Tile Shop Holdings Inc. Q1 2023 Earnings Call

Good day and thank you for standing by welcome to the Q1 tile shop Holdings incorporated earnings Conference call.

Time, all participants are in a listen only mode. After the speaker's presentation, there will be a Q and a session.

To ask a question during the session you will need to press star one one on your telephone and you won't hear an automated message visine in your hand is raised to withdraw your question. Please press star one one again please.

Please be advised today's conference call is being recorded.

Right now like to have a conference call over to your speaker today, Mark Davis, Vice President of Investor Relations and Chief Accounting Officer Martin. Please go ahead.

Thank you good morning to everyone and welcome to the task shops first quarter earnings call. Joining me today are Kabloona, our chief Executive Officer, and Carla Bruni, our Chief Financial Officer.

Certain statements made during the call today constitute forward looking statements made pursuant to and within the meaning of the Safe Harbor provisions of private Securities Litigation Reform Act 1995 as amended.

Such forward looking statements or subjects, both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements.

Risks uncertainties are described their earnings press release issued earlier Andean our filings with the SEC.

Forward looking statements made today are as the date of this call and we do not undertake any obligation to update these forward looking statements.

Today's call will also include certain non-GAAP measurements. Please see our earnings release or a reconciliation of those non-GAAP financial measures, which has been posted on our company website with that let me now turn the call over to cat.

Thanks, Mark good.

Good morning, everyone and thank you for joining us today for an update on our business and our first quarter results.

Comparable store sales during the first quarter of 2023 were flat with 2022 during.

During the quarter macro headwinds continued to persist.

Interest rates and swelling housing turnover created challenges across our industry. However, we continue to see steady demand for remodeling projects feedback received from our customers indicated some homeowners are choosing to remodel their homes as opposed to moving.

Many of our pros indicate they still have a healthy backlog of work. Nevertheless, we anticipate macro conditions will remain challenging over the next several quarters <unk>.

<unk> teams continue to make progress against the retail excellent schools are pro sales mix, which includes sales approach and pro referrals was over 70% of our total sales during the first quarter. Additionally, we've made progress improving adoption of best practices at a number of our stores that have underperformed in the past.

While we're making progress in this area, we still have more work in front of us give.

With another team this year.

<unk> excitement, we continued to execute our initiatives during the first quarter. We have identified a number of high quality products that we can stores for a lower price points and suppliers across the mirror. We believe that this effort combined with recent decreases in international freight rates will help offset some of the inflationary price increases we have experienced over the last year.

We're excited about this addition to our assortment and believe that could become a meaningful part of our overall sales mix over time.

With that I'll know hand, the call over to Carla.

Thanks Tabby good morning, everyone.

First quarter sales are comparable stores for flat with 2022, we did see lower levels of traffic during the quarter that was offset by an increase in the ticket average.

Gross margin right during the first quarter of a 64.2%, which equates to its 30 basis point decrease from the fourth quarter.

The sequential decrease in Martinez case, you continued increases in inventory costs.

We value inventory at average cost and typically hold just under a year of inventory on hand.

Average cost, we're still increasing as inventory received landed during the first quarter. We expect costs will start to improve its international freight rates have come down and his lower priced products from our resources initiatives start to work their way into our apartment.

At the same time, it's important to note that we have price or <unk> products competitively and that these products carry on lower gross margin right and <unk>.

We anticipate the acceleration of LPT sales and continued growth the backstop will create a headwind to our overall gross margin right. However, we expect the incremental sales of these products will result in an increase the gross profit dollars and improve our leverage on ethics SG&A expenses.

First quarterstaff, selling general and administrative expenses decreased by $700000 when compared to the first quarter of 2022.

Is $600000 increase in software licenses and a $400000 increase in operating supplies.

Justin EBIT margin rate was 10.1%.

First quarter earnings per share decreased by one penny from seven cents during the first quarter of 2022 to six cents during the first quarter of 2023.

Turning our attention to the balance sheet, our inventory decreased by $5.5 million from the fourth quarter to $115 $5 million at the end of the first quarter.

A majority of this cash was used to reduce our debt, which was $25 million at the end of the quarter.

With that heavy and I was happy to take any questions.

Thank you at this time, we will conduct got a question and answer.

<unk> well we <unk>.

<unk> the Q&A roster.

Our first question comes from Mark Smith from Lake Street.

Yeah, Hey, guys Jacobs up to Mark this morning.

Just looking could you give us any update any additional details on the new store openings this year.

Hey, Jacob Yeah. This is Kevin.

<unk> is going to generate more income, but that's.

Okay.

Maybe you just kind of your balance sheet improvements or solid how how are you guys thinking about returning capital her cash to shareholders via by back or.

Good morning. This is Carla and thank you for your question at this point, we are not planning on any share buybacks or dividends at this point I mean, it's always a consideration.

We are constantly.

Sure Yeah, So we were pretty.

When you look at product costs is outweighed a lot of the product costs over the last at last year. The ocean freight costs was large.