LL FLOORING HOLDINGS, INC. Dyskusja kierownictwa i analiza sytuacji finansowej i wyników operacji. (formularz 10-Q)
Uwaga dotycząca oświadczeń dotyczących przyszłości
This report includes statements of the Company's expectations, intentions, plans and beliefs that constitute "forward-looking statements" within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by words such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "assumes," "believes," "thinks," "estimates," "seeks," "predicts," "could," "projects," "targets," "potential," "will likely result," and other similar terms and phrases, are based on the beliefs of the Company's management, as well as assumptions made by, and information currently available to, the Company's management as of the date of such statements. These statements are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond the Company's control. These risks include, without limitation, the impact of any of the following:
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zmniejszone wydatki konsumpcyjne z powodu wolniejszego wzrostu, recesji gospodarczej, inflacji, wyższych stóp procentowych i nastrojów konsumentów;
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nasza reklama i ogólna strategia marketingowa, w tym przewidywanie trendów konsumenckich i zwiększanie świadomości marki;
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utrzymujący się okres inflacji wpływający na wydatki konsumpcyjne;
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nasza niezdolność do realizacji naszych kluczowych inicjatyw lub jeśli takie kluczowe inicjatywy nie przynoszą pożądanych rezultatów;
• stock price volatility;
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konkurencja, w tym alternatywne oferty handlu elektronicznego;
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zmiany płynności i/lub zasobów kapitałowych oraz wpływ wszelkich zmian lub ograniczeń, w tym między innymi zdolność do pożyczania środków i/lub odnawiania lub rolowania istniejącego zadłużenia;
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dostępność transportu i koszty, w tym wpływ wojny w
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zakłócenia w łańcuchu dostaw i dostępności produktów związane z pracą przymusową i innymi przepisami handlowymi, w tym w odniesieniu do ustawy o zapobieganiu pracy przymusowej Ujgurów („UFLPA”);
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niezdolność do zatrudniania i/lub zatrzymywania pracowników;
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niezdolność do przechowywania pracowników ze względu na ogólną presję na rynku pracy;
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wyniki postępowań sądowych i ich wpływ na płynność;
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szkoda reputacyjna;
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niemożność otwarcia nowych sklepów, znalezienia odpowiednich lokalizacji dla naszego nowego konceptu sklepów i sfinansowania innych nakładów inwestycyjnych;
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zarządzanie wzrostem;
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zakłócenia w naszej zdolności do dystrybucji naszych produktów, w tym z powodu trudnych warunków pogodowych;
• operating an office inChina ;
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utrzymujące się i potencjalne przyszłe skutki pandemii COVID-19 i związanych z nią kwestii zdrowia publicznego;
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zarządzanie zewnętrznymi instalatorami i firmami dostarczającymi produkty;
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odnawianie najmu sklepu, magazynu lub innej firmy;
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utrzymywanie optymalnych zapasów dla potrzeb konsumentów;
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zgodność nasza i naszych dostawców ze złożonymi i zmieniającymi się zasadami, regulacjami i prawami na poziomie federalnym, stanowym i lokalnym;
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nadmierne poleganie na dostawcach z ograniczonym lub wyłącznym źródłem;
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uszkodzenie naszych aktywów;
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dostępność odpowiedniego drewna liściastego, w tym zakłócenia spowodowane skutkami trudnych warunków pogodowych i ograniczeń w łańcuchu dostaw;
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Spis treści
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roszczenia z tytułu odpowiedzialności za produkt, roszczenia dotyczące uzasadnienia marketingowego, roszczenia dotyczące wynagrodzenia i godzin oraz inne roszczenia dotyczące pracy i zatrudnienia;
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wystarczająca ochrona ubezpieczeniowa, w tym ubezpieczenie cybernetyczne;
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zakłócenia spowodowane zagrożeniami dla bezpieczeństwa cybernetycznego, w tym wszelkie skutki incydentu związanego z bezpieczeństwem sieci;
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the handling of confidential customer information, including the impacts from the California Consumer Privacy Act and other applicable data privacy laws and regulations;
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zakłócenia systemów informacji zarządczej;
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pozyskiwania produktów w kraju i zagranicą, w tym cła i opóźnienia w spedycji i transporcie, a także skutki ceł antydumpingowych i wyrównawczych;
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impact of changes in accounting guidance, including implementation guidelines
and interpretations related to Environmental, Social, and Governance ("ESG")
matters;
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internal controls; and
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anti-takeover provisions.
