Lifetime Brands Inc. Q1 2023 Earnings Call
Good morning, ladies and gentlemen, and welcome to lifetime Brands' first quarter 2023 earnings conference call.
At this time I would like to inform all participants that their lines will be on a listen only mode.
After the Speakers' remarks, there will be a question and answer period, if we'd like to ask a question. During this time. Please press star one on your telephone keypad I would now like to introduce your host for today's conference Andrew Squire. Mr. Squire you may begin.
Thank you.
Good morning, and thank you for joining lifetime Brands' first quarter 2023 earnings call with US today from management are Rob Kay Chief Executive Officer, and Larry <unk>, Chief Financial Officer.
Before we begin the call I'd like to remind you that our remarks. This morning may contain forward looking statements that relate to the future performance of the company and these statements are intended to qualify for the safe Harbor protection from liability.
<unk> by the private Securities Litigation Reform Act any such statements are not guarantees of future performance and factors that can influence. Our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission.
Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments, except as required by law. The company does not undertake any obligation to update such statements. Our remarks. This morning and in today's press release also contain non-GAAP financial measures within the meaning of regulation G promulgated by the securities.
And Exchange Commission included in such release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP.
That introduction I'd like to turn the call over to Rob Kay. Please go ahead Rob.
Thank you.
Good morning, everyone and thank you for joining us.
In line with our expectations our results for the first quarter 2023 continued to be impacted by a combination of macroeconomic and industry specific challenges that remain in factor facing the consumer durables industry.
It is important to note that our market shares have remained stable and in fact, we are slightly gained share in our largest categories, including kitchen ware kitchen measurement and bad scale.
And in terms of absolute dollars in food storage.
While we expect industry headwinds.
Mhm to remain we will continue to take actions to best position ourselves during this period of economic uncertainty.
As we will discuss further today, we continue to successfully navigate the economic and industry specific challenges.
Our wide array of actions, including balance sheet management.
Disciplined control of our cost structure.
A disciplined and choice for pursuit of investment opportunities such as our foodservice initiative and year end day and.
And a major restructuring of our international operations.
These actions will yield short term benefits.
But more importantly, physicians lifetime favorably for long term growth and improved profitability.
In the first quarter, we delivered $145 $4 million in net sales compared to $182 7 million.
In the same period last year.
Over the last 12 months, we have generated adjusted EBITDA of $15 $8 million.
I've discussed these results were driven by the ongoing macro and industry challenges, including the continued impact of reduced ordering from our largest customers due to inventory rebalancing by retailers.
However, lifetime once again performed well in comparison to the market and our industry peers.
Let me now turn to our core U S business.
As we discussed on our fourth quarter call.
Retail is a cross channel continued to evaluate their inventory and distribution strategies with a focus on rebalancing stock levels. Some ordering patterns that were altered by the recent global supply chain crisis.
Further in response to current economic pressures.
Many of our largest retailers have been reducing stock levels and in some cases pause orders completely in the first quarter.
Leading to softer shipments of products to our customers.
It's important to know that this slowdown has been felt across the industry and it's not unique to lifetime.
In recent weeks, we've begun to see an increase in demand.
With a pickup in order flow from many of our customers and we remain optimistic that purchasing levels will normalize in the coming quarters.
While this trend related to customer inventory levels is encouraging.
We believe that the general economic environment, we will continue to remain unfavorable and consumer spending will continue to be challenged.
Due to inflationary and recessionary pressures in many of our end markets.
We have also maintained a focus on profitability and not volume, which can be seen in our gross margin percentage, which is improved despite pricing pressures that exist among retailers in response to the normalization of supply chain cost this year.
While we have not seen any retail price reductions.
Wholesale unit prices have declined we did we would expect this to have a positive impact on point of sale. Once these price reductions get passed along to consumers.
Now turning to our international business.
Our international business stabilized in the first quarter driven by the impact from the restructuring of our Europe based international operations that we completed at the end of 2022.
