Ross Stores Inc (ROST) — Q1 2020 Earnings Call Transcript

Good afternoon. Joining me on our call today are Michael Hartshorn, Group President and Chief Operating Officer; Travis Marquette, Group Senior Vice President and Chief Financial Officer; and Connie Kao, Vice President, Investor Relations. We'll begin our call today with an update on the current status of the company's operations, including our store reopening plans, followed by a review of our first quarter performance and details of our financial position entering the second quarter. Afterwards, we'll be happy to respond to any questions you may have. As a reminder, all store and distribution center locations were closed from March 20 through the quarter end to help prevent the ongoing spread of the coronavirus. Further, our corporate and buying offices were also closed with most associates continuing to work remotely. With the closure of our retail operations, we made the difficult but necessary decision to temporarily furlough the majority of our store and distribution center associates as well as some other employees across the business effective April 5. More recently, on May 14, we began a phased process of reopening stores on a market-by-market basis. This followed a careful review of current guidance from health officials and advisers as well as federal, state and local governments. Approximately 700 stores have reopened since, with the remaining stores expected to be reopened over the coming weeks. Our top priority will always be the health and well-being of our associates and customers, and we will only reopen stores when it is safe to do so. Further, the state of the pandemic remains very dynamic, and these plans could change materially as we cautiously move forward. As we restart operations, we are implementing a variety of measures with the goal of keeping our associates, customers, and the communities we serve safe. These measures will include additional cleaning and sanitation of stores and workspaces, providing associates with personal protective equipment based on CDC or other health guidelines, and implementing physical distancing practices. We will also be reopening and ramping up our distribution center network in the coming weeks. In addition, we expect to reopen our corporate and buying offices in the coming months. As with our stores, we are putting in place additional health and safety measures across all areas of these facilities. Turning now to our financials. As noted in today's press release, our first quarter results reflect the unprecedented impact the COVID-19 pandemic has had on our business which led to the closure of all stores from March 20 through the end of the quarter and our first quarterly loss in more than 30 years. Total sales for the quarter were $1.8 billion, down from $3.8 billion in the prior year. Given that stores were open for less than seven weeks of the 13-week period, the comparable store sales metric is not meaningful for the quarter. For the 13 weeks ended May 2, 2020, we incurred a loss per share of $0.87 versus earnings per share of $1.15 for the same period last year. The net loss for the period was $306 million versus net income of $421 million last year. In addition to the significant negative impact due to the lack of revenue from the closure of all stores beginning March 20, our operating loss also includes a one-time non-cash inventory valuation charge relating to the portion of the inventory that we now expect to sell below our original cost. As we ended the quarter, total consolidated inventories, net of this valuation charge were down 3% over the prior year with packaway levels at 42% of the total compared to last year's 44%. Average in-store inventories were up 1% at quarter end versus the same period last year. Turning to store growth, we opened 20 Ross and 7 dd's DISCOUNTS locations in the first quarter and ended the period with 1,832 total stores. Given the significant uncertainty of consumer behavior and shopping patterns as stores reopen, we will not open new stores in the current quarter and now expect to open about 39 stores this fall for a total of 66 new stores for the full year. Now Travis Marquette will provide further details on our first quarter results and our financial position entering the second quarter.