Informacje dotyczące ryzyka i niepewności zawarte są w raportach Spółki przekazywanych do Urzędu Skarbowego
This management discussion should be read in conjunction with the financial statements and notes included in Part I, Item 1. "Financial Statements" of this quarterly report and the audited financial statements and notes and management discussion included in the Company's annual report filed on Form 10K for the year endedDecember 31, 2022 . OverviewLL Flooring is one of the leading specialty retailers of hard-surface flooring in theU.S. with 443 stores as ofMarch 31, 2023 . Our Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. Our online tools also help empower customers to find the right solution for the space they've envisioned. Our extensive selection includes waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, tile, and cork, with a wide range of flooring enhancements and accessories to complement. Our stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all our products, the majority of which are in stock and ready for delivery. Our vision is to be the customers' first choice in hard-surface flooring by providing the best experience, from start to finish. We offer the accessible flooring expertise and high-touch service of a local store, combined with the value, omnichannel convenience and product availability of a national brand. We plan to leverage this advantage to differentiate ourselves in the highly fragmented flooring market. To supplement the financial measures prepared in accordance withU.S. generally accepted accounting principles (GAAP), the Company uses the following non-GAAP financial measures: (i) Adjusted Gross Profit; (ii) Adjusted Gross Margin; (iii) Adjusted SG&A; (iv) Adjusted SG&A as a Percentage ofNet Sales ; (v) Adjusted Operating (Loss) Income; (vi) Adjusted Operating Margin; (vii) Adjusted Other Expense; (viii) Adjusted Other Expense as a Percentage ofNet Sales ; (ix) Adjusted (Loss) Earnings; and (x) Adjusted (Loss) Earnings per Diluted Share. These non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies. The non-GAAP financial measures are presented because we believe the non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, These measures provide an additional tool for investors to use in evaluating our ongoing operating performance, and management, in certain cases, uses them to determine incentive compensation. The presented non-GAAP financial measures exclude items that management does not believe reflect our core operating performance, which include incremental costs of sales and associated legal costs related to disruptions to supply chain and other trade regulations and changes in antidumping and countervailing duties, as such items are outside of our control or due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature. Reconciliations of these non-GAAP financial measures are provided on the pages that follow (certain numbers may not sum due to rounding). 15
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Spis treści
Podsumowanie wykonawcze
LL Flooring's first quarter was very challenging and our performance primarily reflected the impact the difficult macro backdrop had on discretionary home improvement spending. In addition, we continue to experience pressure from brand awareness and operational challenges that impacted first quarter results. Despite the near-term volatility, we remain focused on areas of improvement that will help stabilize our results and drive long-term growth opportunities. These include further broadening and growing our brand awareness among consumers to drive traffic; ensuring a consistent customer experience across our omnichannel network to improve conversion; and improving operating efficiencies by actively working to reduce costs while focusing investments on our top growth priorities. Importantly, we continued to execute on these areas during the quarter. As we look to the remainder of 2023, we expect the macro backdrop to remain challenging as elevated inflation and higher interest rates drive a more cautious consumer and pressure higher ticket discretionary purchases. In the near term, these factors have limited our sales visibility. Looking beyond 2023, we remain confident the long-term fundamentals of our business are strong. As we continue to work on each of our strategic priorities, we remain focused on delivering long-term sustainable growth as a leading specialty flooring retailer.