Which has had an immediate and positive impact on our bottom line.
Consistent with our international strategy, we continued to solidify our international positioning which was driven by the benefit of our direct go to market strategy.
The rollout of kitchenaid to more markets and implementing our new go to market strategy in Australia, and New Zealand.
Starting with kitchenaid.
As a reminder, we expanded kitchenaid to international markets by 2021 and focus on building out distribution throughout last year.
We have seen tremendous consumer enthusiasm for kitchenaid products whenever we have introduced the brand internationally and as a result, we are gaining incremental distribution channels to sell more kitchen aid products to a wider array of retailers in Europe , many of whom have already begun ordering from us.
We believe that this addition to our international product offering.
Or serve as a catalyst to increase our distribution among major retailers in Europe and other international markets.
In Asia Pacific, which is our second largest international region behind Europe .
We are seeing immediate benefits from the changes we have made to our go to market strategy in Australia and Israel.
Consistent with our direct selling go to market strategy that we are implementing across most major markets.
By eliminating third parties, who only solely limited assortment. We are now able to sell all of our products and add an increased margin.
We expect this to have a positive impact on sales in the back half of the year with even more opportunities to increase sales in 'twenty 'twenty four.
To an even greater degree than in our core U S business.
We expect macroeconomic factors to continue to impact our international business, most notably in the U K.
We believe the actions we have taken to restructure our European operations expand our offerings and revamp our Asia Pacific go to market strategy will position the business well for long term growth.
Xiaowei favorable improvement in contribution margin in 2023 and become profitable in 2024.
Given the continued significantly depressed consumer environment in Europe , we don't anticipate seeing a significant impact to the top line until 'twenty 'twenty four.
While the environment remains challenging I'd like to now touch on a few areas of business, where we do anticipate growth in the near term.
The first is our foodservice business, which consists of mikasa hospitality for front of the house products and tailored malware used in professional kitchens.
These end markets have been relatively unimpaired by macroeconomic trends.
Our foodservice business continues to gain traction and Mcarthur hospitality is now recognized as a player in the industry and no longer considered a startup brands.
We expect foodservice to reach nearly $30 million in revenues by the end of 2023.
And we continue to see this as a potential 60 million dollar business by 2026.
We remain excited about the long term potential of our expansion into commercial foodservice because of the consistent recurring revenue characteristics of the business.
We are also building momentum in year on that.
Which we will soon be expanding into the wholesale channel, which we view as critical to digitally native brands in response to the change in acquisition cost of customers driven by algorithmic and iOS changes that are material in materially impacted ecommerce sites over the past year.
And a half.
With this initiative combined with our efforts, we expect ear and day sales to grow more than 90% year over year.
In E Commerce, our direct to consumer sites have performed well and grew 18, 6% year over year.
Our model has proven successful and we have maintained a positive contribution margin since 2021.
While our total e-commerce business was relatively flat at 18, 7% of himself.
The overall E Commerce business was down 22, 6% in dollars.
<unk> to 2022.
As a result of Amazon our largest pure play e-commerce customer.
The purchasing in the quarter.
Again this trend concerning Amazon shipments is not unique to lifetime, and it's impacting most vendors who sell products on Amazon.
Uh huh.
I would like to inform everyone of some steps we have taken as part of our strategy to diversify diversify our supply chain and reduce exposure to China.
We are in the process of acquiring manufacturing operations, which does business as a maquiladora under the IMAX program in Mexico.
This acquisition will allow lifetime to manufacturers some of our plastic molded kitchenware products in Mexico, and import them to the U S duty free.
We closed this transaction on may 3rd and it is our expectation that the facility will be fully online in 2023, enabling us to begin a process.
A greater volume of products are either made or sourced in Mexico.
As we continue navigating these uncertain times.
We remain focused on executing on our growth initiatives.
Moving inefficiencies and costs from the business.
