity. it, and really haven't news to been home as on new relates connection performance what's in keep an between but eye seen it

Martin D. Agard

that is Peter, pricing the bit consumer to react tariffs I to would question link there Brian's ability increases, and this prices price our price rising that and around back particularly be through offset in little does those to XX% how power tariff where just as do scenario a just already, there's a increases slowdown if work and more of well, meaningful. could against

So, housing, of less slowing remodel housing down churn certainly activity. stock, on affordability the of

more prices, needing the causes do raise of a and are we us hesitant and tariffs because the potentially about we just that of While much have we be to downside business. is protect to case how

Peter Jacob Keith

appreciate Okay. you very much, Thank I because feedback. the

Dennis R. Knowles

Yes.

Operator

question. with proceed Our Baugh Please next question is with your Stifel. John from

John Allen Baugh

And Good of commented morning course, I is for and thanks you're taking the that's I of was my that know from sourced question. curious on primarily China. mix LVP what selling. you up.

that? would I it think you're counter other headwind or overall sourcing because overall about you business how you mix seeing standpoint, be an work when everything guess a even a more alleviate going else? So China product exposure forces in terms there your is question, versus that what from is the In are of at as words, expect to LVP more of

Charles E. Tyson

manufacturing a If design or from the We our is very whether that, categories help go there style out large back the the that moved than we've product EVP. there think expectation John. down solid and manufacturing things, and to move feels suppliers opportunities very I really of expect programs to of we other in come will wood and of from from are morning, a Yes, that their creative that that do like couple cycle is longer into strongly But others said, there and great recently, program. open into in it's up have those a both just actively us good possible risk Kong from the as other a country in benefits multi-country out we effect, are we Hong counterbalance mitigation standpoint are capacity, coming XX% who consumer drive we a short-term ability are where now. execution, sourcing folks does Brazil some and And with country-to-country to is tariff just negotiation good right categories we any China, cost standpoint. Yes, Obviously, term that believe that the there some in bases from working certainly believe of Dennis got is is China. but Taiwan opportunity. have be believe I've are design, EVP.

there may the As goes a perspective cost from I mentioned, capacity a perspective, side. from positioned sourcing well and play. laminate there mix as side And a opportunities be the on we're XX% from into

our to in we're the issue there's what John, pretty one leverage with positioned those we're answer cost multi-country today. not on and So, this sure for customers. both of to become that And make angles very complicated of does right the both sourcing aggressively terms working side products

Dennis R. Knowles

Yes. John, I would learned there China; solid in category you vinyl. is say I just if laminates, as to guess was this Charles' that comment, we every anything could as that me follow-up hardwood, as I surprised that engineered almost business get a well sell

we're Charles other still if it, better can in of it's but just countries. we portion that not of And than source it, as less are fortunate so, competitively we of sizable that mentioned, but half most just

there. us So opportunity lot of for

John Allen Baugh

color it's mentioned some the gave in Marty on through walk start fourth start into into the XX% quarter timing, could And your us cost gross That when margin, would your you you but Thanks. you then XX%? And then end September timing that tell the flowing be that of maybe would to flow not maybe fully. a just as inventory? follow-up, helpful. And us of and precise the flowing and that goods? the you when us Could of so partially would the through

Martin D. Agard

Yes.

and item again are three, five so January The be And products Engineered take through get bamboo faster quarter – an article. in and generally second be how may October say a those that some the X take six and of will still start slower, be the turns, level would somewhere based fully Vinyl popular article not into started turning fast so on could months may to the the they come our is. going. and tariffs slower, gets turning that turn but in given that to months X. let's the XX% on sort tariff four, into – would of depending of answer inventory the same floor at products realized really reflective, turn XX% products fully inventory

six and to months effect, of going are turn. tariffs months four speed and say, these on let's the between, take somewhere based again, real it's So, before the

the think that's generally you're for. I question So, looking

will way make inventory at as months. pace, of price depending Our turn on and but seven vendors to in They – increases go same surely fast and again the in cost as cost the the way. and six, three article, from their months outs kind that slowly as go slow as

price Our sometimes we but up go coming can events protect. quicker, in we increases promotional that have

increases a cost or lag the in well, And the tariffs there's of the not so the sometimes outs. effect effects typically as price as slow inventory on our as

John Allen Baugh

and Thank luck. Great. good you

Dennis R. Knowles

John. Thanks,

Operator

proceed Our your is from next with Stephens Rick Please question. question Nelson with Incorporated.