InFebruary 2023 ,U.S. Customs and Border Protection ("CBP") added aluminum and polyvinyl chloride ("PVC") to a list of categories including cotton, tomatoes and polysilicon for which CBP has the ability to request additional documentation from importers under the Uyghur Forced Labor Prevention Act ("UFLPA"). During the first quarter, CBP began to request additional documentation with respect to the UFLPA for some shipments of vinyl flooring originating fromVietnam . We require our vendors to follow our strict guidelines on responsible sourcing, we obtain periodic certifications from them concerning compliance with these standards and we perform audit procedures of their supply chain documentation. While CBP is continuing to detain shipments within the vinyl product category, and we are diligently working to provide additional documentation that they are requesting, we do not know how long their review of the documentation will take or when these delays will be resolved.
W pierwszym kwartale 2023 roku mieliśmy do czynienia z ciągłymi opóźnieniami, w wyniku których
We're continuing to work to mitigate the disruptions by featuring alternative products in our current assortment and leveraging our sourcing capabilities to look at alternative flooring categories and sourcing geographies. Despite our mitigation efforts, we believe that this issue could have further material impacts on sales and margins as we progress throughout the year. See "Risk Factor - The Company and third-party suppliers on whom we rely source a significant portion of the merchandise we sell fromAsia , which exposes us to the risk of supply chain disruptions" in the Company's annual report filed on Form 10K for the year endedDecember 31, 2022 . 16
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Spis treści
Wyniki operacji
We believe the selected sales data, the percentage relationship between net
sales and major categories in the consolidated statements of operations and the
percentage change in the dollar amounts of each of the items presented below are
important in evaluating the performance of our business operations.
% Increase
(Decrease)
in Dollar
% of Net Sales Amounts
Three Months Ended March 31, 2023
2023 2022 vs. 2022
Net Sales
Net Merchandise Sales 87.5 % 87.5 % (13.8 )%
Net Services Sales 12.5 % 12.5 % (13.1 )%
Total Net Sales 100.0 % 100.0 % (13.7 )%
Gross Profit 36.6 % 37.3 % (15.4 )%
Selling, General and Administrative Expenses 42.0 % 35.5 % 2.2 %
Operating (Loss) Income (5.5 )% 1.8 % (360.9 )%
Other Expense (Income) 0.5 % - % (7826.7 )%
(Loss) Income Before Income Taxes (6.0 )% 1.8 % (383.0 )%
Income Tax (Benefit) Expense (1.6 )% 0.4 % (464.2 )%
Net (Loss) Income and Comprehensive (Loss) Income (4.4 )% 1.4 % (362.2 )%
Three Months Ended March 31,
2023 2022
SELECTED SALES DATA
Average Sale1 $ 1,767 $ 1,695
Comparable Store Net Sales (Decrease) Increase2 (15.4 )% (3.6 )%
Transaction Count Decrease3 (19.6 )% (23.3 )%
Average Retail Price per Unit Sold Increase4 8.7 % 10.3 %
Number of Stores Open, end of period 443 431
Number of Stores Opened in Period, net of closures 1 7
1
Average sale is defined as the average invoiced sales order, measured quarterly,
excluding returns as well as transactions under $100 (which are generally sample
orders or add-on/accessories to existing orders).
2
Sklep jest ogólnie uważany za porównywalny pierwszego dnia trzynastego pełnego miesiąca kalendarzowego po otwarciu.
3
Liczbę transakcji oblicza się, stosując średnią sprzedaż do całkowitej sprzedaży netto w porównywalnych sklepach.
4
Średnia cena detaliczna za jednostkę sprzedaży (stopy kwadratowe podłóg i inne jednostki miary listew i akcesoriów) jest obliczana dla całej firmy i nie obejmuje przychodów niezwiązanych z towarami.