To that end, we are starting to see the benefits of our UK restructuring, which we expect to generate $2 $3 million of cost savings by the end of the year.
We have also eliminated several senior management positions in our corporate structure generating savings of $1.3 million.
Looking ahead, we are taking a phased approach to the rest of the business and expect to eliminate another one $5 million of cost during the second quarter.
And we have also developed additional levers we can pull as the year progresses.
We expect these actions to have an immediate impact on our bottom line and also favorably position the company for 2024.
Yes.
On that note, let me now turn to our financial guidance.
We issued our full year guidance for 2023 in our press release this morning.
To recap, we expect a top and bottom line to be down in 2023, driven by the assumption that lower end market demand will persist throughout the year as a result of inflation dampening the market.
Continued stress on the consumer.
And the recessionary environment, both internationally and in the U S.
Again these issues are not unique to lifetime.
We are confident in the resilience of our business model I mean, the actions we are taking to position ourselves for growth next year.
I also wanted to point out that we have written off all exposure to bed Bath and beyond.
It was nearly all related to private label dinnerware.
This was a charge of approximately $1.5 million in the first quarter related to our open accounts receivable balance.
And our 2023 guidance assumes no sales to bed Bath and beyond.
Before I turn the call over to Larry I want to touch on our balance sheet.
At the end of last quarter, we were at our highest level of liquidity in our history, and we increased that by $5 million in the first quarter of 2023.
Larry will speak more about our balance sheets and liquidity as well.
Given the strength of our balance sheet, we continue to evaluate value enhancing opportunities, including M&A as a potential avenue for accretive growth.
However, given the current economic environment, we expect to focus more on deleveraging in the near term.
And we will be conservative with how we deploy capital.
But as always we will be prudent and operative opportunistic should the right transaction arrives and.
And take actions that we believe to be in the best interest of our shareholders.
Once again, our business model has proved resilient and the.
Dziedzic actions, we have taken have positioned us well to grow in 2024.
Our position in the markets, we serve remain strong and our recent data from Chicago, formerly NPV.
Validates this.
The lifetime to Porno transformation, which we began in 2018.
Has created a solid foundation for the company to weather difficult economic environments, such as the one we're in now.
Our efforts to produce a leading portfolio of strong recognizable brands.
With a multi channel growth opportunities.
[noise] develop opportunities in adjacent durables categories to provide us with above end market growth rates.
Build a best in class innovation engine to strategically drive growth.
Implement a more focused and efficient global platform with scale and enhance operational effectiveness.
And generate strong cash flow to enable financial flexibility.
Have positioned the company well for the future.
We are confident that tremendous progress we have made over the past several years to transform the business.
US to achieve our long term goals as we effectively managed with current and future challenges.
Our entire team remains laser focused on executing on our objectives and I am thankful for their continued efforts and hard work.
With that I'll now turn the call over to Larry.
Thanks, Rob.
We reported this morning, our net loss for the first quarter of 2023 was $8 $8 million or <unk> 41 cents per diluted share compared to net income of 400000 or <unk> <unk> per diluted share in the first quarter of 'twenty two.
The net loss was $2 $6 million for the first quarter of 'twenty, three or 12 cents per diluted share as compared to adjusted net income of $4 $1 million or 18th cents per diluted share last year.
Cash from operations was $1 8 million in the first quarter of <unk>.
23, as compared to income from operations of $4 4 million last year.
Adjusted net income.
Justice, giving adjusted income from operations for the first quarter of 'twenty, three was $3 4 million compared to $10 2 million last year adjusted EBITDA for the trailing 12 month period ended March 31, 2023 was $50 8 million before of limitations.
Beginning in the first quarter of 2023.
For all periods presented our adjusted net income or loss and adjusted income from operations excludes acquisition intangible amortization. We believe this presentation provides useful information to stakeholders regarding financial results and trends and provides additional perspective regarding the impact will be amortized.
Interest expense on applicable income and earnings per share measures.
