TTSH - Earnings call transcript Q2 2018 | Tile Shop Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Tile Shop’s Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] And as a reminder, today’s conference call is being recorded. I’d now like to turn the conference over to Ken Cooper. ahead. go Please

Ken Cooper

Good welcome Candis. call. everyone the on Thank the morning Tile and to earnings Shop’s call, you, to second quarter

Joining Operating are Cabby me our call our Officer. on CEO; Interim Chief Bob Financial Lolmaugh, and Officer; Rucker, Chief Kirk Geadelmann, our today’s

we Today’s also include issued a release as this – the over see statements of for Securities statements of prepared Certain filings Private with made our of call earlier SEC. uncertainties and obligation and forward-looking Act the the are Such statements. to statements cause Reform release non-GAAP our turn Interim in will statements. and filings of not meaning as in and statements Bob XXXX, of pursuant of Rucker. me measurements. Safe forward-looking described earnings analyst today remarks, and call results CEO, the are such Harbor the our are the non-GAAP amended. known Founder press both those our update to made do will Those date unknown undertake these forward-looking any The our subject call, be to let uncertainties during earnings Following risks differ measures. actual that for reconciliation to today materially the from provisions risks our and opened Litigation call financial and to Please questions. the made Bob? With certain constitute could that, forward-looking within call

Bob Rucker

quarter results. Good to us thank our Thanks, second today morning for joining and Ken. you discuss

to Our improved last financial performance relative quarter the quarter. in

easier half on for path. the right from year. we’re we to assortment This quarter our on product X.X% X.X% this we’re good the strategy being of being confidence basis down well quarter the quarter. the us Our same-store With second progress compares, that in and feel sales gives were in XXX improvement second as in point down first the positioned is we better improved

profit perspective. had a We also a dollars profit gross XX% nice once achieved rate. increased and We margin gross a gross from quarter again

of made We that our This investment increase customers, for the strengthen service key are Pro call. you in to with includes levels, progress our increase on outlined the the last and stores. our our making we each traffic areas relationships

We expect us. in has for into profits been revenue be the will to these costs increased continue to translate future. XXXX and transition and a higher year

upscale and sales making easier We are management field more appealing organization working channel partners. hard and assortment, product on our focusing stores our are improving shop, marketing our our efforts reenergizing our and service to on through professional who customers

accomplished far. We with so are what pleased we’ve

the process. would I continue brief Finally on Shop to of the to present focus CEO the we Tile our future At develop leadership a update continue on and in-house our like leaders. provide selection to time

go Cabby? into We’re progress that turn now good is the that opportunity team our in on the greater of would making good on to fully the sign is Cabby like who the over our our in embracing and will I call to of front challenge them. strategy initiatives. each detail management

Cabby Lolmaugh

Bob. Thanks, Good morning, everyone.

products of the that older only but demand. upscale priority Not increasing tiles consumers this was we assortment. is first our of carry, our The product total the discussed aggressively replacing last the also believe on our expansion we number involve that call style tile with we

be work by never expect progress the and of making this course, be with complete. end ongoing. quarter, but this well-positioned our will of initiative to will It We’re assortment steady third have the

every of Our most day. our product over to significant need be we top learning that years the assortment past on

leaders chain in have work the industry. ensure best assortment the planning and hard to demand at supply merchandising, Our are we

total we to peak did have of have of As we in matter introductions And decided product tiles assortment which to XXXX. new sheet bring on in which pace having pace the Kirk section. year end, than our implication continue will the is the short-term well new on fact, even number will originally elevated above through recent product are a inventory, some discuss balance of anticipated. an his what This we we broader

presentation. priority second related Our is to store

have We streams two work underway here. primary

the First, more completed These a year. the benefit during which first last margins store mature remodel in significant remodels, EBITDA not quarter, of we four-wall the seven highest stores stores of the of five the of or have the some in the us that completed remodels these years. larger, the three gives digital included have in half had more Certain of chain.

focused The second products. to our merchandising all enhancing work our on in-store is showcase stream of

piloting end the new been fixtures six past months, systems. merchandising and caps, we’ve Over

second these present our and the us fixtures in to assortment all of our efficient year balance across effective various in more our for cash ways. to customers and merchandising and chain entire in to and investment stores. it of older capital our of Some remodels with Make shop we’re help management, sound explore options. and To half enable tile fixtures investment the ensure the customers and easier the looking stores

additional even required the also do further be a entering to this will amount merchandising best the and evaluate as important remaining XXXX. we to complete display that mature the plan during refresh timing few into we vignette head second of for investment, half the more we larger believe of While year, investment we stores We’ll assortment. of remodels capital stores newest our it’s make the tiles and

Our improve to competitive a attract associate, priority our to to quality investment system leadership the third us allow high talent we to environment. in sales retain made expand labor to compensation is regional sales the and

regional regional to at field. sales did positive with the number of work very This the this leader spend each and manager. As stores’ reminder, reduce feedback store a each each has can we That from time store overseas. increases been leaders the

managers trained staffed regional who are intern in with the manager well have doing experienced levels, stores Tile Shop sales deep business. desired close who they has their a store of by Our the way of are at benefit working relationship the managed

