Tile Shop (TTSH) 2 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Quarter 3 2023 Tile Shop Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Officer. now speaker hand President today, Relations Chief would to conference of I and first your Mark Accounting Instructions] like the to over Investor [Operator Davis, Vice Please go ahead.

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

our our made Joining call today our Executive that this provisions today do and statements uncertainties SEC. from pursuant Karla Those Cabell constitute Officer; uncertainties and are call, Certain statements within statements Lolmaugh, earnings such filings risks Financial The issued Securities we both any forward-looking Litigation XXXX statements. statements. in Private and subject these of forward-looking press obligation and earlier to date with of cause differ release the harbor our forward-looking actual of Chief Officer. the are of the the forward-looking and made unknown the me to and undertake and update today Act in Chief to results to Lunan, risks are during materially safe described known amended. Such could meaning the made of as Reform as not statements are

also release also those include the over measurements. Today's call let now our that, reconciliation me posted our non-GAAP to earnings turn company call non-GAAP will on see or financial Please been measures, certain Cab. has of a which website. With

us for Mark. for Thanks, and joining update today on everyone, you thank business. Good an our morning,

on help present and impact our in changes our services to continues the invest While make the to assortment, capabilities macro challenges, we business. to to continue environment e-commerce expand mitigate

with to negatively changes impacted current the last environment. have progress by I over the these Despite challenges, interest challenging we which third headwinds am has the factors in lower traffic implementing contributed to higher As during significantly to sales adapt quarter. the our the pleased we have stores, across of rates our levels discussed economic environment created previously, our made exasperated industry year. These have

to middle we our For example, well took adding by customers assortment steps tile enterprise to great, competitively. end new market look perform that our offering improve to products

We vinyl their economical that while tile past customers luxury options quarters seeking the homes few provide also refresh choices. for making line expanded products to our of over more

Additionally, differentiation. in stores we services the believe our a we are point offer key of

We continue offering taking are are we latest to By appeal well and tools associates design ensure to equipped to and techniques to in pairing financing invest and installation training and with positioned believe customers. steps, with we the our our trends both our help higher-end options, competitive to customers. these budget-conscious

our continue professional pursue We customers. our enhance to opportunities with to relationship

priced serve. budget-friendly of provide For our they competitively options present vinyl our to luxury to tile the expanded example, homeowners tile for combined with assortment approach our offerings, SKUs,

a am Plan customers key confident a attention play professional service, [ with strong our relationship management these market customers. in Pro hosting value Our cultivating of, endeavor customer help our ] strengthen Forward with in-store pleased segment. I this industry loyalty remains assortment Go both with role our I'm program, professional exceptional and and trainings proposition Pro with and with and that retail to extensive our paired relationships The experts. benefits, us

players assortment. regional vast over is limited high-quality this variety suppliers a lower cost some new assortment big and tiles with believe to exceeding our supply assortment. against of across due goals increases cases, nice both when compared incurred more point and our products existing our our to in tile year, a our in source standards. We another with Around at made to worked key Turning factors. tile We've we cost X,XXX We've progress XXXX. or last unprecedented of chain time of maintaining box, while local to our differentiation

diversified, and we global which competitive Our is supplier a believe is advantage. base

website Our over same online advertising, new Wisconsin the do us and relocate start, I the last not digital to in and openings experience a XX% opened store early The improving a At gain initiatives us continued the stores year. I'm sampling We store near seen grow believe and enhance results. quarter by for helped of our the additional we've month. our growth. to Milwaukee, definitely we I'm e-commerce program in XXXX. to encouraged investments date by to It's shopping in invest store traction. new Colorado compared anticipate making Earlier to our this during taking project continue e-commerce time, summer, pleased position off nice quarter Springs. results e-commerce this when prior any to order that X third completed we're our the is the with a the orders in in

the fourth count We store XXX the which to also close made decision to store during the X bring the will end of year. quarter, the at

business. our about I enthusiastic remain prospects for the

I expect the the the environment. hard we dedication. and With have over great term, their macro doing now the like navigating in we is job I'd to thank believe to the Tile work call Karla. that excellent entire persist for in presented team an headwinds to near that, While team current I'll hand challenges a Shop

everyone. Thanks, Cabby. Good morning,

in and last to the an at partially of by sales lower traffic quarter decreased ticket by levels stores from third of store This comparable year. offset average increase quarter value. due Third was X.X%

