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Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Sleep Country Canada Holdings Inc. Q1 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]I would now like to turn the call over to your speaker today, Dave Friesema, CEO. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining us. On the call with me today are Stewart Schaefer, our Chief Business Development Officer and President of Dormez-vous; and Craig De Pratto, our Chief Financial Officer.First and foremost, I'd like to begin with acknowledging the devastating human and economic toll that the COVID-19 pandemic has taken. I would like to express my sincere gratitude to frontline workers who deal with the realities of this crisis every day. Our thoughts are with the impacted individuals and families. I would also like to thank our employees, who have remained dedicated through this unprecedented time.As mentioned in yesterday's press release, our objectives at this time are fivefold: one, keep our employees safe and employed; two, continue serving our customers' needs; three, support local communities; four, establish near-term business continuity alongside suppliers and landlords; and five, ensure the long-term prosperity of our company and shareholder value, which includes the financial initiatives outlined in our filings.This quarter is really a tale of 2 realities: before and after COVID-19. We started the quarter from a position of financial and operational strength across all 3 of our banners, Sleep Country, Dormez-vous and Endy. E-commerce performance was impressive. Bricks-and-mortar performance was impressive. We are capturing market share, benefiting from solid free cash flow and witnessing the strongest same-store sales performance we had seen in years. While we don't typically disclose month-over-month KPIs, we feel that unprecedented times call for the veil to be lifted in some places to show the full impact of COVID-19. January and February combined, same-store sales increased by 13.1% compared to the same period last year. In March, they sharply declined to negative 26.8% at the quarter-end. Consolidated same-store sales had contracted by 0.9% at the quarter-end compared to quarter-end in 2019.Same-store sales are, of course, largely dependent on brick-and-mortar results, which materially changed for us on March 21 when we voluntarily closed our physical locations to aid in curbing the spread of the virus and to ensure the safety of our associates and customers.With that decision, we quickly shifted our focus to our online assets. For the last 2 years, we have discussed our strategic investments in building a strong and diversified business, including the importance of our investment in our digital platform as well as the strategic acquisition of Endy. These investments have positioned us well to continue to drive revenue while our 276 stores remain closed.This crisis has proven just how powerful our digital platforms and strategic partnerships are today and will continue to be in the future. Most notably, following store closures on March 21 until the end of March, our e-commerce platform delivered 143% growth versus the same period last year. This growth has accelerated through April and the first week of May. While we are well positioned to take share online, the pandemic has accelerated our digital innovation road map. For example, immediately after store closures, we launched our Sleep Expert Chat program, which was originally planned for Q3 of this year. This program brings the in-store legacy of our sleep expertise to the virtual landscape by chat and by phone. New and loyal customers have responded extremely well, with the chat sessions increasing exponentially since launch. Average unit selling price, conversion rates and customer satisfaction rates have all increased materially in response to this differentiated and valuable service.No matter the channel, our goal remains the same: to exceed our customers' expectations and provide a superior customer experience, and our results indicate that we are doing just that.I've shared that our third objective is local community support. In addition to complying with all government direction, subsequent to quarter end, we made a commitment to donate up to $1.5 million in mattresses and bedding essentials to organizations and communities impacted by COVID-19. This began with a $150,000 in product donation to the City of Toronto Rapid Housing Access initiative, which supports homeless individuals, couples and families moving out of the shelter system into permanent housing. Since then, we have made donations to health care organizations, shelters and governments across the country in cities such as Vancouver, Calgary, Regina and Montreal.Sleep is an essential pillar of health. And we have -- we all have a role to play in this health crisis. I'm proud to see Country's helping Canadians in need by providing a safe and secure place to rest each night.Our final 2 objectives are business sustainability and long-term prosperity. I am confident that the proactive and prudent financial initiatives we have put in place will ensure that Sleep Country emerges from this crisis with strength and well positioned to grow our market share. Each financial initiative, which Craig will discuss in more detail, is laser-focused on preserving liquidity and ensuring financial flexibility. These actions include: expanding our senior secured fed credit facility with an additional $50 million accordion; temporarily suspending both the dividend and the NCIB program; postponing capital expenditures relating to store renovations and openings, and pausing the second phase of our ERP implementation; applying for the Canada emergency wage subsidy program; deferring 100% of the Board of Directors 2020 unpaid cash compensation and deferring 25% to 50% of named Executive Officer salaries; and implementing additional cost-saving measures across the business.Over the past 25 years, as Canada's leading specialty sleep retailer, we have successfully navigated the challenges that economic downturns and transformations have brought to our industry. Through each, our resilient business and dedicated team of associates have always emerged stronger than before. Our healthy balance sheet, strong free cash flow, supportive banking syndicate and evolving business model has enabled us to manage through times of market volatility and instability. Today, we remain dedicated to supporting our business, our teams, our partners and the communities in which we operate as we navigated this crisis together. I am confident that our business will rebound at strength as it always has, and that we will continue to drive profitable growth and shareholder value into the future.Craig, I now turn the conversation over to you to discuss our financials.