Like we fourth and forward. one, and which win actions, retail formalize X, Number will we of recent Pro taken assortment Our be we’ve is sales continued is been Pro customers. the will them. the also December We’ve the new promotions on with several and going professional lever offered product of meaningful part new relationships last launched benefits this channel. well over be as to our to some to long-term core our build have our have we a used our the early June program. in believe at new our directed Number received we XXXX. program customers. all benefits, loyalty is ongoing The years certain include priority back by continue grow This avoid two, price Pros

Our understand provide person hosting where improvements the service more we’re shop been they three, assortment, to tactic our choose and our we’ve making providing store events in design all at to to in service. high product Pros’ goal our This stores. exciting is consistently person. level service sales our who to a Shop communicate is Tile of regardless customer our merchandising our in-store or the Number a needs is of

our associates upscale as branches has reverted their in our early Pro installation involved of sales Over these calling four, have for and organize stores The to that feedback we’ve Association. event rolled in we six that professional and our partners local and five, certain by in on events of initial market model Pro Pro path. our the Pro train our business. stores. Many validate roughly consumers. we’re National we strong the right us managers used majority on associates sales attended markets consumers. move these each of in of XXX serve. model to books XX% in months, helped we now last and us the we or market out identify these and vast top local traditional Pro from stores Pro serve These Number and tenure website of regional June, They managers former our have with pricing the product with of from competitors our focused finally as prospects, Trade managers and better all the over our the events hosted Number back prospects well have customers either channel field,

pricing if we Historically good research assortment, from navigate our customers feedback of [indiscernible] ability making. the into our our this about to we our broad to easy and feel low a happens, importance decision adjust website has come to customer to the All make Once upscale customers’ our our store. convert. will see and

results. results moving to is like Kirk, team call you fast, through energized financial we’re turn who the take will generated far. and We’re by over the now the Kirk? I’d to the so

Kirk Geadelmann

everyone. Thanks, morning, Cabby. Good

from the performance quarter Bob items. a to we had solid quarter. mentioned, a of improved couple like financial key As I’d first highlight

sequential first the First, in we by during the the XXXX. quarter improvement of sales comparable quarter were store compared encouraged to

to We profitability our the opened strong of be tiles increased new million quarter. last Including of margin over first intended stores key months to customer the recently by quarter. gross in strong a continuation the also continued of despite sales the trends and XX%, certain for that of we’ve the encouraged many orders introduced improved initiatives designed new our investments customer and traffic improve $X service. made Certain stores strategic are are emerged improve from second to to of during others XX approximately and expenses

expect strategies improve that these assortment, continued all to of initiatives in a to event long-term key are with product our performance also customer these Pro new our all program, as investments will help the mind, as Pro marketing and financial strategy, initiatives are continued improve we designed well traffic. loyalty in in While near-term. The gradually designed our

originally have year. roughly products the received we’re beginning of new the at planned of XX% the We that

in products merchandised stores We DC’s at the end stores yet the are of be on will quarter. new of or was not the many products received anticipate is However, the the still all just of displayed third these water. product by these in as

new the I’d This our assortment store initiatives now strategy sales to highlight business were X.X% to the being Net like continue a in continued addition, the to to to next $XX.X several lines financial and quarter. year-end. we strategy. important up to weaker This product the second product made inventory our we the quarter. our to continue service support we’ve performance provide our year, for months our last strategic in higher as compared during was traffic our plan of through result quarter price. Comparable back transition declined several of investments on as now and X.X% assortment to update additional brief capital to somewhat and will as relative result year-over-year. In focus add sales on our refine expense product we million one

on work will near-term to the relatively and to retail aggressive year’s promotions, on stores our continue last assortment, traffic that work be product strategies. new to our lap expect continue loyalty and focus Pro choppy We remerchandize we as our price complete marketing

second quarter of we margin The increase of in we XX our exclusive While million QX. in year-over-year million on are offerings, to mix. and advertised our or quarters XX% not as a sales as quarter the historical profit margin improvement perspective, was a the last stores, $X XX.X% to positioned was well rate second yet rate to to the two higher expect we was margin continue price is end from our for gross profit want to results, where closer and believe online over plan X.X% well as unique, improved basis that from equal are an we upon range. quarter half all be the approximately for as product $XX.X of of eliminating year our we year. to points XX% gross second of maintain focus XXXX. last Gross XXXX, higher Gross the same well for gross Based last promotions, of of of result sales to

opened administrative cost quarter XX $X The of as with full over to were for million associated for $X.X driven new million approximately of last XX quarter in $XX.X and quarter million last $XX.X general of the second million the the selling, was expense stores a months. costs year. by Our compared increase

relationship approximately largely of investments million In management of second store capabilities. compensation, addition, XXXX strategic redesigning leadership, included our customer in and store website $X our building the quarter planned out

approximately To year, expense $X we’ve the million and year experienced at total distribution date between market also will in to of this increase managers for the of and investment mean was year, freight these incurred addition original this not centers year, transportation beginning our closer projected Pro plans The million which for we strategic contemplated the range. mostly in stores. that likely financial related fully outbound higher shipping Finally, will an $X initiatives. our to our of to in $X our end million our be expense cost, the

store for back effort the the run sales due of However, second Income openings in year, of points approximately to $X.X landlord. XXXX. concluded expected rate store of we the which the an did compensation million improvement expect quarter for stores, earnings effective was to slated tax EBITDA for opening, was XXX XXXX. XXXX of to rate in from our expense share a the compared was anticipate slow company’s XX% in XXXX. and in anticipates the income planned due XXX was Adjusted Act with decrease XX% to the overall the will quarter second Net half We million for annual not margin tax Tax quarter EBITDA store due rate was to balance with XXXX the second stores, open $X The XXXX, million during XXXX. first increase quarter of $X.XX. Jobs anymore naturally primarily the from Cuts quarter third now company million of and $XX is for quarter. our productivity. the We the to $X.X The second per in the third basis was of XX.X%, quarter. delays Adjusted was tax