quarter year. XXXX the the improvement XX margin point point gross Our from quarter decline gross third compared margin sequentially a a XXX of the basis was quarter in rate which basis to second and XX.X%, last represents during same

subsided, increases is margin if the the and company products partially last was inflationary costs, our increase success The in price sourcing Cabby seemingly continue that year-over-year decrease The implemented in as products mentioned. improvement of we to see sequential at an the believe positioned we well quality is especially margin cost to near pressures term gross have year. by have offset gross over in cost due to the in better

and lower gross most vinyl carry products, products. than back rates our remember products, of tile margin However, it's several our important to of our shelf that like luxury tiles

gross likely increases pressure on luxury put vinyl continued our in over growth items anticipate shelf of sales margin overall will time. We rate and tile back

However, exchange making our gross an we on SG&A improve leverage this it's comfortable fixed as profit should and dollars expenses. increase are

decreases increase quarter $X Third was benefit of to and XXXX not in level recognized the million decreased third compared XXXX offset of expenses. These were a repeated by by third was store $XXX,XXX when marketing the in a million expenses. exit expense decrease onetime and and that The SG&A million shipping and due variable at of quarter quarter decrease partially $X.X million lease $X.X decrease in decrease XXXX. at transportation depreciation expenses a a in a largely and $XXX,XXX $X.X to compensation in

in to capital at to the inventory cost, will inventory million at areas we price working $X.X the levels to continue strong down inventory freight We optimize the sheet. we have levels have replace trend we points. million at purchased inventory as this the Inventory second and We're decreased $XX.X sequentially of higher to of business. In quarter invest as balance other made we continue inventory year the end with the to progress downwards term, third near had a anticipate received by from pleased quarter. this lower

$XX.X of $XX.X the our cash generated flow. to $XX.X the year-to-date to quarter, We million of This of reduce the $XX we the end also balance million million million fund has continued year million. sheet flow. of deliver and to Year-to-date, at operating strong debt the $XX capital at us our grow helped cash expenditures on beginning third from cash outstanding balance

are to pay excess cash We questions. expect With continue to happy term. near the down and use I to Cabby to debt any in take our that,

the Lake you. this Thank Street the Capital Markets. Michaelis Instructions] session. time, At question the question-and-answer from Our we comes [Operator Maxwell with of line conduct first

seeing me. wondering in if in QX maybe maybe any discuss now I then from from what one QX was QX. First could and you trends to consumer changes you're

question. The our be We're This is Thanks with order, line. interest heightened is in average our which -- LVT of decrease continues the still traffic, seeing are we for Cabby. product increasing selling rates, to we're but a great. consumer more the

and a of this lot why And remodels. to other on continuing consumer. tailoring designers while assortment a budget-conscious like our and end that's our stuff that forward to to seeing we're high we're focus design pros So that providing really our more of assortment

with overall, it's But traffic, decreasing Maxwell. surprised rates we're yes, and now. is same, much the not that interest and the been where by So pretty right the at housing

right. All

Next X going for me. been opening It sounds like the has new store well.

in wondering Just new if from there's that learnings any opening Colorado.

smaller Pro customers more a good We and directly with focused there are approach to our our design little on footprint, of retail a a customers. and That's working bit question. forward

good. that chain, smaller We're we're are different with business store the coming our footprint. and a so that to far, we're But the across so and of happy the in to at carefully, of continue results. So remodels with looking segments the experiment that going sales monitoring out

me. inventories comfortable how like A worked where It past over a couple low sounds you're from down to I inventory want of can quarter. just at, sense get get. more this

on we fulfillment XX%, carry watch healthy prices come burn Yes. We order we our continue we a to we to we rate our some inventory is feel inventory customers. for and a more and units customers. and lower as room to of for fulfillment XX% still feel down, have amount our can our What have

still room our closely there on we So is that balance. -- we're monitor and feel to inventory go

me. last X then And Okay. for

want to increase sense Just volume-driven get price-driven. at an over of same-store looking I of or a decline in the quarter, much sales was from traffic how

team it's it's -- up, declines, just think the which the traffic of has declining to mean, I been I our volume due for driven, environment. I I'm mean our outperformed Maxwell. macro proud but pricing executing Yes, is we don't mainly but pricing. is it

You bet.

I remarks. you. questions this back for to to All showing no like would at I Mark now Davis further closing am time. it turn right. Thank

The you We in conference Shop, interest . our Thank and listening a to day. appreciate Tile great for earnings your call. have

conference. for your participation program. you does today's in the conclude This Thank

disconnect. You may now