Thank you. Good morning, everyone, and thank you for joining us today.

Before we begin, let me take a moment to reference the Safe Harbor provisions of the United States Security laws for forward-looking statements.

This conference call may contain forward-looking statements that are subject to the significant risks and uncertainties, including the future operating financial performance of Lumber Liquidators. Although Lumber Liquidators believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectations or any of its forward-looking statements will prove to be correct.

Important risk factors that could cause actual results to differ materially from those reflected in the forward looking statements are included in Lumber Liquidators' filings with the SEC.

The information contained in the call is accurate only as of the date discussed. Investors should not assume that the statements will remain operative at a later time.

Lastly, Lumber Liquidators undertakes no obligation to update any information discussed in this call.

Now I'm pleased introduce Mr. Rob Lynch, President and CEO of Lumber Liquidators.

Rob, please go ahead.

Good morning, everyone. I'm here with Dan Terrell, our CFO.

And we're excited to be speaking with you about our first quarter results and solid start to 2012. Overall, we are very pleased to see our value proposition, combining price, selection, quality, availability and people continuing to resonate with consumers.

Our team remained focused on revenue growth, capitalizing on increased traffic in our stores and building on our momentum from the second half of 2011.

Specifically, we believe our targeted marketing programs, supported by our sourcing initiatives, helped generate strong customer traffic. Effective execution by our store teams increased conversion into net sales.

Additionally, we continued to implement our sourcing and logistics initiatives, enabling us to expand operating margin. Our entire team is focused on driving growth and striving for operational excellence in all that we do.

To briefly discuss our highlights of the first quarter, net sales increased almost 18% compared to the first quarter of 2011. Comparable store net sales were up 7.5%.

Gross margin climbed 110 basis points to 37.3%. Operating margin expanded by 120 basis points and net income increased approximately 42%.

Also in the first quarter, we completed our inventory optimization, launched our share repurchase program and continued to reinvest a portion of the gross margin gains from our sourcing initiatives to enhance our competitive position as the low-price leader.

Growing revenue, continuing to improve our sourcing, optimizing our supply chain, driving traffic through advertising reach and frequency, and developing the best people to serve our customers. I'd like to update you on the progress we have made in these areas.

We attribute the growth in our customer traffic to the strength of our marketing and advertising programs during the quarter. As many of you know, historically, we have directed our marketing efforts toward the core DIY customer.

Beginning in the fourth quarter, we tested broadening our advertising reach and frequency to expand our target audience to include other consumer segments. Based on the positive response from the fourth quarter test, we fully implemented this strategy as the important spring remodeling season began in the first quarter.

We were pleased that even with our enhanced marketing strategy, we were able to leverage our advertising spend given our strong top line results.

Additionally, we further expanded our footprint, opening 4 stores in the first quarter. We are tracking, according to our store opening plans for the year, as we have placed greater emphasis on optimizing total market returns through an integrated real estate strategy.

We have enhanced our site selection processes and we'll continue to appropriately balance our mix of new stores, relocations, remodels and assortment expansion to maximize return on investment. We reiterate our plans to open 20 or 25 new stores in 2012.

In terms of sourcing. We are executing the strategy we have employed in recent quarters, performing line reviews and expanding our product assortments.

We will continuously foster our vendor relationships and work closely with our vendor partners around the world to further enhance our sourcing strategies. I'm impressed with the team's performance in this area, the benefits of which are reflected in our gross margin and operating income.

As we discussed last quarter, optimizing our supply chain, just like our sourcing initiatives, will be a multi-year initiative. That said, we are already making progress on a number of fronts.

Similar to the benefits from our sourcing initiatives, a portion of these benefits will be reinvested in support of our value proposition and in expanding operating margin.

Most importantly, we continue to emphasize the ongoing development of the Lumber Liquidators team, both at the senior management level and within their departments. Our world-class team believes in and is committed to a shared strategic plan instead of initiatives.

I'm thrilled that our entire team is aligned and aware with our goals and is working so well together to drive results. I'd like to specially recognize our field organization and their efforts in successfully implementing our strategic initiatives and in driving continuous improvement in our store-level operations.

In addition to consistent execution and our focus on operational excellence, we have established a fun working environment and culture that is serving our customers better than ever.

As I mentioned earlier, we initiated our share repurchase program during the quarter. We purchased almost $9 million worth of shares, we remain focused on returning value to shareholders and are pleased to have been able to launch this program.

We believe we are very well positioned to leverage our past capital investments, maintain our strong debt free balance sheet and generate substantial free cash flow.

Lumber Liquidators continues to be a very strong company. With a value proposition that is relevant and resonates with consumers, we have established a strong platform to grow and we have significant opportunity to expand.

We believe we are in a position to capitalize on the investments we have made in recent years and to execute on our strategic initiatives to consistently grow both net sales and earnings.

