Q1 2024 Lifetime Brands Inc Earnings Call
After the Speakers' remarks, there will be a question and answer portion of the call if you'd like to ask a question. During this time. Please press star and number one on your telephone keypad I would like to introduce your host for today's conference Carly King Mr. Kang. Please go ahead.
Operator: After the speaker's remarks, there will be a question and answer portion of the call. If you'd like to ask a question during this time, please press the star and number 1 on your telephone keypad. I would like to introduce your host for today's conference, Carly King. Ms. King, please go ahead. Thank you.
Carly King: Thank you.
Carly King: Good morning, and thank you for joining Lifetime Brands' first quarter 2024 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Larry Winoker, Chief Financial Officer.
Carly King: Good morning, and thank you for joining lifetime Brands' first quarter 'twenty 'twenty four earnings call with US today from management are Rob Kay Chief Executive Officer, and Larry when ochre Chief Financial Officer.
Carly King: 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 established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release, and other factors are contained in our filings with the Securities and Exchange Commission.
Carly King: 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 established by the private Securities Litigation Reform Act.
Carly King: Any such statements are not guarantees of future performance and factors that could influence. Our results are highlighted in today's press release and other factors are contained in our filings with the Securities and Exchange Commission.
Carly King: Such statements are based upon information available to the company as of the date hereof and are subject to change due to 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. Also included in that release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP.
Carly King: Such statements are based upon information available to the company as of the date hereof and are subject to change for future development.
Carly King: 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.
Carly King: With the comparable financial measures calculated in accordance with GAAP.
Carly King: With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.
Carly King: Introduction I'd like to turn the call over to Rob Kay. Please go ahead Rob.
Robert Bruce Kay: Thank you.
Robert Bruce Kay: Good morning, everyone, and thank you for joining us. I am pleased to report a solid start to fiscal year 2024, delivering first quarter results that were in line with our expectations and came in above the broader market. Our performance this quarter is a direct testament to the work we have done in the last few years to ensure we are well positioned. As we look ahead to the rest of the fiscal year, we are confident in our ability to continue driving operational Advancing Our Strategic Growth Initiative and investing in our business to drive value for our customers. We delivered $142.2 million in net sales this quarter, a decrease of 2.2% year over year. This slight decrease reflects both economic headwinds and the impact of inventory rationalization efforts among select retailers, which I will elaborate on later in my remarks.
Robert Bruce Kay: Good morning, everyone and thank you for joining us today.
Robert Bruce Kay: I am pleased to report a solid start to fiscal year 2020 for delivering first quarter results that were in line with our expectations and came in above the broader market.
Robert Bruce Kay: Our performance this quarter is a direct testament to the work we have done in the last few years to ensure we are well positioned to compete and gain share notwithstanding market conditions.
Robert Bruce Kay: As we look ahead to the rest of the fiscal year, we are confident in our ability to continue driving operational excellence.
Robert Bruce Kay: Advancing our strategic growth initiatives.
Robert Bruce Kay: And investing in our business to drive value for our shareholders.
Robert Bruce Kay: Okay.
Robert Bruce Kay: We delivered $142 2 million in net sales this quarter.
Robert Bruce Kay: Decrease of two 2% year over year.
Robert Bruce Kay: This slight decrease reflects both economic headwinds and the impact of inventory rationalization efforts among select retailers, which I will elaborate on later in my remarks.
Robert Bruce Kay: It is worth noting that third-party market data [inaudible] reported a decline of approximately 3.5% in point-of-sale revenue, indicating that Lifetime's top line performance exceeded the broader market across our category. Despite these macro pressures, we delivered strong bottom-line growth, driven by a gross margin of 40.5% for the quarter, exceeding expectations and surpassing that of our first quarter last year. This was a result of benefits from a favorable product.
Robert Bruce Kay: It is worth noting that third party market data, which we track reported a decline of approximately three 5% and point of sale revenues, indicating that lifetimes top line performance exceeded the broader market across our categories.
Robert Bruce Kay: Despite these macro pressures, we delivered strong bottom line growth.
Robert Bruce Kay: Even by gross margin of 45% for the quarter.
Robert Bruce Kay: Exceeding expectations and surpassing that of our first quarter last year.
Robert Bruce Kay: Okay.
Robert Bruce Kay: This was a result of benefits from favorable product mix.
Robert Bruce Kay: New product introduction.
Robert Bruce Kay: New product introductions, and Stability in our Supply Chain. Further, our margin expansion and increased profitability, despite challenges in the underlying market, underscore our continued focus on disciplined expense management as we balance investment and growth with delivering financial results, beginning with our core U.S. business.
Robert Bruce Kay: And stability in our supply chain.
Robert Bruce Kay: Further our margin expansion and increased profitability.
Robert Bruce Kay: <unk> challenges in the underlying markets.
Robert Bruce Kay: The scores are continued focus on disciplined expense management, as we balance investment and growth with delivering financial results.
Robert Bruce Kay: Beginning with our core U S business.
Robert Bruce Kay: We delivered solid results in the first quarter and performed well in comparison to the market and our peers. As widely reported for the quarter, end markets across our industry experienced a dip in demand leading to decreased shipment volume among retailers. One factor which contributed to our decline in shipments was a lowering of in-stock levels at certain retailers, particularly in e-commerce.
Robert Bruce Kay: We delivered solid results in the first quarter and performed well in comparison to the market and our peers.
