Good morning, and welcome to the 1847 Goedeker conference call for the company's third quarter of fiscal year 2021. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On the call today are Chief Executive Officer, Albert Fouerti, Chief Financial Officer, Maria Johnson, and Executive Chairman, Ellery Roberts. Please note that various remarks about future expectations, plans and prospects constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.
The company cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated, including risks described in the company's filings with the SEC.
Any forward-looking statements made on this conference call speak only as of today's date of November 15, 2021, and the company assumes no obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today. Please note there will be an opportunity to ask questions after the prepared remarks. To ask a question, you may press Star then one on your telephone keypad.
To withdraw, please press Star then two. A replay of the conference call will be available on the 1847 Goedeker investor relations website this week. At this time, I'll turn the call over to Albert Fouerti for opening remarks. Please go ahead, Mr. Fouerti.
I want to begin by thanking the many stockholders who have provided encouragement and support to me since I took the CEO role in September of this year. I also want to thank our employees for their dedication and our customers for their trust in us. Before getting into the quarter and going over to our outlook, I want to discuss the massive opportunity in front of us. We have a very unique opportunity to become the undisputed e-commerce leaders in the U.S. home appliance market.
Our market is extremely fragmented and lacks a premier online destination for homeowners as well as builders and contractors. I agreed to step into the CEO role because I have long-term vision for filling that white space and seizing massive opportunity.
With this context in mind, I need to stress that truly great e-commerce businesses are built over a course of years rather than quarters. This means it's going to take discipline, patience, and ongoing investment to fully realize our opportunity. This also means we're not going to take shortcuts during what I deem our current foundation-building phase. I feel we can maintain this type of operating philosophy because we have the right pillars for long-term growth. First and foremost, we already have a distinct ability to offer customers core premium and luxury appliance brands through one point-and-click experience.
Second, we have a differentiated product expertise that exceeds what other retailers and online marketplaces could provide to consumers and B2B customers. Third, we now have an online leadership team with decades of collective experience in e-commerce and home appliance world.
Lastly, we have an existing growth trajectory that could be built upon. When my brother and I started Appliances Connection 20 years ago, we did not have any of these tailwinds that Goedeker has today. Yes, we still managed to scale, constantly grow revenue each year. We ended up expanding from approximately $155 million in annual sales to approximately $400 million in annual sales over the last 5 years and as a standalone business. This track record at Appliances Connection is one of the main reasons why I'm so confident about our path forward now.
We've built a standalone business that has superior value proposition relative to the competition. With respect to our go-forward strategy, I have been working with the board and the rest of the management team to put in place a new plan to solidify our foundation for long-term growth.
We are an e-commerce company that specializes in home appliances and providing great content, not a hardline merchant and not an omni-channel retailer. Our priorities must reflect this reality. In the quarters to come, we are going to be focused on initiatives that include building a best-in-class tech stack and digital marketing presence. The backbone of our success will be our fulfillment and logistics systems, as well as other technologies in our supply chain. This is why we are investing in our tech stack while also constantly optimizing our consumer-facing digital touchpoints.
The legacy Goedeker systems do not seamlessly plug into the Appliances Connection platform, but you can trust that the combined entity's back-end and front-end tech will be more, much more cohesive when the new brand is rolled out in the first half of 2022. Another priority is recruiting world-class talent to the management team.
We are interviewing executives with background in analytics, e-commerce, marketing, logistics, and supply chain. Many of these individuals are from leading brands and companies. Over the next couple of quarters, we plan to make several senior hires and introduce compensation plans that align pay with performance. Another focus area is ensuring expansive product selection. We are also focused on constantly providing customers access to a vast catalog of core, premium, and luxury brands.
Our catalog will also start to feature more upgraded and environmentally friendly models as well as more private label offering in 2022. Private label can be a major opportunity spot because of the attractive margins and opportunity to sell private label that cross a variety of channels to the extent it makes sense for us.
