La-Z-Boy - Earnings Call - Q3 2020

Transcript

Speaker 0

Ladies and gentlemen, hello, and thank you for joining this La Z Boy Fiscal twenty twenty Third Quarter Results Conference Call. Participants are in a listen only mode, but you will have the opportunity to ask questions after today's With that, I am pleased to turn the floor over to your host, Kathy Liebman. Welcome, Kathy.

Speaker 1

Thank you, Jim, and good morning. Thank you for joining us to discuss our fiscal twenty twenty third quarter results. With us this morning are Kurt Darrow, La Z Boy's Chairman, President and Chief Executive Officer and Melinda Whittington, CFO. Kurt will open and close the call, and Melinda will speak to the financials midway through. We'll then open the call to questions.

Slides will accompany this presentation and you may view them through our webcast link, which will be available for one year. And a telephone replay of the call will be available for one week beginning this afternoon. Before we begin the presentation, I'd like to remind you that some statements made in today's call include forward looking statements about La Z Boy's future performance. Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10 ks.

We encourage you to review those risk factors as well as other key information detailed in our SEC filings. Also, our earnings release is available under the News and Events tab on the Investor Relations page of our website. And it includes reconciliations of certain non GAAP measures, which are also included as an appendix at the end of our conference call slide deck. With that, I'll now turn over the call to Kurt Darrow, La Z Boy's Chairman, President and Chief Executive Officer. Kurt?

Speaker 2

Thank you, Kathy, and good morning, everyone. Following yesterday's close of market, we reported a strong third we reported strong third quarter results, which included an increase in sales to $476,000,000 a double digit GAAP consolidated operating margin, double digit upholstery margins, operating cash generation of $66,000,000 and $19,000,000 returned to shareholders through dividends and share purchases. Our performance for the period reflects the ongoing strength of the La Z Boy brand, coupled with our powerful global supply chain. Across the entire North America La Z Boy furniture gallery network, Written same store sales increased 10.5%, the fourth consecutive quarterly increase. And our company owned retail segment turned in its seventh consecutive quarterly increase in delivered same store sales.

Looking at our results fiscal year to date, consolidated sales are up 3.5, delivered sales for our company owned retail segment are 9.7% higher, and written same store sales for the Z Boy Furniture Galleries Network are up 6.4%, all in all a very solid performance. With consumer confidence remaining high, interest rates low, and positive housing trends on the macro side, we believe we are well positioned to capture market share in this environment with our strong brand, our vibrant La Z Boy Furniture Gallery system, with vast custom offering and speed to market promise. I will now walk you through our operating results by segment, then we'll start with our retail segment given its ongoing excellent performance. Our Retail segment continues to deliver excellent results driven by improved traffic trends and ongoing strong execution at the store level, increased design sales, selling more complete room groups, and improved engagement with consumers. Sales for this segment increased 5.1% to $167,000,000 and delivered same store sales increase of 5.5%, the seventh consecutive quarterly increase as we noted earlier.

On a GAAP basis, operating margin improved to 9.8% from 8.9 in last year's third quarter. And on a non GAAP operating basis, it increased to 9.8% from 9.1%. Across their broader store network, which includes both company owned and dealer owned stores, written same store sales for the three fifty five La Z Boy Furniture Galleries stores increased 10.5% for the third quarter. We believe this excellent performance reflects the strength of the La Z Boy brand, the positive impact our marketing platform featuring Kristen Bell, which I'll talk a little bit more about in a moment, and our broad array of on trend furniture coupled with our design program. The results also reflect positive momentum in Canada for the quarter and year to date.

The strength across the store system demonstrates our core customers' preference to shop in store, fueling our objective as well as our dealers to continually invest in the La Z Boy Furniture Gallery program. For the third quarter across the network, three new stores were opened, three were remodeled, one was relocated, and one was closed. For the fourth quarter, plans are to open one new store, relocate one, remodel one, and close two, ending the year with three fifty four La Z Boy Furniture Gallery stores, with 152 in the new concept. Now on to our wholesale business. In the Upholstery segment, on sales of $337,000,000

Speaker 3

GAAP

Speaker 2

operating margin increased to 13.8% from 10.3 in last year's third quarter. And non GAAP operating margin increased to 11.2%, up from 10.3%, reflecting supply chain inflationary pressures more than offset by efficiencies and lower raw materials. Our non GAAP operating margin primarily excludes the net benefit of 8,700,000.0 related to our supply chain optimization initiative announced in August, most of which relates to income from the sales of our Redlands, California facility. Recall as part of our plan, we closed the Redlands La Z Boy branded upholstery facility and shifted production to our Neosho, Missouri, and Silent Spring, Arkansas plants. We also transitioned our leather cut and sew operations from our Mississippi facility to our large cut and sew center in Mexico.

