JOAN - Earnings call transcript Q2 2022

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Operator

Welcome to the Fiscal Year 2022 Second Quarter Earnings Call. My name is Daryl, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn Jain. now will call Ajay over I Ajay, begin. you may

Ajay Jain

which I and or today to statements, company company's significant revise actual subsequent the and Daryl, from and the factors cause undertakes you, circumstances. information any differ current events, SEC. that would and may the subject statement uncertainties risks good today to forward-looking results made Thank as the comments expectations. risk afternoon. or like These filings no recent the of update company's could review reflect speak to forward-looking to new that remind and include release cautionary future materially to Please obligation are with earnings statements management's everyone press in statements contained

refer earnings today, can was financial release, non-GAAP JOANN's to non-GAAP call GAAP between section relations company's financial measures filed website reconciliation to the the today management at of the measures. press the investors.joann.com. in certain and A During posted SEC the and investor with which be found may

are call I Miquelon, the from over turn will JOANN Financial Officer; Wade Susz, the On Executive now President and Officer. Wade. to call and Matt today Chief Chief

Wade Miquelon

nation's today interest wide range thanks of and everyone you, Good sewing we rollout to time as crafts leading Ajay. the continue and especially Thank afternoon in new in is exciting initiatives on for the an to retailer. This call your JOANN. our as organization growth

Our second of and dedication all our quarter reflect team members. efforts results the combined

our the loyal our of robust also omnichannel the to to and net in and kind momentum unique I our truly cover omnichannel merchandising of our Matt customers continued more driving our growth product operations our financial our brand, most the financials JOANN shopping promoter sewers strength store from opportunity offerings execution crafters. record performance. continued highlight underpinning our take but and experience, resulting factors of include also in customer other from wanted stores. will and newest Through a one Some and we capabilities significant in our are engagement detail, excellent strength

QX also percentages increase of the JOANN stack. during highest million, Our $XX.X reported gross adjusted XXXX. second on $XX.X reflecting million, our improvement to the the of two-year quarter company's fiscal operating a a margin EBITDA for basis compared quarter, in last XXX history point an was

As increase XX.X% ahead which internal year. fiscal a JOANN in in QX, profit for this plan our reported term our a extended performance, the new full of result, first took adjusted meaningful that a half from a XX.X% growth the acceleration of two-year us remains earnings stack our to an dollar for year. operating balance gross quarter on steps results our growth improved during strengthen we is terms. first debt the sheet and deliver well with In on and maturity QX, planned positions further financial we which to offers pricing for loan EBITDA

announced. measures proceeds our and new and of allow were We to we to our pay initiatives down also center of These which bank will existing used business in recently also Opelika, net our to this the growth our us a sale The Alabama. transaction leaseback support completed dividend in debt. invest from strength our policy, distribution continue

going to of presence, our Though global enhancement stages across every category. product geographic are growth already platform through We especially the is shipping international of which excited were the with expanding are at forward. XX e-commerce weeks by we will of and in provide increased JOANN our countries reach results matter very margin from opportunities initial launch we a early major

in proposition company quarter the to with second of due quarter that of intend JOANN's the Historically, leverage terms our simply Outside the can our our of later the in offerings of lowest particular U.S., the is additional of inherent to our We international breadth expect related seasonality accordingly. we other and contribution this JOANN there value and ship across rollout. countries fall e-commerce no phase earnings next to is offers assortment what business. and space terms sewing in of sales to

by EBITDA. For typically growth levels their unprecedented store QX of competitors we our annual locations. our represents across as as by or less of all perspective, one XX% well to course consumers as had PPE year major an temporary peak our an was of the spending adjusted sales Last exception of closure of due

As a last result, by year. total our comparable of sales XX% QX in increased

anomalous the beginning most XXXX. far expect year fully our the ending fiscal don't year-over-year we While comparisons was to QX of quarter last year, into by normalize January

we Delta total For comparable of large the the year, variant, evaluate comparisons basis. fiscal continue the of on are second balance performance. to quarter believe versus two-year COVID continue overall the We've from current most reported which some XXXX. to sewing we negatively We appropriate that X.X% by our fiscal growth framework categories had sales impacted solid a two-year year sales to the see trends the

revenue offset to in second our quarter, continue same compared and representing period performance. below by respond a two-year QX the reached our to favorably Omnichannel to fiscal over expectations, stronger XXXX. XX% sales the of than largely also was the in shortfall $XX.X Customers omnichannel our in grew sales this on stack was XXX% margin our X% by million While capabilities. planned

penetration revenue now for curbside total ranked now omnichannel best-in-class around third and service. our pickup Our a of is our accounts a as BOPUS

from did number of the in to new customers, up two-year the At tend expectations. in metrics customers, trends of ahead three at Importantly, habits. on basis sequential our top we customer From were newly levels. Also QX, growth pullback first sales who a acquired sharp ran seasonal or experienced their acquisition doubling of in customers non-core and and digits a our be basis, above QX, their a increase nature we pre-COVID more double quarter. during shopping retention our experience million

and such as summer time environment. reopening quarter, the post-vaccination and services activities given these engaged were the outdoor data indicates customers more Our that travel other during non-core in leisure interest

at As I the mentioned especially customer and JOANN. satisfaction proud progress earlier I'm of continued

are protocols promoter the also each arts net consistently and results, all with members' consecutive highs exceeding I have the within following of team light sales in goal the keeping customers and record the forma scores pleased throughout date financial the safe. this which crafts target of especially store quarter. these to with customer our remodels, our our acknowledge achieved sewing, returns We're in in efforts improved to appropriate recent year of would like are and and experience. transforming pro month Our from COVID

early of our store newly at our fleet refresh the stores outperforming very While net promoter initiative, multi-year store refreshed our in stages we're still meaningfully scores are overall.