We believe offering a vast selection is a major competitive advantage that can constantly set us apart from brick-and-mortar retailers and large e-commerce companies. We are equally committed to building the best-in-class supply chain. We are working to expand our fulfillment network to provide cost-effective, quicker, and more dependable shipping within our expanding customer base in the southeast and the southwest. We are identifying well-positioned fulfillment centers in states such as Texas and California.
Our analysis leads us to believe establishing facilities in these locations will limit delivery transfer and touches on orders, thereby reducing our shipping costs and minimizing product damage. Although we are taking extra time to negotiate the best possible deals, this is an area we expect to make major headway by the end of Q2 2022. A final piece of the puzzle for us is strengthening customer service.
We are replicating the Appliances Connection customer care model of Goedeker. This means building a team that is accommodative and very well-versed when it comes to products. Our team is already cutting down on call wait times and improving online response times. As we expand our fulfillment network and encounter fewer supply chain delays, we expect customer satisfaction to be on the rise in 2022.
I recognize that some of these initiatives were discussed under the previous management team, but they are now being pursued by leadership with sizable stockholding and strong e-commerce track records. We are going to continue populating the company with people and processes who can help us grow while meeting all these foundation building goals by the end of 2022.
Before handing it over to Maria, I also want to take the opportunity to acknowledge the challenges and headwinds we worked to address over the past quarter. First, the CEO transition announced in late August was a difficult decision for the board, but decisive action was taken that will hopefully make us stronger for years to come. I intend to lead the company to great things and aggressively recruit top talent willing to align themselves with the performance. We are very focused on strengthening our employee base by adding new skill sets and reconciling redundancies.
As you can probably tell, I am bringing a new culture of intensity and rigor to the business. Second, the public concerns conveyed by certain shareholders created unrest, but they also provided management an opportunity to reflect on some of the company's needs.
The settlement ultimately reached with Kanen Wealth Management complemented our ongoing board refresh efforts. While we were disappointed that recently appointed director, Sunny Basul stepped down because of unforeseen time constraints, we have a pipeline of excellent director candidates in place. We will be adding multiple directors with additive expertise in the coming quarters. Last, we continue to receive shareholder feedback regarding our capital structure, including our outstanding warrants and prospect of a highly dilutive transaction.
On the first topic, I can share that we have begun exploring strategies for optimizing and simplifying our capital structure, and we are interviewing financial advisors to support the process. On the second topic, our proxy statement proposal for an increase in shares was a normal course request, nothing more. We want to be opportunistic when it comes to small acquisitions such as our accretive purchase of Appliance Gallery in Florida.
We have no plans to explore any dilutive transactions. I will now conclude my initial remarks and turn it over to Maria Johnson to provide an overview of our financial performance.
Thanks, Albert. Good morning, everybody. Net sales for the quarter were $141.9 million, an increase of $39.7 million over pro forma sales for the third quarter of 2020. On a year-to-date basis, pro forma net sales were $405 million, which is an increase of $144.5 million over pro forma sales for the same nine-month period in 2020. Pro forma gross profit for the quarter was $31.4 million, and the margin was 22.1%, up from $21 million with a 20.5% margin for the third quarter of 2020.
We did, however, see our gross margin deteriorate roughly 100 basis points on a quarter-over-quarter basis due to lower volume rebates, heightened freight costs, and prior period adjustments for the legacy Goedeker's business.
Pro forma gross profit for the nine-month period was $96.1 million, with a 23.7% margin, up from $52.4 million and a margin of 20.1% for the 2020 period. GAAP gross profit for the third quarter was $31.4 million, compared to $2.2 million for the prior year third quarter. Pro forma operating expenses for the quarter were approximately $24 million, with the largest expense items being personnel costs of $8.5 million, which include certain severance, advertising expense of $3.7 million to avoid generating orders that cannot be filled quickly.
Bank and credit card fees of $4.9 million, and general and administrative expenses of $4 million. Pro forma net income for the quarter was $3.9 million, and for the nine-month period, it was $32.1 million.