I'd now like to turn the call over to Dan for a detailed review of our financial results and outlook, and then I'll return with closing remarks. Dan?

Thank you, Rob. Good morning, everyone.

I will provide additional details on the results for the first quarter, then update our outlook for the remainder of 2012.

Net sales for the first quarter of 2012 grew to $188 million, an increase of $28.4 million or 17.8% over the first quarter of 2011, with both comparable and non-comparable stores contributing to the increase. At comparable stores, net sales increased $11.9 million or 7.5%, which we believe resulted from an 8% increase in the number of customers invoiced, partially offset by a slight decrease in our average sale.

As Rob indicated, we continue to better coordinate our sourcing initiatives with our promotional campaigns and we believe our efforts to expand our advertising reach and frequency resulted in greater recognition of our value proposition and increase traffic to our stores.

With regard to our average sale, customers continue to prefer premium products in product lines with average -- lower than average retail price points. As a result, our average retail price per unit sold decreased 1.8%, partially offset by an increase in our volume per sale.

New store location continue to drive our top line and net sales in non-comparable stores increased $16.4 million when comparing the first quarter of 2012 to 2011. This net sales increase comes from the 44 new locations opened since the beginning of 2011, including 4 in the first quarter of 2012 and 16 in the first quarter of 2011.

As a reminder, we generally consider a store comparable on the first day of the 13th month of operation.

As a group, our non-comparable stores are more mature on a months of operation basis in the first quarter of 2012 than they were in the first quarter of 2011. This is due to our varying the number of stores opened each quarter over the last 2 years, including, in 2011, when we opened 27 of our 40 new locations in the first half of the year.

As a result, our non-comparable stores averaged approximately 8 months of operation in 2012 versus approximately 5 months of operation during the first quarter of 2011. The net sales at a given store generally increase with maturity, particularly in the first 2 years of operation.

Gross profit increased 21.4% to $70.1 million and gross margin was 37.3%, up 110 basis points in comparison to the first quarter of 2011 with benefits from both transportation and product cost. We believe that net shifts in our sales mix and the net benefit of sourcing initiatives contributed approximately 45 basis points to the gross margin expansion in the first quarter of 2012.

Within our sales mix, moldings and accessories grew to 15% of net sales in the first quarter of 2012 from 13.8% in the first quarter of 2011. And as many of you know, moldings and accessories have a higher than average gross margin.

Within our sourcing initiatives, gross margin in the first quarter of 2012 benefited relative to 2011 due to the continuing impact of line reviews and an increase in direct sourcing from certain international vendors which were serviced by Sequoia prior to our acquisition in the third quarter of last year, partially offset by lower vendor allowances. Our sourcing initiatives were launched in the first quarter of 2011 and at that time, consisted primarily of vendor allowances, including significant initial support from Sequoia.

We believe lower net transportation costs contributed approximately 65 basis points to the gross margin expansion in the first quarter of 2012, due primarily to lower international container rates and better alignment of product allocation to sales demand. These net benefits were partially offset by a higher average cost per domestic mile driven due to higher fuel costs and a decrease in direct shipments received by our stores.

As in-store inventory levels were realigned in the first quarter of 2012, unit purchases received directly at the store increased to -- decreased to 17.4%, down from 21.9% in the first quarter of 2011. Increasing the percentage of direct shipments received by our stores continues to be a strategic initiative, and we believe we will have a greater percentage for the full year 2012 than the approximately 23% achieved in 2011.

Selling, general and administrative expenses were $56.8 million for the first quarter of 2012 compared to $48.5 million for 2011 but, as a percentage of net sales were 30.2% in the first quarter of 2012 versus 30.3% in the first quarter of 2011. Overall, SG&A reflects the growth in our store base including Canada, higher commissions earned by our store management in the first quarter of 2012 than in 2011, higher accruals for annual management bonuses, higher benefit costs, including medical expenses and certain higher legal and professional fees, including those related to our California class action matter, launch of our share repurchase program and renewal of our revolving credit facility.

Further, we increased our advertising spend by a net $1 million in comparing the first quarter of 2012 to 2011, but leveraged that spend 70 basis points across a larger store base with a stronger net sales at comparable stores. We continue to reallocate our advertising to more effective media channels as we broaden our reach and frequency.

The effective tax rate was 38.6% in the first quarter of 2012 compared to 38.7% in the first quarter of 2011.

Net income for the first quarter of 2012 increased 41.9% to $8.2 million or $0.29 per diluted share based on approximately 28.5 million weighted average diluted shares outstanding. Net income for the first quarter of 2011 was $5.8 million or $0.20 per diluted share based on approximately 28.4 million weighted average diluted shares outstanding.