ways labor stressed to And inflation. Looking being to epicenter ocean in forward, the have and on and To issue overall managing monitor that facing supply most is and is availability carefully will pressures chain costs. we're been which we we inflationary at pressure, overall the critical currently logistics. well-documented freight mitigate shorter-term effective feedstocks, identify date, despite highly continue related the the

times we half to position what historic in-stock For container strong pay perspective, we is our Nevertheless, secure back currently will all-important have average shipments. to are ensure required rate done as our that much for the as to in we of overseas be year. required a XX

have JOANN. we While it chain growth Ultimately, topline right these like With balance through turn been finally, Matt short-term, between and by I'd we will like striking we driving the the quarter in Please face JOANN near express these managing margin to and issues in term we're to improvement. call over expect more gross the anyway supply headwinds for detail. our they note customers become continue And financial also by Until we'll others to impacted value drive I'd thoughts ultimately hurricane results Ida. and create concern choices will be that to help are for tailwinds. to transient ready that, to our to discuss our be you and smart prove you all and in second engaged that we can. then, our will enterprise to team in to who continue keep members

Matt Susz

all net million constituents improved first members in $XX.X key of in per the earnings million of a diluted would quarter million year fiscal $X.X Wade's our million. of quarter customers adjusted performance most at $XX.X basis, EBITDA of you, share Wade. organization reported our I'll reaffirm and with our impacted here versus support dedication second across entire was our cover last two-year in under income $X.XX. compliment our by team highlights all $XX.X pandemic. We our XXXX. Adjusted On the and EBITDA from to quarter I second key in JOANN. Thank comments like

stack, two-year quarter an of year. of to Other first in in quarter schedule profit the in additional the projects of included basis toward slowed our had Wade performance As the quarter three our $XXX.X the a and previously points acceleration fiscal an store year. the the at in program we'll was from fiscal complete margin growth key which COVID-XX to seven we refresh of sales, approximately gross that projects XX.X% is to of second We developments quarter mentioned, the increased seven build XX dollars the first in On improvement full past due XX.X% relaunch million, as this completed pandemic. latest months third projects next of XXXX. a XXX we compared XX.X% record gross quarter

lowering credit our We rate. interest covenant-lite maturity also facility, our million XXXX refinanced our term new loan to and with a $XXX extending

we of as for to a proceeds transaction Opelika, was credit completed The generated our leaseback used net our income on related one-time in transaction gain million our that item million revolving Additionally, distribution Alabama which the borrowings $XX.X sale statement. recorded to we $XX center, this reduce facility.

of we our a paid company quarterly as dividend per $X.XX first share. Finally, public

now XX.X% just $XXX.X this comparable dividend to quarterly decreased period with color to decreasing results. the announced. same detailed XX.X%. sales last provide compared amount quarter by Net I year more sales Our by of will our million on the for same was total

second on On high quarter well driving XX%. sales of from and reminder, closures, and total year on benefited other the increased geographic of product the As as This spending two-year material customers XXXX. of our broad-based a from all growth quarter as high divisions, sales a by grew channels second basis. fiscal regions stack, both quarter competitor the last produce growth by two-year a to in sales masks comparable X.X% second PPE comparable store as year was numbers facial total unusually in last

the mentioned, over to basis a our As company sales and for a of particularly XXX% at was XX% our total e-commerce accelerated comprising Wade growing contributor two-year strong trend We on quarter. two-year business during expansion last XXX the compared basis year ago. by rate sales the same margin and years gross quarter points points grew basis to to by XXX our two period as in

by grew dollars on two-year As a profit XX.X% a result, gross we basis.

promotion, inventory optimize to to continue these We effectively and clearance manage reduce drive results. shrink

well we third to some obtain than congested COVID-XX to peak with our our ocean for the well and quarter gross temporarily for into our we expansion as levels, products committed having XX ports pandemic. as over have we season, incur To driving absorb ocean will currently expect and shut chain for from exciting which our for by introduced We season. are Despite margin rates and additional freight, networks. of those to XX% through to by and move the freight and assortments, holiday costs to challenges times of challenges, are successfully this current environment, providing products that robust selling offset factors bookings basic work historical up seasonal and driven cases, down remain in in unprecedented peak higher overseas. constraints, imported rail merchandise as customer we fall continue the cost significant fourth as merchandise being We accomplish will fashion to most need supply

efforts allow events. these key product to of stores ahead our centers distribution to All will us of through and move sales

gross While business be on value sheet, reporting seasonal impact impact the plan second in of these beginning negative approximately quarterly in $XX in our as item incremental impact million the costs we of inventory affected. heavily normalize. most one-time for third expect EBITDA cost adjusted fourth quarter peak balance these on chain to of these half, are in muted margin was upcoming our We see to much with quarter, margin quarter. more a costs to reconciling Starting one-time isolate as these costs until the holiday in incremental our the back gross impact will supply the our pronounced

