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Vector Group Ltd (NYSE:VGR)
Q1 2020 Earnings Call
May 8, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Vector Group Ltd.'s First Quarter 2020 Earnings Conference Call. During this call, the terms adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and others should be considered in addition to, but not as a substitute, for other measures of financial performance prepared in accordance with GAAP.

Reconciliations to adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website located at www.vectorgroupltd.com. Before the call begins, I'd like to read a safe harbor statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties and that could cause actual results to differ materially from those set forth in or implied by forward-looking statements.

In particular, the extent, duration and severity of the spread of the COVID-19 pandemic and economic consequences stemming from the COVD-19 crisis, including a potential significant economic contraction as well as related risk and the impact of any of the foregoing on our business results of operations and liquidity could affect our future results and cause actual results to differ materially from those expressed in forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings.

Now I'd like to turn the call over to President and Chief Executive Officer of Vector Group, Howard Lorber. Please go ahead.

Howard M. Lorber -- President And Chief Executive Officer

Thank you. Good morning, and welcome to Vector Group's First Quarter 2020 Earnings Conference Call. To begin, I'd like to thank you for joining us this morning, and we hope that you and your families are safe. The past two months have been challenging, and it has changed the way we live and work. And during this time, our exceptional organization has risen to the challenge and demonstrated resilience and compassion. With me today are Nick Anson, the President and Chief Operating Officer of Liggett Vector Brands; and Bryant Kirkland, Vector Group's Chief Financial Officer. Ron Bernstein, Senior Adviser to Liggett Vector Brands, will join us during the Q&A.

As you know, the COVID-19 pandemic has affected virtually every business in the United States, and we are no exception. While real estate transactions have slowed throughout most of the country, New York City has been particularly hard hit, and this has impacted our real estate segment. During this time, we have connected with our teams and their families. I remain impressed by the dedication and initiative of our employees and agents who are balancing significant work responsibilities with many personal commitments and challenges. We will work through this time together.

And later on in the call, I will discuss initiatives already taken at Douglas Elliman. And I'm pleased to report that our tobacco business remained strong and had an excellent first quarter with substantial year-over-year gains in tobacco adjusted operating income and higher unit volume. I will now turn to a review of our business for the first quarter of 2020. Nick will then summarize the performance of the tobacco business. Related to Vector Group's operations, I will first discuss our liquidity and capital structure and update you about recent events. I will then review our operations for the first quarter ended March 31, 2020.

As of March 31, 2020, Vector Group maintained significant liquidity with cash and cash equivalents of $467 million, including cash of $49 million at Douglas Elliman and $69 million at Liggett and investment securities and investment partnership interests with a fair market value of $153 million. In April, we used $170 million of cash to retire our convertible notes upon their maturity. Now turning to Vector Group's operations for the first quarter. Vector Group's revenues for the first quarter ended March 31, 2020, were $454.5 million compared to $420.9 million in the 2019 period.

The company recorded adjusted EBITDA of $60.2 million compared to $49.7 million in the 2019 period. Adjusted net income was $39.9 million or $0.27 per diluted share compared to $13 million or $0.07 per diluted share in the 2019 period. The company recorded adjusted operating income of $53.3 million compared to $42.6 million in the 2019 period. For the first quarter of 2020, Douglas Elliman reported $165.6 million in revenues and adjusted EBITDA loss of $7.7 million compared to $161.9 million in revenues and an adjusted EBITDA loss of $9.0 million in the 2019 period.

The COVID-19 pandemic is having a profound effect on the global economy and financial, and especially in markets and especially in the New York real estate market where approximately 70% of Doulas Elliman's brokerage revenues are derived. In response to the pandemic, various governmental agencies in the New York metropolitan area and other markets where Douglas Elliman operates have instituted restrictions on individuals and on the types of businesses that can operate, which impacted Douglas Elliman's ability to do business.

Douglas Elliman began to experience a severe decline in closed sales volume in mid-March, and this continued in April and May. We anticipate that this sales volume will continue to be slow until the fall, and possibly longer. Consequently, in April 2020, we made significant operating adjustments at Douglas Elliman, including reduction of staff by approximately 25% and reducing all other salaries by approximately 15%. We are also consolidating some office locations, and we're in discussions with our landlords regarding rent reductions, deferrals or holidays and are hopeful we can reach a fair and reasonable resolution with our landlords across the country. Because of these factors, we will continue to evaluate the impact of the rapid development of the COVID-19 pandemic on our real estate segment.