Robert Bruce Kay: As widely reported for the quarter and markets across our industry experienced a dip in demand leading to decreased shipment volume among retailers.
Robert Bruce Kay: One factor, which contributed to our decline in shipments was a lowering of in stock levels at certain retailers, particularly in e-commerce.
Robert Bruce Kay: Lifetime tracked a noticeable divergence between shipments and sell-through rates with these retailers, which speaks to the continued customer and consumer receptivity to our product. We are confident that as demand returns, we will see a corresponding rebound in shipment activities to normal levels. I'll now discuss our international business, where we continue to focus on investing in growth and improving our performance across each of our end markets, while our investments are broadly bearing fruit and supporting share gains.
Robert Bruce Kay: Lifetime, trapping noticeable divergence between shipments and sell through rates with these retailers, which speaks to the continued customer and consumer receptivity to our products.
Robert Bruce Kay: We are confident that as demand returns, we will see a corresponding rebound in shipment activities to normal levels.
Robert Bruce Kay: I will now discuss our international business, where we continue to one invest continue to focus on investing in growth and improving our performance across each of our end markets.
Robert Bruce Kay: While our investments broadly are bearing fruit and supporting share gains.
Robert Bruce Kay: The ongoing recessionary environment in the U.K. continues to put significant pressure on demand for the market. In the first quarter, we saw a substantial decline in UK order volume during the period, resulting from a temporary decrease in shipment volume from a major customer and sluggishness in the independent and specialty retail channel.
Robert Bruce Kay: Ongoing recessionary environment in the U K.
Robert Bruce Kay: <unk> continues to put significant pressure on demand for the market.
Robert Bruce Kay: In the first quarter, we saw a substantial decline in UK order volume during the period.
Robert Bruce Kay: Resulting from a temporary decrease in shipment volume from a major customer and sluggishness in the independent and specialty retail channels.
Robert Bruce Kay: However, we expect buy-in will return to normal levels in the coming months, particularly driven by recent incremental placement at national retailers and a rebound in the e-commerce channel, which we have begun to experience. Turning to our other international markets, in Asia-Pacific, we continue to realize the significant benefits of the change in our go-to-market strategy in Australia and New Zealand, where we are consistently gaining new customers and Seeing Higher Markets. Additionally, our markets throughout Southeastern Asia are benefiting from the infrastructure investments we've made over the last several quarters.
Robert Bruce Kay: However.
Robert Bruce Kay: We expect volume will return returned to normal levels in the coming months, particularly driven by recent incremental placement.
Robert Bruce Kay: And national retailers and a rebound in the ecommerce channel, which we have begun to experience.
Robert Bruce Kay: Okay.
Robert Bruce Kay: Turning to our other international markets.
Robert Bruce Kay: In Asia Pacific, We continue to realize the significant benefits of the change in our go to market strategy.
Robert Bruce Kay: In Australia, and New Zealand, where we are consistently gaining new customers and seeing higher margins.
Robert Bruce Kay: Additionally, our markets throughout South Eastern Asia are benefiting from the infrastructure investments we've made over the last several quarters.
Robert Bruce Kay: And we are confident that the solid volume growth and pickup in sales rates we are seeing in those... will continue throughout 2024, in European markets and predominantly in our core UK markets. After a strong start to the year, we saw a meaningful drop-off in shipments in March, driven by poor retail sales across all channels and a shutdown in shipments to our largest customer, which is in the e-commerce channel, for nearly a six-week period. This had an adverse impact on our international segment results for the quarter, which were basically flat to the prior year but below our expectations.
Robert Bruce Kay: And we are confident that the solid volume growth in pickup in sell through rates. We are seeing in those regions will continue throughout 2024.
Robert Bruce Kay: And the European markets and predominantly in our core U K market.
Robert Bruce Kay: After a strong start to the year, we saw a meaningful drop off in shipments in March driven by core retail sales across all channels and a shutdown and shipments to our largest customer which is in the E Commerce channel for nearly a six week period.
Robert Bruce Kay: This had an adverse impact for our international segment results for the quarter, which were basically flat to prior year, but below our expectation.
Robert Bruce Kay: Okay.
Robert Bruce Kay: Although our international segment was not favorable in terms of contribution margin for the quarter, we remain confident this segment will produce a meaningful improvement in contribution margin for the full year, based upon the actions we have previously taken and some momentum we are starting to see in market share gains, which I will talk about in a moment, trying to implement our growth initiative. First, let me address our progress in our food service.
Robert Bruce Kay: Although our international segment was not favorable in terms of contribution margin for the quarter. We remain confident in this segment will produce a meaningful improvement in contribution margin for the full year.
Robert Bruce Kay: Based upon the actions we have previously taken and some momentum we are starting to see and market share gains, which I will talk about in a moment.
Robert Bruce Kay: Turning to our growth initiatives.
Robert Bruce Kay: We are continuing to gain share through our Mercasa Hospitality product and remain on our path to deliver $30 million in revenue from our food service business for the fiscal year. We remain excited about the opportunity in this business, which continues to gain traction with customers and build a book of business that will serve as a solid base for the foreseeable future. In e-commerce, our sales for the quarter were impacted by inventory rationalization efforts as safety stock levels at our largest e-commerce customer were significantly reduced, leading to meaningful decreases in order volume.
Robert Bruce Kay: First let me address our progress in our foodservice business.
Robert Bruce Kay: We are continuing to gain share through our cost of hospitality product line and remain on a path to deliver $30 million in revenue from our foodservice business for the fiscal year.
