LL - Earnings call 4 2023 | LL Flooring Holdings, Inc.

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Operator

Good morning. My name is Drew, and I'll be your conference operator today. At this time, I would like to welcome everyone to the LL Flooring 4Q and Full Year 2023 Earnings Conference Call. [Operator Instructions]. Bruce Williams with ICR, you may begin your conference.

Bruce Williams

operator. you, Thank and everyone, for us. joining Good thank morning, you Commercial Tyson, and Financial Chief Today, Retail and I'm Officer; President Charles by and President, Vice Chief joined Executive our Bob Wadhams, Senior Sales. Andrew Officer; Madore,

As we safe of U.S. the statements. reference laws forward-looking harbor or provisions securities let begin, me the

Flooring. statements call the financial and future forward-looking subject significant that LL conference This contain risks to operating performance are may and including of uncertainties

it can LL forward-looking believes reasonable, forward-looking the statements expectations reflected such expectations statements to be its its no Flooring correct. in give of Although that prove of that assurance are any will

SEC. Important those cause reflected risk included actual from forward-looking the differ the statements are materially Flooring's could factors in LL in results that the to with filings

discussing comparable in are GAAP the date measures of in only this During an non-GAAP non-GAAP may call will as on is financial of accurate reconciliation explanation useful The call, adjusted the financial directly measures discussed A management to most measures discussed. today's contained why financial of earnings. be results information and our the basis. today's be

Now I turn the call to would to Charles. over like Charles?

Charles Tyson

and thank QX conference joining LL you Flooring earnings for our for call. Bruce, Thanks,

Madore, Chief Senior me on the Professional Officer; call is President and Andrew Joining Wadhams, of Financial Bob Vice Sales. and Retail

premier value update national the the independent with During an as an strategic our on of to and personal go results our through LL one-on-one scale a we that Flooring and today's initiatives retailer will of call, we'll specialty QX and provide the that retailer. expertise position year continues national full delivers

have remodel to interest as discretionary weaker and softness rates were in results and home existing quarter improvement, challenging sales, fourth spending. big-ticket home elevated led inflation Our

studies lowest the one existing on its know, of expects the in you spending that the with the issued XXXX indicator the in during joint sales home remodeling for leading XX for home will XXXX. housing LIRA sales improvement December of home from declined years. spending. since Data at And activity, decline level remodeling leading year-on-year, is indicators X.X% from center quarter, home time first As existing

spending quarter, Specifically, during declined QX. fourth from revenues and XX.X% X will the XX.X% remain the declined average in quarters predict declines store lower In and indicators sizes improving by before first consumer total project the somewhat driven traffic in sales leading the that our Pro customers. continued and pressured comp

million disciplined the sales transportation delivered the Despite For we operating promotions primarily to reported deleverage. we quarter, loss $XX.X quarter lower to due decline, product and an during expansion margin the sales adjusted and of due gross costs.

In addition, achieving coupled versus trend-right product we availability continue diligent in our sheet management, the year. right working our managed pressures We're we XX% to cash ensuring inventories with this and our capital effectively despite customers. while debt down operating assortments on us allowed flow difficult environment prior have on very we our a with delivering balance This, profitability. for as our very to the rightsize inventory reduce

liquidity. with continue and aggressively be working will and costs We capital disciplined to manage

scale. that remain to long-term industry housing end, by against progress market is this the driven will an that with energized the by highly making remain a when driven LL better the that the market believe household the of we're highly intact, retailer our have stock, we're of long-term the strategies the uniquely positioned challenged, high we aging $XX providing penetration execute flooring come U.S. on share by remain by fragmented, us in To benefits rising Flooring continuing year expertise billion independent this remains carpet, and capture to tailwinds that Flooring from is of strategic independence. a our national While well will in Including turns. fragmented marketplace We values. cycle formation company. our LL the a industry positioned initiatives home increased industry make to

addition, match offer In value an we offerings service to from difficult compelling independent. with and that are competitive pricing

