Tile Shop(TTSH) ZACKS·2025-05-12 18:10Core Viewpoint - Tile Shop Holdings, Inc. (TTSH) has experienced a significant stock price increase of 14.8% following its Q1 2025 earnings report, outperforming the S&P 500 Index's 0.5% rise during the same period [1] Q1 Performance Snapshot - For Q1 2025, Tile Shop reported net sales of 91.7 million [2] - Comparable store sales dropped 4% year over year, attributed to decreased store traffic [2] - Net income fell sharply to 1.7 million in the prior-year period, resulting in diluted earnings per share of 0.04 in the prior year [2] Adjusted EBITDA and Margins - Adjusted EBITDA declined 38.4% to 7.4 million, or 8.1% of net sales, a year ago [3] - Gross margin improved by 20 basis points to 66% from 65.8%, driven by lower inventory write-offs, partially offset by higher delivery costs [3] Other Key Business Metrics - Total operating income decreased to 2.3 million, compressing the operating margin to 0.2% from 2.5% [4] - Selling, general, and administrative (SG&A) expenses declined 0.3% year over year to 58 million, primarily due to a decrease in depreciation and costs associated with the closure of a distribution center [4] Cash Position and Capital Employed - Tile Shop ended the quarter with 20.9 million at the end of 2024, with no outstanding debt [5] - Operating cash flow totaled 18.6 million in the year-ago period [5] - Pretax Return on Capital Employed fell to 1.2% on a trailing 12-month basis, down from 11.3% a year earlier [5] Management Commentary - CEO Cabell Lolmaugh noted the impact of low housing turnover and macroeconomic headwinds but emphasized a focus on improving customer experience and managing costs [6] - The increase in tile volume sold was attributed to an expanded product assortment, particularly entry-level options and luxury vinyl tile [6] Supplier Diversification Strategy - The company sources from over 25 countries, which is expected to help navigate increased tariffs on certain imported goods [7] - Partnerships with domestic manufacturers are being developed to offset some international sourcing risks [7] Product Mix and Average Ticket Values - Despite a shift in product mix, the company maintained average ticket values due to stronger volumes [8] - New engineered hardwood and laminate products, along with large-format tiles, contributed positively [8] Factors Influencing Financial Performance - The decline in net sales and earnings was primarily driven by lower store traffic and the absence of an extra sales day that benefited the prior-year quarter [9] - The company maintained average ticket size by offsetting lower average selling prices with increased tile volumes [9] Guidance - Tile Shop did not provide formal financial guidance but expressed confidence in the spring selling season and the effectiveness of its inventory strategy and global supplier diversification [11] Other Developments - The company subleased its New Jersey distribution center, expected to yield $2 million in income, with half benefiting SG&A expenses in 2025 [12] - Tile Shop expanded its design collaboration with Alison Victoria to differentiate its product portfolio [13]