Sleep Country Canada Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 9, 2023

There are 7 speakers on the call.

Operator

Good morning. I'd like to welcome everyone to Sleep Country's Q1 2023 Results Conference Call. Yesterday, Sleep Country released their financial results for the Q1 of 2023. A copy of the earnings disclosure is available on their Investor relations 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 Stuart Shafer, President and CEO.

Operator

Please go ahead.

Speaker 1

Thank you, and good morning, everyone, and thank you for joining us. With me today is Craig DiPrado, our CFO. Looking at the Q1 of the year, despite ongoing tightening in consumer spending and macroeconomic uncertainty, Our results were very solid. When compared to Q1 2022, which was the best Q1 in our company's history, We were pleased to maintain steady revenues while continuing to drive our business forward to deliver on our multi year strategic plan and maintain our position as Canada's leading sleep retailer. With our strategic plan in place and the strength of our balance sheet, Our team continued to execute well with a focus on building the country's best sleep ecosystem of multiple leading retail brands that continue to disrupt and reimagine Canada Sleep Space.

Speaker 1

As a spotlight on the quarter, we continue to see our brick and mortar stores contribute strongly with online sales softening as consumers choose to shop more in person. We expanded our retail footprint by opening 2 new Sleep Country stores in Chewinigan, Quebec and Thunder Bay, Ontario, bringing our store count to 290 locations. We continue to invest in our brand portfolio and officially welcome Silk and Snow at the start of the quarter. The brand and the team have been incredible addition to our family of brands as we continue to focus on growing the brand through differentiating it in the market with its aesthetically appealing unique products and its world class digital marketing. Subsequent to the end of the quarter, we were thrilled to acquire 100% of Casper Sleep's Canadian operations.

Speaker 1

Casper is the original disruptor of the mattress industry in North America and invested over $1,000,000,000 globally to build a leading brand focused on delivering a frictionless and elevated sleep experience. This acquisition aligns perfectly with Sleep Country's strategic omni channel journey. With Casper, we are adding 1 of North America's leading retail brands to our growing family of sleep brands, which now includes Sleep Country, Dormez vous, Endy, Hush and Silken Snow, reinforcing our 29 year brand statement of Why Buy a Mattress Anywhere Else. We are incredibly grateful to our entire team who have worked tirelessly over the last few years to transform our business into Canada's leading sleep ecosystem and deliver on our purpose driven strategy to ensure all Canadians get a great night's sleep. We are proud of the team's efforts to drive awareness and own the conversation around the importance of sleep Canadian's well-being with a 5 week digital and influencer campaign for Sleep Awareness Month and World Sleep Day this past March.

Speaker 1

We are also very proud of Endy for winning Best Workplace for Women by Great Places to Work for the 2nd year running. We continue to focus on our commitment to equity, diversity, inclusion and belonging across our workplaces. Our strategic investments have enabled us to create the ultimate omni channel sleep experience for our customers. We continue to establish A loyal customer following as our business and brands continue to grow along with our channels and product lineup. And with ongoing investments in supply chain, distribution, logistics and digital platforms, we are well positioned to deliver a seamless customer experience and grow our market share for years to come.

Speaker 1

Looking ahead, we remain cautiously optimistic for the back half of 2023, while focusing on our multi year strategic plan, investing in our house of brands, innovative products, our people and delivering a best in class experience for our customers. Thank you once again to our fabulous teams at Sleep Country, Dormez vous, Endy, Hush, Silk and Snow and now Casper and to all our partners for their commitment and support for all our businesses. With that, I now turn it over to Craig to discuss our financial results.

Speaker 2

Thank you, Stuart, and good morning, everyone. As Stuart noted earlier in the call,

Operator

We are pleased

Speaker 2

with our Q1 2023 results, especially considering the macro environment we operate in. We saw a decrease in our revenues by $500,000 or 0.3% from $207,000,000 in Q1 2022 to $206,500,000 in Q1 2023. This change was mainly driven by a 6.2% decrease in same store sales, partially offset by incremental revenue earned from the Silk and Snow acquisition in early January 2023, 1 net new store opened in 2023 as well as our wrap stores opened in 2022. Although we had a negative same store sales growth in Q1 of 'twenty three, we achieved a strong 3 year stack same store sales growth 21.1 percent for the period ended Q1 2023 and achieved a CAGR of 8.5% from Q1 2019 to Q1 2023. Our Q1 revenues from our e commerce platform increased 150 basis points from 20.8% in Q1 2022 to 22.3 percent in Q1 2023.