Although these moves include short term costs, we believe they will allow us to further optimize operations, strengthen our competitive positioning in the marketplace over time, and will provide ongoing annual savings. On the commercial side of the business, we continue to see momentum with the relaunch of the Live Life Comfortably campaign featuring our new brand ambassador, Kristen Bell. Since the launch, there has been month by month increase in consumer recognition of the campaign and Kristen as our spokesperson. Importantly, we are seeing increases in consumers indicating that La Z Boy furniture fits their style or is for people like them. We believe this, combined with the quality and comfort that the La Z Boy brand is broadly known for, is driving the brand's strong performance in the marketplace.

On the merchandising side, as noted last quarter, we are experiencing great success with the new wireless remote upgrade for our power recliners with orders continuing to increase and exceed expectations. In fact, more than half of consumers are selecting the option with its sleek, stylish wand and various memory positions. We have also introduced a line of pet friendly fabrics featuring iClean technology, which are doing well, and our sectional sofa business is extremely hot right now. At the upcoming April, we will add to our new sectional supergroup collection that allows for multiple configurations to meet consumer needs. We will also introduce seating upgrades and enhanced motion mechanism and a custom leather offering that will give us more competitive starting price points.

Now turning to our case goods segment. On essentially flat sales, Operating margin was a solid 9%, although slightly down from last year, reflecting the impact of tariffs on the occasional table and increased freight. As noted last quarter, we have moved much of our table sourcing to Vietnam and stabilized the business vis a vis last quarter, although there is still some work to be done. Now let me spend a few moments on Joybird, the e commerce business we acquired last fiscal August. For the quarter, Joybird delivered $22,000,000 in sales, up 18% versus the prior year.

The business continued to improve its gross margin quarter over quarter, fueled by supply chain synergies. The operating loss decreased versus the prior year period and sequentially from the second quarter. Joybird continues to exhibit fast paced top line growth and is bringing La Z Boy a new consumer through a new channel. Although the trend in growth and integration efforts is slower than originally anticipated, we remain optimistic about Joybird's prospects to add long term value, and we'll continue to make improvements across the business model with the objective to balance investments and growth with bottom line performance. Before Melinda goes through the financials, I want to make a brief comment on the past weekend's news about Art Van Furniture with respect to its private equity owner exploring a variety of options with its creditors, investors, and landlords to ensure it can continue serving its guests and communities.

While Art Van is an important customer for us, no one customer accounts for more than 3% of our consolidated sales. To that end, we are monitoring the situation closely, but it's too early to define how this may or may not impact our business. I will now turn our call over to Melinda.

Speaker 4

Thank you, Kirk, and good morning, everyone. As always, let me remind you that we are presenting our results on both a GAAP and a non GAAP basis. Non GAAP results continue to exclude purchase accounting adjustments for our acquisitions and one time charges related to our supply chain optimization initiative announced in August, including the one time gain on the sale of the Redlands facility during the quarter. Additionally, for this quarter, we excluded an impairment charge for an investment in a privately held startup. We believe this non GAAP presentation better reflects underlying operating trends and performance of the business.

For the fiscal twenty third quarter, we recorded 1,400,000.0 pretax or $02 per diluted share in purchase accounting charges, the majority of which were related to the acquisition of Joybird, is reflected in corporate and other. We also recorded a pretax charge of $6,000,000 or $0.10 per diluted share related to the investment impairment. And we recorded a net benefit of $8,700,000 pretax or $0.14 per diluted share related to our supply chain optimization initiative. In last year's third quarter, we recorded 1,500,000 pretax or $02 per diluted share in purchase accounting charges. And as always, a full reconciliation of GAAP to non GAAP is included on our press release and in the appendix section at the end of our consolidated call slides conference call slides.

Moving to our consolidated second quarter results, sales increased 1.8% to $476,000,000 led by our retail segment. GAAP consolidated operating income was $52,000,000 versus $41,000,000 in the prior year quarter. Excluding the net benefit related to our supply chain optimization initiative and purchase accounting charges, non GAAP consolidated operating income increased to $45,000,000 from $42,000,000 in last year's quarter. Consolidated operating margin on a GAAP basis was 11% versus 8.7% in last year's quarter. And non GAAP consolidated operating margin was 9.4 versus 9%, reflecting improvement in our upholstery and retail segments.