Third quarter pro forma net income reflects an income tax expense of $2.3 million versus a $7.3 million tax benefit in the second quarter, and the roll-off of the $3.7 million employee retention tax credit. GAAP net income was $3.3 million for the quarter compared to a net loss of $4.2 million for the same period in 2020. Pro forma adjusted EBITDA for the quarter was $11 million, with a margin of 7.7%. Nine months pro forma adjusted EBITDA was $43.9 million, with a 10.8% margin.
Third quarter pro forma EBITDA is roughly on par with the reported second quarter pro forma EBITDA after accounting for the opening balance sheet audit adjustments to Appliances Connection that reduced second quarter gross margin by $0.7 million, as well as the $3.7 million employee retention tax credit.
For the nine months ended September 30, 2021, the company had working capital of $20 million and incurred negative cash flow from operations of $18.3 million, mainly as a result of additional investment in inventory required to fuel our continued top-line growth and switch to the credit card authorization model for Goedeker's business. Additionally, the company had cash and cash equivalents of $27.2 million at the end of the quarter, down from $45.2 million on June 30, 2021, and up from $1.3 million on March 31, 2021.
The quarter-over-quarter decrease in cash reflects the company's strategic and purposeful focus on obtaining inventory to fill anticipated customer orders and help offset ongoing global supply chain headwinds. With respect to our outlook, we are reaffirming our full year guidance previously articulated at our second quarter earnings call. This includes full year revenue on a pro forma basis of between $520 million and $550 million, full year gross margin on a pro forma basis between 22.5%-24.5%, and full year pro forma adjusted EBITDA margins of between 9.5% and 11%.
As new management continues to evaluate the industry landscape and implement our e-commerce growth strategy, we will be assessing what the most appropriate metrics should be, for potential future guidance. Now I will hand the presentation back to Albert for closing comments. Albert?
Thanks, Maria. You could see our sales have stabilized, and we are looking at an upward momentum. Now that we have additional storage capacity at our two main warehouses, we were able to add significant inventory to mitigate the majority of supply chain disruptions going forward. We expect to be back to our old fulfillment rates as early as next quarter. This will obviously have a positive impact on growth. As far as margin, while we do not have the benefit of rebates right now, due to the tight supply, we're introducing price increases where appropriate.
Additionally, as fulfillment centers are rolled out and brought online in the coming quarters, our cost of shipping will decrease and help long-term margins. We expect to add at least two new fulfillment centers during the first half of 2022.
I also want to mention that in order to provide further transparency to shareholders, we have included in our 10-Q filing the additional details on our COGS composition and specifically freight cost increases associated with supply chain constraints. As the supply chain normalizes, we will likely to get larger rebates than before because we are a larger company. This will support margin improvement even if the shipping cost remains elevated.
In closing, I want to turn to an exciting new initiative that we are planning to formally roll out in the near term, our B2B solution offering, our platform to satisfy an array of unmet needs for many builders and contractors as the housing economy continues to thrive.
The market opportunity with builders and contractors is massive, as well as unaddressed markets including government, hospitality, healthcare, and senior living, leading us to believe that the right B2B offering could be a meaningful sale to our top line in 2022 and beyond. We are in the process of finalizing an agreement with a highly experienced executive to lead our B2B offering. I continue to believe that we are well on the way to becoming a company with $1 billion in annual sales, especially with the opportunity presented by the B2B segment.
There's obviously significant work to be done during the rest of 2021 and throughout 2022.
As noted earlier, we need to have the right people, processes, and systems in place, but we can realistically see ourselves achieving $1 billion in revenue by 2023 or 2024 based on our plan, growth trajectory, and the macro tailwinds created by the low interest rates and high demand for housing. I'll conclude there, and at this time, I ask the operator to open the call up for any questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you'd like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Matthew Lee with Canaccord. Please go ahead.
Hi, all. Great quarter. I just wanna talk about subscriber metrics. I mean, can you help us understand, you know, why we're seeing such strong subscriber growth year-over-year even on a organic basis?
I apologize. Could you repeat the question? I did not understand. I can't hear you. Or you speak a little bit closer to the phone. Hello?