Speaker 2

Moving on to gross profit. Our gross profit margin decreased by 30 basis points from 34.6 percent in Q1 2022 to 34.3 percent in Q1 2023, mainly due to deleveraging occupancy costs tied to lower sales, which are partially offset by an increase in average unit selling price. Going forward, we expect the sequential step ups we have seen over the past year in gross profit margin to settle and be more consistent going forward and fluctuate based off of the seasonality in our business. Total G and A expenses increased by $5,000,000 or 11.6 percent from $43,100,000 in Q1 2022 to $48,100,000 in Q1 2023. This change was mainly driven by an increase in media and advertising costs impacted by the incremental spend by Silk and Snow acquired in Q1 2023 as well as increases in warehouse occupancy, costs, credit card and financing charges driven by higher finance sales, compensation and intangible depreciation expenses.

Speaker 2

As a reminder to the market that our D2C brands, Hush, Silk and Snow are earlier in the growth cycle resulting in a deleveraging on marketing and fixed costs in the near term. EBITDA decreased by $4,500,000 or 10.3 percent from $44,200,000 in Q1 2022 to $39,700,000 in Q1 2023. Adjusting our EBITDA for LTIP, ERP and acquisition related costs, our operating EBITDA decreased by $5,300,000 or 11.5 percent from 46 dollars 7,000,000 in Q1 2022 to $41,400,000 in Q1 2023. It should be noted that Q1 2023 adjustments to EBITDA of $1,700,000 came in lower versus $2,500,000 in Q1 of 2022, resulting in our operating EBITDA margin decreasing by 260 basis points quarter over quarter. Finance related income and expenses increased by $3,500,000 from $3,000,000 in Q1 2022 to $6,500,000 in Q1 2023.

Speaker 2

This change was mainly due to an increase in interest expense on the company's senior secured credit facility as a result of higher effective interest rates and the change in fair value on the interest rate swap year over year and lastly, an increase in interest on our lease obligations. Net income attributable to the company decreased by $7,100,000 from $18,400,000 in Q1 2022 to $11,300,000 in Q1 2023. Adjusting for LTIP, ERP and acquisition related costs as well as accretion expense related to hush and silk and snow, Adjusted net income attributable to the company decreased by $7,600,000 from $20,800,000 in Q1 2022 to $13,200,000 in Q1 2023. Diluted adjusted earnings per share decreased by $0.19 or 33.9 percent from $0.56 in Q1 2022 to $0.37 in Q1 2023. On to some capital allocation items, during the Q1, we repurchased for cancellation 299,000 common shares for total consideration of approximately $7,300,000 We received approval for a new NCIB, which commenced on March 9, 2023, to purchase up a maximum of approximately $2,600,000 of the company's common shares, representing approximately 10% of our public float.

Speaker 2

Additionally, we received TSX approval and established a new automatic share purchase program in connection with our NCIB. We intend to continue to execute against our NCIB as opportunities arise in 2023. On May 8, 2023, the Board approved a 10.2% increase in our quarterly dividend to $0.237 per share, which will be payable on May 31, 2020 to the shareholders of record at the close of business on May 24, 2023. Regarding our capital CapEx spend for 20 We plan on opening a minimum of 6 new Sleep Country Canada Dormez vous stores. And once we finalize our new and innovative store formats later this year, we plan on renovating a minimum of 7 new store or 7 stores in 2023 under this format.

Speaker 2

Later this month in May 2023, we are opening our new Kitchener warehouse and we plan to consolidate 2 of our existing warehouses later this year. Additionally, we will continue to invest in our ERP technology to further enhance our digital capabilities, omnichannel experience and spend approximately 1% of our revenue for ongoing store and DC maintenance. Thank you. And I will now pass the call back over to Stuart for closing remarks.

Speaker 1

Thank you, Greg. Our performance demonstrates Our unwavering commitment to our strategic plan and our team's ability to adapt and thrive in challenging times. We continue to invest in our business by building a remarkable house of brands with the most innovative and expansive product lineup, a strong focus on expanding our channels of distribution and our touch points with all Canadians and the most robust omni channel sleep experience for our customer. As we close out the quarter and we look ahead to the remainder of the year, we continue to be cautiously optimistic of the macro environment while remaining steadfast and our commitment to drive efficiencies and results seeking out the best opportunities that support our long term strategic goals with a constant focus on managing our strong balance sheet while growing and returning value to our shareholders. Thank you again to our teams, partners, shareholders for all your support in the Q1.