Robert Bruce Kay: We remain excited about the opportunity in this business, which continues to gain traction with customers and build a book of business that will serve as a solid base for the foreseeable future.
Robert Bruce Kay: In E Commerce, our sales for the current quarter were impacted by inventory rationalization efforts as safety stock levels at our largest e-commerce customer were significantly reduced leading to meaningful decreases in order volume.
Robert Bruce Kay: We believe this will be a temporary pause as sell-through data across all of our categories was strong, and we've picked up share in nearly all of our categories. Accordingly, we expect to see robust performance in this channel throughout 2024. New product development is one of Lifetime's core capabilities that provides us with a competitive advantage. We remain excited about our robust product pipeline, where we have continued to invest in a challenging end market environment, which has further differentiated Lifetime from many of our competitors.
Robert Bruce Kay: We believe this will be a temporary pause as sell through data across all of our categories were strong and we've picked up share in nearly all of our categories.
Robert Bruce Kay: Accordingly, we expect to see robust performance in this channel throughout 2024.
Robert Bruce Kay: New product development is one of lifetime's core capabilities that provides us with a competitive advantage.
Robert Bruce Kay: We remain excited about our robust product pipeline.
Robert Bruce Kay: We have continued to invest in a challenging end market environment, which is further differentiated lifetime for many of our competitors.
Robert Bruce Kay: The Dolly Parton line of products we announced last year has now been introduced to our customers and is garnering significant While we originally expected some shipments in the second quarter, due to a change in shipment mechanics, shipments will begin in the third quarter.
Robert Bruce Kay: The Dolly Parton line of products, we announced last year.
Robert Bruce Kay: Has now been introduced to our customers.
Robert Bruce Kay: And is garnering significant interest.
Robert Bruce Kay: While we originally expected some shipments in the second quarter.
Robert Bruce Kay: Due to a change in shipment mechanics shipments will begin in the third quarter.
Robert Bruce Kay: And at this point, we'll exceed our initial, Further, while this line is being launched in the Dollar Channel, we are having meaningful conversations with other retailers about expansion across several categories. Additionally, our KitchenAid line is gaining strong traction in our international end markets, notably in continental Europe and Australia and New Zealand. As a result, there are numerous customers where we have either gained listings or expanded listings. Now that we have established a beachhead on shell at Tuskegee... We will see the benefit of this strategy this year.
Robert Bruce Kay: And at this point, we will exceed our initial estimates.
Robert Bruce Kay: Further while this line is being launched in the dollar channel.
Robert Bruce Kay: We are having meaningful conversations with other retailers about expansion across several categories.
Robert Bruce Kay: Our kitchenaid line is gaining strong traction in our international end markets, notably in Continental Europe, and Australia, and New Zealand.
Robert Bruce Kay: Okay.
Robert Bruce Kay: As a result, there are numerous customers, where we have either gained listings or expanded listening now that we have established a beachhead on shelf at these customers.
Robert Bruce Kay: We will see the benefit of this strategy this year.
Robert Bruce Kay: Looking ahead, we are preparing to announce a new partnership that we are particularly excited about for our international geography. We expect to launch it likely this year but no later than next. More to come on that front, but we believe these new product introductions and brands will translate to top line growth in our international segment in 2025. For our S.W.E.L.D.
Robert Bruce Kay: Looking ahead, we are preparing to announce a new partnership that we are particularly excited about for our international geographies.
Robert Bruce Kay: We expect to launch it likely this year, but no later than next year.
Robert Bruce Kay: More to come on that front, but we believe these new product introductions and brand will translate to top line growth in our international segment in 2025.
Robert Bruce Kay: product line, we received good reception following our brand relaunch, as we sold through and out of many products, delivering sales above expectation. Notably, these shipments were exclusively online as we pursued this relaunch solely on Swell.com and e-commerce platforms.
Robert Bruce Kay: For our <unk> product line, we received good reception following our brand relaunch as we sold through and out of many products.
Robert Bruce Kay: <unk> sales above expectations.
Robert Bruce Kay: Notably these shipments were exclusively online as we pursue this re relaunched solely on <unk> dot com and e-commerce platforms.
Robert Bruce Kay: We will continue to roll out this reenergized well product line across multiple channels and are pleased with the direction of this line. Let me briefly touch on our supply chain. As I noted, stability in our supply chain was a contributor to the solid margin expansion we were able to deliver this quarter. To that end, we were pleased to lock in rates for our ocean freight contract at levels comparable to last year, offering us stability in this key cost.
Robert Bruce Kay: We will continue to rollout this re energized wealth product line across multiple channels and.
Robert Bruce Kay: And are pleased with the direction of this line.
Robert Bruce Kay: Let me briefly touch on our supply chain.
Robert Bruce Kay: As I noted stability in our supply chain was a contributor to the solid margin expansion, we were able to deliver this quarter.
Robert Bruce Kay: To that end, we were pleased to lock in rates for our ocean freight contracts at levels comparable to last year offering us stability in this key cost back.
Robert Bruce Kay: In Mexico, we are pleased with our continued progress bringing our plastics manufacturing facility online. The facility remains on track to reach full production capacity this year. We continue to be active in many geographies, including Mexico and across the world. Product supply diversification will remain a priority for us moving forward as part of our continued efforts to strengthen and de-risk our supply chain by moving towards sourcing 25% of our goods outside of China. Turning now to Oral Balance.