And as a reminder, last year's third quarter included a onetime benefit of a 110 basis points related to the redesign of our employee benefits programs, which was included in both our GAAP and our non GAAP numbers. GAAP earnings per diluted share for fiscal twenty twenty third quarter were $0.74 versus $0.61 in the prior year period. Non GAAP EPS was $0.72 per diluted share versus $0.63 in last year's third quarter. Non GAAP results for the fiscal twenty twenty quarter exclude charges of $02 per diluted share for purchase accounting, the $0.10 per diluted share impairment charge, and the $0.14 net benefit related to the company's supply chain optimization initiative. In fiscal twenty nineteen, third quarter non GAAP results excluded a $02 per diluted share charge for purchase accounting.

And again, last year's third quarter GAAP and non GAAP results included the $07 benefit related to employee benefits changes. Turning to gross margin, third quarter consolidated GAAP gross margin increased 140 basis points versus the prior year quarter and non GAAP gross margin increased 150 basis points. 60 basis points of improved gross margin were driven by changes in our consolidated business mix due to growth in our retail segment and the contribution from Joybird, both of which carry a higher gross margin than our wholesale businesses. Additionally, the upholstery segment margin benefited from supply chain efficiencies that offset inflationary pressures as well as from favorable raw material prices. Consolidated gross margin was also impacted by a decline in gross margin for our case goods segment, primarily due to higher ocean freight and higher tariff costs on certain occasional tables.

Last year's third quarter GAAP and non GAAP reporting also included a portion of the onetime benefit from the changes to employee benefits. Moving on to SG and A. GAAP SG and A as a percent of sales decreased 90 basis points in the fiscal twenty twenty third quarter compared with prior year, and non GAAP SG and A increased a 110 basis points. Changes to our consolidated business mix increased SG and A as a percent of sales by 70 basis points for the quarter. Last year's third quarter also included a $3,800,000 one time benefit from the employee benefits redesign, which was included again in both GAAP and non GAAP results.

And finally, on a GAAP basis, the sale of Redlands drove a 200 basis point improvement in SG and A as a percent of sales for the quarter and has been excluded from our non GAAP results. Our effective tax rate for the third quarter was 26% compared with 26.9% in the prior year period. Absent discrete adjustments, the effective tax rate in fiscal twenty second quarter third quarter would have been 25.8%. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes, and we continue to estimate our effective tax rate will be in the range of 25 to 26% for the full fiscal year. Turning to cash, we generated $66,000,000 in cash from operating activities in the quarter on stronger earnings, increased customer deposits due to the increase in retail written sales, and improved working capital management.

We ended the period with $168,000,000 in cash, cash equivalents and restricted cash and $30,000,000 in investments to enhance our returns on cash. During the quarter, we invested $13,000,000 in capital primarily related to machinery and equipment, upgrades to our Dayton manufacturing facility, and investments in our retail stores. We also paid $6,000,000 in dividends and spent 12,000,000 purchasing 400,000 shares of stock in the open market under our existing authorized share repurchase program, which leaves 4,800,000.0 shares of purchase availability under that authorization. Our capital allocation priorities remain to invest in the business to drive growth and then provide returns to shareholders with our dividends and discretionary share buyback. We expect capital expenditures for fiscal twenty twenty in total to be in the range of 45,000,000 to $55,000,000 slightly lower than our prior estimate due to the timing of projects.

These expenditures are primarily related to plant upgrades and improvements to several of our retail stores. And finally, before turning the call back to Kurt, I want to again remind you of several items for the remainder of fiscal twenty twenty consistent with our call outs in previous quarters. We will continue to with our non GAAP presentation, excluding purchase accounting adjustments as well as the charges related to our supply chain optimization initiative. For acquisitions to date, adjustments continue to be anticipated in the range of $08 to $0.10 per share for the full fiscal twenty twenty, plus any effect from revaluation of the contingent consideration liability for future earn outs on Joybird, where the payout could range from 0 to $65,000,000. Additionally, our supply chain optimization initiative, we expect to record costs of 1 to 2¢ in the fourth quarter for a total impact of 5 to 6¢ per diluted share benefit for the full year when including the sale of the Redlands facility.

