Sleep Country Canada Holdings Inc

TSX:ZZZ

Earnings Call Transcript

[Operator]

Good morning, my name is Jacqueline, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sleep Country Canada Q1 2021 Results Conference Call. [Operator Instructions] Yesterday, Sleep Country Canada released their financial results for the first quarter of 2021. A copy of the earnings disclosure is available on our 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, sir.

[David Friesema, CEO & Director]

Thank you very much. Welcome, everyone, and thank you for joining us today. I hope you're all staying safe and healthy. Joining me today are Stewart Schaefer, our newly appointed President of Sleep Country Canada Holdings Inc., and Craig De Pratto, our Chief Financial Officer. We are pleased to share the results of another successful quarter.Building on the momentum of our record 2020 results, Q1 continued to demonstrate the power of our omnichannel ecosystem, no matter the headwinds. It is notable that these results were achieved amid lengthier store closures due to the COVID-19 restrictions compared to this time last year. Despite our physical-store network being closed for 32.9% of operating days compared to 10.2% of operating days in Q1 2020, we delivered powerful growth across our CP -- ecosystem, further strengthening our position as Canada's preferred sleep partner.I would like to thank our team to Sleep Country Canada, Dormez-vous and Endy as well as our valued suppliers, landlords and media partners for their continued dedication and hard work, especially considering the ongoing pandemic, which continues to take a toll on individuals and organizations across the country. And Sleep Country is no exception. And as a result of extended store closures in certain regions this quarter, we look forward to reopening and well-being -- welcoming our associates back to our closed stores soon. As a result of our team's ongoing commitment over the last -- past year, it is a great pleasure that I can share our Q1 highlights. Revenue increased by 20.7% to CAD 183 million. Net income grew by 74.1%. Same store sales increased by 19.6% and a 52.9% increase in adjusted diluted EPS from CAD 0.17 in Q1 2020 to CAD 0.26 in Q1 2021.Our purpose at Sleep Country is to transform lives by awakening Canadians to the power of sleep. We strive to live our purpose every day, and in Q1, our brands proudly supported over 175,000 Canadians to achieve their best sleep as a pillar of their well-being. In pursuit of this purpose, we continue to chart our business against 3 strategic platforms to achieve sustainable and customer centric growth. One, providing a world-class customer experience. Two, pursuing relentless channel and product innovation. And three, helping Canadians improve their lives through sleep as a pillar of well-being.The achievement of Q1 clearly demonstrates the power of our strategy to deliver formidable results, and we have seen great success result -- as a result of our efforts across all 3 of our strategic pillars. It is clear that our customer-centric approach is highly effective at establishing new relationships, deepening existing ones, and ultimately growing our business for long-term success. Beginning with our commitment to provide a world-class customer experience, we are proud to share that e-commerce drove almost 1/3 of our total quarterly revenue. In addition, our powerful same-store sales growth includes our fourth consecutive quarter of triple-digit e-commerce growth. These results showcase that our focus investments in our digital and physical sleep ecosystem are resonating with loyal and new customers alike, enabling Canadians to learn, trial purchase, and deliver on their own terms.We are also pleased to share that our highly impactful Dreamline, digital chat and phone capability, which brings the unparalleled expertise of our Sleep Experts to the digital realm, will remain an important channel and part of our customer experience model in the future. We have seen a remarkable 