Thank you, Barbara. As Barbara mentioned earlier, we reported a net loss of $306 million or $0.87 per share for the first quarter. Operating margin for the period reflects the impact of the significant revenue decline from our store closures as well as a one-time non-cash inventory valuation charge of $313 million or $0.58 per share. As a reminder, we are on the lower of cost or net realizable value method of accounting for inventory, which provides that most markdowns are recognized when inventory is sold unless the markdown takes the item's value below costs. The one-time valuation charge in the first quarter reflects our estimate of inventory that we expect to sell below cost in the coming months. This first quarter reserve, therefore, reflects only a small portion of the total markdowns we believe will be necessary to sell through the existing spring inventory. We expect that the vast majority of markdown activity will occur in the second quarter. It is important to note that the ultimate impact of these markdowns will depend on the pace of sell-through as we move through the quarter. Now let's discuss our current financial position and balance sheet. As noted in our press release, in response to the severe economic disruption created by the COVID-19 pandemic, we quickly took decisive actions to increase our liquidity and financial flexibility. These included drawing down $800 million under our existing revolving credit facility, completing a $2 billion senior unsecured public bond offering, and obtaining a new undrawn $500 million revolving credit facility. As previously announced, we suspended our stock repurchase program on March 19. Before doing so, we repurchased 1.2 million shares of common stock for a total purchase price of about $132 million. We have no plans to repurchase shares for the remainder of the year. Additionally, we announced today the suspension of our quarterly dividend payments. We are also aggressively cutting costs throughout the company by minimizing non-business critical operating expenses, rightsizing our merchandise receipt and inventory plans, and reducing capital expenditures to further enhance our liquidity. Capital expenditures for this year are now projected to be approximately $420 million, down from our initial guidance of $730 million. We ended the quarter in a strong financial position with over $3 billion in liquidity, which includes an ending unrestricted cash balance of about $2.7 billion and the new $500 million revolver. As Barbara mentioned earlier, we are in the early stages of resuming operations by reopening groups of stores as it becomes safe to do so over the coming weeks. However, we have no visibility on how quickly consumer demand will recover and the impact this will have on store traffic. Given these unknowns, we are not providing second quarter sales and earnings guidance or an updated annual fiscal 2020 outlook at this time. Now I'll turn the call back to Barbara for closing comments.

Thank you, Travis. We want to emphasize that due to the significant global health crisis caused by COVID-19, ensuring the safety and well-being of our associates and customers is our top priority. With the uncertainty regarding the impact of this health crisis on consumers, we believe it is wise to adopt a cautious approach in managing our business. Looking forward, I want to highlight that we have a strong team of experienced leaders throughout the organization, along with a solid financial foundation, as Travis mentioned. We also see considerable opportunities in the market to acquire some exceptional brands at favorable prices. In the long run, we are well-positioned in the off-price sector and believe consumers will continue to prefer retailers that prioritize value and convenience, which gives us confidence in our ability to navigate these challenging times successfully. At this point, we would like to open the call for any questions you may have.

I know it's early days on the store openings, but I was wondering if you could just provide some performance details for those stores that have been open, how they're trending?

Hi, Lorraine, it's Michael Hartshorn. Stores for us have been reopened less than a week. So we wouldn't provide commentary at this point. Beyond the initial openings, though, as Travis talked about in his commentary, there are a number of factors that will impact consumer demand post-opening, including the economy on the backside of commerce reopening, changes in customer behaviors, impact of social distancing, and certainly, the competitive environment among others. So at this point, we can't predict what's going to happen after we reopen the stores for the remainder of the year. We do believe, though, there will be a negative impact on consumer demand throughout the remainder of the year.

I was hoping you could talk a bit more about the process of realigning inventory. Obviously, you took the write-down here in the quarter. How long do you think it will take to clear through some of the seasonally inappropriate goods and make room for fresh inventory? And then just any context on how aggressive you're being with purchases in the marketplace today?

Yes. In terms of inventory, again, given the fact that our stores were closed for two months, we do have a substantial amount of aged seasonal goods. Again, with the abrupt closure of the stores and the significant broad-based decline in trends leading immediately preceding the stores, inventories were misaligned. So in that light, we reviewed our inventory position and assessed the markdown risk that we had. And have recorded in the first quarter the portion of markdowns that we believe will be below cost. In terms of ultimately what the sell-through and how long it will take to move through those, again, it really depends. We don't have a crystal ball. We don't know how quickly the consumer will return to our stores. As Michael mentioned, there are a lot of economic factors that will influence that. And ultimately, as I mentioned, the impact of the markdowns will depend on what that rate of sell-through is as we move through the quarter.

