Pier 1 FY 1Q17 Earnings Call Notes

Pier 1 Imports’ (PIR) CEO Alexander Smith on Q1 2017 Results

Experiencing same customer trends as everyone else

” clearly we are experiencing the same customer trends as the industry generally, namely the ongoing movement to purchase outside a store. Indeed, our direct-to-customer sales ordered outside the store were up 40% in the first quarter driven by both increased traffic and higher conversion rates on our site.”

Mis-executed in outdoor

“Overall, our topline results in the first quarter were below our plan. We had some categories that performed exceptionally well, tabletop for instance, but that was not enough to pull up our chain average. Our shortfall came principally in outdoor furniture, the result of some new product misses and a reduction in the number of floor models.”

Digital strategy highlighted email, search, display and social

“Now let’s talk about our digital marketing efforts. We are seeing positive results from our initiatives around frequency and retention as well as new customerReturned to TV advertising

“Our return to television advertising commenced in April and we were on air for six weeks during the first quarter. We are on air now for our July 4 One Big Sale and then back again for Fall and Harvest. While it’s still early days we are happy to be back on TV. Our TV ads providers with the opportunity to reinforce our brand messaging, which we have believe will help drive incremental traffic to our Pier 1 Import stores and website. Its full effect of course will be most prevalent during the forthcoming Holiday season.”

It’s not a highly promotional environment, it’s just the environment that we live in

“we said on the last call you know this is no longer a highly promotional environment, it’s just the environment, it’s the world that we live in. So our job is – and by the way I think I said our promotional activity in Q1 was pretty much inline with what we would expected, so our job is as much in some retailers is just to get smarter and smarter about how we use those promotional dollars, make sure that we are only using them on promotional activity that really does drive merchandise margin dollars and not the overexcited by things that drive sales that no margin dollars. ”

Free shipping is a discount like any other

“Well I think you just answered your own question there which is we look at free shipping as just being one of the promotional offers which we can use and we try and balance free shipping along with all the other. I mean free shipping is just another discount and we just look at it alongside all the other discounts opportunities that we have.”‘

Restoration Hardware 1Q16 Earnings Call Notes

Restoration Hardware’s (RH) CEO Gary Friedman on Q1 2016 Results – Earnings Call Transcript

Consolidating distribution centers is better than managing several

think our bias today after a pretty fulsome review is to really simplify our distribution points and hold inventory in fewer distribution centers as opposed to spreading it out across multiple distribution centers. Our previous plans were to continue to open more distribution centers. Our analysis says that the inefficiencies and extra inventory you had to buy-and-hold to be in stock across multiple DCs was causing us inventory deleverage and bloating our balance sheet and also making it difficult to be in stock in the right DC, driving DC to DC transfers up, transportation costs up, etcetera, etcetera. So, our view is to hold inventory in fewer locations, in DCs, and that will improve our in stocks, reduce our working capital needs and inventory, improve our return on invested inventory and simplify things for both our internal teams, who are leading and managing inventory and our vendors.

macro headwinds are affecting the luxury market

I think we articulated that as one really being the macro factors that are affecting the luxury market that we believe is an accelerating headwind. And I think that’s seen pretty clearly across our industry and anybody who’s serving that luxury market today.

We are still performing

you step back here, we ,look look about retrenching or if you think about the action for taking, this is not a Company that all of a sudden its running negative 10 or 15 comp. We are still performing in the positive sales growth versus very aggressive numbers over the last several years. So we see these moves as short-term in nature.

We don’t have a broken top-line model, just difficulties in the short term

we expect the business to begin to accelerate in Q4 and are very optimistic about the content in the goods, and we’re going to have the most significant refresh of new product at retail in the history of our Company and we’re going to remodel the stores and install design ateliers, expand our design services. So I wouldn’t think about that the fact we got a broken top line model. We’ve have some difficulties in the short-term. We’re taking some actions to fix those.

We can always turn promotions back on

“We can always turn promotions back on. This is not like do or die. This is not like we made a change and if it doesn’t work we’re just going to kind of stay the course and drive the business down. That’s not our goal here. We think this is a right long-term move for the Company. We’re making long-term decisions and investments for the brand and business and we think they’re the right ones, but for some reason we’re wrong. I can tell you being I think I’m still the biggest shareholder in the Company, I’m going to change course and we will make decisions that are the right decision for the business, the brand and the shareholders”

There’s clearly a slowdown but we’re not anticipating another step down

“Sure, Oliver. Let’s try to start at the top of your questions. The demand environment, the evolution and we have — we believe we’re taking what — how we see the consumer responding today, which we think that there’s definitely a slowdown. We’ve incorporated those trends in our go forward guidance and we believe we’ve been appropriately conservative in how we guided. So that’s how we think about it. If there’s a another meaningful step down, we’re not anticipating that today.”