230,000 interactions since launching this capability last year, underscoring our promise to provide exceptional customer experience at every touchpoint and across every channel.Regarding our relentless pursuit of channel and product innovation, our goal is to be Canada's singular sleep partner and gateway to the world's best sleep assortment. We are confident that the purposeful sleep ecosystem we have built, including our retail store network, e-commerce platforms, third party marketplace relationships and exclusive brand partnerships will continue to drive significant growth and serve as a key differentiator for us in market. In Q1 2021, we opened 2 new stores, one in Fort Saskatchewan, Alberta and Collingwood Ontario, bringing our retail store network 283 stores and growing. We continue to enjoy fruitful relationships with our brand partners, and our customers are responding well, as illustrated through mattress and accessory revenue growth of 19% and 27.7% respectively. We look forward to showcasing further innovation on this front over the coming months.Another landmark moment in the quarter was the completion of Endy's contingent consideration payment of CAD 25 million after the Endy team well exceeded their growth and profitability targets established at acquisition in 2018. Endy continues to innovate in the e-commerce space as Canada's dominant online mattress brand and has enjoyed immense success as one of the country's fastest-growing retailers. Endy is a powerful brand within our sleep ecosystem, and their commitment to providing only the exceptional -- only the most exceptional customer experience closely aligns with the beliefs that have driven the Sleep Country and Dormez-vous brands for 26 years. At the very core of our business is our commitment to helping customers achieve their best sleep as a pillar of overall physical, mental and emotional well-being. Our unmatched seep expertise and ubiquitous reach of our sleep ecosystem positions us to help Canadians prioritize and achieve their optimal sleep, a role that is now more important than ever.Within the realm of the strategic platform, we launched a highly successful brand activation on World Sleep Day. Our My Sleep Promise campaign successfully inspired Canadians to prioritize sleep as one of the best forms of self-care for a happier and healthier life. Sleep Tips, developed in partnership with SleepScore, a leading sleep science company, resulted in scores of Canadians making their own sleep promise to establish healthier sleep habits. We enjoyed immense success in this campaign, with over 30 million social impressions and 50 million impressions in traditional media -- in media and our busiest sales week so far this year, all of which culminated in meaningful advancing our mission of awakening Canadians to the power of sleep. We look forward to championing sleep on behalf of Canadians in the months and years to come. We are still in our growth journey having only scratched the surface of the value that our sleep ecosystem can deliver. We are eager to explore its capacity to sustainably grow our business and capture more market share. No matter how Canadians choose to shop, we are proud to be their sleep partner of choice.It gives me great pleasure to announce the exciting news of Stewart Schaefer, being appointed President of Sleep Country Canada Holdings. Stewart's been a guiding influence in the world of sleep for nearly 3 decades. As the visionary and chief architect behind much of our strategic growth over the past 16 years, including the introduction and exponential growth of our accessories category, the building of our powerful sleep ecosystem and the acquisition of Endy, his business acumen, entrepreneurial spirit and passion have elevated our family of brands to new heights. It is a true pleasure to work with Stew, and I'm excited to see the phenomenal growth I know he will deliver across our strategic platforms.I will now turn the conversation over to you, Craig, to discuss our financials.

