Lifetime Brands, Inc. (LCUT) Q2 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Lifetime Brands Second Quarter 2021 Earnings Conference Call and Webcast. [Operator Instructions]. I would now like to introduce your host for today's conference, Andrew Squire. Mr. Squire, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brands' Second Quarter 2021 Earnings Call. With us today from management are Rob Kay, Chief Executive Officer; and Larry Winoker, Chief Financial Officer. Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the company, and these statements are intended to qualify for the safe harbor protection from liabilities established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as on the date hereof and are subject to change for future development. If it is required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

Thank you. Good morning, everyone, and thank you for joining us today to discuss Lifetime Brands second quarter 2021 financial results. Before we begin, I want to thank the Lifetime team for their dedication and hard work that has once again delivered exceptional results. Driven by the Lifetime 2.0 strategic plan that we implemented beginning in 2019, Lifetime continues to achieve strong results. During the second quarter of 2021, we continued our excellent momentum from the start of the year as well as from 2020. Our results this quarter reflect the continued strong demand for our products, leading to solid sales growth across our business, which combined with a continued focus on cost control and operating efficiencies continues to produce double-digit bottom line growth. Of note, Lifetime continues to outperform in the majority of our categories and across channels as we focus on providing products wherever consumers are shopping. During the quarter, we delivered top line growth of approximately 24%, driving net income of $5.8 million compared to a net loss of $4.0 million in the second quarter of 2020. We also delivered a gross margin dollar increase of roughly $12 million or 22% during the quarter as we successfully manage cost pressures throughout our business. In addition to strong top and bottom line results, we have continued to generate significant free cash flow. This cash flow generation has fortified our balance sheet, enabling us to continue to deleverage while also maintaining our rapid pace of investment in the business and inventory as well as funding our strategic growth initiatives, giving us a distinct competitive advantage. With that, let's turn to a review of our core U.S. business. I'm pleased to report that we've delivered our eighth consecutive quarter of year-over-year growth. Similar to prior quarters, our strong results were a result of increased market share and elevated demand across many of our product categories. During the quarter, we have also begun to see revenues from some incremental growth initiatives, such as our beautiful launch at Walmart, and the rollout of our KitchenAid cutlery. While we continue to benefit from our strategy to invest in increased inventory levels to ensure product availability for our customers and consumers, we also experienced some pressure on margins driven by macroeconomic factors, including inflation and increases in labor and shipping costs. The current global shipping crisis meant that we were unable to fulfill all of our open orders for the quarter. I'll touch on this in more detail shortly. But as you can see by our results, we were still able to achieve very strong revenue growth of 24% for the quarter and 29.5% year-to-date despite the supply chain headwinds affecting our industry. Moving to e-commerce. This channel continues to show strong growth. It is worthwhile to point out the pandemic and post pandemic impacts on brick-and-mortar as well as e-commerce channels makes a year-over-year comparison difficult. In the second quarter of 2020, brick-and-mortar stores were substantially shuttered. With stores in most geographies opened in 2021, consumers rapidly returning to brick-and-mortar locations has resulted in a decline of pure-play e-commerce sales as a percentage of our overall sales. For the second quarter, e-commerce sales as a percentage of revenues was 16.1%. This results from a decline in dollar growth compared to the second quarter of 2020 of 25.9%. However, year-to-date, our e-commerce sales have grown 9.7% compared to prior year. For perspective, our e-commerce revenues in total have grown more than 60% since the beginning of the pandemic and by more than 70% compared to second quarter 2019 level. The slower growth rate year-to-date is reflective of the impact of the COVID-19 related closings of brick-and-mortar retail locations, which drove sales to the e-commerce channel during the second quarter 2020. When viewed in this context, our online business continues to grow meaningfully, particularly on a pure dollar sales comparison given the growth in the overall business. E-commerce remains an important growth driver for Lifetime. And in addition to our pure-play growth, we continue to see very strong shipments with our omnichannel retailers, which we do not track separately. Moving to our international business. Our turnaround plan that we fully implemented in 2020 continues to deliver improved performance in our international operations. We continue to be on plan from a profitability perspective, although we have seen some impact to revenues due to continued COVID and Brexit-related challenges in Europe. However, the strength of our Asia Pacific business, coupled with our improving performance in Europe, allowed us to deliver solid bottom line results, and we expect to continue this momentum moving forward. Specifically, revenues for the quarter grew $2.6 million or 14.9% and EBITDA contribution grew $1.4 million or 67% compared to the comparable period a year ago. Year-to-date, EBITDA contribution has improved $5 million compared to the comparable period a year ago. As I mentioned at the outset, we have continued to invest in our growth initiatives and have seen