Our our to for inventory and showrooms distinguishes carry our Pros customers. availability product to consumer us from our availability product independents and immediate

Our product which maximize Board the our especially I across will that continuing Board assortment detail time. more national they will their this innovation differentiate is of alternatives review, answering to touch on our and of in other be with shareholder strategic questions announced August would be on foreign us not independents, providing carpet The In last retailers, would later, year, not at evaluating only network. this I update with continues but or that and value. expansion an

carpet and Looking CRM experience. rollout, increasing consistent executing and brand transformation on are X on through priorities, investments our which on growing forward, business, engagement focused our on which customer initiatives, we driving a expansion driving Pro our the of our brand strategic innovation include ensuring growth customer and our product investing remain awareness,

against on focused I'm we're update the experience teams aggressively managing Andrew? Pro operating that will more Andrew and improving liquidity. improving well are provide Additionally, and by CRM as customer on. field our initiatives a as our now our making as efficiencies costs detailed encouraged that execution as well

Andrew Wadhams

and the value our we're the we Thanks, marketplace with uniquely manual Flooring will simplifying removing Charles. In stores, relationships tasks, expertise. our and redundancy, LL customer. on selling store allow processes of reducing flooring to building offer differentiated is which proposition as in associates positioned a focus

tools lower our manager level. to store narrowing, in we're and implementation is we While the performance, we variability challenges at inconsistent face the gaining experiencing and our traction turnover associate with continue believe and store the performance with of CRM

in improving activation learnings to initiatives from of for promise people to the the 'XX moved results. customer, that by status important in We data XXXX. CRM. our routinize half provides CRM, led consumer recently With to NPS hold rolled the able seeing for us show interacting our means of customers. processes We're and we've QX. producing we're to out results already those to in that scores. rolled to place it of and Pro with in accountable the key provide for and transactions. the out encouraged adoption as QX by initiate This CRM continue the visibility This refinements we're Our back in allows evidenced actions

CRM improve us improved and time. their over Our leaders our all our customer training, began coupled allows that sales sales conversion to with quarter, leaders new to those December, associates. Pro. greater service trained believe we platform, and on lead training sales ongoing productivity this support our store proactive we will model, In

Pros from file. we Not to every daily actively of we're sales are of cycle. able target also able we've learnings more our only Pro, our the For effectively, implementation in aspect to taken targeting in Pros to customer CRM where are we outreach are and and are reactivation the those increasing the and track of but retention

awareness allow drive tools necessary our building conversion. are We're to and and to capabilities Pro. that Pro new Our offer illustrating managers associates to that for customers can new that help relationships customers Pro build our with with stores

Additionally, experience. not outside the we're national Pro accounts with targeted across developing expansion pleased sales customers have that our relationships past. Customer country in program the our teams new the of with segments of

policies underperforming and the we level and point store measure look measure to Looking third-party regional processes our NPS at the the and regions to across the customer trends at level. improving of on centers the improving at call create We and course partners. our stores, consistency touch variability and see network. every that corrections continue for customer installation make scores and execution friction. review daily any We web, focused We're our experience, across store interactions

scores effort on by is XXX behalf scores NPS our class. of improved the are our we team customers. now us you are since proud team I level highest basis tell of and the our XXXX, sustained tracking can't of During how to in our our best points all began

a so teams Lastly, so knowledge that professional the leaders experts and is critical our future and our as sales is retaining them success, to development even of product priority. much

retaining knowledge know result, correlation pleased also by We there's is reduce paramount voluntary that to and that a manager, turnover leaders able XX%. I'm store tenure that our team and between performance. success, to were our a As

managers. been markets our managers become regional encouraging successful in see historically traction show to to As their important, beginning new our regional those performance. managers It's

and Charles merchandising Charles? the I'd over Now initiatives. like discuss back to to call turn awareness brand to

Charles Tyson

Thanks, Andrew.

