Rob DeMartini: Yes. On top of that, Jeremy, last year Q1 was by far our highest spend and this year it is by far our lowest spend and yet the spend is up 11% on the year.
Jeremy Hamblin: You are saying year-to-date or the total for the year?
Rob DeMartini: No, total year. Year-to-date, I don’t have that number in front of me, but year-to-date spending in the quarter is probably about 50% of what it was year ago.
Jeremy Hamblin: Got it. Okay, guys exciting. Best wishes.
Rob DeMartini: Thank you, Jeremy.
Operator: Thank you. Our next question is from Bobby Griffin with Raymond James. Please proceed with your question.
Bobby Griffin: Good afternoon everybody. Thanks for taking my questions. Rob and team, you have clearly a lot of moving parts here with the product launch, exciting stuff getting out there. Do you have an estimated of what the EBITDA drag is from the part of the launch that you are kind of helping support the retailers in, whether it’s just any type of where we can kind of try to get a feeling of the underlying profitability of the business this year?
Bennett Nussbaum: When you mean EBITDA drag Bobby do you mean €“ tell me more €“ say more about it, you mean in the product construct?
Bobby Griffin: Well, I mean there is clearly some onetime costs that you are absorbing here. Retailers, I guess, are going to be absorbing some to launch something as big as you are launching, kind of given the history of the company, that’s the biggest product launch. So just curious, is there any dollar figure around that of what the product launch costs here are? Or any way to kind of like back into that where we can kind of get a better feeling of where the underlying profitability is of the business?
Bennett Nussbaum: Yes, I’m trying to figure out a good way to answer that. It’s customary practice in this industry that floor samples go in at half their normal wholesale cost. So, resetting 3,400 doors, there is a price to that. I don’t have that in front of me, but we can figure that out and share that with you. And then in a couple of cases, and we have built in some dollars to clear inventory mark down in rare cases, maybe even pick up and resell in another format. So there definitely is a cost tied to that. I don’t have a good roll up for you right now. We’ll get one and follow-up with you.
Bobby Griffin: Okay. I guess do you have the €“ for 3,400 doors we can kind of figure, we can back into a price €“ do you know the average SKU that’s going in for door and the restroom there.
Rob DeMartini: Yes, we’re going to move from pre-launch about 4.4 beds per door and that will go up about 1.5 to 1.8.
Bobby Griffin: Okay, that’s helpful. And then I guess just on the quarter itself, is the sequential decline in gross margin from the 41.5% to the 35% that we just reported in the fourth quarter, is that all just the change in mix, wholesale went up 500 basis points? I know we talked previously about a more promotional environment too.
Rob DeMartini: Yes, I mean, as we said going into when we wrapped it Q3, we knew it would be more promotional. That probably cost us a couple of points. Channel mix cost us a couple of points, and those are the two big steps.
Bobby Griffin: Okay. And then Rob, lastly for me, I mean, I understand your comments about your product being €“ you got to get the new product out there to really kind of see what’s going on from demand. It’s helpful. Do you think the industry itself here in the year-to-date period has stabilized? Or do you think it took a further step down?
Rob DeMartini: It feels to us now, I think our brand is underperforming the market right now, because the product is stale and that’s part of that soft quarter. I’m not pinning all that on the category, but I do think, it did feel as Q1 kind of week on week got weaker after January.
Bobby Griffin: Okay. And then the comparison start to get, I guess, easier for the industry here towards the end of March, is that correct, in your view?
Rob DeMartini: So, I hear, I haven’t had any easy comparisons yet, Bobby.
Bobby Griffin: You and I both look forward to hopefully seeing some of that.
Rob DeMartini: Well, let me say it more, let say it more positive though, we are confident in wholesale expansion, the work that’s going to go on in our showrooms and fresh marketing and product to re-energize e-commerce. I clearly believe we grow behind this initiative in regardless of the health of the category.
Bobby Griffin: Okay, fair enough. I appreciate the details and best of luck here with this big launch.
Rob DeMartini: All right. Thank you, Bobby.