We Turning of $XX.X sheet. to of the cash our with balance debt. $X.X long-term million million and ended quarter

first debt approximately Our the by slightly from $X.X increased quarter million.

to million investments higher Inventory assortment suppliers, second able certain best new to than was support quarter as anticipated additional make was product strategy. originally $XXX to shipment continue to approximately the inventory of company the the for work We in with our products. of accelerate

this to our properly merchandised While of product in in we position support to half back solid the a we goals believe significant get in the sales work remains our year. amount a of new are stores,

our next higher will than much now assortment. levels remain overall year-end We refinements higher inventory inventory certain our be anticipate earlier, likely XX% for assortment mentioned make XX% months additional approximately I we stronger to year, As to as the to several a last continue will our investments stores, product reflecting level quarter approximately to technology planning Capital store be that new the merchandising will capability primarily million store and primarily expenditures that in planning remodels, processes. enterprise the on three POS our a work system were supply quarter, related on resource include in and $X during improving focused chain strategy.

for As previous our calls, earnings roughly three discussed or on historical remodel store payback we’ve years the is better.

decided return historical merchandising to the the slow in this projects of these XXXX our half While on is good, some enable second have to we work of investments.

of second, all that XXX rollout stores. Based certain As showcase we this our entering we tiles want we to have over investments been merchandising The brand these six consistent effectively need made systems store of to months. year. this to the has the message and mentioned, work our tested assortment fixtures clear of focus to all last designed and and upon new several testing convey results, we customers; First, will the Cabby twofold: decision a be the to

making we to now As the capital year. We now in handful are additional of the of of same year. be million expect the we’re believe from to spending should the $XX a of come. we of the remodels to investments now many second return a only result, this at time, many half high-end create At our million assessment years $XX planning

XX% generate than Our eventually capital longer well greater on term a goal margins greater is to adjusted of increasing EBITDA employed to return as as than XX%.

comments few a offer China to like tariffs. on I’d Finally,

XX% can implemented, to three look XX% and approximately changing products. tariffs we are If of other If outside open can suppliers. options: our we similar represented. similar we as China for we Asia of have purchases to get know, you First, suppliers China As the from come well are quality,

customer. Second, is We we feel possible. can pass it the through to this do

With our Third, to that and cost sales we in offset increased can absorb your structure. saving Cabby for I happy extra look hope take elsewhere cost and cost Bob, are questions. the operator, or can price

Operator

our Moore Securities. [Operator from you. And of first question Thank Instructions] Daniel comes CJS

now line open. Your is

Daniel Moore

a place get the are in ahead refurbishments, of in congrats to are or on having where that to I’m of out deeper an progress early the Are And regions the Want morning. into already of terms improvement for Thank there? kind there dive stood and on progress. the sales, early improvement? refreshments those quick try tangible same-store particular any any were there certain taking Good Thanks one and questions quarter quarter? stores little indication you. in follow-up. that

Kirk Geadelmann

morning, Good It’s the for Dan. Kirk. Thanks question.

across – as are I growth of remarks, bit terms in it’s some organic and at we choppy we sort things growth. of of little choppy in the as my comps our metrics, a and inconsistent good a still metrics. of just markets the our of look some We’re it’s across lot still happening well. the in said like sales seeing company our total country metrics But the as But

So get we’re we quarters, as consistency the the our as company the next of bit a markets go we out terms that across we serve over well. can little as of well in couple individual here hopeful as more total that metrics

Daniel Moore

CapEx. get to on see in do going in. been a – one I’ll year-end probably by by I Helpful. sneak impact to Kirk. meaningful Thanks. sense to how XXX One, or averages? the And don’t it And need for two, a then meaningful enough that XXXX, it inventory follow-up, beyond refurbished historic of Appreciate trying either many elevated our relative make you or ongoing the turns have it touch kind of the stores with quick inventory two-parter, a new way? Just plan tangible forward

Kirk Geadelmann

both a That was them. I’ll two-parter But Yes. there, take of Dan.

bit, doing year, with end quite originally we’ve remodels as the talked – every we of terms as about even by as stores, not the many a little In of anticipated. this

I we talked that this remarks in remodel. either still looking XXish need major to a years XX for up. bit pretty think little as We Cabby only stores alluded to freshen and As the think would open we that look stores, maybe new of well. majority would person or as the vast I of those receive end year, we last to know pretty freshen we’ll the stores. need about part they’re have the good I chain, his at they up. But five most the the average the a have those of mean By stores in