encouraging progress across the board. With Mikasa Hospitality, we are strongly encouraged by the tenor and results from sales conversations, and we see continued opportunities from the disruption to the hospitality industry that has resulted from the COVID-19 pandemic. As we begin to build our book of business, we expect to start seeing revenues increase through this year, and Mikasa Hospitality remains on track to be profitable by the second half of 2022. Long term, we continue to see this as a huge market opportunity for us and one where we have a right to win. Our development stage online tabletop platform, Year & Day, is on track to relaunch in the fourth quarter of this year. As we have discussed previously, we are excited about this strategic acquisition, which will enable us to reach Millennials and Gen Z consumers and enhance our dinnerware offering for this high-value age group. We continue to expect the transaction to be accretive by 2022. And longer term, we see this brand as a potential $10 million revenue business. In terms of our other brands and product growth initiatives. As I mentioned previously, our Beautiful by Drew Barrymore brand of kitchen tools, gadgets and cutlery has now launched at Walmart and is currently in market and gaining traction. We see opportunities to continue to expand this product line moving forward. Our KitchenAid expansion also continues to gain traction, both with the introduction of new product lines, such as cutlery, as well as international growth as we take advantage of the strong global brand equity and roll out this line across various international markets. Finally, we are ramping up our new offerings in the barbecue, pet and storage and organization categories. We are still in the early stages of establishing these categories but initial product launches have been successful, and we are positioned to see more meaningful revenue contributions starting in 2022. Let me take a few minutes to touch on the current operating environment. Following the reopening of global economies, we have seen post-pandemic demand increase across numerous industries, including ours. However, despite continued strong global demand for our products, we are also managing certain macroeconomic headwinds. The lingering effects of COVID and new variants have resulted in key port closings in Asia and impacted the broader supply chain. As a result of a combination of factors, including these impacts from demand surges for goods from Asia, COVID complications and global shipping imbalances, we have seen shipping costs significantly elevated and other costs have also increased as a result of the current inflationary environment. We are actively working to mitigate these headwinds through a number of initiatives to drive down our operating costs, increase our flexibility and invest in inventory levels to ensure availability of our products. And we have implemented price increases that should start to show up in our results in the third quarter with a more impactful results coming online in the fourth quarter. The ongoing global shipping and inflationary challenges will impact our margin percentages until we can fully mitigate these impacts, as we prioritize meeting strong demand levels and producing margin dollars over maintaining margin percentages in the near term. Before we turn to our financial guidance, I wanted to expand on a recent disclosure we made regarding our decision to sell a portion of our stake in Grupo Vasconia. As a reminder, we have had a passive 30% equity investment in Grupo Vasconia, the largest housewares company in Mexico. This investment was made in 2007. We recently disclosed an agreement to sell approximately 8.5% of our stake for approximately $3 million in net cash proceeds. As Grupo Vasconia is not core to our business and does not contribute materially to our earnings, we will continue to seek opportunities to monetize this asset. Now turning to our financial guidance. Despite the industry and macroeconomic environment, I just described, we continue to produce strong results and remain confident in our ability to execute in the second half of the year, resulting in a double-digit growth for the year. We have talked about 2021 as a year of growth investment, and we have made a conscious decision not to scale back our planned investments despite increases in operating costs. We continue to manage costs prudently and in addition through the mitigating actions we have taken to offset the macro headwinds, we identified other areas of the business where we have opportunities to take out costs. Thanks to our strong balance sheet and financial performance, we are confident we can continue to support our long-term growth plans in the current environment while delivering profitable growth. As a result, we have raised our full year 2021 revenue and EBITDA value. As detailed in the press release we issued this morning, we now expect full year 2021 revenue between $870 million and $890 million, and adjusted EBITDA of $84 million to $88 million. As we look ahead, we remain focused on executing against our strategic plan and delivering value for all Lifetime Brands stakeholders. In closing, our remarkable progress gives me confidence that Lifetime is past an inflection point where we achieved a new level of business performance in our core business, created meaningful value from our international operations and positioned the company to capitalize on continued profitable growth opportunities. We are seeing sustained momentum across the business and executing well against our strategic initiatives. With the addition of several plus one growth initiatives beginning in 2022, we believe that Lifetime is well ahead of the long-term plan we set out for ourselves in 2019 and updated earlier this year. We expect the investments we've made in our business to continue to deliver tangible results as we navigate the macroeconomic environment and react to the challenges and opportunities in the marketplace. With that, I'll now turn the call over to Larry.

