TTSH - Earnings call transcript Q1 2019 | Tile Shop Holdings, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the First Quarter 2019 Tile Shop Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call will be recorded. I would now like to introduce your host for today's conference Mr. Relations. Investor with Cooper Ken

You may begin.

Ken Cooper

Good Thank call call. everyone the to welcome you, to earnings Catherine. and quarter the on first morning Tile Shop's

me Chief Lolmaugh, Geadelmann, are today's Chief Officer; our and Kirk Joining our Officer. Financial on call Executive Cabby

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

Cabby Lolmaugh

and Ken, Thanks, morning, everyone. good

continued the in make during this of good first to the was strategic While progress in quarter. traffic progress weakness on continue by quarter initiatives, we our trends overshadowed many

outstanding for all complete During work our unfinished able the initiatives. quarter, to were the we XXXX strategic of

and the website new January our including systems stores X nationwide store as in in our went us opportunity. We ERP ability also our system distribution two new target and live I for mid-January. system to Minnesota teams upgrades. expand our office they on of our significant center business We over teams, in this be our gives our the how more Plymouth, these next the believe ERP proud upgrade XX and long-term January, team years with platform XXX new handle cannot here

New on a customer functionality sales January some issues Initially, system traffic, present X. we and, on experience this impact during negative typically systems with in unique our had our the case, conversion and our immediately do quarter. challenges experienced after POS

While in fixed by speed of in times most certain January, seasonally. system began longer. checkout up factor issues additional customer of X were our picked encounter This as a problems cases particularly performance to to we our some business up with these and impacted times

generally to quick pro not some cases times our many expectation meet temporarily speed, pro's to Our checkout believe per stores. during multiple reduced quarter, relatively frequent week, we of customers, visits of process. to Unfortunately, are accustomed checkout our our which stores first for whom we did in our the a frequency

the fourth Our in impacted Net well, levels poor systems. dipped results in reaching NPS NPS was by January. quarter of scores retail back This our March, January back. bounce Subsequent to challenges were conversion. XXXX, primarily close our in of customer After scores all-time And our in during experience negatively in reflected immediately we to due the NPS January, our expect. new saw January high to we after experience Promoter as particularly customer highs Scores was

have in in stores item system. We've to-date action place continued improvements some our hope some early May. to that additional of good currently we are performance POS tuning all enhancements we is made Our in here and testing

to the As the the in deliver continue best our we forward will look and assortment, XXXX, presentation our the to strategy remainder service be best of industry. best to

differentiation is now initiative Our one competitors. from priority it our remain points as it of will is top key but complete, assortment of product our

portion for overall total with now overall introduced sales a new XXXX these for we've significant mix. the the products our Our XX representing continue last sales climb to of over products sales months

Our results as for the stone well. to continue category improve

As for typically X are man-made for times about a the ASPs reminder, stone products. prices average selling

So support to continue our nice should provide average this growth. to ticket

key very we're the collections now as retail be in excited these last the few we retail end designer offering who We're them or present other the The partners Finally, have in our SKUs can group to recently for we've customers. May. man-made introduced. key glass serve about weeks of and by of close no and confident we stores customer available our come expect to ceramic all pro-channel arrived often last that competitor new and choices our influencers to just that other our color to the

Let me historical top for traffic to back was during turn will be retail both our levels the to and pro now traffic. factors. three of Getting priorities. by traffic quarter to customers continue our Weak driven one

for systems. account estimate We our one-third The new decline to first the our ERP new systems in traffic these conversion website factor quarter. approximately during of was platform

we was by performance had not customer the Second, the few caused fairly we poor quarter traffic in first for our consistent. at our past it looked where very delays quarters, comp impact. performance geography, weather was projects. case during it our This an When clear of the The decline quarter. nationwide the was one-third in overall accounted weather estimate as approximately completion of

Midwest markets the delivered Southern store markets negative in fact, delivered positive sales positive quarter. comp during our growth while generally generally double-digit In comp growth sales store and many Northeast the range, our with

approximately than Another that open March year. higher the important at is balance point data sales our last was order of end XX%

in some other our transactional are of like order competitors. We business not a business

also pro their the not ended able a our many are open for closer to of Many end sales function project how would of ready at orders these only of have we So results much delays orders levels weather. of are close have March, deliver. sales customers yet created If our been order been of range and we pick hadn't first with due by unseasonal line estimated orders would in to quarter. open the normal to our to more caused up balance simply but our up

is to outstanding we to service. our don't for know example with Our to is have industry-leading and proactively It's It's great they these tile a and customers are that that important duration. this action item pickup pros specified formal go. pro really pick-up or within policy coordinate the and schedule ready delivery sales that their installation to forcing orders ensure appreciate, note here our a value of customer time proposition to a customers materials

