WD-40 Company (NASDAQ:WDFC) Q3 2019 Earnings Conference Call Transcript

Jul 09, 2019 • 05:00 pm ET

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WD-40 Company (NASDAQ:WDFC) Q3 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

(Operator Instructions) Your first question comes from Linda Bolton Weiser with D.A. Davidson. Your line is open.

Analyst
Cindy Ding

Hi. This is Cindy Ding on for Linda. Thanks for taking our questions. So, first, did you see any shelf space changes at any retailer?

Executive
Garry O. Ridge

Shelf space changes, well, no.

Analyst
Cindy Ding

Okay.

Executive
Garry O. Ridge

No, there was no change in our shelf distribution.

Analyst
Cindy Ding

Okay. Thank you. And then, now that the gross margin is at around the 55% targeted level, do you see potentials to get to a higher level going forward?

Executive
Garry O. Ridge

Yeah. As we've always said, we believe we do have upside on our gross margin and it will continue to be impacted as we roll out our premiumization strategy with things like Smart Straw, the next generation of Smart Straw, EZ-REACH and as our Specialist product range grows as a percentage of our overall revenue.

Analyst
Cindy Ding

Great. And as a follow-up to that question, are there any updates you can provide on the new Smart Straw system? And when should we expect to learn about pricing and margin details?

Executive
Garry O. Ridge

The commercialization plan is currently being reviewed. We expect that we would start seeing some of the next generation of Smart Straw into the market as we predicted sometime around the middle of next year. And we'll keep you updated as we get closer.

Analyst
Cindy Ding

Thank you. Is the next calendar year?

Executive
Garry O. Ridge

Yes.

Analyst
Cindy Ding

Thank you. And then, what are some initiatives to get the cost of doing business to 30% of sales?

Executive
Garry O. Ridge

The biggest driver for cost of business was increase of revenue. We've often said that it's really about getting leverage out of the infrastructure we have. So, as our revenue grows, then you will see that that will have an impact on the cost of doing business ratio.

Analyst
Cindy Ding

Thank you. That's all of our questions.

Executive
Garry O. Ridge

Thank you very much.

Operator
Operator

Your next question is from Daniel Rizzo with Jefferies. Your line is open.

Analyst
Daniel Rizzo

Hi. Just to follow-up on, I think, what you was talking about, last call, you mentioned that rotation at the warehouse was a headwind in the U.S., I think it was just some product rotation and I think that was being referred to in terms of shelf space. Is that still an issue now or that kind of ended?

Executive
Garry O. Ridge

In most cases, we are through the impacts that we had around pricing but we continue to have opportunities to increase distribution across the club channel and through that first round. We haven't lost any further distribution. So, again, we would expect we'll rotate in as we were rotated out sometime in the future.

Analyst
Daniel Rizzo

Okay. And then, I think you mentioned that that sales were strong in Asia, China was flat and Australia was down a little bit. I was just wondering what region you were seeing kind of the strength then, I mean, what specific country or area?

Executive
Garry O. Ridge

The biggest gain in the Asia-Pacific region was through our distributor markets. Those are countries like Malaysia, Singapore, Indonesia, Taiwan, Korea, Japan, there's a few others,