Okay. For whatever reason, he must have accidentally disconnected himself, perhaps adjusting his volume. Again, if you have a question, please press star then one on a touch-tone phone. Once again, if you have a question, please press star then one. I do have a question then from Steven Brandstetter of ABL. Please go ahead.
Good morning, gentlemen. Great quarter. Let's talk about growth for 2022. Everyone knows about supply chain disruptions, you know, throughout the country. You guys had an amazing growth quarter. What are we looking at in 2022, and how do we get there?
Sure. Thank you for the question. We will focus on the guidance for 2022 once we get closer to the end of the year. At a high level, I can tell you that any investments that we're making basically that we do right now, it's gonna help us grow into 2022. Once we get closer to 2022, we'll definitely get back to you. If you wanna have a one-on-one call later on, we can definitely also please share with IR, we'll get back to you.
Okay. About, I guess warehouses or distribution centers, have you strategically picked where in this country, you know, where across America you plan on putting these?
Yeah, definitely. We're spending a little bit more time focusing and getting at the right locations closer to the highways, closer to where employees are, closer to where the right location needs to be, closer to where our consumers are going to be. Definitely, we're spending the right time. We're gonna make the right investments in the right locations, have the right facilities opened up, as soon as possible.
Margins, if assuming we get these warehouses open in the next, you know, 3-4 years, how will the margins improve? Where will they improve? Will they be improving because of you having more control over, you know, shipping costs? Or, you know, what would cause improvement in margins by opening these warehouses?
Sure. It's a multifaceted fix, basically. One, we could divert all inventory. We don't have to look and have all the inventory in one location. We could spread out the inventory across all states and all locations to where our consumers are based on. Second, it will reduce touches, it will reduce handling, it will reduce returns, it will reduce cancellation, it will reduce damages.
There's a huge saving there. It's gonna reduce cross-docking, and it's gonna reduce long-haul shipping. That can be a huge investment and a huge saving there.
Gentlemen, thank you for your time. Again, continued success.
Thank you so much.
The next question comes from Mark Riccitelli with Shay Capital. Please go ahead.
Hey, Albert. Congrats. Great quarter. You kind of addressed the 2022 outlook. If you could just help me for a moment. I know you mentioned obviously you've had a lot of supply constraints from your vendors. Maybe you can just talk about, are you starting to see better planning and cooperation from your vendors? Any kind of visibility to that actually improving into 2022?
Because I guess based on the prior 2 quarters, you guys talked about this backlog and having to shut off your marketing window kinda halfway through the day. I'm just trying to get a sense on how much demand is actually not even being met at this juncture. If you had a better supply chain, you know, what would 2021 and 2022, what could it look like?
I can't really speculate about the guidance for 2022, but I would like to tell you what I think I mentioned in the past when we took office. It's pretty simple. We changed. This is what's great about our company. We're pretty agile at making sure that we can go out there, see where the troubles are, and then we try to go fix it or adjust it right away. We went ahead, and we took the approach. It's our time to go ahead and forecast for inventory for the near-term future.
We started bulking up. As you can see, our inventory is starting to build up. We started this back in September. Now we're in November. We have a pretty significant amount of inventory going into the Q4 plus going into first quarter of 2022.
if there is a supply chain issue, it continues to happen, we're prepared to have the right inventory in the right location with the right timing for future quarters. At the same time, if inventory starts easing up and getting better, which is great for us, it will get us better margin, and it's gonna help us also go into 2022 at a much easier, you know, a much easier and a little bit less inventory that we need to have on hand.
Okay. Was there a follow-up, Mr. Ryan Riccitelli?
Oh, I'm sorry. I hit mute. I apologize. Could you comment, I mean, if the supply chain was a little bit better in 2021, do you think you could have been 10 or 20% higher if you didn't have those type of constraints?
If we had inventory was the king, unfortunately, in the past, I would say, a year. If we had inventory, growth should have been much better, but we had to deal with what we had to deal with. Whatever constraints that we had in inventory and supply, shipping and other stuff. We worked our way through all the inventory concerns as much as we can. As you can see, it's starting to build, so yeah.