supply the Uyghur to chain China reduce that input to to liability Prevention disruptions our year China Labor supply the our and mitigate on realigned due chain in Force materials have we We act. faced earlier

we've expect. the We're disciplined product that $XX During on in-stock the by category-leading reducing or that year, we're consumer to been standards customers high maintain getting with inventory by continuing inventory our management, assortments. our encouraged while our XX%, response the million

brand the more brands focused brand, in We the hardwood which product. the gravitate on to are through destination the as a best customers of continues we of the strength market. We're the known awareness Bellawood raising see more to behind be one natural for

to advantage as enhance we demand wood take believe assortment stronger that our business. to we the consumer and strengthens wood positioning for continue We ourselves are

were in sales year, the category fourth an during for in While improvement we trend full saw the quarter. down the

continues to deliver looks carries of best well received that Next, I'd able for we the features wood most customers brand customers. great We're our some laminate. our to the combined value the premium of vinyl carry. our it be Duravana that of to decors and Duravana like by highlight features with as has best realistic

inventory efforts inventory are largely fourth pleased out overcame sourcing our in the category, network. Within stocks positioning store diversification and our faced confident are the we of most shortages across that during we XXXX. vinyl the of we that our behind quarter, us. In We're

during captured category Our improved unit in-stock velocity improved quarter. positioning in customers the as within more vinyl a the

product our carpet of ReNature update ReNature some terms that's has brand XXXX and you our to on product scratch CoreLuxe now a was best within the waterproof, our product rollout. received hypoallergenic been This differentiated customers. I'd added the product which our innovation, a in category. of vinyl In that well and the by resistant, by portfolio, of half launched like styling. back our dent we've is to is

to to a our $XX As carpet billion of an gain us product for share. opportunity the additional market reminder, offerings opens of addition up

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discussed we've previous As brand remains Flooring LL low. on calls, awareness

we near-term resources while year. marketing drive a basis in saw brand brand improvement XXX for also awareness aided resources to conversion. to performance to allocating and points allocate However, continue awareness the We'll drive

With now conversion. targeted first-party have we the rollout of will CRM, customers. the our greater have able reducing by in that data, and of to believe our we're the our campaigns effectiveness implement efforts tools place sales to much cycle drive increasing We more we marketing enriched and

to the few offer like unfolding availability and impact events on potential I'd the the Lastly, Sea in costs. on Red comments product and a

While disruptions significant rates, transit longer contract seen to we're our have do material we date not to expect to expecting not times. see and increases

remains In it we persists conclusion, prices, lower disruption interest costs. As that if elevated due for worsens, see persist home housing challenged may the in we improvement, environment and challenges expect freight turnover to higher will or and XXXX. potentially rates and the macro conflict higher

and carpet our growing brand continuing to second, business; customer enhancing fourth, will and our offerings ensuring engagement initiatives; finally, our execute and on a continue rollout; customer Pro we through to our our innovative on increasing through products X our first, CRM product strategic focusing However, third, drive consistent awareness; initiatives: experience. expanding

aggressively us shareholder are be We customer differentiated capital long-term with laying costs value. will the drive experience managing we will more continue make provide with the the to us and deliver believe opportunity better market and growth to working foundation disciplined and a in We and liquidity.

record thank over Bob? Bob to want satisfaction I a our share turn our will outlook. delivering organization our and customer the associates financial to XXXX. I such NPS exceptional great work now Finally, call and in details for to all of across to score continuing doing deliver service

Robert Madore

business I'll good discuss and I'll through year approaching results. numbers walk everyone. XXXX. discussing Charles, core items certain eliminate then results, full of our fourth non-GAAP today, and quarter we're adjusted Thanks, which be will that and morning, are Today, indicative our how not certain I

our to earnings results, For full release our please press details on our Relations financial Investor of regarding section refer the website.