Now I will turn the call over to Nick to discuss our Tobacco business. Nick?

Nicholas P. Anson -- President And Chief Operating Officer

Thank you, Howard, and good morning, everyone. Firstly, I'd like to echo Howard's earlier words and hope that you and your families are all safe and well. While these are undoubtedly difficult times, I'm very proud of the way our organization has responded to this challenge. Our employees have remained focused on the task at hand and embraced a tremendous team spirit, and I have no doubt these qualities will help see us through this crisis. As Howard indicated, despite the many difficulties associated with the COVID-19 pandemic, Liggett performed well in the first quarter.

Year-over-year volume and market share increased during the period, which contributed to a 50% increase in tobacco adjusted operating income. On an operating basis, we made various adjustments during the quarter to address health and safety issues for our employees as well as those with whom we do business. As we continue to work to maximize our business performance and ensure business continuity, we will follow applicable statewide orders and regulations as well as ongoing CDC guidance. As the COVID-19 situation unfolded in March, there were some anticipatory wholesaler, retailer and consumer buying related to initial concerns of the ongoing availability of cigarettes.

These concerns have proven unfounded thus far, and we have continued to ship products as usual. However, we estimate that approximately 60% of Liggett's year-over-year earnings increase was the result of this buying pattern. It should be noted that as a volume in the second quarter, Liggett's underlying shipments remained stable. As noted on previous calls, we are in the income growth phase of our Eagle 20's business strategy and remain pleased with the results we have achieved thus far. We began increasing prices on the brand in late 2018 and have grown volume, share and profit since then. Our market programs and promotions have proven successful, and we remain optimistic about Eagle 20's continued growth going forward.

I will now turn to the combined tobacco financials of Liggett Group and Vector Tobacco. For the three months ended March 31, 2020, Liggett revenues were $287.1 million compared to $256.8 million for the corresponding 2019 period. Tobacco adjusted operating income for the three months ended March 31, 2020, was $69.2 million compared to $60.1 million for the corresponding period a year ago. In addition to the inventory adjustment tailwind previously mentioned, Liggett's higher earnings resulted from increased pricing, strong underlying product demand, efficiencies and promotional spending and Master Settlement Agreement benefits.

According to management science associates, overall industry wholesale shipments for the first quarter were up 7%, while Liggett's wholesale shipments increased 8.2% versus the prior year quarter. The increase in wholesale shipments are a reflection of the buying patterns previously mentioned. As we regularly note, we believe retail shipments are a better indicator of industry trends as various actions by manufacturers and wholesalers can impact trade volumes, these effects are typically less pronounced with retail shipments.

While retail shipments in the first quarter were somewhat affected by the accelerated buying pattern, the effect was much less than at the wholesale level. For the first quarter, Liggett's retail shipments increased 2.2% over the prior year quarter, while industry retail shipments decreased 0.4%. As of March 31, 2020, Liggett's retail share increased 11 basis points to 4.3%. Eagle 20's retail volume for the first quarter grew by more than 10% compared to the prior year period, and it remains the third largest discount brand in the U.S. Eagle 20's is now sold in approximately 77,000 stores nationwide, and its growth continues to provide an effective volume and profit complement to Pyramid and other Liggett brands.

Despite managed and anticipated volume declines, we remain pleased with the performance of Pyramid. The brand continues to deliver substantial profit and market presence of the company, has strong distribution and is currently sold in approximately 100,000 stores nationwide. We continue to see little impact from premium economy brands, such as Marlboro Special blend, Newport Red and various Camel line extensions. While our first quarter 2020 results had limited impact from smaller deep discount-focused companies, this market segment remains the industry's most active. Various smaller companies create pricing pressure as they seek to undercut the market in targeted geographic markets.

Liggett has marketplace advantages relative to these companies, including our strategic approach, the broad base of our distribution, our consumer-focused promotional programs and the technological and executional capabilities of our sales force. As you're all aware, there continues to be a range of negative developments in the vapor category, and we remain pleased to have no exposure to that segment. Today, we have not seen any material impact to our business from vapor or other noncombustible products.

We are very pleased with our first quarter 2020 performance, particularly in light of the current macroeconomic environment. Our results continue to validate our market strategy. And as we look ahead, we remain focused on generating operating income from the strong sales and distribution base of Pyramid, while delivering volume, share and profit growth from Eagle 20's. As mentioned earlier, we have implemented workplace protocols that meet or exceed state and federal guidelines.