We still spent our our approximately going reallocate decision there to third million media last in so much in felt with was was year. The $X traditional stores on not that factor we dollars system final product have fixtures arriving, play to assortment that those return new media being store the delivered completed we appearing not would put into expect. remerchandising and and upgrades

We the are through XXXX. these of remainder considering using dollars

we for to greater we some she and it to us slightly primarily At brand work targeted time decades. strategy. develop carefully CRM to recent work household We internally our customer required with supplement typically with design believe of marketing greater with extensive addition and as for time our content implement enable building work as takes and as which traffic retail been dedicated to these using has marketing this income. is content been retail as customers project we last because intensive based that catalogs time, had intend will have new analysis her such and initiatives to views trends some efforts tools, have to our sales higher something we the addition, same recent and This premium our retail our this research magazines. can core ads recent the and In customer upon insight as is retail provided took customer believe brand lower This segments. segmentation as very we exclusive high-end end completed new all on continue to this product well the investment

Now keep adjusting tools data we Based the most of this have we in are prior believe and last mix did helped accordingly. mind, our in investment. product process are media in of importantly, we've great We data, the retail well most our a service we very CRM to are excellent not core new upon for all year's customers. confirm to exist this our selection customers. retail made service, with pro appeal investments considerations and wide range top and two to important the product positioned Perhaps recently value believe

some the fund this intend expense better of to these next and discuss quarters, marketing implications the to traffic. intend in how forms marketing Over we several invest a in we of few minutes. of results and more to investments drive will retail Kirk customer immediate various drive more

on in our be ensuring we have priority best top stores to third our product website. and Our continues presentation the

work products fully entered conversion XXXX This we in During we contributed At improvement extensive new results. fixtures installed the that complete showcasing that have recently good having will these investments We've XXX% seen in all certainly in mid-May. fixtures quarter, stores. stores with improved conversion to new we've the new finally we and all made can XX be merchandise believe say we're by the point, customer some our have merchandising assortment. first

brand product shopping experience efficient our more powerful on now Finally, website more presenting very with are and marketing The effective of manner, and in fun. content consistent overall our a much platform a signage and great messaging. for images customers our and website the new and our job making does in-store research easier our our and

ultimate new is on catalogs, our one through our is objective a project product shopping or Our researching over in to customers seamless she experience website stores. inspire your opening whether our of

priority top is Our fourth service.

and During market new XXXX, store regional distribution sales managers. substantial in compensation, and we both center investments made leadership pro

these on primary conversion. return. and is to excellence, increased our to generate team work Our continue in operations leverage to with closely improved all XXXX traffic focus and fully I goal sales investments

improvement I seeing will we ensure good hard some to continues. and are in As conversion that work mentioned, we

unit fifth top growth. store priority is Our

be the Our of years that new store three in next openings two over will our current to to markets. expectation the continue is existing majority

positioned. estate Our our plans of for which the six team one regional us to We support and store real sales have and a pipeline finalized well open stores, expect talent now relocation. is year trained leaders,

end the to expect year we XXX with stores. So

focus Kirk of you the through I'll Our Kirk? the now details. on call beyond. XXXX is turn financial some to and will who now over take

Kirk Geadelmann

everyone. morning, Good Cabby. Thanks,

of sales to begin decline positive margin XXXX and as As employed. are growth store capital Cabby primary mentioned, on on our EBITDA reason make well optimistic we X.X%. that for to our of remain is sales adjusted for on trends We Generating comp for critical achieve path. return plans traffic progress our us long-term some weak the as objectives right comp XX% XX% were the

quarter, back relatively bounce fell to for expectations comp of Although this sales we we quickly. during short believe the our are well-positioned we

This hitting up. was was As with that Cabby significant company Nearly we're with we out feel mentioned, We close it weather an is to a like busy close now factors either combined it to our new can't quarter stable to all ability our of and having wrapping control. orders. several implemented stores. being our in products things extremely business our initiatives relates as affected or stride

with and appear merchandising new toughest Our parts fixtures, each past stores be great the looking our signage the upgrades. and to system caps, we of are end of

sales on a growing our we affluent Finally, a From customers affluent of Small traffic team sales, is sales the make with an converting annual traffic total who customer projects of sales our sales. sweet large-sized and formula retail retail spot. be more comp moderately XX% our and our project, is our for This laser-focused customer will doing industry large-sized and comprise of XX% providing excellent service project. sales perspective, and winning approximately growing have growing sales and XX% believe a projects doing industry We mid-sized for strong total the sales profit. up mid-sized traffic mid-single-digit and pro XX% industry projects who profit. and industry are of and

serve continue group this well. We as to will

a I'd tile for SKU entire like covers and positions now provide us good, options, which project best X.X% to assortment, of and of to $XX.X brief outlook all now XXXX first overview types sizes. sales Our spectrum the customers the deliver better, were by our XXXX. down current quarter traffic. X.X% year-over-year. quarter financial decreased million in Comparable our for store sales performance weak of update driven Net of

