Supply Chains Realign as China Loses ShareThe tariffs that were imposed have transformed global supply chains. The share of U.S. supplier volume from China, Hong Kong, and Korea has dropped from 90% to 50% over the past decade. This shift began during the first wave of tariffs in 2018 and has continued to accelerate since then.Moreover, Vietnam, Indonesia, Thailand, and India have emerged as the biggest winners. These countries now manage a growing share of U.S.-bound production. According to Wells Fargo, s ...

Core 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 $88 million, a decline of 4.1% year over year from $91.7 million [2] - Comparable store sales dropped 4% year over year, attributed to decreased store traffic [2] - Net income fell sharply to $172,000 from $1.7 million in the prior-year period, resulting in diluted earnings per share of $0.00 compared to $0.04 in the prior year [2] Adjusted EBITDA and Margins - Adjusted EBITDA declined 38.4% to $4.6 million, or 5.2% of net sales, down from $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 $183,000 from $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 $57.9 million from $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 $27.1 million in cash, up from $20.9 million at the end of 2024, with no outstanding debt [5] - Operating cash flow totaled $9.9 million in the quarter compared to $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]

Financial Performance - Q4 Fiscal Year 2025 consolidated net sales were $485.9 million, a decrease of 0.7% year-over-year[27] - The gross margin for Q4 Fiscal Year 2025 was 48.6%, a decrease of 40 basis points year-over-year[27] - Adjusted diluted EPS for Q4 Fiscal Year 2025 was $2.33, compared to $2.45 in the prior year[27] - Fiscal Year 2025 net sales were $1.908 billion, a decrease of 4.9% year-over-year[29] - The gross margin for Fiscal Year 2025 was 47.9%, an increase of 60 basis points year-over-year[29] - Adjusted diluted EPS for Fiscal Year 2025 was $7.17, compared to $8.91 in the prior year[29] - Free cash flow for Fiscal Year 2025 was $83.1 million, compared to $269.4 million in the prior year[29] Business Segment Performance - Beauty & Wellness net sales for Fiscal Year 2025 were $1,001.3 million[17] - Home & Outdoor net sales for Fiscal Year 2025 were $906.3 million[17] - International net sales increased by 5.3% in Fiscal Year 2025[21, 29] Strategic Initiatives and Outlook - The company plans to offset 70% to 80% of the tariff impact in fiscal year 2026, based on tariffs currently in place, through supplier diversification[21] - The company estimates that less than 20% of the consolidated cost of goods sold will be exposed to China by the end of fiscal year 2026[23]