Also, a reminder on mix. Our evolving consolidated sales mix may affect the seasonality of consolidated results. With Joybird in the growth of the retail segment, third quarter consolidated sales could outpace or be level with fourth quarter, which has historically been our largest quarter. Regarding SG and A cost trends, we would again note the impact of changes in our consolidated business mix with Retail growing and the acquisition of Joybird. This mix impact for the full year is expected to be an SG and A increase in the range of 100 to 150 basis points, the majority of which was realized in Q1 given the timing of the Arizona and Joybird acquisition.

And finally, last year's fourth quarter GAAP and non GAAP results included a one time 3¢ per share charge for the final stages of the redesign of our employee benefits program. And now I'll turn the call back to Kurt for his concluding remarks.

Speaker 2

Thank you, Melinda. As we head into the end of our fiscal year, I feel positive about La Z Boy's positioning in the marketplace. Our foundation is solid and includes a strong brand, world class global supply chain, well performing store system, and engaging marketing. This platform, combined with ongoing strategic investments fueled by our strong cash position, will drive long term profitable growth and return to our stakeholders. We want to thank you for your interest in La Z Boy Incorporated today, and we'll turn the call over to Kathy to provide some instructions for getting into the queue for questions.

Kathy?

Speaker 1

Thank you, Kurt. We will begin the question and answer period now. Jim, please review the instructions for getting into the queue to ask questions.

Speaker 0

I'd be glad to, Kathy. And thank you, Kurt and Melinda, for your comments this morning. To our audience joining, if you'd like to ask a question at this time, please press star and one on your telephone keypad. A friendly reminder that if you're joining us today on a speakerphone, please return to your handset prior to pressing star and one to be sure that your signal does reach our equipment. Once again, that is star and one if you would like to ask a question.

We'll hear first from John Baugh with Stifel.

Speaker 5

Thank you. Good morning, and congrats on a solid quarter. I'll jump right in. I guess the first question is on the comp, which is quite strong. And I know it was a little soft in your prior, but I'm curious, were there any calendar issues?

Did it surprise you how good it was? Was weather better? Maybe some cadence during the months? Comments on traffic ticket. You did mention Kristen Bell.

Just curious if you could parse out why you think that number was so strong.

Speaker 2

So I can give you a number of factors, John. I can't give you percentage of which factor is weighted one way or another, but I think you start out with La Z Boy itself, and our dealers have been investing in their stores quite a bit the last four or five years. And our research would indicate that consumers prefer to shop in stores that are on trend and inspiring, and stores that are fifteen, twenty years old don't really fit that bill. So there's been a great effort in upgrading the look of our stores. I do have to give our marketing a call out the way we're going to market both online and television, and Kristen Bell has been fresh spokesperson for us who is attracting a younger customer.

But the big issue comes down to my mind to what our store teams are doing, their execution, how they close more sales, build the ticket, get into the home. And it's not it's coming across the whole to have a 10% same store sales increase for a quarter, you just can't rely on one region or one area. It's coming across all of North America, and we see pockets of strength everywhere. Can't really comment much about the timing. Was January a better month because the days between Thanksgiving and Christmas shortened and there was more pent up demand?

I don't know how to do that math specifically, but I'd say the only thing, there was probably a little weather last year, particularly in the Northeast, but I don't think it was significant. But we have had a warm winter and no major snow on holidays, so I'm sure that hasn't hurt. But I just think it's a multiyear effort of finding our sweet spot and determining how we're going to market and what we're doing. And we continue to bring product to the market that the customer seems to like. So we're obviously very pleased with the direction of our retail business.

Speaker 5

Okay. And the other number, Curt, Melinda, Kenny, that jumped out at me was upholstery margins. And you cited efficiencies and the raws being lower. I guess, can you delve into the efficiencies? And is that a byproduct of the restructuring or something else?

And then if it's not the restructuring, maybe remind us how you think that's gonna impact, productivity costs going forward. And then, maybe an outlook for the raw material cost situation, I don't know, a few quarters out versus any pricing action you've taken or will take?

Speaker 2

Thank you.

Speaker 4

Sure, John. A couple of things. As we said, you know, we have fueled this business for a long time by great work of kind of continuously driving efficiencies on the supply chain side of things. And certainly, the Redlands move, as you noted, is a piece of that that we will see benefit over the longer term. We're still in the stage right now where there's costs related to that too through all of those efficiencies, but starting to see that that turn positive.