$XX.X sequentially. a results primarily sales the increase have were points of As store over margin XX of products entered continued last first improvement from the Gross year. better of conditions. for profit that quarter These first markets. was weather impacted million approximately the poor to Gross higher our XXXX, assortment. by markets of XX.X% quarter the decrease last of pricing quarter Cabby mentioned, the much of Southern we The year year-over-year same X.X% generally experienced result less new on basis was in

deliver range the a rate margin to XX% gross forward. going in expect We

million. increased the $X costs first were Our selling, the million Depreciation $XX.X general administrative from of quarter for and XXXX. quarter expense

earnings year first and also of in We Kansas City, million in expense decline was million shipping Adjusted the and enterprise XXX costs. in of income $XX.X stores. reduction planning January, of end that million approximately quarter with closed quarter. XX.X%, $X.X implementation a at Chantilly, $X.X its million last to was basis expenses, opened $X.X system. the First a transportation share $X.XX. concluded EBITDA in In we related store the million resource with during were first quarter new and more per expenses was to for our Virginia. These store variable we in quarter the was by the Adjusted EBITDA and lease, XXX $X.X SG&A first Net quarter. included extra one expense one compared margin advertising expense point mostly including the offset

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

Our flow. $X.X Inventory fourth by from $XXX.X cash decreased quarter of to X.X%. increased approximately million the improved million fourth or the $X from quarter operating debt due approximately million

we We normalize inventory will levels as expect begin to through move XXXX.

a inventory flow, to nice million with expenditures first the and new maintaining primarily during technology some levels optimize us These ERP have quarter approximately will our and suppliers key merchandising, and our system. tools more new an assortment new leverage to Capital related available We of with tools communicate our to enable opportunity effectively better levels. and store the investments. inventory in-stock $XX.X reduce store opening were receipts investment while industry-leading good

of million to XXXX approximately capital continue the CapEx our remainder expect the $XX for year. for in of investment we to level moderate We as expect

of us XXXX. Based we've improvement some portion while based to the additional normalization working to identified good work improving of A these trucking levels, our just the plan results customer course marketing execute months, to trends. retail capital been XXXX reduce also to traffic. we opportunity is of with slightly current rate, over goal the savings the over that traffic believe remainder we that last make primary enable addition nine we have below strategy, our initiatives investments to of upon on Cabby savings a the will mentioned improve have in in-house We the and very SG&A we our In year. marketing some in experienced spending inventory believe pro including sales we our G&A activities pro we customer retail of run last over strategy our current sound upon and the sequential opportunities

retail return upgrade. Our will we update us generate investment believe we should new is and One customer near-term. ensure tools the this good able a additional CRM help in to ERP our be targeted, regarding last

material internal we report controls in reporting two weaknesses While over we arising X. XX, January are from to effectiveness on March reporting as of still XXXX, of on completing our controls the implementation ERP financial over the expect our assessment financial internal

of expect end the completed remediation XXXX. prior of the be weaknesses also We will material the fiscal to

Moving long-term to outlook. our

growth. Our mid-single-digit within to sales to internal several growth long-term believe EBITDA sustain ROCE adjusted at we target continues be those will If levels next achieve goals are margin we for and our years. we the comps sales able

expense, strategic investments and inventory retail we competitive and we XX very our level. necessary to serve Over a that be highly needed customers and the we've the all at high months believe pro made last capital to

set tools remainder beyond. believe Catherine, a return the shareholder with Finally, years and now take a to repurchase we board of has questions. repurchase are us a help dollar share nice and the few will program. authorized share XXXX of established we maximize to provide dividend over million of combination us information, ago the a We our With $XX program ready that

Operator

[Operator with you. And from Small Instructions] Geoff comes our question Thank first Citi.

is line Your open.

Cabby Lolmaugh

Hello, Geoff. Good morning.

