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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
I would like to welcome everyone to the Sleep Country's Q4 2021 Results Conference Call. Yesterday, Sleep Country released their financial results for the fourth quarter of 2021. A copy of the earnings disclosure is available on their website and includes cautionary language about forward-looking statements, risk, and uncertainties, which also applies to the discussion during today's conference call.
I would now like to turn the conference call over to Mr. Stewart Schaefer, CEO and President. Please go ahead.
Thank you, Kelsey, and good morning, everyone. I hope you're all healthy and well. With me today is Craig De Pratto, our CFO. We are very pleased to share our outstanding results for the quarter, rounding out the strongest performance in our company's history. Guided by our purpose, vision, and strategic road map, we have built Sleep Country into Canada's leading sleep partner. I'm incredibly grateful to our 1,550 associates at Sleep Country, Dormez-vous, Endy, and Hush, who have demonstrated agility, resilience, and determination to exceed our customers' expectations one customer at a time.
2021 was an exceptional year with the fourth quarter delivering above our expectations with Q4 revenue growth of 9% and record revenue growth of CAD 162.5 million or 21.4% in 2021. This quarter had a two-year stack growth from Q4 of 2019 of 45.4%. This strong quarter was driven by our relentless pursuit to expand our market share by driving new customers as well as our loyal ones into our sleep ecosystem of expanded channels with innovative products and brands. We continue to deliver on our multiyear journey to transform and improve upon our customers' experience with the expansion of our physical and digital touch points where our customers can discover, learn, test, trial, and seamlessly purchase our sleep products any way and anywhere they want to shop. Despite COVID concerns, our same-store sales grew to 3.2% and by 18.3% for the entire year, which has further confirmed our bullish outlook for bricks-and-mortar in an omnichannel world.
We continue to build our retail network by adding six new locations this year to finish up with 285 stores from coast to coast. Our retail stores still remain the key sleep destination of choice where our trusted sleep experts are dedicated to making sure our customers have the right and the best night's sleep. We increased our footprint and visibility to new customer segment with our pilot opening of our newest concept of Sleep Country and Dormez-vous Express stores. This new concept is being tested in 10 Walmart Supercenters in Ontario and Quebec. We are thrilled to deepen our relationship with Walmart Canada and position ourselves alongside the world's leading retailer that attracts millions of shoppers to each of their stores every year. It is still very early days with this new concept with our 10th store that opened mid-December, but we are very excited to test, learn, and gather the data to determine our path and trajectory to open up more stores.
Our investment in our digital transformation and eCommerce platforms, along with our online marketplace partnerships, fueled a growing share of sales representing 20.9% of our total revenues in Q4. Our award-winning Endy business, Canada's number one bed-in-a-box retailer, continue to surpass expectations with more than 520,000 online transactions in the year. We were excited to finalize the acquisition of Hush Blankets in Q4, and we're thrilled to welcome their expertise into our digital transformation while growing and building our expanded online communities.
Over the last year, we extended our online presence to millions of more customers, building on our strategic plan to grow our marketplace relationship with Canada's top retailers. With our exclusive relationships with Walmart, Best Buy, and now Loblaws that we announced subsequent to the quarter-end, we are reaching millions of more new and loyal customers through our Sleep Country and Dormez-vous elevated online shop-in-shops with a full assortment of sleep products.
Also in the fourth quarter, we expanded our product portfolio with Hush's innovative wellness accessories: their temperature-regulating weighted blanket, ice-cooling sheet, famous pillow, and recently launched mattress-in-a-box. We were also excited to announce our investment in Sleepout, a Canadian start-up specializing in portable blackout curtains for the bedroom who started shipping orders last month and supplied Team Canada Olympic athletes with their blinds. With these additions to our Sleep collection, we will continue to grow our digital sleep ecosystem and accessory assortment as a profitable extension of our product mix.
Our Hush acquisition and Sleepout investment capped off a year in which we became the exclusive retail and digital partner of Casper's celebrated core collection of mattresses in Canada and continued to differentiate ourselves in the Canadian retail marketplace with the world's most relevant sleep brands such as Tempur-Pedic, Sealy, Simmons, Serta, Kingsdown, Purple, Simba, and now Casper.
We continue to be guided by our north star with our purpose of awakening all eyes to the power of sleep with some of our new partnerships like Well.ca, which was announced in Q4; our celebration of World Sleep Day; our first ever Wellness Ambassador, Bianca Andreescu; all of which has helped us build upon the importance of sleep as an important pillar in our lives like diet and exercise as an essential part of health and well-being.
