Arhaus (ARHS) 2 Nov 232023 Q3 Earnings call transcript

Company Profile

Participants

Wendy Watson	executive
John Reed	executive
Dawn Phillipson	executive
Steven Forbes	analyst
Seth Sigman	analyst
Maksim Rakhlenko	analyst
Jennifer Porter	executive
Jacquelyn Sussman	analyst
Peter Benedict	analyst
Jeremy Hamblin	analyst
Jonathan Matuszewski	analyst
Cristina Fernandez	analyst
Peter Keith	analyst
Phillip Blee	analyst
Vicki Liu	analyst

Call transcript

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Operator

Good morning, and welcome to the Arhaus Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal remarks. Please note that this call is being recorded, and the reproduction of any part of this call is not permitted without written authorization from the company. I will now turn the call over to your host, Wendy Watson, Senior Vice President of Investor Relations. ahead. go Please

Wendy Watson

Chief thank Chief Earnings and Reed, joining Third the by Dawn Arhaus Chairman they session. prepared Good be Q&A and will On you Ecommerce with XXXX joined Phillipson, and Officer; Call. Chief Porter, John Officer. me Quarter After and remarks, our morning, Jen Executive for Financial Marketing today Co-Founder, for are Officer

one please follow-up. question limit Q&A, During and to one

press today. queue. you and have XX, please within questions, for ir.arhaus.com. issued of call hours. quarter our our release If are A earnings the return to XX-Q website the at XX on will We XXXX, our the Relations before Those additional ended available available be website our replay Investor September market documents open on

events, risks remarks trends or events As today strategies, constitute statements. to expectations, due and of materially future concerning a Actual objectives, forward-looking reminder, number uncertainties. may results results or a differ

these refer additional of summary to made as risk by in SEC. with our in a For forward-looking statements statements. company on undertakes cautionary and The the law, our factors statements subsequent as update may annual and Form are updated factors such please these morning's be and filings described XX-Qs revise may report to factors time as from or and press date, release time today's required of the except and be the XX-K obligation information, to no risk this

non-GAAP reconciliations. press includes non-GAAP release refer We morning's certain the to financial measures will this and also relevant

to turn I the will Now over John. call

John Reed

our quarter strong to first us joining for performance. delivering for call another you I of thank and Arhaus everyone, out thank and across morning, want teams Good today.

ensure asked why first-class will the find enjoyed our pieces purchase why furniture, incredible teams the teams all produce crafted our all artisan proud have the ecommerce our the designing and people. of to our growth via the reported that inspirational quality, across and and Thank with are delivering make love heirloom at the continuing teams and home. very grow product-facing consistently third company of demand that execution for clients you. and that of The in-home are a their elevate delivery can in channel so and that I'm you is functions. comp We Arhaus brand client-facing are be the a in and that our testament and quarter, outperforming industry. generations. developing is to The assisting spaces you. special of XX.X% pleased We showrooms of to passion beautiful our and vendors working of have our Many to support furniture experience to

of are and collections expand finishes. livable aspirational home their the brand love Our our clients dreams of and categories some experience where creating shareholders us have We introduced, into most ever to luxury. allowing these where to of new popular can can new new locations collections Arhaus we clients new their expanding imagine

and our reflected performance. We our are this client and in about is products experience, our passionate

and net XX.X%. regions, million, income demand strong experienced and with of We margin with X.X% $XXX a comprehensive all of million of and revenue of EBITDA margin net $XX include $XX highlights products a across of channels. quarter Third million adjusted

profitability. to Moving

important accelerated by Conservancy. Nature and communicated saw and cost driven reduction our we year-over-year As earnings, openings expected donation related new primarily last the showroom quarter, to we our in expenses an to

service. final provide an our Some key enhanced hires that new grow initiatives mile and elevate will and include I'm experience continue excited more in-home to to as experience delivery processes new designers about we some client this

of business on and opportunities where see we focusing trade XXXX also are in We beyond. lots growing our

Turning to the showroom growth.

will This X opening very showrooms, Beach. week, in Gables, this one and Gatos, new of bring And in we Florida December showrooms additional We year-to-date Las tomorrow, open Coral plan opening to New Newport to X Desert, year, traditional a and X busy Huntington California our in then X. York. have showroom Station, Palm

that due new between and that the of there our out the We see I perform delivered of how in income as statement revenue. remind and showrooms are lag begin the you financial gate, hit to a client -- and to to showrooms purchase our timing wanted our makes client is we normal right purchases when recognized a before is benefits very when proud purchase to a

showrooms Additionally, growth after months. again comparable opened reported after growth our and for they XX they months been comparable have in been demand are report new are for XX our have reflected open

focused showroom a investments in Oklahoma with our collection City. support inspired new begin We forward on of our globally are look new X approximately continuing heirloom crafted have another These to furniture, new development In making and footprint grow XX renovation studios. to plus XXXX to to artisan closing, and future Arhaus, you. and locations growth the showrooms, journey look our XXXX, or the outlet to we the footprint relocations, growth in new expansions growing share to excited to across to locations States, I'm tremendous X years design new XXXX, are finish white at sizable new projects. about showroom X to as X out Angeles the new our of to continuing traditional expect with exciting with openings we and to showroom on new accelerate annually X I showrooms design targeting space showrooms we traditional as X Los growth showrooms for we excellent new quality to into and to X are varied In several United our are future. studios, and and the our locations in continue many expand new