Geoff Small

European the past website Move issues.

confidence trend the were now And how first headwind us improve quarter? What quarter. evolves seeing the So persistent the today, year? you those fact remarks through gives will the quarter? mentioned through through you you help in early that Can prepared the what traffic in second in you're understand

Cabby Lolmaugh

the there. first your and traffic a talking mute this when implementation, most ERP and we Hey, first I January. of our second weather about been impact through saw the There launched implementation. missed But it Geoff, half, was ERP Cabby. we must question. battle issue to cut part after with yes, is the that the was have significant a It

by be sequentially to traffic in systems improve did into QX and that the We're February seeing our we're see into we of day improved continue traffic as Now day. the through trend March. happy

So we're QX. see we're confident where in to what and it's going going

Kirk Geadelmann

the morning thing I'd though. think still -- is weak other good only generally -- add, it's pretty I Geoff that

and While some QX frequency felt pro and January, about here remarks our systems in it we challenges due QX, first talked with opening the past think we pro is we're just last of between traffic. Cabby's here. challenges saw QX, that throughout in of really We Cabby our with nice visits progress with that the sales comments some our said biggest we biggest to in also And and opportunity customers. pro growth decelerated year the the QX reaccelerate in our to

first hand-in-hand additional we're still of not increase with And pros. goes the where pro happy And system our frequency to said. business that traffic. still order reaccelerating with as Cabby and the that's doing is speed with So, work -- the the some we're performance, that

Geoff Small

sales the authorization, And than that's light the down That's use rather pay or that to right can in you're capital understand seeing? the Why buyback preservation challenges the decision? of cash debt regarding helpful. share us Understood. you help

Kirk Geadelmann

XX have we've like done done these a amount about tremendous feel several in We frame sort and We're we work of work. last have worth we will place, off over very in pay year we strategy good years the that over of of work things the certainly months. Well, and a confident time think a long-term.

So we program. good investment a here feel might we share with repurchase like have opportunity the

Geoff Small

quarter. Understood. in Thanks the best second luck guys, of and again

Operator

Thank you.

with Our next Securities. CJS question Moore comes Daniel from

open. is line Your

Daniel Moore

and Good store -- to for more morning. Cabby your and the returns specifically Maybe the Thanks months, and working, guess, all taking what's cetera? about isn't talk, know -- questions. of ability the the XX just next bit ERP the over and evaluate and a confidence little what's the refurbishments about effectiveness to Kirk, SKUs new going your given ERP, challenges. out what able look to you're confidence et et as to be what's six I implementation you and cetera, measure that weather, what's

Kirk Geadelmann

morning, pretty much we've new the Good And adding mix sales to are our to excited and comes monitor been it stores SKU Daniel. we how our how especially new counts the in pretty and everything perform. month out. month SKUs Yes, when they in with

we SKUs, As continue some we these tenure give them improving. see to to

and something and all we new working the see changing. put we place Shop remerchandising the after our when for And comes come go direction at So to that's going to really it time see to updating monitor in the Tile SKUs tell of When the conversion can They in it we stores, change can it SKU up. ability are all the on assortment. when the is gives see with is comes that stores, and what one that customers. that the especially to us we remodels how trends count, our are and customers the

results. see those we pop-ins see the stores, Once when the hit excited pretty impact. the immediate you we're can So,

Daniel Moore

in back How can we get around you checkout these metrics does any of they now with of to do much Okay. normal? increase? some specificity been come the when that back challenges down issues regard have handled How to that issues, those? times much And terms in give

Kirk Geadelmann

been the Dan, in and Cabby retail XX, is with she transaction, checking lines and order, indicated measure and she time we terms we're in for has XX pretty if six, sales it's on think the But his store working best her have that, I if way XX, of our a times, one into for retail design might pro. spent people. complex a typically a is with opening out several or of probably she I it's the whether our checkout of a seven customer customer mean, to and have that has she working that hours pros, staffs some remarks.

main really little going frustrated some and at picking sure. In a dip pick up when it's longer is And for checkout it throughout purchase is at a So it system much. January, at of see time our that's to pro customers time If probably doesn't quarter. did retail part she she but her for and in she is with up too the the her it where probably stuff or she a that ready husband. later notice transaction, we January times do her of not will were maybe that her, for even improved the on, probably

in time satisfaction we end a the so sometimes, -- our three, they pros And customer from times know it have frustrated little are the got them a five, of retail normal customers sort of a they're pros to retail and by when week XX takes were we stores to perspective. longer. back But the quarter, the -- our

monitor we and bit new we or impact. it in down top NPS can and frequency that we frequency to the up we system back don't in was lost down little think our that, think worked a to permanently saw We scores the normal speed while get pros due levels and got so, of to our went quarter, that of speed, on understand systems, Daniel, we And then we certainly high back any their January that biggest didn't that. increase. as And will

speed the and saw and And our March seamlessly Now to tune to speed. the that we to add more through more we're continuing customers, system feedback. enhancements up get and we worked for February to pick

we're do. they work in and we in saw it went where to said, mentioned Like close. came still believe now. my we QX, is it as were and I comments how to of scores where we right there's so, I then And And where NPS back

