Good day, and welcome to the WD-forty Company Third Quarter Fiscal Year 2020 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. At the end of the prepared remarks, we will conduct a question and answer session. I'd now like to turn the conference over to your host for today's call, Ms.
Wendy Kelley, Director of Investor Relations and Corporate Communications. Please proceed.
Thank you. Good afternoon, and thanks to everyone for joining us today. On our call today are WD-forty Company's Chairman and Chief Executive Officer, Gary Ridge Vice President and Chief Financial Officer, Jay Rembolt and President and Chief Operating Officer, Steve Brass. In addition to the financial information presented on today's call, we encourage investors to review our earnings presentation, earnings press release and Form 10 Q31, 2020. These documents are available on our Investor Relations website at investor.
Wd40company.com. A replay and transcript of today's call will also be made available at that location shortly after this call. On today's call, we will discuss certain non GAAP measures. The descriptions and reconciliations of these non GAAP measures are available in our SEC filings as well as our earnings presentation. As a reminder, today's call includes forward looking statements about our expectations for the company's future performance.
Of course, actual results could differ materially. The company's expectations, beliefs and projections are expressed in good faith, that there can be no assurance that they will be achieved or accomplished. Please refer to the risk factors detailed in our SEC filings for further discussion. Finally, for anyone listening to a webcast replay or reviewing a written transcript of this call, please note that all information presented is current only as of today's date, July 9, 2020. The company disclaims any duty or obligation to update any forward looking information, whether as a result of new information, future events or otherwise.
With that, I'd now like to turn the call over to Gary.
Thanks, Wendy. Good day and thanks for joining us for today's conference call. Jay, Steve, Wendy and I are once again dialing in from our respective homes. We hope you and your families are staying safe and healthy in these unprecedented times. I am so grateful for the highly engaged tribe we have at WD-forty Company.
As a global business that operates in 176 countries around the world, each of our locations has been impacted by COVID-nineteen in different ways. But one thing is certain, Our tribe members everywhere adapted quickly to an unparalleled situation. Through considerable effort and ingenuity, the tribe has demonstrated agility and innovation quickly making dramatic changes to how we conduct business. This has enabled us to hold our own this quarter even when confronted by extremely challenging circumstances. The results our tribe have been able to deliver during this volatile and uncertain time has reinforced to me the importance of a highly engaged workforce.
On a completely different topic, I'd like to take a moment to share something that has been on everyone's minds. WD-forty Company has a long history of doing the right thing as it relates to how we conduct ourselves, but we typically refrain from speaking publicly about social or political issues because we have tribe members in 16 countries, which span the range of political structure, ethnicity, language, religions and cultures. However, we want our stakeholders to know that racism runs counter to everything we teach and the senseless acts of racial injustice that continue to plague our world are both wrong and deeply sadly. At WD-forty Company, we celebrate equality, diversity and inclusion. And while these things are central to our culture and how we operate, there is always room for improvement.
To that end, we are listening, learning and reflecting and evaluating our practices, protocols and initiatives to find ways we can make a meaningful impact. We expect to share our continuing efforts and focus on progress in these areas of diversity and inclusion with our stakeholders in our initial ESG report that we expect to file in October 2020. Given the disruptions and disturbances that COVID-nineteen has caused for the past several months, we have a lot to cover today. For most of us, COVID has touched every aspects of our lives and has created challenges beyond anything we've experienced. You've often heard me say that physical awareness and mental awareness or simply said, making the end user aware of the value our products deliver and making them easy to buy through our multi country, multi channel distribution strategy is the core to our success.
Where we have been easy to buy like in e commerce and certain countries and trade channels that have not been locked down due to COVID-nineteen, we performed very well in the Q3. To the contrary, in geographies with strict movement restrictions in place or places where our e commerce business is less developed, our sales were challenged. Today, we reported net sales of 98 $200,000 for the Q3 of fiscal 2020, down 14% compared to the Q3 of last year. This decline was primarily due to disruptions related to the COVID-nineteen pandemic. In a few minutes, Steve will discuss in greater detail the impacts that COVID-nineteen pandemic have had on our individual segments, particularly those with the strictest lockdown measures in place during the Q3.
