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I would like to welcome everyone to the Sleep Country Q2 2021 Results Conference Call. Yesterday, Sleep Country released the financial results for the second quarter of 2021. A copy of the earnings disclosure is available on their website and includes cautionary language about forward-looking statements, risks and uncertainties, which also applies to the discussion during today's conference call. I would now like to turn the call over to Dave Friesema, Chief Executive Officer. Please go ahead.
Thank you very much. Welcome, everyone, and thank you for joining us today. I hope you are all staying safe and healthy. Joining me today are Stewart Schaefer, our President; and Craig De Pratto, our Chief Financial Officer. We are pleased to share the results of another successful quarter during which we held roughly 200,000 Canadians transform their lives through the power of sleep. Off the top, I would like to sincerely thank our teams at Sleep Country Canada, Dormez-vous and Endy as well as our valued vendors and partners for their continued dedication, commitment and hard work. Expanding on our announcement subsequent to quarter end, I am formally introducing Stewart or Stu Schaefer as the incoming Chief Executive Officer upon my retirement and departure from Sleep Country at the end of fiscal 2021. Stu's vision, determination and leadership to see Sleep Country's family of brands through to their full growth potential have been driving force behind our success over the past 15 years and will continue to play a pivotal role as we enter the next chapter of our growth story. I will now turn the conversation over to you, Stu, to discuss our strategy and performance in the quarter.
Thanks, Dave, and good morning, everyone. Guided by our strategic growth roadmap, we drove solid and sustained performance across every key metric this quarter while continuing to optimize our sleep ecosystem across all our stores, digital footprints and brand partnerships. As a result, we achieved significant growth in Q2 and seamlessly served the sleep needs of new and loyal Canadians despite ongoing pandemic-related challenges. We are very pleased to share our strong Q2 financial highlights. Revenue increased by 67.3% to $192.2 million with retail stores closed for 32.7% of normal operating days compared to 54% in Q2 2020. Net income rose by $17.5 million in Q2 2021 from a net loss of $500,000 in Q2 2020. Adjusted diluted EPS grew 269.2% from $0.13 in Q2 2020 to $0.48 in Q2 2021. In addition to these achievements and the face of supply chain challenges, we expanded our gross profit and operating EBITDA margins. The power of our omnichannel sleep ecosystem and differentiated service model was more apparent this quarter than ever before, with these results showcasing the unique ability of our brands to adapt, excel and capture market share in this demanding environment. While our industry has benefited from the customers' investment in health and home, we believe our strong performance is significantly outpacing the market due to the added trust in our brand and our disciplined execution of our strategic initiatives, which in turn has expanded our reach to target and serve more customers across multiple platforms and channels. These initiatives include growing our profitable store network, the significant expansion of our digital platforms, starting with the acquisition of Endy, the launch of our revamped Sleep Country and Dormez-vous websites, our highly visible marketplace relationships with Walmart and Best Buy. And our exclusive partnerships with the world's most exciting sleep brands like Tempur, Simba, Purple and Malouf. In the past 27 years, I cannot imagine a time when the agility and resilience of our business and our teams was tested as much as we've been throughout this pandemic. To try to cancel out some of the noise and illustrate the growth and strength of our strategic initiatives, consider the fact that with 32.7% of our store operating days closed in Q2 2021, we were still able to drive meaningful revenue growth of 15.4% over Q2 2019 when our entire store network was open. Another way to look at this is on a year-to-date basis. Our stores were closed for 33.3% of normal operating days for the first 6 months of this year compared to the same period last year when our stores were closed for a similar 33% of store operating days. This year, we delivered 41% revenue growth and 44% operating EBITDA growth versus the same period last year. These powerful results highlight the relevance and efficiency of our growing omnichannel ecosystem. Our strong results are fueled by our disciplined execution, which have propelled us into the next phase of our success story. As ever, we continue to chart our business against 3 strategic platforms to achieve sustainable and customer-centric growth: one, providing world-class customer experience across all our channels; two, delivering relentless channel and product innovation; and three, helping Canadians improve their lives through sleep as a pillar of well-being. We made important progress against several transformative milestones in Q2, highlighting our elevated customer experience, Canadians continue to respond favorably to our sleep ecosystem, which allows the customer to learn, trial, purchase and deliver on their own terms during their journey. Our e-commerce channel drove almost 30% of revenue in Q2 with many digital customers visiting our stores in their journey to buy demonstrating the relevancy of our digital platforms and the elevated experience our websites provide to today's omnichannel customer. Our impactful Dreamline digital chat staffed by our sleep experts has continued to be a trusted resource for Canadians and has helped raise the average ticket substantially for our online business. The Endy team has done an amazing job and continues