Our first quarter net income this year includes a net loss of approximately $0.02 per diluted share related to our Canadian operations, approximately in line with our expectations and primarily due to advertising and administration expenses. We expect our Canadian operations to be neutral to accretive to net income beginning in the second quarter of 2012.

As Rob mentioned, we began our share repurchase program in the first quarter. And through March 31, 2012, we have repurchased approximately 387,000 shares of our common stock for $8.9 million and we had approximately $41.1 million remaining under our authorization.

Cash and cash equivalents totaled $61.4 million at the end of March compared to $61.7 million at December 31, 2011, and up over 42% from the $43.1 million at March 31, 2011. The total inventory balance at March 31, 2012 was $191.8 million, up from $164.1 million at December 31, 2011, and $163 million at March 31, 2011.

Our available inventory per store was $578,000 at March 31, 2012, up from $517,000 at December 31, 2011, but down from $596,000 at March 31, 2011. Available inventory per store at March 31, 2012 was lower than the prior year as we continue to better align inventory levels with sales demand through strengthened merchandising, product allocations and distribution initiatives.

Inbound in-transit inventory of $37.4 million at March 31, 2012 was significantly higher than the $20.7 million at March 31, 2011, due primarily to the timing of certain international shipments, better alignment of inventory with the timing of certain promotions and our plan to generally build inventory earlier in 2012 than in 2011 to meet the spring demand.

We continue to target available inventory per store to range from $540,000 to $560,000, with variations based on seasonal demand and product availability. We anticipate inbound in-transit inventory to approximate historical levels by the end of the second quarter 2012.

Working capital was $168.1 million at March 31, 2012, compared to $151.7 million at March 31, 2011, with the current ratio at 2.7x and 3.3x, respectively. Capital expenditures totaled approximately $3.2 million for the first quarter of 2012 compared to $4.2 million for the first quarter of 2011, with the decrease primarily due to fewer new store openings and lower expenditures for our integrated information technology solution.

Turning now to our updated outlook for 2012. We now expect net sales for the full year in the range of $720 million to $750 million, up from our previous range of $710 million to $740 million; the change in comparables store net sales to range from slightly negative to low single-digit positive.

We continue to anticipate opening 20 to 25 new store locations in 2012; and we now expect 2012 earnings per diluted share in the range of $1.10 to $1.25, based on a diluted share count of approximately 28.4 million shares, exclusive of any future impact of our share repurchase program, up from our previous range of $1.05 to $1.20.

The first quarter of 2012 continued the momentum we built in the second half of 2011. That said, we are in the middle of our important spring season and our outlook recognizes that the demand for large ticket discretionary purchases in 2012 may be volatile, and we expect the customer to remain cautious and price sensitive.

As we move forward, we are committed to executing our plan of continuous improvement and expect to deliver multi-year operating margin improvement.

I'll now turn the call back over to Rob for his closing remarks.

Thanks, Dan. Our team continues to be motivated and excited by the opportunities ahead.

And we are pleased with their coordinated efforts in providing the industry's best value proposition to our customers. We enter the important spring remodeling season well positioned to serve customer demand and continue to capture share in our fragmented market.

Our key strategic initiatives and infrastructure investments have generated returns over the last 3 quarters, which we believe will continue and be cumulative in the coming years. We remain confident in our store model, value proposition and expansion opportunities.

As we move forward, we remain committed to taking a prudent and balanced approach to growth and continuously improving our operations. Maintaining and enhancing our value proposition of price, selection, quality, availability and people remains our priority and we will continue to invest in protecting and nurturing that value proposition for the long term.

Before we turn the call over for questions, I would like to thank all of our associates in the U.S., Canada and Shanghai for their dedication in ongoing efforts.

Operator, we're now ready for questions.

Congratulations, on a great quarter here. I wanted to just focus on comps and the guidance.

This is your best comp in over 2 years, really a great job of executing here. You have another relatively easy comparison in the second quarter.

The housing market seems to be getting better. You have less cannibalization.

Your marketing seems to be working. Could you just help us think about your guidance for comps and what the puts and takes are and to -- why perhaps things couldn't be a little bit better than that range that you've given us?

Okay, this is Rob. What I'll say, first of all, is that we do -- we feel really good about the momentum we've been building.

Since Q3 last year, Q4 and Q1, we've had 3 quarters of consistent build and sales gross margin and operating income. And I would say that the guidance in our comps reflects more of the fact that, as Dan mentioned, we're not totally through our important spring selling season.

We've got several weeks ahead of us there. It's critical.

We're focused on that. Yes, we still have a bit of a cautious outlook, particularly, as Dan mentioned, we operate in the big ticket discretionary area of improvement.

So we still expect the customers will be cautious given these discretionary purchases, and so we think our guidance is appropriate in the comps. It's appropriately conservative.

