Tile Shop(US:TTSH)2023-05-06 21:08Financial Data and Key Metrics Changes - Comparable store sales during Q1 2023 were flat compared to 2022 [4] - Gross margin rate for Q1 2023 was 64.2%, a decrease of 30 basis points from the previous quarter [8] - Net income for Q1 2023 was $2.5 million, with adjusted EBITDA at $10.3 million and an adjusted EBITDA margin rate of 10.1% [10] - Earnings per share decreased by $0.01 from $0.07 in Q1 2022 to $0.06 in Q1 2023 [10] - Inventory decreased by $5.5 million from the previous quarter, totaling $115.5 million at the end of Q1 [11] Business Line Data and Key Metrics Changes - Pro sales mix, which includes sales to professionals and referrals, accounted for over 70% of total sales in Q1 [5] - Sales of LVT (Luxury Vinyl Tile) products are gaining momentum, with an expanded line launched in Q4 2022 [6][7] - Clearance item sales increased due to improved visibility on the website [6] Market Data and Key Metrics Changes - The company faced macro headwinds such as rising interest rates and slowing housing turnover, impacting the overall industry [4][5] - Despite challenges, there is steady demand for remodeling projects as homeowners opt to remodel rather than move [4] Company Strategy and Development Direction - The company has decided to delay the opening of a second new store in 2023 due to the challenging macro environment [5] - Focus on improving retail excellence and adopting best practices in underperforming stores [5] - The company is sourcing high-quality products at lower price points to offset inflationary pressures [6] Management's Comments on Operating Environment and Future Outlook - Management anticipates that macro conditions will remain challenging over the next several quarters [5] - There is optimism regarding the reduction in freight costs and the potential for improved margins as lower-cost products are introduced [15][16] - The company aims to reduce debt and generate cash before considering returning capital to shareholders [13][14] Other Important Information - Selling, general, and administrative expenses decreased by $700,000 compared to Q1 2022, attributed to various cost reductions [9] - The company generated $25.8 million in operating cash flow during the quarter, primarily used to reduce debt [11] Q&A Session Summary Question: Update on new store openings this year - The company is on track to open a new store in June or July but has delayed the second new store due to macro headwinds [12] Question: Thoughts on returning capital to shareholders - Currently, there are no plans for share buybacks or dividends, with a focus on controlling SG&A and improving results [13] Question: Discussion on inflationary pressures and product costs - Management noted a reduction in freight costs and is optimistic about rebounding margins as lower-cost products are introduced [15][16]