to exceed all our metrics and expectations having now surpassed 23,000 customer reviews this quarter with an average rating of 4.9 out of 5. This quarter, we were also very pleased to welcome Best Buy Canada into our family of distribution channels with the launch of our newest innovative marketplace partnerships. This exciting partnership includes retailing all our fabulous brands on Best Buy marketplace and positioned Sleep Country as the exclusive supplier of traditional mattress on bestbuy.ca. With over 400 million customer visits to the Best Buy website and stores each year, this partnership builds on our strategic initiatives to grow our marketplace relationships while exposing our Sleep Country brand to a broader segment of customer and offers yet another attractive easy-to-use digital touch points for Canadians to engage with our sleep assortment. Beyond partnerships, we continue to expand our very profitable retail store network with 4 new stores and renovated 5 this quarter. This brings our total footprint to 287 stores, of which 82% have been renovated to our enhanced design. Each of these new locations have outperformed our expectations. We were extremely pleased to be warmly welcomed by these new communities.Shifting from channel to product, revenue growth for mattresses and accessories increased by 66.6% and 69.8%, respectfully, demonstrating that our product assortment and important brand partnerships like Tempur, Simba, Purple and Malouf and many more continue to resonate with Canadians across the country. Additionally, we are thrilled over the early success of Endy's latest innovation and first foray outside the bedroom with the Endy sofa, which has received a great response in the first months as we test the markets. These are still very early days for this exciting innovation, and we look forward to watching the Endy team expand on one of Canada's most successful digital brands. In Q2, we shared another exciting glimpse into our company's roadmap with the announcement of our 2 new storage hubs in Belleville and Calgary. Combined, these will expand our warehouse capacity by 65%, increasing operational efficiencies, improving the opportunity for margin expansion and support future years of planned growth. The new storage hubs will drive meaningful improvements to our customers' experience included expanded assortment, improved stock availability and faster fulfillment options. I'm delighted to share that the first of the 2 hubs in Calgary opened in July with the second plan to open later this month. We remain committed to our purpose of transforming lives through sleep. Each of the initiatives I've outlined above helped Canadians achieve their best sleep as a pillar of their overall physical, mental and emotional well-being. To that end, we are very proud to announce our first wellness-focused brand ambassador campaign with Tennis Grand Slam champion, Bianca Andreescu, during this quarter. Our inspiring, There's No Dream Without Sleep, campaign has been a popular success with over 95 million television impressions and 18 million social impressions to date. And we look forward to serving as Canada's champion of sleep for wellness in the months and years to come. Good luck in the Canadian open, Bianca.Thank you. Over to you, Craig, to discuss our financials.
Thank you, Stewart, and good morning, everyone. I'd like to reiterate that we are extremely pleased with our very strong Q2 results. As noted earlier in the call, A reminder that in Q2 2021, our retail store network was impacted by the mandated government closures in Ontario, Quebec and Nova Scotia. In Q2 2021, our store network was temporarily closed for 32.7% of its normal operating days compared to 54% in Q2 2020. On a year-to-date basis, our store network due to the mandated government store closures was temporarily closed for 33.3% of its normal operating days versus 33% in year-to-date 2020. Even with the challenge of our store closures, the approximate 1/3 of the quarter, we produced strong Q2 results, demonstrating the strength of our growing sleep ecosystem, differentiated business model, brands, strategic investments and our associates' continuous hard work and commitment. Our Q2 revenues increased by $77.3 million or 67.3% from $114.9 million in Q2 2020 to $192.2 million in Q2 2021. This increase was mainly driven by 65.5% increase in same-store sales, 4 new stores and our wrap stores. We continue to see a significant component of our revenues generated from our e-commerce platforms. In Q2 2021, 29.6% of our revenues were generated from our e-commerce platforms. We saw the 67.3% revenue growth quarter-over-quarter come from both our mattress and accessory categories. Mattress revenues increased by $60 million, or 66.6%, from $90.1 million in Q2 2020 to $151.1 -- sorry, $150.1 million in Q2 2021. Accessory revenues increased by $17.3 million, or 69.8%, from $24.8 million in Q2 2020 to $42.1 million in Q2 2021. Our gross profit increased by $29.4 million from $37 million in Q2 2020 to $66.4 million in Q2 2021. The gross profit margin increased by 2.3% from 32.2% in Q2 2020 to 34.5% in Q2 2021. This was primarily due to an increase in average unit selling prices, lower product costs and leveraging our fixed distribution, occupancy and depreciation costs. These efficiencies were partially offset by higher COVID-19 PP&E delivery and inventory adjustment costs in addition to higher compensation costs that were favorably impacted by wage subsidies under the Canadian Emergency Wage Subsidy program in Q2 2020. We did experience pressures on our freight costs, primarily from our container imports. Regarding G&A expenses, costs for Q2 2021 increased by $11.3 million, or 40.4%, from $27.8 million in Q2 2020 to $39.1 million in Q2 2021. As a percentage of revenue, our G&A expenses decreased from 24.2% of revenue in Q2 2020 to 20.3% of revenue in Q2 