Tile Shop(US:TTSH)2025-11-04 21:50Financial Performance - Comparable store sales decreased by 1.4% and 3.0% during the three and nine months ended September 30, 2025, respectively, due to lower levels of traffic in stores [95]. - Net sales for the third quarter of 2025 decreased by $1.4 million, or 1.7%, compared to the third quarter of 2024, with comparable store sales down by 1.4% due to decreased traffic [108]. - For the nine months ended September 30, 2025, net sales decreased by $8.3 million, or 3.1%, compared to the same period in 2024, with comparable store sales down by 3.0% due to decreased store traffic [112]. - Net loss for the nine months ended September 30, 2025, was $1,050,000, compared to a net income of $2,949,000 for the same period in 2024, representing a significant decline [121]. Gross Margin and Profit - Gross margin rate decreased by 360 basis points to 62.9% during the third quarter of 2025 compared to 66.5% during the third quarter of 2024, primarily due to increased product costs and higher levels of discounting [96]. - Gross profit for the third quarter of 2025 decreased by $3.9 million, or 7.0%, with a gross margin rate of 62.9% compared to 66.5% in the same quarter of 2024, primarily due to increased product costs and higher delivery expenses [109]. - Gross profit for the nine months ended September 30, 2025, decreased by $9.7 million, or 5.5%, with a gross margin rate of 64.5% compared to 66.1% in the same period of 2024 [113]. Expenses and Cost Management - Selling, general and administrative expenses decreased by $1.7 million, or 3.1%, from $56.0 million in the third quarter of 2024 to $54.2 million in the third quarter of 2025 [98]. - Selling, general, and administrative expenses for the nine months ended September 30, 2025, decreased by $4.0 million, or 2.3%, compared to the same period in 2024, due to various cost reductions [115]. - The closure of the Spring Valley, WI distribution center is expected to yield an annualized benefit of approximately $1.0 million [100]. - The Company is evaluating strategic options to manage anticipated cost pressures due to U.S. trade policy changes, including elevated tariffs [91]. Cash Flow and Capital Expenditures - Net cash provided by operating activities was $11.3 million for the nine months ended September 30, 2025, down from $28.5 million in 2024, attributed to a decrease in net income [131]. - Capital expenditures were $7.9 million for the nine months ended September 30, 2025, a decrease from $11.8 million in 2024, primarily due to investments in store remodels and technology [128]. - Cash and cash equivalents totaled $24.1 million at September 30, 2025, an increase from $21.0 million at December 31, 2024 [134]. Stock and Financing - The Company plans to implement a reverse stock split at a ratio not less than 1-for-2,000 and not greater than 1-for-4,000, subject to stockholder approval [85]. - Approximately 1,307,000 shares of common stock are expected to be cashed out in the Reverse Stock Split based on a mid-point ratio of 1-for-3,000 [85]. - The company had no borrowings outstanding on its line of credit as of September 30, 2025, with $73.8 million available for borrowing [125]. - The Credit Agreement provides a $75.0 million revolving line of credit, with interest rates ranging from 1.25% to 1.75% based on the Rent Adjusted Leverage Ratio [123]. Tax and EBITDA - The effective tax rate for the nine months ended September 30, 2025, was 18.7%, down from 27.9% in 2024, primarily due to a decrease in taxable income [116]. - Adjusted EBITDA for the third quarter of 2025 was $2.0 million, or 2.5% of net sales, compared to $5.0 million, or 6.0% of net sales, in the third quarter of 2024 [120]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $11,543,000, which is 4.5% of sales, down from $19,194,000 or 7.2% of sales in 2024 [121]. Company Operations - The Company operated 140 stores in 31 states and the District of Columbia as of September 30, 2025, with an average store size of approximately 20,000 square feet [93]. - Standby letters of credit totaled $1.2 million as of September 30, 2025, related to workers' compensation and medical insurance policies [125].