And in terms of fresh inventory in the stores, obviously, we're just first opening our stores now and trying to liquidate the goods that are in the stores and also the goods that were in process outside the distribution centers and in the distribution centers. So we need to first work through that. The merchants have not been actively buying in the marketplace. They've been staying very close to their vendors. And after we understand a little bit more about what sales and sell-through can look like, we will go back into the market, I would say, with a very surgical lens of what it is we need and what we can understand of what we think the customer wants.

An extension of the last question is when you are ready to re-enter the marketplace and make purchases, how are you assessing category opportunities? We have heard from some competitors that home goods are performing better than fashion apparel. I am curious about how industry trends might influence your buying decisions right from the start.

Sure. Category opportunity. First, I think we have to see as we sell through our inventory, what the customer is voting for, whether it's apparel or home. The home business overall has had a trend for a long period of time. One would expect that home, going forward, would still be a good category, especially as people are kind of home nesting and buying things that perhaps they normally might buy. But with that, it will really depend on what the opportunities are out there in both apparel and in home. We see a lot of goods out there. We're anticipating that there'll be a lot of great closeouts and branded bargains for the customer. So I don't want to put sides around saying it's one business versus the other. I think in this environment, a lot of the deals may dictate where the sales would come from.

It's Tracy Kogan filling in for Paul. I was wondering if you guys could talk about how you're thinking about packaway in this environment? And maybe if you might be packing things away for less time than you normally would? And as a corollary to that, how quickly could you flow things into stores?

On the speed, Tracy, on the speed, we can flow inventory from packaway very quickly, a matter of days through the distribution center and a matter of a week or two into the stores.

And just in terms of just the thought process around buying packaway, I'm assuming you may pack away that I could release earlier than packaway that it might not release until March of next year. Is that really your question?

Exactly.

I think it depends on what the product is, right? So in some classifications of product, there'll be goods that would be appropriate sooner than later. And in some products, some classifications, you would really have to hold it until the spring season if it's truly spring product. So it varies based off of the classification and the gender, the timing, the whole thing. But there's a lot of product out there in total. So I would say there's a lot of choices, some of which probably could flow a little sooner.

I wanted to understand if you have excluded packaway from your inventory, how many weeks of inventory would you typically have on hand? Is it sort of 8 weeks or 10 weeks at normal sales volume? And then secondarily, are all of your distribution centers also reopening at this time? And as your stores are reopening, are you in a position to be able to actively flow inventory to stores now that you've got some of them opening?

Kimberly, on the distribution centers, we have management teams in all of our distribution centers and are ramping up production, and that includes California, the Carolinas, and also in Carlisle, Pennsylvania. So we're ready to start the distribution centers. In South Carolina, we've already started production and prepared to start backfilling stores as they need.

In terms of in-store inventory turns, again, if you just focus on in-store only, our turns are quite quick. I don't think we've quantified that specifically in the past, but it would be significantly faster than if you're just trying to look at the total inventory metric on the balance sheet.

Okay. Great. And lastly, I'm wondering if you have any comments on just how business was trending pre-COVID for either the month of February or the month of February and the first week of March, just any way to understand directionally how the business was moving before we went into this very, very unusual time.

Sure. As we talked about previously, sales trends were above plan in February, and we felt good about sales up until early March when, I think, as we talked about, there was a very rapid deceleration just prior to when we closed our stores on March 20.

Okay. Great. Lastly, can you provide an estimate for where you expect second quarter inventory to be? Do you believe you can address the aged inventory you currently have? Do you expect to have cleared that aged inventory by the end of the second quarter?

Kimberly, on pace, our goal is to move through it in the second quarter. And we're going to operate the business very, very cautiously, both inventory, sales, expenses, capital, and we're going to put ourselves in a position of strength so that we can chase the business and leverage expenses. So we would expect inventory to be down at the end of the second quarter.