Thank you, Dave, and good morning, everyone. I'll start this morning off by quickly going over the Q1 results and then going through our liquidity-focused financial initiatives mentioned in yesterday's press release. I'd like to reiterate that we are pleased with our results for the quarter, despite the material disruption to businesses in Canada and globally resulting in an uncertain economic environment.Now on to the quarter's results. I'll start with revenue. In the first quarter, revenue increased by 1.5% to $151.6 million when compared to $149.3 million in Q1 of 2019. Our total sales growth over the year was largely driven by a double-digit increase in e-commerce sales across all 3 brands and our wrap stores. Q1 mattress revenue increased by 2.8% to $122 million compared to $118.7 million in Q1 2019. While accessories revenue decreased by 3.3% to $29.6 million from $30.6 million in Q1 of 2019, these numbers were materially impacted by COVID-19 and the closures of our stores, as evidenced by our same-store sales growth through the end of February at 13.1%, as Dave mentioned earlier.Gross profit during the first quarter decreased by 2.9% to $41.2 million from $42.4 million in the same period of 2019. Our gross profit margin declined to 27.1% of revenue from 28.4% of revenue in the same period last year. This decrease is primarily influenced by sales and distribution compensation, store occupancy costs and a depreciation on our right-to-use assets, showing a delevering due to the store closures as of March 21, 2020.G&A expenses for our first quarter increased by 9.6% to $29 million compared to $26.4 million in Q1 of 2019. This is largely due to an increase in salaries and benefits, professional fees, warehouse operating costs, credit card and financing charges, offset by savings in advertising expenses for the quarter. As a percentage of revenue, G&A increased from 17.7% to 19.1%. When adjusted for nonrecurring expenses related to our ERP and the Canadian emergency wage subsidy, our G&A would improve by approximately 1%.Moving on from G&A. Our operating EBITDA for Q1 decreased to $27.9 million or 18.4% of revenue compared to $29.5 million last year. Again, this is negatively impacted by our store closures and slowdown in March tied to the pandemic. Finance-related expenses increased in the first quarter to $5.4 million, up from $5.2 million in Q1 2019. This is largely due to increased interest expenses related to the acquisition of Endy and an increase in our interest expense on our senior secured credit facility, which was fully drawn at the end of the quarter. Our adjusted net income for Q1 increased by $2.3 million to $6.3 million or $0.17 per share, down from $8.6 million or $0.23 per share in Q1 of 2019.Net cash flows used in operating and investing activities were $3.5 million and $2.3 million, respectively. In terms of our cash position at the end of Q1 2020, we held $52.7 million in cash compared to $13.6 million in the same period of last year. As of March 31, 2020, our existing credit facility balance was $210 million compared to $175.6 million at the same time last year. The company drew down our credit facility, given the uncertainty around the global pandemic, ensuring flexibility around our liquidity. Our flexible and highly variable model is unique in the retail sector. We are confident in our positioning to come out of this unfortunate event in a position of strength. The actions taken by management to further secure liquidity will allow the company to operate in a strategic manner going forward.To this end, I'd like to discuss our prudent financial initiatives to ensure our business has sufficient liquidity and financial flexibility over the near and long term. One, we expanded our senior secured credit facility agreement with an incremental $50 million accordion. Two, we temporarily suspended our dividend and NCIB program, which we fully intend to resume upon return to normal operating conditions. Three, we have postponed capital expenditures and guidance for the year, specifically related to new store openings, store renovations and Phase 2 of our ERP system. Four, we are deferring 100% of the Board's unpaid cash compensation for the remainder of 2020. Five, we are deferring between 25% and 50% of named Executive Officer salaries. Six, we qualify and have applied for the federal government's Canadian emergency wage subsidy and have kept our sales and operations associates on staff at a reduced salary. Seven, we are implementing various cost-saving measures across our entire business, including marketing, procurement and sales expenditures. Eight, we continue to invest in our online capabilities to service our customers virtually. Our e-commerce assets continue to be strong revenue drivers during this time.In closing, we are doing everything that we possibly can to build up the walls around our business. This includes staying in close contact with our associates, landlords and suppliers to keep all aspects of our business sustainable. I'm pleased to share our initiatives with you today and hope these measures provide our shareholders with the confidence that management is focused on the things that matter and will allow us to come out of this stronger on the other side.Back over to you, Dave, for closing remarks.