Throughout the year, as we have done for almost 28 years, we are very proud to continue to support communities across this great country with donations that help thousands of families in need to get a better night's sleep. We look forward to marking World Sleep Day 2022 in the coming weeks and reminding Canadians of the importance of a good night's sleep.
The success of this quarter goes to our teams and partners who continue to be resilient in these turbulent and ever-changing times. Our results demonstrate our proactive measures, as well as our ability to quickly shift our plans. But that does not mean that we are immune to the challenges around the rippling effects of the pandemic, which deepened once again by the resurgence of COVID later in the fourth quarter; the ongoing supply chain challenges, both internationally and now domestically; the volatility and impact of inflationary pressures that are real, and in some cases transitory, but in other cases more permanent; and the potential macro concerns and consumer confidence with a volatile stock market, rising oil prices, and a war in Ukraine and rising interest rate environment.
While we have no control on the macroeconomic environment, we are feeling more confident and stronger than ever before with our long-term strategic initiatives and sleep ecosystem that we are building that have clearly positioned us separately from the pack of other retailers. Our strategic investments in people, partnerships, distribution, inventory, innovative product assortment, retail and digital customer experiences, combined with outstanding execution by our best-in-class teams, have built a resilient sleep ecosystem that has enabled us to deliver for our customers wherever and whenever they choose to shop.
As we close out our most successful year and look forward to the year ahead, we are positioned better than ever before to continue to lead Canada's sleep space and differentiate our brands with the best assortment of mattresses and sleep accessories across the most relevant distribution channels in the country. We are committed to accelerating our growth and investing in our strategic plan to drive digital innovation, grow our touch points, and expand our portfolio of products, all to deliver the best frictionless omnichannel sleep experience for our customers.
Thanks again to all our Sleep Country, Dormez-vous, Endy, and Hush teams, along with our market partners for all your contributions to our success in the quarter and last year and for your continued determination to deliver for our customers. I am so proud to lead such a diverse group and feel fortunate to belong to this great organization.
With that, I'll now turn the conversation over to Craig to discuss our financial results.
Thank you, Stewart, and good morning, everyone. We are extremely pleased with our Q4 and fiscal year 2021 results. In full year 2021, we earned record-breaking revenues of CAD 920.2 million, which is an increase of CAD 162.5 million or 21.4%. This increase was mainly driven by our same-store sales growth of 18.3%, four net new store openings, and post-acquisition revenue from Hush, which was acquired on October 22, 2021.
Our brick-and-mortar stores continue to perform extremely well, generating 76.5% of our revenues, with our eCommerce channels generating our remaining 23.5% of revenues for the year. These exceptional results were achieved despite similar operating days being closed in fiscal 2021 as compared to fiscal 2020 at 17% and 20% respectively.
For the full year, our gross profit margin increased by 220 basis points from 32.3% in 2020 to 34.5% in 2021. Our EBITDA increased by CAD 33.1 million or 19.9% from CAD 166.4 million in 2020 to CAD 199.5 million in 2021. Net income attributable to the company increased by CAD 25.3 million or 40% from CAD 63.3 million in 2020 to CAD 88.6 million in 2021. Basic earnings per share increased by CAD 0.68 per share or 39.3% from CAD 1.73 in 2929 to CAD 2.41 in 2021. And lastly, our diluted adjusted earnings per share increased by CAD 0.70 or 36.1% from CAD 1.94 to CAD 2.64 in 2021.
Taking a look at our Q4 results, revenues increased by CAD 22.3 million or 9% from CAD 248.9 million in Q4 2020 to CAD 271.2 million in Q4 2021. This increase was mainly driven by a 3.2% increase in same-store sales, four net new store openings, and post-acquisition revenue from Hush. From a two-year stack perspective, as Stu mentioned before, revenues increased by CAD 84.7 million or 45.4% from CAD 186.5 million in Q4 2019 to CAD 271.2 million in Q4 2021. Our eCommerce sales represented 20.9% of revenues in Q4.
Our gross profit margin increased by 300 basis points from 33% in Q4 2020 to 36% in Q4 2021. This increase was mainly due to higher average unit selling prices and leveraging occupancy and depreciation expenses. These efficiencies were partially offset by higher transportation and delivery costs, sales commissions, and higher freight costs tied to our container imports.
Our EBITDA was impacted by higher SG&A costs, mainly driven by an increase in media and advertising spend, compensation, professional fees, depreciation, and IT expenses. Two items to point out within SG&A for the quarter, our compensation expense was higher due to our LTIP meeting over performance for our 2019 PSU plan. This adjustment was made within the quarter. In addition, our IT professional fees line was higher by approximately CAD 2 million on nonrecurring spend tied to the ERP project.