Thanks, Rob. As we reported this morning, net income for the second quarter of 2021 was $5.8 million or $0.26 per diluted share versus a loss of $4 million or $0.19 per diluted share in the second quarter of 2020. Adjusted net income was $6.1 million for the 2021 second quarter or $0.28 per diluted share as compared to an adjusted loss of $3.1 million or $0.15 per diluted share in 2020. A table which reconciles this non-GAAP measure with the reported results was included in this morning's release. Income from operations was $11 million for the second quarter of 2021 as compared to income from operations of $4.3 million in the 2020 period. And adjusted EBITDA, a non-GAAP measure, that is reconciled to our GAAP results in the release was $96.7 million for the trailing 12-month period ended June 30, 2021. This represents a $5.8 million increase over the $90.9 million for the trailing 12 months ended in March 2021. Net sales in the 2021 quarter were $186.6 million compared to $150.1 million for the 2020 quarter. U.S. segment sales were up $34 million to $166.6 million. The increase came from category growth and increased market share in the Kitchenware product category. Almost all product lines in the category achieved increases. Category growth reflects high demand on the continuation of consumers preparing more meals at home, the reopening of brick-and-mortar customers and overall strength of our product lines. Market share gains reflect the benefit of the company's greater market share obtained in 2020 and further gains from 2021. Tableware products increase came from all product lines, most notably on Flatware sales from a new warehouse club program and Dinnerware sales to reopen brick-and-mortar customers and in e-commerce channels. In home solutions, home decor and measurement product sales growth was offset by a decline for hydration products, which did not anniversary a 2020 warehouse club program. International segment sales were up $2.6 million to $20.1 million on a reported basis or $400,000 in constant U.S. dollars. Sales of the company's European business were down slightly due to lower e-commerce sales, offset by higher sales to reopen brick-and-mortar customers. Growth for the global trading business in Asia drove the increase in sales within the segment. Gross margin for the 2021 quarter was 35.4% and for 2020 quarter, it was 36.1%. Despite the decline, gross margin dollars increased by 22%. For the U.S. segment, gross margin was 35.8% in the 2021 quarter versus 37.6% last year. The gross margin percent decrease was primarily due to a higher inbound freight costs, reflecting a worldwide shortage of shipping containers and other supply chain constraints. The higher freight costs may persist, and we may also experience increases in product costs due to commodity inflation incurred by our suppliers. We anticipate mitigating these higher costs through selling price increases and negotiation opportunities with our suppliers and ocean-freight carriers. Gross margin percent was also affected by product mix. For international, gross margin was 32.3% in the 2021 quarter compared to 24.8% in 2020. The improvement is attributable to the 2020 period being negatively impacted by higher reserves for slow-moving inventory as well as customer mix. Distribution expense for 2021 was 10.1% of net sales as -- 10.1% also in the 2020 period. For the U.S. segment, distribution expense as a percentage of sales shipped from its warehouses was 9.4% and 9% for the '21 and '20 quarters, respectively. The increase was a result of higher hourly labor rates and warehouse equipment and supply expenses, partially offset by the leverage benefit of fixed cost and higher sales volume. For the International segment, distribution expense as a percentage of sales shipped from its warehouses, excluding moving and relocation costs for the U.K. operations in 2020 was 17.5% and 50% for '21 and '20 quarters, respectively. The increase was primarily attributable to increased shipping costs for products shipped from our U.K. warehouses to Continental Europe. Selling, general and administrative expenses were $36.2 million for the 2021 quarter versus $34.4 million in 2020. And U.S. segment expenses were $26.4 million in '21 versus $25 million last year. The expense increase was primarily due to lower expenses in the prior period due to the company's savings initiative in response to the COVID-19 pandemic. The increase was partially offset by lower allowances for bad debt. And as a percentage of net sales, SG&A expenses improved to 15.8% in the '21 quarter from 18.9% in 2020. This improvement is due to the leverage benefit of fixed cost on higher sales volume. SG&A expenses for International segment were $4.2 million in the '21 quarter compared to $4.4 million for the 2020 quarter. The decline reflects the timing of selling expenses related to advertising and marketing. Unallocated corporate expenses were $5.7 million in the '21 quarter versus $5 million last year. The increase was driven by higher incentive compensation and reversal of temporary COVID-19 pandemic savings, partially offset by lower professional fees. Interest expense was $3.8 million in '21 versus $4.2 million in 2020 quarter due to lower debt outstanding. The taxes for the quarter in 2021, income tax rate was 25.3%. This rate varies from the federal statutory rate of 21% due to state local income tax expense and an allowance of foreign losses net of a benefit related to share-based compensation. And for the 2020 quarter, the company recorded an income tax expense of $3 million on a loss of $100,000. This was due to the impact of permanent items, including the nondeductible goodwill impairment charge. Looking at our debt and liquidity. Our balance sheet and liquidity continued to strengthen. At June 30, net debt was $218.8 million. The net debt-to-EBITDA ratio was 2.3x. And liquidity, which includes $33.3 million of cash plus availability under our credit facility, was approximately $180 million. And finally, as discussed in the release, and as Rob commented earlier, our financial guidance for the full year of 2021 now as follows: net sales of $870 million to $890 million, an increase of 13.1% to 15.7% over last year; adjusted income from operations of $55 million to $58.5 million, an increase of 14.8% to 22.1% over last year; adjusted net income of $28.1 million to $30.8 million, an increase of 39% to 52.5% over last year; and adjusted EBITDA of $84 million to $88 million, an increase of 8.7% to 13.8% over last year. This concludes our prepared comments. Operator, please open the line for questions.