[Craig De Pratto, CFO & Corporate Secretary]

Thank you, Dave, and good morning everyone. I'd like to reiterate that we are extremely pleased with our very strong Q1 results. As noted earlier in the call, in Q1 2021, our retail store network was impacted by the mandated government closures in Manitoba, Ontario and Quebec. In Q1, our store network was temporarily closed for 32.9% of its normal operating days in Q1 2021, compared to 10.2% in Q1 2020. Despite the significant challenge to our store network being partially closed, our strong Q1 results demonstrated the strength of our business model, brands, strategic investments and our associates. Our Q1 revenues increased by CAD 31.4 million or 20.7% from CAD 151.6 million in Q1 2020 to CAD 183 million in Q1 2021. This increase was primarily driven by 19.6% increase in same-store sales, 2 new store openings and our wrap stores. We continue to see significant growth in revenue for our e-commerce platforms. 29.3% of our Q1 revenues were generated from our e-commerce platforms. Additionally, we saw significant growth in both mattresses and retail, or sorry mattresses and accessories revenue categories.Our mattress revenue increased by CAD 23.2 million or 19%, from CAD 122 million in Q1 2020, CAD 145.2 million in Q1 2021. Our accessories revenue increased by CAD 8.2 million, from CAD 29.6 million in Q1 2020, to CAD 37.8 million in Q1 2021. Our continued focus on bringing the best products -- product assortments to Canadians has positively contributed to our Q1 2021 revenue growth across both revenue categories.Our gross profit increased by CAD 9.1 million, from CAD 41.2 million in Q1 2020 to CAD 50.3 million in Q1 2021. Our gross profit margin increased by 0.4% from 27.1% in Q1 2020, to 27.5% in Q1 2021. This margin increase was primarily due to lower product and commissions costs, as well as, leveraging fixed cost occupancy and depreciation costs. These decreases were partially offset by higher COVID-19 PP&E, and in addition to costs associated with providing our customers with curbside pickups in areas where our stores were closed. This decision to continue to serve our customers put downward pressure on the company's margin for the quarter, as these wages were fixed in nature.Moving onto G&A expenses. Our G&A expenses for the first quarter increased by CAD 5.1 million or 17.5%, from CAD 29 million in Q1 2020 to CAD 34.1 million in Q1 2021. As a percentage of revenue, our G&A expenses decreased from 19.1% of revenue in Q1 2020, to 18.6% of revenue in Q1 2021. The CAD 5.1 million change in G&A expenses is mainly driven by additional dollar spend in media and advertising and compensation occupancy expenses for the quarter.Moving on from G&A. Our Q1 operating EBITDA increased by CAD 4 million or 14.9%, from CAD 26.4 million in Q1 2020, to CAD 30.4 million in Q1 2021. The increase is primarily due to strong revenue growth in Q1 2020, combined with improved gross profit margin and partially offset by additional dollar spend in G&A expenses. Our Q1 net income increased by CAD 3.7 million or 74.1%, from CAD 5 million in Q1 2020, to CAD 8.7 million in Q1 2021. Our basic earnings per share was CAD 0.24 per share, compared to CAD 0.14 per share in Q1 2020, representing 71.4% growth quarter-over-quarter, as Dave mentioned earlier.For the quarter, we experienced a net decrease in cash of CAD 2.7 million. Net cash flows used from operating activities in 2021 were CAD 11.5 million. Cash flows used in investing activities for CAD 17.1 million. And lastly, cash flows provided by financing activities were CAD 25.9 million. A large part of the cash used in operations and investing activities related to the completion of the Endy's contingent consideration of CAD 25 million, which was paid in March 2021. On the capital allocation front, on May 10, 2021, the Board declared a dividend of CAD 0.195 per share on the company's common shares. Additionally, the notice of intention to the TSX to pursue an NCIB, which was filed earlier this year, was accepted in March 2021, providing us the option to repurchase shares commencing March 9, 2021.Subsequent to the end of the quarter, in April 2021, the number of verified COVID cases surged in Canada. We were required due to government mandates to temporarily re-close certain stores in the attempt to contain the spread of the virus. As of today, approximately 47% of our stores remain temporarily closed. This completes the overview of the financial results. Back over to you, Dave, for closing remarks.

[David Friesema, CEO & Director]

Thanks, Craig. Building on our powerful results, we move forward with optimism and from a position of financial strength. The future of Sleep Country, Canada, Dormez-vous and Endy is bright, as we continue to grow and optimize our enhanced service model and deepen our trusted relationship with Canadians. The quarter's results are a testament to our strategy and our team's unmatched ability to anticipate, adapt and evolve with Canadians' needs. meeting them with the perfect solution to suit their sleep and wellness journeys, no matter how they choose to shop. I'm continuously impressed with our team's dedication to our customers and communities, and have confidence in our continued growth. We remain committed to meaningfully and positively supporting our environment, our people in our communities.We're proud to be the only national sleep retailer offering a comprehensive mattress recycling program, and are pleased to have diverted over 35,000 mattresses and foundations from landfills in Q1 through recycling and donations. In addition, Endy expanded its Healthcare Heroes initiative in Q1, transforming call rooms and new Endy mattresses at an additional 6 Canadian hospitals, including Scarborough General Hospital in Ontario and Hospital Pierre Boucher in Quebec.To close this call on a celebratory note, I am thrilled to share that Sleep Country, Dormez-vous and Endy, all received recognition from the Best Workplaces Institute as Best Workplaces in retail and hospitality. In addition, Endy was voted the most trusted mattress in a box brand in Canada 2021, by BrandSpark, all fantastic achievements that reflect our best-in-class brand family. Looking ahead, we remain focused on executing against our strategic platforms on providing world-class customer experiences, innovating across customer, product and channels, to help Canadians achieve their best sleep and well-being. We are confident that our business is uniquely positioned to thrive today and tomorrow, and remain committed to delivering sustainable and profitable growth for our customers, associates communities and shareholders.With that, we conclude our remarks, and open the floor for questions.

[Operator]

[Operator Instructions] Your first question comes from Martin Landry from Stifel.

[Martin Landry, Managing Director of Equity Research]

Congratulations on your results and congratulations towards -- on your promotion.

[Craig De Pratto, CFO & Corporate Secretary]

Thank you, Martin.