Speaker 1

With that, we conclude our remarks and open the floor for questions.

Operator

Okay. And your first question comes from Martin Landry from Stifel GMP. Martin, please go ahead.

Speaker 3

Hi, good morning. Good morning, Martin.

Speaker 2

Good morning.

Speaker 3

My first question is on your sales of accessories. They continue to perform well. They were up 6.5% this year. Wondering, how do you ensure that Those customers that are buying these accessories come back to your store when they're ready to purchase a mattress. I would assume you have a customer database and you do some outreach, but it'd be great to hear more about your strategy on that.

Speaker 1

Sure. And great question. And just also going to touch on strategically how we look at our accessories, Martin. But So you're correct that Crotty and the Lease line, whether it's online or within our stores for customers to engage with our brands on accessories for us is a huge lead generator when the confidence returns to make the bigger purchase, which is the mattress. So, in anticipation of a softer Q1, that we were feeling a little bit from Q4, There was a strategic shift on some of our marketing to be able to generate traffic in our stores with the accessories as well as obviously our mattresses.

Speaker 1

And that paid off really well for us. And as you noted in your report, with 1,000 Basis points higher in terms of the gross margin. So accessories is a very important part of our business. It's a very profitable part of our business. But for us, as long as we are continuing to have customers engage with our brand, That is the most important thing that we watch for.

Speaker 3

Okay, That's helpful. I'd like to switch gears a little bit and talk about Casper. It looks like a great acquisition, a great brand for you guys. Wondering what's the first steps for you to integrate Casper or to work on Casper this year? And what are the long term plans for that brand?

Speaker 1

So we're about 3 weeks in, so we'll give probably more color as time goes on. So forgive me. I will tell you the first thing is to welcome the team and make them feel a very important part of our entire ecosystem and that's happening right now. We're also going to learn from Casper and see the Casper personality and make sure that we preserve the Casper personality, which is one of the reasons why we bought this retail brand. And slowly we will learn with the team side by side on how do we engage the brand with more Canadian consumers.

Speaker 1

We do believe that the brand awareness of Casper is well underdeveloped the brand is very well developed compared to the revenue that this brand is creating. So we're excited about the opportunity of expanding both its retail footprint, as well as its digital footprint. So more on that to come probably over the next couple of months.

Speaker 3

Okay. So you're talking about an expansion of the retail footprint. So there's a potential for you guys to add more store to their network?

Speaker 1

100%. This for us is a perfect Besides that the brand and the awareness of the brand and the fact that they only have 6 stores in all of Canada, of which 4 are in Toronto. We see great opportunity to be able to expand that retail footprint. That being said, we like to walk before we run, and we are going to plan methodically in terms of how we're going to execute that and what markets and what customer segmentation QThac and what markets and what customer segmentations that we want to particularly drive. So You should see more of that happening within Q1 of 2024.

Speaker 3

Okay. That's it for me. Thank you.

Speaker 1

Thanks, Martin. Thanks, Martin.

Operator

Your next question comes from Stephen MacLeod from BMO Capital Markets. Stephen, please go ahead.

Speaker 4

Thank you. Good morning, guys.

Speaker 1

Good morning,

Speaker 4

Steven. Just a couple of quick questions. Just wondering if you can give a little bit of color on just around the outlook, specifically, If you can give some color around Q2 to date. And the wording in the press release is such that you talk about cautiously optimistic for the back half of the year. And I'm just curious what kind of sort of confidence or visibility you have into that outlook?

Speaker 1

I guess our visibility is as good as yours, Stephen. Unfortunately, nobody has a crystal ball. And the Q2 started off similar as Q1 finished, so which is why we talk about the back half. We do feel that we have easier comps in the back half because we did see the market begin to slow down and consumer confidence drop at mid summer last year. So we had Q3 and Q4 that we saw the momentum of this slowdown.

Speaker 1

So we are cautiously optimistic that the back half will be better. I also believe and hopefully this is the case That the Bank of Canada and the Fed have now stopped with the interest rate hikes and maybe this is the new norm, some conversations about Then CUNNING, but even if this is the new norm, I think consumers are healthy. We're still seeing that. We're seeing that by Even the accessories that they're buying and the price points that they're buying, unemployment is still incredibly low. So this is unusual Slowdownrecession, whatever it is.

Speaker 1

So, our past experience has shown that consumers need to get Comfortable with the new norm and if this is the new norm, we're more positive of how the consumer is going to return in the back half.