[Operator Instructions]. I'll take our first question from Linda Bolton-Weiser with D.A. Davidson.

So just a small little clarification on the Vasconia stake. Are you selling your whole stake or only 8.5% of your stake?

Linda. So we have sold 8.5%?

Yes.

Yes, 8.5% out of 100% of our stake. So 100% of our stake used to be 30% of the company. We've been looking to monetize, we view it as a stranded asset, and we've been looking to monetize it. We were able to monetize 8.5% of our total stake through some stock sales, and we are looking to try to monetize more in the future. So we still own from -- of the 30%, we own 91.5% of that stake.

Okay. Yes, I understand. And then can you just talk about on your gross margin impact in the quarter, I mean it was down year-over-year. But you said pricing would start to make a little bit of a positive difference in the third quarter. So do you kind of think the gross margin year-over-year decline, was that at the worst point in the second quarter? Or do you think the year-over-year decline might actually get a little bit bigger in the third quarter?

Excellent question. I think that anyone would honestly say there's a tremendous amount of unknown right now. But we continue to react to the situation. We have already mitigated the inflationary cost of goods pressures through price increases. And what will flow through is incremental price increases through dealing with increased shipping costs. So without further gyrations in the marketplace, your assessment would be correct.

You mean that maybe it might be a little bit bigger year-over-year in the third quarter?

We should start getting the price because we will start getting price increases to offset that. The question is where the shipping costs will normalize? And while our demand remains extraordinarily high, We are focused in continuing to gain availability over cost. So our shipping costs are a function of long-term negotiated contracts, but you -- there's not enough availability to fulfill all of our shipping costs through that avenue. So we buy incremental shipping costs on, for lack of a better description, it was called the spot market. And that has increased dramatically, but we would rather and we still make margin dollars increased availability, which we view will give us a competitive advantage and gain more market share if the opportunity arises, and that would have a negative impact temporarily on margins. But if in a steady state situation, you'd see the second quarter most likely, mix aside, being the low point. And again, as you know, when we have big shipments in a given quarter to club, which is lower margin but direct import, that has an impact in the quarterly margin.