[Martin Landry, Managing Director of Equity Research]

My first question, there's lots of discussion on inflation in the economy, and I'd like to see how that's playing out in the mattress industry. Wondering if you can discuss your line up of mattress, and if manufacturers have implemented price increases at the beginning of the year.

[Craig De Pratto, CFO & Corporate Secretary]

Martin, our pricing usually with our partners over the last 26 years is fixed, and it's very rare that we will absorb any price increases. As people understand, there is clearly signs of inflation everywhere, not just in product, but in our logistics, in our labor. And, there has been some price increases that were discussed in the early part of the quarter, and reflected in some of our pricing already, and some that will be -- that's happening right now. That being said, I believe very strongly through our pricing power, that in our demographic and on our product mix, that we could pass on most of these price increases onto our stores and our products, without having any impact on our business. Does that answer your question?

[Martin Landry, Managing Director of Equity Research]

Yes. Can you quantify what price increases you've received from manufacturers on average?

[Craig De Pratto, CFO & Corporate Secretary]

The price increases have been minor between 2% to 3%, and we've seen more of a price -- more inflation in terms of our logistics through pricing sub-containers and transport. That's been more of the unexpected increase that we saw over a period of time and we've already adjusted for that.

[Martin Landry, Managing Director of Equity Research]

Okay. And maybe just a follow-up is, wondering if you can break down the revenue drivers, giving us more details on volume versus growth for volume versus price for the quarter.

[Craig De Pratto, CFO & Corporate Secretary]

In terms of that breakup of merchandise between mattresses and accessories or more specifically...

[Martin Landry, Managing Director of Equity Research]

Just mattresses, we can focus on mattress. Wondering what -- how was your unit-volume growth and how was your average unit price?

[David Friesema, CEO & Director]

I can cover that one, real quickly, if you want. It's just -- as we talked about throughout last year, we were excited that we were seeing increases in our below CAD 1,000 but while not seeing decreases above CAD 1,000, and we continue on that same pattern. So we're seeing a really nice distribution of price comparisons across all of our price points and so it is -- our AUSP is down a little bit, because we're selling more customers at the lower end, but we're still selling just as many or more at the higher end. So we think that is about as healthy as you can get.

[Martin Landry, Managing Director of Equity Research]

And then on your unit priced, can you talk about that a little bit? Sorry, on your volume growth?

[David Friesema, CEO & Director]

Our volume growth was up significantly.

[Operator]

Your next question comes from Vishal Shreedhar from National Bank.

[Vishal Shreedhar, Analyst]

Congrats on the results. I was hoping to draw a little bit on your team's experience given your significant knowledge of the industry. Just wondering as you scan history, if you recollect being in a period this strong, and maybe if you can comment on the factors driving the strength. Obviously, triples these initiatives are driving the strength as well, but just on the backdrop, your interpretation.

[David Friesema, CEO & Director]

Well, I think it's interesting, I think what we're seeing is where our stores are open, they continue to be very busy across the country. But we're sitting here today with 47% of our stores not open. So we're -- again we -- as we've always said, market share is a backward looking environment. We don't really understand it until it's already behind us. But we have every reason to believe from speaking with our suppliers, that a lot of our success is coming from taking share, and -- because we have -- over the last several years, and I hope people are starting to realize it, we're not just a bricks and mortar retailer anymore. We're a very strong bricks and mortar retailer, but we're a strong omnichannel retailer. Whether it be at Sleep Country, Dormez-vous and especially Endy. And so I -- where we're open it's busy, and where we're not is where we will catch up.

[Vishal Shreedhar, Analyst]

Okay. And with respect to how this period stacks up versus your prior periods operating periods in history, is this the strongest operating period in Sleep Country's history, as you can recall?

[David Friesema, CEO & Director]

I believe Q4 was stronger, because less of our stores were closed.

[Stewart Schaefer, President & President of Dormez]

There's no question that we're getting an additional share of the disposable income of the Canadian consumer, since there's other things that they cannot do, and also, Canadian savings rates, as you all note, are at the highest level that they've been in years, so that all bodes well. I will also add that there was a few years -- this is an industry that's had a compounded growth of around 5% to 6% annually. And the last few years, it lagged a little bit. The beauty of our business is that there is always that catch up, where we think that sales get deferred. So part is, we believe as a catch-up over the last few years, that people are refocusing back on their home. And the wave of wellness that COVID has definitely implemented in the minds of Canadian consumers, we believe that that will continue as people realize the power of sleep and how important it is to their health and wellbeing.