Net sales of$240.7 million decreased 13.7% compared to the same period last year, driven by lower spending by consumers versus last year combined with a decline in Pro sales. Total comparable store sales decreased 15.4% versus the same period last year. During the first quarter, the Company opened one new store, bringing total stores to 443 as ofMarch 31, 2023 . Average sale increased 4.2% and average retail price per unit sold increased 8.7%, primarily due to the Company's pricing and promotion strategies to offset higher material and transportation costs as well as favorable product mix. This was more than offset by the 19.6% decrease in transaction count, reflecting continued pressures on consumer discretionary spending due to consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales. As the Company continues to navigate uncertainty in the macroeconomic environment, it will continue to monitor the competitive pricing environment to inform its pricing and promotion strategies. 17
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Spis treści
Zysk brutto
Gross profit of$88.0 million decreased$16.1 million compared to the first quarter of 2022, and gross margin of 36.6% decreased 70 basis points compared to the same period last year, driven by$2.1 million in incremental costs related to customs delays on flooring products that contain PVC as a consequence of the UFLPA. Gross profit for the first quarter of 2022 was impacted by the net of antidumping and countervailing duty rate changes. Excluding these 2023 and 2022 unusual items, adjusted gross margin (a non-GAAP measure) of 37.4% increased 20 basis points compared to the same period last year, primarily reflecting the Company's ability to offset higher material and transportation costs (collectively up more than 500 basis points) through pricing, promotion and alternative country/vendor sourcing strategies. In order to further reduce transportation costs and optimize our supply chain network, the Company will be opening a third distribution center in the third quarter of 2023. InMarch 2023 , the Company entered into a ten-year lease agreement for a 457,363 square foot distribution center inDallas, Texas , which will enable us to more efficiently serve our stores located in theCentral United States . See Item 1, Note 8 to the consolidated financial statements for further detail regarding the lease. Additionally, the Company's financial statements have been impacted by Section 301 tariffs on certain products imported fromChina in recent years. The tariffs flow through the income statement as the product is sold. The Company has deployed strategies to mitigate tariffs and improve gross margin, primarily through adjusting its pricing and promotion strategies and alternative country sourcing. Through its sourcing strategy, the Company held the percentage of merchandise receipts subject to Section 301 tariffs to 16% during the three months endedMarch 31, 2023 and 2022. As discussed in Item 1, Note 7 to the consolidated financial statements, the Company is unable to predict the timing or outcome of the ruling by the CAFC. If these appeals are successful, the Company should qualify for refunds on these Section 301 tariffs. Three Months Ended March 31, 2023 2022 $ % of Sales $ % of Sales (in thousands, except percentage data) Gross Profit/Margin, as reported (GAAP)$ 88,000 36.6 %$ 104,079 37.3 % Vinyl Charges1 2,138 0.9 % - - % Antidumping and Countervailing Adjustments2 - - % (241 ) (0.1 )% Adjustment Items Subtotal 2,138 0.9 % (241 ) (0.1 )% Adjusted Gross Profit/Margin (non-GAAP measures)$ 90,138 37.4 %$ 103,838 37.2 % 1 This amount represents costs related to customs delays on flooring products that contain PVC as a consequence of the UFLPA. 2 This amount represents net antidumping and countervailing income associated with applicable prior-year shipments of engineered hardwood fromChina .
Koszty sprzedaży, ogólne i administracyjne
Selling, general and administrative ("SG&A") expenses of $101.2 million
increased $2.2 million , and SG&A as a percentage of net sales of 42.0% increased
650 basis points versus the first quarter of last year. SG&A expenses in the
first quarter of 2023 included a $0.3 million charge for legal fees charged to
earnings related to CBP requests for additional documentation on imports of
flooring products that contain PVC as a consequence of the UFLPA. Excluding the
impact of the legal fees, adjusted SG&A expense (a non-GAAP measure) increased
$1.9 million year-over-year, and adjusted SG&A as a percentage of net sales (a
non-GAAP measure) of 41.9% increased 640 basis points compared to the first
quarter of last year.
The increases in both SG&A and adjusted SG&A as a percentage of net sales were
due primarily to expense deleverage from lower sales volumes. In addition,
operating expenses were higher due to the planned investments in our growth
strategies including: costs associated with new stores, investments in
technology and digital enhancements to improve the customer experience, and
consulting fees related to realigning our cost structure, as well as
inflationary cost increases. The increase was partially offset by restructuring
cost savings and lower variable costs due to lower sales volume.