Translation of our foreign subsidiaries results from their functional currencies to the U. S. Dollar had an unfavorable impact on sales this Q3. On a constant currency basis, sales would have been $100,500,000 in the 3rd quarter. Though the global health crisis is not over yet, I do believe we have maneuvered through the immediate crisis very well.
The test has not been to simply get through this period, but to stabilize the business in such a way that we can reset and thrive in the future. We've always had a very clear strategy with very clear targets enabled by culture. What this crisis has required us to do is pause, reset and become even more laser focused on how we will achieve our growth aspirations. As a reminder, our growth aspirations are guideposts, not guidance, and they're probably wrong and roughly right. Our growth aspirations are to drive consolidated net sales to approximately $700,000,000 and to do that while following our 55, 30, 25 business model.
Because of the uncertain global economy ahead, the timing of our growth aspirations are still unclear. We hope to be able to provide an update to investors on our growth aspirations later this calendar year. So on to strategic initiative number 1, which is to grow WD-forty Multi Use Product. Our goal under this initiative is to grow WD-forty Multi Use Product to approximately $530,000,000 in revenue. In the 3rd quarter, sales of WD-forty Multi Use Product was $71,700,000 down 19% compared to last year.
The decline in WD-forty Multi Use Product was driven primarily by a 30% decline in sales in EMEA due to the significant lockdown measures adopted by many countries in the region in response to the COVID-nineteen pandemic. This decline was additionally impacted by lower sales of WD-forty multiuse product in both the Americas and Asia Pacific, which declined 11% 13%, respectively due to the impacts of COVID-nineteen. As the blue and yellow brand has evolved, we are focused on ways to premiumize our delivery systems. Delivery systems like SmartStore have been so successful because end users love the convenience and the value they deliver. I'm very excited to share with you that our latest innovation Smart Straw Next Generation, which has the ability to be sold with or without a toolbox friendly locking capability has arrived on store shelves in Canada.
Smart Straw next generation has a more durable, easy to spray actuator and will create a better end user experience. As we have shared with you in the past, our objective is to grow Smart Straw penetration to 60% of WD-forty multi use product global sales. Canada is leading the way in launching SmartStore Next Generation and we will begin to ramp up our conversion efforts globally next fiscal year. Strategic initiative number 2 is to grow WD-forty Specialist product line. We remain optimistic about the long term opportunities for WD-forty Specialist and believe we can grow the product line to approximately $100,000,000 in revenue.
In the 3rd quarter, sales of WD-forty Specialist remained relatively constant compared to the Q3 of last year, which we view as a win in these challenging times. This stability is primarily attributed to a 28% increase in WD-forty Specialist sales in Asia Pacific, much of which was driven by strong sales in China. In addition, during the Q3, we experienced strong sales of WD-forty specialists within the e commerce channel. We've made significant progress on the global rebrand of WD-forty Specialist, which we shared with you earlier this year. For the first time ever, WD-forty Specialist will fully leverage our most iconic asset, the blue and yellow can with a little red top.
We believe the Refresh brand will accelerate awareness and improve findability in store. I'm happy to share with you that the product wearing the new WD-forty Specialist packaging hit some store shelves in May ahead of schedule and we are getting very positive feedback from our customers on the refreshed packaging for the product line. Strategic initiative number 3 is to broaden product and revenue base. Strategic initiative number 3 includes maintenance, also includes home care brands such as Spot Shot and Lava in the Americas, 1,001 in EMEA and Novak and Solvol in Asia Pacific. Our goal for the products under these initiatives is to reach combined revenues of approximately $70,000,000 Global sales of products included in this initiative were $14,100,000 in the 3rd quarter, relatively constant compared to last year.
Although sales under this category were flat in the quarter, sales of home care and cleaning and byproducts were up 10% 51%, respectively, compared to last year due to the increased demand as a result of the COVID-nineteen pandemic. Sales of WD-forty Bike were particularly strong in EMEA as people in areas hardest hit by COVID are buying and fixing up bicycles and riding them more than ever before. Strategic initiative number 4 is to attract, develop and retain outstanding tribe members. The safety and well-being of our tribe and their families remain our top priority during this health crisis. Accordingly, the vast majority of our employees have been working from home for the last 4 months.