Barbara, I was wondering if you can talk to us about comparisons to the post 2008, the 2009 and '10 recovery period? And what opportunity you see from potential bankruptcies, all at J. C. Penney? And then for Michael or Travis, if you can quickly talk about when you're opening the stores, just curious, how are you layering in payroll hours? How are you metering throughput? And then what's happening to the basket size?

Sure. We won't provide specifics on basket size. The stores have only been open for a week, and there are local regulations governing the flow of customers in and out. Each store has security personnel managing customer entry based on set occupancy limits. In most situations, we are operating below the required capacity to ensure the safety of both customers and staff. We have also allocated payroll to maintain safe distances and to facilitate smooth movement through the registers.

And then in terms of a comparison to 2008, I think the current retail environment is different. Obviously, this crisis is much worse. We're expecting the recovery to be much slower. During the financial crisis, we didn't have to close stores. We didn't have to navigate through health and safety mandates, shelter in place, social distancing. So we think this is very different, and we think it will be a slow recovery on our way back. In terms of Penney's and bankruptcies, there's been a lot of bankruptcies I think long term, the way for us to think about it is that there's an opportunity for market share, particularly in the moderate portion of the business.

Could you maybe discuss your fixed versus variable cost, including costs that fall into your cost of goods sold? And how might that change? Or will costs need to ramp up with some of the things you need to do to operate stores now in terms of cleanliness and other safety precautions?

Yes, if we consider our total operating costs, which include both the cost of goods and general and administrative expenses, most of these are variable costs. When you exclude the merchandise margin, the remaining costs are approximately two-thirds fixed and one-third variable. Regarding additional costs, as Michael mentioned, we anticipate extra expenses related to social distancing, increased cleaning tasks, and significant expenditures for personal protective equipment. These costs will be integrated into the business as we progress. We will strive to find offsetting savings aggressively. We’ve already taken several steps to identify cost savings, many of which will continue. However, I expect costs to be somewhat higher due to these other considerations.

And I would just add that those safety investments are absolutely necessary as we prioritize health and safety for the associates and customers. So we would expect the new protocols to be in place for the foreseeable future.

On merchandise margins, as we think about the cadence of the headwind this year, any way to size up or think about the magnitude of second quarter merchandise margin pressure relative to the back half of the year? And maybe just as importantly, what's your confidence in returning to 2019 gross margin levels? Is that a 2021 event? Or over what time frame is that a reasonable assumption to get back to where we were pre-pandemic?

It's Michael. Regarding the return to pre-pandemic levels, we currently lack sufficient visibility to provide a definitive answer. The margin for the second quarter will depend on the sell-through during these early stages of store reopening. We'll have a clearer idea as the situation develops and will provide more updates at the end of Q2.

There’s a lot of discussion about this being one of the best buying opportunities in a long time, and Barbara addressed that during her comments. However, there are also conversations in the channel about vendors starting to reduce their inventory. I’m curious if this affects your opportunities, or if you think it’s just a short-term situation.

Let me start by saying that there is a significant amount of merchandise available in the market, and it spans a wide range. Regarding vendors packing away goods, most of them are not really in a position to do so, as they likely do not have the cash flow to support it. Perhaps the larger vendors could manage this, but overall, they do not represent the majority in the market.

I got a question. The stores haven't been open for very long. So it's hard to get a read probably on how much traffic is going to return and how quickly. But have you done any market research over the last few weeks, trying to figure out how consumers may feel about the off-price shopping experience and the treasure-hunt experience in this world of social distancing? And if you think that they'll feel just as comfortable in your stores when things reopen as they were before the pandemic started?

Jay, we have seen customer research, maybe more generally, but it's really hard to read. When you have customers sitting at home versus returning, leaving their homes. I think their perspectives are going to be very different over time. And I think they're going to evolve very, very quickly. So it's really hard to rely on that data to make any decisions. I think the country opening very quickly, I think everything is evolving very fast. So it's hard to put a lot of reliance on that data.