Thanks, Craig. As has been mentioned many times over the course of this call, liquidity is key now, and we are in the thick of the COVID-19 landscape. While the full impact on our business is challenging to quantify, we are confident that our current objectives, including our proactive financial initiatives, have laid a strong foundation from which we will benefit as we come out of the other side. As I said at the beginning of this call, our current objectives are: one, keep our employees safe and employed; two, continue serving our customers' needs; three, support local communities; four, establish near-term business continuity alongside suppliers and landlords; five, ensure the long-term prosperity of our company and shareholder value.As the federal and provincial governments begin to release their frameworks for reopening the economy, we continue to monitor the situation closely. With the decision of Québec government to slowly reopen retail, we have put plans in place to begin opening some of our stores as of Monday, May 11. We are working diligently on a plan to reopen our stores in a safe and responsible way. We will monitor and adapt to our customers' sentiments and needs, and we'll institute appropriate protocols that meet the needs of our teams and customers.I would also like to highlight our team's efforts in the rollout of our ongoing sleep well, stay well and say goodnight campaigns. Spreading messages of positivity in community during this time has resonated with many people, and we have received an overwhelming volume and positive response from Canadians across the country.As we begin to see what a reopened economy might look like, Sleep Country's pre-pandemic position of financial and operational strength, combined with our proactive and prudent business continuity strategy throughout this crisis, will enable our business to continue as Canada's premier sleep retailer in the new post-pandemic economy. I am confident that we are well positioned to emerge from this crisis with strength and that we will all see better days for our people, our communities, our long-term strategic agenda and delivering shareholder value.With that, we conclude our remarks and open the floor for questions.
[Operator Instructions] Your first question comes from the line of Matt Bank with CIBC.
I guess I want to start with the online business. So wondering if you can provide any numbers. So would you be willing to share what percent of sales were online in 2019? And/or what percent of your online sales come from Endy?
So Matt, we have not ever shared those numbers, and we still believe that they should be held as one company. I can tell you, though, directionally, that our online business at both Sleep Country, Dormez-vous and at Endy has continued to grow. If you remember, we rolled out our new website at the end of last year. And that really started our growth in earnest, and this has continued to accelerate throughout 2020 and especially in -- since the pandemic started, both for our Sleep Country, Dormez-vous and Endy.
Okay. And then on the online sales, I guess, as you saw them take up 100% of your sales during the store closures. Can you share kind of how that played out in terms of what it did to AUSP directionally, mix between bed and box versus traditional? And also how accessories looked online during that time?
Sorry about that. There's just a bit of a delay here. So one of the things that we've done as we've rolled out the Sleep Expert Chat program, and so that is really giving a lot more opportunity for the consumer who can't go into store right now to get the information they need, to make the purchase that they want and that they need. And because of that, we're seeing conversion rates going up. We're seeing -- I mean obviously, we're seeing traffic go up. We're seeing conversion rates go up. And we're also seeing our customer satisfaction scores go up.
Your next question comes from the line of Sabahat Khan with RBC.
Just in terms of your additional credit capacity. Can you maybe give us some color on with stores, I guess, opening in a little while, what are your thoughts on the kind of cash burn you might have over the next quarter or 2? And can you also comment on, I think there was some commentary around covenants might also have been revised with this additional financing. Can you maybe give us a color on where those stand and your expectations for cash use over the next couple of quarters as you ramp back up?