Factory protocols, among other things, require employee health evaluations and physical distancing. We have made arrangement for rapid mitigation of any issues that may arise and are confident that we are well equipped to manage contingencies. In addition, we are always subject to industry and general market risk and remain confident that we have an effective program to keep our business operating while supporting market share and profit growth.

Thanks for your attention, and back to you, Howard.

Howard M. Lorber -- President And Chief Executive Officer

Thank you, Nick. We continue to believe that Vector Group is well positioned to generate long-term value for stockholders. We have strong cash reserves, have consistently increased our tobacco unit volumes and profits and have taken the necessary steps to position our real estate business for continued success. As previously noted, effective in the first quarter of 2020, we adjusted our quarterly cash dividend target from $0.40 per share to $0.20 per share. We are pleased with our long-standing history of paying a quarterly cash dividend. It remains an important component of our capital allocation strategy. While we will continue to evaluate our dividend policy each quarter, it is our expectation that our policy will continue well into the future.

Now, operator, would you please open the call for questions?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Ian Zaffino with Oppenheimer.

Mark -- Oppenheimer -- Analyst

Hey, good morning guys. This is this is Mark [Phonetic] on for Ian. So good to see continued performance on tobacco. Can you guys just give a sense of the pricing trends in tobacco for the quarter? And then what sort of the expectations are going forward, just given the impact of COVID and the outbreak? And then sort of what the customer sort of sentiment is in the market?

Nicholas P. Anson -- President And Chief Operating Officer

Sure. So with respect to pricing trends, during the year the first quarter, industry did take a $0.80 per carton price increase mid-February. And looking forward, I think it's hard to tell at the moment what the industry is going to do. Obviously, these are uncertain times, and the expectation of continuing to deliver profit is very high. So I think that it's uncertain what the various companies are going to do at the moment. But we're staying focused on our brands, on Pyramid and Eagle 20's. And we're hoping to continue to deliver profit, as we have done in the past.

Mark -- Oppenheimer -- Analyst

Okay. Great. That's very helpful. And then, I guess, any sort of insight on shipments aside from just pricing? And then any shifts in terms of your strategy, just given where the market is?

Nicholas P. Anson -- President And Chief Operating Officer

Yes. Well, just to I mean, obviously, to reiterate what we talked about, we had a very strong quarter here in the first quarter. Certainly seeing some payback in the second quarter. But the good news is we're very happy with the underlying trends that have continued here in the second quarter. Basically both Pyramid and Eagle 20's volumes remain very stable. And as a company, we've always been very focused on providing the consumer with value. And based on the current economic environment, we believe we're well positioned in the marketplace at the moment.

Mark -- Oppenheimer -- Analyst

Okay, terrific. And then just quickly shifting over to real estate, if I could. Thanks for all the details on New York City and the trends here, but can you guys share any colors on the trends outside of New York, maybe like Florida and other markets?

Howard M. Lorber -- President And Chief Executive Officer

Yes. I mean, Florida, it's been a little easy to do business. California, it's been easy to do business. New York has been toughest as it relates to not being able to show anyone's apartment. So we've gone to electronic showing, OK, which is a little difficult. But having said that, it surprises me. We've actually done a few pretty nice-sized sales that way. So people are starting to get used to it. And I'm imagining that New York will open up by, probably the latest, the middle of June where the brokers can really get back to showing the apartments.

And also, the industry makes they sort of make a big deal about the fact that listings are down a lot. Well, listings are down a lot because we are not encouraging people to put their places on the market now. We don't think it really makes sense. If they want us to, we'll do it. But we're really looking to the when we can really go back to work. And then I think you'll see a surge in listings. And generally speaking, the surge of listings will be good for us because there are will be a lot of people in the marketplace.

Mark -- Oppenheimer -- Analyst

Okay. That's very helpful. And then just a quick one on the liquidity profile. Can you guys just give a sense of any access to liquidity, whether it's on the revolver or any sources of funding aside from cash on hand? And then also, can you just give a pro forma liquidity picture, pro forma for the debt retirement recently?