We’ll to work XXXX good year for positive year the next both we end merchandising remodel very overall, to we But year. that. And of just remodel we we’re the presentation. this we’re trying as as the here material doing and step well back about investment be to will So next feel and a on as overall we’re make as of try like going year this beginning year. store year head what the maximize with and our figure very well, out into and result store at the feel this our impact

of inventory, terms I just say, fair we’re resetting our to really inventory. of think In sort it’s

now have we have certain breadth year or probably We needed, I we was of cut think that didn’t particularly in out we subcategories. been. we should know many last inventory, – it assortment a than SKUs our quite lower few too the

is this year a this So reset year.

as on forward, our going said, Cabby every day. be we’re assortment Going single to working

last a was that learned think lesson we year. I hard

think as or some won’t work. as don’t doing this be – year. still impactful I material saw have we be we’ll as But it’ll So it

Cabby Lolmaugh

very stores rate the bring you when in bit And great. look in with reinforce and to new they those our like XXish very good assortment, the are a remodel. Kirk Of lot that These Dan, still these on mentioned, want they’re and a And the we’re little on to I’d this Cabby. pleased having comment run sound. I impact really overall of SKUs is stores that operationally our of we new walk sales. as more

and as forward. going we’re make on to going a educated better like these decision these vignettes what SKUs new I’d sell to So in put watch

of kind those investment. that wait stores some and make of it’s So on see we a before

Daniel Moore

the for Understood. color. and Thank thanks you

Operator

our And from Peter you. comes next question of Thank Benedict Baird.

open. now is line Your

Peter Benedict

for taking thanks question. guys, the Hi

I I bit cadence June, some degree, one you occurred loyalty, of about to around the a of First pulling can a lot mean talk just changes mean the I comps. maybe website. in the think from XQ. pricing more saw you the across Pro

when sequential year? thinking the the how But fourth trend think of curious approved in kind place? XQ? be about can lot assortments we how opportunity thinking should should quarter, Certainly in of and just you’re comp of be the all kind XQ, curious compares So given we the the how back about just and half of a in be about seems the to the

Bob Rucker

it’s think just Good morning, choppy. back anchor Peter. I to, Well, I

moving As you’ve lot a pieces different have of said, now. we right

we of to have operational one, confident It’s very strategies. really good of specifically impact been because it a makes While feel – our them all tougher the obviously, little it and assess, I’m about none each of isolation. in

So high them critical we conviction measure as can. Many things things, things. of are the as these all the all ones we that We’ve tested. the try to we’ve right best

look that the So from But still next feel of start as and across seeing for And lot we our – several have hopefully goal quarters. choppiness some stabilization we’ve overall, mean we’ll and chain. look over to that is we I consistency again, confidence to we some our a perspective.

Peter Benedict

Okay. That’s fair enough.

you starting slow it the in compensation turn back your SG&A, remarks, in mentioned Just store increases prepared to half. to

stable? of Just there so year. materially around SG&A that? expand the Is remain steps does down curious of kind kind thoughts of of that half that of over curious that of understand maybe or back there. you your think why if the Just the quarters Thanks. any as was reason first we level the upon can two each $XX about And overall we million, just

Kirk Geadelmann

Peter. Sure,

is know, little bit As business guys seasonal. our a you

so are year half the just we sales year, of in typically slowdown have of some a the lower of than first bit half of natural that slight just due SG&A fact the part So that that. in of to the the seasonally it in do in the we some increases back

of we’ve we piece other a bit last of quarters, about our talked staffing. as couple it the good little over feel about The

where We’re really well. we a recruiting are at point

coach a we’re we’re course, sales area up. sales the really in team, get we’re commission and added folks we’ve to where of new that – Now And trying to kind the an of their environment.

them. And we can because productivity changes unproductive if more higher. our is we’re get folks, service. higher compensation customers better the made. learn the their a commission that that getting we get are our Obviously, for their levels also offering for that It’s essentially them sales – we’d better sell, it expect. compensation we’ve of can from stipend, they So sales feet, And and because it’s a folks gives products. also some impact But level subsidy the of for to they’re the to learn our a comfort reduces their how aren’t

need it’s a But program that we think really to work. I we So good have.

productivity Our work type to new going to sales we the have And do of progress associates half the our year. in expect. with we’re work make managers regional we think sales sure of back need this we that with some store that make that managers that and the on

Peter Benedict

mean two. you if one year. around we next years, But does likely outlook. one year mean XXXX back store get you’re only not to it like more just guiding do And store and double to another Okay, sneak get something look should The to? have to a growth. just, or Or desire about growth mean I beyond do could this to rate that mid-single thanks. growth digits? you going maybe think you’re digit Or is back I where the want I few I growing

Cabby Lolmaugh

is this Hey Cabby. Peter,

growth We’re to going into a real going and XXXX. to continue on work strategy unit estate

XXX unit still and to is our We’re X% growth nationally some to up goal. to longer-term hold still XX% going targeting stores,

really current to assortment with the the our our stores on and focus – We’re stores half new systems optimizing product. our merchandising best getting all of with the XXXX going of back of portfolio the

Peter Benedict

Okay.