Robert Bruce Kay: In Mexico, we are pleased with our continued progress, bringing our plastics manufacturing facility online.
Robert Bruce Kay: The facility remains on track to reach full production capacity this year.
Robert Bruce Kay: We continue to be active in many geographies, including Mexico and across Asia.
Robert Bruce Kay: Product supply diversification will remain a priority for us moving forward as part of our continued efforts to strengthen and derisk, our supply chain by moving towards sourcing 25% of our goods outside of China.
Robert Bruce Kay: Turning now to our balance sheet.
Robert Bruce Kay: Our strong earnings and cash flows have provided us with the flexibility to reduce our terminal balance by almost $100 million over the past 12 months. While maintaining historical high levels of liquidity, we are pleased to be approaching our target leverage ratio of three times or below. Our continued focus on disciplined expense management has helped us maintain strong levels of liquidity above historical norms, which affords us ample flexibility with respect to capital allocation.
Robert Bruce Kay: Our strong earnings and cash flows have provided us the flexibility to reduce our term loan balance by almost $100 million over the past 12 months.
Robert Bruce Kay: While maintaining historical high levels of liquidity, we are pleased to be approaching our target leverage ratio of three times or below.
Robert Bruce Kay: Our continued focus on disciplined expense management has helped us maintain strong levels of liquidity above historical norms, which affords us ample flexibility with respect to capital allocation.
Robert Bruce Kay: We continue to view the market as favorable for strategic acquisitions and remain open to opportunities for value-enhancing acquisitions that align with our priorities. We will continue to evaluate these opportunities as they arise. On that note, let me now turn to our financial guidance for 2024, which we issued in our release this morning. While we are closely monitoring the initial signs of pressure on retailer and market demand that we observed this quarter.
Robert Bruce Kay: We continue to view the market is favorable for strategic acquisitions and remain open to opportunities for value enhancing acquisitions that align with our priorities.
Robert Bruce Kay: We continue we will continue to evaluate these opportunities as they arise.
Robert Bruce Kay: On that note, let me now turn to our financial guidance for 2020 for which we issued in our release this morning.
Robert Bruce Kay: While we are closely monitoring the initial signs of pressure on retailer end market demand.
Robert Bruce Kay: That we observed this quarter.
Robert Bruce Kay: Our outlook reflects our confidence that we are positioned to continue executing and creating value regardless of market conditions. We have growth opportunities already in our pipeline for the year and are eager, eager, to continue bringing new products to market and gaining share across categories. Our guidance is based on our belief that we can grow our top and bottom lines through Net Market Share Expansion and Diligent Operational and Expense Management. A rebound in our end markets will be accretive to our guidance.
Robert Bruce Kay: Our outlook reflects our confidence that we are positioned to continue executing and creating value regardless of market conditions.
Robert Bruce Kay: We have growth opportunities already in our pipeline for the year and are eager to eager to continue bringing new products to market and gaining share across categories.
Robert Bruce Kay: Our guidance is based on our belief that we can grow our top and bottom lines.
Robert Bruce Kay: Through net market share expansion and diligent operational expense management.
Robert Bruce Kay: A rebound in our end markets will be accretive to our guidance.
Robert Bruce Kay: We note that due to timing factors, the expectation built into our full-year guidance is for a slight decline in the second quarter with growth in quarters three and four and for the full year. In summary, we are operating from a position of strength as we head into the remainder of fiscal 2024, with strong momentum across our business and the flexibility to invest in our continued growth. We are well positioned to capture opportunities as demand improves and create meaningful value for our shelves. With that, I'll now turn the call over to Larry to discuss the financials in more detail.
Robert Bruce Kay: We note that due to timing factors the.
Larry: The expectation built into our full year guidance is for a slight decline in the second quarter with growth in quarters, three and four and for the full year.
Larry: In summary, we are operating from a position of strength as we head into the remainder of fiscal 2024.
Larry: With strong momentum across our business and the flexibility to invest in our continued growth.
Larry: We are well positioned to capture opportunities as demand improves and create meaningful value for our shareholders.
Robert Bruce Kay: With that I'll now turn the call over to Larry to discuss financials in more detail.
Laurence Winoker: Rob, as we reported this morning, net loss for the first quarter of 2024 was an improved $6.3 million or $0.29 per diluted share compared to $8.8 million or $0.41 per diluted share in the first quarter of 2023. Adjusted net loss was $3.2 million or $0.15 per diluted share as compared to $2.6 million or $0.12 per diluted share in 2023. Income from operations was $1.8 million in the first quarter of 2024 as compared to a loss of $1.8 million in the 2023 period.
Larry: Thanks, Rob as we reported this morning net loss for the first quarter of 2024, with an improved $6 3 million or 29 cents per diluted shares compared to $8 8 million or <unk> 41 per diluted share in the first quarter of 2023, adjusted net loss was $3.
Laurence Winoker: $2 million for the first quarter of 2024, or <unk> 15 per diluted share as compared to $2 $6 million up 12 cents per diluted share in 2023 income from operations was $1 $8 million in the first quarter of 'twenty four as compared to a loss of $1 8 million in 'twenty three period.
