LL Flooring Reports Fourth Quarter and Full Year 2023 Financial Results

Core Insights - LL Flooring Holdings, Inc. reported challenging business conditions in Q4 2023, with comparable store sales down 19.6% due to weak existing home sales and lower consumer spending [1][2][3] - The company remains optimistic about long-term fundamentals driven by aging housing stock, increased household formation, and rising home values, despite short-term economic challenges [2] Financial Performance - Q4 2023 net sales decreased by 19.7% to $211.8 million compared to the same period last year, with total comparable store sales down 20.2% [3][5] - Gross margin improved by 270 basis points to 38.6%, while adjusted gross margin increased by 260 basis points to 38.3%, mainly due to vendor cost reductions and lower transportation costs [3][5] - SG&A as a percentage of net sales rose by 430 basis points to 46.8%, reflecting expense deleverage from lower sales volumes [3][5] - The operating margin loss increased by 170 basis points to 8.3%, with adjusted operating margin loss rising by 550 basis points to 8.6% [3][5] - Loss per diluted share increased by $0.09 to $0.62, while adjusted loss per diluted share rose by $0.35 to $0.64 compared to the previous year [3][5] Full Year Overview - For the full year 2023, net sales decreased by 18.5% to $904.7 million, with total comparable store sales down 19.6% [5][6] - Gross margin decreased by 40 basis points to 35.7%, while adjusted gross margin increased by 140 basis points to 37.5% [5][6] - SG&A as a percentage of net sales increased by 740 basis points to 44.6%, with adjusted SG&A rising by 820 basis points to 44.5% [5][6] - The operating margin loss for the year increased by 780 basis points to 8.9%, with adjusted operating margin loss rising by 680 basis points to 7.0% [5][6] - Loss per diluted share for the year increased by $3.17 to $3.59, while adjusted loss per diluted share rose by $2.84 to $3.01 [5][6] Cash Flow and Liquidity - As of December 31, 2023, the company had liquidity of $118.2 million, consisting of $109.4 million in excess availability under its credit agreement and $8.8 million in cash and cash equivalents [8] - The company generated $21.3 million in cash flows from operating activities during 2023, primarily due to effective inventory management and cost-saving initiatives [8] 2024 Business Outlook - The company anticipates continued challenges in home improvement spending through at least the first half of 2024, with no financial guidance provided at this time [9] - Adjusted gross margins are expected to maintain year-over-year, driven by potential reductions in transportation costs [9] - SG&A dollar spend and as a percentage of sales are expected to increase year-over-year due to lower net sales while investing in strategic initiatives [10] - Capital expenditures of approximately $15 million are planned for 2024, primarily related to strategic initiatives and maintenance investments [10]