It seems counterintuitive, but I think this prolonged sequestering is actually making us a more connected and collaborative tribe. As I say, necessity is the mother of invention and 2020 is the year that our tribe learned to be more technically savvy and how to work more efficiently as a global team from the comfort of their homes. That being said, I'm happy to report that some of our offices around the world are either open or in the progress of phased returns to an office environment. We are being thoughtful, deliberate and flexible in how we return our tribes safely to our offices and there is not one size that fits all in any of these approaches. Strategic initiative number 5 is operational excellence.
I believe our commitment to operational excellence has been an enormous asset over the last 4 months. From a financial perspective, we have always been good stewards of our shareholders' capital resources and conservative in our financial commitments and this has served us well in times like these. From an operational perspective, our tribe has never been more focused or better equipped to execute and deliver despite these considerable hurdles. They must overcome over the short term due to the impacts of the global health crisis. I'll now pass the call to Steve, who will discuss some of the operational highlights.
Thanks, Gary, and good afternoon. The impact of the global health crisis in our operations presents us with unique challenges that we continue to evaluate and address on a daily basis. When we spoke to you back in March, we didn't know how hard we would be hit as a result of the COVID-nineteen pandemic. We were optimistic and shared with you that despite the enormous disruption experienced in many countries, March revenue levels were roughly in line with what we have historically seen. Unfortunately, April May became much more of a challenge for us as more and more countries around the world went into lockdown.
Though our sales held up relatively well compared to some industries, the performance of our individual segments in the Q3 was driven primarily by whether or not distribution channels were open in any particular market. We saw the most significant sales declines in markets that were hardest hit by COVID-nineteen and which had the most stringent lockdown orders in place. For example, in the United States and Australia, sales increased 1% 16% respectively. Is because in these markets most of our traditional distribution channels were open. And in the U.
S, we have a developed e commerce business, which helped us to offset losses we experienced in other trade channels. In markets with very strict lockdowns, for example, many of our emerging markets, distribution was simply shut down and our e commerce business in those markets is less developed. As a result, sales in these markets were severely restricted in the Q3. One thing that's become very clear to us in the last 4 months is how important it is for us to have a robust e commerce strategy in place. In 2018, we committed to our global vision of becoming the category leader in digital and e commerce.
Since the pandemic began, the number of consumers who are shopping online has been rapidly increasing. We're fortunate that the investments we've made in this space have positioned us to take advantage of the seismic shift to e commerce that is currently taking place. During the Q3, our global e commerce sales grew by approximately 125% with strong sales growth across all three trading blocks. Year to date e commerce sales are up by approximately 77% and this helped to offset some of the loss we experienced in brick and mortar distribution in many markets. So now let's take a closer look at what's happening in our trade blocks starting with the Americas.
Net sales in the Americas, which includes the United States, Latin America and Canada were down 5% in the 3rd quarter to $50,100,000 Sales of maintenance products decreased nearly 10% in the Americas, primarily due to a 46% decline in sales of W40 multi use product in Latin America. This decline was driven by the decreased availability of our product due to disruptions around the distribution and sale of our products due to the complete lockdown of many markets within the region due to the COVID-nineteen pandemic. In addition, sales in Latin America were negatively impacted because during the Q3, we recently shifted to a direct distribution model in Mexico. While we anticipate a successful build of our direct customer base in Mexico in future periods, sales in this region were unfavorably impacted by the initial transition. The good news is that consolidated net sales in the United States held up reasonably well, up a little over 1% in the 3rd quarter to $43,700,000 We consider this a win given the current environment.
This sales increase is attributable to higher sales of home care and cleaning products in the United States, which increased to $5,900,000 in the 3rd quarter, up 43% compared to last year. As Gary mentioned earlier, we're seeing an increased demand for cleaning products as a result of the COVID-nineteen pandemic. Despite the significant increase in sales of these products in the Q3, we continue to consider our home care and cleaning products except for those tied to our growth aspirations as Harvest Brands continue to generate meaningful contributions and cash flows, but are generally expected to become a smaller part of the business over time. Finally, consolidated net sales decreased 10% in Canada to $2,700,000 primarily due to a 16% decline in sales of maintenance products driven by the negative impacts of the COVID-nineteen pandemic. In total, our Americas segment made up 51% of our consolidated net sales in the 3rd quarter.