Yes. Saba, this is Craig here. Yes, so on the cash burn, I think what we'll do is we'll point to more directional around what elements of our business are variable in nature versus the more fixed cost. I think when looking at cash burn or assigning a number of days to a cash burn calculation, there's a lot of assumptions. And so we don't want to go down that path. But I will just give you some additional color around the flexibility of our model and where there is some fixed costs throughout the P&L.So down to gross profit, we are largely variable. Again, we do have a portion of our store rent is all up in the gross profit. So that is the main element that would show a delevering for an extended closures, the cost around our rent for our stores, our retail locations. Outside of that, they're very much a variable model down to gross profit.A reminder, and you could even see it in our results in quarter 1, our marketing cost is very flexible and highly variable. And this allows us to be nimble, both in times where we need to pull back spend as evidenced in Q1. Even though with stores closed, we were able to capture savings in the marketing line within our SG&A. So lots of flexibility and very much highly variable on the marketing side. It also is important to note that coming out on the other side of this, because of that flexibility, we can be -- we can rapidly increase those costs as we see how our stores ramp up on the other side of the pandemic.Our G&A cost stack, a big portion of that is our credit card financing charges is also a completely variable cost, and that marketing component. So when you look at SG&A in its entirety, about 55% of the costs fall into that marketing, which is variable, and our credit card and financing programs, which is also variable and tied to sales. Outside of that, there is -- our G&A cost stack has our compensation in there.One thing to add, in our professional fees, which are more -- are kind of fixed in nature -- or sorry, the professional fee is not, our compensation is. The one thing I do want to note is our -- we did apply for and are -- and qualified for the Canadian emergency wage subsidy. Those numbers are not reflected in the results for Q1. And it was recorded as a subsequent event. So the dollars that will be applied on that program would have added about 1% to our bottom line. I just want to kind of note thatSo in terms of cash burn, we did the right things in terms of securing liquidity, one, on our current facility, but then again, extending it. And then, two, making sure that any areas where we are highly variable that we did control those costs in a very reactive and rapid manner, and that's evidenced around the pullback on the advertising spend. So I know that might not pin down enough or a number for you on a number of a cash burn or how we do that. But I think there's just too many assumptions on that front, but I just wanted to give you some additional color as to where our pressures are on the P&L versus where we have flexibility on a variable basis. And then in terms of the covenants, the covenants were very slight revisions on leverage and -- but nothing that would -- we'd run up against in the foreseeable future.
Great. And then maybe just one on the same-store sales. I guess, from your perspective, are you able to shed any light on what might have driven the strong January and February comp? March is obviously understandable, but was it strong through January and February? Was there may be some pent-up demand that came back to market? Can you maybe give a little bit of color on what you saw across those 2 ones?
Well, I would say that we even have to go a little bit further back. We saw a very strong end to 2019. And that just kept going right into 2020. We were -- and again, it was really every banner, every channel, every avenue along that way was very strong. And we put a lot of it on marketing. We put a lot of it on the initiatives we put in place. We put a lot of it on the new e-commerce platform we rolled out at the end of last year. And so it really was a situation where for the last Q4 or Q1 was just gaining momentum.
All right. Great. And then you mentioned you're having some discussions with landlords and other stakeholders. Can you maybe give us any insight on -- towards discussion that have led to any sort of rent deferrals or some breaks on with your bank partners or landlords? Any color you can provide there?
It's Stewart. We are working very closely, obviously, with our respected landlords and suppliers to ensure that we maintain that strong relationship while managing our cash responsibly. We could say that our April rent has been paid in full, and we are in conversations around the May rent as we hopefully slowly get back to reopening our stores.
Okay. And then maybe the last one for me. I guess with the drawdown on the credit facility and kind of the outlook to store openings, can you maybe give us an insight into what kind of a ramp that you're planning for from a management perspective? What are the things you're preparing for? How long do you think, obviously, a lot of uncertainty out there, but just kind of what is your sort of base case as you're planning to reopen your business?