2021. The $11.3 million change in G&A expenses was mainly driven by an increase in media and advertising, compensation costs that were favorably impacted by wage subsidies by $1.5 million under the CEWS program in Q2 of last year.Moving on from G&A. Operating EBITDA was $43.7 million in Q2 2021 or 22.7% of revenue compared to $24.5 million in Q2 2020 or 21.3% of revenue, representing an increase of $19.2 million or 78.6% mainly tied to strong revenue growth in Q2 2021, combined with the improved gross margin and partially offset by increases in G&A expenses. Our Q2 net income increased by $17.5 million from a net loss of $0.5 million or negative $0.01 per share in Q2 2020 to $17 million or $0.46 per share in Q2 2021. Turning our attention to our year-to-date results. Our year-to-date result of revenues increased by $108.7 million or 40.8% from $266.5 million in year-to-date 2020 to $375.2 million in year-to-date 2021. The increase was mainly driven by a 39.4% increase in same-store sales, 6 new stores and our wrap stores. Similar to the quarterly results, we continue to see a significant component of our revenues generated from our e-commerce platform. On a year-to-date basis, 29.4% of our year-to-date revenues were generated from our e-commerce platforms. We saw that 40.8% of revenue growth year-over-year came from both our mattress and accessory categories. Mattress revenue increased by $83.3 million or 39.3% from $212.1 million in year-to-date 2020 to $295.4 million in year-to-date 2021. Accessories revenue increased by $25.4 million or $46.7 million (sic) [ 46.7% ] from $54.4 million in year-to-date 2020 to $79.8 million in year-to-date 2021. Our gross profits increased by $38.5 million from $78.1 million in year-to-date 2020 to $116.6 million in year-to-date 2021. Gross profit margin increased by 1.8% from 28.3% (sic) [ 29.3% ] in year-to-date 2020 to 31.1% in year-to-date 2021, primarily due to product -- leveraging product costs, fixed distribution, occupancy and depreciation costs. Again, these decreases were partially offset by higher delivery and inventory adjustment costs in addition to higher wage compensation costs that were favorably impacted by the wage subsidy of $13.4 million under the CEWS program in year-to-date 2020.Moving on to our G&A expenses for year-to-date 2021, increased by $16.3 million, or 28.7%, from $56.8 million in year-to-date 2020 to $73.1 million in year-to-date 2021. As a percentage of revenue, our G&A expenses decreased from 21.3% of revenue in year-to-date 2020 to 19.5% in year-to-date 2021. Again, these increases were mainly driven by an increase in media and advertising expenses, compensation expenses that were favorably impacted by the wage subsidies of $1.5 million from the CEWS program in year-to-date 2020 in addition to telecommunication and information technology and occupancy expenses. Operating EBITDA was $75.2 million for year-to-date 2021, or 20% of revenue, compared to $52.3 million for year-to-date 2020, or 19.6% of revenue, representing an increase of $22.9 million, or 43.6%, mainly driven by strong revenue growth in year-to-date 2021, combined with improved gross profit margin and partially offset with an increase in G&A expenses. On a year-to-date net income basis, we increased by $21.2 million from $4.5 million in year-to-date 2020 to $25.7 million in year-to-date 2021. Our basic earnings per share increased by $0.58 from $0.12 year-to-date 2020 to $0.70 year-to-date 2021. On a year-to-date basis, we experienced a net increase in cash of $50.6 million. Net cash flows provided from operating activities came in at $23.5 million. Cash flows used in investing activities was $28.5 million. And lastly, cash flows provided from financing activities was $17.3 million. On our capital allocation, on August 3, 2021, the board declared a dividend of $0.195 per share on the company's common shares. The company also has the NCIB program in place. This completes the overview of our financial results. Over to you, Dave, for closing remarks.
Thanks, Craig and Stu. This quarter, I have the pleasure of sharing the important milestones our brands have made towards our environmental and social responsibility commitments. We diverted over 35,000 mattresses and foundations in Q2 through recycling and donation as part of our comprehensive recycling program, the only program of its kind from a national sleep retailer. We also expanded our donations to new communities, including at our recently opened location in Cornwall, where we donated sleep solutions to local shelters to help those in need. Endy's ongoing efforts to support frontline workers through the Health Care Heroes campaign have helped transform call rooms at 35 Canadian hospitals with new mattresses. As we emerge from the pandemic, we are seeing Canadians prioritize and investing in their sleep as a pillar of personal health and well-being. Our powerful sleep ecosystem, differentiated service model and commitment to helping every Canadian achieve better tomorrows, through better tonights, positions our brands to capture these investments for years to come, all the while driving sustained and profitable growth through multiple avenues of revenue. We are more excited than ever for the future as we execute against our growth strategy with passion, focus and discipline. The moat around our business is the deepest it has been in our nearly 30 years with a full pipeline of initiatives, the industry's most talented team, enormous storage hubs to facilitate future demand, compelling product and marketplace partnerships and a clear purpose of transforming lives through sleep. We have only just scratched the surface -- excuse me, we have only just scratched the surface of the full value of our sleep ecosystem and look forward to many years of sustained profitable growth.With that, we conclude our remarks and open the floor for questions.