Speaker 4

Right. Okay. That's helpful. And then I'm just curious just along those lines, Same store sales being down 6.2%, which was better than we were looking for and better than a sequential basis Like what are is there anything in the macro or in the general news flow cycle that you see Either more negatively or positively impacting consumer sales, like is there anything you can correlate strongly to based on what you can see?

Speaker 1

Yes. I mean, we're all watching the same thing unfold in the news and on TV. And I have no scientific proof of this, but when you see banks failing in United States, When you see defaults and debt rising, I mean, the news hasn't been so great yet And that usually has an impact on consumer confidence. In this past quarter, Q1, and even into April May, A lot of things that are happening to United States definitely spills over in terms of the confidence of the consumer. So more than that, No, because I mean, we saw a little tick up in unemployment, but still these are fabulous numbers and The world seems to be very hot in terms of employment engagement.

Speaker 1

So not bigger signs than that.

Speaker 4

Yes. Great. And then maybe just one more if I could. Just wondering if you can give a little bit of color around how sales Holding through Q1 on a month to month basis. I know you've given that color on the past, which has been very helpful.

Speaker 4

And then any strength you're seeing On a relative basis by price point.

Speaker 1

Yes. So on the quarter, on Q1, January actually was the strongest of the 3 months, which was a bit of a spillover that came in because we report on delivered business from the end of the year of Q4. February March were consistently softer, both about the same thing. April was about the same thing as February March. On the high end, to answer your question on price points, the high end consumer seems to be Holding in well, our lifestyle beds, which is usually for our mid to higher end consumer, was actually up on the quarter, pillows were up on the quarter, headboards and footboards were up on the quarter and off of a strong Q1 of 2022.

Speaker 1

On the low end, in our Bloom Collection, we saw some interesting shifts that started to Grow again, reignite, which we actually look at as a positive sign, because those that was the first consumer To back away as of last year, it was the low end that stopped buying or slowed down on their buying a lot quicker than the mid into the high end. So it's a little bit of a barbell effect that we're seeing right now. And the middle consumer, which is usually our price point between $1,1500 which is a very important price point, That one seems to have slowed down, except those customers were the greatest purchasers of our accessories this quarter. So They've been still engaging, but they didn't do buy the mattress.

Speaker 4

That's great. Thank you for the color.

Speaker 1

Cool. Pleasure, Steven.

Operator

Your next question comes from John Zamparo from CIBC. John, please go ahead.

Speaker 5

Thanks. Good morning, guys.

Speaker 1

Good morning, John.

Speaker 5

I wanted to start on the renovation plans and it looks like there was a change to those. You previously targeted 20 to 30 renos. Now that's a minimum of 7. It was a similar change to the warehouse plans where you were going to consolidate 4 and now it's 2. I wonder is this just a function of leverage following the Casper deal or was it related to your outlook for the year or something about analysis of return to those projects?

Speaker 5

Just would like some more color there.

Speaker 1

Yes. It's less about the leverage. It's more about watching the macro environment and testing our 2 new stores. We're going to be opening our new 4.0 design. 2 stores are going to be opening in the next couple of months, the next 2 to 3 months, 1 in Montreal and 1 in Toronto.

Speaker 1

And we're going to test and we're going to learn. We don't renovate just for the sake of renovating because our stores are pretty look pretty good. We renovate to make sure that we're driving a higher dollar per square foot in those stores. And there's a plan specifically about driving more of our accessory business and bringing in a little bit more of our digital footprint into the stores. And so we need a little time and data to watch that happen.

Speaker 1

If all goes well, We will probably we have a smaller window for the year to be able to do it. We won't do it in the Q4 because Q4 has turned out To be growing in strength for us over the years. And Q3, which is our biggest quarter of the year, doesn't give us that much Room either and we're going to be selective in terms of the markets and the regions that we do it. So we just don't want to close too many of the stores. On the warehouses, Montreal's original warehouse lease is coming due and we had 2 additional Warehouses that we opened over the last few years, one that was out in Vauderoi in the West Ireland and the other one in the East End to support our growing business in Quebec.

Speaker 1

We closed down the Vouderoy one already and the one in the East End was just lined up to expire this year with our Montreal facility. So it was really like 3, And I know Craig said 2 because there's only the second one now. 3 becoming 1 in the West Island that's Going to handle that and years of growth.

Speaker 2

Yes. And so John, on the change in the outlook, it's just that we the Montreal consolidation, It's likely to push just into Q1 of next year and that's why there's the adjustment on the outlook. But there's no fundamental variance from the original plan. It's just more of A timing of when that renovation will be complete.

