LL Flooring (US:LL)2019-04-30 19:14Financial Data and Key Metrics Changes - The company reported net sales of $266 million, an increase of 2% over Q1 2018 [8] - Comparable store sales were down 0.8%, which was in line with previous guidance [8] - Gross margin for Q1 2019 was 35.2%, down from 36.3% in the same quarter last year, primarily due to tariff costs [25] - SG&A expenses were $97 million, slightly up from $96 million in Q1 2018, with adjusted SG&A at $95 million [26][27] - The company recorded an operating loss of $3.4 million compared to a loss of $1.4 million in Q1 2018 [28] Business Line Data and Key Metrics Changes - Installation sales grew by 13%, while merchandise sales saw a nominal increase [24] - The Pro business penetration topped 30% of sales, indicating strong growth in this segment [9] - Bamboo products, which account for approximately 7% of the business, continued to face a decline due to changing consumer preferences [8][24] Market Data and Key Metrics Changes - Online sales penetration increased from approximately 4% in Q4 2018 to 6% in Q1 2019, indicating a positive trend in digital engagement [16] - The Texas market experienced a decline in merchandise sales due to comparisons with the peak of Hurricane Harvey recovery in the prior year [24] Company Strategy and Development Direction - The company is focused on enhancing customer experience and driving margin expansion despite tariff challenges [10] - A new advertising agency was onboarded to improve marketing efforts, with early positive results from promotional events [10][11] - The company plans to open 10 to 15 new stores in 2019 and remodel existing locations based on insights from a new store prototype [30][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing transformation strategies and improving profitability despite ongoing tariff impacts [8][15] - The company reiterated its full-year 2019 guidance, expecting mid-single-digit revenue growth and flat to low-single-digit comparable store sales growth [30] - Management noted that the macroeconomic backdrop is expected to decelerate by 1 to 2 points, impacting industry growth [65] Other Important Information - The company has a liquidity position of $130 million, which includes cash and availability under its credit agreement [29] - The company is exploring partnerships to leverage its brand and product assortment [22] Q&A Session Summary Question: Can you help us understand how merchandise sales evolved through the quarter? - Management noted that comps were clunky, with a good January, a weak February, and improvement in March as new marketing efforts took effect [35] Question: Can you comment on the quantitative performance of the new larger format store in Florida? - The new store is trending to the high end of the store portfolio, benefiting from high visibility and larger displays [39] Question: Can you tell us about the backlog and customer deposits? - Customer deposits were up, indicating good acceleration in new orders towards the end of March [46] Question: How much more was bamboo down compared to other categories? - Bamboo was down substantially more than the reported 15.4% decline in solids and engineered products [48] Question: What is the current attach rate on installation sales? - The attach rate was at 13% for the first quarter, which is higher than the initial target of 7% to 10% [67] Question: Did you raise prices because of the tariffs? - Yes, the company raised and lowered prices to maintain a competitive position amid tariff impacts [90]