Franchise Group, Inc. (NASDAQ:FRG) Q3 2022 Earnings Conference Call November 3, 2022 4:30 PM ET
Company Participants
Andrew Kaminsky – EVP & CAO
Brian Kahn – President and CEO
Eric Seeton – CFO
Conference Call Participants
Michael Baker – D.A. Davidson
Pete Lucas – CJS Securities
Ian Zaffino – Oppenheimer
Vincent Caintic – Stephens
Operator
Thank you for standing by and welcome to Conference Call — the Franchise Group Third Quarter 2022 Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to your host, Andrew Kaminski, Executive Vice President and Chief Administrative Officer of Franchise Group.
Andrew Kaminsky
Thank you, Denise. Good afternoon and thank you for joining our conference call. I’m on the call with Brian Kahn, Franchise Group’s President and CEO; and Eric Seeton, Franchise Group’s CFO.
Before getting started, I’d like to mention that certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other provisions of the federal securities laws.
These forward-looking statements are based on management’s current expectations and are not guarantees of future performance. Actual results could differ materially from those expressed in or implied by the forward-looking statements.
The forward-looking statements are made as of the date of this call and except as required by law, Franchise Group assumes no obligation to update or revise them. Investors are cautioned not to place undue reliance on these forward-looking statements.
For a more detailed discussion of these and other risks and uncertainties that could cause Franchise Group’s actual results to differ materially from those indicated in the forward-looking statements, please see our Form 10-K for the fiscal year ended December 25th, 2021 and other filings we make with the SEC.
The financial measures discussed today include non-GAAP measures that we believe investors focus on in comparing results between periods and among peer companies. Please see our earnings release in the News and Events section of our website at franchisegrp.com for a reconciliation of non-GAAP financial measures to GAAP measures.
Non-GAAP financial information should not be considered in isolation from, as a substitute for or superior to GAAP financial information, but we include it because management believes it provides meaningful supplemental information regarding our operating results when assessing our business and is useful to investors for informational comparative purposes. The non-GAAP financial measures the company uses have limitations and may differ from those used by other companies.
Now, I’d like to turn the call over to Brian. Brian?
Brian Kahn
Thanks Andrew and good afternoon to our listeners and thank you for joining us. I’ll provide a general update before turning the call over to Eric to provide financial details. We’ll then be happy to answer questions.
In Franchise Group’s fiscal third quarter, our execution at American Freight was poor, while our other five operating companies combined to produce financial results above our expectations.
I think it’s important to specifically separate our poor execution at American Freight from a difficult home furnishings environment that has also been impacting American Freight, Buddy’s, and Badcock for some time.
While we can’t control the environment, we absolutely can control our execution. We expect execution to be a net positive for FRG in all environments. Execution is my responsibility and I don’t expect to make the same mistake twice.
Specifically, we paid too much for the wrong mix of inventory and that combination creates real consequences throughout the A Freight system, including reduced profitability from heavily discounting or writing-off slow moving and damaged inventory.
This impact of discounting is compounded since our associates are commission driven salespeople. Landed inventory costs are currently coming down and I expect them to continue to decrease. So, we need to turn our existing higher cost inventory as quickly as possible and replace it with the right mix with lower landed costs that are consistent with the deep value culture that our customers expect and our associates expect to sell.
I estimate this process has cost us $10 millions — tens of millions of dollars in cash through the end of Q3 and could cost tens of millions more to get past it. In our financial statements. This manifests itself in lower revenue and lower gross margins due to higher write-offs and discounting and the ultimate consequences that instead of $390 million of adjusted EBITDA for 2022, we’re likely to report around $350 million in EBITDA.
This cash cost of getting through this process relative to our budget has been and will be paid for by excess realized cash proceeds from Badcock’s real estate sales. But as the profits on our real estate sales are not included in adjusted EBITDA. While I’m frustrated with where we are and how we got here, we can’t afford to rip the band aid off quickly and get back to business.
Despite these current operating issues, which has led us to report negative EBITDA for A Freight itself in the most recent quarter, I continue to believe American Freight will ultimately be the most valuable business among the six brands that we own today measured in terms of both annual free cash flow generation and terminal value to FRG.
I believe the current asset base of 359 company-owned stores and six franchise stores has the earning power in excess of $150 million of EBITDA as it is, and we have a tremendous amount of green space to open both company-owned and franchise stores.
I can say with conviction that we will have the opportunity to accelerate new store openings over the next several years and we’ve hired Peter Corsa to become the CEO of our newly created Home Furnishings division, in part to do just that.