Okay. One of my other companies today on a call said that they were actually sensing a slight easing in the tightness of container availability. Are you starting to see that at all? Or are you seeing it just being just as bad?

I don't think anyone in this world can answer that question accurately.

But I thought you said, Rob.

No. I mean -- I don't think so. We're not planning on that. And if it does, we'll only benefit from it. How about that?

Okay. So I mean clearly, you had terrific sales growth in the quarter. Did you feel that you got any benefit from the stimulus in the quarter?

Yes. I think our view is that people will spend U.S. dollars. And people use our products every day. So when there's more money in circulation, they'll spend more, and we will benefit from that. We'll have continuously looked at when there's new round of stimulus, and we'll advance feed certain channels to make sure there's adequate inventory so we don't get cut short because people kind of -- it pops and then comes back down. So the build benefit that usually is the first check, but not on a continued basis.

Okay. So is there any way to -- I mean was there some growth like predominantly consumption growth at the retail level? Or was there a fair amount of retail replenishment?

So a lot of our growth has been driven, just we pick up substantial market share. We've seen -- in 2021, we've seen a little pickup in food service, right, which was nonexistent. We've definitely seen pick up in 2021 in brick-and-mortar because particularly in the second quarter, right, because a lot of it was substantially closed a year ago, and that's picked up at the expense of e-commerce. But generally, overall, we've grown across categories and not just our feeling supported by NPD data. And that's driven -- driving and continues to drive a lot of our growth. It's not like in terms of stock levels, a lot of our retailers, we weren't blipped, so to speak, by certain retailers being out of stock and then all of a sudden needing to replan or replenish a tremendous amount. In Europe, we did see that this quarter, so we were negatively impacted particularly in e-commerce, where our largest customer didn't have room in their own distribution centers. So while we were out of stock on, if you went online to buy the goods, they couldn't replenish because their own warehouses are which we stock. So that's actually -- that is broken and we benefited from that in particularly July. But in general, if you look at our total numbers, it's just sell-through and continued sell-through. And as a matter of fact, as I mentioned, in the second quarter, there was a decent amount of orders we could not ship during shipping issues, so we would have -- we had demand and the ability to ship a lot more, but the shipping constraints hurt us, nonetheless, we put up very good numbers.

Okay. And then just on your price increases that you're implementing. Is it kind of broadly across the portfolio? Or are you really focused in on certain categories where you think you've got the most pricing power? And how is your effort similar or different from -- during the tariff period?

So on the first question, it's across all categories. And look, there are 2 buckets of price increases, and we're also focused on a lot higher where we can on the cost side. But on the price side -- pricing side, first, which we knew earlier, was just inflationary cost of goods sold pressure. And there is a difference in terms of the product categories on your cost inputs because we focus on not trying to overshoot. We really focus on the true math and sharing the true math. And therefore, we ask for only what is the price increase. In -- since that time and all the price increases have been focused on shipping costs, which is across the board, everything we do. The second question was on tariffs, right? I mean the approach is basically the same. So tariffs didn't uniformly impact us across all of our categories. So in the categories that they did, when an item 1 test, we would then sit down and explain the math and why we need the price increase. The problem -- the challenge, I should say, in the tariff was where the tariffs were set at a certain level, they were raised, they were lower. They were put on, they were taken off, and it was very difficult to pass on a price increase in that environment because no one knew where it was going to end up. And particularly in brick-and-mortar retail, you don't want to resticker everything and then have to change it. So that's the way the ability to get price increases. Whereas in this environment, it's well known and it's more that there is a agreed upon time line when they go into effect.

Okay. That's helpful. And then, actually, just my last question is just a little detailed thing from Larry. I'm seeing on your schedule of adjustments reconciling net income to adjusted net income. There's these 2 items, foreign currency translation loss, reclassified from [indiscernible] and then a gain on change in ownership in equity method investment, those 2 items. Where would those 2 adjustments occur in the income statement? Which line would those be in?

Yes, it's in the equity and earnings line. So exclusively it happened early -- during the quarter. Grupo Vasconia did a primary offering. They sold to raise money approximately 10 million shares. So because of that dilution, we actually had a -- we had a gain. But then we had previously realized a loss on translation, which is in this other comprehensive income. So now you have to reclass it to what we call like the regular P&L, a little convoluted. But we had a gain, but the translation gets reclassified from 1 type of -- for one section in this income statement to another. And it's separate from what Rob was describing about that we sold shares in early July.

