Tile Shop (TTSH) 5 Nov 222022 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q3 2022 Tile Shop Holdings Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After speaker’s presentation, there will be a question-and-answer session. advised conference be being Please Instructions] that is today's recorded. [Operator Chief the now Vice to and like would conference President Officer. to Relations Davis, I Mark hand over today, your Investor Accounting speaker Please go ahead.

everyone to earnings quarter morning Good you. and to Shop's call. The welcome third Tile Thank

are and now in our harbor in of made are earlier website. over our as include that, to will our of constitute been forward-looking today statements. see the any known of Those forward-looking statements. safe for differ Today's these Private me of could release XXXX posted as of earnings filings our has forward-looking those measurements. with our call statements made do issued press date are statements earnings SEC. The obligation to Litigation Officer; pursuant to Reform today such Lunan, Securities Act we and risks within Chief risks measures, that reconciliation amended. forward-looking and and the the non-GAAP to update the not subject undertake of release and on uncertainties results the call from today Cab. Such company Joining call to our a non-GAAP me also Financial call Please and let financial certain uncertainties turn during also the which Officer. the actual Executive With Karla and both are cause meaning Chief materially provisions Certain Cab Lolmaugh, statements made statements unknown described this

our business for morning, and you results. an our on us third Good joining financial thank today and everyone, Mark. quarter Thanks a review of update for

pleased quarterly this morning. is earlier announced results team we the with Our

of comparable respective continue record This environment to the revenue. for sales with remains stores represents quarter. million $XX.X volatile, at While the ended sixth our quarterly the macro consecutive quarter and sales grow we

We good line. bottom delivered also the flow-through to

our per signaled earnings we resulted that been possible discuss what a reported practices Karla We've also made expense over announce just the details focusing and few very for what the last products proud last in share our in to same able and we housing We've refining our share I'm accomplish. share and in period quarter minutes. strength the time, processes progress horizon. the turnover I'm year coming. significant At strong slowdown completed have of new in two repurchase remodeling in see may will program. activity repurchases in sales management and combined decreases I with technology. demand by to results on the improvement home that over disciplined third the the enjoyed interest that pleased Rising Our repurchases challenges on last we've doubled a a These team, year. rates investing been of of years. be made

Now with know and resilient years over a I've been The organization. I XX this Tile for Shop is

In shown fact, challenging. when macro that is we the grow even can environment we've

the We current success. of our focused proactive of level staying with on are goal sustaining

company to the even environment objectives. ahead following executing I grow by position the believe look we a we As in XXXX, can to challenging

First, we're luxury vinyl expanding our tile products. line of

also buy broad LVT it this buy For innovations our product led that This surface were and to also customers. both growing lines many that accept customer product We've us option. fastest often test Several who concerns, on showed hard LVT one increased. we from has order. the retail initiated our a flooring. have demand appeal a the pilot to higher-quality viable lower a several has consumer tile LVT market quarters us in profile to a Initially products in customers product of products of ago, as question margin test LVT small base years pro Over categories of number hesitant time, learned us whether with would and been line we and and have quality LVT enter the a from given of same stores.

Over with our end assortment a expand have over actively worked suppliers our LVT at assortment launched products We've products believe our October. that our resonate we will we of to points price XX to the summer, the of range added at of with that customers.

will a margin sales investments store leverage our profile LVT margin sale, of the assets of the additional an profitability. profile believe improve and tile While distribution in is and volume than lower help that we overall the us

Second, we're XXXX. planning in stores open to new

Wayne was Jersey prudent in a first We with since vast operating on majority base stores were to the until the in norms. quarter been opened pause of historical store New XXXX. of our focus have openings store store it our our New felt existing

significant store and for have made the last progress path improvements two our existing base. we believe We within a over years continued have

relocating time, and volatile stores the third opening XXXX. conservative growth. we planning this Given in macro new take environment, store two we're At to approach store a anticipate to a

Over invested initiatives take growth. growth teams opportunity managers talent the company ready for the on stores. our new to added We're construction new design I'm and excited XXXX. for We've in position for we've a process last establish to our the in to measured store help opening year, currently and of refining to bench

perhaps in Last, to recently is expand nice Third, last We've over our and reach. made our We've team digital of potential. forward to look and but significant area, to progress focus in the sales in of pace added still most some losses conversion store some store practices shrink nice and to importantly, helped in seen rates, as store discretionary discounting to continue of invest execution many drive capabilities has believe e-commerce untapped stores. We've measures we'll continue and this accelerating stores. on digital effectiveness improvements our EBITDA. in our year the change initiatives and and level improvement strategies. there and improving existing we per growth, pro such across level This team developing financial our will our

talent I'll now I excellence hand on be walk focus XXXX, next the key quarter sales through over will that, look With company's the believe development to to to continued the the ahead catalyst call us performance level. a Karla? to Karla results. third and propel As we to