I would-
One question.
This is Tyler. I just wanted to follow up. I think this is a lot of question. It's great. To answer the question, perhaps you could give insight into fill rate as a stat that we track that would show what our sales, recorded sales were as a percentage of orders. Perhaps that would give insight into what 2021 could have been.
Absolutely. We were down to almost 64% fill rate. We had a high of almost 78% fill rate. To your point is, if we had inventory and being able to fulfill at 85% or 90%, our quarter would have been significantly higher of this quarter, last quarter, the whole year of 2021. Unfortunately, at certain times in 2021, we went down to almost 64%-62% fill rate, which is pretty, you know, not a good fill rate at all. Our historical high is anywhere from 85%-90%, and that's really what we're trying to get to in 2022.
Right. Great. That's great color. I guess just final question. I mean, I know we certainly believe that, you know, COVID has kind of accelerated the adoption of direct-to-consumer in many aspects in the retail environment. Now, especially in appliances, high-end appliances, commercial, like you've spoken about, and it's illustrated certainly in your presentation.
What I noticed, I don't know if you had a chance to review, I assume you did, Whirlpool's earnings call. They talked about them going $1 billion in direct-to-consumer. So I'm just wondering, you know, are they looking to do some of that themselves? Are they turning to you because you must be the largest possible outlet to go direct to consumer in this current environment.
Yep. Just one thing, let me correct you there. It's $1 billion worldwide, not in the United States. You know, because in the United States, they're not looking to grow that much. We actually addressed it and we spoke to them. Yes, once we get our fulfillment centers where we are, we are going to be the best place to be for a direct-to-consumer appliance company that's out there. In other countries and other places around the world, they do not have companies similar to what we do, and they're trying to fill that gap, and that's why.
By them doing D2C worldwide, they think they can hit about $1 billion. In the United States, they're strictly still sticking to the old process of vendors being able to sell vendors, dealers and other places.
Right. I imagine if Whirlpool is making a statement like that, I imagine they all sort of tend to follow the same direction. I imagine you're having those same conversations, whether it's a Viking, an Electrolux, a Samsung.
One thing you got to understand with pro consumers, not all customers want to buy the same product all the time. They might want to buy a Bosch dishwasher or a Miele dishwasher, but they want to buy a different type of refrigerator, a different type of range. So it's very difficult for any type of B2B, you know, any type of major vendor to be in the B2C business long term. Yes, maybe now it made sense for them because they had the inventory, they had the demand, and they started doing it. But as a consumer, you typically do not wanna buy a refrigerator that matches you.
You wanna get a product that matches your need, and you're not gonna stick to one brand. That's one. Two, not all manufacturers have all the products that consumers want. So to your point, Electrolux.
Electrolux has a very good washer and dryer, but they might not have the best range for your needs. When you want to go out, then you want to buy a GE Profile or GE Monogram range, you can't get that from just shopping on a B2C type of market. It's not like Apple, where you can choose one product from the product that they offer. You're talking here about 30,000-40,000 SKUs across multiple different brands that's out there. It's going to be very hard for any manufacturers to be able to do a B2C direct, long term.
How many SKUs are you carrying now, and how many do you plan on carrying in 2022 and beyond?
We keep on looking for good partners and good manufacturers to add on to our mix. We have about right now 35-50 thousand SKUs that are ongoing selling of several SKUs, but we have in total about 100,000 SKUs, but not all products sell. As you know, it's an 80/20 rule. We focus on the product that's available, that's in stock, that's coming in, that they've been manufactured. That's really our focus now for the next six months to a year.
Just, I guess, I apologize. I know I said final question, but just as far as addressing your, I mean, this type of growth that you think about a billion-dollar company in the next few years, everybody's having issues with drivers. How are you? Are you competitive? How do you feel about getting equipment and bringing those drivers? Are there other things you're doing to augment your delivery force to keep up that, let's call it that first-class service?