Howard M. Lorber -- President And Chief Executive Officer

B.K. you want to handle that?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Yes. Okay. So as Howard mentioned, total cash plus investments was $620 million at March 31. Of that number, $69 million was at Liggett and $49 million at Douglas Elliman. So our liquidity now on a consolidated basis, using those numbers after $170 million of payment, would be $450 million. In addition to that, currently, we have about $130 million of cash and availability under the revolver at Liggett, which is up significantly. And the largest piece of that relates to we're not we can defer excise tax payments until July.

Mark -- Oppenheimer -- Analyst

Great. And then, I guess, having you on the line, just another quick housekeeping. Can you guys just give us the shares outstanding for the quarter?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Sure. For computing EPS, it was 147.1 million, and for computing equity, it was 148.1 million.

Mark -- Oppenheimer -- Analyst

Thank you guys very much.

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Okay.

Operator

Our next question comes from Jacqueline Crawford with Jefferies.

Jacqueline Crawford -- Jefferies -- Analyst

Hi, Congratulations on the strong quarter, especially here in tobacco. But just I was more concerned about the economy, and I realize that you said that you feel that you're positioned well in the discount category. But I was just wondering if you could provide a little bit more information here. If you would expect to see more smokers stray down into the discount category or deep discount category within your products? And if so, if you're seeing any additional competition with any of your peers fighting for these consumers here? And any impact on price that you have seen or might expect to see moving forward?

Nicholas P. Anson -- President And Chief Operating Officer

Thanks for your question. So I would say in answer to that, we've been talking about down-trading on our calls for a number of years now. Within the discount segment itself, our focus with Eagle 20's has primarily been on the low end. And that's a segment that's been a source of growth within the cigarette market for a number of years. Yes, there's, obviously, a fierce competition down there. But again, I think we are well positioned strategically and with our sales force to compete very strongly in that particular market. So we're certainly continuing to see that segment of the market grow. But I think, also, over the last few weeks, we're also seeing some very preliminary signs of a broader discount market increasing as a whole as well.

Jacqueline Crawford -- Jefferies -- Analyst

Okay. And then I appreciate you providing the additional information on the cost savings at Douglas Elliman, but I was wondering if, just more broadly, could you provide any more information as to what's the fixed versus variable cost there at both real estate and tobacco?

Howard M. Lorber -- President And Chief Executive Officer

I didn't hear the end of your question, you were breaking up.

Jacqueline Crawford -- Jefferies -- Analyst

Sorry about that. I was just saying, could you please provide the fixed versus variable cost breakout at both real estate and tobacco?

Howard M. Lorber -- President And Chief Executive Officer

Go ahead, Nick. Tobacco.

Nicholas P. Anson -- President And Chief Operating Officer

We certainly don't have that information to hand. I mean could we maybe follow-up with that information a little later date?

Jacqueline Crawford -- Jefferies -- Analyst

Yes. Yes, that would be just fine.

Nicholas P. Anson -- President And Chief Operating Officer

Okay.

Jacqueline Crawford -- Jefferies -- Analyst

And then just finally, do you have any channel breakdowns just among whether it be grocers or convenience stores where your tobacco products are sold? And what your what any impact you would expect traffic at those various retailers to be having on you moving that forward?

Nicholas P. Anson -- President And Chief Operating Officer

Sure. So I don't want to go into too much specifics about the channel. But the good news is that for the last few weeks, we really haven't seen a huge impact to those stores that we're doing business in. As I mentioned in my script, we've probably got distribution about 127,000 stores. And anecdotally, we were hearing that maybe 1,500 to 2,000 stores tobacco stores were impacted where we called on. So it was a very small percentage of our business. So the good news is the distribution chain actually, the supply chain and the distribution chain has remained open and really hasn't had any significant impact on our sales business.

Ronald J. Bernstein -- Non-Executive Chairman Of Liggett Vector Brands And Senior Advisor

If I could add, this is Ron. Initially, there were a number of tobacco outlets that were not food sellers that needed to shut down. As Nick said, it was a small percentage of our business. But virtually, all of those are coming back online or are back online now. And just looking at the arc of the situation since the pandemic became part of our reality.is that the worst of it from the standpoint of the flow in the cigarette marketplace, it looks to be passed. So the anticipation is that the market will only get stronger and broader as we go forward.

Jacqueline Crawford -- Jefferies -- Analyst

Okay. Well, thank you for that.

Operator

Our next question comes from Ed Brucker with Barclays.