Rick Nelson

Thanks. the to Good I and pro side the morning. of would follow installation like up on the business.

do that big challenges anniversary you pro become you You're big of seeing very these growth, to proportion business of that? as sales? as how well with services from anniversary When big of start growth installation the can businesses, to those in When a moving when – of both do some XX%. XX%

Martin D. Agard

with – start doesn't it I'll I pro, is sales. think well, I Yes. don't of know don't our XX% let's with the anniversary or that merchandising it it And start slows know we down, – approaching anything.

can we that and offerings and edge pro continue have pro, and our to we and it to expect the for millennials use higher the foreseeable extent build things So, then offerings service and can continue higher continue pros the to edge too. future business it for to better

into install in that late last California and the business, states, got expanded XXXX. Florida we fully the On

fully first a we expanded will first of by anniversarying program XXXX. be quarter of quarter So, the install from XXXX, the

helped couple a more several I low a third – That So audience for why how installs quarter where is and have And range I where year. part of in it track different that the program teens that has it, XX%. and the than that, all stores indicate investors was that's number offered been that's been that's quarters. of the for much the grown quarters, in the call

quarter fully expanded the of we're first like the being talking for fully as business we and feels offering, XX% X.X sort of contributing where the it's XX% of of of expanded about – is So a next reasonable XX%. get business X.X%. to like and that X% That's part that installs the year anniversarying XX%, growth more XX%, something sales, growing points at installs comp

So and face the will part year. of in this fourth be there quarter that will we we way

the So to go to something from comp of contributing X.X%-ish. like X% X.X% maybe to X%-ish more something it like will growth

you around guidance that's I the So think can best I give that.

Charles E. Tyson

a portion spent an spend said we an I segment. we if as leveraged just Yes, I customer install significant before, opportunity. can that from not of our as add, our installation have see marketing And perspective, against

testing installation the that quarter enhanced our as that I that attract certain business. are said in against we're customer installation an markets four and doesn't the a brand to new will We understand believe in program even traffic in today that

of is Lumber around there Liquidators. and So, opportunity installation a we awareness brand lot at think

Dennis R. Knowles

on infrastructure very would behind is Yes, our installation we intentional add terms that that have well just Mike installation. to think it, as and that the talking I about. to network been make pro Charles in and have tirelessly right build of have that network, business is both that a just, making could. it, what the our the the we Charles Rick, sure I way that's where built in we fully this a leverage and to And worked pro sure ready we're when and at were and

to see without So, performing in as perform Marty benefit is said, been has that that's that. continuing for over a where But it well cycle continue we'll see any as it year. to our well, and markets We're intentional in less we push. place

But experience, work the XXXX that do. to as digitize both continue Charles on for fully fourth a want we see to and kind for for XXXX. that to of have of start into business But into little mentioned, as So, us We pro the the lean we the to XXXX will bit still to work and to in helps customer. remainder quarter we and leverage some do-it-for-me do that our that.

Rick Nelson

and That's good a lot Thanks helpful. luck. guys, really

Dennis R. Knowles

Rick. Thanks,

Operator

question-and-answer the over to Ladies management we like the back to session. reached end I would and have remarks. for our call gentlemen, closing of turn

Dennis R. Knowles

operator. you Thank

me say our support. vendors, Let next team, look thanks to shareholders updating our you customers again quarter. your to Thank you. our LL We and for the continued forward

Operator

Thank today's conference. This concludes you.

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

LL Flooring (LLFLQ) 30 Oct 182018 Q3 Earnings call transcript