last longer ability no inflation last we other term. pandemic-related selling, to the to quarter and year, year. sales the saving year. about were second by expenses in was operating and to our lower XX% costs driven store but decreased enhanced significant and are compared expenses also same We feel cost general incurring fact compared longer quarter good over Our manage initiatives second administrative by the quarter the what that last through Reduction very

is to an our for key platforms labor distribution We to to expenses by quarter year in million already two also The and West pre-opening store sales total driven in to for flow majority have the while X.X% effect expense support the as lower and key e-commerce compared held incentive due to investments seasonal our new refresh grew product wage more $XXX,XXX competitive amortization by Interest interest us ongoing strong of levels maintain $XX.X technology interest our is spring. international period. pools, multipurpose service. our in by in to ago stores those Jefferson, has allow last centers activities. to as $XX.X The stores, by we our on-track million. a second comparable be Ohio. the of of center consumer to last average increased in as that and direct same healthy to our year $X.X year, costs to fulfillment customer and us fulfillment restarted deliver quarter to employment levels last increased expenses to decline Store million Depreciation over million well reflects refinancing comp cumulative which debt and initiatives. the over X% over new X.X% to years the quarter allowed quarter versus our for increase expense recent versus and in rate been depreciation average same lower increased supporting decreased have after and closing normalizing That year rates have $X.X facility modest last growth next time and stores

provide us cost I return our maintain with shareholders, fund continue described to strategic strong earlier. a while chain non-recurring flexibility to that a and absorbing sheet the provides all We to balance the objectives supply

was debt million $XXX.X $XXX.X July Our XX, XXXX. from of long-term million a decrease of August XX, XXXX, as

our loan quarter, our XXXX. we of refinancing facility, prior latest During first-lien significant due completed a which was term

Our to term balance repay used the were neutral the first-lien line loan borrowings million our our loan down prior on sheet new partially leverage as current to to our proceeds $XXX balance of term asset was base pay and credit.

with our and extended on Our prior comes maturity of July new rate more XX, to XX terms pricing flexible interest term an business term to facility points the XXXX loan loan. with favorable basis compared

resulting the under leverage months of of trailing X.X EBITDA to debt the second times. end As cash facilities adjusted of the net quarter, $XXX.X ratio credit our XX adjusted a reported EBITDA million reported for was in less as

free further and As quarter fiscal earlier, we'll reduce we flow capacity portion of have of during cash end a the shared generate leverage our debt substantial our fourth by we to have year. our

rollout to next for and expenditures a our ramp to information we second new technology. distribution full capital million nearly quarter to the issues. inventory second initiatives by the despite in refresh store landed inventory improved initiative to complete our distribution times ended a $XX year. million absorbing $XX.X We $XX as to total with by capital be by XXXX our the ago, million of same We year million driven speed expect XX, quarter continue as quarter new additional also will the COVID We two chain our expenditures XX% store center range times up still to system execute on work drive of inventory the turns Capital $XX driven below and center ago. in the were efficiency. years our new working within what project, related versus point-of-sale supply Merchandise to X.X July year investments early X.X full costs in

dividend first was $X.XX Our shareholders record June XXXX. on June share quarter of per of on XXXX to paid XX, XX,

September of cash declared recently per September XXXX of the shareholders second Directors payable at of of business share Board quarter close on for record on Our dividend XX, $X.XX XXXX. to XX, the

specific not While year formal our at may expectations time, that be earnings did we items those this want for providing provide on revenue fiscal on our modeling some business. useful we or are our XXXX to full guidance to updated

basic XX.X% $XX between We million fully estimate $XX quarter first and are average fourth $XX for weighted summary, XX.X we for average are year. For the for happy to expected expected We preparing range the expense million and Weighted business $XX million of the and of closing respectively, supply million our capital million and expenses in expected income XXXX. full your and million. our for Depreciation approximately are basic projected million. $XX a million. and fall and year. to XX.X% fully unprecedented of shares we with the to a annual full to With shares to of take to XX.X the XX.X be be is for $XX Pre-opening remain expenditures, respectively. we'd to and global through financial interest $XX range challenges. to expect performance to million, chain effective amortization rate pleased million diluted $X tax that, and diluted An toward fiscal million season successful are be current half our the In be questions. third selling of holiday fiscal XX.X million be focused and on year

Operator

is Liz. you. Thank from Go [Operator And question America. Instructions] Liz Bank Suzuki of our first from ahead,

Liz Suzuki

do been demand? Were unable in where would table? have the think so, you. much meet you you have supply And specific if may that sales enough there were to on thank that products categories left procure of you Great, how to cost

Wade Miquelon

that say, to think look where be now, do in at COVID. investing year, - say of would good going I you lot that. We've even right last been seeing What mean, as to and QX, kind an for had variant like kind we're we've a really Delta I say pretty benefits in would you a we're we're we we would of we from the I know, been as the shape. I if are of that position wanes, position. stronger negatives in

the apparel, related Southeast for notions fast categories of in for - example, example. special occasion fashion coming for So, Southeast, very were about XX% or back example the back our coming are other

like QX, back one cosplay really businesses region. that's So, if and number that you were was look very now things tied and weddings up, teens in those Southeast because events, like. performing the pulled high far proms, to And region, were rebounding at they