Adjusted net income or loss adjusted income from operations and adjusted EBITDA, a non-GAAP financial measures and are reconciled to our GAAP financial measures in the earnings release.
Following our comments for the first quarter of 2023 versus 2022 unless stated otherwise.
Consolidated sales declined by 24%.
2022, it's.
As Rob discussed macroeconomic and industry specific challenges negatively affected the consumer durable industry.
The U S segment sales decreased by 19, 7% to $133 5 million to.
The decrease occurred in <unk>.
All product categories.
This was attributable to slowing replenishment orders as retailers reduced their safety stock in weeks of supply on hand.
In addition, consumer spending reduction has reduced the overall market size.
Debated the decline in retailers ordering.
International segment sales were down by 28% to $11 9 million, but 18% on a constant U S. Dollar basis. The decrease was driven by similar factors noted for the U S.
Consolidated gross margin percentage increased 37% from 34, 5%.
For the U S segment gross margin increased to 36, 6% from 34 seven b.
The improvement was due to lower inbound freight costs and favorable product mix for international gross margin increased to 42% from $32 seven.
Improvement reflected higher selling prices implemented in late 2022.
Lower inbound freight costs.
Also lower duty on goods from EU customers now imported to our UK distribution facility in the Netherlands, rather than the U K and the benefit of foreign exchange hedging gains.
So the U S distribution expense and some such as a good shipped from its warehouses were 10, 5% versus nine 9% last year.
The increase was driven by lower shipment volume, resulting in under absorption of fixed expenses higher inventory storage costs and higher real estate taxes.
This increase was partially offset by a decrease in power and other warehouse supply expenses.
International distribution expenses as a percentage of goods shipped from its warehouses were 24% versus 21, 7% last year.
The increase was due to lower shipment volume, partially offset by low cost of shipments to EU customers customers, which should now ship from the Netherlands.
Selling general and administrative expenses declined to $37 9 million in 2023 from $39 5 million last year.
U S segment expenses increased by 800000 to $29 3 million due to the higher allowance for doubtful accounts related to bed Bath and beyond.
Actually offset by integration costs with swell that were incurred in the prior year.
For International F G and H expenses decreased by $1 5 million to $3 6 million.
Lower foreign currency exchange losses, and lower employee expenses the reduction in employee expenses was a result of restructuring actions implemented in the fourth quarter of last year.
Unallocated corporate expenses decreased by 900000 to $5 million and lower stock compensation expenses legal and professional fees and reduced salary for our executive chairman during his transition employment contract period, which ended on March 31.
In the 2023 period, we recorded $800000 for restructuring expense related to a contract termination payment for our executive chairman pursuant to the transition of appointment.
Period.
Interest expense increased by $1 5 million due to a higher so for base rate on our variable rate debt.
For taxes in the first quarter income tax benefit rate of 18% differs from the federal statutory rate of 21%, primarily due to state and local income.
Our local tax expense the impact of non deductible expenses and foreign losses for which no tax benefit is going to be nice.
Related to group about Estonia, our 24% owned investors the company recorded a loss of $700000.
'twenty three period versus 400000 last year.
City versus earnings of 400000 last year <unk> results were negatively affected by its aluminum business in the first quarter. We also recorded a noncash impairment charge of $2 1 million to write down our investment in basketball.
This charge was prompted by a decline in its public trading price below our carrying value.
The carry value of the company's investment after the recorded impairment.
$10 4 million.
And looking at our debt liquidity notwithstanding the current challenges I'm pleased to report our liquidity released an all time high of approximately $205 million at March 31.
This was comprised of $41 million of cash and cash equivalents plus availability under our credit facility and receivable purchase agreement.
In this difficult and uncertain business climate, we are especially focused on continuing to maintain a strong liquidity position.
And take appropriate action to generate positive cash flow.
Our primary capital allocation priorities are to support our current businesses and Delever our balance sheet.