Just a couple of questions for me. I think the first one is can you just update us on store opening plans for this year? Just sort of how you're thinking about that, both at Ross and at dd's. And I'd just be curious if this situation has changed your thought process at all? Or if there's any sort of way forward for any e-commerce business at Ross?

Sure. On store opening. So as we said in the commentary, in the first quarter, we did add 20 Ross, 7 dd's locations. For the balance of the year, we're not going to open stores in the second quarter based on where we are in the pandemic and based on the uncertainty. And then based on lease obligations and opportunities we have in fall, we're going to open 39 stores. So that's 66 new stores for the year, and that compares to our previous guidance of about 100 stores. I'd say beyond that, at this time, we wouldn't comment further on how many stores that could be for next year, but we still believe we have the opportunity to grow to 3,000 stores. And then on e-commerce, I'd say our view has not changed at this point. Our focus and efforts are going to be on safely and profitably reopening our bricks-and-mortar stores this year.

Got it. And if I could just ask one more thing. Regarding the vendors and your vendor partners, do you think those discussing packaway will excel at it? Do you believe they are capable of making sound judgments on packaway? Any insight you could provide on that would be helpful, Barbara.

On when the vendor is packing away their own goods?

Yes. Yes.

Just want to make sure. Listen, just because they haven't done it before, it doesn't mean they won't do it well. I would imagine that they go through and would assess the way we would assess what the mix of their inventory is and what they think can go forward into the next year. And depending upon what type of manufacturer I am, if I have basics, I might think I could carry those forward, but I might not want to carry forward my fashion goods. I would think there'd be a lot of pieces of it that would be somewhat similar to our thinking in terms of just understanding what you think you can sell when you get to that period because when you're holding goods, it's critical to understand when I go to sell and there if you sell it or release it, you know it's the right goods at the right time. So I would imagine they're putting together a process of how they feel about their assortments and then making a judgment call. But again, I'm not a vendor.

I think you usually do a good job detailing the gross margin. Could you clarify the merchandise margin compared to store occupancy, and whether the merchandise margin includes or excludes any write-downs? Additionally, Travis mentioned that merchandise margin pressure might be greater in Q2. I'm trying to figure out where merchandise margins and gross margins should be. I understand you’re not providing guidance, but a bit more detail on the margins would help us with our modeling.

Yes. In terms of total operating margin, the main factor for the quarter was the low level of sales. That, coupled with the valuation charge, significantly influenced the overall result. Due to the substantial deleverage associated with sales, the specifics and components are not particularly meaningful. Therefore, we do not believe it is relevant to provide that breakdown. Could you remind me of your second question?

Just, I guess, merchandise margin trajectory, Q2 relative to Q1.

Yes, relative to Q2. Again, it's going to completely depend on what the ultimate sell-through is of the product as we move through the quarter. As I mentioned, what the hit or the impact that we took in Q1 really just related to the below cost portion of those markdowns. And so the rest of the markdowns will be recognized as we sell the product in Q2, depending on how quickly that product sells is going to determine sort of what the ultimate value of the markdowns that we need to take and what gross margin looks like. But there is absolutely a risk that it could be depressed further in Q2.

So in our markdown approach, we'll obviously take a first markdown. And then based on sales, the second markdown. And then we'll be very, very aggressive to liquidate the spring merchandise. So it's going to be highly dependent on how quickly we sell through the merchandise.

I'm curious when you will start purchasing for fall and back to school. And Barbara, what metrics or factors will you use to decide how extensive that purchase should be?

How big the buy will be or just how...

Exactly, exactly.

I think when you're making a purchase, it's not just about the size of the buy; it's about what you believe you need. If it were a very significant deal, we might set it aside. We're adopting a very cautious approach and controlling our spending and the pace at which we acquire products given the current uncertainty. However, if there’s an exceptional opportunity that offers tremendous value and a great deal for the customer, we would not hesitate to pursue a larger purchase. Ultimately, it varies. As for our strategy in the stores, we will maintain a conservative plan and manage our expenditures, unless something extraordinary comes along that we wish to acquire, which could potentially be a large buy or not. Each transaction is unique.