Everyone is becoming an Amazon customer

“almost every consumer is becoming an Amazon consumer, because of the breadth of their assortment and the simplicity that they bring to the consumer for many goods, and especially durable goods and that you need in and repeatable purchases. So, look I’m a big Amazon customer. It is Amazon serve the customer at every level in a way that is relevant, I’d say, no. I don’t think Amazon is going to be the only retailer left on the planet and I highly admire them”

Amazon is advantaged because they’re allowed to operate at 1-2% operating margins

“They’re, I’d say, short-term they’re advantaged, right, because they don’t have the same earnings hurdles that many traditional retailers have today. So you have retailers that are out there, they’ve been making 8% to 15% operating margins and all of a sudden Amazon is coming in with 1% or 2% operating margins and eating their lunch. I mean, it would be an interesting world to see if all the other retailers lower their operating margins to 1% to 2%, what would the fight look like. So it is a little bit of an unfair fight, right, because Amazon is not being held to the same standards from a profitability point of view. But today the market’s allowing that and actually rewarding that.”

We can all learn a lot from Amazon though

” Listen, I think Jeff’s is a very smart guy and he is using that advantage for all it’s worth. And he has been using it and he has been killing them. So god bless. I mean, it’s we can all learn from a lot of that — a lot of things that Amazon has done and what they continue to do. So we are big students of Amazon and big fans of what they do.”

We are reinventing physical retailing

“we’ve got advantages of our own and we like the advantages we have. We also think we’re — just like Amazon is reinventing online retailing and we are learning from them. We believe that we’re reinventing physical retailing and we’re building advantages that nobody else has on the physical side of the world. So, but look today — everything is changing in our industry and if you’re not a complete student of the entire retail business, no matter what channel, you’re going to get behind.”

Bed Bath and Beyond 3Q15 Earnings Call Notes


Bed Bath & Beyond’s (BBBY) CEO Steven Temares on Q3 2015 Results

Overall softness in the macro retail environment

“our performance in the third quarter reflects the recent retail trends we have been experiencing. As we said, on the one hand we experienced softer in-store transaction counts, and on the other hand sales from our customer facing digital channels demonstrated strong growth in excess of 25%. These mixed results were against the backdrop of the overall softness reported in the macro retail environment during the quarter.”

At least we’re generating cash flow

“While most pure-play retailers who primarily sell merchandise in home related categories are struggling with profitability and others rely on outside sources of capital to remain viable, our Company generates healthy cash flows and our strong balance sheet enables us to make strategic investments necessary to continue to create a best-in-class omni-channel platform to position us for long-term success.”

Susan E. Lattmann

Comps down 40 bps

“”Net sales for the third quarter were approximately $3 billion, about 30 basis points higher than net sales in the prior year period or approximately 70 basis points higher on a constant currency basis. Comparable sales for the third quarter decreased approximately 40 basis points or were relatively flat on a constant currency basis, reflecting an increase in the average transaction amount and a decrease in the number of transactions. As Steven said, sales from our customer facing digital channels demonstrated strong growth in excess of 25%, while our comparable sales through stores declined in the low single-digit percentage range.’

Gross profit margin down

“Gross profit for the third quarter was approximately 37.8% of net sales, compared to approximately 38.4% of net sales in the corresponding period a year ago. Gross profit as a percentage of net sales decreased primarily due to an increase in inventory acquisition costs.”

Williams Sonoma 3Q15 Earnings Call Notes

Gabrielle Rabinovitch – VP, IR

Laura Alber – CEO, President

15% comps at West Elm

“The West Elm brand continues to deliver exceptional results. Comparable brand revenue increased by 15.7% on top of 17.4% last year marking 23 consecutive quarters of double-digit comparable brand revenue growth.”

Human connection and data science

“Human connection still matter in the digital age and at West Elm we are successfully laying our world class customer insights with our innovative high touch shopkeeper program, balancing the science and art of retail. Data science will continue to provide invaluable insights on customer behavior and buying trends but by empowering our store managers to run their stores like small businesses and forge deep community connections through our West Elm local program, we’re essentially running the brand in the collection of unique small retailers linked with the powerful data and technology of a global enterprise.”

I’m optimistic about the holiday season

“I’m optimistic about the holiday season. Yes we have seen some retrenching this fall and retailers and even some really good retailers have given some mix reports out there but there is not a lot of good news out there too. We know that our customers love their homes and the holiday season is the time to decorate and obtain and also to be generous with gifts to your family and friends.”