Daniel Moore

terms time, -- longer those any And in that of obviously back give speed Is Is end us are guess term of process it understand by normal are we granularity in back I can Just us the a we of getting where QX? -- issue? but the you help normal. a that. to Okay. to

Ken Cooper

tested to We're We've market little the week. test plan, here a goes going last over running if stores goal. bit speed in all a That's in some mid-May. up a next little few improvement a stores our to lot things -- week. of the of should And according we not have and with here everything bit, hopefully a by

Daniel Moore

in. Helpful. look given And and you the if not that's lastly back at the comps obviously. frame from QX, not and are what me still reasonable jump as and half that goal year. normal as maybe time I'll Mid-single-digit Is back in more are comps the easy realistic is something

Ken Cooper

have of got want specifics the we like Obviously don't the into get solid to year. and close rest and improve want still back have improving I you that. to others year to quarter to but well positioned a we're, we're being by to systems any we know to been feel where with feel that we're we be here

Daniel Moore

back jump I'll you. thank in

Ken Cooper

Alright thanks Dan.

Operator

And you. question with Feldman Joseph next from Telsey. Thank comes our

Your line is open.

Joseph Feldman

my taking just for Thanks questions. guys. Wanted to Hi, -- to Yeah. begin.

something quarter just even at Promoter and you that and like that it in And you'd be. Net at think mid-February quarter had on from to than targeting yet up the -- to picking indicated second understand trends positive comps even in were and half guys I the actually clear, where Did more But had point. I the time still were changed now we guess the that traffic change of back comp. comments right not Scores reported our April? what that be fourth low-single-digit like So, improved, we when the is guys -- I you to had the quite

Cabby Lolmaugh

is were we Hi, our ERP What really I -- unwind, that question. felt into Joe, issues when overcome getting had did call. our as call, we normal. speed after was back get QX new February ERP, things and in Cabby. I we our of some the first hurdles us, system these it launched Yeah, a things run March. lot hurt and business and when I for we as earnings to seasonally, big think our this Thanks ones. QX lingering was you busy we mean and increased that really And But believe. The happened

that weather Northeast, And new that, closures the top impacting. the and speed. continued not improve did of and were then so on so, we system issues And Midwest to we found in some store battle

So, call where that at was out months, next figured the we were us. to all few what we it new and

Kirk Geadelmann

to add we have Joe, if XX% had for have been order very close only is, we his in thing opening our the to mentioned levels, would I was If quarter. year. Yeah. prior estimated would remarks levels, range would the Cabby higher just the it historical only in would our back bank normal it from that about been have with line

Joseph Feldman

in is I offset us of point? it third we about should going to million all the And ERP -- the just helpful. spending. if think better platform had guys and the then, kind That's that or also that, reduction there just you you related with on and the of just all one expenses because and I ad this Thanks that in follow second the web $X it. ERP how could understand Got at the SG&A, I is wanted up quarters forward, expense we'll one, guess expenses to I other still see that guys. here think understand and some behind

Kirk Geadelmann

to goal particularly will investment most we G&A investment main ERP both important that. like and talked return target. systems good expenses as back traffic that retail the And think also, necessary marketing getting intention Joe. are our feel we the is will And additional customers. are that with because good any improvement. levels need investment additional the then in that our is where for we possible, well about, any can on, fund certainly additional really necessary, I both it It's I our our as any marketing savings that mid-sized That's get project a fund That's that savings

Joseph Feldman

Got make the you, that place differently anything issues comment have press remarks in you to come just -- weakness. did that? it. I and just but the I about additional what comment I two prepared soon, Is in, if more guys in remediated but kind had there you you'll wanted done could first that it sounds occur in clarify the And any one the you said of can guess, and material it could release, have where sneak those how -- then, what quite guess know I like up.

Cabby Lolmaugh

Yeah. Nothing mean, working a additional control place month did we'll planned. improve or go things we And comfortable we auditors really as the with the relatively last soon. from in things I have get goal. with some improvements some perspective. have control our our That's additional In just two, numbers. didn't to hopefully work to to add. our exactly And

Joseph Feldman

guys. with quarter. Good Thanks, luck this Okay.

Ken Cooper

Thanks, Joe.