And how much can you delay that buy for this fall? I mean when will you have to make your initial decisions on what to carry for back-to-school, what to buy for back-to-school?

Well, first of all, we could challenge what back-to-school is going to look like, right? I mean, right now, I'm not sure we even know when schools are going back, if schools are going back, if there's going to be children learning remotely. So I think that's the first question of whether there is a true back-to-school the way we know it, a traditional back-to-school. We're going to buy it as close as we can buy it, the way we normally do because, again, we still have this inventory in front of us that we have to liquidate. We're planning on liquidating. We're planning on getting through. So if I take the continuum, we have to open the stores, get through those goods and then come out and buy new goods for that July, August, September period, based on trend line we'd determine how much we would buy. So there's a lot of factors in there, but we're going into it, thinking it's a very conservative plan because we're not sure how the customer is going to respond once all the stores are open and is she willing to shop and come back after we get through this huge liquidation period across the whole country. So I think it remains to be seen.

My question was on negotiations with landlords. Can you talk about any rent deferrals that you achieved for April and into the second quarter? Will any permanent reductions perhaps be achieved? Or anything that you can share there would be very helpful.

Alexandra, it's Michael. Our real estate relationships are obviously critical to the long-term success of the business. Like many other retailers, we are engaging with our landlord partners to negotiate either abatement or deferment of occupancy costs during the period of closure. At this point, we wouldn't get into the specifics at this point because the negotiations are ongoing across our fleet of landlords.

I would like to clarify some of the language regarding gross margins mentioned earlier. In this quarter, you incurred a charge exceeding $300 million, which appears to impact gross margins by about 1,600 to 1,700 basis points. You mentioned this as a small part of the overall situation. I want to confirm that this relates to the inventory you expect to sell below cost. Looking ahead to next quarter, we're discussing inventory markdowns, not just reserves. Are you suggesting that the impact from this could be similar to the charge taken in the first quarter? I’m not asking for firm guidance, but it seems like for mainline stores and department stores, this aspect could be comparable to the reserve in the first quarter. Is that what you are indicating?

Yes. Let me take a moment to explain. We use the cost method of accounting, which means markdowns are recognized in earnings only when the product is sold. If the markdown reduces the item's price below cost, we recognize that part immediately. As we evaluated our inventory at the end of the quarter, the markdowns we recognized by the end of Q1 were only those that brought the product price below its original cost.

And to be clear, it's what we expect to happen during the second quarter. It's not necessarily markdowns we've already taken below cost.

Correct. Correct. Again, ultimately, the markdowns that we'll recognize in Q2 relate to as the product is sold, it depends on what the markdown is as it goes out the door. And so that's going to depend on the rate of sales. Obviously, we have first markdowns on that product now, depending on rate of sales, we'll take second markdowns and/or third markdowns. And depending on how deep those go that will determine the ultimate markdown impact.

To answer your question briefly, yes, it could exceed that in the second quarter.

Yes, this is Travis. Let me address a couple of points you raised. Regarding cost savings, it's important to note that while the economic landscape has changed, much of the pressure on wage rates we may face relates to legally mandated minimum wage increases. As of now, there have been no changes to these, especially in California, though there are some other regions to consider. It's difficult to predict how the freight markets will behave moving forward. Fuel rates have decreased, which could be beneficial, but speculating about capacity and overall freight rates remains challenging. There are a lot of variables at play, and we are uncertain about the outcome. As for reinstating the dividend, it is crucial for us to have better visibility on sales trends and their sustainability, alongside the needs of the business in both the short and long term. We will evaluate several factors before considering the reinstatement of the dividend.