While there has been a short term impact on the Americas segment due to COVID-nineteen, over the long term, we anticipate sales within this segment will grow between 3% percent annually. Now on to EMEA. Net sales in EMEA, which includes Europe, the Middle East, Africa and India, decreased to $32,500,000 in the 3rd quarter, down 27% from last year. EMEA's reported results in the Q3 were negatively impacted by foreign currency exchange rates. On a constant currency basis, sales in EMEA would have decreased to $33,800,000 down about 24% compared to last year.
As you know, in March through May, Europe was the epicenter of COVID-nineteen and therefore nearly all of our European markets were negatively impacted by the pandemic during the Q3. Sales of maintenance products decreased nearly 26% in EMEA, primarily due to lower sales of WD-forty multiuse product throughout both our direct and MD markets as a result of the comprehensive lockdown measures adopted by many countries in the region at brick and mortar locations. The lockdowns limited many retailers' ability to participate in promotional activities and sell high volumes of certain products, such as our W-forty multiuse product. We also experienced lower sales of home care and cleaning products in EMEA, which decreased to $1,700,000 in the 3rd quarter, down 45% compared to last year. These declines were driven entirely by lower sales of 1,001 Carpet Fresh in the UK.
Sales of 1,001 Carpet Fresh was significantly higher in the Q3 of last fiscal year due to the favorable impacts of digital marketing associated with the brand. Net sales in our EMEA direct markets accounted for 67% of the region sales. All sales in our EMEA distributor markets accounted for 33%. In total, our EMEA segment made up 33% of our consolidated net sales in the 3rd quarter. While there has been a short term impact on the EMEA segment due to COVID-nineteen, over the long term, we anticipate sales within this segment will grow between 8% to 11 percent annually.
Now on to Asia Pacific. Consolidated net sales in Asia Pacific, which includes Australia, China and other countries in the Asia region, decreased to $15,600,000 in the 3rd quarter, down 5% from last year. Changes in foreign currency exchange rates had an unfavorable impact on sales in the region. On a constant currency basis, sales in Asia Pacific would have decreased to $16,400,000 in the 3rd quarter, down only 1% from last year. In Australia, net sales were $4,900,000 in the Q3, up 16% compared to last year, driven by increased demand for our Novak and Solvol cleaning products as a result of the COVID-nineteen pandemic.
In addition, W-forty Multi Use Product and W-forty Specialist were up 4% 18 percent respectively from period to period. The impact of the COVID-nineteen pandemic were very limited in Australia compared to many other countries since COVID-nineteen case numbers remained relatively low and the country adopted less severe lockdown requirements. Changes in foreign currency exchange rates had an unfavorable impact on sales in the region. On a constant currency basis, sales in Australia would have increased 28% from last year. In our Asia distributor markets, net sales were $5,800,000 for the quarter, down 30% compared to last year.
This decrease in sales was primarily due to various disruptions in the market related to the COVID-nineteen pandemic. Similar to what we experienced in many emerging markets in Latin America, we experienced temporary closures, complete lockdowns and restrictions required by local government authorities as a result of the COVID-nineteen pandemic. Our Asia distributor markets are not impacted by currency since we sell our products in U. S. Dollars in the region.
The good news is that in China, where we experienced significant disruptions from COVID-nineteen in the Q2, net sales in the Q3 increased to $4,900,000 up 26% compared to last year. Sales in China during the quarter was strong as they began to resume more normal operations. Also, we had some very sizable orders that we were finally able to ship that had previously been delayed due to COVID-nineteen. We remain optimistic about the long term opportunities in China, although we expect a lot of volatility along the way due to the possibility of further disruption from COVID-nineteen, the timing of promotional programs, the building of distribution, shift in economic patterns and varying industrial activities. In total, our Asia Pacific segment made up 16% of our consolidated net sales in the Q3.
While there has been a short term impact on the Asia Pacific segment due to COVID-nineteen, over the long term, we anticipate sales within this segment will grow between 10% to 13% annually. Looking forward, given the exceptionally volatile external environment we are experiencing, I want to share some thoughts with you regarding the remainder of the fiscal year. During the Q3, a large majority of our revenue shortfall came from our EMEA segment. We are pleased to report that our EMEA business saw a very strong rebound in June, particularly in our direct markets as most countries in the region have relaxed the restrictions which had been implemented from March through May. We also saw solid performances from the U.