Kirk Geadelmann

that and get think Peter I’d topline I And and would it’s the that growth we used point comp of only on largely seeing, the certainly the add unit we that, thing been then, on back expect that’s restart ranges a we’ve to evaluate based of to see to the topline. just provided. the growth stabilized Once we function to then some is that kind then Cabby

Peter Benedict

lot a Thanks guys. Okay.

Operator

Stifel. you. comes Baugh And from next question Thank of John our

Your line open. is now

John Baugh

you. have Thank ton on Good is progress What we in making are into maybe inventory the unit more per to DCs? here. know – and stores, you sense are sample you coming? I it dollar is dive positions of dollars. having Or in the Just the much get higher? caring everything precisely this you higher the are morning – the are increase but to you congrats care, in-stock the of trying on I wanted into floor? inventory there? price the increases investments Is a for where don’t

Kirk Geadelmann

Good really morning, John. Sure, absolutely. It’s just a function units. of

up. going number SKUs is of Our

assortment – store we’d the have our assortment. have we’d the – adding most any displayed have would certainly the at that as stock and as you be we SKU SKUs in know to we’d But SKUs have We’re And the add of to samples. well same DCs.

believe the it to end increase And So comps a couple in well over compared year, inventory. do X,XXX quarters inventory optimized. we’ve QX, we assortment also for of at reaccelerate our the is as of that the main as to our get last thing the help we SKUs add certainly we last said can

we’re the putting to be. get we SKUs is the wanted And our going believe so to to best in that chance us we topline where give

little bring world in of of some our as various a little a so bit end But year. up of some why see it the and back a the very inventory saw around inventory us we of hard than try sooner, view, with at this our many we SKUs as sets the we to thing fast actually the And partners working we’re which in in than that’s bringing could we pretty originally expected. good we half for anticipated, quarter is originally because bit higher successful

our So to and our goal folks learn sales so them. we on about is on, those tell customers them new to make now sure that present that for all to the out them them SKUs, boards start about is get can and to stores,

John Baugh

went higher, SKU that lot will it what is, the higher, presentation downturn? to So is Are just in things be to I’m and X,XXX down been has still curious to increase before back we higher be the shelves still this compared that fairly guess I were understand a Kirk, whether slightly I before changes and SKUs I bare a stores maybe year. But the going inventory where not but past Or they overall inventory if the year-over-year. year-over-year, happened compared made? were getting and prior prior to the similar to say therefore, the went

Kirk Geadelmann

last at that’s – where SKUs That’s get Honestly, comparison low good where we’re as Shop. from subcategories in get is time, back pretty as we’re Yes, a within for productivity really to now, all I we last to at you this low our this at closer we pretty did which we were we’re We recent as assortment. time, said, in our XXXX, our to we peak well X,XXX the year Tile going various right were a good assortment Yes. of was time optimized. about to it about go we think as our the And going in a to back pretty XXXX, little but past overall. that assortment. look feel getting our probably lot

John Baugh

in speaking year bringing what terms these obviously Okay. is you average of the bringing are hadn’t planned again, higher in per terms And the then, And doing SKUs. later and current sort unit your you product that in then transitioning what help, point? And of new price specifically, of and sense this type, generally price price in to bringing points? sales? any you’re or Are

Kirk Geadelmann

absolutely. Generally –

bit about well, think to expect in up. a QX ASPs trend talked see we are little we going a As that And that’s our continue. I as

very not on into are exclusive We to products. product focused. going be focused several going on I’m we’re get to But specifics categories reasons. for

end, exclusively Some we’re higher But stuff. we though generally of on those end not brand – focused be be going will to even have focused on exclusive. – higher only the branded the it’s

coming good and we’re characterized also product of We some in very have as products. what tranche nice the

expect certainly end is higher and and But bit a exclusive little generally, ASPs varies. So to very we it unique skewed that really more yes, the stuff, something product. higher

John Baugh

do speed last built the vignettes, is, question a seven But we my when did you’re Is if store recollection maybe were they do targeted of we And that know, and were think turnover. to and was changing? capital is merchandise how my the in of remodeled, significant these think stores? when caps remodel. which don’t don’t and displays, years or was I this you we sort and you you My How about turns a you the of think vignettes. I talking things about do duration these the investments when quickly all Okay. over last, the about the end how about, know, memory

Cabby Lolmaugh

XX to remodel with This I marketplace the company, a at XX to layout John, is to hot use I Hey when a great And utilize today. a even just about vignettes certain too for ours. what’s because Being utilizing because so wanted changing want getting want some these the to and to look they want years, we strength stores you in that’s in vignettes salesperson for any you think utilized stuff from stay I’ve no, was has time tile manager exceptional. many you though But to customers at assortment, that’s last. could And good last the years where look is out want it vignettes, want we question. couldn’t layout at going in new hot, and away look Cabby. and definitely the you more, timeless of long was also that maybe said I been to our a vignettes core your

vignette, remodel make a is take we has of tile into things team the look we’re out going what swapping fixturing? as a of then consideration. A, forward. proven a at time? we So last decision the And lot What or cost? is What going to overall when itself to long

haul? long as on we stores. our we’re know with people I in the the there. product So and right products, looking track doesn’t sticking at decision right And vignettes And then we’re make It’s making we such industry spoil. nice with the right are what want remodel now, think in a now, influx right for to the fashion new sure our there, our to

of even it’s you these when utilize something stock, aspects we So on a lot of though we’ll not vignettes. it the can different still have wall, in utilize still

John Baugh

Good and Cabby Thanks, team. Kirk Okay. and luck.