Customers will shop at retailers who have a compelling product

“I believe that consumers will shop the retailers that they trust and who have compelling product and in store experiences, I think as you go to the stores whether you got to a mall or great street going to be a top lift in terms of destination.”

Julie Whalen – CFO, EVP

ecommerce is 51% of revenue

“net revenues in our ecommerce channel grew 7% or 22.7% on a two year basis to $628 million and represented 51% of net revenues with growth primarily resulting from the continued strength we’re seeing in the West Elm brand.”

Pat Connolly – Chief Strategy and Business Officer

Bed Bath and Beyond 2Q15 Earnings Call Notes

CEO Steven Temares

Physical stores remain central to serving our customers

“As our digital and physical channels continue to converge, the physical stores remain central to serving our customers and provide us a tremendous opportunity to be close to them. The ability to consult with our knowledgeable and solutions-oriented sales associates coupled with our in-store services, encourage customers to visit and spend time in our stores. Options such as reserve online, pickup in-store, buy online and return to store and online appointment scheduling highlight various points of interactions we have with our customers across our channels.”

Promote from within

” our success is first and foremost because of our people. We believe in a meritocracy, and we significantly promote from within.”

high quality service during important life events

“We have earned the reputation for providing high quality service during important life-stage events, such as getting married, having a baby and going to college.”

Expanding into other categories

“Our newer merchandise category such as furniture, mattresses, jewelry, watches and luggage are continuing to gain recognition with all our customers and we are steadily adding new brand to the assortment.”

Pier 1 2Q16 Earnings call Notes

Alex Smith – President and CEO

Not happy with 2Q; inventory issues

“looking at the business from a high-level perspective, we’re not happy with our second quarter earnings. Our principle frustration centers around the ongoing inventory related issues impacting our business.”

Cause of problems going away, but fallout continues

“inventories are now down year-over-year. So the cause of our problems is going away, but the fallout continues and we expect it to continue to be the case for the balance of the year.”

Ecommerce 17% of sales

“E-commerce represented 17% of sales in the quarter highlighted by continued increases in online traffic conversion and average ticket.”

Will continue to feel effects of inventory the remainder of the year

“Suffice it to say, we will continue to feel the effects of our elevated inventory levels, the remainder of this year. This is particularly frustrating and we are disappointed about the impact it’s having on our margins and profitability. Nevertheless, we have substantially reduced inventory growth since the beginning of fiscal ’16 which puts us on the path through improvements.”

Numbers are being dragged down by clearance

“I think this is just an interesting perspective as well for you. If we look at the achieved margin on our mark down merchandise and if we look at the achieved margin in our full price merchandise and our achieved margin on our promotional merchandise, those numbers really are rock solid compared with previous years. What has changed is the mix so we’re selling less full price at the full margin and a little less promotional and a lot more clearance and that’s really what drag the number down.”

A lot of this is self inflicted

“So if you’re asking in terms of your question I think a lot of this is sell-inflected in one way or another.”

Competition is more intense than it was 4-5 years ago

“you’re absolutely right the competition is certainly more intense than it was four or five years ago with some smaller chains rolling out nationally and the pure e-com players that you referenced. And all those guys take some sales, but that doesn’t in anyway get the quality of our market position and all the qualities on merchandise. ”

You have to be on your game all the time in this environment

“So listen you’ve got to be – in this sort of environment you got to be on your game all the time. Your product has to be spot on, your marketing has to be spot on, but I don’t see any weakness in what we’re doing.”

Jeff Boyer – EVP and CFO

Sales growth below expectations

“Total sales in the second quarter increased 2.7% to $430 million, while company comps increased 2.5%. On a constant currency basis, total sales were up 4% and company comps were up 3.8%. This was below what we had expected and primary reflects the discipline in outdoor season that Alex discussed previously.”

Not a promotional issue, an inventory issue

“we aren’t going deeper on the promotional intensity. This isn’t a matter of going deeper on the offers. We had more clearance inventory”

Laura Coffey – EVP of Planning and Allocations

Wont give margin on ecommerce sales, but have said that it’s higher margin that store sale

“And I think what we have said consistently Denise, is that the contribution from operations level or fulfilled sales has a higher margin than the store sale and we’ve been very consistent on that and that’s been the story as how that fulfilled sale percentage grows, it will over time move that contribution from operations up. There is really no change in that, that’s still the case.”