Absolutely. That's why we, in the beginning of any call that we mentioned, are working on building the right infrastructure in the right location, in the right placement. We're not just gonna open up in a great warehouse, and you can't even get drivers full. You can't get, you know, 20 people to work. We took the strategic approach, and that's what we've been doing here for the past 10 years we've been running the business. We always look at a great investment. We don't look at it just short-term, we look at it as long-term. We're focusing on our drivers. Our pay structure is pretty good.
As you can see, yes, we did have some impact in shipping, and that's really why we broke out the shipping from our costs, so we could show you the cost impact that we had in the shipping. Once we get that addressed, we could see the cost improvement and the enhancements in margin once we get the shipping cost under control, open up our fulfillment, reduce our touch, reduce our damages, reduce our returns, get to the customer faster.
In return, it's gonna go convert better for us. In return, we're gonna be able to recruit better drivers, better services, world-class customer service, world-class sales and world-class delivery system.
Okay, great. Thanks, guys.
The next question comes from Kevin Mangan with ThinkEquity. Please go ahead.
Good morning, congratulations on the quarter. Just touching on fill rate, which you just brought up. I think earlier in the call you mentioned expecting to get back to your historical levels, kinda early in 2022. Just wondering if you could provide some commentary on how you think that relates to, you know, the rest of the industry.
Historical, before the pandemic, we were always being able to fill about 85%+, and that's really what we're focused on. The way we're gonna focus on it by being able to go out there, forecast months ahead, and that's what we had a commitment of doing this year. We started forecasting months ahead, looking at our top product, our focus product, and geared the product to consumer, the website, the marketing, all to go after the product that's being manufactured, that we could actually source the product for the ongoing 2021 and ongoing 2022.
That's what we're gonna have to focus on. I can't really give you a better color on the supply chain. That's all controlled, you know, by the manufacturer, by employment, by chip shortages.
What we're focused on right now is going out there, source the product that we are going to market with, try to get it up to the 85%+ that we historically have been achieving.
Okay. Was there a follow-up, Mr. Mangan?
Yeah, I guess, do you see yourself ahead of the industry, on par or behind, based on kind of what you just discussed?
Well, our focus that's been in the past many years, we focus on technology. We focus our systems to work. We adjust our systems, our people, our processes to go out there to always be ahead of the curve. That's what makes us different, and that's what we focus as an e-commerce company. We're not just a traditional hard line merchant that focus on bulk buys and focus on one-time buys. We are a true e-commerce company. We build systems, we build processes, we build personnel to go out there to always be ahead of the curve.
Got it. Thank you.
The next question comes from Steve Emerson with Emerson Investment Group. Please go ahead.
Good morning, Steve.
Mr. Emerson, your line is open. Okay, we'll go to the next questioner. The next questioner is Tom DeMayo with ThinkEquity. Please go ahead. Excuse me, Mr. DeMayo, your line is open. Please go ahead with your question. Okay, the next questioner is a follow-up from Steven Brandstetter of ABL. Please go ahead.
Gentlemen, would your company consider doing a reverse stock split to get the stock price higher? This way more institutions would be interested in buying the stock. A lot of institutions don't wanna buy stocks below $3. You discussed about cleaning up the market cap with the warrants. If you did like a 5-to-1 or a 10-to-1 reverse split, there'd be many more institutions. Have you put any thought into that?
so-
Albert.
Yeah, yeah.
Yeah. Sure. It's Ellery Roberts. Thanks, Albert. I think I'd like to take a first crack at this call and then return it to Albert. We're absolutely evaluating all options to address any concerns or take advantage of any possible means of you know, solidifying an institutional shareholder base that would be more reflective of what we think our business should be from a market capitalization standpoint. In terms of investors who need a certain share price or a certain market capitalization, that's in our you know, in the back of our mind. As Albert outlined earlier in the call, we have no intent to do anything dilutive.