So, I say product. weren't flowing start there good would actually very of

We be But expect on year. stock are again of the the and good have in the kinds of those the that to people to being businesses in are really weddings balance proms and ones able events. those dependent

Matt Susz

specifically, inventory really and between mentioned normally that in of get of sales pretty position, kind quarter XX% had probably we second basic ranging on for bookings our We think getting maintain in arise on We we and don't ton some on but our stocks good Liz, we of get like Where quarter think, those, be. which seasonal and we to late. to do question I your given is, count back some about of able have for Halloween been some. is we've half again fall XX% speed programs. job did I actually a a where done, bit a the impact good we've the

our say a would been other And thing of really the product that hurt we're sell-through was little when I there. there has strong. arrive, seeing is So bit

being bit start to we it those us a able gives programs, that little we the did sell later normally items get those for of half a So on but do. in encouragement lot of back

Wade Miquelon

was being back chains out-of-stock really go whole as really I to disrupted an There's believe our supply part decision aggressive mean, point think just after more have having are product global half. we for that I a in of versus end any definitely no more in sales. beyond, margin the know, promoting than on to you or that up

stuck So the on just again a the chain. balance pretty like nature it's given pretty supply good I of we that feel entire pragmatic, and

Liz Suzuki

years And any Halloween on core early still environment likely demand, lockdowns more Great. a this little year's into quarter thoughts last little and follow-up, me thinking tighter just ago And holiday is think lower, the bit given probably just it's is materials read a about that that on you a fall bit to likely for how be. actually which about date leads for Halloween customer-related in two versus to right promotions? was then the whether to promotional and you be are

Wade Miquelon

half Yes. is of promotional People is see I I think really will This we've on for this to, able in potential it freight rational don't and outside keep and probably reads mean, that early inflation, the eye I it Halloween, last well. kind been of ocean And very again, changing, extremely start are think, one environment broadly of good. Halloween, with best been I again back probably firstly. I still we environment. the wasn't there The but we've very strong. manage year, It's example, we're early very, that really feeling have days. on

people are Importantly very bleed with optimistic I'm positioned fall as again, into as merchandise. the - well be and which together events, do fall Christmas. that to we're don't ready well also into our

here So look at pretty good. as we're we feeling it

Liz Suzuki

much. very Thanks Great.

Wade Miquelon

Liz. Thanks,

Operator

our next from Go from Suisse. ahead. question And Lavesh Credit Hemnani comes

Lavesh Hemnani

for Hi, taking you my everyone, thank questions.

considering you provide more customers that related, are specific categories How some quarter last second I purchasing perform on machines comment those you. can And reads to strong in of you the the Thank categories as seeing, year? that did early mean were the last on those color anything results, firstly, terms in year? specific multiple on So, really QX well? the doing

Wade Miquelon

Yes.

divisions of were our our and two-year on up top and customers stack customers were new channels again, And very our up. All our were three million basis, a meaningfully.

businesses two-year our at special really more where really stack - those seasonal those be based and are to the it's the related is on business. the if occasion sewing up are it while they business And sewing events. and crafts basis, up what and need a than issues those was related and look really lagging to notions, you arts The we was picture. events. or again good apparel it a It's that's are, businesses So big related where - meaningfully call, fashion on to,

you As higher Southeast opening I most than that hits look were was that QX, businesses if those areas. at said and now before, area roaring maybe up, as back, the COVID

seeing You're those again. curb

Again on early Halloween pretty again those optimistic we're people evolving exciting. on businesses, next So We reads will are see our events. there because be into eventually their potentially project.

those see we're when to travel, vacation as well we positive. he that. here tell good the those customers we I we're everything we and that Matt starts the And probably and starts we're drive actually wane, but is so. is for feeling competing activities and is weekend actually very with kids the coming to non-core is camp as back half. set as So go been the into they where up weather to about customers. can think, forward, years, again feeling back picture start Early and go and here of pretty actually kind non-core This reads summer day and you, turn go holiday out, the school XX summer you're When now historically back are

Matt Susz

customers two-year the quite sale have craft on supplies the basis. very be your year and purchases, would sewing were what key Yes, follow-on some so the record that to seen is technology we a see bought just piece think those on machines, another say, the I materials of strong strong. particularly number is crafting and continuing of bought - side question customers of be past to their I that still

certainly levels, were not year. as - above well last as they but kind pre-pandemic hard So of as

Lavesh Hemnani

it. Got

margin As on follow-up piece. a just the

basis. I you. be embedded So, that the XXX mean should within back key unpack points items for on and up Thank sort you some Can two-year half? basis of of what the

Matt Susz

growth of some kind Sure, the that. non-pricing of that about a of third is pieces of

and an so is on clearing in substantially, there. it Really to spoken kind from We're impact of discard earlier. shrink of terms about of is a our had markdown promotional So in unprecedentedly margin, third clear cleaner impact favorable kind improvements their balance improving in and we of what we're environment. the much of

that to around past lot we we've a elasticity over categories. think position lot advantage two a promotional a of also are put I in of key the - years better take work really understand much ourselves to our of done and

really the of that's So that two-thirds other growth. kind driving of

think piece to confident Wade's environment drive and super that the ability leverage continue promotional back So our we and that into that, I point can to to half.