Ed Brucker -- Barclays -- Analyst

Hey, thanks for taking the question. First of all, I was wondering what the kind of dynamics you've seen around, I guess, what seemed to be pantry loading, first? And then also did you see any positive benefit from the stimulus checks that started hitting accounts in mid-April? And when those did hit, do you think the discounts that are in market benefited? Or do you think there was maybe a trade up effect there?

Nicholas P. Anson -- President And Chief Operating Officer

Sure. Well, again, just to reiterate, we certainly saw significant pantry loading in the back half of the last two weeks of March, and we have seen some payback of that. And again, that pantry loading was at both the wholesale and the retail level. It's very difficult to tell whether all that has been paid back. I think there's so many competing variables going on in the marketplace at the moment that it's very tough to see, like, true consumer underlying trends at the moment.

So trying to parse out the effect of the additional stimulus checks and the increased unemployment benefits really the honest answer is it's too early to tell. We're going to need to get a little bit more data over the course of Q2 to really get an understanding as to how those that additional money within the economy, and specific to the discount segment, is impacting the business.

Ed Brucker -- Barclays -- Analyst

Great. And then given maybe what could be a potential recession upcoming, does that change your ability to come to market and kind of playbook to bring new products to market? And do you have any new products in the boat that you're looking to get out in the near term?

Nicholas P. Anson -- President And Chief Operating Officer

Well, I'm certainly not going to go into any specifics with respect to new products. But obviously, we're looking at the market, and we're always looking at opportunities. I mean, yes, honestly, at the moment, with limited sales people out in the field, the ability to execute a new brand launch is limited. But again, at the moment, though, we're very, very happy with our 2-brand strategy. Eagle 20's and Pyramid are performing very well. So those are the brands that we're focused on at the moment. And again, we think they're well positioned in the marketplace based on the current economic situation.

Ed Brucker -- Barclays -- Analyst

My last question, going to the real estate market. I was wondering how we should think about the real estate market over the next six months. Do we think about it like an '08, '09 recession kind of playbook? Or is that completely off base, and this is completely new? How are you thinking about it going forward?

Howard M. Lorber -- President And Chief Executive Officer

Well, because this is something that really none of us have experienced, it's hard to predict. But having said that, we feel that we'll know a lot more when we're able to actually show apartments and try to sell them, and houses. It's hard to base it on what we're seeing today because we're not seeing that much today. I would say that the markets will rebound, can't tell you how quick it's going to rebound. But in certain markets, you're pretty sure.

People are looking for second homes in a lot of our markets, the ones that are in the city now, they work in the city or live in the city. And so there is a that market is pretty strong. The suburbs around New York City has picked up pretty well. So that one is pretty strong. And what remains to be seen is how the city does because in the city, it's been attacked besides from the COVID, it's been attacked from the political part of the city side with by putting in taxes and so forth that have hurt the market. Like last June, they put in this increase in what they call the mansion tax, which added quite a big bill to high-priced apartments.

But June last year was like our biggest month that we've ever had in business because everyone bought before the time that they would have to pay the increased mansion tax. So that will be a bad comp and we'll never meet that comp again. That was a huge, huge month. So besides the I would say two things, besides the pandemic we're in now, we also have to concern ourselves about the state of the places where markets are like the city, OK, especially on the financial end. Because if they start talking right away to with tax increases and stuff, obviously, that will make it more difficult.

Operator

Our next question comes from Robert Sullivan with MidOcean.

Robert Sullivan -- MidOcean -- Analyst

Of the real estate operating selling G&A expense, which was roughly at $260 million in 2019, I was wondering if you could break that out into just some broad categories for us just in trying to model kind of cash burn within real estate going forward.

Howard M. Lorber -- President And Chief Executive Officer

B.K., do you want to do that?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Yes. So Robert, about $34 million of that related to property management subsidiary we own. Advertising was another $25 million. Vector does charge a management fee of $2 million, and then depreciation and that number is about $8.6 million. So you're left with about $193.6 million after that. And then as we said in our earlier conference call, about $4 million last year was spent on the ERP system. So of that $189 million, that's comprised primarily of rent and salaries.

I mean they're just cost to run the offices. Now although that number may look fixed, we can go into that number. And by consolidating offices, by reducing our workforce, by what we what appears to be about 40% of salaries, and we can make part of that number variable. And then, obviously, on the cost of sales number, that's all commissions, so that's all variable. Does that answer your question?