Okay, great. And then to follow-up on new store productivity, by our calculations, it came in over 80%.

I'd love to hear, based on your analysis, how it came in for the quarter. I would think that you'd get better productivity as you take a closer look at where you want the stores and have a higher threshold to the extent you could share some color on that, it would be very helpful.

Yes, Brad, I'll start and then maybe Rob can add in on some of the experience we've had on improving the site selection and the market optimization. But from a productivity standpoint and a non-comp base, I think one of the drivers is the maturity of the stores.

We're averaging to 8 months of operation in Q1 versus 5 months last year. So that tends -- as our stores climb the sales ramp, that tends to contribute more to the non-comp number and increase new store productivity.

We'll expect that number to come down in the second quarter and eventually stabilize at the more historic levels. We still continue to look for the mid-50 range on new store productivity.

But as you say, certainly our approach to new stores, the real estate team we've got in place, the commitment to continuous improvement in market optimization has had an impact.

Yes, this is Rob. I would add to that too that if you net out the difference in the tranches based on the maturity of the store ages, I think the key thing to think about is, we keep talking about continuous improvement.

So we've dialed in, part of the reason why we slowed down on our new store growth was to dial in, open the hood and really look at our real estate strategy, to dig in, make sure it's integrated, make sure we're driving total market returns. We've been tweaking it behind the scenes last year.

This year, we're very pleased with things we've done in this site selection process. Some of the other things we're doing as we balance the mix, as we talk about again, new stores, remodels, reloads, assortment expansions.

So I think overall, I would say that we are pleased with the new store performance in that model. And again, when you combine that with our opportunity for growth and our market share, we're excited about the future.

You stated your strategy for the year was to drive traffic and improve margin rates. In terms of what we saw in the quarter with really strong gross margin leverage and modest SG&A leverage, is that kind of the rate there or the playbook that we should expect for the rest of the year with pretty strong gross margin gains and then I guess smaller SG&A increases?

Yes. We've talked a lot about our sourcing initiatives.

And the thing there, as well as we dive into other parts of the business within the supply chain, within store operations, it's really about -- it's a long-term view of continuous improvement and driving those benefits. So overall, we're pleased with the results from the sourcing initiatives.

They're flowing through as expected and I think, again, generally, we expect them to continue over time this year and beyond for several years.

Okay, and then I think, when we last spoke, and when you last spoke to the Street in the fourth quarter, I believe you said that payroll would likely grow at around the rate of sales, given you had a pretty good increase in your sales rates. Your payroll didn't leverage as much as we would've expected driven by the commissions and bonus accruals on that higher sales level.

If you had better sales throughout the duration of the rest of the year, would you actually de-lever payrolls through 2012?

For the rest of 2012, on a higher sales number, we think the first quarter would represent the highest percentage of sales. And you're right, it was driven by increased commissions, bonuses.

But there were also included in there some additional benefit costs, which can tend to be a little bit lumpy, but we think we've experienced the heaviest part here in the first quarter.

A couple of questions. First of all, on the gross margin front, your transport cost leveraged nicely.

What are you seeing in terms of container prices today? Are they as favorable as they were in the first quarter?

Presumably things like fuel, will if anything be better for you? But what is happening on the transport side, on the shipping side, that is?

Part of our first quarter, benefit came from the prices we paid in the fourth quarter with -- related to the international container rates, when they were lower on a year-over-year basis. In the first quarter, if you look at things like the Shanghai Containerized Freight Index, you saw international rates start to approach neutral year-over-year.

Our rates -- our blended average rate was still a little bit less in Q1 on a year-over-year basis. So while first quarter probably represents the maximum benefit on international container rate, we may continue to see some benefits going forward, but it's then expected to be flat year-over-year.

Got it. And then on the sourcing side, you actually had a bit of a tough sourcing comparison this quarter.

You had a bit of a bulge last year and the first quarter when some line reviews I believe kicked in and the benefits got a bit more restrained in 2Q then gained momentum later in the year. Is it possible to try to size what the benefits in aggregate look like and do you feel like you have already identified what all of those might be or is that really a multi-layer process?

Well, Matt, I'll answer then I'll turn it over to Dan. As you think back about the sourcing initiatives as we talked about them last year, there were 3 phases to them.

And the initial one was really just getting in, assessing and approaching the vendors to participate in our marketing, our vendor allowances and rebates. That's why you see that compare to last year because we were pretty effective in that, particularly in Dan's notes, with Sequoia contributing early on in the negotiations.

So that's what we're up against. I think what you're seeing now is, as we've kind of implemented the strategy, it's going into the line reviews, into the product costs and as that flows through and the turning of the inventory you're seeing that accrue when it comes through.

So yes, we -- the freight cost, the inbound freight cost helped a lot. The margin did help as well.