Our EBITDA increased by CAD 4.5 million or 8.5% from CAD 52.8 million in Q4 2020 to CAD 57.3 million in Q4 2021. As noted above, when normalized SG&A costs for the LTIP and ERP costs, our adjusted EBITDA shows an increase of CAD 8.2 million or 15.3%.
An item to note for the quarter that put pressure on our net income was our effective tax rate which increased by 7% from 21% in Q4 2020 to 28% in Q4 2021. This change in rate was due to a change in the company's tax position in Q4 2020 on the deductibility of its relative expenses, which resulted in a lower effective tax rate in Q4 2020. In 2021, our effective tax rate has returned to normal range.
Net income attributable to the company decreased by CAD 0.2 million to CAD 26.4 million in Q4 2021 from CAD 26.6 million in Q4 2020. This decrease was mainly tied to the income tax swing as I discussed above. Our adjusted net income attributable to the company increased by CAD 3.6 million or 13% to CAD 31 million in Q4 2021 from CAD 27.4 million in Q4 2020. Basic earnings per share remained unchanged at CAD 0.72 in Q4 2021. However, if we apply the 2021 income tax rate to our 2020 results, the increase in our basic EPS in Q4 2020 to Q4 2021 would have increased by CAD 0.06 or 8.7%.
On to other items for the quarter. In Q4, we amended our existing credit facility of CAD 260 million to include an additional CAD 100 million accordion and extended the maturity date to October 22, 2026. Subsequent to the quarter end, on February 8, 2022, the board declared a dividend of CAD 0.195 per share payable on February 28, 2022 to shareholders of record at the close of business on February 18, 2022.
Now, on to our framework for capital allocation. We remain confident in our business' ability to generate strong free cash flow and have seen leverage decline from historical highs of 2.8 times on a post-IFRS basis at the end of 2019 to our current leverage of 1.6 times at the end of 2021. With regards to our leverage, we intend to maintain a strong balance sheet while being comfortable with the long-term leverage in a 2 times leverage area. We'd also feel comfortable temporarily exceeding 2 times leverage for a period of time, provided we see a path of getting down below this level within a reasonable timeframe. We intend to have a balanced approach towards returning capital to shareholders via dividends, deploying our NCIB, while also investing in our business and growth, all largely funded from free cash flow.
Our framework for capital allocation is as follows. Despite the recent market volatility, given the strength of our balance sheet and resilient cash flow profile, we feel comfortable increasing our dividend at our next payout in May 2022 by a minimum of 10%. We intend to grow our dividend at a rate of at least 10% annually in the near to medium term.
Turning to our NCIB, we believe our shares are trading at a discount to peers and our historical average, and we'll be opportunistic in its deployment. We've thus submitted a notice of intention to the TSX to increase our NCIB from CAD 25 million to CAD 50 million.
In terms of our capital expenditure plans, both from a growth and maintenance perspective, our baseline investment program will target the following areas: a minimum of 6 store openings per year, between 20 to 30 new store renovations to our latest format, ongoing maintenance to our store and DC network in the range of 1% of revenue, and investing in our ERP and technology to further enhance our omnichannel experience to our customers.
Lastly, we'll be maintaining a disciplined filter around assessing potential M&A targets. We'll evaluate M&A transactions against alternative uses of cash and plan to communicate a more detailed framework in the future around M&A.
Thank you, and I will now pass the call back over to Stewart for closing remarks.
Thank you, Craig. Our outstanding results in the fourth quarter and the full year demonstrate the power of our omnichannel experience and differentiated service model. Building on our deep foundation of sleep expertise, we will continue to expand our reach to more customers across our multiple platforms, channels, and partners; and grow our product assortment to offer the country's best and most innovative sleep selection.
As I look ahead, I see incredible opportunities for Sleep Country and our brands as we build our sleep ecosystem, attract new customers, and help our existing ones achieve their best lives through a great night's sleep. We are in a fabulous position to drive long-term profitable growth as we continue to lead Canada's sleep space.
With that, we conclude our remarks and open the floor for questions.
Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] And your first question comes from Martin Landry from Stifel GMP. Please go ahead.
Hi. Good morning, Stewart and Craig.
Good morning, Martin.
Hey.
How are you?
I'm good. Thank you. My first question is on looking at 2021, the full year. Your same-store sales increased by 18%. That's the fastest pace since going public back in 2015. And I was wondering if you could break down volume versus pricing for us. I know historically you have not done so, but inflation is at very high levels right now, and it's kind of blurring the picture a little bit for us. So, a bit of color would be amazing.