Operator

Jaffray. next Thank Piper you. Keith our comes And of question Peter from

Your line is now open.

Peter Keith

Hi, everyone. thanks. Good morning,

the remove fulfillment. really e-comm no to wanted is to two regards. into Number website I decision So dig in pricing from the I’m more there one, assuming

me move remove world wondering, pricing the know, for confidence site I your omni-channel, And about for of we sales? market deterioration of is get So going that and But then, you the big as this the and type and the next sense. won’t of quarters? the I’m months in just traffic right backwards, what I’m coming of the be that off don’t is model, that a probably, curious, over taking how maybe kind see can would picture, headwind makes XX might in you maybe this trends X% months also comps/sales business

Cabby Lolmaugh

Cabby. team lot stores. a this We to that knowing on than is a much the as when of exactly advertising, that’s advertising special And we And price, you’re more we online retailer. is Peter, price are the a Yes it Shop into Tile tile. a want research a made you’re people our get The decision a was price. after specialty

to much tickets, the customers. it’s And our customers more going the much future. stores in drive decided – traffic make stores and ASP have only for for convert larger to process in a are a to our higher don’t to as to we greater more the ability and I knowing think better the regenerator so team it’s impact us – our website our stores, when a at

different materially than months If you very look it ago. our was at six it’s website,

you is just So higher the to was feel inspiration. look overall pricing of great it’s It get a at it. and not removed, to place is it have look end

go of one website, to stores, anyone inspired no our into out deciding to if their come and be is home, in do a want our there they’re to going to renovation they to So doubt.

better So part and we a as position our that’s not specialty I believe, in a little higher those are of game. very good a to price we ourselves retailer decisions need market, end our as online, more with the don’t selection, on

Peter Keith

you of, headwinds, that you just assuming because you sales did Or be would think that should a So maybe mean, stores? the type before? And e-comp about forward? have I some don’t going drive is fulfillment headwind to we there now, modest sales

Kirk Geadelmann

is Peter, Kirk. This good morning.

I your It’s think modest. I it’s assumption is fair. relatively think –

We’re as is about adjustments be – impacted. of our we’ve online, that talked going you make the some to fulfillment

be customers. for will fulfillment still pro there However, our online

for We our removed prices customers. have pro not

of Our program. and Pros for both see all products assortments, part the well as the can as now price get price the the as of our loyalty our they price regular that

we’re So right e-commerce. away are completely not But from Cabby’s on. comments I think shifting

know, and Our about and to service, about is about both product and price fourth the it’s core customers. factor, our list strength is it’s unique, you And create fifth collaborating and it’s on timeless. with channel as that’s – it’s a very homeowner it’s but for something uniqueness certainly our the partners or

else of uniqueness broad So to that we want variety and we service lead we offer the assortment, no other that’s that one does. and a product believe strength with things

Peter Keith

there has questions. And I remodels, then few enough. wanted fair a the been upon to Okay, circle

year XX. seven to-date So of if planned done beginning the with the versus you’ve the

XX to that the products basic you just maybe the So display which get explanation? better this remodel we order want the to XX that appropriately you’re back vignettes, a in to interpreting to had in that of new year, is it pushing you circled sense

Kirk Geadelmann

exactly what’s That’s happening. Yes.

on and bit get are going very which them pushing – we ones They real first get successful thing is we’ve tranche, year, had be older. are roughly The that months we believe, the back. a in little planned, and new But not impactful. to a need to XX skew everyone We’re They for that it’s stores, investment return that believe the they important and did them not of most did the did first very, this through ones I we the year. of ones a refresh. good going the of done stores think to much is that their stores, the as understand remodel skew we’re we second six they other the larger. will Most

pretty a the even feel those little we delaying following good and next year. So into year bit or getting about those

Peter Keith

Okay. colors from designs. stores there, And just that one large fall as of a some tile is travertine, which still have I display there’s to seem and guess that of fairly concern bit little we vignette well generally robust investors out have hear if the out-of-favor, more I is

that stores an view be does taste some preferences work? some has Or those You tend assortment and travertine that such does with regional guys issue? of stores heavy the still to

Cabby Lolmaugh

see you’re my right. years. last is the a little falling like but things And as and certain shift travertine, category couple learnt back years here we well. – selling still bit travertine several it’s favor we’re or products or – in marble Well, of that that of I’ve That forth that out with man-made

freshen we’re little a say up we to refresh do that’s different. at look first fair type store, while going bit a little our that, something still of fill and the it’s to to probably we to that So maybe vignette plan if bit

Kirk Geadelmann

very travertine And those at vignettes, styles. of good you design some when mixing we’re at up look

– usually almost not it’s never. So

travertine going find transitional of you’re accessories, You just lot to designs t use to they’re help find going that But find straight the as a relevant. mosaics, vignettes. with we that fusion, travertine things see going keep different you’re it

customers, like some or travertine, some or the the love but marble I that let’s wood don’t of that That want I appeals style So something that. throw Well, faux customer. vignette. use to [indiscernible] introduce

just different color I like the not So transition displays. something natural I have stone we into maybe personally customer travertine worried a can having and stone. ASPs about higher