Well, I would say we're not having one base case. We're making many different plans on what day we think we're going to be opening, what that ramp is going to look like because we want to make sure we're making the right decisions. And we will -- every day, we keep adding data to that. For instance, as I had mentioned, our e-commerce business has continued to accelerate as we go through this. And so that changes our dynamics as we go. We're also looking at other countries around the world and trying to get a view for how they're opening up. It would be too early for me to be able to put my finger on one of those plans. But what we're expecting to have, a slower ramp-up than a stronger one, and we're prepared for that. The other nice thing about it is, when you look at our stores, we want to make sure our customers understand that if you don't want to go out and go into a store, we have our online chat program that we can help you with. If you do want to go to our stores, if you're someone who's going to be out getting back into it, we have the strength there, too, because our business is somewhat built for social distancing. We inherently have low traffic compared to our competitors, and we have very strong plans in place for having our stores be prepared for that traffic.
Your next question comes from the line of Vishal Shreedhar with National Bank.
Just on the new sleep chat -- Sleep Expert program with the chat functionality. I noted that since you've launched that, you're seeing increased customer satisfaction and increased conversion. Wondering how those metrics compare to the in-store experience, if you can shed any light on that?
Well, it's very difficult to measure because, obviously, it's apples and oranges. What I can tell you, though, is that when you compare it to not having the chat program, it's quite different. The customers are getting a lot of satisfaction and a lot of help on the chat. And if that doesn't answer their needs, then we move them, if they choose to, to move them to a phone to actually have a conversation with the person. And our plan is, just to be clear, we haven't said it, but I just want to make sure. Our plan is that, that will stay when we reopen our stores. And that is not going away. This is a new added. As I said, we're going to roll it out in Q3. But obviously, this has been accelerated. We are very pleased with the early day results, and it's going to continue to be a part of our business going forward.
Okay. So management said that they're curtailing CapEx, but they're maintaining certain digital investments. But similarly, ERP Phase 2 is being delayed. So wondering if you can just remind us on what ERP Phase 2, what functionality that provides? And when you anticipate to reengage with those investments?
Sure. So Phase 1 was the rollout of -- the main part of Phase 1 was rolling out our new e-commerce platform, which we did at the end of last year -- towards the end of last year, and we're obviously extremely fortunate that we did that because it's giving us a lot more capability today. Phase 2 is taking the stores and the distribution centers and making them part of the new ERP. Right now, they're on our old legacy system. And while we would like to do this as quickly as possible. The good thing is that our legacy system does a good job of running our stores and our distribution centers. And so we are already beginning to plan scenarios of how we're going to restart that program, and a lot of that will be based upon, number one, when people can start working together again. And number two, how the business is ramping up and when we decide that we can make that investment again.
Okay. And management in the past, there's been a lot of discussion on what the new world will look like. I'm talking pre-COVID-19. And in the past, management was favorable on new store growth as a key driver for Sleep Country. Wondering if, as you've gone through this period, if you've had a chance to reflect on that or maybe it's too early still and to -- and as we get out of this situation, wondering if store growth will be as big of a driver for Sleep Country going forward.
Well, I think -- first of all, I want to remind everybody of what our store philosophy has been. We've been opening stores and they've been successful, and they've been adding to the bottom line. We are where we don't have an ego around how many stores we have. So we will continue to make those decisions based upon the facts of the day. The one thing we do know, though, is that whatever, and we don't have a firm view on it yet because you can't until we're in it, but whatever the scenarios are, when this is over, it is an area where we will have strength because we already have stores that I mentioned just a minute ago, are very good opportunities for the people who want to shop to go to as far as social distancing goes. We are already the largest e-commerce player in Canada, and we're just growing that. So again, don't know what the future is going to look like completely. But when you think about what the inherent ingredients of our business are, we have the strength in all of those categories.
Okay. And maybe just one more here for me. Just as I try to model out Q2, obviously, with all the moving parts, and we don't have precedents for many of these line items that are moving it, very difficult for us to get a sense of how the quarter is unfolding. I imagine that's the case for you guys internally as well with all the data that you have, given that we're in such unprecedented territory. But that March data that you have gives sales numbers, so thank you for that. But considering that the world was social distancing and your stores are closed for part of that month, those numbers are probably better than most would have feared in terms of the March data. So looking at April, is there any way or any help that you can give us as we think about April and May? Or anything at all that we can use for modeling?