But again, we were up against -- the line rebates were down year-over-year just based on how those 3 phases of the strategy are kind of implementing and rolling through the cost of goods.

Got it. Another question I have related to the nature of the top line strength that you saw.

Clearly, when the company can execute like it is, with no systems overhangs, and it sounds just like a whole lot of organizational momentum that can drive top line. Clearly, you don't exist in a vacuum and lots of the data points that we've seen around you from both suppliers and other retailers have been pretty good.

If you think about the kind of business that you're doing, whether it's business related, that you can tell is related to home transactions, existing home sales or to new home construction or finally, just to the traditional remodel upgrade business, where do you say, if you can put your finger on it, the incremental strength is coming from?

Are talking about externally or within us? I mean...

I guess within you and that might relate to the environment. I guess, I'm going to ask to look within your business, yes.

Yes, I mean, what I would say Matt is, to look at -- considering our purchase occasion and our, how discretionary and big ticket we are, I think we probably would be less effected right now from external forces. But internally, really what's going on is I think it's all about these opportunities we have to improve the business, our continuous improvement mindset, the investing in our resources, our teams and then aligning around those goals and driving and executing on our strategy.

So I mean, I mentioned in my notes that I feel better than ever about how the teams are aligned on some big initiatives. They've been communicated and accepted and bought into throughout the organizations from the corporate office all the way down to every employee in the stores.

And our teams again are pulling together on those initiatives and executing them really well. So I'm pleased with that and that's why I'd call it out and I just -- I think that part was going on behind the scenes, just the organizational dynamic and the culture and some of the morale's really good.

Stores are excited, they're making more money, so they feel like they're winning it.

Matt, what I would add there too, is that Rob said in his notes, we really do think broadening the region frequency of our advertising has brought in still the customer looking for remodeling. So we broadened the customer base, they're responding to the promotions and the stores are doing an excellent job of converting that interest into open orders and invoice sale.

So I don't think there's been a change in the customer, but we broadened the base we're appealing to. And again, from a macro standpoint, there've been fits and starts, for the rest of the year we're not looking for it to be any different than the way it has been in these last 4 or 5 months which I characterized as inconsistent and flat.

I don't think we're looking at a downturn, but also I don't think we're looking at an improvement either.

Got it. And then lastly, and you sort of brought this up on the advertising side, I myself have noticed some of it on the radio in venues or media that we didn't used to hear, hear your ads on, you seem to be able to broaden your advertising footprint without really accelerating the advertising spending dollar growth.

So can you talk about the puts and takes on the marketing program? Presumably, you got your cost down or you're moving your advertising into those channels away from some others.

So if you talk about how the dollar allocation is shifting, that would be great.

Yes, sure, Matt. This is Rob.

The strategy was going into the year was -- on a rate basis to reinvest what we typically leveraged in national advertising. So that's what we've been doing and then to your point, it was 2 things.

You got the extra dollars from that but then also the reallocation, looking at what we have been spending and can it be better applied. We tested it back at the end of last year.

We did some things that worked and we are excited about it. And we continued it into the first quarter of this year.

As you said, you've heard it on the radio. I think the takeaway from that is it really speaks to our value proposition.

Our value proposition has resonated with our core DIY customer, that's what the company was founded on. And it really makes a lot of sense now as we're kind of broadening that out.

It's validating the value proposition and it's resonating really well with other customers and groups.

I would like to ask you about the comp gains that you achieved this quarter. How do you think that compares to the overall industry?

And do you think you're in fact gaining share of market?

Rick, I think I -- I think everyone in the remodeling space is probably going to report a pretty good number in the first quarter just -- from what we've heard from the macro environment, we think ours is a little less related to weather, if and some others might be, ours is a considered purchase, long purchase cycle. Again, we've been building momentum through the second half of last year.

We've broadened our reach and frequency. So we feel like we've been driving a strong customer traffic with some of the promotions, some of the advertising we've been running and we've been able to convert that.

So we feel like we've gained some market share in our space and that our comp number isn't really weather driven.

And are you seeing anything different from a competitive standpoint, specifically from the Home Depot or Lowe's? And how do you think those retailers are doing from a share standpoint within your category?

Yes, Rick, this is Rob. I don't think we want to necessarily speak to what they're doing with share but I would tell you, it's a competitive marketplace.

There are strong competitors out there. But as you go back and you look at our model, our value proposition, our store model, it's working, it's effective, it's resonating and as you can see in the sales growth and in the comps within our stores, and that's what we're happy about.

And again, as we've tried some of these new advertising and the marketing strategies and expanding that reach and frequency, of that existing value proposition it's validating the value proposition. The customers -- some of these newer customers that may be a little greener than your typical core DIYer are really adapting well to that value prop.

The price works just as well with them. Quality and selection is critical.