decline Net versus decreased quarter, declines by $XXX.X of prior difficult. million the and Comparable year. our ticket. consumer year-over-year, units declined in period, in driven sales merchandise XX.X% business the prior X.X% a and X.X% XX.X% transactions For sold driven segments. the the Pro decreased year price fourth retail to by compared remain in average decline per in sales fourth Average XX.X% quarter conditions

sourcing domestic the year. from cost comp increase vendor lower by from million basis profit vinyl outs $XX.X and costs the XX.X% driven by million For The full our XX.X% declined gross gross costs, in of of sales XX.X% adjusted headwinds higher store $XX.X XXXX to period net we margin and last compared was XX.X% Adjusted declined million offset quarter of points vendors. fourth same and XXX increased to the year, or sourcing to compared $XXX.X sales partially increased decreased transportation margin as adjusted primarily

full volumes XX.X%. profit driven structure. The net both $XXX.X million improved was while the strategic margin profit due XX.X% were adjusted and in as to primarily expense net lower of XX.X% was CRM. cost XX.X% The and and SG&A as points occupancy associated million quarter sales percentage variable by from to and lower year, $XXX.X sales sales with our was of fourth expense deleverage higher in Adjusted expense percentage expense offset in were a compared from million of SG&A sales was increases, realized costs The adjusted was partially margin gross gross gross SG&A million the by from compared to gross $XXX.X carpet SG&A SG&A XXXX. to of XXX million, adjusted or decrease review For sales rollout decreases volumes. costs basis lower of cost adjusted and and a $XXX.X $XX.X increases savings the of

in $XXX.X the was million to SG&A $XXX.X year, full prior the expense adjusted For million year. compared

$X.X we year, the for million from quarter. our million the For $XX realized initiatives cost and

further to as in cost XXXX to We work will our rightsize continue we optimize operating structure. efficiencies

Other increased million $X.X expense for fourth the million. quarter $X.X to

other interest duty year, as antidumping primarily with other rate was current unfavorable compared full year. expense The million driven million the the expense expense in in well in change average year. higher For associated the was $X.X to an prior increase debt $X.X levels by as

per million $X.XX million measure, share was to loss, non-GAAP a share, last non-GAAP loss the prior fourth an Full an sheet chain compared of sales efficiency. comp in flow. inventory through last compared $XX.X a million operating year to year prior UFLPA decline. prior $X.XX to of $X.XX loss per million As year. the turning the for fourth loss was in-stock $XX.X the year supply loss prior their year operating $X.XX have a per was improving operating operating supply quarter $X.X inventories declined able products. year. to last availability was want management on compared Adjusted Adjusted result, To to thank operating during quarter year. a We loss with challenges of the million hard we're vinyl the a for to period. million work $XX.X measure, stemming a with chain from measure, line $XX.X to availability period Now cash loss to was Adjusted in loss, We year, our $X.XX that XX% in capital in by team compared million non-GAAP our year. our compared $X.XX loss $X.X our net of I was rightsize million and compared or share, operating loss $XX compared to year million to and $XX.X quarter and navigated our end, and to compared and measure, loss the working the was per diligently Adjusted $XX.X in as loss last $X.XX were work our of non-GAAP net share was we to a inventories. balance pleased $X.XX

a did good of capital areas the during working year. we managing effectively addition, all In job

yield We in other improvements on overall focused components and identifying our continued to working working efficiencies our will on management capital continue be further to inventory capital.

of to of challenging under terms December to The XX, our the believe million million availability and quarter availability under the of million in facility. $XXX.X balance of December million revolving that agreement a credit with liquidity, decrease as $XXX.X of as of We $XXX.X of our environment. million credit availability of XXXX, In $X.X sheet navigate us macro the represents $XX.X in liquidity $XXX.X XXXX. million XX, cash position continues ended from comprised we

management pleased capital we're working flow. earlier, to our cash stated As operating and contribution its with

million facility XX, of pleased million credit December as was a challenging were we XXXX, Despite year-end $XX of there I'm under revolving balance. December outstanding debt XX, lower $XX XXXX. able our to As compared that to the year,

provided by strategic year, merchandise net full which Dallas management. CapEx distribution working our of effective inventories, and was opening purchases the initiatives, was $XX.X our including sell-throughs capital operating For reflects cash primarily investments higher-cost center activities in $XX from million our successful driven expansion QX. carpet flow our the million reduced in and of the inventory