Peter Keith

question Okay, guys. great. One last for you

that extensive to letters going as the be? of that type bit little investment. disruption? three you give about Can mentioned a think any joking something that How sense but you I’m us analyst ERP strike the into a that? Kirk, is not it of community, hopefully it’s which fear So timing Is you causing on

Kirk Geadelmann

We’ve slowed words why company. just really Yes. the time we needed it’s unit the It’s the something we feel our acronym, to down – we thought that growth team we out right That’s like try spell have use rather to Peter. here it’s this year. the a for place, And really, in good I do. than

have we capacity So some internally. extra

So it’s time. just right the

and got to well really is, POS of capability, – as year that. through on And going as customers. part there’s We you’re always things better – it focus supply somewhat as persons we’re through be is obviously, main know We’re mindful some But stores going you there’s to our things of transitional systems. opportunities hey, our chain of a we for our have make here.

some changes. making are We

are We get we’re executed, need to and that. system confident make team And outcome. we’ll these well in doing we some upgrades manage changes have to including we’ll so get of – that the all the we’re well that it and sure place of

Peter Keith

one And last.

that when exactly for new the the Kirk, ERP live? the so switch, do questions. all goes put you Sorry system

Kirk Geadelmann

this will Peter, that be so year. year. XXXX, It next be not in should early

Peter Keith

guys. very for Thanks questions. good so Okay, my much all answering

Kirk Geadelmann

Okay, Peter. Thanks.

Operator

And question Advisory our from Thank of Group. next Instructions] [Operator Feldman Telsey you. Joe comes

line Your is now open.

Joe Feldman

how what like exactly them just and yet. change just you’re guys. I’m But talking about Hey, fixtures, the the thinking about earlier will remodels regard to personally in share were can fixtures you Thanks that displays good you With that? haven’t I and new how seen the – the little morning. the call, as and color curious more are

Cabby Lolmaugh

Cabby. fixture Joe, we’re question. a our different utilizing Yes, to display this Good boards. is

from As you maybe walk a four know, nine when stores, smaller could anywhere display you boards. typical boards or eight into a to section larger X-foot

and of in going sure square count SKU our have want increase store. footage our to we make assortment display that is full the into all we the With and on stores stores the

way grounded We want that because to us. have proud our very a figure keep we’re of and get all out board that’s successful to been we the could we where for boards, still it’s something

of will it’d can some the the and just rose. out these space more same gray utilize able display we the drop to into board We’ll drop new fixtures be and where So board. in take double effectively, the these go

a will still it. section. It’ll see get going board. into be that to you we’re able every every X-foot be board, It’ll on more tag but still So to just all have price grouted

some fixtures utilizing of to our end specialty tiles like the going into upscale on That’s We’re all tiles and merchandising photography, end encaustic caps. well photography, on as different display well. things cement-made we’re also as that stores utilizing at such as different caps looking or that, with new

you’re photography So feel in. better when more different to to it, more little and they feel assortment look walk at. you quite with looking a do put The boards when impactful of I consumer an in, walk higher how to get upscale, and is, going the

that So we’re excited about investment.

Joe Feldman

I about helpful, where this we’re to longer is? guess, cycles, the consumer are and what always you. guys inventory? going And are tends be just bringing at like to that fashion we transition then talked a the on what’s that embarking – thank Because demand more – it part That’s in product follow you on of cycle there is of in that’s new that to in, feels the a point I sort how behind it that, have stylistic? it on new and recall shift Is guys you

Cabby Lolmaugh

Cabby again. is This

differentiate lot the a to competitors. we getting and from lot in there a groups, found for surveys, with source a isn’t what unique of yourself today, As we our good a really talking of – lot Pros, your marketplace with focus lot to of styles work designers,

world, going all see from you’re our what newer you over lot a to is stores come more newer well. the So to in when everything patterns to sizes as XD from tiles color

bold see to going bright You’re colors.

do story going a else have no Museum You’re going and is down to up collection. Where Albert have that come that the Things things from? to road. The they one see to them.

stone, ceramic, I come pretty arrive, and excited watching makes You even these happier. watching tiles that’s man-made going be And porcelain, unique. on going everything, week, every to out sales for floor, the the the to new go we’re to sell we’re source – me them and be I get Tile Shop,

from apart going yes, – blog. to we’re it’s everyone So ourself set on the

Joe Feldman

ask to sneak great, more the I stores. could If That’s in. want I thanks. one about just

upscale have support of are moment the the you right to are those slowing I are understand kind stores like have, – trying in the to locations of Given go what enhancing know right to store original the lot I’m at the guess, strategy XXX again? but in say, right I stores, spots support you today them your you they the focusing though, on growth it? down more to a – – are this I more markets,

Cabby Lolmaugh

– Undoubtedly, is have we concern yes. no there. There

and our at, destination the If is stores going you a Shop where you’re to Tile look location. notice they’re at

had and Some talk top people down when a the his that’s of any and our sometimes historically we performing successful and They retail. years yes, that near lot go years that nowhere top today. of with it something chain. ago baffles this been sit created stores and through have it’s of it Bob are the about And strategy other

and sites, we So apart. set to that potential continue look at new sites us new markets

a high-end it’s say, or to to customer more go. how project, wants and going to much to our Pro need and do going when call affluent this a cost to So a see Pro is where to is they’re going you

we’re So pretty happy.