Peter will be responsible for driving operational excellence at American Freight, Buddy’s, and Badcock. But I know that Peter shares my views about the unique profitability profile at American Freight and the impact that American Freight can have on FRG.
Many of you already know Peter from his nine years at, At Home [ph], where he was instrumental in growing revenue and EBITDA by over 500% for that value, retail or home decor products. His track record is public and it speaks for itself and I’m overjoyed to welcome Peter to the team.
Moving on, franchising activity continues to accelerate across FRG. For the first nine months of 2022, we sold 193 territories and opened 74 new locations, while closing 37 locations. We’re starting to see cost of construction materials and labor improving and we believe our franchisees will have an easier time opening stores over the next couple of years compared to the last couple of years.
Regarding capital allocation in the quarter, we repurchased 2.2 million shares and an average cost of approximately $35 per share and we paid a quarterly common dividend at an annual rate of $2.50 per share. We did not make any acquisitions during the quarter, but we did increase our revolver capacity to $400 million compared to $150 million at the start of the year.
Eric, I’ll turn the call over to you to provide financial details and then we can take questions. Eric?
Eric Seeton
Great. Thank you, Brian. Before I address the results of operations, I would like to remind you that we will be making many references to pro forma items throughout this call. Our press releases and filings may refer to historical financial results for the acquired businesses prior to their acquisition by Franchise Group. These items have been adjusted to align with our fiscal calendar and accounting policies to the extent reasonable.
Comparison to pro forma results will allow us to discuss and evaluate performance of the acquired companies when a comparable period is not available due to the timing of the acquisition.
In the course of preparing our interim financial statements for this quarter, we identified misclassifications of interest related to Badcock, securitized receivables, and cash use and financing activities instead of cash provided by operating activities, and the consolidated statements of cash flows for the first two quarters.
For both of the affected quarters and then impacted the misclassifications had no impact on the balance sheet. The overall consolidated statement of cash flows, the income statement, or the operations of the company.
The reclassifications relate solely to accounting presentations required by U.S. GAAP. The result of these misclassifications will require us to file an amended 10-Q for both periods, which should be completed and filed next week.
Moving to the third quarter results, I will start with a quick recap of our Home Furnishings businesses. In the third quarter, system-wide Buddy’s had a negative same-store sales comp of 4.6% with franchisee comps declining 3.7% and corporate stores declining 9.6%. Buddy’s opened six new franchise stores and awarded six new locations maintaining its backlog of 98 locations.
Badcock comped down 19.1% for the third quarter. During the quarter, we closed on the previously announced sale of Badcock’s headquarters for $23.5 million and also sold $198 million of Badcock consumer accounts receivable for $116 million.
The net proceeds of both transactions were used to pay down the balance of our ABL. American Freight comped down 18.3% for the quarter. We sold 13 new franchisees in the third quarter, bringing total franchise backlog to 39 locations. We continually review the carrying value of our assets to ensure they reflect fair value on our balance sheet. Due to the recent performance of American Freight, this quarter we took a $70 million non-cash impairment charged to the goodwill of American Freight, which is reflected in our GAAP operating results.
Sylvan continued to perform on third quarter and deliver comps of 15.8%. Sylvan closed five locations and sold six new franchises in the quarter, bringing its backlog to 18 units.
Pet Supplies Plus generated system-wide same-store sales comps for the third quarter of 6.2%, franchisee comps grew 8% in the quarter, while corporate stores grew 3.7% for the quarter.
PSP continues to accelerate its growth and brand building with the sale of 16 new franchisee area development agreements in the third quarter, bringing the total backlog at PSP to 226 locations. We also began selling Wag N’ Wash franchises this quarter and signed development agreements for 31 new locations.
Vitamin Shoppe comps were down 7.7% in the third quarter direct to consumer accounted for approximately 23.7% of the business and franchising continues to build momentum with 35 stores sold in the third quarter bringing backlog and 55 stores.
On a consolidated basis for the third quarter of 2022, total reported revenue for Franchise Group was $1.1 billion, net loss from continuing operations was $121.2 million or a loss of $3.09 per fully diluted share.
Adjusted EBITDA was $73.1 million and non-GAAP EPS was $0.59 per share. Net loss from continuing operations include a goodwill impairment charge of $70 million related to our American Freight segment.
I want to reiterate that we’re still in the process of transitioning consumer financing at Badcock in house to third-party partners and have excluded the non-core results of the finance business from adjusted EBITDA and non-GAAP EPS.