in of drive terms our ability be to continue and inventory our shrink. cleanliness down to favorable We

is So those. little bit We've for we import freight a probably feel margin here around we that tailwinds. XXX we of that kind about that roughly is scope this like, take few talk looks what but going back and questions with good meaningful. to assume of offsetting be of those headwind bps Again will about everybody the a dealing half be will piece kind

Wade Miquelon

Yes. said right. Matt it

is goods also cleaner. think to goods our to fashion, I because seasonal coming power and pricing if overstated, we're really it move discard, means been with have don't have memory least we only strong less inventory not important behind is it at And that's not need in able other any that it. recent

for a in a I great to long think position place just So be, that's we'll this stay be able time. to and

Lavesh Hemnani

Thank much. so you Understood.

Operator

next from Go from comes our Barclays. Paul. ahead, Paul question And Kearney

Paul Kearney

Hi, everyone. and the this reopened? Thanks is at or people other that played whether as on things main out cadence is you for two-year stack a pursuing of variant just Delta - view it deceleration it whether I'm activities from If how that the of look into taking provide just And my driver we the monthly seems you QX. sales, question. QX to a can there curious suggest

Wade Miquelon

a both. think, of I it's bit little

to our non-core JOANN, meaningfully couple Again, sideways are variant beyond. hundred of that in, back. a about, our that, starting top that's and but little You teens can surprising bit they they were in our tie customers. businesses but if that piece the at three customers so actives were XX% million new and a or came going up move, will just of you of come talked look some Again they of kind other basis new about the the of the And that growth. Delta core points now they with I

little cooped but to to other that kind So those we group a being year then of travel do the is that's do, being fades between And that think strong, very just and two and group a it's really split feel come again group things. that a historic bit. for I activities that do we up will natural, back of able kind

Paul Kearney

the and gives anything kind back-to-school And those particular the strengthen, of any there Okay. in kind just trends. you're Are the or of outlook? confidence quarter-to-date categories kind curious that back-to-work on especially you're quarter-to-date of then just of seeing seeing kind that

Wade Miquelon

I that the by businesses and and very time really driven that and arts those doing take for away are is really will said, long a all doing categories events, very, you big sewing and if seasonal Like continue crafts think well. we sewing those well, are

feel we're that event feeling to business main back stand EBITDA again do good, our that's the product we're we lose to we us in pretty really many our disproportionate order our momentum. half, sure gaining that have areas in we're inventory, made for for we have we're don't feel we to share moved make in anywhere and tall. and the is have strong able seasons We we of standing amount don't in that ahead So want share. the and - We being that use where losing and in sure that

Matt Susz

slower much of our typically It's looking time more I in Yes, for that quarter. August at the in terms of period like really second quarter, third think, kind performs us.

the significantly our we accelerates the kind Day through starting this Labor balance which starts significantly the year, see again looking weekend, fall much of what over of accelerate from like weekend, more summer. and traffic, holiday business Our

Paul Kearney

you. Thank

Operator

And Wells Fargo. Fadem our from next Zack question comes from

David Lantz

taking Zack. on our kind around international customers? you've customer purchasing is provide early for additional how of can of terms and of U.S. days e-commerce This those launch, Thanks you David the in versus questions. for seen details Through Hi. what Lantz vary patterns the

Wade Miquelon

patterns global rise demand but countries Germany exciting to different for here. others, its where I but seeing. that say think fact surprisingly what thing speak would it's two we're seeing selling countries in that's English-speaking a people mean do easier. is we Israel, of I Yes, in days, couple especially early we're which like a clearly language are the What and probably there that's including I one but really ramp disproportionate The gives

because for big and make other really The for large do able a size seeing to we larger meeting the exciting. the everybody. it's than part we're the that's order But order thing it and in again But to we're is discount win-win domestically. freight orders size what is

as across exciting which said, for we think all categories, I again seeing we have us. is purchases, are of our also seen We

David Lantz

then And a follow-up great. That's also. just

I about growth you if was SG&A additional getting digit on we're store that QX. down So the could per next over mid-single color wondering you're in range how thinking few some to provide in the quarters.

Matt Susz

basis just SG&A the trend sure two-year and growth following persisting? how I'm question, on a So, for just see our make we that

David Lantz

yes. Exactly,

Matt Susz

Yes.

meaningful anything I we've we're really don't of if for something of to us of again, from trend I and competitive see But need we on continuing think, required, to So would been think ensure lean that, labor, would kind the always we on into we so recently. that that's absent derail top stay there.