So, I'll tell you, Martin, as you know, for competitive reasons, we don't break it out. But you're right on the money in the sense that this has been a mix of unit growth as well as inflation and us passing some pricing off on the higher premium lines of our bedding. I could tell you that throughout the year, we saw strong unit growth of our business. The last two weeks of this year and really starting around December 10 when Omicron aired its ugly head, we saw our units start to drop off slightly.
Yeah. And could you maybe give us some color on the volumes versus historical levels because there's some concerns that there's been a bit of pull-forward of demand in 2021. So, are your volumes in 2021 higher or in line with historical levels that you've achieved?
Oh, no. No. Historically, they were the highest that we've ever achieved. And if there was any type of pull forward – and, again, we don't have a crystal ball, Martin. But if there was any type of pull-forward, I will tell you that in October and November – and I think it was media-driven and advertising-driven because everyone was talking and worried about empty shelves in the month of December – we saw really strong growth in October and November and a little bit lighter in December. Maybe partially because of Omicron, maybe partially because there was maybe a pull-forward from December because people wanted to make sure that they were doing their Christmas shopping a little bit earlier. But that's the only signs that we've seen so far.
Okay. Okay. And maybe last question for me, wondering if you could discuss traffic trends recently. You've mentioned a lot of macroeconomic impacts on consumer confidence, and I'm wondering if you're seeing – what you're seeing from the consumer right now in terms of behavior. Are you seeing an impact for rising rates and rising inflation?
So, we traditionally do not give guidance, nor do we plan to start on giving guidance, except that we are in some unusual circumstances. I will say the last two weeks since the war broke out in Ukraine and all the atrocities that have been happening, we've seen a slowdown in the last two weeks that have been slightly unusual for us.
Okay. Okay. That's helpful. Thank you.
Thanks, Martin.
Thank you. And your next question comes from John Zamparo from CIBC. Please go ahead.
Thank you. Good morning, guys.
Good morning, John.
Morning, John.
I wanted to ask about consumer behavior. In particular, what are your US peers have said there were greater challenges on passing through pricing on lower ticket items and introductory price points? I'm curious if you're seeing that. And just generally, what – or how would you describe consumers' reception to seeing higher prices?
Yeah. Sure, John. I think – and I know which peers you're referring to, and it would be similar to what we're seeing in Canada. Usually on any times of inflation – and maybe this even adds color to Martin's earlier question – in times of inflation, conversations around interest rate hikes, disposable income, and the higher gas prices at the pump, it is usually our price-sensitive customers that seem to slow down a little bit in terms of their purchases, which we have seen.
That being said, we've always been in a very strong position, in the most enviable position of the mid- to high-end of our market. And some of our strategic relationships that we built up over the last few years, Tempur-Pedic being one of our strongest, Purple, Casper just recently, we seem to see nice acceleration on our mid- to high-end, so offset by our decrease in our lower end; but that is definitely a shift in the consumer.
Okay. Understood. And then my second question, on the eCommerce business, you mentioned in the past the success that you get from having customers use the Dreamline chat function versus those who don't, and there is a significantly higher average spend there. Have you seen an uptick in the usage rate of that feature? And are there ways you can incentivize customers to use it?
So, it continues to grow every single quarter. And the experience, we're still at very early days and the team is doing an amazing job. But as we get better at it, we're actually starting to see more of an uptick on it, especially as it starts to shift to a little bit more premium bedding where our sleep experts manning the phones definitely make a big difference for the consumer when they're purchasing. So, we're seeing a higher AUSP, and that's very much driven by our sleep experts on the phones.
Okay. That's helpful. I'll pass it on. Thank you.
Thanks, John.
Thank you. And your next question comes from Stephen MacLeod from BMO Capital Markets. Please go ahead.
Thank you. Good morning, guys.
Hey, Stephen.
Hey. Good morning.
So, thanks for giving a little bit of color there around the Q4 drivers, and I just wanted to make sure I understood correctly. I think what you were saying was that you did see a slowdown at the lower end in terms of demand just given some of the macro impact. But did you say that that's been offset by ongoing strength in the mid- to high-end? Is that the way to interpret that?
Yeah. Exactly, Steve. We have not seen a slowdown in our mid- to higher-end. So, if you want me to even break out even further, below our CAD 1,000 price points, we've seen a drop-off. Above our CAD 1,000 price points, it continues to accelerate.