[Operator Instructions] Your first question comes from John Zamparo with CIBC.
I just want to say congratulations to both of you on the recent announcement. Maybe if we could start with the Endy sofa. You called this out in the press release and said it was a strong start for the product. Can you add a bit more color here? Are these new customers entirely? Are they adding to their basket? And when you think about product extensions, should we view that primarily as from Endy or from other brands as well?
Well, I would say that -- just to start off, this is very early days for that. And so while we're very excited, we also just want to highlight it's early days. I will say that it is a very good mix of new customers and existing customers that we're seeing it from, which is what we were hoping for. I would say that Endy will continue to be innovative with their products. But I would also like to say that Sleep Country has been innovative as well. We add new products all the time. So I think it's going to continue to be a mix on that front. Stewart, I don't know if you have anything else to add.
The only thing I would add is that early stats and, to Dave's point, this is very early days, and they're just testing this new product as well as an incredibly successful headboard that they launched is that on the sofa, 60% of the sales to date are new customers. So that broader customer segmentation is very exciting to us.
Okay. That's helpful. And then I wanted to move to capital allocation, and I'd like to get a sense of how the company ranks priorities here. It's a relatively underlevered balance sheet. Results have been quite strong lately. So when you think about growing the business organically, M&A, debt reduction, the dividend, buybacks, how do you rank those priorities in terms of importance? And what levers do you feel comfortable with?
Yes. So John, we are looking to come out over the next few quarters and communicate a more formal plan around some of the bookends on our debt side of things, and how we view leverage as well on the dividend from a yield perspective and then how we think holistically around the NCIB program in addition to our capital investments strategically to drive growth going forward. In terms of where we're at today, we're very pleased that we've been able to reinstate the dividend, given the noise of the pandemic. And on the NCIB program, what we are -- our thoughts around that is we do have it in place, but we've had store closures interrupt the last few quarters. And so we want to get that behind us. Now that that's behind us, in addition with our ERP investments and that's starting to roll out, we now are in a better position to be able to execute against some of these other allocations that you've seen Sleep Country do historically. So in terms of priorities, I'm going to probably defer that to the next quarter to give a little bit more of a broader update, but I hope that addresses your question.
Yes. Understood, understood. Okay. One more for me and then I'll pass it on. We've heard south of the border lots of your peers have talked about supply chain disruptions, inability to get products to market. How would you describe your supply chain in Q2 and Q3? Have you seen disruptions, but it's just that you're able to direct customers to other products or other brands? Or you just haven't seen this level of interruption versus some south of the border?
So we're not -- we are part of the same system that everyone is in. So John, you are correct. One of the beauties of our business is the diversification of our lineup. So there are certain of our brands that have had more challenges and interruptions in the normal supply chain. We -- our world is split in 2. We have our just-in-time local manufacturers as well as our imports. On the just-in-time local manufacturers, there's been some disruptions from some of our U.S. partners, but we have always been privileged by having a priority relationship with them, and we support them as well as they support us. The greater challenge for us in the second and into the third quarter is the import. That's no -- I'm not telling you anything that you don't know. Cost of containers are all over the map, have gone from as low as what traditionally was $3,500 for us to as high as $27,000 and somewhere in between. And we work very closely with our partners to find an amicable relationship in terms of trying to achieve those price increases. And there's been delays. A lot of the ports, there's high demand, and there's delays of containers getting out. So that's definitely been a bit of a challenge. But that is really primarily in our accessory business is the bulk of our imports. And we carry 30 different pillows. So if 1 pillow is out of stock, it's very easy for us to shift our customers to another pillow. So we haven't seen an interruption on our floors because our teams have been fabulous to be able to ship to the customer. But yes, we've seen some challenges within the supply chain, both locally and internationally.
Your next question comes from Martin Landry with Stifel.
Congratulations, Stewart, on your appointment.
Thank you, Martin.
My first question is just looking at your sales growth very impressive given that the stores have been closed during the quarter. And it looks like when the stores reopened, they quickly make up lost ground. But that's squeezing a significant amount of volume in a short period of time and I'm wondering, did you incur overtime expenses to cope with that logistical challenge?
So I would say that our business is always cyclical in a sense. So the summers are busier, so what we're really kind of experiencing right now is kind of like some are busy like the busiest time, but over a longer period of time. So we do experience some over time, but it was not something that I would call out as outside the norm.