S, Canada and Australia in June. These current market conditions suggest that for the full fiscal year consolidated revenue is likely to be in a range of $395,000,000 to $405,000,000 Now I will turn the call over to Jay for an update on the financials.
Thank you, Steve. From a financial perspective, we believe we're in an enviable position with a very strong balance sheet, a manageable amount of debt, good cash flow and historical precedent that indicates our revenue numbers can hold up during an economic recession and rebound fairly quickly thereafter. We believe these factors will help us navigate a world filled with continued uncertainty. Let's start with a discussion about our 50 five 30, 25 business model, the long term targets that we use to guide our business. In the 3rd quarter, our gross margin was 54% compared to the 54.5% last year.
This represents a decline of 50 basis points. Higher warehousing and inbound freight primarily in EMEA negatively impacted our gross margin by 120 basis points. In addition, increased promotional activities primarily in the Americas had an unfavorable impact on our gross margin of 70 basis points. The cost of promotional activities such as sales incentives, trade promotions and cash discounts that we give to our customers are recorded as a reduction to sales. And the timing and magnitude of these activities can cause fluctuations in gross margin from period to period.
Changes in major input costs positively impacted our gross margin in total by 60 basis points. Petroleum based specialty chemical costs, as will be impacted our gross margin by 80 basis points period over period. However, increased cost of aerosol cans negatively impacted our gross margin by 20 basis points and offset some of the gains we realized due to the lower petroleum based costs. Beginning in late February, crude oil reached multi year lows and we expect falling oil prices will continue to be a net positive to our gross margin. It typically takes between 90 120 days before we begin to realize the benefit of lower crude oil prices.
In the Q3, we began to see some benefit from the steep drop in oil prices experienced earlier this year, and we would expect to see this trend to continue. Also positively impacting our gross margin were foreign currency exchange rates and sales price incentives in EMEA as well as sales mix changes primarily in the Americas and Asia Pacific segments. When combined, these items positively impacted gross margin by 80 basis points in the 3rd quarter. Now I'll address the 30 or our cost of doing business. In the Q3, our cost of doing business was approximately 32% compared to 33% last year.
As you know, a majority of our cost of doing business comes from 3 areas: people costs or the investments we make in our tribe. This also includes the costs associated with any earned incentives or what some other companies call bonuses, investments we make in marketing, advertising and promotion and freight, the cost to get our products to our customers. Despite the reported revenue decline we experienced in the Q3, we managed to reduce our cost of doing business as a percentage of sales because we took immediate actions to reduce the spending levels within our business. We've always been good stewards of our resources, frugal in our spending and conservative in our financial commitments. However, the COVID-nineteen pandemic has required us to become even more prudent in how we invest during these uncertain times.
In 2008, during the last significant economic downturn, we took actions that enabled us to adjust our cost structure that allowed us to support our business model and keep our tribe intact. We are focused on achieving similar outcomes now in 2020. This brings us to EBITDA, the last of our 50five-thirty-twenty five measures. EBITDA was 22% of net sales for the 3rd quarter, which is flat compared to last year. That wraps up the discussion on our fifty fivethirtytwenty five business model.
Now discuss a few other items. The provision for income taxes was 23.9% in the 3rd quarter of this year compared to 19.8% last year. And the increase in the tax rate was primarily due to a much lower benefit expected from foreign derived intangible income. Net income for the 3rd quarter was $14,500,000 versus $18,100,000 in the prior year, reflecting a decrease of 20%. This resulted in diluted earnings per common share of $1.06 for the 3rd quarter compared to $1.30 for the same period last year.
Weighted average diluted shares outstanding decreased to 13,700,000 shares from 13,800,000 shares a year ago. Now a word about working capital and capital allocation. We define working capital as accounts receivable and inventory less accounts payable and accrued liabilities. In the current environment, we're paying particularly close attention to our working capital and are using appropriate levels of working capital to manage the profitable growth of our business. When compared to the Q2 of 2020, inventories have remained relatively constant and accounts receivable has increased only slightly.
We are keeping a close eye on accounts receivable, but do not expect any material changes as a result of the impacts of COVID-nineteen pandemic. We do believe inventory levels may trend up slightly over the next few quarters. This is due to changes we are intentionally making to support the business. First, we have to ensure that we have adequate levels of inventory on hand in this uncertain manufacturing environment. 2nd, we recently launched direct operations in Mexico, which requires that we build up inventory to keep and meet the requirements of this new market.