Okay. Okay. That's helpful. Thank you. And then I just wanted to drill down a little bit on just the gross margin and SG&A, if I could. You had some strong gross margin performance in the quarter. And I'm just curious if there's anything in there that's sort of onetime, just given the backdrop we've seen with some of the inflationary pressures. That seemed like that was a higher level than we were looking for. So, I'm just curious as to what the sustainability of that might look like.
Yeah. Again, when we – on the last call, we did remind that our containers had been kind of delayed and pushed through. And so we did have a little bit of – in Q4, you saw some pressure from the containers coming through as we received some and moved those through the sales cycle. But we'll continue to see pressure on that on our margin in Q1 just because those container costs were much higher. Reminder, from CAD 3,500 historically to – we've seen upwards of CAD 28,000 to CAD 30,000 per container.
So, now that we've received, you can see our inventory is higher just because we've got – we've been proactive, we received more inventory. Now, as we sell that through in the cycle, that will come through and have some pressure rolling through Q1. So, I'd say there'd be some pressure coming through. It's just a little bit of a timing shift, but you did see some of that in Q4.
And then in terms of G&A, we did kind of point out a few items on – in the call script. But just to clarify, there was, one, our marketing spend as a percentage of sales has increased, and that's a reminder. We did acquire Hush. They have a higher marketing spend as a percentage. Our eCommerce business is tracking at a very nice pace, around 20% – almost 21% for the quarter, and it does have a little bit of a higher percentage of marketing spend versus the rest of the brick-and-mortar business.
In addition, we did have our LTIP costs increase for more one-time adjustment of our 2019 PSU plan. So, that would be a onetime item in SG&A. And then lastly, we had about CAD 2 million in nonrecurring against the ERP project. And so both the LTIP and the ERP costs are normalized down in adjusted EBITDA to show that – you'll see the percentage pick up to our EBITDA line on an adjusted basis. But the only other item there, just to point out, that was a little bit higher which was expected was that advertising spend just as a percentage of sales.
I'll add one other thing, Stephen, which is hard to measure, and we want our unfair share of all categories in terms of mattresses from the low end to the high end. But what we've also seen as the business shifts a little bit to the mid to the high end, there are efficiencies in that model too, delivering a CAD 500 mattress cost is the same thing as delivering a CAD 2,000 mattress. So, it's hard to model it for – I'm sure for you guys, but it does drive a higher overall gross profit margin for us.
Right. Okay. Okay. That's helpful. And then just to clarify, when you talk about gross margin, I assume you're meaning moderating on a quarter-over-quarter basis. So, it'll moderate from Q4 rather than year-over-year. Is that right?
Exactly. Yeah. You're correct. Yeah.
Yeah. Okay.
Yeah.
And then just in terms of SG&A, can you quantify what the [ph] outlet (00:30:11) cost was in the quarter?
It was – I don't have the number right now, but it would've been a pretty [ph] deal (00:30:21) like a few million dollars.
Okay.
Yeah.
Okay. Great.
Stephen, he could get back at you...
I can get back to you on that, for sure.
Yeah. With the exact number.
Yeah.
Right. Okay. Okay. Thank you. And then just finally, before I turn it back, just on the capital allocation framework, thanks for that color, Craig. On the net debt to EBITDA, you talked about sort of being comfortable at that 2 times range. You're going to naturally delever over time. So, what are some of the levers that you would pull to keep that net debt higher? Is that – would we kind of attribute that potentially to the buyback in the absence of M&A?
I guess that's a fair way of looking at it, Stephen. Then we did increase the NCIB. We've submitted to the TSX for approval up to the CAD 50 million mark. And – but I think the way you're thinking about it is fair.
And, Stephen, you've been around long enough. I will tell you that our balance sheet is the strongest it's ever been, and we're really confident in the strength of our business as well as our balance sheet. And there's been a lot of conversations at the board level in terms of our dividend increase.
But with the geopolitical uncertainties tied to the atrocities that are happening in the Ukraine, add in the growing inflation and interest rate hikes, we prefer and are very comfortable on this increase, pause right now and see how the impact on consumer confidence may or may not roll out or change over the coming months.
But at the same time, we are targeting to increase our dividend in the future by a minimum of 10%. And the buybacks on our stock, as Craig mentioned in the script, we believe that our stock is undervalued right now, currently trading around 7 times EBITDA, which is why we're increasing our NCIB from CAD 25 million to CAD 50 million. And we also think some uncertainty in the marketplace may create some interesting M&A opportunities, and we're still aggressively pursuing anything that's going to enhance our strategic growth opportunities.