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Spis treści
During the three months endedMarch 31, 2023 , the Company redeemed$0.7 million of MDL and Gold vouchers and reduced the accrual for legal matters and settlements for the full amount, relieved inventory at its cost, and the remaining amount -- the gross margin for the items sold of$0.3 million was recorded as a reduction in SG&A expense. During the comparable prior period, the Company redeemed$1.1 million of MDL and Gold vouchers with a gross margin for the items sold of$0.4 million . Three Months Ended March 31, 2023 2022 $ % of Sales $ % of Sales (in thousands, except percentage data) SG&A, as reported (GAAP)$ 101,185 42.0 %$ 99,025 35.5 % Legal and Professional Fees3 280 0.1 % - - % Adjusted SG&A (a non-GAAP measure)$ 100,905 41.9 %$ 99,025 35.5 % 3 This amount represents incremental legal fees charged to earnings related to CBP requests for additional documentation on imports of flooring products that contain PVC as a consequence of the UFLPA. This does not include all legal costs incurred by the Company.
Dochód (strata) operacyjna i marża operacyjna
Operating loss was$13.2 million in the first quarter of 2023, compared to operating income of$5.1 million in the first three months of 2022. Adjusted operating loss (a non-GAAP measure) of$10.8 million decreased$15.6 million from$4.8 million adjusted operating income (a non-GAAP measure) in the first quarter of 2022. Operating margin of (5.5)% decreased 730 basis points compared to the first quarter of last year. Adjusted operating margin (a non-GAAP measure) of (4.5)% decreased 620 basis points compared to the first quarter of last year, which reflects the increased selling, general and administrative expenses and decreased gross margin as described in the above sections. Three Months Ended March 31, 2023 2022 $ % of Sales $ % of Sales (in thousands, except percentage data) Operating (Loss) Income, as reported (GAAP)$ (13,185 ) (5.5 )%$ 5,054 1.8 % Gross Margin Adjustment Items: Vinyl Charges1 2,138 0.9 % - - % Antidumping and Countervailing Adjustments2 - - % (241 ) (0.1 )% Gross Margin Adjustment Items Subtotal 2,138 0.9 %
(241 ) (0,1 )%
SG&A Adjustment Items: Legal and Professional Fees3 280 0.1 % - - % SG&A Adjustment Items Subtotal 280 0.1 % - - % Adjusted Operating (Loss) Income/ Margin (a non-GAAP measure)$ (10,767 ) (4.5 )%$ 4,813 1.7 %
1,2,3 Bardziej szczegółowe objaśnienia tych poszczególnych pozycji znajdują się w sekcjach Zysk brutto i SG&A powyżej.
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Spis treści
Inne wydatki (dochód)
The Company had other expense of$1.2 million for the first quarter of 2023 compared to other income of$15.2 thousand in the first quarter of 2022. The prior year income was favorably impacted by the reversal of interest expense associated with antidumping and countervailing duty rate changes. Excluding the antidumping and countervailing adjustment in the first quarter of 2022, adjusted other expense (a non-GAAP measure) of$1.2 million in the first quarter of 2023 decreased$1.1 million from the first quarter of last year. The increase in other expense and adjusted other expense in the first quarter of 2023 is due to the interest on borrowings on our Credit Agreement, compared to no borrowings on the Credit Agreement in the first quarter of 2022. Three Months Ended March 31, 2023 2022 $ % of Sales $ % of Sales (in thousands, except percentage data) Other Expense (Income), as reported (GAAP)$ 1,159 0.5 %$ (15 ) - % Interest Impact Related to Antidumping and Countervailing Adjustments4 - - % (84 ) - % Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)$ 1,159 0.5 %$ 69 - % 4
Kwota ta odzwierciedla wpływ na dochód z odsetek niektórych dostosowań antydumpingowych i wyrównawczych związanych z mającymi zastosowanie transportami przetworzonego drewna liściastego z poprzedniego roku z
Rezerwa na podatek dochodowy
The Company calculates its quarterly tax provision pursuant to the guidelines in
Accounting Standards Codification ("ASC") 740-270 "Income Taxes." Generally, ASC
740-270 requires companies to estimate the annual effective tax rate for current
year ordinary income. The estimated annual effective tax rate represents the
best estimate of the tax provision in relation to the best estimate of pre-tax
ordinary income or loss. The estimated annual effective tax rate is then applied
to year-to-date ordinary income or loss to calculate the year-to-date interim
tax provision and is adjusted for discrete items that occur within the period.