I will say though, there is one area that we maybe had additional pressure or increased costs, but it was planned, Martin. We were proactive in terms of building up our inventories as we go into busy and some of our distribution centers were overflowing. And so we had additional freight cost, demurrage cost, container cost of sitting out in our parking lots, which, obviously, the Belleville and Calgary super hubs are going to help with that. But that was planned because it's a lot more important for us to have the product and stock available for our customers, so we had additional costs related to that.
And especially considering the challenges with supply chain now, it was an even -- in hindsight, it was even better decision.
Okay. And can you quantify the impact on gross margin? Or is that not material?
No, I would say it's not material enough to.
Okay. And switching gears, you're obviously gaining market share. And I'm wondering, are you monitoring new customers versus returning customers? And if you do, it would be very interesting to see what's the proportion of your new customers in the quarter versus returning customers and how that's fluctuated versus historical levels?
So I'll start that off and see -- just on a market share point of view, as you know, we track our market share using the StatCan data and that is a backward looking. So we kind of have a view of year-to-date through May, so it's not up-to-date. But what -- our indication is that our market share has gone from just under 35% to just under 38% year-over-year. So we feel really good about that. I will also tell you that one of the reasons we're rolling out a new ERP is that we don't historically have a great point of view on new versus old customers. And so I'm not going to be able to give you a satisfactory answer for the second part of your question. But hopefully, in the years to come, we will be able to give a better answer to that.
I will also add, Martin, the partnerships that we've created over the last couple of years, specifically with brands like Purple and Simba as well as the relationships that we created with our marketplace in Best Buy and Walmart has broadened our customer segmentation. So we know just based on certain categories of our business that we were targeting to grow specifically for that demographic of customer has been working very well for us. So definitely, there's been an expanded reach that we've had traditionally from our existing stores.
Okay. And my last question is going back to your capital allocation as well. Sorry to focus on that, but your financial leverage, when looking at your bank debt over EBITDA is probably the lowest level since you've been public. Wondering what's the hold back to not return capital to shareholders right now?
Again, Martin, I'll just -- I'll kind of just go back to some of the pressures that have been on our business. And so we do want to make sure that some of the events and store closure pressures were behind us and the ERP was rolled out so that we understood how effective it was, and how we're going to have the schedule to roll out over the rest of the year. So I would just go back, we agree. We feel like we're in a healthy -- from a leverage perspective and very conservative and just more to come on that over the coming quarter. It is one of those things when you take a step back, we've had very strong results. But there has been a lot of pressures from a store closure perspective, and we still want to make sure to be conservative on that front. And then we will come out with more exact plans because it's something that we've been discussing with investors for some time, and we're happy that our store network is back open.
Your next question comes from Stephen MacLeod with BMO.
Just a couple of questions to follow up. Just on the gross margin. Very strong performance in the quarter, the 34.5%. Is there anything sort of onetime in there that maybe wouldn't repeat in future quarters. I'm just curious if we could -- this maybe represents a new run rate in terms of any structural changes in the business?
So I'll start off, and then Dave or Stu can add. But one thing that you will see is that nothing onetime in nature in the quarter. We did have a strong sales mix and that did fall through to gross profit. The one thing I will just point out in Q1 and year-to-date, we did have compensation costs when we did offer curbside pickup and incur that was more onetime and that was pointed out in Q1. So that did have a little bit of pressure follow-through on the year-to-date results. But we're pleased with the way we're able to have a good sales mix drop more dollars to the gross profit line. And I'd say the only other pressure that we did see this quarter was around the container cost as Stu indicated on the incoming freight. But overall, very, very pleased with how gross profit performed this quarter.
Okay. That's great. And then in the past, you've talked about when stores are reopening or I guess when you get an in-store sale, it's -- in-store sales are opportunities to drive higher AUSP. And I'm just curious if you could talk a little bit about sort of what you saw in terms of sales demand trends with the recent reopenings. I guess most of it happened right at the end of the quarter. I'm just curious if you have any commentary around that?
Definitely, Stephen, we see when our stores are open, our higher end of our category transacts much better than it does online. And our partners like Tempur and Purple and Simba and all the higher end of our category definitely does much better in the times when our stores are open and our sales associates are being able to explain the benefits of the higher-end products. So we definitely saw that in this past quarter.
And then, the only thing I'd just like to add to that at all is we really have 3 different avenues. We have Online Direct. We have our Sleep Chat, our Dreamline, and then we have in-store. And so -- and we do that because customers can self-select how much service they want. And we do see the people that go directly online are generally the lower AUSP, generally they are. In-store is the highest, but Dreamline has done a great job of giving people the assistance that they require. And generally speaking, when people get that assistance, they invest more.
Okay. That's great. That makes sense. And then maybe just talking about the new hubs, which you're increasing your capacity. You mentioned in your commentary that you also expect there to be a positive gross margin or positive margin impact from the new hubs. Can you just talk a little bit about where that positive margin impact would be coming from?