it Dawn. to over Now, I'll turn

Dawn Phillipson

Thank you, morning. good and

The elevate showroom was primarily increased $X action to experience. primarily costs, the quarter. X.X% and increased higher gross $XXX or margin as and growth very with As as X-year and growth price we we expand as delivery margin percent comp receded to John costs year fixed the sale our revenue costs higher our up delivery net showroom a basis. million on XX%, income pleased a of performance. points with product and net basis our in QX costs. are million Gross showroom items X% quarter million, container to when from decreased a XXXX XX.X% XXX third in-home X-year third decreased the with include versus Key decline that XX.X% margin higher products due delivery described, we $XXX X.X%, quarter a costs decline was basis statement higher were fixed Gross revenue reflecting on stack of our footprint last XX.X%. Demand of comp comp

was and The increased support million. expense donation Third expense increased quarter demand new of to $XX Nature corporate higher Conservancy, to million XX% primarily the to to the by and driven related SG&A showrooms selling the business. the $XXX increase growth expense

Third quarter the decreased million. the to in quarter million third income XX% million net XXXX $XX quarter XX% from in Adjusted of decreased to $XX $XX EBITDA XXXX.

XXXX. thinking our Let me to we're now of and about the remainder move outlook how

our net XXXX of have raised adjusted this outlook to year-to-date As reflect and performance. net our year full midpoint income we morning, we for EBITDA revenue, the announced

$XXX an $XX for release. Our X%, This XX% $XX and full million, to fourth $XX revenue comp net is million our of implies income adjusted quarter guidance to the of in million. press year a outlook XXXX million $XX EBITDA million of net of of outlined to decline million to $XXX

comp Our [ ] low the demand same in range. single-digit growth is

up you release. our please Thank like all refer For for your questions. for our to and other results the press details call would now open we related outlook, attention, and to to

Operator

[Operator Forbes Securities. from first comes with Instructions] the line of question Our Steven Guggenheim

Steven Forbes

Maybe trends mentioned you just low to demand single the start, digits. Dawn, up

through strength demand just about that rephrase we you've over here and the next quarter backlog the income here couple us quarters? statement to should the work think expect we to seen maybe and fourth or of As through the how guidance the year-to-date, flow

Dawn Phillipson

backlog So through backlog, year. abnormal a by a that we us the lot months of better the And forward.So information into this handle really what granular we've has we've of enabled end kind the on had in that's started that spent few is more time the really the the to of carried digging do in do backlog what than abnormal be to past. XXXX and is get result a over been last expect

strategy, So in to backlog normalized we're really outbound capacity, feel a our inventory pleased us. that our have higher our reflected available few buys. we with really There's about we're good that. seeing the information a We for number reasons that

really first prudently is we're component buying newness. The into

might not. which to take as because clients also we newness, good in we're a off are collection, wait some don't particular exactly know a bit thinking So might typically finish discipline pretty We're which about and finish longer. deploying willing little

we're So own to bit and being forward in over of backlog we few prudent what purchasing higher have newness and a That going certainly but in flexibility. preserve working our seen capital last years. kind some assumptions, into normalized will beliefs the we've really result how

The often half Â– that showrooms showroom the second opening, quarter. and that number are about high cadence even of and heavier number as number back think fourth piece towards a we're just driving opening opening the normalized we're that's we we're a of backlog and is weighted higher showrooms the in in as years

weeks. -- you X next showrooms opening earlier, we in talked have as X about as So the we've

of just normalized backlog a that carryforward year. as So we will also this in exit result higher

when engaged today normalized between recognized timing perspective from the would a it's demand whether is a a occur of when of are in component. clients those. in and of certainly home-related through light who then number showrooms call refresh And is in higher a robust piece engaging the deliveries a whether net and flooring, paint, about think you renovations, higher as that's revenue, that there's clients just are I that are So versus out more backlog there's volume rolling projects it's last

also timing a is client So a preference that higher backlog. there's normalized in resulting

deliver that about of we that the of year. next that we that there again, then would will number, would will also by as end year's million the which $XXX have then roll still entered the into next majority revenue, think And roll component normalized of we is normalized product abnormal but backlog to backlog anticipating into a The is abnormal, this And just about was XXXX. expect backlog. higher So that year. then year,

clients prior. it. about in So they homes what is higher XXXX we getting and perhaps to their was the when product and like lead than a in in But backlog little good be going general to feel it number bit really times client

Steven Forbes

Maybe to just around focus it A as and a predictability John. pertains for retail you follow-up year around or margins. growth either lot sales X of

XXXX us to those relative stores performing targets class if margins? how as XXXX the can forma sort sales is of was I productivity of to inform the And pertains pro targets or thinking us and pro remind those it as So curious how maybe you're forma about you class for well?