Speaker 1

And I want to add one last thing around how we look at our capital allocation. We do believe these are very interesting times and we do believe it allows for Interesting opportunities. So we like to have keep our war chest full and The strength of our balance sheet does put us in a unique position in a market that is a little bit more difficult. So as we deploy capital, we are very thoughtful in terms of the return on for our shareholders, whether it's a dividend increase, whether it's NCIB, whether it's another acquisition or whether it's deploying that capital in terms of renovations or IT Investment. So we're just watching and waiting how the world unfolds and making sure that we deploy our

Speaker 6

All right. I appreciate

Speaker 5

the color. One quick follow-up on that. Is there any Current plan to change the capital allocate to buybacks this year given the Casper deal or are you still targeting that $50,000,000 level?

Speaker 2

Yes, I mean, we're going to continue to be opportunistic, but the returns on buying back shares and the lack of any sort of execution risk Against buybacks, we still think that's a very attractive use of capital. So I think you can expect similar ranges To last year or to that target that we disclosed a year ago.

Speaker 5

Got it. Okay. On your Walmart Express or sorry, your Sleep Country Express stores, in the past, you've said you'd potentially look at 80 to 100 locations that you could open over time. Given the change in your renovation plans, has there been any change to the total number or the pace of store openings for your Express stores?

Speaker 1

No. We don't we count that as growth and not our renovation. And so we're still having conversations with Walmart to make sure that we position ourselves in the best locations within the Walmart space. So that plan is going to continue to unfold.

Speaker 5

Got it. Okay. And thinking longer term about your store footprint, you'd spoken on the Q4 call about But potentially looking to open up stores for different brands under the Sleep Country portfolio, is that kind of related to pausing renovations that You might want to introduce these stores sooner rather than later for your other brands or you're looking at ways to integrate them with your current footprint. I'm curious how you're thinking about Expanding brick and mortar for your other brands.

Speaker 1

Yes and yes, John. So There is going to be a couple of tests that we're going to be doing over the next few months with a store within a store. There is going to be a test on taking one of our digital brands and creating a first test footprint for them in a store location. And we're very close to launching another concept that we are going to test on the high end side in a category that we're going to talk about a little bit more next quarter in the Yorkdale Mall. So We got a I think what the pandemic showed the whole world is that There's a reason why whatever it is, 65%, 70% of GDP hits consumer spending.

Speaker 1

Consumer spending, it's an activity and people love to shop and especially for our tactile items in the brick and mortar. And the DTC component Businesses are very important to our entire ecosystem, but that brick and mortar omni channel component is important too. So we do see Wonderful opportunity ahead for us for each one of our retail brands and that's how we look at our business. Sleep Country, Dormez vous, ND Hush, Silk and Snow and Casper are all retail brands that we believe we're going to be very thoughtful in terms of geography, very Thoughtful in terms of customer segmentation and very thoughtful in terms of merchandising hierarchy that we believe we have lots of room to grow.

Speaker 5

All right. That's very helpful. Thank you for that. And one last one just because it's topical. I wonder if you could get your thoughts on the Mattress Firm acquisition this morning, if there's any relevant implications for Sleep Country.

Speaker 1

I'm sorry, did they announce it this morning? Because I didn't hear you.

Speaker 5

Yes. Tempur Sealy is buying that at this firm.

Speaker 1

Well, it's about time. Your very first impression. Yes, exactly. Well, it's the worst kept secret because I've been hearing about it since last October. So first of all, Let me reach out and say congratulations to the Tempur Sealy team, Scott Thompson, CEO and Monty, the President of Canada.

Speaker 1

I think that's fantastic. I think they will do an amazing job with that business And they are very important partners to us. And I think it shows a very interesting path in terms of how partnerships between retailers and manufacturers, which is why we've never gone into the manufacturing business is key to the future of this industry. So that's a big congratulations out to that team.

Speaker 5

Okay, got it. Thank you very much.

Speaker 1

Thank you.

Operator

Followed by 1. Your next question comes from Brian Morrison from TD Securities. Brian, please go ahead.

Speaker 1

Hi, Stuart. Sorry, I want

Speaker 6

to follow-up on that because the acquisition was done

Speaker 4

in a

Speaker 6

multiple of 9.3x EBITDA, which is significantly higher than you are trading currently. I wonder if you think there's any desire or if there's anything preventing the suppliers to have more direct access to the consumer in Canada?

