Hamilton Beach(US:HBB)2019-08-05 03:35Financial Data and Key Metrics Changes - Hamilton Beach Brands reported revenue of $130.9 million in Q2 2019, down from $135.9 million in Q2 2018, attributed to lower sales in U.S. consumer and global commercial markets, partially offset by growth in international consumer markets [9] - Gross profit margin decreased to 21.2% from 22.4% due to higher inbound freight costs and unfavorable currency movements [10] - Consolidated revenue was $148.4 million compared to $157.9 million last year, reflecting decreases in both segments [30] - Consolidated net loss was $944,000 or $0.07 per diluted share compared to a net loss of $874,000 or $0.06 per diluted share for Q2 2018 [33] Business Line Data and Key Metrics Changes - Hamilton Beach Brands' operating profit was $3 million compared to $4.2 million in the prior year, primarily due to lower revenue [10] - Kitchen Collection's revenue was $18.3 million, down from $22.8 million last year, with an operating loss of $3.2 million compared to $3.8 million in Q2 2018 [25] - Kitchen Collection's gross profit margin was 43.8%, down from 45.6% last year, mainly due to higher inbound freight costs [26] Market Data and Key Metrics Changes - E-commerce sales increased significantly over last year, with Hamilton Beach Brand being the number one in U.S. e-commerce for small kitchen appliances [21] - International sales grew in Q2 and are expected to continue growing, with expansion efforts in South America, China, and India [23] Company Strategy and Development Direction - The company is focusing on six strategic initiatives to enhance market position and financial performance, including expanding geographically and increasing share in the Only-the-Best segment of the small kitchen appliance market [16][19] - The company plans to introduce over 80 new product platforms in 2019, with significant emphasis on innovation [14] Management's Comments on Operating Environment and Future Outlook - Management expects a stronger second half of 2019, driven by successful placements and promotions, with a focus on e-commerce to offset any potential softness in brick-and-mortar sales [12][42] - The company is reaffirming its full-year outlook, expecting moderate revenue growth and increased operating profit compared to 2018 [40] Other Important Information - The company has reduced its store count to 162 as of June 30, 2019, with plans for further closures [27] - Capital expenditures are expected to be approximately $4.5 million, primarily for ERP system development and new product tooling [40] Q&A Session Summary Question: Have you stopped disclosing free cash flow by segment? - Yes, the company has stopped disclosing free cash flow by segment [49] Question: What are your expectations for each brand for the second half? - Free cash flow for Hamilton Beach Brands is expected to be approximately or above the $20 million target [50] Question: What about Kitchen Collection's free cash flow expectations? - Improvement is expected compared to the prior year for Kitchen Collection [52] Question: What do you expect to do with the proceeds from free cash flow? - Proceeds will be reinvested in initiatives, fund dividends, and potentially used for acquisitions [55] Question: How do tariffs impact your business? - Current tariffs affect around 10% of revenue, but the company has mitigated the impact through pricing adjustments [61] Question: What is the inventory situation in the channel? - The company is not loaded with inventory and expects strength in the e-commerce channel to continue [64] Question: What is the strategy for Kitchen Collection? - The company is managing the Kitchen Collection business prudently, focusing on lowering rental rates and enhancing profitability [88] Question: Will the number of Kitchen Collection stores continue to decrease? - The company is assessing store performance and will adjust the number of stores accordingly [90]