[Vishal Shreedhar, Analyst]

Okay. Looking -- you talked about your success as an omnichannel retailer, and your investments have certainly paid off. Wondering if you can share some of your -- some of the differences between your online customer and your in-store customer, and if you're seeing those differences evolved throughout the pandemic, or change.

[Stewart Schaefer, President & President of Dormez]

So what -- we can tell you that the online customer is very similar to our in-store customer and back, beside one area, and I'll leave that to the end. But the journey definitely begins anywhere that they want it to. And -- but it seems that it does involve the store, especially on a price point of above CAD 1,000. So the journey may begin on their phone, and they are definitely coming into our stores as we do our geo tracking and be able to churn in that. And they may conclude it at the store or again on their phone. And we saw that when the stores were closed and then reopened, people lining up to get back into our stores. The added bonus for us, and Dave alluded to it a few moments ago, is our focus on driving our below CAD 1,000.Price point, and even below our CAD 500 price point, which we always believe that, we didn't have our fair share in that category, which we wanted. And with our brand and the confidence in our brand, the below CAD 1,000 price point and below CAD 500 price point has definitely accelerated, and that trajectory has not slowed down for us. And that's a -- we believe a whole brand new category, that we're growing at a much more accelerated rate than we ever had before.

[Operator]

Your next question comes from John Zamparo from CIBC.

[John Zamparo, Associate]

I wanted to ask about the commerce business and the acceleration you're seeing there. And obviously, this is going to be an omnichannel business moving forward. But, does the success of e-com make you re-think capital allocation at all moving forward, and maybe you lean more on the online business, and more of your investments are through marketing or social media rather than just building out new stores? Would like to get your thoughts on that.

[David Friesema, CEO & Director]

I think the one thing that I want to make sure that we're all clear on, because we're very clear inside our company, is that we do a lot of tracking and we do a lot of analysis every time we open a store, every time we do anything. And we want to have the right number of stores. So, we don't have any ego about having more stores. We want to have the right amount, and so we'll get to that right decision. As of now though, we haven't seen anything that indicates the stores aren't a successful part of this equation. We remind people of Q3 last year, where our stores were open, we were in the middle of a pandemic with no vaccine, and still 82% of our business went through the stores. So we'll continue to track it and we'll have the right number, but the stores still play a big significant role, as Stewart mentioned a minute ago, especially above the CAD 1,000 category. And so we'll continue to make sure that we are opening stores were required.

[Craig De Pratto, CFO & Corporate Secretary]

I will also add in terms of capital allocation, we're constantly measuring what is the best return on that investment. And some of the stores that we opened during the pan -- last year during the pandemic and continued again this particular quarter, have been some of our strongest openings that, we've ever had. And as of note, while we've often mentioned the amount of stores that we believe per capita, which we think it's one store for every 100,000. So still comfortably, we are a long way from that at 283 stores. And until we see any signs that e-commerce is growing in spite of our brick and mortar, which we have seen zero sign of that, we'll continue down the path of opening stores and hopefully driving our digital ecosystem.

[John Zamparo, Associate]

Okay. And then my follow-up. I wanted to dig a bit deeper on the question about online customers versus in-store. And I get sometimes there's overlap between the 2, but do you see any difference on conversion rates, on the mix of mattresses versus accessories? You mentioned the transaction size. Is there more spending on returns or freight? Any color you can add on these [ addings ] would be helpful.

[Craig De Pratto, CFO & Corporate Secretary]

Well, it's been an interesting year for us and a big learning period. When COVID hit, our accessory business exploded, because people were cocooning at home. And then as the stores reopened, we didn't really see much of a slowdown and it continued. Our e-commerce continued to grow on the mattress side, because customers were going in and testing our mattresses, and again, like I said before, partially including this -- concluding the sale in-store and some online. But there's no question that the accessory side of the business is a easier transaction for the customer to do online. We've seen a lot of our loyal customers coming back and adding to the baskets. They made a transacted something in the stores and then were adding to their baskets online. And a lot of new customers who we -- who are experience Sleep Country -- again, both mattresses and accessories, but the accessories, as noted in this quarter, seems to have accelerated quite quickly. That being said, the stores being closed, the 40-odd-percent of our stores that are closed this past quarter, we do a very good business on cash and carry of our accessories, which also is a lead into buying mattresses. And we are pleasantly surprised that the accelerated growth that we had despite the fact that so many of our stores were actually closed. Does that answer your question?