Speaker 1

I'm sorry, in Canada or in the U. S, Brian, what was your question? I'm sorry.

Speaker 6

Specifically in Kansas, like is there any risk that these guys Potentially come in and are interested in having more direct access to the Canadian consumer.

Speaker 1

Yes. So first of all, let me comment on the first part of that. At a 9.3 EBITDA, it should send shock waves to Canadian investors how cheap Sleep Country stock is for the one of the most profitable Mattress retailers out there. So put that in your bonnet for a second. 2nd, No, I don't think so.

Speaker 1

I actually think there is some cost efficiency that happens when this I mean, we buy from manufacturers and they add a premium onto it and then they sell it to us and then we add a premium onto it. For example, this acquisition with Casper, which is a retailer, we're also going to be now having others manufacture The product and not buying it from another retailer is doing it. So you're going to see the Casper prices come down as the new lineup rolls out. So The consumer is actually going to do better on that. The fact that, Sealy Temper bought Mattress Firm, Scott Thompson and the team are Very smart guys and they understand that brands are important to the consumer.

Speaker 1

And I don't know what their plans are for their floor, but even if that Happened within the Canadian landscape. Brands matter and being able to maximize that for the consumer is very important. And keep in mind, Sealy Temper also sells to all the other retail brands within Canada, and that's a huge part of their business. Same thing within the United States. So this is not the first for them.

Speaker 1

It is an acquisition of Dreams in the UK. And again, I don't want to comment on their business, but the landscape in the UK hasn't changed much. So I actually think it's a good thing for the consumers in the end because It should reduce cost for the consumer longer term.

Speaker 6

Well, I certainly do think it highlights I wonder just in terms of the number of acquisitions that you've done recently, whether you're content just digesting what you've got right now or if there are more

Speaker 1

It must have been in our Board meeting yesterday, Brian. So the answer is, for the moment, yes. Listen, the Casper deal was opportunistic And it was a fast and quick deal because of the timing on that, which we were really excited But we really believe that our portfolio now, in terms of how we are going to serve The Canadian consumer from all different price points, from all different choices, from all different brands, is going to add more choice in terms of product, pricing. And so we think It's time to buckle down and take what we have and really take the magic of Sleep Country and put that together. We see our D2C brands forming interesting relationships and partnerships and efficiencies that we're looking to drive Within that category, our wheelhouse has always been brick and mortar and our DVC brands are excited about that and we see a long Runway for that within Canada.

Speaker 1

So to answer your question in a very long way, if the next 6 months, our only focus To drive efficiencies within our business, focus on the growth of these fabulous brands that we have, We are very excited and our hands will be full.

Speaker 6

Right. And Stuart, can you update us with the acquisitions that you've completed, what you think your market share is in both mattresses and accessories currently?

Speaker 1

So hard to tell. We get some of the data from Canada. We get some of the data from United States. So I'm going to say 40%, maybe it's more, maybe it's less. Part of me wonders It's also part of our success in Q1 besides our marketing shift that we did on our accessories was also because of Bed Bath and Beyond closing.

Speaker 1

So that is a $500,000,000 business that just disappeared within Canada. And we do hope that we are going to pick up part of that business. So we've always said that our accessory business we thought was around 8% to 10%. For sure, it's growing. And in Silken Snow, 50% of their business is accessories and 50% is mattress and Hush is also a strategic point.

Speaker 1

So I don't have good numbers, Brian, around that. But if you get something, please share it with us. We just know it's going in the right direction.

Speaker 6

Understood. Last question, Craig. Can you just comment on the timing of the closure of the convert and the asset purchase of Casper, why they're separate? And why would the convert books to be backdated?

Speaker 2

Yes. So it was essentially grouped up as a package deal, but there was a diligence period required In addition to the converts, the diligence on the convert was fairly quick, but then on the broader asset purchase deal And putting together the transition services agreement and master services agreement, because the 2 parties do need to work together as we transition is why there is an additional amount of time tacked on. You will see in the financials that a portion of the convert is actually treated as a prepayment of Part 2 of that So that's why there's a little bit of a difference in terms of the timing was really tied to some of the diligence required just on the second portion Yes.

Speaker 6

All right. Thank you both very much.

Speaker 1

Thank you, Brian.

Operator

There are no further questions at this time. I'll turn it back to you.

Speaker 1

Well, thank you very much again for all of your support and have a great summer and we'll chat with you folks in August. Be well.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Sleep Country Canada Q1 2023
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