While we can perform the income statement for consumer lending, the balance sheet continues to reflect the securitization debt and accounts receivable despite most of the receivables having been sold to third-parties.
Once we discontinue originating consumer loans — customer loans, we believe the securitized receivables will be accounted for as a sale and the related assets and liabilities will no longer be reported on our balance sheet.
We ended the quarter with approximately $1.1 billion in outstanding term debt and cash of approximately $73 million. During the quarter, we increased the size of our ABL revolver to $400 million and had approximately $265 million of availability remaining.
With the continued increase in interest rates, our cash interest expense as of today has increased accordingly and is expected to cost approximately $112 million this year, compared to our estimate at the beginning of the year of approximately $70 million.
As Brian mentioned, we are reducing our output for the balance of fiscal 2022. Outlook for revenue will remain at approximately $4.3 billion. Outlook for adjusted EBITDA is being updated to approximately $350 million to $390 million. And the outlook for non GAAP EPS is being updated to approximately $3.25 from $4.
In conjunction with our balance sheet and business performance, we believe we have sufficient liquidity to continue to meet all of our obligations and support all of our businesses for the foreseeable future.
Denise, could you please open the line for questions? Thank you.
Question-and-Answer Session
Operator
Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions]
Our first question comes from the line of Michael Baker with D.A. Davidson.
Michael Baker
Okay, hi, guys. So first question, I guess, in maybe an obvious, I think what’s on a lot of investors’ minds is the dividend and how safe is the dividend?
Brian Kahn
Everyone on the call, we’re just — for some reason the operator has — having an issue, we’re not able to hear you.
Michael Baker
I think it’s Andy’s. Okay, great. I’ll keep along the question. I think it’s Andy’s problem. But anyway, yes, cash down because of the higher interest expense because of what’s going on with American Freight, a lot of cash drags there. How safe is this dividend? To me the dividend is one of the most important parts of the story, how safe is the dividend? And how do you balance out against buying back stock, which you did this quarter?
Brian Kahn
Sure, no, it’s a fair question. Our normal cadence is to go through our annual budgeting process in November, which we start next week. We meet at Board in December and then set dividend policy for what we plan to be for the full year with the benefit of the budget.
I’d like to stick to that past practice as we move forward here, but I do agree with you and I recognize that our dividend is important to our shareholders. It’s a cornerstone of our capital allocation philosophy. And we — when we instituted the buyback, we did so expecting that that would be an additional tool in the toolbox and not necessarily instead of.
I also recognize that if we ever do cut the dividend, the reliability that dividend will be thrown out the window. We’d like to be the type of company that’s viewed as growing its dividend in good times and managing through bad times without a dividend cut. We did manage to do that through COVID. So, we’ll see if we can continue to be what we want to be. Hope that is a little bit helpful. But I know that’s not very specific answer to your question.
Michael Baker
Well, I guess a follow-up is, in the past the policy — the dividend policy has been 25% of EBITDA — this year, presumably EBITDA — or was getting towards the higher end of that, I guess the question is, will you go — would you go above that ratio, if there’s a year or two, when EBITDA is lower than expected?
Brian Kahn
Yes. That’s another fair question. Over the long-term our target is to pay a dividend approximating 25% of EBITDA, as you know, but in any given year, it could be higher or lower than 25%. And it has been higher and lower than 25% Over the last several years, so it depends on the circumstances.
And I think it’s fair to say that the dividend, like all of our capital allocations are heavily managed, if not micromanaged. So, yes, there’s no there’s no hard fast rule, we set it each year, we’ve set the dividend at the end of the preceding year, and then, managed through the year. So, in a year where we outperformed our expectations, we didn’t adjust the dividend and in the middle of the year, and this year, we’ll end up at least it appears that we’ll pay over 25% of EBIT out as a dividend based on, these charges that we’re taking in American Freight.
Michael Baker
Okay, great. One more, if I could on the balance sheet. You said those receivables, that the Badcock securitizations are going to stay on the balance sheet until you stop originating new loans, when do you stop originating new loans? That’s not part of the ongoing strategies. I understand if you guys do those loans. So, when does when do you stop that practice? And when does that come off the balance sheet?