Laurence Winoker: An adjusted income from operations for the first quarter of 2024 was $5.7 million compared to $3.4 million in the 23 period adjusted EBITDA. The trailing 12 month period ended March 31 2024 was $59.5 million, an increase of $2.2 million from $57.3 million for full year 2023. Adjusted Net Loss, Adjusted Income from Operations, and Adjusted EBITDA are non-GAAP financial measures which are reconciled to our GAAP financial measures in the Earnings Report. Following comments apply to the first quarter of 2024 and 2023 unless stated otherwise.
Speaker Change: And adjusted income from operations for the first quarter 'twenty four was $5 7 million.
Laurence Winoker: $3 4 million.
Laurence Winoker: In the 'twenty three period adjusted EBITDA for the trailing 12 months period ended March 31, 2024 was $59 $5 million.
Laurence Winoker: An increase of $2 2 million 2 million from $57 3 million.
Laurence Winoker: For full year 2023.
Laurence Winoker: Adjusted net loss adjusted income from operations and adjusted EBITDA, a non-GAAP financial measures, which are reconciled to our GAAP financial measure in the earnings release.
Laurence Winoker: Following comments over the first quarter of 2024, and 2023 unless stated otherwise.
Laurence Winoker: Consolidated sales declined by 2.2%, and US segment sales decreased by 2.3% to $130.5 million. As Rob commented, a key factor was lower in-stock levels at certain retailers. Within this segment, the decrease occurred in home solutions and kitchenware categories. The home solutions decline was due to lower hydration products and tailored bath measurement products. Kitchenware's decline was from kitchen tools and barware, partially offset by an increase for cutlery and boards.
Laurence Winoker: <unk> sales declined by two 2% U S segment sales decreased by two 3% to $135 million as Rob commented a key factor was lower in stock levels at certain retailers within this segment. The decrease occurred in home solutions and kitchen Ware categories.
Laurence Winoker: Home solutions decline was due to lower hydration products and tailor Bath measurement products.
Laurence Winoker: With decline was from kitchen tools and bar were partially offset by an increase for cutlery and boards. This segment's decrease was partially offset by an increase the tableware category due to our new warehouse club program.
Laurence Winoker: The segment's decrease was partially offset by an increase in the tableware category due to a new Warehouse Club program. However, international segment sales were down 1.6% or $200,000 or $700,000 in constant US dollars to $11.7 million. As Rob commented, this slight decrease was due to the ongoing recessionary environment in the UK and a drop-off in shipments in March from a temporary decrease in shipments to a major customer. However, the decrease was partially offset by higher sales.
Laurence Winoker: International segment sales were down one, 6% or $200000 or <unk> <unk>.
Laurence Winoker: $700000 in constant U S dollars to $11 7 million.
Laurence Winoker: As Rob commented this slight decrease was due to the ongoing recessionary environment in the U K they.
Laurence Winoker: Drop off of shipments in March from a temporary decrease in shipments to a major customer that.
Laurence Winoker: The decrease was partially offset by higher sales in Asia.
Laurence Winoker: Gross margin increased to 40.5% from 37%. US segment gross margin increased to 40.8% from 36.6%. The improvement was due to low inbound freight costs and a favorable product mix. However, international gross margin decreased to 35.9% from 42% as the prior year benefited from a very favorable currency hedge. Excluding the hedge benefit, the current quarter's gross margin improved on a better product mix and lower container costs. U.S. distribution expenses as a percentage of goods shipped from its warehouses were 10.5% in both quarters.
Laurence Winoker: Gross margin increased to 45% from 37%.
Laurence Winoker: U S segment gross margin margin increased to 48% from 36, 6%. The improvement was due to lower inbound freight costs and favorable product mix International gross margin decreased to 35, 9% from 42% as the prior year benefited from a very favorable current.
Laurence Winoker: <unk>, excluding the hedge benefit the current quarter's gross margin improved on better product mix and lower container cost.
Laurence Winoker: U S distribution expenses as a percentage of goods shipped from its warehouses with 10, 5% in both quarters.
Laurence Winoker: The significant inventory reduction during 23 resulted in second order benefits of more efficient labor utilization and lower facility expenses in the current quarter. These benefits were offset by a temporary surcharge rate on domestic shipments. International segment distribution expenses as a percentage of goods shipped from its warehouses decreased to 23.6% versus 24%. The improvement was due to lower outbound freight rates obtained from a new carrier.
Laurence Winoker: The significant inventory reduction during 'twenty three resulted in second order benefits of more efficient labor utilization and lower facility expenses in the current quarter.
Laurence Winoker: These benefits were offset by a temporary surcharge rate on domestic shipments.
Laurence Winoker: International segment distribution expenses as a percentage of goods shipped from its warehouses with 23, 6% versus 24% the.
Laurence Winoker: The improvement was due to lower outbound freight rates obtained from a new carrier.
Laurence Winoker: Selling general and administrative expenses increased by 4.2% to $39.5 million. The U.S. segment expenses increased by $1.5 million to $30.8 million. As a percentage of net sales, expenses increased to 23.6% from 21.9%. The increase is driven by inflationary factors and mostly affects employees, the largest component of SG&A. Other increases included legal expenses and expenses related to the startup of the company's manufacturing operations in Mexico. However, allowances for bad debt declined as last year included a charge-off for bad debt and beyond.
Laurence Winoker: Selling general and administrative expenses increased by four 2% to $39 5 million.
Laurence Winoker: The U S segment expenses increased by $1 5 million to $30 8 million as.
Laurence Winoker: As a percentage of net sales expenses increased to 23, 6% from 21 nine.