Quarter end, our net debt was $225 $5 million and leverage ratio was four four times.
Reported in our release. This morning, we are issuing financial guidance for the full year of 2023 as follows net sales of $662 720 million adjusted income from operations of 41, and a half to 46 and a half million adjusted net income of $12 five.
$15 million and adjusted EBITDA of $50 million to $55 million.
This concludes our prepared comments operator, please open the line for questions.
Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session.
To answer your question you May press Star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star team.
Our first question comes from the line of Linda Bolton Weiser with D. A Davidson. Please proceed with your question.
Yes, hi.
Several questions.
First you.
You mentioned in the beginning of your remarks, Rob that something about.
Price decline well it wasn't quite understanding that are you talking about rolling back some of the price increases you made previously or are you talking about promotions or mix or what were you referring to there.
Yeah.
The prices of goods that were selling to retailers we lowered.
Lowered.
So you could call it rollback of the increased prices that were passed through when the supply chain.
Costs were very very high so ASIC lowered retailers, we're looking for those money and to date those have not been passed through to the consumer.
We do expect that to ultimately happen, which would lower retail prices, which.
Should benefit the end market demand.
So just to be clear, you're saying the <unk>.
Previous price increases were never pass through.
Now, you're giving back some price to the retailer because they never pass that really bad.
Technically no takeaway, we didn't give back the increase we chalk, but that's what it's related to so we did pass through increases as was discussed.
During the supply chain crisis in this environment as the particularly ocean freight costs.
Way down.
Retails are aware of that they've been looking to get price discounts to the products. They buy is resolved and we can go into a negotiation.
So we have passed through already.
These price decreases.
Yeah.
Yeah, Yeah, you did but I guess.
Some of the other companies I follow yes, like freight and even plastic resin is down a lot but companies are talking about other costs still being quite escalated.
Other cost inflation component so they haven't.
Some companies are actually still taking price increases so I guess I'm, a little surprised about what you're saying.
Okay I understood though.
Yeah, I mean, there's a lot of.
And minuses, but as you see even with these price increases our overall margin is up so we're getting the benefit.
Not passing through everything but ocean freight is down and that's what they're really looking for compensation for not just from us from everyone in our industry.
According to <unk>.
We were recently at the board of the IHA, which is most of the people in the industry.
Everyone is saying the same thing. So this is what we're seeing in consumable consumer durables.
And it's not blanket.
It's select.
But there have been reductions which are already in our numbers that we've given.
Retail office.
I'm not sure what the other people are telling you, but the people we're competing against in our categories are doing the same thing too.
To our knowledge.
Okay.
Alright.
So just a couple of real quick ones how much in revenue in 2022 did you have two bed bath and beyond.
It's about 1% of our business maybe.
Seven 7 million.
Okay.
And then.
And the Mexican manufacturing.
Like a good thing.
One well.
Let's be ready to be started shipping into the U S.
And when would we see some maybe margin improvement related to it.
What categories is that manufacturing going to be in.
So it's all in kitchenware.
It's not a very big facility.
And our main goal in this transaction is twofold, it's to establish a beachhead in Mexico.
And once we're physically with a presence there as a manufacturer it will greatly facilitate our ability to source effectively there in addition to manufacturing our own products.
And this is related to our strategy, we've been working on to Derisk, our dependence upon China and de risked the political risk and the interruption risk should there be conflict between the U S and China or should that escalate I should say.
So in terms of margin enhancement.
We're not counting on that today, particularly in an environment, where ocean freight rates now are at almost at historic lows quite the opposite it's boomerang.
And that'll normalize it it can't remain this well.
So our goal is to basically remain neutral.
We do eliminate the manufacturing margin right because it's not a third party manufacturer there and Ah. We just closed on the transaction, we have to ramp up production and that will ramp up throughout 2023 and be at full capacity towards the end of the year.
Okay.
And then.
The year end.