Wade Miquelon

us. What we our how big the employees pretty stories there. I that rates is I'm is, you DCEs if labor, will to if been store to them. you hard the with and kind support is have people suppose, think about been, not continue out step-ups that's paying also there an - what's anyone. difficult, off, it's versus made last they average. wage they But employees, more keep or to Again I would back, feel and us last in feel true over is you good it people of I premium we years, They to ask strides lay year, get our furlough it get do were sure and that our furloughing I couple hourly probably say and of that are - with

we we've think good feel of I the terms systemically a So trying in wages both terms made people. ability the in the of well increase as to position pretty to progress retain in as

David Lantz

thanks. Great,

Operator

comes Fernandez Advisory from the from question next Group. Cristina Telsey our And

Cristina Fernandez

talked you follow-up of Yes. two-year about quarters? the component fourth think quarter think stock the for sales. back Thank In you you. I your like on a second comp mid-teens the last achieving third In that the today past, doable basis, next sort mid-teens and of to the August, quarter in how half. is wanted light to quarters of on still unfolded for do I couple

Wade Miquelon

back dollar - gross quarters. think like we I in profit kind last see probably we're going a that be how is targeting of is the in about the half mid-teens to we're increase which we few what did

sales of bit selling know, the now, will That's margin below But that we think profit you have be see the something product settling to in there versus kind see. modeling than see it maintaining. have now two-year little to consistently always and how kind on what sales, mid-teen the is we somewhere want of any Again, I basis, to a bias just chains, off said because and this heavier we and is quarters that's of see versus supply we right the the margin, kind extent is we think trade two-year it year a where I the is our it. of stack dollar pretty we're kind way behind have not dust of, stack. as gross that So the we in

Matt Susz

Yes.

another in think, way. I

Wade Miquelon

right, freight than that Excluding anomaly, but that… other

Matt Susz

correct. Yes,

dimensionalized, seen it's think So, freight cost the months probably several non-recurring we I kind Yes, expected of where excluding ago. we

at to are well. at margin and than been we we pace much rapid be a time expansion we've we maybe bit but relative gross accelerate what I think sales bit than more to a expect thought slower slower that certainly able expected would as sales

Wade Miquelon

seen of decade. kind ocean for normal freight calling it’s worth double more last over the what of are We what we've is than

assuming base. building hope - isn't to conservative, we're what was. settle ultimately that that that's But it into I going we're but that's it and where So

Cristina Fernandez

Yes. That's helpful.

can of into the ocean expect know your subject we that you've quarter, the that just you remind you're XXXX? this should and that something I'm I fluctuations? shared us, before, increase on the much fourth as market more don't to how sort thinking for contracted On if is spot of the seeing purchase versus freight, is go capacity we would

Matt Susz

Yes, I $XX think. I that's million really think question

issue our is not break now kind even about this down, is you're So of having for well to time we The right there. would contracted capacity that needs. typically XX% through peak our be of

week’s of under can contract. we if at capacity be some fortunate, XX% XX% we're So or

which markets, need. now, So therefore but you costs we to are country are astronomical of these those to ensure right just we're them into we having desperately pay brokered get product in that

I doubled able our to rates to how think that actually rates on rates contract certainly exactly we're this we year be is we be able of to of those now contract get to to to the that for and way normalize we're normalize again, as we're ship kind on and But going back capacity is anywhere that. products get treating costs to cost. to being procured going and for close to those - able need right that be normal majority as have as we not mentioned this contract

Wade Miquelon

doing be we sure Yes, again, to you're others we're as not for just really But be well, which may the to going we're or doing is in there for gears we're complying obligations, what are going strong I'm contractual hearing be discussion in stock terms making probably there customer. as meantime, to may the we're the and which customers sure think of with in another this day. from be another the

Cristina Fernandez

you. Thank

Operator

our Guggenheim. Steven. Go from from And Forbes ahead, next question comes Steven

Steven Forbes

evening. Good

right right, Wade, roadshow long-term points out laid - how the process secular algo business promotion, about as late at growth Or the pricing, basis the you those basis any about step for points points market of optimization, blocks see if changes So, taking think the long-term maybe that a et within that been has of business and various think building it? basis growth currently XXX is XXX addressable cetera, there basis points to that the growth, would growth we factors? that IPO the impact XXX to you you back, sort of the on algo of XXX still during

Wade Miquelon

tailwind still still if we terms what just underlying place look think said we the was obviously, of the COVID what confident at pretty feel as, store space a I And of in we we're into you - mean on No, us the we our the last like. believe our that. can about growth before, makes seeing mean I it. us refreshes, I and is and year, lift share, where I all getting had And think for that take people more PPE I like

a - bit, our actually about and little is getting the right out spiking of at I up. little here. think I don't only actually wonky it. from closures, going bit world curbside being anxiety we but is we're when that - Again, headwinds again it's think see and select we're space business business these from getting XX% a opens worse, blossom people

very said, good algorithm. feeling about we're that all So now that

Steven Forbes

sort anticipated around to six for? XX you the of months, the freight Appreciate just initial Chinese thoughts the from follow-up concerns then on but the quantification the headwind long And of on running back the it year, a to import costs. I months, ports New some Year how and months, the mean say, negotiations expect timeline XX any half, sort normalization last given due for potential of of labor next behind

Wade Miquelon

million Chicago what never it systems had done transloading, that's anything Cleveland It's some and one you basically been I you for XX% in in what couldn't thing and that look Everybody port just of Matt to much. put you do shut But view. a I I you and cases, the point know view, we container ask $XX worth my and product, at about you down whole point call and to truck, know, don't mean, just think, you has capacity I probably if In bulky. XX% if but containers market more that other tell million, system, the because want really fact it's worse. can the jam. products the out have rail of didn't you this have to and of been were $X been the XX% then off system then the had, on of like and that of year point, the were at so Suez of and take derailed, came plans demand, you LA have Canal actually rail you to had has if it has $X lined for before. The crisscross do. some million just the which another and