Kirk Geadelmann

thing locations. I’d only different a it’s just what Cabby Joe, as The that there, have we – of we like know, you to – add to said have variety is

them. many some of real bit just for off beaten high-traffic A a like the a But Cabby be successful to continue often through our things path. of stores It’s to you a focus think traffic Pro estate, stoplights more little we’ve as the and very about going Grade have real customer, said, is of convenient which retail and Pro then want don’t bunch We are customers ours, areas. as our And retail fight not that. to most

why location locations bunch explains beaten are of a bit that by some for path, little our competitors, the reason one the more that a are of off us. often a that’s think I better

strategy real very feel good about estate we So our and our forward. now estate real right moving

Joe Feldman

quarter. Good with That’s this guys. great. Thanks luck

Kirk Geadelmann

Joe. Thanks,

Operator

And Chukumba Thank our comes of question next Markets. from you. Loop Capital Anthony

open. is now line Your

Anthony Chukumba

Or of you’re the X,XXX of of guess, we that new my end believe, over new And new terms quarter? the we Thank where have end SKUs? at XXX it for Thanks. that I’m are where quarter of to question the my end I’m Was Kirk, were – SKUs and more the first then the first the second sounds call at X,XXX just I at of specifically taking questions. thanks by the of a still a the of warehouse it I those of – store. that? let’s we over Maybe and going on quarter? year, think guess, in it bringing that SKUs lot was you – that’s assortment? in, the you be actually are of you’d quarter? way. and kind less was, I at coming the than the X,XXX these were to I mentioned mean, course just in or second triangulate that? end third the I on that that [indiscernible] than the sort do to the but their in quarter. mentioned end trying you comps have new with water the the SKUs XXX And like of

Kirk Geadelmann

the question. Anthony. question, Yes, fair Thanks for

beginning planned originally that So there. year group of as to of if at way – XX% we for at remarks, SKUs the look this we’re prepared the my I year, of that in said SKUs, assortment our about the for bring you the into

DC in the In SKU, the possession. mean and In it’s in the it’s our possession it board. our terms got of we in hasn’t could store, it it’s could have mean to the yet our store quite on

sales product talked way we cases, on the that’s about, our process. some In the the to present important Cabby water. still on is As very the board

that in So By end there. of XX% in we million way quarter, own our all $XXX of be the the It’s we’re it. inventory product about stores. the will third and of of the

will in interacting it, originally be our year we and buying And Our of our at in bring SKUs it. that be inventory. the vast of customers also it, looking will selling the and planned salespeople this rest to the majority hopefully

at addition in In also to the strategy, our SKUs. continuing that, assortment look to bring made some decision we’re to and additional we

some feel be have higher quarter, want pretty and still We’ll like we everything we of pretty we solid an the should And they much perspective. to serve and third we about a very pretty little little our have the position by year. but we’ll really at product going a talked from try to bit, sell to stuff some get have we’re going want after in in our assortment high level be the than we’re to in able to so a unique. to be be that where that, And as But we’re to originally customers going back end we view, that anticipated. to good a improvement In and buy. to

Anthony Chukumba

then Got quick just it. follow-up. And one

I initiatives as mentioned was know, you you products the adding of sales the the look influence any divergence well. mean, is one But seeing market marketing versus XX% in comps Pros, your So I rest non-Pros? they’ll major obviously your at about I and that – of right in of your high I seen Pro working. words, as you sales significant you managers. have other mean, signs Pro initiative Pros say, kind mean, are directly of now, comps direct to any your manager are

Cabby Lolmaugh

markets very We chain-wide now it. some at is Pros a it’s Anthony, it time some we’ve know quite to base, for it’s our the a right We’ve while we looking for tested the question. decided program and is are and this with time customer and Cabby. growing. segment This in very, great to Hi, been go little important

based So price. as a with my more with I’ve it’s having store based the on tenure as and relationship communication on then said Pro, before, manager,

Pros right the strengthen contact we’re and we can we have that stores all track. know of if a relationship, on of accelerate to point that around all So our for

field. and So new those funds the Pro happy. of this manager used to some market the we’re market Pro fund eliminated in kind of – we It manager title

are these closely. that with for it Shop So been quite us watching we’re employees time. some Well, Tile have

So they operate and makes how us we do and we business know comfortable. exactly it how

Anthony Chukumba

remainder the year. of the it. Got luck with Good

Cabby Lolmaugh

you. Thank

Operator

for Cooper And to closing that Ken session remarks. question-and-answer conference today. concludes over for the to like any turn back our I’d

Ken Cooper

quarter Tile Have participating look Thanks forward investor the our of you Thank great then interest We another morning. day. your in this for in to quarter for report outreach. to Shop. earnings strong a third of October. We forward look rest

Operator

the day. all disconnect. have thank gentlemen, for and program, participating in conference. today’s does a conclude Everyone, great may Ladies and you you This

Tile Shop (TTSH) 19 Jul 182018 Q2 Earnings call transcript