Sure. So a good portion of our accessory business, as you know, is imported. And as over the last few years, we have shifted some of our business from local suppliers to importing directly ourselves. And we see an expanded gross profit margin on collections that we are going to be sourcing ourselves directly, and that should probably continue with a variety of different products. And at the same time, we believe the ability to stock merchandise, be able to service our customers quicker and faster and always be in stock is a huge competitive advantage for us. Also the difference between the super hubs and our distribution centers, they are -- the 17 distribution centers that we have are fulfillment centers. And we've always prided ourselves on the quick turnaround of the in and out of that delivery. So freeing up our fulfillment centers from storage, which is what's been happening over the last few years, will grow the efficiencies in those facilities, and that last mile is becoming more and more important with speed.
Your next question comes from Patricia Baker with Scotiabank.
I have the last 4 questions. I want to follow up on the supply chain discussion. Just curious what your outlook is for 2022 with respect to those higher costs? Do you think that we might -- what your outlook is on product price inflation when we come around to January 2022 when look at the pricing for the year? Do you think we'll see higher than normal inflation on your products?
I will say to you, Patricia, that we don't have a better crystal ball than you, but it seems as though January is right around the corner, and we're not seeing any ease of pressure on those container prices. So this is unprecedented time. In 27 years, I've never seen the inflation and the volatility in pricing like this. So I anticipate the first quarter will probably continue this way. Hopefully, there'll be some pressure that will be alleviated. As for inflation, traditionally, for 27 years, as long as the entire market is experiencing inflation and the competitive intensity of our competitors is growing in the same way as us in terms of inflation. Inflation has been a good thing for us, especially with a variety of products that we carry because we can service customers at every single different price points based on all the different vendors that we carry. So we don't necessarily look at that as a bad thing. There is a lot of positivity around that. The volatility component is just a little bit more difficult to be able to manage quarter-by-quarter, and that probably will continue. But I will say that our teams have done an exceptional job and our partners have been amazing also through these difficult and turbulent times.
Okay. And then just another possible pain point here. What's been your experience with being able to get the labor, and particularly, the drivers work for the vehicle to deliver the mattresses and accessories?
So Patricia, I think as Stewart highlighted before, we are going to experience what everybody experiences. So we're having a more difficult time getting people and drivers in our warehouse than we have historically. Having said that, we're doing okay. We've built in a system that allows us to have our own people, but it also allows for 3PL to help pick up when we have a challenge, so we're managing it well. I will also just add on the store front, our teams are -- we have much lower problems there, where people are making commissions and are doing well. So the pay is well there, and people are looking forward to coming back to work when we reopen. So as I say, a lot of these things that we're talking about as far as freight and as far as cost expense, we're experiencing what everybody is experiencing. But in a lot of these ways, we feel that we're advantaged because we have some other things in place that allow us to work around it, and we'll continue to be proactive.
Okay. Excellent. And then just back to the discussion on the performance of the gross margin in the quarter. And one of the things that you attributed to the better gross margin was a higher average unit selling price. And is that primarily attributable to what Dreamline is doing for you? [indiscernible].
Yes. So it would be a combination of, one, the continued strong performance on Dreamline, but also other stores did open. We did have less pressure because we were having more customers go to those higher ticket priced items as we opened. If we go back in the quarter, Quebec did open up fairly early in the quarter, so there's a limited impact there as well as out East, that also opened up fairly early in the quarter. So the real pressure was in Ontario. But as they opened up on June 11, which is earlier than we had expected, we saw a good return and an uptick on the in-store performance and margin getting driven on that front from average unit selling price being higher.
I will add that the Dreamline, Patricia, not only supports our online business, but it also drives customers into our stores because it is -- this is not a call center. These are our sleep experts from our floors that have been trained. And if they -- if a customer is looking for a quick solution easily done online, if the customer requires additional help and service in the store, the Dreamline team is very capable of setting that up, and that's definitely driven more customers into our stores than ever before.
And then the last -- the last thing, Patricia, I'd like to add to is, I think we also need to look and say, how proactive we were at being flexible on our pricing. When prices started going up, we were very quick to act. And so we were in front of that curve rather than behind it, which helps.
Okay. Understood. And my last question, just want to follow up on Stewart's introductory remarks and discussing the strategic overview. You mentioned Stewart, 3 pillars of customer experience: channel and product innovation and sleep as a pillar. And I just would like a little bit more discussion around those 3 things. And specifically, which of those 3 do you think has the biggest opportunity? And then secondly, where are you in the journey on each of these strategies? Because for example, I know the customer experience can always improve, but Sleep Country does provide an exceptional customer experience already. So I'm just wondering whether the bigger opportunities are in the other 2 pillars? Or just broadly, I'd like to hear you speak about them a bit more.