Brian Kahn
That’s correct. So, we are testing a waterfall — third-party waterfall, that does not include the Badcock, writing their own paper. So, once we have perfected that waterfall, and then we will roll it out to the dealers, we want to learn on our dime and not on theirs. So, we’ll make the mistakes and eat those — the cost of that on our income statement balance sheet, rather than pass it off to them. And as soon as that happens, we’ll turn it on in the dealer stores and stop selling Badcock credit altogether.
Michael Baker
Okay. Thanks. I’ll turn it over to somebody else.
Brian Kahn
Sure.
Operator
Thank you. Our next question comes from the line of Larry Solow with CJS Securities. Go ahead, your line is now open.
Pete Lucas
Yes, hi, good afternoon. It’s Pete Lucas for Larry. Can you speak to volume trends at Pet Supplies Plus and Vitamin Shoppe? If I’m not mistaken, volume was roughly flat in the first half with revenue growth mostly attributed to price increases. Did volume change a lot in Q3?
Brian Kahn
Volume continues to be weak and pricing is offsetting weak volume, I think it’s been relatively consistent for both of those brands in that regard.
Pete Lucas
And then last one for me. In terms of — you talked a little bit about capital allocation but in the current environment, how do you view M&A activity? Is it more cautious? Or do you? Look – are you seeing more potential opportunities to purchase good businesses under temporary pressure?
Brian Kahn
I think we’re seeing more opportunities. But I think we have to be very careful about which opportunities we pursue, a large acquisition that requires us to refinance our existing credit facility could be very costly, what looked like expensive credit, a year ago for us where we planned on coming into this year, and refinancing, cheaper is now much more expensive than it was. So I think we need to be very cautious. We are extremely active; we always are active. That’s one of the reasons that we went out to find Peter, we need somebody who can spend 365 days a year focused on value creation, and, operating our home furnishing businesses, and that he can do that, well, we’re spending time, we are pursuing M&A.
But I do think we will be very careful, I think that we recognize that you can buy businesses today, as the multiples have come down quite a bit, the cost of capital is higher. But if you just think about the maths, if we even pick a pick what you might consider to be a low multiple, five times, which many businesses go for, we can go invest our capital and opening more American Freight stores in less than one time EBITDA. So that’s a great use of capital as the one brand that we own, where we will open as many company owned stores as we can and then the return on that capital investment is better than really any acquisition we can make anyway. But we will continue to pursue diversification of our brands continue to try to scale existing brands and scale franchise groups through M&A. But we’ll certainly be very careful, in this environment.
Pete Lucas
Very helpful. Thanks, I’ll jump back in the queue.
Brian Kahn
Sure.
Operator
Thank you. Please standby for our next question. Our next question comes from a line of Ian Zaffino with Oppenheimer. Go ahead. Your line is now open.
Ian Zaffino
Hi. Great. Thank you very much. I just wanted to understand the inventory issue a little bit more, maybe give us examples of you know, what was higher price? What was lower priced? And then also, I know you’ve pointed inventory at American Freight. But buddies and bad cop face, relatively similar. I’m sorry. And then up, I said – they face pretty similar, same store, sales declines. Maybe help us reconcile that or square that? Thanks.
Brian Kahn
Yes, it looks all three of our home furnishings, businesses have seen prices, your costs escalate. And that cost was tempted to be passed on to the customer and has been passed on to the customers that are actually willing to make a purchase. So they’re all three are the same in that regard, as you would have assumed, I think, with American Freight, the main difference is when supply was tight, and there was a time where we really, we couldn’t get inventory, we were struggling as the supply chain really contracted and wait times were very long, and then orders would get cancelled anyway, we really just in my fault, we just bought whatever we could, instead of what we should. And we bought it at higher prices as well.
So it’s one thing if you’re buying the same product that your customers are used to saying, and you’re waiting and you’re getting the margin for it. It’s another thing when you’re just trying to fill the floor because we’ve got great salespeople on our floors, and we think they can sell out anything that we put on the floor. But we did buy everything that we could instead of what we should and now we’re essentially unwinding that.
So just thinking through that a little further, we can either dribble it out over time and try to maintain normal margin and that is a strategy, and I think that’s what a lot of people are doing, or we can recognize the issue, recognize that we can afford to rip the band aid off, move that inventory out and reset the deck. And for my money, there’s no question that two wrongs don’t make a right and every stick that we have on the floor, that shouldn’t be there and isn’t priced properly, doesn’t turn and it takes up space on the showroom floor from the right stick, that’ll turn three to four times while that slow moving stick is just sitting there waiting to be written off damaged or sold for peanuts.