Right. Okay. That's great. Thank you for that color. Appreciate it, guys.
And then, Stephen...
Oh, yes.
...just to get back – sorry. Just to get back to you on the incremental from last year to this year on the LTIP line was CAD 2 million approximately.
Oh, great. Okay.
Yeah. Yeah.
Thank you.
Thank you. [Operator Instructions] Your next question comes from Meaghen Annett from TD Securities. Please go ahead.
Thank you. Good morning.
Morning, Meaghen.
I just wanted to go back to some of the conversation earlier here. I mean, Stewart, can you talk to maybe about your expectation for unit growth for the mattress industry for 2022? Because we have seen industry participants talk to this sort of flat to slightly positive outlook for units, and maybe that's more so applicable to the US. But how would your view line up there for the Canadian market? And maybe you could just generally talk about your comfort in volumes being positive for the industry in 2022?
Yeah. It's a great question, Meaghen, and I'm listening to the same things that you're listening from our peers and our US partners. If you would have asked me the question a few weeks ago, my outlook would be pretty bullish based on the consumer and the flush with cash and low debt levels and still spending lots within – at home. Travel still has not returned. Share of wallet still seems to be positive. But I don't even want to speculate over the coming months or a year because I don't know if we have even seen or come close to what the repercussions will be of this Ukraine move or how many times the Bank of Canada is going to move on their rate increase.
So, I'm hoping to lean to you guys to give us a little bit of insight. But the consumer has been strong and has been still demonstrating that, barring the last couple of weeks where we've seen a little bit of a pause. And pauses don't ever concern us because it's a pause, it's not a loss. It's an – and usually it's a shift within timing, so we usually pick up on it as the pandemic demonstrated. But more than that, on units, I don't know.
And just my second question is on capital allocation. So, with regards to M&A, are there any acquisition criteria you can talk about today in terms of categories, geographies, and potentially size? And if you could also just talk a bit more about the rationale for your investment in Sleepout, and if we can expect any similar investments from Sleep Country going forward. Thank you.
Sure. So, acquisition is always going to be driven by our relentless focus and discipline around the sleep ecosystem that we're trying to build. There is no secret that we still believe there is a long runway in terms of our accessory business, especially in the landscape within Canada. And I will point out, there is an interest, as Hush has a percentage of their business in United States. So, nothing on the horizon at the moment, but that does expand our interest in terms of going past the borders within Canada. But acquisition will be always within that sleep space, and we actually think that there's some more opportunities on the horizon as we expand on that.
Sleepout, not only do we love to invest in great businesses, but we love to invest in great people. Endy, the original team of Raj and Mike and now the President, [ph] Alea (00:36:47); as well as Lior and Aaron from Hush; and Mark and Hannah – sorry. I was going to say, Anna, I apologize – Hannah from Sleepout, were incredibly impressive and incredibly smart, incredibly entrepreneurial. It was in our sleep ecosystem, it's still within the bedroom, which is our key focus. And we love bringing talented people into the fold, and you should expect to see that also.
Thank you for all the colors.
Thanks, Meaghen.
Thank you. Your next question comes from John Zamparo from CIBC. Please go ahead.
Thanks. Just a couple follow-ups. Stewart, you spoke [ph] recently (00:37:42) of being able to open stores in smaller cities and you've seen some really attractive unit economics on those stores. So, I'm wondering, in regards to the guide of six new for this year, like, do you think that's temporary? Does that contemplate what you're seeing in smaller cities? Is there potential upside to that over the next few years?
100%, John. I'll tell you what, first of all, it's a minimum of six stores. And if you're hearing any hesitation or pause on the amount of stores, it has nothing to do with our bullishness in terms of opening more stores. In fact, there's a long list of stores that we're looking at, some that are – some leases that are coming due that we're waiting for people to exit.
I will tell you, we are practicing some fiduciary responsibility right now in the sense that our construction cost over the last four or five months have gone up by 30%, 40%. So, there's no rush for us to open up stores. And some of our deals, we've actually pushed off and delayed a little bit in the hope that we're going to see a return to normal prices. Lumber has already come down dramatically. That being said, with the war in Ukraine and the commodity prices going up of late, that may persist for a little bit longer, but you should expect a minimum of six stores.
Plus, keep in mind also in that number, it's not – we're not talking about our Sleep Country Express and our Dormez-vous Express stores, which at still very early days, and we're testing out to see that model; and that is also another opportunity of growth for us in our brick-and-mortar footprint.