The availability of the product in the warehouse, in the stores, they can take it with them if they want it really resonating. And the people, I mean, I think that's really one of the important things that we're seeing is that kind of synergy between the reach and frequency driving customers in and then as they engage our people.

Our people are world class they're knowledgeable, they're free and available when you walk in to be helped. So I think we're happy with how we're competing in a tough -- in a competitive marketplace.

And Rob, could you talk about the promotional events? How they might have compared in the quarter year-over-year and what the expectation is, what the plan is as we move forward?

The events for the quarter, in terms of Q1, as they compared to last year, I think the incremental that you want to look at is really in terms of what drove the momentum was back to what Dan said was that we layered in with our typical strategy of great deals, great pricing. We increased the reach and frequency of our advertising.

We reallocated advertising from less effective to more effective channels, so we got a ROI on that, so that worked. And obviously, if that's working then we're going to continue to do it.

So we're going to stick to that cadence, we're going to stick to our overall plans coming into the year of reinvesting national advertising. And again, if we can gain leverage, it should be, just like we did in the first quarter, on growth on top of that reinvestment.

That's right. And any commentary on early 2Q sales?

Rick, we're the middle of remodeling season here and I think it would be premature to talk how it looks so far.

I just wanted you to confirm. I think this is the highest gross margin you've ever posted.

And if you could talk about the sustainability of it, maybe particularly on the transportation cost front. I mean, it seems to us that the focus you have on sourcing and supply chain, you're just starting to see it pay off.

It seems like this should accelerate rather than decelerate. Would you comment on that?

That would be great.

Laura, I'll start as I've been here longer. It is the highest gross margin that we've ever posted.

And transportation cost going forward are going to be variable. As you know, fuel, international container rates, over the last few years, have fluctuated pretty significantly.

We do feel like some of the logistics initiatives that we'll implement going forward will begin to provide benefits, but certainly there could still be a lot of volatility in those rates over the next year or so. I think Rob will probably join in but we think there are cumulative benefits from the sourcing initiatives that we've -- we're realizing but there are more to come.

Yes, I would agree with Dan. I think, Laura, Matt pointed out a good -- made a good observation as you look back and compare the breakout of the gross margin to last year.

Even within the cost of product, the difference between the vendor allowances and the cost of goods. So again, early on last year, we were getting more of it upfront in the allowances and we were just starting the line reviews.

So again, you're seeing some of that flow through now. I think we are -- we've anniversary-ed now, the Q1 pop in the allowances last year as we kicked everything off.

So I would say you can continue to see things flow forward. I tell you, the exciting thing for us is the flexibility that it gives us, in terms of what we can do for the long term.

And then, as we reinvest in to our value proposition, as we do things like we're doing with the reach and frequency of our advertising. We're out there building our brand, we're showing our message and it's effective.

So I want you to know that we're going to be prudent about that as we reinvest. We want to make sure we get the right return and it gives us our goal overall as we accrue benefits.

We can reinvest some in the long term support of that value proposition and differentiating us out there in marketplace versus the competition also driving the operating income which is a goal as well.

Just got 2 questions. One is, I know you don't want to comment on the spring sales, but it sounds like that you also don't believe that there was any pull forward effect because of the weather into the first quarter.

Is that fair to assume that?

That's right, Dave. We've seen momentum build now since the second half of 2011.

So given the nature of the purchase, we just don't think that the weather had that much of impact. It certainly didn't hurt, but we don't think we pulled forward demand in the spring.

Okay. Then secondly on the EBIT margin, if our numbers are correct for this year and next year you'll be sort of approaching and hitting sort of all-time highs on the EBIT margin line.

With the margin -- with the gross margin sort of being also at all-time highs, what's the visibility and in the timing in terms of trying to get the SG&A ratio to begin and contributing towards that improvement in the EBIT margin?

What I would say there is , that's an opportunity for us. So again, as we drive continuous improvement in the operations, as we have identified and set up our strategic initiatives and our priorities, that's definitely a priority for us over time.

I would add in, there's not a person walking these halls that doesn't realize continuous improvement means SG&A and operating margin, not just gross margins.

Do you think advertising cost next year could be an opportunity?

Well, we want to continue to reinvest what we need to do drive appropriate traffic. So it's a little hard at this point to predict because part of that's going to be where we are from a macro standpoint, how effective some of the channels are, but that's the one place we don't want to look for substantial leverage.

We want to continue to reinvest prudently and make sure it's the right strategy long term.

Terrific results. I know there's been a couple of questions on the gross margin.

I wanted to just dig into a little some of the nuances. So last year, if my notes are correct, you did get a very sizable benefit from the vendor allowances.

Could you quantify on a basis point measure how much that was down year-on-year for the quarter?