I think to your point, we're seeking ways we can creatively manage dilution caused by right exercise of warrants on a I guess a premature funds working flow and understand that we think there's been a creative opportunities out there. Right now we're taking this pause to reflect on the transition that's been made you know in terms of closing the transaction and Albert, Marie, and the team being there. This is a company that has seen rapid growth and looking toward the mid of the year. All options are on the table. We're working with advisors to evaluate ideas.
Okay.
Okay. I'm up.
I think you broke.
Yeah, you guys are breaking up a little bit on the call. Also, is the $1 billion target organic growth or are we making acquisitions to get that growth?
We feel very confident in what we're doing right now, without actually doing any type of major, M&A type of deals. We feel confident in the growth in the company and what we've built. As you could tell, for the past five, six, seven years we've been in this business, we were able to grow year-over-year. We feel very confident being able to grow the company year-over-year. Yeah, if there is M&A available, if we have some type of accretive proposition comes across our table, we're more than happy to look at that also.
Very good. Thank you. I'm done.
The last questioner today will be William Bremer with Vanquish. Please go ahead.
Good morning, gentlemen. Can you speak on the underlying agreement that you have with the manufacturers of your products? Secondly, the premier brands, the Viking, the Wolf, the Thermador, how, or when are we gonna be receiving direct involvement with the premier manufacturers there? As, I don't see them being listed on your website.
What we do right now, we sell all the brands that's out there that's available in consumer products. There are certain products and certain brands that can only be sold in certain location, geographic areas. You can only sell them in their 100-mile radius, 50-mile radius, 150-mile radius, or just certain counties. Each manufacturer with certain high-end, not so many of them, just few of them, have certain geographic territorial areas.
By us expanding our footprint, we will have better service, and we'll be able to cover more areas in certain manufacturers, certain products on the ultra-luxury items. That's only limited about three or four brands. But all the rest of the brands are basically you could sell them anywhere across the country, nationwide.
Okay. Your return policies, how does that work if unfortunately the product is damaged in the shipping and handling, how does that flow back to your to your balance sheet?
Right now, we take it back as just a regular process return. If you take the product, it gets returned back to us, we process an exchange, or we process a refund for the consumer. It depends if certain manufacturers take it back, certain manufacturers just gets allowance. Each manufacturer has a different process in place to take back and address these type of returns. Obviously and that's one of the ultimate goals that we're trying to focus on.
We could see a huge improvement in margin by focusing on getting these other fulfillment centers up and running. Once we get them up and running, that's going to reduce damages, that's going to reduce touchings, it's gonna be a better experience to the consumer. Customers don't have to wait 14 days or 21 days or 30 days to get the product.
The return is gonna let us and help us go out there and get that consumer that's right now printing our ad and going to the nearest retail store that's out there to say, "Hey, do me a favor. Could you get me this particular product?" Right now they won't have to because we can supply that particular customer, and they won't be just showing only our website. It's actually gonna be able to convert a lot higher, a lot faster.
Okay, that makes sense. Finally, you mentioned your private label or your future endeavors to private label. What specific are you targeting? Are you targeting the cooking area, refrigeration, dishwashers? Can you give us a little bit more clarity on what you are strategically thinking now?
Sure. There's a lot of items that are out there in the market that are missing from being in the market. There's certain products that are demanded by the consumers. They're not being able to be addressed by the other manufacturers, and they don't wanna address these particular products or the particular price points or particular feature sets that the consumers demand.
Not because they don't, you know. Each manufacturer has their own tooling, they have their own processes in place that they can use to build out a product. What we realized is that missing gap in this industry, there's a certain product that is demanded by the consumers, and we went ahead and committed. It's in the middle. It's a premium to luxury. And it's very in all categories. It's not just cooking or refrigeration.
We're looking at a full line of appliances.
Okay, very nice. Also, I just wanna let you know, I requested a one-on-one with this management team September seventeenth. I have not received the validation of that. I would like to follow up with you directly. If you could let Greg know, or I'm sure he's on this call, that I would like to have a one-on-one with you. Thank you.
Absolutely. No problem. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to Albert Fouerti for any closing remarks.
I just wanna say thank you to everybody for joining the call. We appreciate your time and have a great day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.