For the three months ended March 31, 2023 , the Company recognized income tax
benefit of $3.8 million , which represented an effective tax rate of 26.2%. For
the three months ended March 31, 2022 , the Company recognized income tax expense
of $1.0 million , which represented an effective tax rate of 20.4%. The higher
effective tax rate in the current period primarily reflects the impact of
permanent items on the pretax ordinary loss.
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Spis treści
Dochód (strata) netto na rozwodnioną akcję
Net loss per diluted share was$0.37 for the three months endedMarch 31, 2023 , compared to net income per diluted share of$0.14 for the three months endedMarch 31, 2022 . Adjusted loss per diluted share was$0.31 for the three months endedMarch 31, 2023 , compared to net income per diluted share of$0.13 for the three months endedMarch 31, 2022 . Three Months Ended March 31, 2023 2022 (in thousands, except per share data) Net (Loss) Income, as reported (GAAP)$ (10,585 ) $ 4,037 Net (Loss) Income per Diluted Share (GAAP)$ (0.37 )
Gross Margin Adjustment Items: Vinyl Charges1 2,138 - Antidumping and Countervailing Adjustments2 - (241 ) Gross Margin Adjustment Items Subtotal 2,138 (241 ) SG&A Adjustment Items: Legal and Professional Fees3 280 - SG&A Adjustment Items Subtotal 280 - Other Expense (Income) Adjustment Items: Interest Impact Related to Antidumping and Countervailing Adjustments4 - (84 ) Other Expense (Income) Adjustment Items Subtotal - (84 ) Income Tax Adjustment5 (636 ) 85 Adjusted (Loss) Earnings$ (8,803 ) $ 3,797 Adjusted (Loss) Earnings per Diluted Share (a non-GAAP measure)$ (0.31 ) $ 0.13
1,2,3,4 Bardziej szczegółowe objaśnienia tych poszczególnych pozycji znajdują się w sekcjach Zysk brutto, SG&A i Inne koszty (dochody) powyżej.
5
Korekta podatku dochodowego jest zdefiniowana jako suma marży brutto, SG&A i innych pozycji korekty kosztów (dochodów) pomnożona przez federalną stawkę krańcową Spółki, która wynosiła 26,3% za okresy zakończone
Płynność, zasoby kapitałowe i przepływy pieniężne
Źródła płynności
Cash flows from operations supplemented with our short-term and long-term borrowings remain sufficient to fund our operations while allowing us to fund our growth initiatives and positionLL Flooring for long-term success. As ofMarch 31, 2023 , we had liquidity of$156.8 million , consisting of excess availability under our Credit Agreement of$149.8 million and cash and cash equivalents of$7.0 million . This represents an increase in liquidity of$21.2 million fromDecember 31, 2022 , primarily reflecting repayments of outstanding debt under the Credit Agreement. We believe that cash flows from operations, together with cash on hand, and the liquidity under our Credit Agreement will be sufficient to meet our obligations and fund our settlements, operations, anticipated capital expenditures, and potential share repurchases for the next 12 months. The Company continues to navigate uncertainty in the macroeconomic environment due to consumer confidence, inflation, volatile mortgage rates impacting housing affordability and lower existing home sales. We prepare our forecasted cash flow and liquidity estimates based on assumptions that we believe to be reasonable but are also inherently uncertain. Actual future cash flows could differ from these estimates. 21
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Spis treści
Zasoby kapitałowe
As ofMarch 31, 2023 , our material contractual obligations consist of long-term debt and letters of credit under our Credit Agreement and leases. See Note 5 to the consolidated financial statements for further detail related to our Credit Agreement. See Note 8 to the consolidated financial statements for further detail related to leases to be read in conjunction with the Form 10K for the year endedDecember 31, 2022 . Cash Flows Summary Three Months EndedMarch 31, 2023 2022 (in thousands)
Środki pieniężne netto dostarczone (wykorzystane w) działalności operacyjnej