October, So for is event ship is, lot the get over. to main late months. November, then We once kind what I would say many we of a us for don't

out more coming be where demand to capacity is coming but only on, to to going start not going you're fall. so there's our demand And other

and start will of know don't ever are as and we said, in But what thing our XXX% this more going what so ahead next our I to reset. of this get is we're be to base year. to it's the But what means paid. got And building that much we're I to now we've things next in in in February Matt through January, better Xx taking year. steps believe doing right of building forecast cleared

to We was. it will a years. never go back know, don't few where I might that take

it's have in XX%, there's online. lot booked whatever, that XX to that days, don't few XX the years, days, quite after get understand, next a through XX of think once so, the certain really but for or I volume As we for a I we've days where while. already that a we is flows then of coming way, good going But lot have us a capacity news

Steven Forbes

you. Thank

Matt Susz

that's think, what's costs Yes, going the fairly, normalizing to demand capacity back yes, though. think definitely - to is really down these capacity - drive the I I

be be able to I of rates contracted want you you're this normal on are again. going So going in think what looking to terms if retailers to when be kind following of more for forward, that's

Wade Miquelon

is give you X,XXX that containers just contract wage let's call, around numbers, are math, this a kind for where, historically, depending you I most of some program bouncing mean, to say, Just people. let's for just you where give but

transload $XX,XXX, to next last it as the checked as you $XXX,XXX least the AR into but and and top at of the last $XXX,XXX. between in months, mid-teens, And $XX,XXX, be paying have - may I high that. several know, can't on was several months you're You

but with got by that want there to feel we of not to not the want best is money is intake. made the the customer. decision we be do situation, wonky we customer. to we the position We've a spending don't it's lose lot what So momentum in didn't security our with are again, And

Steven Forbes

Thank you.

Operator

And William Blair. our next ahead. Go question comes from from Hofkin Daniel

Daniel Hofkin

afternoon. Good

the different I amplify, maybe just were could - Just bit the ask than doing clarification would expected of partly maybe understandable, Could just also were and you rank if that said sales related substantially constraint? was variant people you it part a altogether? like of seem demand but the just the what Delta in then is So, question. way? said wasn't And quarter. or order second it in negative possible, The other the it supply that just might was put fashion around it clear maybe and going was, it out not factors which was degree is sounded to quite know you activities negative part in be saying work it, sounded my a you that like also a opposite like it would first part. all I a some biggest but was big numbers little a

Wade Miquelon

XXX mean, is where but this it's basis it. points our were points I below think Yes, we XXX rough kind basis again, that to again of expectation math, on I

and down that of on. These You kind business cosplay occasion you large businesses it businesses think weddings, notions again XX% can split fashion are can special middle lot other. are our kind by that Again like of related businesses. A I like the blame of these and are apparel, by conventions. about driven of big by events, of

kept getting and Delta the variant on COVID, and of stopped delayed can You on blame and kind where delayed. things

about the again, other gearing again half, do. reason dropped a been and season of other little I travel stands events. just that now that or summer these the just able when that customers confident of things kind you it to outside that's the when I out now. think haven't bit that's time. always kind and think time deeper is go drop to come non-core up for pretty So we some out and they'll priority are But They probably kids higher I than about for in feel of you fall in seasonal to if half But this now who the heads, take think school, starting going year can, that back we math

other the sales? point think what themselves, honestly skew-by-skew, would gross we we're margin, guess I we a Yes, I business-by-business, normalize we is I put quarter here where again, about out making I went is a we're dollars inventory how smart money lower sequentially. a that back, actually necessarily last have being at great good piece so stack if a XX% So mean think have sure it. feel quarter, Again, profit we're very have And been behind that it could and from put at some XX%. out. two-year but that was to where on we paid we we driven I at also, don't think again,

you want to... So, Matt,

Matt Susz

address going think, of it Yes, think That's the business variant is, one benefit mentioned, intuitively on. thing because I'd may last is spiking really very kind Dan, be helping of I our we had Delta the assume like I actually you of pandemic the year. some to just nature what's

not it's Now don't... we case anymore, where the

Wade Miquelon

PPE. Downplaying

Matt Susz

have PPE. making Yes. customers in by large and We don't coming and

buy for are I extended masks be them assumed think might people year. everywhere. to finished last have don't You they time periods anticipating can of like they're wearing going

not - So, that's and category seeing lips very at spike, we're seeing really specific is of we're there happening not all. nose and that when

Wade Miquelon

If discretionary anything, a right, we are fully business, right.

positive fear anxious for our than more about say, variant, Delta out, people or COVID general, have in if about negative again or that's anxiety going So additional I'd customer.

Daniel Hofkin

that But the of as away of more typical like there some the summer it in is likelihood think forward? you going get kind from period sounds reacceleration we

Wade Miquelon

Yes, important us that but most then customer. very we're think for spending teens. Those million active and are that came engaging, say, those higher the Honestly three is well in customers teens and two are I JOANN and year segments that into new more, would actually ecstatic. very what I typical top the of they're last customers

I good. now, those healthy two two three are of So pick. very that's If had the I'd to to be the right pick

Daniel Hofkin

Okay.