And so I would say, you know, it's it's just that continual that continual rhythm of looking for those efficiencies while at the same time you've got input costs that we're seeing inflation on. On the raw material side of things, that was still a benefit quarter on quarter in the third quarter. We will pretty much have anniversaried most of that by the fourth quarter. And so that one, we're probably as far as a year on year, we're probably starting to even out on that. Broadly though, I'd say, we're obviously very pleased with how the upholstery margins benefited in the current quarter.

And we'd see some of that to come through, but it's a bet of everything kind of worked altogether in our favor this quarter as well.

Speaker 5

Okay. And and lastly, quickly, we've made it this far without talking about the virus, but I'm gonna bring it up. Talk to us about how that could influence your business, I guess, particularly leather, but walk us through what you're seeing and what you think could could or could not happen to your business if we continue to be shut down over there. Thank you.

Speaker 4

Sure. So, you know, for us, we we obviously are are monitoring the situation very closely. You know that for the most part, the majority of our employees in our operations are in the North American continent. But nonetheless, we have very valuable suppliers and some employees there. The first and most important thing is we know that everyone's safe.

We've provided safety equipment to our employees that are there, and we've temporarily brought our expats home while we weather this situation. As far as all of the work that we have with suppliers over there, with all the data we have as of today, we don't expect to see any material impact on the current fiscal year. If things continue to kind of not start to to peak down a little bit, we could at the very end of the fourth quarter start to see some supply issues. And as you noted, that's really on leather and and some of our upholstery components. Right now, we look good.

But again, it's fluid day to day. And as things continue to evolve, we'll be watching that for potential impacts as we go into next fiscal.

Speaker 5

John, just one point The on

Speaker 2

Tier one suppliers, and I think Apple mentioned this, Tier one suppliers are coming back online last week. But as the supply chain works over, and particularly in China, there's tier two suppliers, tier three suppliers, and we don't have a lot of visibility to the people who actually weave the fabric or find the yarns. And so we're we're glad our suppliers are back to work. But if they don't get support from their suppliers, then then there could be some little hiccup towards the end of our fiscal year, which Melinda related to.

Speaker 5

Okay. Thanks. Good luck.

Speaker 2

Thank you, John.

Speaker 4

Thank you.

Speaker 0

Our next question will come from the line of Bobby Griffin at Raymond James. Please go ahead. Your line is open.

Speaker 3

Good morning, everybody. Thank you, for taking my questions, and congrats on a good operational quarter. I guess I wanted to first fall back up on on John's question on the virus. Just to help us maybe get a little bit better understanding, are products actually flowing from your suppliers to to your factories now, or are you relying mostly on just inventory reserves that you've built up for fabric and leather?

Speaker 2

So if if you go back, Bobby, a little bit, a lot of product came our way, some still on the water, right prior to Chinese New Year. And and Chinese New Year is normally a few weeks, and now they've extended it to get people back. So there hasn't been anything moving here for the last three or four weeks, but we plan for that. It comes every year. We know There may be some goods that didn't quite get shipped before they went on break, and that stuff will ship.

The concern is about new stuff being made and hitting our deadlines going forward. But we're not low on fabric at this point, and we plan out real well, and our supply chain team is monitoring this very closely. But right now, we've not seen any disruption. It's just the concern that the stories from time to time are changing, and we we wanna see how the next couple weeks go.

Speaker 3

Okay. That's very helpful. And then I I guess, next for me, pretty big gap between the same store written sales and the delivered sales. I understand the delivered sales are just for the stores you own, but, is there any timing issues there of of, you know, getting products out? Or is there anything to help us think about, that that gap?

Speaker 2

So the fact that we operate with a four to five week backlog, Bobby, that most everything that we sold after Christmas and all through January did not get delivered. And in the quarter, January was the strongest month of the three. So there was no hiccup other than normal seasonal points of view, and and we we do take vacation at our plants the week between Christmas and New Year's. But nothing unusual, just, thankfully a little better business.

Speaker 4

And as you pointed out, Bobby, that that that written number is across the entire furniture gallery network, where obviously the delivery is just the ones that are corporately owned.

Speaker 3

Yep. Well, good to hear about January. I guess, Kurt, I will take the chance since you brought up one of the months, to see if see if you'll give us any comments on how Presidents Day trended, at least for the data you you do have.