So that would be a really big increase in revenue as you go wholesale what what would be the base and sounds like is it like just a few million dollars like how big is that yeah, it's such a big increase percentage wise, 90%, because we are getting traction, but also at a very low base right. So I'm still very low single digits.
But I think it's important we're trying to make there is digitally native.
Brands need to go wholesale that's what we're good at we're taking them all shale, it's a good opportunity we're getting good.
Good feedback and direction.
No.
It was an incubation investment and we're showing you the path to get it to positive contribution.
Okay.
And then my last question is just a clarification on the cost savings you had mentioned a couple of things.
2.3 million is that the total cost savings and then you mentioned a couple of other things.
The other thing that was allowed.
Good.
Yeah.
All individual which would be added together I think I mentioned three in particular the U K.
Corporate position elimination and then the third bucket is.
Just that's just out of the U S business, our cost spend that we're eliminating.
So those are three different buckets.
So add them all together.
Yeah, So it's like $5 million roughly.
Roughly yes.
Hey.
Okay. That's it for me, Thank you and good luck with everything.
Thanks Ben.
Our next question comes from the line of Brian Mcnamara with Canaccord Genuity. Please proceed with your question.
Yeah.
Alright, thanks for taking the question guys.
First the midpoint of your sales guidance implies sales for the balance of the year will be roughly flat how should we think about the cadence of sales growth for both Q2 and H Stewart as Q2, another down and then and then where we're flatlining or any any color there would be helpful.
Sure.
So we wouldn't pick up momentum in the second half of the year Q.
Q3 and Q4.
So I would expect the seasonality to be.
Similar to.
Traditional years last year not being introduced.
Got it.
And then second I guess.
Your sales guidance at the midpoint it falls below 2019, and 2018 levels. In 2018 only included 10 months of element you mentioned end market demand is lower but is it below kind of 18 and 19 levels is that a fair way to kind of look at it.
Yeah.
I mean, it hasn't been talked about if you look at it and not just the data from certain Conor, which was a combination of MPD and our IRI our market share actually include increased a quarter point.
So we are not expecting a pick up until 2024, driven by where the market is.
Which is kind of flat to 19.
Yeah.
Okay.
Is it fair to say the current headwinds are temporary like how low could retailers go with inventories I mean, it was something like unprecedented for you guys.
I mean, you've been around a while.
So just to emphasize what we were trying to say is we've seen a lot of inventory rebalancing.
Continued and in.
The first quarter, but what we're also seeing an which is incorporated in our guidance is.
Recessionary and inflationary impacts, which are hurting and market demand.
So we saw last year, a big gap between the P. O S data so the sell through and sell it. So our shipments did not match that which is not a sustainable situation.
That is normalizing and we're seeing that Amazon it had it normalize and they had a lot of.
Capacity and they've been very public about paring back their warehouse capacity.
And sites and their growth.
Additional warehouse capabilities. So we are they stop.
Orders for a good part of the first quarter, we've seen that as an example pick up.
Not just in the U S.
It's our single biggest customer in Europe , where we saw the same trend and we're starting to see a pick up because ultimately right you need to sell goods.
Brian Let me clarify something I don't have all the details in front of me, but your comment about sales being lower than they were in 18, So you've got a separate U S and international.
I suspect you can see its own international for two reasons because of the restructuring we did getting out of private label unprofitable private label in the U K and U K you know the pound's got crushed in terms of.
Street rates versus the dollar and it was something.
2018, probably back in 2018 was more like one.
140.
So top of my head, but it could go drill then I think you got to look at the U S or the U S. Second is got below 19.
And as Larry pointed out we walk away before you started following us we walked away from a fair amount of unprofitable business.
Alright.
Just trying to figure out like what's like a normalized kind of level going forward. If you talk to us. It feels like your business is still pretty depressed me, Mike we're going to kind of jump ball that crush level at some point is that fair to kind of thinking about it that way.
At some point absolutely.
It will be back and we will benefit significantly from that.