Matt Susz

and we - acquisition new in say of customers terms and are in Well, customers again a accelerate. us. is, for - continues customers to arts typically the would lot in They're those a other addition do piece, pre-pandemic XX%, We're I new half. trended we of actually first arts our would and like what share to up of customers We've lot crafts growth craft seasonal of of and the categories.

to be about excited continue So, that.

that signs back is some customer strengthens half, industry us. more So think that some I in Yes, our got think I the casual if there indications for we've in again positive

Daniel Hofkin

just kind you Okay. of I And that's accelerate any - remodels to question updated relative can to quo? relates refreshes. profitability what might status then But what other on my year. starting sales thoughts - contribute next the supposed know standpoint and and to more they that there

Matt Susz

Yes.

So, think, relaunch our we're in Pleased, said, as of seeing projects of early of from we're done. that. we've on early kind kind Wade very the what again, I

will lifts So kind nothing lifts up indicate high to in that single-digit well digit lower the for our stores strong tier we do relocate. double to shouldn't projects of above we see

We've do to have we types see year. indication already are - planning well intend those that the those We have into next most projects our of won't the no lifts. we for line pro we are that, forma identified we with with and expectations in XX of those

Daniel Hofkin

you Thank very much. Okay.

Operator

Go ahead, next comes question Jordan. Anchorage Jordan Capital. at our Fine And from

Jordan Fine

if to and might G&A question. the quarter, you I you had provide Hi, wondering inflation-related? wage guess decline thanks for the some maybe sales more been or because was you first despite it that And the relative employees whether was kind to have guess than clarification it I was taking flat as could my to was expected why due I in sales. miss of

Matt Susz

is G&A one chain really that say weekly to operate We nothing I operator, - don't costs. average our is Yes, in our terms base DCEs. would of sales quarter-to-quarter there and in operator, of fluctuate stores inflation much it our a takes thing

that is primarily planograms. because that sale doing take in thing a sales. the on other avoid store we lot other in we on we of our our does driving half half, a reset of do we like ready care The want lot projects back in that a the projects - slower teams operations to time focused particularly get the of back of for We to occur, lot

a limited back if risk do all quarter cost. to we So that when to there half the putting don't we can in is too we of deeply, our that do sales because dip of leveraging readiness cut and for were kind you're want at amount at

Wade Miquelon

like costs of staff A are... lot occupancy and our

Matt Susz

fixed. They're

Wade Miquelon

They're fixed.

Jordan Fine

it. Got

how year cohorts Okay. cohort that follow-up kind what from compare reusables, your in last terms And the those that people then expected expectations made machine and were? demand of of to the purchases do of you

Wade Miquelon

two bit and it the with that a pretty algorithm. compares in and keep lower We the quarters were running our little months. on par we've last favorably, prior few had But

I think year benefit seem last bit well in it's last but the to have it that sales month two, were below many little to or so low, machine what there substantial forward. not be a going be would

Matt Susz

on there a than little bought these by were customers. a engaged customers And bit, machines we chunk those core of our described less average

in that did we as dip expect usually up back customer half. pick that for the we'll it that with would does see So that us, again, back

Wade Miquelon

it that and is are studies us a I've with - that into it, had seen really going this and enthusiasts space arts more than there's pandemic. crafts too. But the on There relevant tells few and both alive and nothing sewing

again, if A-game, - so good our And for good we to it's about, we're going feel can us. play pretty we continue to be

Jordan Fine

relative the were of for out And me of guys kind just shook where last the the some was for quarter? you I industry just like than a performance it it. peers to your the little of Got one for of how expectations kind viewed seem the higher rest guess your because you Okay. then

Wade Miquelon

gained we we area figure and our like methods try have particular lost probably know that definitely in every where areas, we know share feel don't any to we had we share in Well, several and to out. I methods,

different and pretty our businesses that. segments, but I to against we we're our apples-to-apples at look about we segments, again, good and think - different So feeling benchmark try

Jordan Fine

Okay. Great. Thanks.

Wade Miquelon

- of But we would benefactor the very of they one seasonal it. their who have closures a having of they've say, been we really seasonal a business, there of very good and really decor, also, had competitor have decor the as one run kind good great is one of at I player. is also a look

crafts between think good we've whatever. I able the sewing that versus decor parse versus to board. like to market But to again, have understand across I said, So you held versus different the arts feel our or we much and segments I pretty be gained share think, versus seasonal the pretty own

Operator

back would management like for this to more time, And we turn to have closing it remarks. questions I no at

Wade Miquelon

to just on optimistic about people I being off. look it here. to and for it future takes of wanted We the Well, things everybody A XX,XXX thank happening the XX,XXX, call. good very remain lot pull

not the all momentum ride. if we where it So and under promoter feel for keep think day, strength the strong we the all do our customers our we indicators happy, going a of job those employees have those we it. net And we're of do and we really at does end make to customer, have gaining on with our a in only show of that too, up lot results

you. to I it talking more later. Thank forward So look and appreciate

Operator

today's concludes you. gentlemen, Thank participating. this conference. Thank for and Ladies you

disconnect. You may now

JOANN (JOAN) 3 Sep 212022 Q2 Earnings call transcript