$ (23,401 ) Net Cash Used in Investing Activities (4,741 ) (5,189 ) Net Cash Used in Financing Activities (25,231 ) (528 ) Net Decrease in Cash and Cash Equivalents$ (3,823 )
W ciągu trzech zakończonych miesięcy
During the three months endedMarch 31, 2022 , the Company used$23.4 million of cash flows for operating activities, which was primarily the result of purchases of inventory ($64.8 million ), partially offset by increased accounts payable ($26.0 million ), and net income ($4.0 million ). Net cash flows used in investing activities included$4.7 million and$5.2 million in capital expenditures in the three months endedMarch 31, 2023 and 2022, respectively. Capital expenditures in both years were used primarily for opening new stores and investments in digital, with additional investments related to store rebranding in the first quarter of 2022. The Company opened one new store in the first quarter of 2023 versus seven new stores in the same quarter prior year. Net cash flows used in financing activities was$25.2 million during the three months endedMarch 31, 2023 , compared to$0.5 million during the three months endedMarch 31, 2022 . The activity in the current year was primarily attributable to$25.0 million of net repayments of outstanding debt under the Credit Agreement. Additionally, financing activities in the first quarter of both 2023 and 2022 included repurchases of common stock.
Zapasy towarów
Our net sales fluctuate slightly as a result of seasonal factors, and we adjust merchandise inventories in anticipation of those factors, causing variations in our buildup of merchandise inventories. Generally, we experience higher-than-average net sales in the spring and fall, when more home remodeling activities typically take place, and lower-than-average net sales in the winter months and during the hottest summer months. Merchandise inventories onMarch 31, 2023 decreased$24.6 million fromDecember 31, 2022 as the Company began to sell through inventory rebuilt from the prior year and reduced inventory purchases. We consider merchandise inventories either "available for sale" or "in-transit," based on whether we have physically received and inspected the products at an individual store location, in our distribution centers or in another facility where we control and monitor inspection. In-transit inventory generally varies due to the timing of certain international shipments and certain seasonal factors, including international holidays, rainy seasons, and specific merchandise category planning. 22
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Spis treści
Merchandise inventories and available inventory for sale per store in operation
were as follows:
As of As of As of
December 31, March 31,
March 31, 2023 2022 2022
(in thousands)
Inventory - Available for Sale $ 284,462 $ 307,730 $ 266,228
Inventory - In-Transit 23,276 24,566 52,346
Total Merchandise Inventories $ 307,738 $
332296
Inventory Available for Sale Per Store $ 642 $
696
Inventory available for sale per store as ofMarch 31, 2023 decreased compared toDecember 31, 2022 due to the same drivers as merchandise inventories as well as the opening of a new store in the first quarter of 2023. Inventory available for sale per store increased compared toMarch 31, 2022 reflecting the Company's strategy to utilize the merchandise inventories rebuilt in 2022 to offer a compelling assortment of trend-right products close to its customers, as well as, to a lesser extent, inflation.
Krytyczne zasady rachunkowości i szacunki
Critical accounting policies are those that we believe are both significant and that require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences and various other factors that we believe to be appropriate under the circumstances. Actual results may differ from these estimates, and we might obtain different estimates if we used different assumptions or conditions. We have had no significant changes in our Critical Accounting Policies and Estimates since our annual report on Form 10K for the year endedDecember 31, 2022 .
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