[David Friesema, CEO & Director]

Yes. And the only thing I'll add to it is that we track -- it's to the second part of your question, we track very carefully our return rate, and we're comfortable that we're well in line with what we want to be on that business.

[Operator]

Your next question comes from Stephen MacLeod from BMO Capital Markets.

[Stephen MacLeod, Analyst]

Congrats on the quarter and Stewart congrats on your promotion.

[Stewart Schaefer, President & President of Dormez]

Thanks, Steve.

[Stephen MacLeod, Analyst]

I just had a couple of follow-up questions. You guys have given a lot of great color here. Maybe just asking question a little bit differently. E-commerce has obviously been a big driver of growth and has really stepped in during the pandemic, leading to a record quarter in terms of e-commerce as a percent of overall sales. Are you able to give any color on where you think -- how you think e-commerce settles in once we exit pandemic? And, hard to say what normal looks like, but, just curious if there's some sort of run rate where you think e-commerce will settle in at?

[David Friesema, CEO & Director]

Well, I think historically speaking, we've mentioned that, we thought that it might get to -- and I'm talking revenue, somewhere in the 25% over time. But again, that's speculation, we passed it this quarter. But that's with our stores -- a lot of our stores being closed. I think the one thing, the good thing is, wherever it settles in, we think we're going to be the largest. We already are, and we'll continue to push on that, with not only good offerings, but good expertise. I think the one thing, we haven't talked about much today is our Dreamline and our Dream chat, which is a really nice addition to being online only. So, we really -- we talked -- everybody's talking about 2 channels, online and the store. We created 3. We have online only, we have a lot of support from Dreamline, which is our Sleep Experts on chat or the phone, and then we have the in-store experience. Again, when we say that we want to be where the customer wants us to be and how they want us to be there, I don't think, we've ever been further along on that. We're just going to continue to push on that.

[Craig De Pratto, CFO & Corporate Secretary]

I will also add that, it will probably never go back to what it was before, because we've all become -- got accustomed to actually shopping with that convenience on line, and it is definitely been a seamless experience for Canadians. But, I guess the customer will dictate that to us, Stephen, as time goes on. And I will add that -- just want to remind everyone that, we are still really early in this runway and which is very exciting for us. And as Dave mentioned, on the Dreamline and there's other things that we're working on that we're really excited about, that we haven't even deployed yet. But this really began for us November 19. And so it's -- we're still in our infancy of what we're going to be doing. Plus our Endy team is unbelievable and continuing to grow and come up with great ideas and adding some new products to the mix. They just launched a new headboard which is expanding our basket size there. So, a lot of exciting and interesting things still to come for us.

[Stephen MacLeod, Analyst]

And then actually that's a good segue to my next question with respect to Endy. Obviously, when on your bought Endy -- we're several years in now, but you thought one of the things that you could leverage from their expertise was their ability to have a strong online presence. Would you say that, having Endy in your portfolio has really helped to drive e-commerce and omnichannel growth in the Sleep Country and Dormez-vous banners?

[David Friesema, CEO & Director]

I would say that it's been a fabulous collaborative effort and there's no question that the team at Endy are the leading force in Canada, in our opinion, online. And they've been a fabulous asset and taught us some wonderful dos and don'ts along the way. But, I will also give a call out to Sari Deckelbaum, who is our VP of E-Commerce, who has exploded our business. And thank goodness for her and her fabulous team as well as John Baigrie, our Head of IT, who launched our e-commerce in a timely manner, and they've been exceeding all our expectations well.

[Operator]

Your next question comes from Sabahat Khan from RBC Capital Markets.

[Sabahat Khan, Analyst]

Just a quick question on the same-store sales. I think you're indicating that about 33% of the normal operating days, the stores were closed. How many stores are in the comp base, or how did you go about figuring out which stores to include given the closures last year and this year?

[David Friesema, CEO & Director]

Well, I'll let Craig answer that mathematically, because he is the expert there. But I thought I would just -- I really want to point out, we're trying to de-emphasize same-store sales. We know we have to talk about the number. But we really think the total growth is the best way to measure it. But, Craig, over to you.