John Reed

big, in well. business. We're lot our And I are we been can happy profitable the very them that. we in. will we're very They've that are same. Thank at markets question, above to a we And midsized stores are on we stores, To more that capitalize where lot of performing shortly Others board A certainly the well with the we your group. you. new see coming yes, very big always here are the or answer of expectations. whole find in happy new markets think take we do do very, with.

welcome. You're

Operator

comes with Barclays. Our Sigman Seth the next from line of question

Seth Sigman

mid-single-digit was really first around average you My about a Last price decrease. question quarter, talked pricing.

some were potentially here? from are did in changes view on temporary pricing that how How your continue. What's that there playing think there. play is I just would out? curious, that I'm out? factors other There

John Reed

take Yes, I can that.

all some that spot hit container and little the think, aggressive margin we pricing. with any thought we pricing and the across we're up higher just and some our It performance. so Dawn pieces.But we our down I be We've we're forth to be point as of had at where a this wasn't of could before, selected with whittled cost, the go And board plans. seen perfect and certain right by it a at mentioned kind with sales certainly we very competitive more that, now think collections, as very, to was happy means. on we on did a we inventory

Seth Sigman

Okay.

to freight start the have follow your quarter the you pressures costs? about some of should that just savings could that And think of to this question related of come How to back my we going pricing do And already? lower pricing those point. industry to margin, understand up on Are those on refine forward? through through. that taken you others think more about trying actions. the those see that kind lower Just that? you How or steps around Is follow-up is then pricing in also sense to gross

Dawn Phillipson

the there's said quarter, in freight we as these like mix So price to that quarter, SKUs talking gross anticipated.So a second bit think towards not we And these of we shift margin third from reductions. the that be would we couple a product the of exactly what versus felt through things are were flowing the the more reason price that is about when the anticipated. pressures benefits caused primary offset the mix skewed actions shift, we that had some really originally as

price we at saw clients So items were those points. these really that resonating with

the mind as there takes the keep compression than third bit that through is forward margin s to and some is And unanticipated that So bit delivered. great demand to. through related think was that gross to bad that a little to time had thinking at I a we're news The written, P&L great faster in as we product and that be anticipated quarter. is flow clearing wanted demand news we that time. go of we in are the That the

expect that delivered over that the pieces impact we the not to mind next as inventory of quarters like product then all in few would through would these keeping from some is be being we're I through. So margin and

all higher these is in selling. And of lot So price costs. they that factored A guide demand just at receded were this that will we into already. keep on, took actions continue mind then the of products those freight

is the an added then on from and competitors industry-leading. just we proposition And excellent and We So monitor doing. they're perspective, there. still believe closely market piece our track what that value

really that want on and we remain it that we be. So to our is making sure where proposition focused value

how with comfortable So in moment the at the positioned market. we're we're

Operator

Rakhlenko TD question comes from Cowen. next of Maksim Our the with line

Maksim Rakhlenko

Great.

versus how can end price other new took products first, versus So of you the frame core you came the from or strong on? demand life the that of much in XQ of some actions products

Dawn Phillipson

to that want granular. We get don't

then than a important I responded with Jen, the be we bit we're on the think about action different guide asking our in -- everything to have quarter, with fourth well. and report it the September forward we move campaigns the you to demand add price little regards really you'd that handle clients.So XXXX, with you're like guide faster all as components marketing that what's anticipated. SKUs. for a campaign? on resonated to a note marketing factored inventory the is that factored that saw and pleased And We have any But is have we to certainly. phenomenal do context good Clients with into the to and will it overall, as did

Jennifer Porter

that campaign. pleased Dawn just had Yes, fall point the really, emphasize just really our to we're of we the made, -- results with

to incredible and So both and see catalog our of driving response consumer and traffic end process, that, purchase saw site fall products.We're at also of with launch our collection engagement August of continuing terms new those really top the to stores sellers engagement that the into and hit part really, just in our there. to price weren't collections the strong ongoing action onto

really with additional truly clients the business. Mexico, a to As resonated and August for you the our incredible being that of partners storytelling and one in now. we our QX, top collections down really able of what may in telling our has story makes been detail early was well vendor performing Rooted about with which remember, ] [ that years of one share of knowledge couple And launched campaign that of special,

health with both the across existing client and really, included happy wasn't seeing category. we're those to also and really we're product reacting clients new product fees, but really in and new action the both price that excitingly all happy that So for

John Reed

doing we've Yes. product if great. to had that well while. of And current new that, that product the then as Max, And just the well. just on of is existing seeing top as current home slowdown run most, add The that any product something a a product, for had not has a on the I'll We're been we've side. on product

mix we're certainly really well. and happy on resonating So whole leading doing we're edge of are of but it, people are the the with side We products kind think design our product. with core

X last we're the years, Over up XX%.