Moving on to our store network.

for XXX for More the our to renewal growth our is up and have plan ways half our coming do be network. have We within years, store next and stores real not in estate in we we'll of to X XXXX. portfolio than portfolio, constantly optimize net looking

stores underperforming, only While are our have comp store that profitable. we sales than less have X been

such, portfolio and overall store profitable. As our is healthy

me to year. of through continue the the for not the on some provide We're the expect to the providing earnings navigate half the least environment remainder our macro let look specific first guidance to uncertainty year. of we year, in the at perspective we As year, but economic color for

cyclical to remain continue focused primarily initiatives. be our against challenged, to due strategic factors, these on uncertainty. Despite company we The executing revenues macro full expects year

drive the the we're during transportation supply lower costs While as XXXX, a Dallas able margin XXXX, we chain in online of to higher may partially favorable that Sea impact could product costs activity due and half DC in to gross XXXX. result costs our experience expansion in of back Red the offset shipping by the coming late

are execution pleased our working management focused our and we is continue will improvements on further in yield inventory and efficiencies capital initiatives. through that identifying our in line, We of remain to inventory

preserve rate will we focus our cost Lastly, our manage current with to prudently and aligning expenses on sales of structure profitability.

In addition, to the million we strategic the support including primarily turn operator rollout. With spend expect to XXXX, that, in of continued our I'll capital investments, questions. terms to $XX in approximately expenditures, our call carpet for back

Operator

Instructions]. [Operator

Our first question comes Laura from from Loop Champine Capital.

Laura Champine

to like I decision incremental a over as you what's of the SG&A better sense get wanted dollars on count horizon? behind see decline, the that a payoff keep and kind to expect to what's what and sales spending the even time store of

Charles Tyson

Yes.

carpet as our that stores Pro to our So said into that element flooring category, with of we've provider, been it XX in in see an make we've an and and on being a significant as That's stores. we us which pleased end-to-end rollout, come business continue both based increase the investments business. adding customers that we initial a on our important our available consumer on

carry benefit, we product. the past, we've The is said the for other inventory don't that as in that

And continue important us we is that see as prebundance working drive perspective, lean to good spent and overall optimistic build year, So our where out, the in an we fourth the see that capital in we're capital towards continue industry from a building we've of the as brand. back the to said, as to is to quarter, flow-through, half particularly roll for into growth strategy our has as the of that we and it a and XXXX. really very being

Laura Champine

XX this plan year? today, that's If the what's time for stores next

Charles Tyson

that that, we've evaluate quarter, next more full we're update in rolling stores, and continuing and the we'll rollout. the in you we're quarters out on So XX announced year to future

Laura Champine

ops where need to much how if this Is you goal? contemplated so, from Got you cut generate would it. year? hit again a And there of inventory scenario an that cash

Charles Tyson

Yes.

management cash XXXX, in sales out, was performance million good I of year. our line this source working with last capital. managing comp was year As Inventory in did down big our for we down operating It XX% We pointed in the positive performance. manage flow opportunity contributor $XX payable. a job over year. in inventory really we'll see year-over-year. and same the last accounts A XXXX, get to payables proper It line to to addition did sales a to in will flow of way continue with operating be further we cash

both our of contributors those be flow feel 'XX. cash operating So in positive situation will we things to

Operator

no have this further We questions time. at

back Tyson closing hand for to Charles I'll any over remarks. So

Charles Tyson

where like our progress our everybody thank we for I'd operator. to you initiatives. QX the next look update our joining you. to you, earnings on us Thank we'll XXXX call, call forward Thank for and of

Operator

Year That concludes XXXX XQ Conference today's Earnings Call. LL Flooring Full and

may You disconnect now your lines.

LL Flooring (LLFLQ) 4 Mar 242023 Q4 Earnings call transcript