Finally, the launch of Smart Straw next generation may cause inventories to be elevated for a time. Our capital allocation strategy includes a comprehensive approach to balance investing in long term growth, while providing strong returns to our shareholders. In fiscal 2020, we will invest approximately $25,000,000 in capital projects, majority of which is being used to procure the proprietary equipment and machinery we will use to manufacture our Smart Straw next generation delivery system. Though we elected in April to suspend the stock repurchases under our current share buyback plan, we continue to return capital to our shareholders through regular dividends. On June 16, our Board of Directors approved our regular quarterly cash dividend of $0.67 per share payable to shareholders of record on the close of business in July 17.
So with that, let's turn to fiscal 2020 guidance. COVID-nineteen pandemic has continued to inject a measure of uncertainty into our business, which makes it very difficult for us to accurately forecast short term financial results for the company. Due to these events, in April, we withdrew our guidance for fiscal 2020 and will not be issuing
Gary.
Thanks, Jay. In summary, what did you hear from us on this call? You heard that global sales declines in the Q3 were primarily due to end users not being able to easily buy our products due to the disruptions related to COVID-nineteen. You heard despite these disruptions, sales of WD-forty Specialist remained constant in the 3rd quarter, which we view as a win and a credit to our e commerce strategy. You heard that sales of WD-forty Bike were up 51% in the 3rd quarter, primarily due to strong demand in our EBIT segment and strong sales in e commerce.
You heard the sales of our home care and cleaning products were up 10% due to the strong demand for cleaning products due to COVID-nineteen. You heard that we continue to make outstanding progress in the area of digital and e commerce and our e commerce sales have grown approximately 77% year to date. You heard that Smart Straw next generation has arrived on some store shelves in Canada. You heard that the refreshed packaging for WD-forty Specialist product line has arrived on some store shelves in the U. S.
You heard that we continue to return capital to investors through regular dividends and you heard the current market conditions suggest that our full year fiscal consolidated revenue is likely to be in the range of $395,000,000 to $405,000,000 And you heard that we remain confident that our growth aspirations remain a realistic future opportunity. In closing today, I'd like to share a quote from Doctor. Martin Luther King Jr. If you can't fly, then run. If you can't run, then walk.
If you can't walk, then crawl. But whatever you do, you have to keep moving forward. Thank you for joining us on our call today. We'd be pleased to open the conference call to any questions over to the operator.
Certainly. Our first question comes from the line of Linda Bolton Weiser with D. A. Davidson. Please proceed with your question.
Hi, how are you?
Good, Linda.
That's good. So thank you for the commentary on what you think sales might be for the year. I guess that implies, if I did my math right, about down 8% to up 1% for the Q4 or something like that. What do you see as being the main factors that determine whether you come in at the lower end of that or the higher end of that?
I think there's one thing that plays in completely and then I'll ask Steve to give his point of view. It's really what will get shut down that we're not aware of right now. In my comments earlier, the thing that's become very clear to us in this last quarter is that there's high demand for our product, particularly given the increased amount of DIY activity that's going on in the United States and Europe and where trade channels are open, our point of sale is ahead of last year. But when consumers can't or end users can't buy our product that shuts us down. So I think the biggest risk factor is the risk of unknown of what's going to happen next.
So Steve, what would you say about that?
I think that's very true, Gary. So we've certainly seen a considerable uptick as people have been kind of stuck at home around the world, a significant uptick in DIY activity, which has been proven certainly across the U. S. And Europe. I think secondly, we're in a position to a fortunate position with our e commerce capability to be able to respond to some of those lockdown conditions that have occurred.
And as you've seen, our e commerce business has absolutely boomed in the Q3 and taken up some of the slack of distribution channels that have been closed down elsewhere.
Great. Thank you. And then can you talk about the new product launch in Canada? And can you just mention maybe why you chose Canada first for that launch? And then what do you think the timing of the next market entry might be?
And would the next market be the U. S?