XX%. so And you do that see on you can that, people last products. if up we're the like almost our math the years, X In

on we we're been cylinders. and a here, hitting it's So think nice ride all

Maksim Rakhlenko

Got That's that very And that last it. you sticking helpful. just with made. point

significant feel share. awareness meaningfully term, to used medium outcomping still over meaningfully trending? as the go where market your in you And think And you're direction? that levels behind sense So now you're move how can and are that is of then you What starting you right think your the taking you peers I where that do peers? ultimately, do surveys were

Jennifer Porter

The Max, is We simple Yes, answer great definitely think brand our is growing. question. yes. awareness

are driving I number a think factors of that. there

the are new into new way #X showrooms to and I are are and aggressively before, Arhaus to general our First year.As open been and next this and that clients mentioned new brands. the showrooms continuing we've year foremost that showrooms opening are in discovering be going

So out that's new in We're these markets incredible building opening the spaces really what existing on to and really are awareness. doing focused up increase markets. pleased teams with

people In products, was our addition John just really building to like they're to responding what saying that, off about it. of

been that incredible on continue the discovering are aspects on making friends Arhaus through sure way really an And of to all focused is #X recommendations quality, that clients on and teams experience. new clients Our service, have family. have from

special We into able being story to the of telling reasons hard us. to proud product that friends to then neighbors come. ensuring we maintain. very It's showcase are something so sharing much and and into are that and really important of. and love incredibly the happy one the for putting with brand work effort is they clients So on years that It's is really how our their really so we're are to for focused truly their families

awareness we've that, incredible been think before right I had years few addition ago. doing In of and that. to X decades years lot a brand last We an for things the for opportunity

incredible We continue now. to awareness have opportunity brand an

new continue long really as better making progress a to that. are But get open stories. our there's to very up telling us We to we continue do we for good to continue at towards that runway showrooms,

creating showrooms get there. continue best We at the experience. that really better We to omnichannel showrooms know out our are

teams Our we've we are through bring experience digital great we've a we same to years, and job and working incredible, few our health.com, life advertising, we think to and channels. hard is but how that. really continue so and all really have to team working more come. to through really through on last social media been over I'm those And online, about done of emotional can that connection the at the build excited much that

Brand short continue is to potential huge that the growing, in for grow future. answer is yes. but awareness So to

Operator

with the Gutman comes of Stanley. question from next Morgan line Our Simeon

Jacquelyn Sussman

outbound I point is any better I past This first, couple healthy comp. [indiscernible]? in despite into getting a lines, low incrementally Jackie guess, translate is quarters Sussman very single-digit on comps comp actual capacity for demand issue I the guess positive demand at Simeon. negative actual those the comps? what been will the or along guess of has

Dawn Phillipson

over working how we some around systemic would North in does have have time. inventory is really are regards some So of allocation that good the any with we alleviated Dallas and doesn't made is as planned mean was less we've originally we mean compensating the point bit as of Carolina this Dallas delivery that and it that based The this a through. changes that by than outbound Dallas it kind time. several But last that components news what expect what in at in to Dallas.Now talked productive particular months, we we're productive constraints system point past still Ohio that off capacity, had quarter about and

for regards base the out different. to the good for mind the there. the in of news With XXXX keep the demand that that's and the comp, comp very coming comp are base So

much So abnormal half. which if the you remember, we -- significant all driven was That -- the pushed year, backlog of backlog through pretty was million. about $XXX in second last amount the a

to how in we really is But skew that, numbers resonating, math our perspective. marketing keep our a So mind that from demand, baseline good the points. touch about going our feel product just is

will kind numbers So some next we as of the number year. lack this of normalize backlog noise normalized shake in the out and

Jacquelyn Sussman

in more. And can if squeeze I one

cost lot than at I on anything came in -- adjust the what efforts there in in were of there on intra-quarter for seeing the do line independently Just way quarter you I market you quarter? was think were of least SG&A a expecting. on environment? that based you the the reduction were better what this guess seeing done SG&A, Or broader is what any kind

Dawn Phillipson

things our structure to of to changes We're business. a to it evaluating off how operations changing hires can we're flowing. fluid. a could and dynamic but are from constantly be necessarily number, be and specific Things based drive just cost new timing cost systems Not are just anything of and deployment

good feel have about still place. I expenses that in the we So

then the of or we we in perspective. the the the significant made what accordingly business, just changes relative systems in have quarter would SG&A quarter anticipated to of flows prior. changes will any But through which P&L that based shift shift Some haven't a timing how initiatives off last general, from

Operator

of the Baird. line from Benedict comes Peter question next with Our

Peter Benedict

First commentary margin of question action mentioned some response items. forward. you the the And and on look the is gross of price we just to kind as

as quarter third have thinking be next kind quarters? new over lot that my that's a about of stores up. out we a obviously the so going question. few kind just fixed You've occupancy of curious of Just we baseline got first I'm look the Is level that XX%. of opening, costs that been should

Dawn Phillipson

gross Yes. Peter, we guide don't margin. to

happening margin lot item. a there's line things I of that think in

to action.Delivery that were before any container want few think, received higher action then the a cost to kind price That costs, inventory related get I we product being to will of work additional into. really First cost. that we we it at are the investing where SKUs actively to something through is be quarters the take price the take

we delivery to we any particular experience, sure And on our that want the we're with is think as as really about really in-home order. entering seamless beautiful So make touch client last that, home. that's point experience their the and

So joined really accordingly, we've will she ago, about had great an X to She hired the Final-mile. SVP of us and ways and ideas some think experience. really months elevate invest client that we