We didn't break that up, Peter, but you're right. When we launched these initiatives last year, we've got -- we've had a flood of participation from the vendors, including Sequoia, which was our largest partner at the time, and I think we called out that it was at least 75 points or so of benefit in the first quarter last year.

So it's harder to break out strict allowance from benefit once we acquired the QC, QA operations from Sequoia, began working directly with the vendors in the third quarter. Some of those benefits that were volume allowances are now passing through as lower unit cost.

So it's a little hard to put it on a year-over-year basis.

Okay. Maybe another way to ask it would be -- was the Q1 last year see the largest benefit from those vendor contributions?

In terms of the vendor rebates?

Vendor rebates. Yes.

Yes. I think so because as we continue to drive on the line reviews.

Again, Sequoia was a big contributor on that first one. So as we went through the process of our line reviews and then the subsequent acquisition of Sequoia, that's what kind of drove some of that variation throughout the year, again because given the size of Sequoia to the business at that time.

Right. Okay, yes.

And then you'd also mentioned that your direct-to-store shipments are down a little bit year-on-year. I guess it's a similar dynamic to Q4.

Is that again just trying to fast track some of those Asia shipments to the stores to stock in some for the sales?

Yes, Peter, it is. As we were -- some new suppliers for certain product lines and as that supply began to hit our distribution network, we brought the initial loads here, so that we wouldn't overstock at the store, we can appropriately allocate to the stores.

So all part of the same optimization process and definitely still a strategic goal for 2012 is to increase direct to the stores.

Okay. And then lastly, on a separate topic, you've been mentioning a couple of times today that you've been building on momentum through I guess starting in Q3 last year.

Would that imply then that your, the momentum I guess sort of the comp trends have improved as Q1 progressed?

It's always hard with Q1 because March is such a significant month and January and February are so much smaller, but what we can say is that we did see strong results as we finished Q4. And we saw strong results as in the last 5 or 6 weeks of Q1, which are probably the most important weeks of Q1.

Congratulations on the great quarter. Can you just talk about your outlook for hardwood prices?

Our ability to source direct with the mill share, forecast results, the long term nature of the relationship, that tended to stabilize our product cost, if not lower it, as we gain economies of scale. We haven't seen any significant fluctuations in the domestic hardwood costs.

Okay, so fairly stable outlook there. How much forward visibility do you think you have on that?

We're used -- our buyers are usually working with the mills anywhere from 3 to 6, 7 months in advance, so I'd say we got a couple of quarters. If there was a significant disruption in supply, that it would certainly impact it, but we don't see anything that is materially disruptive coming in 2012.

Okay, good. Just in response to a previous question, you'd indicated that you were aiming to increase the direct-to-stores by the end of the year, can you share with us what that target might be?

Last year's target was 23% and -- or last year's actual was 23% and we're targeting to beat that number in 2012. We're at 17% after Q1, so we have some work to do, but we've always thought that the upper 20%s, low 30%s is a potential and we really haven't chased that long term thought process.

Is that a number that might be achievable in 2013 or is it longer than that?

I think as the logistic initiatives are implemented and we've got a solid team in both product allocation and logistics, I think it's an achievable number in 2013. But we'll see what market forces are at work.

This is Rob. What I would say is it's definitely embedded as an objective and an initiative within the supply chain optimization program.

And again, the timing and the impact from that is going to be -- there's some linkages there and some contingencies based upon as we've acquired our sourcing office over there, as we diversify our factory base, bring in some new vendors, things like that. That's where you're seeing some of the direct slip, but we do have a long term goal over multiple years to drive that number higher.

Okay. And then just finally, Dan, in the past, you've shared with us comps broken into buckets of 13 to 24 months, 25 to 36 months, so and so forth, is there any chance we can get you to do that again here?

David, in the 10-Q that we filed this morning, there, [ph] down in one of the disclosures we talked about, I think it's about 20% increase in stores.

13 to 36 months.

A couple of questions. Just to beat the horse a little bit more on spring pull forward and in context to I would say, continued conservatism on the outlook for top line.

Your customer invoices, which I guess is your measure of traffic, actually decelerated on a 2-year basis. So in the past, you've shared with us kind of leading indicators of demand.

Can you give us a sense of what they're telling you today in terms -- as we look at second quarter, as you're heading into the important selling season?

I mean, I would tell you that it's too early again to really talk about where, how or how the final number is going to look in the second quarter. We just, as we've said a number of times with momentum builds, we've seen interest, be it website visits, catalog samples.

The early indicators of demand have all been strong, beginning in the second half of last year, continuing through the first quarter. As far as the weather impact, again, I just don't think because of the nature of our purchase, the large ticket discretionary, well considered nature of it that the weather had significant pull forward impact from the second quarter into the first.

Okay, thanks. On new store productivity, a follow-up on that.