Okay. That's helpful. Thanks. And then a follow-up on the M&A side. When it comes to the pipeline of targets, how would you describe it versus the past few years in terms of both number of targets and then on the valuation side. Are private multiples or the asking prices, are they reflecting what's going on in the public market?
I think there has been, as everyone knows, a re-rating on the multiples, and that they've come down dramatically, including ours at a 7 times, which I think is ridiculously low, but that's my own opinion. But on the private side, everybody thinks that they have the best next thing. So, people are still slightly bullish within the private space. There's a lot of cash that's floating around in the private equity markets, and they're trying to place it. So, there's some competition on that.
I will say, though, whatever we do acquire, it will be in our sleep ecosystem. It will come with great people, it will come with product innovation that expands on our sleep ecosystem, and it will be a profitable model. We have no need to chase anything that's not profitable.
Got it. Okay. And then one last one, if I may. The ERP system, can you remind us when we should see the impact of that? And how will that play out on the P&L? What will be the primary impact?
I'll let Craig speak to the financial impact. I will tell you that it's going slower as many ERP rollouts. It's going slower than what we had hoped. We're still piloting in the London region and working on some new things. There's no question that COVID and the disruption of people being out of the office and some of our integration partners shifting people around has slowed us down months behind what we were hoping.
The longer term benefit of this, obviously, is to harness our data. As we have openly admitted before, we're good at lots of things, but harnessing the power of our 27, 28 years of data of customers, millions of customers across this country, has not been our strong suit, which is actually exciting for us because that's an opportunity that we still haven't untapped. And we're hoping to see by mid-year this year a lot more advance in that space.
Craig, you want to speak to that?
Yeah. Firstly, on the financial side, so we have the normalizations down below, which – those are very much tied to kind of hypercare and support as the different regions roll out. So, those ones are identified in adjusted operating EBITDA. On the actual cost for, like, licensing and infrastructure and the cost that would be the regular ongoing, they're largely baked into the quarterly numbers. So, you can – I wouldn't expect that you're going to see it very significantly from kind of the run rate it is, but you have to adjust out the one-times to get – and that will give you more of a year-over-year if you take it as a percentage of sales. You'll just see more similar percentage of sales for the kind of IT area once normalized for some of those costs. And same with the professional fees, if you took those two in a bucket. So, I'd say the cost infrastructure going forward is largely baked in.
Okay. That's helpful. Thank you very much.
Thank you.
Thank you. Your next question comes from Sabahat Khan from RBC Capital Market (sic) [Markets] (00:43:15). Please go ahead.
Thanks, and good morning. Just I guess a question on just revenue mix during the quarter, it looks like accessory sales did quite well and likely helped margin. Now, is that just kind of a standard Q4 pickup with gifts and so forth? Or did you see some sort of like a progress in that business that you'd been maybe pushing forth through media, etcetera? Just trying to understand how we should think about directional mix over the course of 2022 and onwards, primarily accessories.
A combination of both the things that you said, Sabahat. So, yes, Q4 is traditionally a higher lift for us on accessories. I mean, years ago when we weren't in this business, Q4 wasn't such a strong quarter for us, but it is getting more and more important for us. We definitely saw a pull-forward. I think Martin asked that question earlier on, but a pull-forward in October and November on our accessory business because that one for sure people were concerned about in terms of gift giving. And – but you should see the normal cadence that you've seen probably over the years.
Third and fourth quarter are clearly becoming more important for us. Third quarter has always been the most important. That being said, on accessories, we still believe that we have a low market share within the space. Hopefully, with our acquisition of Hush, we're going to accelerate that. But we're still somewhere in the 8% to 10%, and we think that we could grow that exponentially over the next few years.
Okay. Thanks for that color. And then I guess maybe just following up on kind of that second part of the comment there with some of your acquisitions. You've taken a number of investment positions, some majority, some minority, some pull-out acquisitions of sleep products. Just trying to understand, I guess, are these more to build sort of like a holistic, sleep-related offering? Or are you eventually hoping some of these products can be rolled into your sort of Sleep Country location? Just trying to understand what the thought process some of these longer term is, or do you envision them, given that some of them are digitally native, maybe they stay just operate on a – with a separate management team and so forth. What's kind of the long term vision there?
Again, Sabahat, probably a combination of the few things that you said. First of all, the uniqueness of the Endy team, the Hush team, the Sleep Country and Dormez-vous teams, we love how they operate their own business. We encourage that, and we have no plans of changing the magic that each of these teams bring to their particular brands.