We chose Canada because a number of years ago, we were in Canada with Smart Straw and we learned through discussion with regulators there that we would have to have a lockable delivery system to meet the regulations. And that was the one of the main reasons behind the development of Smart Straw Next Generation. So Canada was obviously the 1st place because we've not had Smart store there before. And given that we're in early stages of production, volumes are nowhere near where they need to be yet. So Canada was a great place for us to start.
Smart Straw next generation is made up of 2 different delivery systems. It's what we call 2.0, which has the toolbox friendly lockable delivery system and then it has 1.5, which is an improvement of the current SmartScroll, but not lockable. So we will start to convert a lot of markets to 1.5 as we bring up production and that will happen start to happen into the mid part of next year, which will mean we'll have a better product at a with the capabilities to manufacture quantities at a level that will allow us to now certainly push the conversion of markets that don't have SmartScroll at all. So it's going to be a year to 18 month program probably Linda till we see the original SmartScroll 1 gone and it's replaced by 1.5 or 2.0.
Okay. Thanks. And then can you just talk about if you're seeing I mean, you mentioned some areas where you're actually benefiting like the bike from sort of these stay at home doing outdoorsy type stuff. Are you seeing any recessionary type weakness or signs of it as a result of reduced industrial production or anything of that sort in any of your markets?
I don't know Linda how I would dissect that from this economic ice age that we're going through right now. I mean, I'm not sure who's back, who's not and why. Now having said that, we've seen manufacturing start to return in China. But at this time, I think that there is such a disruption in both the market and the distribution channels that it's very difficult to get a clear read on what's moving where. What we have got, which is very reliable is point of sale and where, for example, point of sale is extremely positive for us in areas where we know that artisans and trades people would normally buy.
So that tells us that. There was a great study and Steve, you might want to mention this. There's a great study that we came out in Europe just last week around DIY activity. And Steve, you may want to just touch on the headline of that if you've got that information handy.
Yes. It was just showing a study across multiple countries, I believe 7 or 8 key countries across Europe that showed DIY activity during the COVID-nineteen lockdown period was up by around 30% across Europe.
Thank you. That's very interesting. And then finally, when you report the 4th fiscal quarter in a few months, do you think that you'll have enough visibility to be able to give FY 2021 guidance? Do you have any sense for that right now?
I don't know. Okay. It depends on where we are in the world. I mean, if we've got a vaccine and things are starting to normalize, we might be able to. But I think if we come in at that 395 to 405, we're going to be nearly flat we're going to be nearly flat with last year in some ways.
I think we'll be off between 4% 8%. And I think that's a pretty good result, given the trauma that the businesses are going through.
Thanks. And just one more that I thought of. It seems that the distributor markets are the ones where sometimes these disruptions occur. Can you just remind us what percentage of your revenue is direct versus through distributors?
70 I think Steve you might have the update, but I think 75 is direct and 25 is through distributors. Is that right Steve?
That's correct. Yes.
Okay. Thanks very much. I appreciate it.
Thanks, Linda. Stay safe and well.
Thanks.
Our next question comes from the line of Daniel Liuzzo with Jefferies. Please proceed with your question.
Hi, everyone. How are
you doing? Hi, Daniel. Hi. You mentioned that you made reopening and that the outlook for sales is dependent upon what shutdown or not. I was wondering if your other the emerging markets and I guess Southeast Asia and Latin America are starting to show signs of reopening too, the distribution channel that is?
Daniel, it varies week to week. Our leadership team currently meets on a weekly basis and we have our global leaders from Europe and Asia Pacific and the Americas on that call. And I must say it varies from week to week. Certainly, countries like Indonesia, India have been very, very hardly hit hard hit over time. So it's uncertain yet which countries are moving faster or not.
Just this week, even though Australia was doing very well, they had another flare up in Victoria and Melbourne. Now where is this thing going next? We don't know.
Okay. And then with the rollout of the next generation of Smart Straw, have you disclosed if there's a price premium on that, if you're I don't know if you're raising prices just for the new introduction or have
you not said that? Certainly, the 2.0 version, which is the lockable one has a premium. The 1.5 at this stage doesn't have a premium, but because of manufacturing improvements, it's going to be accretive to gross margin.
Okay. And then finally, it was mentioned that one of the reasons why the tax rate jumped is because of less sales offshore, less foreign sales. Now with EMEA rebounding, the world opening up again, I was wondering, is it possible to say that that would go back to a more, I mean, I hate to use the word, more normalized rate for the Q4 and going forward from there?