Laurence Winoker: The increase was driven by inflationary factors and mostly affecting employee expenses the largest component of SG&A.
Laurence Winoker: Other increases included legal expenses and expenses related to the startup of the company's manufacturing operations in Mexico.
Laurence Winoker: Allowances for bad debt declines as last year included a charge off for bed Bath and beyond.
Laurence Winoker: International SGA expense increased by $600,000 to $4.2 million as a percentage of net sales and increased to 35.9% and 30% As in the U.S., the increase was driven by inflationary factors and mostly affected by employee expenses. In addition, the current quarter reflects an unfavorable impact of foreign currency translation. Unallocated corporate expenses decreased by $500,000 to $4.5 million due to lower professional, interest expense, excluding a mark to market adjustment for swaps, increased by $300,000 due to higher interest rates on our variable rate debt, partially offset by lower average borrowing, for income taxes for the current quarter, tax provision rate differs from the federal statutory impacts rate, primarily due to equity-based awards where the book expense exceeded the tax deduction, and foreign losses for which no tax benefit was recognized.
Laurence Winoker: International SG&A expense increased by $600000 to $4 2 million as of <unk>.
Laurence Winoker: Percentage of net sales increased 35, 9% from 30%.
Laurence Winoker: As in the U S. The increase was driven by inflationary factors and mostly affected by employee expenses. In addition, the current quarter reflects an unfavorable impact of foreign currency translation.
Laurence Winoker: Unallocated corporate expenses decreased by 500000 to $4 5 billion due to lower professional expenses.
Laurence Winoker: Interest expense, excluding a mark to market adjustment for swaps.
Laurence Winoker: Creased by 300000 due to higher interest rates on our variable rate debt, partially offset by lower average borrowings.
Laurence Winoker: For income taxes for the current quarter.
Laurence Winoker: <unk> provision rate differs from the federal statutory income tax rate, primarily due to equity based awards with the book expense exceeded the tax deduction and foreign losses for which no tax benefit was recognized in <unk>.
Laurence Winoker: The effective tax rate for the prior year's quarter differs from the federal statutory rate primarily due to state and local taxes, as well as the impact of non-deductible expenses and foreign losses for which no tax benefit is recommended.
Laurence Winoker: The tax rate for the prior year's quarter differs from the federal statutory rate, primarily due to state and local tax.
Laurence Winoker: As well as the impact of nondeductible expenses and foreign losses losses for which no tax benefit is recognized.
Laurence Winoker: Related to our 24.7% interest in Grupo Basconia, a passive investment, we recorded a loss of $2.1 million. Our investment in Cuba of Asconia is now fully written off. On April 29th of this year, Daskonia shareholders approved a resolution to a reorganization process in accordance with the law on commercial bankruptcy in Mexico. We will evaluate the impact of this on our accounting for the investment, noting that a loss of significant influence over a group of Asconia may result in a non-cash loss of $14.2 million that would be reclassified from the statement of other comprehensive loss to the statement of operations. Turning to a balance sheet, we continue to be quite strong.
Laurence Winoker: Related to our 24, 7% interest in Grupo <unk>, a passive investment.
Laurence Winoker: Recorded a loss of $2 1 million.
Laurence Winoker: Our investment in <unk> is now fully written off on.
Laurence Winoker: On April 29th of this year, the Scania shareholders approved a resolution to our reorganization process in accordance with the law of commercial bankruptcy in Mexico.
Laurence Winoker: We'll evaluate the impact of this on our accounting for the investment, noting that a loss of significant implements overall group <unk> may result in a noncash loss of $40 2 million that would be reclassified from the statement of other comprehensive loss to the statement of operations.
Laurence Winoker: Turning to our balance sheet, we continue to.
Laurence Winoker: Continues to be quite strong.
Laurence Winoker: As of March 31st, 24, our liquidity was approximately 125 million, which included cash plus availability under our credit facility and receivable purchase agreement. This is achieved notwithstanding the reduction of the term loan by $96 million over the past 12 months plus $9.5 million of term loan original issue discount and fees. At quarter end, our debt to adjusted EBITDA leverage ratio was 3.3 times versus 3.4 times at year-end 23 and significantly improved from 4.4 times at March 31 of 2023.
Laurence Winoker: As of March 31.
Laurence Winoker: 24.
Laurence Winoker: Our liquidity was approximately 125 million, which included cash plus availability under our credit facility and receivables purchase agreement.
Laurence Winoker: This was achieved notwithstanding the reduction of the term loan by $96 million over the past 12 months, plus $9 $5 million of term loan original issue discount and fees.
Laurence Winoker: At quarter end, our debt to adjusted EBITDA leverage ratio was three three times versus three four times at year end 2003, and significantly improved from four four times at March 31 2023.
Laurence Winoker: Finally, as discussed in the release, we are issuing financial guidance for the full year of 2024 as follows: next net sales of 690 to 730 million, adjusted income from operations of 49 million to 54 million, adjusted net income of $15 million to $17 million, and adjusted EBITDA of $57.5 million to $62.5 million. This concludes our prepared comments. Operator, please open the line for questions.
Laurence Winoker: Finally as discussed in our release, we are issuing financial guidance for the full year of 2024 as follows.
Laurence Winoker: Net sales of 692 $730 million adjusted income from operations of $49 million to $54 million.
Laurence Winoker: Adjusted net income of 15 million to $17 million and adjusted EBITDA of 57 5 million to $62 5 million.
