LL Flooring Holdings' net sales of $279 million decreased $4.4 million, or 1.6%, from the 1Q 2021.
Gross margin of 37.3% decreased 350 basis points as a percentage of sales compared to the same period last year; Adjusted gross margin of 37.2% decreased 130 basis points as a percentage of sales compared to the same period last year, primarily reflecting significantly higher transportation and material costs (collectively up more than 1,000 basis points) that the Company was able to partially mitigate through pricing, promotion and alternative country/vendor sourcing strategies.
Operating margin of 1.8% decreased 280 basis points compared to the first quarter of last year; adjusted operating margin of 1.7% decreased 340 basis points compared to the first quarter of last year, primarily reflecting increased SG&A as a percent of net sales and lower gross margin.
2022 Business Outlook
The Company continues to navigate uncertainty in the macroeconomic environment related to inflation, consumer spending, global supply chain disruptions, COVID-19, and a challenging labor market. As a result, the Company is not providing financial guidance at this time.
The Company is, however, reaffirming the outlook provided on February 23, 2022 as follows:
- The Company continues to expect comparable store sales for the second quarter to improve on a percentage basis versus the 1Q 2022, and to show positive growth for the full year 2022.
- The Company’s outlook for net sales and comparable store sales growth anticipates inventories returning to optimal levels by the end of the first half as we bring in-transit inventories into our stores and distribution centers, and increasing traction on its growth strategies as the year progresses and the macroeconomic headwinds lessen.
- The Company expects higher transportation and material costs will be a headwind to gross margins in 2022. The Company expects to continue to partially offset these higher costs through pricing, promotion and sourcing strategies but will monitor the market to inform and guide its decisions.
- The Company expects SG&A as a percent of sales to increase in 2022 compared to 2021, reflecting an investment year in support of its goal to grow net sales to $1.5 billion by 2024.
- The Company expects to invest $50 million to $70 million in inventory in 2022.
- The Company expects capital expenditures in the range of approximately $28 million to $32 million, primarily to support growth strategies such as new stores.
- The Company expects to open 20 to 25 new stores in 2022.
President and CEO Charles Tyson said, "During the 1Q, our team continued to gain traction on our six core growth strategies supporting our goal to deliver $1.5 billion in net sales with expanded operating margin by 2024. We were particularly pleased to report record sales to Pro customers and to open seven new stores during the quarter.”
LL Flooring is one of the leading specialty retailers of hard-surface flooring in the U.S. with 431 stores.