It didn't.
What are you know we were more conservative in our guidance that we put out for the year.
When the market bounces back if it bounces back sooner then we've incorporated in.
Our guidance, we will benefit as others will.
Well.
Got it and can you comment on in stock levels in some of your larger customers are you still kind of below where you've been historically or are you kind of caught back up relative to kind of where you were in the back half of last year.
Is improved we are a little below and also with a lot of the major guys. They also cut their levels due to economic concerns right.
Cut back a bit that's one time obviously.
Ultimately you know, whereas you stepped down.
Stop and shipments, but then it picks up but our in stock levels with our major customers.
Have are much closer to normal than they were last year, but not quite there.
Alright, that's all for me. Thanks, a lot guys. Thanks a lot.
Right.
As a reminder, its star one to ask your question. Our next question comes from the line of Anthony <unk> with Sidoti. Please proceed with your question.
Good morning, and thank you for taking the questions. So mostly a question of in terms of your guidance for revenue. If we take the midpoint of the revenue guide is roughly $690 million. So that implies roughly a 5% decline from 'twenty to 'twenty two.
I know a small portion of that is related to bed bath <unk> beyond but beyond that.
Just wanted to get a better sense as to how much of that.
Dissipated revenue decline is because of pricing.
Decreases of Rollbacks are versus unit volumes that you expect.
It's substantially volume very little price.
Gotcha, Okay, Alright, and then.
In terms of the comments about the international segment. So you said that you expect that it would be international segment to be profitable next year or so I'm curious as to what's embedded in your 2023 guidance as far as how much.
Do you think that'll be a drag on profitability.
Yeah.
Yeah, Anthony no, we're not breaking out the guidance international versus U S. But we have said and continue to say that we try and we will be approaching breakeven by the end of 'twenty three.
Net sales were down in the first quarter, so that creates a headwind.
We were on plan at the end of the first quarter bottom line not on the top line.
Okay. That's helpful.
Thanks, Scott as far as the Mexico initiative.
So they are.
Interesting.
Can you just share with us how much you're spending on this initiative I assume it's mostly capex or I'm not sure. You know this is if you could just cut off Phil talk about that as well.
Yeah, very little like about a half million dollars. We're just acquiring the assets of a facility that we've had a long relationship with.
So it's not a very big capital investment.
It definitely is a very important strategic move on our part as.
We continue to de risk from a dependence on a China supply chain.
Okay, Yeah that makes a lot of sense and then.
Last question for me you know as far as your inventories. So you know good it's really progress sequentially and on a year over year basis.
I know you guys talked about the and you released about trying to improve inventory turns so.
Where do you want to get to by year end as far as either inventory turns or just overall inventory.
What do you what are your objectives there.
Yeah, I'll turn it over to Larry but a couple of comments Anthony is one is as you've seen we've aggressively attack.
Our investment that we had made an inventory and reduce fill out in 'twenty. Two continued in the first quarter.
However.
With our revenues.
Going down a bit that has increased our stock levels in our warehouses once again.
So we're looking at how fast we want to decrease that.
Said another way, we can decrease it faster by taking much lower margin, but also bear in mind there.
A lot of extra inventory floating around the system, you've got retailers has gone bankrupt in the liquidators trying to sell off all that stopped plus you have a lot of people.
That are stuck with inventory or they're just counting and significantly including certain yeah. There's.
Significant.
They were at one point, a significant housewares provider in a category called Robinson that just went to liquidation.
Yeah, so that stuff is and so there's a lot of inventory flooding the channel right now channels, particularly the off price and discount channel.
Gotcha, Alright, well that's very helpful color. Thank you very much and best of luck.
Thanks Anthony.
There are no further questions in the queue I'd like to hand, the call back to Rob Kay for closing remarks.
Thanks, Doug.
Thank you everyone as always for your interest and for dialing in on today's call. We look forward to further discourse and conversation I have a good day.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yeah.