It's good to hear everyone's voices and I'm glad you all sound well. Could you discuss the store openings? Clearly, you've slowed them down for this year. I'm curious if you've signed the leases you intended to and are planning to push them to next year, or if those leases haven't been signed yet. Is there an opportunity to potentially secure them at better prices, or will you open fewer next year? I'm interested in your thoughts on this and how you managed to reduce that number to 66.

Sure. On the openings this year, we made the decision not only on the lease obligations, but the cash to open the store. Many of those will get pushed into next year. And then as we get a better view of what the post-trend opening is as we move through the year, we'll certainly make pause on new leases that we'll sign for next year. But wouldn't comment further on how many stores that could be for next year at this point in time.

That makes sense. I have a follow-up question. Barbara, you mentioned packaways and how companies handle them. I'm interested in how you collaborate with many small and medium vendors, particularly those supplying department stores, as they aren't publicly traded and not everyone is aware of them. How is your relationship with these vendors since they've been your partners for a long time? Some of them might be in a precarious situation due to cancellations happening not only from your side but across the entire retail sector.

Marni, I mean, obviously, we're working with all our vendors. The buyers haven't been buying. They've been keeping close relationships. And when we go back out into the marketplace, we'll obviously shop all those same people we've been shopping and doing business with for years and then see what opportunities are out there.

As you think of the measure of fixed and variable expenses, with the thought of reopening and whether it's more limited hours or obviously the extra sanitation and treatment that's needed within a store to operate. How do you think about some of the expenses coming back into the fold? Do you need as much store staff as you had before? And with the combination of what you may be able to do on rents, is there an opportunity for a lower expense structure going forward in terms of how you're thinking about it?

I think it will be challenging, at least based on the current situation, to significantly lower expenses. We are making cuts wherever possible. In terms of our stores, we have reduced hours, which helps to decrease costs somewhat. However, we manage our staffing based on specific needs rather than providing blanket hours. As we reopen, we need to consider additional labor for social distancing, cleaning, and other tasks, which will impact overall store costs. We are still evaluating our entire profit and loss statement and looking for savings, even after taking steps to reduce costs. We will keep assessing where we can find further efficiencies across the board.

And then is there any difference on the dd side in terms of getting operations back up and running as compared to the Ross Stores side, whether in terms of payroll or occupancy? And is there more occupancy in dd's to manage rent costs than there is in Ross? Or is it not different at all?

Yes. Dana, it's very similar across both chains. I wouldn't say there were significant differences.

Most of them have been answered. Just curious, can you tell us what percent of your store base you expect to have open by the end of May? And then what you are anticipating to have open by the end of the quarter in July?

Sure. I can't provide a specific date for May, but we are prepared to open stores as soon as the pandemic situation allows and when given the go-ahead from the government. The timing of the openings is beyond our control. However, based on our current monitoring, we expect to have the chain open by the end of June.

My question is regarding the vendor base. Do you see this as an opportunity to expand it? I know the buyers aren't currently purchasing in the market, but are they seeking new relationships or opportunities? Also, with your current vendors, did any orders need to be canceled and were payments extended during the quarter?

Sure. In terms of growing the vendor base, there's an opportunity for us to continue to open new resources, especially now, some people are a little bit more flexible as business has gotten a little bit more difficult. And the merchants are always trying to open new resources. So whether we're buying or not, still calling people, still trying to build relationships, still trying to move the business forward. Just say the second part of your question, again, about existing vendors? Whether you had to cancel orders and extend payment terms during the quarter just from a liquidity perspective? Initially, we did cancel some orders in the beginning of the quarter when we first took action on what was going on when the pandemic started. But that's very similar to what other retailers did. So we took the actions that we thought were necessary at that time to position us. And then after that, we feel that we'll continue to remain engaged with the vendors we have relationships with now as we come back, but we definitely took actions the way other retailers took actions to get ourselves positioned in a better position so we can manage our way through this very unprecedented situation. So as we come back into the market, we'll be coming back and working with vendors again.

Thank you for joining us today. Our thoughts go out to all of you and your families for your continued health and safety.