Good Thanks morning, everyone. Cabby.

sales in largely sales comparable to by stores quarter pricing X.X%. pleased average was The which increase gross in primarily ticket, partially was rate due volumes. our this in adjustments. the increase increased We decrease an by by driven decrease XX.X%. a sales The result, Third to discretionary during was in at see offset were margin third quarter a

quarter. started price receipts We continue elevated higher at points and the third the to fourth levels inventory quarter of throughout as see we

softening as more decreases approach gross we profit that conservative prices in anticipate adjusting are move dollars. in XXXX, we a the we into rates incremental will the near-term. Given maintaining margin to fourth macro the Accordingly, expansion into Further, we gross environment, during drive quarter. the anticipate modest LVT

gross during a transaction quarter. of year this with the sales expenses was quarter the XXXX asset and rate exchange termination $XXX,XXX In market. recognize the to was $XXX,XXX was third benefit the benefit business lease by this We landlord $X.X recognized increase during compared the the quarter, benefits as of will third not concession, in with landlord our and decrease fourth third compared $X.X connection associated This XXXX. XXXX. the of anticipate when related Under adjusted of changes. $XX.X this one in However, our SG&A year. repeated leases from income terminate margin third of recognized XXXX $XXX,XXX quarter by we the redevelop will quarter terms offset to center. during who a for decreased third third of when during $XXX,XXX the EBITDA anticipate and the We XXXX which was of The pay Also recorded into another mix to this incentives million. last to a during impairment, agreement, of the in the a million and we $XXX,XXX to variance Net of quarter million SG&A third quarter nearby during within the benefit plan the this we was expenses relocating has the vacate to us during with store an to remaining agreement to store quarter. agreed the quarter fourth an pay fee. their store XXXX third space entered quarter plans lease one-time the same the during

$X.XX margin and EBITDA rate of due largely basis improved during adjusted by SG&A favorable third per to from $X.XX the the of points share Our quarter quarter sales Earnings during to XX.X% third in doubled third XXXX. XXX the quarter leverage. increase during the XXXX expense to

$XX During approved XXXX, million Board the our quarter third share Directors of a repurchase plan. of

an or under shares $XX.X share. we $X.XX brokerage repurchased for As of average of commissions of million September XXXX, million had share XX, the per inclusive plan price X.X

the third inclusive million total, repurchased average share end repurchase program. share. completed $XX.X of or per $X.XX commissions the quarter, for price an Following of brokerage the of million In we share shares we X.X

purchases European labor the Turning will million. our in our $XX.X at particularly of pressure million attention our was to levels of accelerate represents in increases rising quarter The raw the the We ahead inventory and energy, XXXX. in with due year inventory begin end quarter second inventory. inflationary sequential anticipate increase closed to remain from price to suppliers expected that to response by decline in elevated We from inventory sheet. through largely cost a of costs. balance the $XXX.X This of to decision the driven increase and material

by a sustain and in company provide non-financial sufficient with In to the $XX.X take new quarter, credit company was the the agreement and largely XX, to on capital will off that that compared from for our JPMorgan This closing, The strong share and deal a With credit we're I facility, the took credit. growth provides are this increase terminated. activity facility we the agreement was the of provided questions. led with results. fully September pleased access as in in years, fund to had million $XX repurchase incredibly straightforward five Cabby the any to certain The debt the initiatives. quarter with line during million and line of of which believe we end We the our of million On financial remains operations entered happy next of prior compliance covenants. with into increase quarter. XXXX Chase. sequential of a was outstanding credit place new inventory company debt to paid As due second the and $XX.X

comes with from [Operator Instructions] question of And Connor Jensen first the our line Street. Lake

line open. is Your

guys. Lake Thanks Mark Street today. for Smith. taking This is for my Jensen call Hi, Connor from

Good being morning, for on, Connor. Thanks

through Can of where price kind increases? and on margin pressures for pass your margin a gross your to So the pretty you profit you're sequential looked talk cost basis. good continue your seeing outlook ability about to on

Good Yes, definitely Karla. Connor. is This morning.