Yes. This is Craig here. It is, to your point, very difficult to provide any sort of forward-looking information. We try to break out a few lines of business and some momentum around e-commerce directionally what we were seeing in March and post COVID. So knowing that our stores are still closed, and at a point when it's appropriate, and we're allowed to, we'll start looking to open them back up. At this point, I can't really provide a much -- much forward-looking information to guide you beyond what we've disclosed in our MD&A and financials. So I can't kind of be more help just, I think, given the uncertainty. That's -- we've tried to put some data into help guide what Q2 could look like, but given uncertainty, that's all we can share at this time.
Your next question comes from the line of Patricia Baker with Scotiabank.
I have a number of questions. So number one, your stores closed on March 21, and then thank you for giving us the number on what e-commerce did post the closures. Just curious, how long -- was there much of a gap between the store closures and when the e-commerce started to ramp?
No, there wasn't. It started pretty quickly. But the one thing to keep in mind is that our live chat with Sleep Expert didn't start for a couple of weeks after that as well as Stewart -- and Stewart is going to add to my comments so I won't go too deep, but -- plus the marketing changes to help drive that, those take time to come on. So the fact is we saw an increase in e-commerce business immediately with the stores closing, but then we continued to refine what we were doing going forward. Stewart, do you have more comments?
Yes. I would probably just add that we saw a quick drop-off the week before we even closed our stores. So as that week started to drop off and consumers started to stay away from our stores, we started to see a ramp-up and on basic essentials. Once our stores closed for those 2 weeks, where we benefited is in our accessory business that as people started to cocoon at their homes, duvets, blankets, we sold more folding cots in that period of time than we did probably 6 months beforehand. As the consumer got a little bit more comfortable in the beginning of April in their new norm, the direction of our business started to go more so to the mattresses and in equals the split between accessories and mattresses and then they continued. When we introduced, as Dave mentioned, the Sleep Chat, that was bringing the expertise of our floor. And where our average transaction online for mattress is lower traditionally than what happens at store level. It quickly ramped up very close to the average unit selling price that we sell at store level with the assistance of the sales experts. And as Dave and Craig both mentioned, that is a huge differentiating point that we were planning to put in place in the third quarter, which is unlike Amazon, Wayfair, any other online player who had always had a line internally that as long as we could get the consumer to cross the [ least ] line, we're going to win just based on the sales expertise. This brings that same sales expertise and help to the consumer to the online platform.
Okay. Excellent. And Stewart, are those bed sales expertise, is that some of your store-based salesmen and managers that are doing the -- providing the expertise?
Yes, exactly. This is not a call center that we commissioned out. These are our sales experts who've been on the floor for many years and who are actually manning the phone calls, and our marketing campaigns actually are going to be shifting to talking about that a little bit more. And as we come out of this, our Chief Sales Officer, Dave Howcroft, has been working diligently on building a team that will continue that process for years to help.
Okay. Excellent. So I appreciate your comments, Dave, when you were pointing out that your stores are inherently built for social isolation, and I certainly agree with that. I'm just curious how much of a challenge do you think it's going to be? And I don't expect you to share the solution, but will there be a solution for the fact that you're also a very high-touch business?
Well, not only is our business set up for social distancing, one -- a couple of the things that we're doing, we've always had a shield, like a shield that a customer can use to protect themselves from the pillow if they chose to. And frankly, we've had it for a couple of years and not a lot of people used it. But the month leading up to our closing our stores, people were using it a lot. And we're creating something very similar for the mattress itself. And so -- and at least in the early days, those will be mandated for customers to use, and they're a onetime use and then the next customer can use it. So we are thinking everything through to be as -- and we'll have cleaning stations in each store and so on. So we have it set up as well as we can to make it as comfortable as possible for those people that want to shop.
Okay. My third question has to do with store openings and renovations. And I do appreciate that you're delaying CapEx, but were there some stores under construction or renovations underway that have been stopped because of construction restrictions? And if so, do you intend to just complete those when the restrictions are lifted?