Well, we sold shares using this Grupo Vasconia need to raise money and they went to the public market. So we piggyback on that, and that's how we got liquidity partially in our Vasconia acquisition.

And we'll take our next question from Anthony Lebiedzinski with Sidoti & Company.

So first, I was just wondering, with this latest news about all these variances -- more specifically, Delta variant, spiking as far as the cases. Have you guys seen here as of late, any noticeable changes in buying patterns because of that?

Not really, Anthony. The variant -- our demand remains strong. We haven't seen any impact in any points in 2021. We have seen related to, not the variant, but the shipping problem that increasingly lesser-capitalized companies or just people who hadn't invested in inventory are having gaps and allows us to step in. So there are some opportunities there, more forward-looking. The variant, the major impact we've had on that, for us, has been more travel was returning and that kind of stopped, from a travel perspective. There is a very big food service show in August called NAFEM that we just canceled yesterday. So for us, you'll actually see the immediate benefit of that is cost savings, right? So it kind of looks good. But ultimately, that's not good. You want to have things like that to be able to grow in the long term. But so the only impact we've seen is on travel.

Got it. Okay. And then so is it possible for you guys to quantify the level of price increases that you're doing in third and fourth quarters? Just wondered if there's any way you can quantify that.

We haven't really, and we're not at liberty to do that. We can say that the impact to us are double digits and the cost price increases, I should say, are double digit.

Got it. Okay. And then -- so in terms of the certainly well-publicized pressures as far as shipping costs and labor and all that, so looking at the back half of your fiscal year here, so do you expect more of the impact to be on the gross margin versus distribution expenses or both? I mean how should we think about as far as adjusting our models here for sort of back half of the year?

Anthony, in our guidance, we really haven't broken out gross margin. We've really focused on operating income.

Yes. But I mean the biggest impact is shipping expense. And there's a lot of mitigating line items, including on the cost of goods sold line, but the big impact of pricing, obviously, shows up in the gross margin.

Got it. Okay. That's helpful. And then I guess lastly, to kind of just steer a little bit. So Rob, you talked about the e-commerce kind of certainly being down as a percentage of the overall sales. But -- so I know there's a lot of noise with all the comparisons versus last year for sure. But ultimately, where do you think that settles after all this kind of -- hopefully, we get past this pandemic. I mean but overall, how do you view that? What are your thoughts on that?

Yes. And I tried to give everyone a little bigger -- because second quarter, it was a tough comparison because remembering brick-and-mortar substantially shut down in the second quarter of last year, right? And things substantially went online. So it's a tough comparison, which is why I tried to give everyone in my remarks, a broader view. It continues to grow. So while we were down in absolute dollars in the second quarter, still year-to-date, we're up about 10%, right, in the 6 months because e-commerce continues to grow. And that doesn't include, which we don't report separately on, is our shipments to omnichannel, which grew over 160% in 2020, continues to be very strong. So I mean as a retailer, we position ourselves, as you know, Anthony, to try to be wherever the consumer is going to shop. So we want to be relatively indifferent, whether a consumer buys something online or buy something in brick-and-mortar. And it's just we need to make sure we have adequate presence in all channels. So whether it ends up, it's going to be higher than 16%, right? So I mean likely 20% or more because that channel continues to grow. But it's hard to really handicap where it ends. People -- it's shown in 2021 that brick-and-mortar is strong, right? They've come back very strongly. Likely -- and if you look in Europe, it's much more -- our business is much more oriented towards independents. They come back with a vengeance, which is great. It's a great channel. We're very, very big in that channel. So people like to shop. Likely, the variant, if it continues in this direction, will damper those sales and people will go more online. So there will be some noise fluctuations. I don't know where we end up ultimately.

There are no further questions at this time. I'll turn the call back over to you, Rob, for any additional remarks.

Thanks, Ashley. Thank you. Thank you, everyone, for joining us on this call. We will be continuing, Larry and I, to speak at conferences, and we'll either meet people there or we will look forward to everyone in our next call at the end of next quarter. Thank you.

Thank you. And this concludes today's program. Thank you for your participation. You may disconnect at any time.