Is there anything to be said about -- are you guys opening bigger stores? You talked about better site selection.

Are you opening in better markets? Or maybe more dense markets, more affluent markets, and -- or the timing of the openings, are they changing in terms of -- are you opening them earlier in the quarter?

And anything else besides kind of the vintage that you spoke to.

Well, I think the general approach there is that we're really assessing the whole real estate strategy and making sure it's integrated and we're contemplating as we go into a market, particularly in an existing market, the existing stores, when their leases come due, how do we work through those lease negotiations, and the bringing in of a new store relative to optimizing the returns to the market. So that's really what's driving it is more of integrated approach.

So we backed up and looked at that, that way and we're pleased with the results. We're testing, we're applying the test this year as we remodel stores, as we relocate stores.

Now we're looking at our assortment upgrades within our categories, our core categories. There's -- I think there's more to come there.

Got it. And then final question on gross margin, a follow-up.

So your molding accessory mix, up more than point in the quarter and by my math, that suggests that potentially contributed 10 to 20 points. So if you could maybe confirm my math and then within that delta to the 45, was there any portion incremental on promotion this quarter.

You had a little bit last quarter and just trying to get how big the sourcing impact was.

The numbers you've done for molding and accessories are reasonable and that's always been a goal of ours -- is to increase that attachment rate. We think its an important competitive position -- is to have the full assortment available for the customer.

We don't break out the sourcing initiatives from the mix. The moldings and accessories weren't really only the mix but they're still a migration as you can tell from the average sales down to some of the lower average price points.

Product, some of which, on a premium side, carry higher gross margins. But certainly, the sourcing initiatives have played a beneficial role and as Rob said, we were going up against probably the highest hurdle from 2011 and here in the first quarter of 2012.

The only thing I would add is that those sourcing initiatives and line reviews will also have somewhat and will continue -- will also play a role within the molding and accessories categories from a cost perspective as we line review them as well.

Congratulations on the gross margin and the execution. I was wondering on the ad and broad reach, obviously you saw the traffic increase so it's working.

I'm just wondering if there's any way to assess -- what type of consumer is coming in? Is it less of a DIYer than before?

Is it maybe more of a female mix than before? Just curious on that.

I mean, the way I would look at that as it is, we're kind of working our way up the curve from the core DIYer to the more casual DIYer. And I think generally, the general feedback we would give you is that we're excited about the value proposition.

It's effectively resonating with a broader group of consumers. And I think, common sense would tell you, as you go towards someone that may be less confident and less comfortable in a big ticket home improvement project particularly doing it themselves, you can see where our value proposition as you go through it and down it, to the people that I talked about would really resonate with them.

And that's what, that's kind of what we're seeing. We're seeing customers that are coming in, and they're coming in, they're looking for high quality, you saw some of the mix changes that Dan talked and in terms of the -- they're looking for good, high-quality product, they're looking to be helped, they're looking for installation.

And we've got all that, we can provide the service and expertise and confidence and the warranty and support behind the scenes for them that they're looking for to give them the confidence to buy.

Have you seen a higher mix of customers choosing your in-house installation in the last year or 2?

That attachment rate has gone up every month or every quarter really since HSS and Lumber Liquidators have joined together. So we're pleased with the service they provide.

We think the customers is pleased with the service that's been provided and we have seen an increase in that attachment.

Great. And then lastly, have wood sales turned around at all?

I presume no, that we're still doing more laminate and bamboo and LVT, and then maybe refresh us on where that mix is today versus the peak 5 or 6 years ago?

Yes, we really haven't seen a lot of recovery and again, we just -- you've seen our average ticket roughly flattened out here and it's not moving dramatically. We think you'd see an increase in the average sale as the hardwood customer comes back.

We've been stubbornly on the sidelines. We've certainly seen increases in some of the lower average retail price points as you indicated and moldings and accessories continued to grab the mix.

So we had the break out in the K and with the average sale roughly flat here in the first quarter, you can kind of assume that sales mix didn't change all that much.

And John, I would add -- the thing I would add is, I'm in the stores I'm talking to customers is, customers continue to be value conscious. And I would think that's the big part of it and then as you look at the nonsolid assortments and those categories in terms of the quality, the technology, the product and innovation that's out there that were actually, that our merchant teams are identifying and bringing in, they're appealing to these -- to our customers.

So I think that's part of it too. It's just that there's been this growth I think within the industry and within our business as well in those items and those categories.

The technology has enabled it as well, not just I think customers being cost conscious.

So within -- well, just to close out, that mix of engineered maybe is going up versus solids?

We have -- engineered has been stronger than solids.

Thank you for joining us on today's call. We look forward to speaking with you again on our next quarterly earnings call to provide an update on our continued progress in executing our strategy and achieving our long term objectives.

Thank you.