Well, I appreciate very much you saying that we provide excellent customer experience. Thank you, Patricia. But we could always do better. I would say the one area that to focus on, and Dave alluded to it or mentioned it earlier, we have never been fabulous at harnessing our data in the past. We have 27 years of millions of satisfied customers that we hope that this investment in our ERP and CRM technologies will be able to service our customers in ways that we haven't done before and serve up products that they haven't already bought from us, from our loyal customers as well as new customers. So that is a huge component of it. I would also say that the delivery side of the business, most times we focus around the sales side of this company, but the execution and that last mile component of satisfying customers is a very important part and you'll see more investments that we're going to make sure that always in stock, always on time and one delivery always with our customers, that's key to the importance. Plus there's so many other areas within the way that we do things, the efficiencies that we could drive into this organization. The importing directly in terms of our containers and as the list goes on and on, and it's always evolving, and our teams are always thinking about that. On the product innovation, those partnerships are key to us. And we want to be selling the most relevant sleep brands in the world, so that we always are front and center in the consumer's mindset on the most innovative product. And that relationship and behavior has been our motto for the last 27 years. So we're still very excited about that because there's exciting new brands that are emerging more than ever before. And we think that we are early in those days as well as the accessory part of the business, which is a strong component and growing exponentially every single year. But I do believe that we market share wise, compared to our mattresses, we're still also early days in that. And finally, on just the improving sleep as a pillar of well-being. We want Canadians to appreciate sleep and look at sleep in the same regard as they do exercise and diet, just sleep is a lot easier than the exercise and diet. And if we could raise that mindset and shift the average consumer from changing their mattress every 10 to 12 years to 8 to 10 years or shave 6 months off of it, a year off of it, it moves the needle quite a bit. So again, every single year, this company is trying to innovate and do something different. The sleepy little company has been far from sleepy. And the teams that we're bringing in, are coming up with fabulous creative ideas and we are just focusing on executing flawlessly.
Your next question comes from Meaghen Annett with TD Securities.
I just had a few more so follow-up question. So just with regards to the outlook, for new stores specifically, so we've already seen 6 store openings this year and that's kind of been the minimum that you've set out. So can you just update your thoughts for the remainder of the year?
So our store count slowed this year reopening, not because of our love for our brick-and-mortar, because our brick-and-mortar is performing exceptionally. In fact, it's performing better. We were doing some comparison and I saw one of the analysts, I think it was Martin who put something out from 2019, and he was dead on with his numbers. It was more pandemic-related and construction delays. Quebec and Ontario, 2 of the biggest markets for us. So some of our store openings were pushed off into 2022. Also, keep in mind, being close for weeks on end, once we get to reopen we don't necessarily want to close down that store as it's generating this type of revenue and this type of growth that we're seeing. So we rather push it off into the quieter time of the year, which is usually traditionally in the first quarter. I will also say that as we are looking to expand and improve on the customer experience, 82% of our stores have now been renovated, except that there is Sleep Country 4.0 already on the drawing board in terms of that next level of customer experience. So as we finalize on some of our ideas there, in 2022, you should probably see a sneak peak of what's to come for our store base.
Okay. Great. And then just a question with regards to advertising spend and where you see that trending as a percent of revenue for the full year. So was there any spend year-to-date that we can think of as maybe one-off given some of the partnerships that were announced? Or is that going to continue?
Less so of partnership one-offs because, usually, the relationship and the support that we have from all our partners has traditionally been exceptional. More so on the volatility of the market and what the pandemic did to radio, television, prints, shifts within the digital space, iOS changing with Facebook, Google. The last 12 months have been changing probably every single month. We definitely benefited from lower advertising costs in the depths of the pandemic when the world just shut down. We never turn off our advertising. So our partners were very accommodating for us to continue on that. And in many cases, rates have returned. In some cases, inventory is even less than it was before because certain parts of the industry is doing very well, and there's some premium to it. So it's been traditionally easier to budget, but definitely more volatile than the past.
And just to address the percentage kind of revenue. When we look back at 2019 as a proxy at the end of the year, we felt that was a fair kind of estimate of what we would have on a more normal year. So I think it's around 7.5% range. So -- and then if you look year-to-date, we did tick up a little bit higher in Q2 at around 8%. But year-to-date, we fall back into 7.3%, which is kind of consistent with what we've been tracking historically. So I just want to say on a full year, probably that 7.5% range is a fair range.
Okay. And then just last question, maybe a bit more of a broader question here. So we've seen some really great progress being made in areas such as partnerships, be it with brands or the third-party marketplaces. And we've spoken a bit about the strategic pillars here. So I'm just wondering, as these potentially become an increasingly relevant part of the business, can you talk about how you continue to really uphold Sleep Country's industry-leading customer service in particular?
Great question. First off, the partners that we choose, we are very selective in terms of teaming up with the best of the best so -- and companies that put the customer first as we have always done. Best Buy and Walmart, 2 leaders within the industry and it wasn't by chance that we chose those 2 leaders or they chose us, and it's a partnership. In terms of brands, relevant brands are very important for us. At the end of the day, our belief is that the customer experience and the ease of shopping is a priority for us, and we are channel agnostic and want to make sure that we are able to service the customer the fastest way, the best way with the best customer experience and something that we're constantly focused on internally and with our partners. Does that answer your question, Meaghen?