So expect as on the some I continued gross do we about pressure the in comments spoke margin.

have very things good happening. We some

improvement have freight rates. We some in

year. We increases are price earlier of experiencing benefit the the in the

to We our strong have controls keep fairly and low also inventory inventory. the have regarding ability the reserves

However, the cost continue. inflationary pressures

working to LVT has control We working price to also a different supplier are price margin And profile. the our costs We're for the we base of and about we increases. need diversify know future and are LVT. very mitigate increases the our excited mindful to that

so that think gross But we're to we continue dollars grow -- company. the going to do And is will that we And going the that affect working will hard to for profit continue we grow. forward.

in I there. color kind know about store Yes, capital growth? another how question. thinking guys but definitely And share maybe growth XXXX, of, then buybacks? makes some one additional you on store and are allocating the What's the appetite between your you said sense for

but prudent said very that's and You we that's for with bet do the at and the thing two two Not business conservative. right time. Actually Connor. to happy this

comments, we refining said process. in store As the new

it So when when to little operate it size, we how when to can things comes looking real more at efficiently. it a comes we're to estate, different comes

in store, we And market so, it's by We'll by the But to we've we'll we do and decision. sure our that identified spots make right watch and few do want analysis. a it macro. be the

it we there. grow Absolutely. to go But love where I see would from started let's with Now two get and more?

Got of then, those do buybacks you. And It past? to makes you're still you've sense. been looking doing kind the in

point. this at Not

it's make business the we're but the now, we able at for execute a right let's environment. with very what's to time tough frame. macro right a happy think, I were We're sure in results, -- doing efficient

sense. Yes. Definitely makes

So, Thanks, I’ll turn over. it guys.

Thanks, Connor.

question comes next Management. McDulin Thank Instructions] you. Charles Kanen Our of [Operator the Wealth line from with

Your line Hello, Charles. is one.

Your line is open.

morning. Good hear you Can me?

Yes. you, Got Charles.

is Dave Okay. Kanen. for This the My apologies confusion.

first margins. in yes, to So, is question gross regards

much prices, from and in terms your there issues of in of Europe, especially Given and of the Nord pricing? hearing percentage? how then, cost in energy are nat And you and your sourcing gas pipeline what then surging sourcing Stream effect on partners comes from terms increases

about for thanks Tile vendor the we partners Shop finger question, typically when roughly to XX day. that our segment. the our from question. It's economics and Dave, it's it good disclose think And it's Hey, you quarter. don't different because on comes a it see assortment -- by that but and from really global when by the challenges quarter really every anywhere changes And to we pulse but comes Europe, has XX, that, got percentage

this that So the remember early We seen something we've time. happening China. at tariffs I it's in antidumping saw on. and happening the

more pain, a quite than bit around So our the all some been the partners we've world. others. And vendor feeling are so moving

a see lots shift -- going to America. so And South in in you're

to back company, find but balance believe actually find to some Asia, and new I -- something partners it's You're to it healthy forces opportunities. seeing strengthens the it's more a you we that it you that because new

materials. So is we struggles big the is the and that they're natural having. the some having raw going It impact. down rates they're a though are Freight stabilizing of gas see

right. You're

moving. we're So

that's answer. the So

to you the there's from Is answer diversify away what so gas -- where nat that that of effect? sourcing able your is So the been you've saying? you're Europe some

Yes. absolutely. Yes,

-- LVT? percent then, you the And Great. do what Okay. term And for to? that percent what quarter, was going grows think longer

Yes.

so we're still to And than go. want where the For end We look of the to throw grow. our quarter, going less XX%. to that SKUs, it was it's something don't was it's percentage a launched I going pilot it to it of at October. just

our we least have if should hopes, grow So it at but that, not all figured we to further.

early How accepted? in the was qualitatively? stores was with the it us you of cap ran could where you share What read kind What pilot?

tile we only saw excited mudrooms. products we fireplace, buying have -- cannibalizing. to and pro a realized still And basements, it instead out single their hey, living to count they healthy rooms, But going really backsplash, opportunity. new wasn't bathrooms have SKUs get bigger retail that actually see add their the launched merchandising, We the feel figured on bedrooms. mean, for and where where forward. to new were we for they assortment we LVT boards, for I the new that, pilot. their their that's down And a ticket saw the ticket. the going And we Well, had we both was we throughout would We now going so saw their year typically the a landed We are had people marketing, street it. and of with it's to us help it propel it

coming year. guys. Thanks, Okay. luck Good the Appreciate in it.

Dave. Thanks, Thanks.

back would And Instructions] Thank to conference to you. [Operator this now time. further Mark questions for showing the remarks. turn closing I'm no I at Davis like

Form XX-Q great anticipate earnings interest The Tile for filing Shop a our in listening later and We day. you for conference your our have today. you call. to Thank Thank

you today's for concludes Thank This call. participating. conference

may You disconnect. now