So of we're results on kind that with side the client of the from the to the we experience that will business we're a and over to invest that in date pleased seeing perspective, continue then, mentioned several next have showrooms. well. John exciting earlier slate we store are quarters. as new rents as showroom that pretty for the And the -- next year course, opening we of a

top in keeping in any line months up benefit. prior XX just to to to mind roll start So that expenses those

are today moving little you a of a target are all bit A California. them those opening think of lot that the as it's with So about showrooms in expenses.

and will do we'll quarters. have come to that then nice over And showrooms in. be But next the on some are rent see so expenses, start next heavier additional several top those in those we rolling line year we

and the encourage just about. takes of So I those puts of that think you are to would some I kind guess

Peter Benedict

the for a a was down just CapEx year on then bit. The little CapEx And and taken question of plan kind cash.

that. driving and then you point But not front. this look is there you're understand want XX% kind time kind you I'm of us a is a just the on just end market of do of Maybe something to we good cash, And there curious at Or cash sure thoughts at could at help was to in position with balance quarter Just is curious, cap that. probably your over this? be where the of in. in say, your that what

Dawn Phillipson

possession XXXX just really as timing related timing we are through of spending start spend about and showroom which when as locations working we're showrooms, and reductions take when of CapEx on we So think those. opening the we

So it's no change just strategy. really in timing. There's

we back next the year, flow it's into business reinvesting balance, with the we cash a on as to regards to So then growth. between years.And look focused out just are for

We a of white ton opportunity. have space

mentioned showroom opportunity. could a and and build have as in of really we're of that kind program, John dig at opportunity which We lot that the business expansion trade looking how beyond grow well. we there

would say we on is the the to organization. more to use return a are on nice that internally of having I drive what lot come for but that, best a So of discussions capital

Operator

Our Jeremy the next question comes line of Hamblin with Craig-Hallum. from

Jeremy Hamblin

Congrats momentum in the strong business. on the

want quarter. the business up I versus performance in business, And back ecommerce to come to X.X%. was here So retail down your XX% the of the side

powerful business?I of of to store business understand, here significant the about just side in saw pricing retail Just in digital interplay you maybe wanted pretty on of terms that ecomm channel thinking QX a your between and kind a of channel. more and the in Is your the actions that reflection of reacceleration that specifically. pricing actions being

Dawn Phillipson

the what's So Q remember reported a off to in really I based of delivered. from you that encourage would channel perspective is

organization, more But really valid. around that with deliveries. about demand certainly, the commentary in said, kind the being just of timing some So underlying your trends less is of of

it pass and ecomm to I'll So the about over can Jen she drivers. talk

Jennifer Porter

pricing I traffic, digitally. to respond your clients mean, strong we're to really, price actions really strong with ecommerce. engagement, see strong strong pleased do and them, conversion, sale we products find about the displaying team and how on on call on actions focusing they in.We last merchandising they react also really and We definitely are seen site. point. If our our to We've spoke come sales

there. engagement pleased the So with we're really reaction

how said because and on to that Having great product there. and response ecomm with easy and seeing incredibly digital that, that ecommerce channels really is section seeing really find product. seeing that, our So full channel. think directly. that are that We're sales product do stronger I for We're clients definitely price a engagement are happy sales responding the consumer to all in our It's on it more with shop we way product great though, ecomm see on that it's as retail well. their prevalent. and to somewhat in just

who some know that continuing of journey that the or also We clients point, are purchases retail in our at that making our majority are ecommerce showrooms well. as on ultimately starting journey

been but ecommerce we've the a So a that one healthy site business It's channel of look performance. omnichannel happy, a really to last not a now, the continue growth all and couple on few seeing relaunch also about going of for going sales forward. we're with the we're year. we're presence looking as And We're overall, But growing to years since to the strong of out that. focus things ecomm channel, our the real QX years only been where at, is that uplift business. continue of as focus ago about happy really our teams talked we're building to has total at our and company really

Dawn Phillipson

taken would And mid-June, that, to with really action in add I that the we even AOV. we've just that lifts price in seen have nice

of core was and kind the of think So business of newness kind not that our price I lends to that also strength actions.

John Reed

up in thing those clients and stores us, last ecomm we as see as find just business areas, And is we our ecomm new go on way one new open well. these

and order web studied online. well people they and the the stores, already been renovation We the ways. store as they on forth that stores, home so have forth. ecomm new stores on and drive know in and goes and so business people it our it into have go And come things and helps really products the come both the So because sit

the So it stores the business. happy in we're with really ecomm very performance of the conjunction and both works and

Jeremy Hamblin

here. then around noise backlog. And Great. Still question a just significant clarifying

kind had you So about commentary, million. last in excess I that QX backlog $XX of of prior indicated year delivered was think

the written if for of ] it? backlog of so of you midpoint of that X/XX that you the that we however are we your look And you if would for kind kind at apples-to-apples? guide X/XX of versus normalization business the be kind prefer have implying obviously, and backlog ex of Are characterize delivered.In to growth, or positive order here year terms QX positive upside [ adjusted excess last

Dawn Phillipson

not to This clarification fourth of the little than the we half so backlog QX. That into point pulled portion that through over I that $XXX was one was of we of QX of the abnormal million anticipated keeping spread year. that $XXX quarter. mind Dallas $XX The backlog backlog but million the strong.So anticipated bit a in hadn't that 'XX. of about is $XX the So due in million million quicker XXXX, expected the year, flows second and think only of last of abnormal in opening was balance was had I the million, backlog that think in is $XXX

backlog So clarification which has point just there, to a been know a I bit folks. confusing

So hopefully, bit that's a helpful. little

backlog in about still we abnormal fourth the year, quarter will think have some As deliveries this this we of year.

bit of backlog XXXX XXXX I little bit in backlog. from of against noise a of So a think in little noise

just clean I be the is by all through normal end be business XXXX, have year. can back then slate really think the this of great and news cadence. it a a we to And in that we'll

about hopefully, feel I on? there that. your more did answer we that question? So can good Is elaborate But

Jeremy Hamblin

No.

the year, cleared sounds be it will backlog. end it the of by like through the think I abnormal

Operator

comes Our Jefferies. next of Matuszewski the line with question from Jonathan

Jonathan Matuszewski

one just the guide. First comp demand on was

a could kind Just in demand that in us of justification seeing of reflected give off XQ. and for conservatism single anticipation is Curious curious October digit the December? you you're that XX% by just in or November what strong comp in slowing of coming whether if low

Dawn Phillipson

very with pleased, guiding with the we're low third saw the pleased to in So that digits we October, We're course, quarter. for what we're was comp. really fourth the demand above which of quarter single

and will taken be this bit we that little cadence the we we year.So price year, that overall think about for as had not we're think November actions December, in we product comping last promotions about we've the a portfolio, in some strategic just November promotional of being November. and in As June the

said, of that being keeping to resonate. years our in for the macro being view marketing consumer, in our resonate. That several in just conservative mind, quarter. happen I general along of continues around just may which, kind with the So now. what guess, product uncertainty continues But The to fourth persists

everyone business demand pleased not we're we would I a what holiday-driven from that also So a perspective. with remind are just seeing.

or that's holiday sofas significant driver a have most desks folks business, of purchasing not a holiday aren't do our gifts. we While assortment, and as

So just a little added context there.

Jonathan Matuszewski

on That's the for my potential helpful. follow-up question membership. And is

offer this. competitors your of Some

the your 'XX other argue backdrop could ideal on and hand, consumer to the for the housing be But would in fire. on clearly not You that. maybe launching brand is

be are would the a you seriously months So membership than say ago? aspects you that would to more you And you're attract that? couple what less more if of pursue it, contemplating or to you were likely

Dawn Phillipson

Jonathan. you, Thank

But of new that is we a new over The better would the going strategy years a we're little until kind So bit we're pricing right have few model? keep debate to we of a close we -- of to lot time for have think one question discussing the have into. the internally active pricing deploy want I is a deploy And to handle is now. a when moment. a looking we on a to that of vest model them and and at membership what several pricing our strategy,

So engaged actively you. what time model pricing our absolutely in and this point but should that at we for nothing strategy be, are note pricing what in a to agree

Operator

Our Telsey of line Advisory the next comes Fernandez with Cristina question from Group.

Cristina Fernandez

a next about talked you couple for of comments, your year. on John, initiatives

the think I were interior trade delivery, new business, there process for designers.

to you if to businesses? I going on exactly see those are differently? to wanted could expand sort your So able of what And are thoughts on you being what grow do

John Reed

nice focusing that Yes, really Sure. trade we're in years. growth business mentioned, couple business I in is of We've the the seen one on. some last as

can the of us there. of We we outside they white service basically space businesses, there's have give finding so think own we're shop. These members And a them if responding one are need, a to who kind do come to really one-stop trade that lot and they're their it's they well.

a or we I think business.Our or we own years added interior started X that great don't designers so. as program, ago So know, that's

We it. continue grow to

add demand. up the just with keep interior more can't signers they to because stores continue We to

So we're seeing stores we some really of mentioned, stores new nice renovating the the growth ever opening company. there, than more and in we're focusing history on are that and as as more we well. Certainly,

When see driving to store move we new a existing store the in see time. an old we open our well. well. sales new with or as a we that on the as great those So or design Big renovate design we model model, lift business

kind things which So product, the the of mention those we're the about. we're X all furniture, what is are focusing on, not to

team it as -- and We why and product. were. about an resonates you with well team, sourcing think we've up product us, And show incredible do that place business product and a product to that much business. furniture a continues have If from new we as really better come right. buy grow. got continues We really great it, them, right, make a it we our off to our And design team with deliver their homes People we're when that's in than that's to clients. we they we execute

day, every focus as we so the product well. And on

Cristina Fernandez

that product in out? you looking the or others outdoor it's you're XXXX, On side, any categories expand call any whether to to want

John Reed

the all across looking categories. we're Yes,

can on house and we we shape, happy grow a how at one products during because that it. How SKUs living mentioned, it. COVID, With very it products on those say, size, room of focused everybody's the a different we really outdoor look the have room, is on and been needs we been grow continue is finding then we expanding is with to room the that, kind configuration. a great each a the dining business.And to As everybody's different room lot has great of the different we've grow fit you -- growth it in can And business? really and of

and the have a product X in see And expand as nice generally up then we coffee our we it working, it's size so to a one that then So carry on and sizes, then product love. if and or sizes conservative, we it and people table in it carry forth. we we start in and lift we different jump SKUs in many see catch we'll finishes rather even

the So grow to that's well. a way business great as

Cristina Fernandez

one program last the and And see you just could initiatives. company's donation did sustainability whether you as I the going Should time? the talk this to others. about recurring think is the or can broader a we donations, organization next we to then to it's Or wanted of conservative to other kind same about nature if year, see one question. be

John Reed

Yes. lot that. on a of We've had debate

eyes now, right help repeat of we a was kind onetime the we're to don't know, didn't But XXXX if here for to world you plan. to burning With compelled is now opportunity we really that our As said, all and that pass our in the we did. It up. don't up. can. always guys think budget feel And internally, plans in that we have any what we we publishing right keeping the want But I open. soon plan Dawn's that have

Operator

of line next Our the question Keith comes from with Sandler. Piper Peter

Peter Keith

here. these where should do think hear then being your to on weekend? Labor you How Day advertising. holiday visibility holiday about number the peaks just to weekends. around I do the upcoming success Labor back extend, continue see of Day lower. guess, advertising your results weekends for your carrying wanted days on opportunity you And Nice I weekend, reflect that in we troughs and extended we about think being And to of your more strategy industry-wide, I kind of around bigger forward, and valleys

Jennifer Porter

Peter, good question.

So is that as of around see you we those there, mentioned, happening. environment out still selling, lengthening times again, the that heightened promotional key do

the Day. We results with are pleased Labor of

As few in part we do be that stage, to want very driven. client, the we have consideration growth our promotionally who that spoke -- last where And subset calls, of of that's about set. our on is we growth

to that forward way. year the any We pulled promotion being promos the the lengthening forward last Dawn we that mentioned of year was are So similarly time just last of marketing earlier to are as in for in we not Day.Looking November. over really Friday anticipate accelerate our December, Black November and expecting Labor happy do to promo earlier,

in look October Black year, out we're brands this Friday of their If seeing happening in you the there. industry, so start it's definitely promos

to expecting the not are I little to our last year. think see expect last accelerate we promotions Black can conversation did promo actually similar decreasing are But weekend, we that what from earlier So you a did we Friday to about bit and what year. around

Peter Keith

back implied guess I Dawn, guides that that press you're my And a question quarterly, QX know the we into I second release. be you've Okay. And an but detailed guide, Dawn. to not came company would in even

the sort be lot highlight a terrible brush take help donation. decline get the margin of is my QX, you margin worse pressuring was wondering the demand The without in trends margin timing and QX And is the that of less it's decline in in these to it the declines. to everyone a million there's are decline of what's in right of just some should to back ideally maybe margin. just quarters through I It heart great, just come question dynamics the of margins but for with as strokes step and if that's And we meaningful for now.So was XX. the get like the trough QX. just noise than in QX the $XX going could seems So your in

Dawn Phillipson

nice delivery. and So backlog mind impact, on keep had from the saw a margin in significant some year that leverage a a last margin perspective, really Â– we from rate first,

In inventory. from said inflated look just the related and when always have near do at we'll but us. we've the inventory there to forward term, comparative.As that business. those actions kind of then timing the And benefit. have we years took, entirely the looking we artificially linear Showroom as several have So will over we're business an and occupancy expect think for we're for really clearing the it June in as the opening just will quarters, cadence to the thing term, impacting going have continue and think about about that long may persist It's right timing impact expansion, end-of-life the next the be we perspective, a through rightsizing we will what's which we're continue that about, excited to certainly, price it's certainly year that we the to next -- margin as be not well. strong for

to we're we taking we grow scaling the beyond does that near the all $X reinvesting sure about we're cause think $X of organization as efficiently. can the into, billion we're term, back that compression. more In business our it areas of really So make and the that as that from to billion some time

trying in-home just to little that you So and delivery a the think talked elevate mouth, time, about the a we're the on that. awareness about great, experience going as of impact have great word Over how to that's bit we business brand component.

the we investments we to product that about talk to business often which as important the about SG&A, think drive As within we're about exciting to in making as us. think and showrooms, as office, the really but isn't back very it's

warehouse thinking any always about deploy little be facility, that, as that's we're a a our as facility our Ohio the like deployed there management top time there's our in will bit we're year system Carolina So North system line. this we looking next deploy noise in in of in -- year, quarter to that first

critical about going from great ERP, bulky, also operations through think vastly which we inventory we linehaul in and us We're and think products process systemic perspective. bill can us to just the a heavy, close products, really our visibility a conversion materials give process the drive from facility deploying We're going just a is some a allocation have there to of manufacturing be planning to making moving to very the our for perspective of on network. for efficiencies large sure expense of for do very our about very which critical the software, in also is you management components. few and as inventory days working system, to you these warehouse be to If that

financial And top the a right for So to really to trying expect the will right things it's we're these the term, be, lots excited margins. do But breathing do though, little the term, near really think, I of room to going ourselves and bit we're give continue compress from of as whole. the a for great We to the long client. term, going a to that's great organization, things line, that for But longer organization as really in we like expansion look perspective. things. what grow

Peter Keith

Okay.

and that X big mention you round the with backlog growth appreciate you did dynamics X to all coming I get timing but Just out, and in. investments, stores new

of to trends? on visibility declines So best the QX, sales as again, worst year-on-year the your potentially of the

Dawn Phillipson

yet. We to for guided haven't anything XXXX

I So fourth that out get my significant kind would be in component But want feet quarter. don't there. quite to the over the math of the indicate year-over-year certainly, would

Operator

Blee line question of William Philip with next Our the Blair. comes from

Phillip Blee

speak past the can you've about profile a changes expect you locations ahead then versus opened? made a benefit direct for years also physical the quite but had prepandemic showrooms productivity to several being over levels, to a the from that to maybe location, new Given have them bit inside year accelerate and square refreshes, we on on foot per maybe these higher continue experience? bit And rent a should big

John Reed

I lease decide do our and only In but we again talk a years I in renovations the sales, the driven furnishings, made that, if want them and folks X how about design back case, up, come and move also do in, we Sure. But can renovate looks ago, We it, a had more. a again we a we'll our more not they way come it's we dramatically and when move we when customer user-friendly just just in store bit.So more things the store. ether as do studios, up to lot emotionally if see doing want -- keep that fireplace web impact clients normally, will and not, quite been we decide to think all warm comes on store to leases working. we as We Yes, we keep that changed will lot the to of up, love put walk in mentioned, it. put the an we it, the as store up the tending we've rooms, designed the things. we a renovate we've stores. order

it's So a been nice, nice change.

product we lot think, 'XX. believe, coming in of I this have past a think lot a lot renovations I of a up moves more, year -- and and

And where brand the our just to looks elevates better, And when looks to the just it good very thing. better. clients a So a it's buy it product it. tend point

And they're never new So it really, look all time. us the seen our competition really them, when our And hear to hear of think come We kind the clients we'll into them. it really truly way the they've sets as new it. into enticing years apart stores from in stores people we certainly, is all and well. away anything come walk blown stores like for because that as

it's a So been thing. very, very good

Dawn Phillipson

other kind leases. just perspective, out break rent And from a do of tactical showroom we our not in filings, versus

number, rent there lease that for to center. you're that seeing from is rent computers distribution that in to everything So number

So keep operational kind strategic now mind that perspective. a of in from

showrooms line, bit more opening from showrooms a rent a are top do will though. those a believe have that are We expensive We that higher perspective.

we're the opportunities So an investment perspective. from looking at very holistically

Phillip Blee

showrooms rate go-forward more price inventory. balancing the and versus quick quarter. then new And new declines of Can we a color How follow-up. cycling one this products saw some maybe action should you about SKUs? on the provide cost We think higher through bit

Dawn Phillipson

continue inventory assortments. to through So we the work

still on I X really think about still focused were handling we're inventory a to how we have an over perspective. from bestsellers. feel years, of a -- little inventory last bit do pockets our through bit assortment, that the the good continuing We core about feel end-of-life work We good haven't the newness. we long,

viewpoint inventory we're we inventory to the and our processes. which strategic to that continuing to be.And a planning rightsized to we'd to we have approach. refine our work -- the get organization levels through like So the continuing them new where planning at And honestly, take

that, through. clear the that we feel planning more good So to we're our to as have overall, allocation on software inventory, pockets also some come planning. trying But software forecasting working and with recognizing some about we're to are deploy still demand think, do I pretty regards we to we

Operator

question of Our Vicki the of America. Bank with final Liu from line comes

Vicki Liu

This Haas. on Jason is Vicki for

third The the first to is related the through question quarter. cadence

strong the you see acceleration campaign, fall did the through quarter. given marketing an third So

Dawn Phillipson

the of the acceleration an months Is the you through third are referencing of quarter? question? that demand Sorry,

Vicki Liu

Yes.

Dawn Phillipson

just that do very it So consumer overall, went make and not not much, pleased lot we because the those feel deeply with one campaigns out a I response yes, those end the pleased to strongly too And how I of mean, month. certainly in But of does mean product. a to and quarter know into we we with are we're the performed. think parse catalogs August. try out I our marketing invest

Vicki Liu

coming think that I up. then as have compare for you does the next And to about And we the year, selling about great pipelines think this per openings we How expense like know year? showroom should how store?

Dawn Phillipson

XXXX. looking that showrooms to have from an still then at out those, know we're time certainly the impact shift here, today, can would that towards we it's staff refining can We looking just dissimilar cadence up those locations. we're As the year, the say, a line but have I lines. time and look both not But which we hire as typically, within

Operator

Thank you.

turn the We like of closing the end have comments. floor now over Wendy Watson I question-and-answer to to our for would reached back And session.

Wendy Watson

to today, us to Thanks, for you next everybody, talking look quarter. joining we forward and again

John Reed

Have day. everybody. Thanks, a great

Operator

teleconference. today's This concludes

participation. You your time. lines may for this disconnect Thank at your you now

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