That's great.
Your next question comes from Sabahat Khan with RBC.
I guess in terms of the customers that you mentioned that are interacting with you online and then coming into store, just curious which products or which brands are they coming into store for? Is it your traditional mattresses is that they look at Endy online and come in-store? Just want to understand what they're looking at, and how that's sort of impacting the mix your offering in-store?
I think -- first of all, I think we do really need to separate Endy from Sleep Country and Dormez-vous. We don't have Endy on the stores in our stores. And so that is separate. I would say the one thing that we're very happy about is that most people that come into our stores are coming to see Sleep Country and Dormez-vous and not a particular product. Our brand is what really is carrying the day. And then we have all of the relevant brands -- well, not all of them at this point in time, but we have most of the relevant brands to show people. And people come in for a lot of different reasons, both accessories as well as mattresses. But the main thing is that they're coming to get our experience.
And I will also add that when we choose our partners, and we have some fabulous partners, as Dave was mentioning, a lot of the new customers -- new partners that we brought in are very strong on the digital acquisition side and the showrooming component is a very important part of the journey, especially as you drive more of a premium quality bed. I will say that some of the best in the industry that we've learned from and have been able to grow our businesses together, Tempur, Purple, Simba, all excellence within the digital space, all reaching a broader customer segmentation or a different customer segmentation and that we see that journey begin online, continue into our stores, sometimes transact and be completed in our stores and then sometimes they continue the journey and transact on their phone. So it's been a very interesting learning experience for us and our partners.
Okay. And then just I guess, the comment earlier on the Endy not being in stores. It is obviously, they have a standalone locations and I think there's at least one specialty we show that has it. Is there a potential to do sort of a shop-in-shop or something at some point? Or is it really the strategic focus to keep those 2 businesses on separate paths to some extent?
So first of all, we said right when we did the acquisition of Endy that we are going to let the leadership team of Endy, who do work closely with us, decide and collaborate with us in terms of direction where they want to go, and how they want to do it. I will say we've had many conversations around the benefits of putting Endy in our stores or not. Endy has done an incredible job, the #1 online mattress-in-a-box player in Canada and continue to grow their business beautifully. There are in-store presence at some selective retailers, and they have done pop-up stores, have worked very well, but more about exposing the brand again in different customers. But they are a digital-first acquisition model, and they continue to focus mainly on that. What the future will bring will be a discussion that we will have with them. Alia, who is the President of Endy, who does an amazing job and her team are very excited that we are still early days in driving acquisition online.
All right. Great. And then on the margin commentary around the new hubs, you mentioned that buying direct will help margin. I guess, does that translate down to the EBITDA line as well? I'm assuming that's a higher gross margin. And I guess, is that enough to offset the incremental, I guess, SG&A for the new hubs?
Yes and yes. First of all, I want to say that our real estate team led by Phil Besner did an exceptional job. In the depths of the pandemic, he convinced us and negotiated 2 amazing deals for us in Calgary, in Belleville. And one of the purposes of that, besides the ability to turn our fulfillment centers back into fulfillment centers and differentiate our storage centers. But one of the main reasons of that is cap rates, as most of you all know, are at the lowest level that I've seen in 27 years also since we're in business. And it's a normal course of our business to continue to expand our distribution centers as our business grows. This move that we made positioned us at substantially lower rates, so that we don't have to expand in the markets that we normally would have expanded at substantially premium rates. So -- and the offset, you're 100% right, is the benefit of the gross profit margin that we should be able to achieve that we're already achieving on our accessory category, but that will translate into higher gross profit that will contribute obviously to the EBITDA.
And then just one last one for me. Any color you can share on what you saw during Q2 as restrictions eased up through the various regions. Like some of the provinces seem to be at different stages of reopening. Just curious on what the in-store trends have been across different regions?
Yes. Sorry, Sabahat. We've seen it very similar through all of our opens and -- our closures and reopenings, which is when we reopen, we start getting people back to the store quite a bit quickly and making up for lost ground, and this is no change to that. And we will continue to be very careful in our stores. We'll be very careful in our distribution centers, but we're going to continue to push forward and try and keep our business as open as possible throughout whatever happens. I'd like to say that this is the first time in a while that Stewart, Craig and I have been able to make this call all in the same room. We're being very safe, and we're being at distance, but it's a nice feeling. And hopefully, we can continue to move down that continuum and continue on this reopening.
There are no further questions at this time. You may proceed.
Well, we just want to thank you all very much for the continued support. Don't hesitate to reach out if you have any other questions or comments, and we will talk in the very near future. Thank you, and stay safe.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.