Speaker 2

Yeah. We're glad to do that. The only data we really have at this point, it's only a day or a day after the holiday. We we were very pleased with our performance over that holiday. Again, no no poor weather.

Consumers were out shopping and and and ready to buy. So we're concluding the holiday, I think, in good shape.

Speaker 3

Great. Well, I appreciate all the detail. Best of luck in the in the next quarter, and thanks again for taking my questions.

Speaker 2

Thank you, Bobby. Thank you.

Speaker 0

And once more to our telephonic audience this morning, if you would like to ask a live question, please press star and one on your telephone keypad. And a friendly reminder, please return to your handset if you're using a speakerphone. We'll hear next from Anthony Lebiedzinski with Sidoti.

Speaker 6

Certainly, nice performance on the same store sales. I just wanted to also look at the product mix. So in the 10 Q, you guys show you do a nice job of breaking down the product mix. So motion upholstery was flat over quarter versus a year ago. Stationery upholstery up nicely, however.

Just wanted to dig in as far as what you think, as far as the reasons why that is, and your expectations going forward.

Speaker 2

I think we mentioned in the prepared remarks, Anthony, that our that our sectional business, the the the larger groups that a whole family can sit on sit around the TV, Both with ourselves and the industry is becoming more popular. And that's growing. And we see we've been seeing a little growth the last few months in our recliner business. Our mix changes quarter to quarter, not substantially, but we may run a promotion on on on one category and not another, and and our dealers may do some other things differently. So there I don't I couldn't tell you there's a major shift or a major trend going one way or the other, but not every quarter is always is always equal.

But no nothing that I can point out that's significantly different than the ebb and flow with our categories in any quarter.

Speaker 6

All right, thank you for that explanation, Kurt. As far as Joybird, you mentioned in your script the integration is proceeding slower than expected. You also mentioned something in the 10 Q about it as well. So I just wanted to follow-up about the issues as far as the integration is concerned. If you could expand on that, that'd be very helpful.

Speaker 4

Yeah. I'll I'll take that one. You know, what I would say overall is if you kinda look at what's going on out there with ecom companies

Speaker 5

Mhmm.

Speaker 4

You know, it there seems to be a bit of a an an interesting balance of you can get a lot of top line growth, but, it's been a bit elusive to see to see bottom line progress. Our goal is to balance the two of those. And so we were very pleased to see Joybird's growth in the quarter on a top line basis, up 18%, while we on the bottom line, small operating loss is getting smaller and smaller. I wouldn't say we have issues. I would just say there's a thousand little things that are all continuing to improve, and together, those are taking more time than we initially, optimistically, probably focused on.

And so our goal is to continue. In last quarter, we recognized additional gross margin synergies. There's still a runway ahead of that. We continue to hone the SG and A investment on that business as well. Over the last quarter, their new website launched fully across the nation.

And honestly, just in the last week or so are we really starting to see that get complete traction. So we still feel very good, and I wouldn't point to issues per se or any one thing. It just is a lot more blocking and tackling than maybe we realized upfront. We feel confident, you know, that we're gonna gonna continue to to make that sequential progress now. You know, we're gonna hit beginning of next fiscal, we're gonna hit seasonal lows again on the sales.

So we'll, you know, we'll go through a little bit of that. But we feel like we'll continue to narrow that gap on the bottom line while still driving growth on the top line that is disproportionate to what we're doing across the rest of our businesses.

Speaker 2

And, Anthony, we could Mhmm. With more marketing spend and all, we we could grow our sales faster, but it wouldn't be profitable. And and and we're not a student of trying to spend aggressively and wait three or four years to get a return. I also don't think our shareholders want us to spend at all costs and take away from our earnings and the rest of the enterprise. So we're taking a balanced approach.

We look around the industry, and there's a number of direct to consumer furniture companies that aren't making any money. We'd like to break that trend, and that's kind of our target.

Speaker 6

Alright. So thank you very much, and best of luck.

Speaker 2

Thank you.

Speaker 0

And to our telephone audience, that does conclude the time that we have allotted for questions today. I'd like to turn it back to Kathy Liebman for any additional or closing remarks that she has.

Speaker 1

Thank you, Jim. Thank you, everyone, for participating in our call this morning. Should you have any follow-up questions, please reach out to me and have a great day.

Speaker 0

Ladies and gentlemen, that does conclude today's update. We do thank you all for your participation. You may now disconnect your lines, and we hope that you enjoy the rest of your day.