[Craig De Pratto, CFO & Corporate Secretary]

Saba, we really did -- when you see the total sales, and then you see our same-store sales, you'll notice that they're quite close. And the reason is, is that, we did just treat it as a normal same-store sales bucket, for the total activity between both e-commerce and our stores for the quarter. We did this because, if you go back to Q2 of last year, where we had material closures, it was treated almost as an asterisk to say that, we couldn't -- the results were too materially different, and we didn't feel it was a fair assessment of the activity of the company. This year with the strong results through e-commerce and the stores that were open and when the stores did reopen in March, we felt comfortable that -- treating it similarly to the way we've done in the past, and not excluding it made the best sense. And it really points to that -- the whole omnichannel approach of when one piece of our business is down or is closed temporarily, we see significant increases and shifts to other lines of business, that being e-commerce and our Dreamline in the quarter.

[Sabahat Khan, Analyst]

Okay. So if I understand that, it's pretty much the entire store base this year versus last year same quarter?

[Craig De Pratto, CFO & Corporate Secretary]

Correct, yes.

[Sabahat Khan, Analyst]

And is that a similar approach you'll be using for Q2, given the store closures are much larger?

[Craig De Pratto, CFO & Corporate Secretary]

Well, I think again last year, because we had such a material impact, we'll decide what's the best way to best explain to the market, because it's because we're going to be leaping over a really, really weak comp obviously in Q2. So it will be -- we'll just continue to be transparent around how we're measuring these items in the quarters to come, as there will be a little bit of noise, just given the pressures from the store closures on our network year-over-year.

[Sabahat Khan, Analyst]

And just the last question from me. With the takeoff of the e-commerce side of the business, and still expanding the store network, are you still looking to expand into the mall channel, or is that something you'll figure out once we're beyond the pandemic and traffic trends normalize? Just want to understand where we could expect some of the future stores to go as you expand.

[Stewart Schaefer, President & President of Dormez]

Well, we're still definitely looking at the malls. Right now they aren't in the immediate focus, because a lot of the malls are still closed down and -- but as we look towards the malls, we're looking for better opportunities in terms of our cost of rents, and -- as well as throughout the entire Canadian landscape, as the market shifts, as some of the retail shifts. As happy and excited as we are about our business, there has been unfortunately a lot of companies that have not done well and part of the repercussions of that or the fallout of that, is that, there is a lot of stores that have been closed. That being said, we look for opportunities and AAA real estate wherever we can find it, which will be in-field stores, because there are still areas that we have to add stores and tertiary markets, which have been doing really well for us as we open up into the new markets. The Windsor was a whole brand new market for us that we opened up, and is continuing to excel. So we still see a lot of pockets all around Canada that we haven't yet explored.

[Operator]

Your next question comes from Meaghen Annett from TD Securities.

[Meaghen Annett, Analyst]

So just maybe following up on Stewart's responses. Looking at potential areas to continue to gain market share, independents, I believe, were prior to pandemic, a fairly large piece of the market in Canada. So, are you seeing those players really exiting the market, to more meaningful extent at this point? And how do you see that unfolding in terms of opportunities over the next year or so?

[Craig De Pratto, CFO & Corporate Secretary]

In terms of, Meaghen, our competition, you mean other retailers?

[Meaghen Annett, Analyst]

Yes.

[Craig De Pratto, CFO & Corporate Secretary]

No, it seems that the one area to be since this pandemic has begun, is in the home furnishing section. So I can't say that we've seen any challenges for other retailers closing or foresee them disappearing. That being said, I do believe -- we do believe, pardon me, that there has been some disruption -- supply chain disruptions across Canada for certain retailers, that we've been fortunate enough and our teams have been fortunate enough to plan properly with, by increasing our inventory and being proactive, so that we could exceed our customers' expectations and have the goods in stock. And we are aware that others may have had some challenges with that. So -- but for now, I don't see that landscape changing.

[Meaghen Annett, Analyst]

And secondly, can you provide an update on the implementation of the ERP? What's in place currently, and what kind of efficiencies do you envision achieving this year and beyond that?