Kirk Geadelmann

you. Thank

Operator

Thank next you. comes And our Justin from Kleber Baird. with question

open. is line Your

Justin Kleber

Justin site. about you remove Hey, pricing pricing since guys. question. made for decision Wanted online. to year about the just Kleber. It's Thanks on It's been the first the taking to a ask

the store feedback providing the traffic any you've back, website, you these right from or that -- that of think pulling challenges just customers strategy do traffic decision? to on related -- price gotten is from Looking that's been maybe

Cabby Lolmaugh

Cabby. Good is is, decision this Justin, pull Hey, to answer absolutely right The pricing. question. the

is that When look done very are Our see. customer the by metrics stores. and all also our is come driven price customer of going to who quickly with at customer looking inspiration. years more that work feel what were pro to obviously, customer it's And we've aspirational the pricing, a get we we our targeting you we people that realized our someone that to there people they're targeted on well core And stores, people few our mainly. for through to And back strategy. our our we that And going website core is but who how that's we then was targeted promotions. not -- there our driving

pricing was right it believe the off the I no, So, to website. pull decision

Justin Kleber

a second typically that guess potentially the I quarter that the could Thanks balance that being what at there you as at the trying of again to just the Can does the out order quarter. sit Okay. you mentioned recognition Cabby. just get Q&A the end for for up us Kirk, that, quarter? mean sense of to help end? XX% in where revenue

Kirk Geadelmann

going that really -- to and what of is think things I we Yeah, And the were projects as said, five and pretty for seen in normal to or for four upper just And sales quarter balances definitely But balances last weather-related close think at like year-over-year it add them gave market pros specific the that pro Midwest. it color with that years. the geographical ago. our it. Cabby geography, had the with if we're was scheduling in the on we've and most order range we we levels, good differential heightened. mean, looking that would we've to try between of coordinate, proactively our over to as I aren't goes number, Justin. to We we to certainly results notable pretty pick work We that And back was delayed, and by XX up. original as our is estimated up. we're I is. higher want as pick-up that, that pick but well. by gave a ready days results their the higher line was it I can it open to them are markets And order -- it part been kind at some stuff not If give quarterly looked and sometimes Northeast don't have largely force

Justin Kleber

Okay.

Now with Last had the all you transportation the you're implemented more you year. strategy something last doing outbound what's new a trucking you color just just to bit out related that in little a on decline markets? going that? I Is called sense. Can you. provide that it question that Thank that on cost makes maybe test? Is on

Cabby Lolmaugh

And route, higher we in for disappoints. route trying some we that in also last back while we Yes. the for were biggest Sure, significantly shipments year, DCs minute we service. And were not not retailers the provider markets at those have markets well. over and but the for also Justin, to getting shipments year experiencing deployed primarily I our It's many can increased as some a certain are about costs biggest going unfortunately talked that. stores drop providers where and all most bids And do particular, generally between last And last and to from are DCs in that. and but efficient were that busier search demand that lose best would early perspective. and would like markets result only our seeing customer were it our

a started for bit sure talking customer is a was good but and was really benefit. take then, we think, QX started both as QX service even see benefit this And And it -- a well. to activity in but QX, in it, also little opportunity we it maybe well. to some back we here opportunity savings of as saw obviously QX, cost some So in-house, of I when in about

to So, we continue. see feel like we able should be that

Justin Kleber

Best luck guys. of Thanks, Okay. going forward.

Operator

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

open. is line Your

John Baugh

late. Good I morning. I joined apologize Thanks.

these. So, you may tariff gross embedded year? in but the are inventory have And answered margin any apologies, there outlook? your address for did outlook or you implications your Again,

Kirk Geadelmann

been We We Good there been gross margins we well. XX% expect here feel In changes comments, that some approximately John. strategy and about good And as we've price our going inventory very my did. our feel on. sourcing that forward. articulated we've about doing good working We I morning, position.

us have We good for feel we're will that to going forward. continue and well-positioned. believe we XX%, we don't very big that So, a about impact tariffs think

John Baugh

be tough I stuff and/or you the could hurricanes. weather some is to comparisons April -- Okay. trends, have QX And are look know the there it, a there -- at had issues, separate ERP but apologies Midwest in cold way in had challenges. again, the or we with which addressed maybe don't you when Texas if Obviously you still

is impact challenges? because but ERP in has apart the from very weak consumer too is then, think doing, an just to overall had the or discern like any and cloud it Is those January it you February, that. there. us there's what certainly And to was sounds there way to or break consumer So you picked subsequently up

Kirk Geadelmann

there could. this could it have traffic. And we more experienced. boil any variables think to But largely I quarter. terms, is play it quantify many in try that down imagine again, can't so the simple we John, as we very to I best to on did impacts were

and main is of certain have a negative the offer piece, start and, with to we're we the decline systems. in just our mix said, not make About potentially need weather. a best just retail to of little And was traffic ability share third primary And customer traffic. remarks. of the we going the we some we sure factor. then Cabby's to get we but the bit get necessarily was segments traffic third that's traffic the do About let's to different what some rest, decline explain consumer think, you a to their specific the after to in number of strategy that that's new tried So softness on spending. estimate was just our our changing customer really I as And going of that a And opportunity year-over-year, extent that estimate forward. being we