I'll let Jay answer that question.
Yes, certainly, the rebound in somewhat it depends on the rebound in EMEA, but it also depends on the rebound in some of the other markets, like for example, Asia and Latin America, whereby we achieve the intangible benefit from sales into those markets as well. So it's some of our foreign markets are more impactful than others. EMEA, Latin America and the Asian distributors are key to that.
All right. Thank you very much.
Our next question comes from the line of Rosemarie Morbelli with G. Research.
Thank you. Good afternoon, everyone.
Hi, Lesme.
Glad to see everyone is well. I was wondering if during this pandemic, the different lockdown in the different regions and so on, you have established a new marketing method that you are going to pursue as we come out into what I call the new normal, which may not be normal at all. So any changes in the way you are operating, in the way the tribe is operating, less fewer people in offices, which could mean that you don't need as many office facilities. You could help give us a feel for what you intend to do or how you will change?
Yes. So one of the things that we're taking advantage of at this time is really making sure that we are very conscious of what learnings we've had. So we haven't made any decisions. Already a great number of our people work remotely. But we believe strongly that social interaction is important, creativity is driven.
What has happened though is we've become much better at being virtual. So I think our overall communication and collaboration will improve than over before. As far as marketing is concerned, no, we're sticking to the tried and true, make the end user aware, make it easy to buy. I think the one area that is continuing and Steve mentioned it was around e commerce and the way that's changed over time. And Steve, you might want to touch on how e commerce is really playing into what we do, particularly given the development of the major e commerce players and how they're now distributed around the world?
Sure, Gary. Thank you. So, yes, I mean, we are absolutely reallocating resources. So following the money, the growth is happening online around the world. And there's been certain news out there about our product not being suitable for e commerce due to transportation reasons.
I mean, that's just complete hogwash. In terms of the transportability of our product, the number of distribution centers are out there in the e commerce network today. In the U. S. Alone, there's over 100 distribution centers for the major U.
S. Retailers. So it's just not a barrier to our growth. And that's where we're reallocating resource in terms of time, talent and treasure towards with very, very positive results around the world.
So you are obviously strong in North America based on what I mean, if I heard properly. What about Europe though?
E Commerce in Europe?
E Commerce in Europe, yes.
Yes. In terms of e Commerce, we have a global strength. So with the marketplaces, I mean, the same players that are strong in North America, we have considerable strength also in the EMEA region across multiple countries. And also China is the largest e commerce market in the world. We have a very strong e commerce capability there also.
And of the €25,000,000 of CapEx for this year, how much are you adding to the e commerce project and taking away from another area if you are?
So, e commerce is not capital intensive. It's really people intensive. That capital this year is really primarily going towards the Smart Straw next generation. But what we have done is brought in some very big talent. And Steve, you might want to mention, we brought about our global digital advisor that we brought in and some of the way we are bringing the e commerce squad together around the world?
Sure. Thanks, Gary. So yes, so a couple of years ago, we put one of our best up and coming global leaders in terms of talented individual to head up our global e commerce squad. They've achieved just wonderful results for us and really doing what we're able to do as a global player. So taking learnings out of China or EMEA or the USA and spreading them across the world to make great progress on our e commerce business.
So that's been a big strength. We recently added a Chief Digital Advisor who came in from a major consultancy and is advising the business, Gary and myself, in terms of our long term digital strategy. So we are making great progress, not only in e commerce, but in the digital strategies that support e commerce. Our Internet traffic during this pandemic has just gone through the roof and that's certainly leading to conversion in sales around the world.
Steve, one of the markets that's performed very well with e commerce is Italy. And I think year to date, our Italian sales are up over last year, but we've made significant progress against the competitive landscape in Italy, correct?
That is correct. It's just one example and there are many more. So yes, we're achieving very, very strong growth in many places like Italy. I mean, the U. S.
Performance, obviously, the U. S. Market is a very large e commerce market for us and growing very, very strongly. So really taking some very nice share in this very fast growing situation.
All right. Thank you very much. Appreciate the help.
Thank you.
Ladies and gentlemen, that concludes our allotted time for the questions. We thank you for your participation in today's conference call and ask that you please disconnect your