So it’s really just a sunk cost. We’ve already paid for it. And we need to move on. That’s, and that’s what we’re doing as aggressively as we can. And we’ll reset the deck and it’s the New Year and the tax season with the right inventory at the right price points and allow our salespeople to service our customers.
Ian Zaffino
Okay, thank you. And then, as a follow up, it looks like Vitamin Shoppe, went from positive comps to negative comps in this quarter. Maybe give us a little color there. What happened? And how do we look at that going forward as far as convenient deceleration and we get into a stabilized level and the color there and be helpful?
Brian Kahn
Sure, Vitamin Shoppe slightly negative comps in the quarter. Look I think Vitamin Shoppe has held up incredibly well, we’ve been hearing for quite some time, all right, COVID induced bump, it’s going to come back to where were it was a $40 something million EBITDA business, it’s clearly not now. And I know, we hear that all the time, I think that the management team has done a great job bringing new products into the stores and into the distribution centers and the new products generate a considerable amount of revenue that offset any degradation in some legacy products. There’s been a shift at Vitamin Shoppe towards a wave. So as we’ve seen, the COVID bump come down that although like the zinc, if you remember from a couple years ago, zinc was heavy seller during COVID, that’s come right back down and our D1 one businesses back down to where it was previously.
But it’s the sports supplements that have grown aggressively – business, that side of the business has a lower margin profile. So we don’t see it showing up quite as much on the bottom line as we do see the growth in the revenue. But I think that’s pretty much the dynamics happening there. As far as the outlook, we’re thrilled they’re hanging on. Activities certainly been down for bed, and they are making up for it and higher basket sizes and also inflation. But they’re not seeing nearly as much as I know, they feel like they’re seeing a considerable amount of inflation but relative to other businesses, other industries and certainly compared to our home furnishing segment. They’re really not experiencing significant inflation.
Ian Zaffino
Okay, great. And then if I get to sneak in one more comment on the interest rate environment and what that does? Or does that impact Americans trade and me Badcock, any sensitivity kind of run or any kind of ways to think about, sales levels that those two segments just given later kind of continuing to go up? Thanks.
Brian Kahn
Sure. Yes. Look higher rates, the economic environment that I think we’re in and that we’re heading deeper into, they’re really good for our value driven, home furnishings businesses like American Freight and Badcock where we can offer payment plans to customers. We’re not quite into it yet. We’re still in my mind well above full employment levels. And as we keep saying layoffs, and hiring freezes every day. I think Amazon announced hiring freeze no incremental hiring in their corporate today. It just every single day, somebody else is shutting it down and we need to get back, down to full employment first. But then once we get back down to full employment, it’ll keep going. And as the unemployment numbers tick up, those folks find value, much more value in the payment options Buddy’s payment options, at Badcock payment options, at American Freight. So that’s, we’re built for that environment.
Ian Zaffino
Okay. Thank you very much.
Brian Kahn
Sure.
Operator
Thank you. Please standby for our next question. Our next question comes from the line of Vincent Caintic with Stephens. Go ahead. Your line is now open.
Vincent Caintic
Hi. Thanks for taking my questions. On the on American Freight, home furnishings generally, just wondering maybe you could talk about how you’re thinking about the holiday season promotions so on and this earlier comment if I could clarify. So do you think and intend to right sizes before the tax refund season? So we should be expecting sort of a normalized home furnishings environment, say by the first or second quarter of next year?
Brian Kahn
Yes. Thanks, Vince. We hope so I don’t know the answer to that. But we’re going to race to get through this. And I think actually, both of your questions fit somewhat together and not necessarily even related. We just happen to be approaching the holiday season.
We typically wouldn’t have large promotions going into holiday season and home furnishings, but we will. I mean, we’ve got some great deals. You should definitely take a look and make a purchase, because we’re going to discount. And we’re going to incentivize our salespeople to move the merchandise that we have now, so that we can bring it.
Remember everything we’re selling now we’re going to be able to replace it with lower cost items as well. So as quickly as we can get through that, the better off we are.
The question and I do not have the answer to it is will we be able to get through and move this inventory in the next couple of months? So that when the tax money breaks, we are in position need to be back to normal? I don’t know the answer to that. But I know that it’s a focus and we’re driving to that every single day.
Vincent Caintic
Okay, thank you for that. And I am looking for washer dryer so and I noticed the deal so I can definitely see an agree with that. Hey, for separate question on just on the balance sheet and your cash position. I was encouraged. It was interesting to see the share repurchases this quarter, just if you could update us how you’re thinking about that, and how — when you so you had the share repurchases and how you think about in terms of the sustainability or your appetite for that. Thank you.