Patricia, it's Stewart again. So yes, there was 4 stores that were in -- remaining that were going through construction as well as some new stores that we are planning to open. There was a new market that we were looking to open, and that has been delayed, first, on our part and then obviously, in terms of the construction industry. And that will be delayed into the foreseeable future and hopefully within the second quarter, towards the end of the second quarter. Renovations are -- the renovations that were planned for the fourth quarter, traditionally, we like to renovate our stores either in the first quarter and the fourth quarters. Those are delayed into the foreseeable future as we manage our cash. But the stores that were planned to open this year, and there was approximately 8 stores that were planned to open this year, are still, at the moment, in the works of open, just delayed further out the New Year.
Okay. And my last question. Just wondering, when you think about the industry going forward in the context of post-COVID environment and the impact on much smaller players, do you anticipate that we'll see some sort of a consolidation or a number of players exit the marketplace, particularly maybe moms and pops who do not have an e-commerce capability?
Well, I would say that we've been seeing the independent market having challenges for the last few years, and this certainly isn't going to help them. And so whether they're going to -- whether people will go out of business or just be weakened and not able to be as competitive, that's what we would anticipate.
Your next question comes from the line of Brian Morrison with TD Securities.
I know you don't like to give out the penetration rate on e-commerce, but I'm wondering if you might be able to, much like you did post-store closures, give us some color on the growth in e-commerce sales through either the end of February or until the store closures took place.
I'm just trying to think of the best because, again, as I say, we are -- just 1 second, Stewart would like to give part of an answer. Oh, no, he wouldn't. I'm sorry. I misread my muted Zoom. So the fact is, we have been adding infrastructure to our e-commerce platform for the past year. And as I said earlier, fortunately rolled out a state-of-the-art website late last year, and we already started to see the increase in revenue and conversion and so on. That was accelerating prior to the COVID. As COVID-19 started ramping up, it accelerated even faster. And since our store has been closed, it has absolutely continued to accelerate. It was strong double-digit growth before all this. And then it went to, as I said, triple-digit growth. And remember, that's including our Endy business, who was already a very big player. So getting that kind of growth on that larger business is impressive. By the way, having said that, we also want our 276 stores reopened because that's a big chunk of our business, too. But this is a process we've been on for 2 years. This has accelerated, as I said, with the sleep chat line, and we're just going to continue to refine that as we move forward.
Yes. No, I realize. That's excellent. I had realized that the expanded platform was put in place in January. When you say double digit, can you give us any color on is that 10%, is that 20%?
Yes. Again, we're trying not to give out information based on that for competitive reasons. We will -- we're going to continue to reassess the information we give out. And because we want to make sure people understand where our strengths are at and so on. And -- but at this point in time, we're not prepared to give that type of information.
All right. Fair enough. Maybe, Craig, can I ask you a question on the CEWS? Presumably you're going to receive a cash refund. I realize it was only 1% to the bottom line in Q1. Presumably, that will grow in Q2. How will that be recorded? Will that be a onetime item? Or -- and is this just wages that flow through COGS? Or is it both COGS and SG&A?
Yes. So the way that'll be recorded, that'll be recorded on a net basis on the line item within SG&A as well as in cost of sales. So our ops and sales compensation costs does land in the cost of sales line item. So there will be some benefit there. And there will be some benefit in SG&A as well as we utilize that towards more of the HQ staff. And then in terms of what we do to highlight that impact, we haven't decided how we'll show that in the MD&A, just given it's quite new. I just wanted to make sure I pointed out that in Q1, we did not reflect that benefit just because when we looked at the accounting of it, it was best to go with the subsequent event disclosure, and then we'll have that benefit flow through in Q2. I do think that any sort of normalizations to provide transparency around that item would be smart from our perspective. And so we'll probably look to do that. And we're not going to try to cloud any of the benefit from that. We want to be upfront from what that adjustment looks like in Q2. Does that kind of address how to think about it?
Yes. I just wanted to know how it'll flow through its financials. I don't think any of us really care exactly what the Q2 numbers are going to be. It's going to be a challenge, for sure. Last question is -- and it's pretty naive, maybe, but with respect to the financing charges that flow through G&A, can you just remind me how that works? That's third-party financing, correct?
Yes. That's the credit card processing and third-party financing, yes.
[Operator Instructions] Your next question comes from the line of Stephen MacLeod with BMO.