Laurence Winoker: This concludes our prepared comments operator, please open the line for questions.
Operator: Thank you. We are now opening the floor for a question and answer session. If you'd like to ask a question, please press star, the number 1 on your telephone keypad. Our first question comes from Anthony Lebiedzinski from Sidoti Company. Your line is now open.
Speaker Change: We are now opening the floor for question and answer session, if you'd like to ask a question. Please press star.
Anthony Chester Lebiedzinski: Number one on your telephone keypad.
Anthony Chester Lebiedzinski: Our first question comes from Anthony maybe Steve.
Anthony Chester Lebiedzinski: <unk> Company. Your line is now open.
Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions. So first, in regards to your first quarter commentary in the International segment, it sounds like there was a big drop off there in March. As far as the core U.S. segment, were the sales kind of more even by month, or did you see any substantial variations? Just wondering about how the quarter flowed.
Anthony Chester Lebiedzinski: Good morning, and thank you for taking the questions.
Anthony Chester Lebiedzinski: So first.
Anthony Chester Lebiedzinski: In regards to.
Anthony Chester Lebiedzinski: Your first quarter commentary.
Anthony Chester Lebiedzinski: Yes.
Anthony Chester Lebiedzinski: International segment. So it sounds like there was a big drop off there in March.
Anthony Chester Lebiedzinski: As far as the core U S segment, where the sales kind of more even by month or did you see any substantial variations in.
Anthony Chester Lebiedzinski: Yes.
Anthony Chester Lebiedzinski: So just wondering about how the quarter flowed.
Speaker Change: Unrelated, but we did see a softer.
Robert Bruce Kay: Unrelated, but we did see a softer March and a stronger start of the year in the U.S. markets as well. But the UK business world, the UK market, is sluggish, as we talked about. They were beating and having a very strong January and February, but then, primarily driven by being shut down by their largest customer, no shipments, had a very bad March, and that put them into this fight to climb
Anthony Chester Lebiedzinski: March and a stronger start of the year in the U S markets as well.
Robert Bruce Kay: Yeah.
Robert Bruce Kay: But the U K business, while the UK market is sluggish as we talked about.
Robert Bruce Kay: We're beating and having a very strong <unk>.
Robert Bruce Kay: January and February, but then primarily driven by being shut down by their largest customer no shipments.
Robert Bruce Kay: A very bad March and that put them into the slight decline.
Robert Bruce Kay: Rob, in terms of your commentary about the second quarter sales being down, is that mostly because of the Dolly Parton merchandise shifting from April to the third quarter, or is there anything else driving that?
Speaker Change: Understood, Okay, and then Robin in terms of your.
Robert Bruce Kay: Commentary about the second quarter sale.
Robert Bruce Kay: Sales being down is that mostly because of the.
Robert Bruce Kay: Dolly Parton merchandize shifting from April until well into the third quarter or is there anything else driving that.
Robert Bruce Kay: It's really not related to that, Anthony. While we initially expected to start shipping DALI in the second quarter, it wasn't substantial. It's just that we're going to ship, you know, nothing or maybe 100,000. We're expected to ship maybe, you know, half a million or so.
Rob: It's really not related to that Anthony.
Robert Bruce Kay: While we initially expected to ship start shipping dollar in the second quarter it wasn't substantial.
Robert Bruce Kay: It's just that we're going to ship nothing or maybe $100 in where we expected to ship maybe.
Robert Bruce Kay: Half a million or so.
Robert Bruce Kay: So it's just timing and it's informational. The reason for the decline is just seasonality and how the business rolled in last year versus this year in terms of, you know, different programs. So it's just timing of how last year played out versus this year. So the comps are different quarter to quarter. And that's why you'll see that drop off and then pick up, not related to the DALI part.
Robert Bruce Kay: So it just timing and it's informational.
Robert Bruce Kay: It's the reason for the decline is just seasonality and how the business world in last year versus this year in terms of different programs.
Robert Bruce Kay: So it's just timing of how last year played out versus this year. So the comps are different quarter to quarter.
Robert Bruce Kay: And Thats why Youll see that.
Robert Bruce Kay: Drop off and then pick up not related to the Dolly Parton launched.
Speaker Change: Okay. So thanks for clarifying that Rob and then.
Robert Bruce Kay: Okay, thanks for clarifying that, Rob. And then, you know, certainly it was nice to see the... Gross Margin improving here in the quarter. But how sustainable is that improvement, do you think, going forward?
Robert Bruce Kay: Certainly it was nice to see the.
Robert Bruce Kay: Gross margin improving here.
Robert Bruce Kay: In the quarter, how sustainable is that improvement do you think going forward.
Robert Bruce Kay: That had to do with timing having to do with how we recognize in inventory the savings that hit the first quarter. That's not going to be maintained for the balance of the year. Okay, so, Anthony, you talked about the gross margin, right, the comment about gross margin? That's correct. Yeah, yeah, I was talking about gross margin.
Robert Bruce Kay: That's.
Rob: That was timing happy to do with how we recognize and inventory.
Robert Bruce Kay: Savings that hit the first quarter.
Robert Bruce Kay: We don't that's not true.
Anthony: We maintained for the balance of the year.
Robert Bruce Kay: Yeah, yeah. I was talking about the gross margin.
Robert Bruce Kay: Okay.
Robert Bruce Kay: I'm talking about.
Robert Bruce Kay: Anthony you talked about the gross margin rate to comment about Rosemont, that's correct I was talking about the gross margin.