John Baugh

Lowe's, flooring competitive a be way seem flooring, with And of at there front, decor slugfest behavior. and is there on little in you're of any I'm along to the how Depot particularly thinking bit the a seeing

still was you do you. think want your from totally Thank you and ERPs competition? ongoing see recover that pro. or the pro some on of kind It's business the You think weak since not to that there's traffic will your do your Is you even mentioned self-inflicted in improved. battles spillover

Cabby Lolmaugh

pro question. in Thanks, pro year was all John. systems deceleration still along. is need -- tied the launching systems, it the think and particular things weather assortment. growth sales manager work on it us events. product to then We there got we but are and improvement has related designers traffic we all new really think in was number and think has, We year-over-year it our And highest decelerated. our directly some the intact. the some that all terms pro this launching at continuing given sales increase any It's saw to market we rewards And was for getting I and And and and weather to think we And -- program, pro excellent still some because things QX factors we've we know certainly good those obviously we I feedback pro an of got improvement with have the strategy, incredible And saw better think to saw, but pros, such in great the product of last our in and to quality in year, to main it really extent on. and are and traffic new sales it better, improve positive here. still least. having

And help think get continue So, we for where elements propel all that strategy you last know year back. our should we're to pro point those those business. once pros foundational place that put to we of should that good, in I we the get part

Operator

Thank you.

with Anthony from Chukumba comes question Loop Capital. next Our

open. is line Your

Anthony Chukumba

Good question. my and taking morning for thanks

question decision that fact on the pull a bit process given time. to I thought on the back guess advertising just some million understand year-over-year, challenge had I'm for the that just to I the So, $X a a been trying has there quite mentioned. traffic you

Just kind of what Thanks. what's on of terms back pulling you're that. thinking in there

Cabby Lolmaugh

Anthony. question. Hey, Cabby. It's Good

As to going the continued fell. our strategy efforts, from and going to our buckets and of spend shifted core to promotional and change strategy marketing it back customer pro our and brand the back where

do things work money what photo magazines. saving went some different design the the So, medias into with remarks, is the with new that ourselves, in high-end felt some and here so us. something of best in, kind going invested going of of studios It We was we with the like to and that we after we is, the pop-ins my did operations a that on for internal website, was was QX, quarter arriving. we when the chaotic knew ERP, way everything in the with products

have So on we QX. as and intent, gotten was through our return decided best that I with we that investment the strategy believe wouldn't

Anthony Chukumba

sure that want ERP just understand ERP I'm guess were like sales how of like a just words why contribute Like understand completely in the about could that. I'm understand problems how you I these this? talking did that sense. time system and point-of-sale helpful, and to lot That's Thank parts talking the to trying with impacted slow, I did fact And I to obviously in you. ERP, just sort how system, to -- about weather other make pros, spent affect the was does of mainly the then, of how particularly trying that be that makes Okay. other that that? did that

Cabby Lolmaugh

was business. subcomponent system, having of Anthony, a Xst. flip integrated other all new our it's aspects POS on were POS we our a to including is the of the functionality ERP, and most we system But fully place the so POS the challenges as January Well, that

Anthony Chukumba

it. very you. Thank Got helpful. That's

Cabby Lolmaugh

Thanks. Anthony. welcome, You're

Operator

you. Thank

Our next from Piper with comes question Jaffray. Keith Peter

line open. Your is

Peter Keith

quarter. the you everyone. as some Hey. morning, you Good a question just wanted maybe around, lost some I pro to ask of -- business strategic said, in

the exceptionally in So, in I guess, looking years. margin gross reported was you've the that margin was it's strong, me interesting six to back, it gross best fact

give to to back. retain in some order maybe thinking this you about business that why decision pros so, lose that made of get a is forward, discounts to there wasn't And hard the business? And to them

give to to trust? So, regain discounts come is and get have you there a back maybe their that consideration in to people

Cabby Lolmaugh

continue pro knowing Cabby. those loyalty our discounts. is increased discounts attain other give this has while best us very to I to well our making new positioned Peter, program and pro customers, Yes, also that pros Hey believe discounts to

they that always always did our forward. are when Shop, to helped discount. into I buckets fall structured. help us gross And what our what continue to margin deserved that pro But has to and was really pros believe will gross with margin And was, the Tile program, rewards launched pros our new more discounts Now we what going get have. it enabled it going