[Craig De Pratto, CFO & Corporate Secretary]

Yes. So, just an update on the ERP. We are running the 2 systems in parallel, and so we've just actually cut over our first DC. So we cut over each DC across the country and all the stores underneath. And then some of the tools that this will start putting in place is warehouse management, supply demand chain planning tools to help optimize the flow of product across the countries, so we are excited about that. In addition, it's now going to be connecting the POS to our e-commerce to all the different channels across the business, so just a greater clarity from a customer journey perspective. And so, we're excited to really kick off a stronger connectivity with our customers and how we frequently speak with them, because it's something that historically we've not had the infrastructure in place to do as good a job as we would have liked. So those are some of the things that would be more on the product journey and the customer journey side of things. It also is allowing us the opportunity, which we've just started, to do things like endless aisle, and so providing our customers with a drop-ship program, where they can order some more fashion accessory items, different colors, that we don't need to necessarily inventory in our store from a working capital perspective. So just excited to see some of the different opportunities that these tools will start putting in place. But the biggest thing that we're excited about is to have the data, to have a little bit more certainty and comfort around the decisions that we're making, and communicate with our customer more frequently.

[David Friesema, CEO & Director]

Thanks Craig. The only thing I'll add to that is just, it's a real time event that's going on right now, which is we rolled over our first distribution center on May 4. And while there's always things that need to be tweaked, we're very pleased with the way it cut over, and it's quite stable. So we're going to continue to progress and monitor for the next few weeks, and then we'll continue the rollout across the country.

[Operator]

[Operator Instructions] Your next question comes from Patricia Baker from Scotiabank.

[Patricia A. Baker, Analyst]

One of the things that's a key differentiator for you, and definitely a driver of market share gains, and the exceptional sales trends that you've seen is, what you refer to as you're enhanced customer service model. And that's underpinned by the very strong expertise that you have with your sales force, and of course that was so important that you tried to replicate that with the Dreamline for online. And I'm just curious, with 47% of your stores closed, and that means that you have a lot of those very experienced and knowledgeable sales people who are not working right now, what are you thinking about the re-openings and do you foresee any challenges with maybe some attrition and not being able to get those people back? And what are you doing to, in the meantime, to keep them engaged so that you don't lose that talent pool?

[David Friesema, CEO & Director]

Thank you. That's a great question, Patricia. While we spend a lot of time thinking about this and communicating with our people to keep them engaged, we've done a lot during the whole pandemic as far as mental health, we've done a lot with LinkedIn Learning, we're starting heavily on that to keep people engaged in different things. I will say that we feel confident that our team is raring to go and waiting to come back. And so, the nice thing about this -- the nice thing, that's a very weird way to say it, but this is not the first time they've been through this, and they realize that after we closed the first and the second time, when we reopened the stores were quite busy. So they're confident that when they come back, they're coming back to a very vibrant environment, it's going to challenge them and allow for them to be -- catch-up. And so, by and large, we think they're really excited and raring to come back.

[Patricia A. Baker, Analyst]

Stewart, you teased us a little bit by suggesting that there's a lot of exciting things to come in the second half and you referenced the Dreamline, and you said that there's stuff that's coming that's in addition to the Dreamline. And probably, you can't really give me an answer, because you'll unveil innovation when you want to. But I'm just curious whether you think some of the new things that are coming down the pipeline would be as exciting and is interesting, as green line.

[Stewart Schaefer, President & President of Dormez]

Patricia, we don't give guidance. But, I will reiterate that, we are still very new and very young, and very early days in a lot of things that, we're working on. So, what we hope to deliver on is some of the things that, we've already delivered on, and continuing to expand our markets and our partnerships, driving and building our communities through our advertising and driving our efficacy and return on ad-spend, bringing more relevant brands to all Canadians, growing our brick and mortar footprint, and growing many channels of distribution-wise through our digital ecosystem. So, all the things that the team hav3 been executing on for the past couple of years, we hope that, you're going to see a lot more of that as we continue down this path.

[Operator]

There are no further questions at this time, I’ll turn the call back over to the presenters.

[David Friesema, CEO & Director]

Well, we are very happy to share this news with you. We always look forward to giving you updates on our business, and we look forward to doing that for our Q2 results. I hope everybody stays safe and that when we meet again, our stores will all be open and our team will be fully engaged, but take care of yourselves. Thank you.

[Operator]

This concludes the conference call. Thank you for participating. You may now disconnect.