That being said, brands is the important word here. Endy has created an amazing brand awareness. Hush has created an amazing brand awareness. And some of those brands, as you're going to start to see and it's already begun on the wholesale level may be appearing in other retail stores. You can see Endy at Sports Chek. You'll see them at Loblaws. Hush is in multiple places. In the fourth quarter, they were on Harry Rosen online marketplace. So – and for sure, longer term, you will see some of those products within our stores when the teams think it's the right time to do it.
That being said, it is a digital push and acquisition for us to drive more market share online as our stores are doing really well and have the ability to bring in multiple types of different products, too. So, it's a little bit of both.
Okay. Great. And then so just kind of along the lines of that comment, in terms of the eCommerce mix, looks like for the full year, you've got roughly [ph] 25% (00:47:04) as sales. And have you envisioned that as the world reopens because obviously stores have not only just sales but a bit of a marketing benefit as well. As you would think about [ph] in particular, it is out (00:47:16), the world opens up more, how do you envision eCommerce as [ph] potentially a trend (00:47:21) over the next few years?
I think we all would agree that the last two years, [indiscernible] (00:47:27) in eCommerce is a lot quicker than anyone have imagined, the businesses that were well-positioned for it definitely succeeded in those [ph] moving on at the end (00:47:38).
That being said, it also changed the consumers' mindset. I know for myself. I don't know if my wife or I are going to go to a grocery store again because it's quite easy just to order it online. That being said, what we did see immediately when the stores reopened after some of the closures in 2020, mask and all, people quickly came back to the stores, especially when it came to premium bedding, anything over or above CAD 1,000.
And so I think when the world normalizes, whatever that new normal is, you probably will see a bit of a pullback in eCommerce, but I think only temporarily. I think the longer term trend, as you well know, is going to continue with the ease of the transaction. But the omnichannel component of it is key.
In 2017-2018, when all the bed-in-the-box guys were popping up and everybody thought it was going to disrupt the industry, especially the brick-and-mortars, I think what everyone has now discovered that the ability to test and begin the transaction online, maybe on your phone, go to one of our stores and test one of the models, and maybe conclude the transaction in your car, for us, it's a seamless experience. It has to be a seamless experience for the customer so that they can transact whenever and however they want with the store or without the store. But I think that will – I think you'll see the differentiating leaders in retail have that omnichannel ability more than those who are just a D2C play.
Okay. If I could just squeeze in one last one, maybe more for Craig. I think you talked about there's some ERP implementation costs [ph] embed in SG&A (00:49:33), which will be ongoing. Can you give us some guidance on this amount that maybe the onetime portion of it that it's getting backed out? Looks like we did about CAD 5 million in 2021. Is there more of this onetime portion that we should expect over the next year as you roll this out?
Yeah. There will be each quarter some amounts that will be backed out, but we'll – those are the ones that are tied to system redundancies while running two systems; and that's quite low amount of it. Most of it is just with support onsite as they're rolling out or working through hypercare. Every time you roll out at different region, there's a period of hypercare that they have to go through. And we just normalize those because those aren't part of the operating model going forward. But we'll continue to be clear on those per quarter going forward just so you can normalize it on your side.
Thanks very much.
Thank you. And your last question comes from Stephen MacLeod from BMO Capital Markets. Please go ahead.
Thanks. I just had one follow-up question. I just wanted to ask about the Sleep Country Express stores that you have in the Walmart partnership. I know that launched in the fall, so I'm just curious if you can give a little bit of color on sort of how that's performing, and maybe any plans to expand that relationship.
Sure. So, the last one – so, we said that we're going to start with the 10 pilot stores. And you know us by now, Stephen, we love to test, test, test and measure and make sure that we execute flawlessly. So, it's still very early days for us. We've always said that we'll probably make a decision in terms of the next leg by mid-year. So, you should probably figure by June. Maybe there'll be some color around it in May as we gather some data.
Thus far, we're quite pleased with what we're seeing. There's a component of the business that's transacting in-store, and there's a component of the business that is a drive to our bigger stores. And I will say we are quite pleased. That being said, these last two weeks, Walmart – our Sleep Country Express stores in our Walmart have slowed down a little bit. Again, I don't know if that's a consumer confidence and it probably marries back on terms of our lower end, but we are really excited about what this could be.
Great. Thank you.
Pleasure.
Thank you. And there are no further questions at this time. You may please proceed.
Well, I just want to say – thank everybody for your support. As always, this wraps up our conversation. And we look forward to speaking to you and updating you folks throughout the year. And have a great weekend, everybody.
Ladies and gentlemen, this concludes your conference call for today. We look forward to keeping you updated throughout the year. Thank you for joining us, and sleep well.