Peter Keith

an structure the with -- at Cabby, just concerned with people have that frustrated? these standing for don't in why getting and that though, going to they're not back give guess, trouble when I'm X% minutes I getting I checkout someone you're extra XX marketing.

thinking? personally back. I discounts to you to -- have them further to I give you'll have think correct discounts, am Where think I in win that give them

Cabby Lolmaugh

And right, to have sure you're whatever No, is happy. store takes managers staff it that autonomy pro and Peter. make absolutely do sales our to the

Now, give sure visits to some bag in want that grout. you do that system is make it's of XX% understood care cases, we they an sure them gone suffering also, point. did less see the many which we away, for a that of from we point. have all can may get take maybe somewhere we knew relationship. did were frequent make we were we they that small at going else a [Indiscernible] at pro taken of that items. But point, issue frustrating off, of care you a If to that they extra money can to bag give the them were at X%, they it's What knew But not to

sponge, but So, pros, But problems, our growth in to sales sure in given we going segment. happy. it sure they're We whatever X% the bucket, us no, they're everything and the having given right. they understand they're they come back. takes their I'm make make and proponent they if made we mix know of could a the we given as off, monitor front pro were big to our to were that we sure we and frustration, did our absolutely that back -- of

Peter Keith

I'm confused that still Thank comments Kirk maybe making. some And a of the was Okay. I then at little you. guess

I to So, pick because on quarter. up the challenges/delays correctly? those the those the in come the not books, pros order weather of you I have comments Am guess, interpreting amounts have

Kirk Geadelmann

a our Yeah mean... That's Peter. right that's guess. that's best I

Peter Keith

Okay.

Kirk Geadelmann

many from just height that Chicago, their order in been delayed March. projects of like we banks for the have in We've particularly we cold Twin the to Paul, like Paul, particular. the Minneapolis-St. And be that's St. where here, had some Detroit snow a weather markets in particularly got that's in feedback part factor. Minneapolis, in anecdotal pros our the markets Cities record set have guess, And

Peter Keith

been a QX? April a does hit sales collected, have start or in strong here shift probably with then, all you that doesn't had And Okay. that support saying guidance -- would into your that of of if you're

Kirk Geadelmann

we our specifics need want think again for to able some to control That's to but everything macro, to And April where that get don't improvement. to going be. back it get on with systems our be We cooperates, sure. or and be there's should into is they QX, part and largely, I goal us to we big a able of going obviously can't if things else for see other do can on things we

Peter Keith

going QX you it's show I'm And again but Okay. going improvement, just some else, a of kind to when to wait issue settle you're to someone to to and maybe do of we that up ask seeing comp this think -- from where the have normalized do a positive marketing kick half back to the or year ERP back in now down? for till in

Cabby Lolmaugh

get I very back into internally get to as our mid-single-digit do that Peter, hard that certainly had we to I fast specifics just QX, to and we to want mean, And to as very, all QX. work comps. don't about we're goal deal can. variables to we're in trying is with the going

Peter Keith

very Okay. guys. much, you Thank

Cabby Lolmaugh

Thanks, Peter.

Operator

And from question next CJS you. Thank Securities. Moore our Daniel with comes

line open. is Your

Daniel Moore

you. Thank

customer for do I canceling? one given challenges? the question Kirk. any know this service at last to you book. somewhere you guess question relates -- pick of those you of order kind my some didn't as that there go how to guess, open else best How penalties put do pros your they it's to it all Sorry mentioned orders is, that Is the for

Cabby Lolmaugh

but is are books. question. and associates sales they penalty Cabby. our There this have Good store every with managers Daniel, the order for no is on canceling tune order, in

and about is A to continue And order store's a before. never we've that orders of timelines, have waiting. -- larger of more We're they seen more we we've as that more deliveries, transitioned jobs have have that is pro and but orders open constant business, bigger bank. individual and seen getting commercial to there skewed the lot lot a are closed them communication out, them feedback So and gotten sit. a we've bigger

has impact big home. jobs. large an residential to sitting a not think is just that these They're had I also orders they're So, that

So as that's reason part well. of the

Daniel Moore

Got you. it. Thank

Operator

to Thank no you back for and I'm showing call Cooper Ken questions. Mr. closing turn I'd the further remarks. like to

Ken Cooper

for Thanks call. to earnings listening conference our

in the and you for have June while update we're We Tile are July. a you in looking in forward on next to and May great providing of and many Thank in interest Shop our day. seeing road your

Operator

thank gentlemen, participating This today's concludes program. in you and for Ladies conference. today's

a You have day. may Everyone, great all disconnect.

Tile Shop (TTSH) 1 May 192019 Q1 Earnings call transcript