Robert Sullivan -- MidOcean -- Analyst

It does. And assuming you were to have no revenues for some time within real estate, I guess, what is your plan around increasing liquidity for that division?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Well, Robert, as you know, we have significant liquidity at Vector, and of course, we always evaluate the capital markets on an ongoing basis.

Robert Sullivan -- MidOcean -- Analyst

Okay, thank you.

Operator

Our next question comes from Chris Colvin with BICM.

Chris Colvin -- BICM -- Analyst

Thanks for taking my questions. Sorry to ask you to repeat this again. So cash and investments was $620 million. Does that include the fair value of the investments? Like, what's the breakout of that again?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Sure. It does. And of the $153 million of investments, about $10 million was in equity securities, $95 million was in investment-grade debt and $49 million was in hedge funds.

Chris Colvin -- BICM -- Analyst

And do you all worry about any type of markdowns? Or did you see any markdowns in those? And do you worry about that, especially if the market turns again?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Under generally accepted accounting principles, they are carried at market value, those investments.

Chris Colvin -- BICM -- Analyst

Okay. And then net distributions from real estate this year, any sense of what those will be?

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

As far as the first and obviously, I will let Howard speak to the year, as far as our first quarter, it was a very slow quarter, net distributions were about $650 million. There was only and those were primarily three projects that we're just receiving distributions as they liquidate, and we only made one tack-on investment during the quarter.

Howard M. Lorber -- President And Chief Executive Officer

B.K., you said $650 million. I think you misspoke.

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

$650,000, excuse me.

Howard M. Lorber -- President And Chief Executive Officer

Yes. $650,000.

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Goodness gracious. Thanks, Howard.

Howard M. Lorber -- President And Chief Executive Officer

Everything is going to be delayed. Projects which we were hoping we'd be starting to do the sales and starting to get some money back from them, all delayed. So can't really guess as to what's going to happen this year.

Chris Colvin -- BICM -- Analyst

Makes sense. And then two questions on the Tobacco segment. I didn't quite follow, in the beginning of the call, you said there was it sounded like a 60% boost whether, it was from retailers stocking or consumers? Can you go back to that basic benefit?

Nicholas P. Anson -- President And Chief Operating Officer

So just in relation to our year-over-year increase, so year-over-year earnings increase was about $9 million. And we estimate that just over about $5 million of that related to the pantry loading with respect to the wholesale and retail.

Chris Colvin -- BICM -- Analyst

Okay. And is there any kind of seasonality in that business?

Nicholas P. Anson -- President And Chief Operating Officer

Well, historically, seasonality for the cigarette business is in the middle of the year, right around June. That's when it peaks at the high season during the summer months, and then falls back in the fall and the winter months. So there's normally a gradual seasonality build around the March-April time frame up to midyear around June. But seasonality would not have impacted the specific inventory adjustments that we saw in those last few weeks in March.

Chris Colvin -- BICM -- Analyst

Got it. And then last question. Just thinking longer term, do you have any concerns about COVID, just people being more health-conscious and not wanting to smoke cigarettes? I mean is there any concerns about that?

Nicholas P. Anson -- President And Chief Operating Officer

Well, we're not seeing that at the moment. As I say, the industry is performing strongly. And within the industry, our sales are extremely stable. So I know there's been a lot of press about that. But at this point in time, we're not seeing any negative effects whatsoever.

Ronald J. Bernstein -- Non-Executive Chairman Of Liggett Vector Brands And Senior Advisor

Where you are seeing some negative effects is on the vapor side because the association of the problems that we're developing prior to COVID, have just been reinforced. And I think that it's put a heavy burden on the vapor category. If you look at where things are with cigarettes, I think that, generally speaking, in the course of a crisis, people typically don't smoke less and they don't drink less and they don't eat less. So the short-term looks solid, and there's no reason to really believe that anything is going to change afterwards.

Chris Colvin -- BICM -- Analyst

Yeah. Great. All right. Well, thanks for the color.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Howard M. Lorber -- President And Chief Executive Officer

Nicholas P. Anson -- President And Chief Operating Officer

J. Bryant Kirkland -- Senior Vice President, Chief Financial Officer And Treasurer

Ronald J. Bernstein -- Non-Executive Chairman Of Liggett Vector Brands And Senior Advisor

Mark -- Oppenheimer -- Analyst

Jacqueline Crawford -- Jefferies -- Analyst

Ed Brucker -- Barclays -- Analyst

Robert Sullivan -- MidOcean -- Analyst

Chris Colvin -- BICM -- Analyst

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