I apologize I was unable to hop into the call. I may have missed on your prepared remarks, so I apologize if any of this repeats it. But a couple of questions I had. Just in terms of -- can you just talk a little bit about how the business performed in '08, '09? I think we had public numbers through Q2 '08 and then didn't really see anything through '08, '09. Is there any color you can provide around how top line trended and how long the recovery took?
So when we -- that was a good learning experience for us. So we cut our marketing expense a great deal in '09, '10, '11. And it was a good decision to make in the first couple of years, but we did it for too long. And we learned from that, that we wanted to be more aggressive going forward. So we probably weren't the best indicator of how we could perform as a coming out of that event. What I would point to more is the way we've been performing in Alberta, which is a -- has been a truly challenged market for a period of time. And we have been able to be smart with our advertising dollars and being prudent, and we have continued to advertise, and we have taken market share there. And so this one, though, is very different because it's not one province, it's the whole country. So we are going to have a good balance of being cautious, but also being prudent, but also being aggressive to make sure that we're taking market share. And some of the -- and a lot of that will also be directed more towards the online in the early days, and where we can measure it very carefully and see the return on ad spend very carefully. But we do believe that this is an opportunity for us to take market share in the long run. Does that answer your question, Stephen?
Yes, that does. That's great. Well, I guess I was more just thinking like how long did mattress sales -- how long did it take for mattress sales to rebound coming out of the '08, '09 recession?
So to the best of our knowledge, again, because this is not on highly scientific. I mean it's what they said, but it's not highly scientific. We believe that the market in Canada dropped about 10%. And then over a period of the next 2 or 3 or 4 years kind of worked its way back up to close to that again. And it has not been -- yes, kind of in that sort of category.
Okay. That's helpful. And then I just had a...
By the way, Stephen, sorry, I can give a little more information if we look at the United States because they have a better measure of it. And so the United States basically dropped about 20%. So Canada, we don't feel dropped as far, and then basically dropped down 20% and then just started coming back at about 6% a year after that. And so it took a big drop and then just got right back [ kind of through a ] pattern.
And actually, Stephen, I just want to add, each and every time, I mean, part of the beauty of being in this business for the last 25 years in each economic cycle and recession and stock market crash, the period of time changes in terms of when the consumer does come back. In each and every one of these times, we came out with a greater market share. And to a point that Patricia made earlier, and not that we ever want to profiteer off of someone else closing, but that has been a normal impact. I will also add one other thing that we've been talking about internally is the fact that we do compete with the purse of disposable income in the consumer household. And one of our biggest competitors is the travel industry and people spending money on their trips on Christmas holidays and summer breaks. And that pool of funds have disposable income. I think the travel industry, at least for the foreseeable future, is going to suffer dramatically, and there is a thought that we may benefit from that too.
Right. Okay. That's an interesting point. A couple of things from your forward -- I think those forward-looking statements are just sort of the risks. Can you talk a little bit about what the impact is in terms of vendor rebates, cost of goods sold? And maybe along those lines, you also cited kind of sourcing risks. Can you talk a little bit about what you're seeing with respect to potential sourcing risks?
Sure. I would say as of right now, sourcing risks, we watch it every single day and we have a report every week. That at the moment is not as -- I'm not saying it's not a concern, but we're not as worried about that at the moment. Secondarily, to answer the original point, which is vendor rebates, the one thing that I want to remind everybody of is that this -- our industry is deferred. It's a deferred issue, not a cancel. So the people that need mattresses, they need accessories and so on, these are being deferred, not canceled. Now they may be deferred for quite a while, but they will be purchased eventually. And the one thing is we are the largest player in Canada by a very significant margin. And even though this will affect our volume rebates, our suppliers are going to want us to help them grow their business back, too. So I believe that we will work very comfortably with each other to make sure that we are helping them, and they will continue to help us.
And there are no further question at this time. I will turn the call back over to the presenters for closing remarks.
Well, I just wanted to once again thank our team for working so very hard and continuing to come up with ideas on how to move our business forward. I'd also like to thank our shareholders, and we look forward to having a discussion with you again at the end of the next quarter. So stay home, stay safe, sleep well and be well.
This concludes today's conference call. You may now disconnect.