Robert Bruce Kay: Right, so it'll be, it'll be, you know, it should be better because we had, you know, this big pickup in this first quarter. So it should be better than last year, but it's not going to be sustained at that level for the remainder of the year.
Robert Bruce Kay: Right. So it will be it'll be.
Robert Bruce Kay: It should be better because we had this big pickup in the first quarter, so should be better than last year, but it's not going to be sustained at that level for the remainder of the year.
Robert Bruce Kay: Right. Year over year, they'll be higher, right? And we've talked and we've locked in things, but we're not going to see an increasing trend.
Robert Bruce Kay: Year over year, there'll be higher right and as we've talked and we've locked in things.
Robert Bruce Kay: But we're not going to see an increasing trend alright don't expect 40% for the full year.
Robert Bruce Kay: Don't expect 40% for the full year.
Robert Bruce Kay: OK, that's good that you clarified that. And then, you know, lastly, before I pass it on...
Robert Bruce Kay: Okay.
Speaker Change: That's good to clarify that and then lastly, before I pass it on.
Robert Bruce Kay: That's reflected in our guidance, and that's reflected in our advice.
Speaker Change: That's reflected in our guidance and Thats reflected in our guidance of course right right right. So I guess my last question before I pass it on so in other words since when you talked about the potential acquisitions. Just wondering how strong is your appetite for that and then you know it.
Robert Bruce Kay: Of course, right, right. So I guess my last question before I pass it on to others: So you talked about potential acquisitions. Just wondering, you know, how strong is your appetite for that? And then, you know, in terms of valuation multiples, what are you seeing out there in the marketplace now?
Robert Bruce Kay: In terms of valuation multiples what are you seeing that are out there in the marketplace now.
Robert Bruce Kay: It's um, our appetite is strong, you know, but as we've done, as you've seen us do, we'll maintain discipline, right? So there's a lot we could have been announcing to the public for a while now, but we've just maintained discipline, and we're not willing to do something less, you know; we're confident in it.
Robert Bruce Kay: Our appetite is strong, but as we've done as you've seen us do.
Robert Bruce Kay: We will maintain discipline I'd say, there's a lot we could have been announcing to the public for a while now but we just maintain discipline and were not willing to do something unless we're.
Robert Bruce Kay: Confident in it.
Robert Bruce Kay: We have seen.
Robert Bruce Kay: And <unk>.
Robert Bruce Kay: Valuations being much more attractive than they've been for over a decade, particularly for strategic as financials are less competitive in this market.
Robert Bruce Kay: We have seen valuations being much more attractive than they've been for over a decade, particularly for strategics because financials are less competitive in this market. The cost of debt is higher, and the availability of debt is lower, so they have to, you know, put in more equity. Therefore, valuations are down for them.
Robert Bruce Kay: Cost of debt is higher and the availability of debt is lower so they have to put in more equity. Therefore valuations are down for them and that has helped the whole market and given an edge to strategics.
Robert Bruce Kay: And that's helped the whole market and given an edge to strategics. So we are interested. The availability of product is out there. In many cases, again, an advantage for a strategic is you need people who can add value and not on a standalone basis. So we are active. We are looking, but we'll maintain our discipline.
Robert Bruce Kay: We are interested.
Robert Bruce Kay: The availability of product is out there.
Robert Bruce Kay: In many cases again, an advantage for our strategic as you need people, who can add value and not on a standalone basis.
Robert Bruce Kay: So we are active we are looking but we will maintain our discipline.
Robert Bruce Kay: All right, that's good to hear. Thank you very much and best of luck.
Speaker Change: Alright, thats good to hear thank you very much and best of luck.
Speaker Change: Thank you Anthony.
Operator: Our next question comes from Brian McNamara from Canaccord Genuity. Your line is now open.
Robert Bruce Kay: Our next question comes from Brian Mcnamara.
Brian Christopher McNamara: Your line is now open.
Brian Christopher McNamara: Morning, guys. Thanks for taking the question. I guess my first one is, as we look at, you know, the guidance applies a pickup of growth on the top line this year, which investors have been waiting for, after I guess, Q2, like, when we look at H2 forward, should we kind of return to more consistent, predictive top line growth from your perspective? And kind of how should that look like?
Brian Christopher McNamara: Good morning, guys. Thanks for taking the question I guess my first one.
Brian Christopher McNamara: We look at.
Brian Christopher McNamara: The guidance implies a pickup of growth.
Brian Christopher McNamara: The top line this year with kind of investors have been waiting for after I guess Q2, when we look at age two forward should we kind of return to more consistent predictive topline growth from your.
Brian Christopher McNamara: Perspective, and kind of how should that look like.
Robert Bruce Kay: Yeah, Brian, as we talked about, there's still not tremendous visibility, and we're not assuming big growth in the end markets and have not factored that into our guidance. If that happens, that's accretive. This is driven by stuff that we have in the pipeline, you know, so new product introductions and new launches and gaining share is what is driving our growth in the sector.
Speaker Change: Yeah, Brian as we talked about they are still not tremendous visibility and we're not assuming big growth in the end markets and have not factored that into our guidance if that happens that's accretive versus driven by stuff that we have in the pipeline.
Robert Bruce Kay: So new product introduction and new launches in and gaining share is.
Robert Bruce Kay: Is what is driving our growth in the second half.
Brian Christopher McNamara: Okay, and then on This is probably a broader question, but... