LL Flooring (US:LL)2021-11-03 15:36Financial Data and Key Metrics Changes - In Q3 2021, net sales were $282.2 million, a decrease of $13.6 million or 4.6% compared to Q3 2020, primarily due to a 7.7% decrease in net merchandise sales, partially offset by a 19% increase in net service sales [30] - Adjusted gross profit was $105.2 million, with an adjusted gross margin of 37.3%, down from 39.7% in Q3 2020, reflecting higher transportation and material costs [31][32] - Adjusted earnings for Q3 2021 were $8.5 million, down $11.1 million from $19.6 million in Q3 2020, with adjusted earnings per diluted share of $0.29 compared to $0.67 in the prior year [35] Business Line Data and Key Metrics Changes - Sales to Pro customers saw double-digit growth, marking a record quarter for Pro sales, while installation service sales also increased significantly [10][29] - DIY sales faced challenges, leading to a decrease in total net sales and comparable sales for the quarter [29][14] - Net services sales, primarily from installation, were up double digits compared to the previous year, driven by increased consumer comfort with professional services [13] Market Data and Key Metrics Changes - Comparable store sales decreased by 4.5% year-over-year but increased by 6.4% on a two-year stack basis [31] - Digital sales through llflooring.com increased more than 100% on a two-year stack basis, indicating strong growth in online channels [16] Company Strategy and Development Direction - The company plans to accelerate growth by increasing the number of new store openings to 20-25 per year starting in 2022, enhancing omnichannel convenience [20][18] - Investments will focus on expanding Pro customer sales initiatives and improving the customer experience through digital enhancements and new product launches [9][10] - The company is diversifying its sourcing strategy to mitigate supply chain challenges and enhance product offerings [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term demand for home improvement spending despite short-term challenges in the DIY segment [22] - The company anticipates continued supply chain constraints and elevated material costs into 2022, impacting inventory availability [23][38] - Management remains optimistic about the growth potential from Pro customer initiatives and the overall market positioning of LL Flooring [28] Other Important Information - The company repaid $101 million of outstanding debt in Q2 2021, maintaining a strong balance sheet with $232 million in liquidity as of September 30, 2021 [36] - The company is committed to enhancing its workforce through increased investments in training and career development to attract and retain talent [21] Q&A Session Summary Question: Regarding increased investment in SG&A expense, how much is for Pro sales staff versus general wage inflation? - Management indicated that significant investments are being made in Pro sales initiatives and expanding store acceleration, with a focus on hiring and retaining talent [42][44] Question: How do the company's sales compare to the overall market growth in floor coverings? - Management acknowledged challenges in estimating market growth but believes they are gaining market share in both Pro and installation segments [47][48] Question: Are Pro customers offered differentiated pricing that they can extend to their customers? - Management confirmed that Pro customers receive a differentiated pricing structure, allowing them to enhance profitability or offer referral pricing to their customers [51][52]