Brian Kahn
Sure, well, we don’t — I think two types of share buybacks. One is I believe, a 10b-5, one were just somewhat automatic. And then the other is the way that we handle it. We’re not — and I said this last quarter, and when we put in the buyback, we’re not — we don’t have a buyback just to take a lid and offset share issuances. We’re looking at buying shares as an investment relative to buying other businesses. So if I can buy your franchise group stock, with American Freight generating virtually no EBITDA, and this point negative EBITDA and that’s what’s in my consolidated EBITDA and earnings per share currently, it’s hard to ignore. And so we did buy a considerable amount of stock when we have an open window.
Not sure what’s going to happen on a go forward basis, of course, but certainly, we put the buy back in to be a tool in the toolbox and we will continue to look at that as a possible allocation of capital.
Vincent Caintic
Okay, great. Very helpful. Thanks very much.
Brian Kahn
Sure.
Operator
Thank you. Standby for our last question. Our Last question comes from Michael Baker with D.A. Davidson. Welcome back. Your line is now open.
Michael Baker
Hi. I guess I just wanted to ask one more follow-up if I could. And just on the American Freight situation, we – Brian, we appreciate you, saying your issue, your fault, et cetera. But specifically like, are you making the buying decisions? Are you — were you acting as the merchant? Or were there merchants involved making these decisions? And how does that structure change with the new President? And then I guess the follow-up the some economic issue there with American freight, industry issues with American Freight as well, how much is the buying mistaken? How much is the industry? Thanks.
Brian Kahn
Right. So go backwards a couple of years, when you couldn’t get any, I understand why we are, where we are. I don’t love it. But I’m not going to pretend it doesn’t exist. Look, all things regarding capital allocation, or execution, are my responsibility, that’s what I do. And this is really both of those categories combined.
I didn’t have to allocate capital to buy more inventory, we could have run skinny, and waited. But we needed to get merchandise on the floor. The merchants and the operators of the business is their job to go get the best deals that they can. And as you point out, there weren’t any good deals, you just had to take whatever inventory, you could. So you could either in my shoe, their job is to go buy inventory and try to move it. My job is to decide whether or not that’s a good use of capital and a good bet or not. I mean, we make predictions every day, our job is to make predictions about the future, go figure out which ones have a 99% — we’ve got a 99% confidence level and in which ones we don’t, and then go figure out how to execute on those where we have 99% conviction, this was not a 99% conviction bet, and we did it anyway, I allowed it. It is what it is.
So I’m not worried about that. We’ve had plenty of good fortune along the way as well. And it’s — like I said, it’s disappointing, but it’s — it doesn’t have any impact on how I view the future of American Freight whatsoever. And in fact in this environment and, again, go back to when you first started covering the company, and a lot of folks got involved asking what happens. And in a recession, how did these businesses do because everybody wants to know that it’s consumer driven business. And we said several years ago that in a recession, that’s the time that you go accelerate your store rollout, because you can get those better real estate leads, that’s really the limiting factor, because we were devalue, we can go into a warehouse next to a nursery, like where you buy plants.
We don’t need to be at the corner of Maine in Maine, this is not an impulse buy, you don’t drive by an American Freight, and say, okay, I think I want to go in there and buy something, you’re specifically going to American Freight for a purpose, kind of like a Cracker Barrel, and you can be wherever you want, well, this is that time. So we’re going to get an opportunity to really accelerate that and Peter is the guy to help us do that.
This is — Peter coming in, we do went out looking for that right athlete for this role many months ago. So this is not a reaction to anything. This is recognizing the environment that we’re going to be in trying to find somebody who’s done previously, what we’re trying to accomplish with American Freight, and can do it with a sense of urgency like we have and that’s why we did what we did.
Just so happens we’re going to get the benefit of that same athlete being able to run their oversee all three of our home furnishing businesses, our home furnishings businesses will all have full management teams and run independently as well. So I hope that clarifies that a little bit, but that’s why we’re doing what we’re doing.
Michael Baker
Okay. Yes. Thanks. That is helpful. I appreciate the color.
Brian Kahn
Sure.
Operator
Thank you. No more questions at this time. I’d like to turn the call back over to Brian Kahn for closing remarks.
Brian Kahn
Great. Well, thank you all for joining us. Feel free to follow-up with any additional questions offline, and operator you can end the call.
Operator
Thank you. Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
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