Restoration Hardware 2Q15 Earnings Call Notes

We are built to execute

“I think what people underestimate is how well this company executes. And I think what – compared to other people in our sector, I know it looks like we’re going so much faster, and it’s true and we are. And we’re doing so much more, and it’s true and we are. But we’re a different organization. We have different people. And we have different methodologies and processes. And I think – and I think that like – I mean, to focus on, we’re adding a restaurant and a wine bar in Chicago. It’s so little compared to everything else that we’re doing that is so important.’

We value capital investments financially, then strategically then emotionally

“we go through a very rigorous strategic process here, where every idea is dimensionalized and valued based on its financial value, its strategic value and its emotional value. And so the financial value to the company is that sometimes a more obvious one, what is the revenue value, what is the earnings value, what is the cost reduction value, what is the efficiency value, when we think about the financial value to the company. Then we go into the – we rank everything on strategic value. How does it position us in the market? What competitive – how does it create competitive differentiation? And how does it position us long-term to win? And so we go through many discussions around that. We try to value things strategically, and then we try to value things emotionally. And emotionally, as it relates to two constituencies, one, our consumers had is what we’re doing? How will it connect with consumers? How – why will they care about it? And will they connect to it emotionally?”

What’s the one thing we would do or die trying

“Once we had clarity on how we see the value of each of those choices and then we force rank. If we do one thing or die trying what would we do, we debate a hell out of that and then we pick one, and we align on that as an organization, as a team.”

We worry about market instability like everyone else

“I think the thing we worry about like everybody worries about is, market instability. What happens with interest rates? What happens with the market? The high end of the food chain you’ve got people heavily invested in the markets. And if markets are in stable, I think that that’s something we’ll worry about. And not a lot we can do about it, just be prepared to deal with it and what’s going to be the effect of rising interest rates? Will it effect big ticket? Will it expect the home buying? We don’t know, we’ve never, I don’t think the country has ever been in this long over a period of this low interest rates.”

There are correlations between our business and the market

“We can see correlations between our business and the market. And it’s interesting, as we all saw the market get beat up and then bounce back and go around. You can see our business week-to-move a little bit”

It’s really hard to be a CMO today

“There’s so many ways to address marketing spend today. And I’d say that the hardest job in America today, and in any company is probably going to be the Chief Marketing Officer. It’s probably why we don’t have one.”

Williams Sonoma 2Q15 Earnings Call Notes

Partnership with AwesomenessTV to reach Gen Z

“In order to attract new customers, PBteen continues to increase its social media reach. In July, PBteen announced a partnership with AwesomenessTV, a multi-platform media company that is a global leader in engaging the Gen Z audience.”

Still working through port strike frictions

“During the second quarter, as expected, we saw higher shipping and fulfillment related costs from shipping inefficiencies stemming from inventory shortages and unbalanced inventory positions across our distribution centers. We entered the period with elevated backorder levels as a result of delayed receipts. In order to get the goods to our customers as quickly as possible, multiple deliveries on a single order as well as out-of-market shipments were made as we got back in stock.”

Key initiative in inventory optimization

“one of our key initiatives is inventory optimization. We are investing in technology, including enhanced inventory planning and allocation systems and upgrades to our customer order visibility tools, as well as incremental labor and shipping costs throughout the back-half of the year.”

Expect additional shipping costs to continue but not to the same degree

“we expect some additional labor and incremental shipping costs will continue primarily in Q3, but obviously not to the degree we saw in the first-half as we continue to rebalance our inventory levels, especially in our West Coast DC. But we’re also accelerating our investment in technology. So it’s not just a labor cost, it’s also an investment in technology.”

Inventory tools that they’re investing in

“accelerating our investment in inventory tools that will allow us to better forecast our inventory flow and space capacity requirements by DC, brand, and channel. And additionally, future system enhancements will give us better customer order visibility, allowing us to know what every touch point where that inventory resides.”

Port disruption caused us to reexamine the whole supply chain

“while the port disruption was extremely difficult, the good news is that, it caused us to reexamine every single element of our supply chain. And we have identified significant opportunities to improve service levels and over time drive down costs.”

Sometimes customers want to shop online, sometimes in store

“obviously, sometimes the customers are going to want to shop online, sometimes they want to shop in the store. And we want to serve them wherever they want to shop.”

Three weeks into the quarter, haven’t seen much volatility

“On the macro, as I said earlier we are three weeks and we have a Labor Day shift. We haven’t had a lot of market volatility. We never read too much into short-term volatility changes that are based on all the market we’ve seen it before. But the balance of what we’re seeing is that, we have a strong lineup for the balance of the year.’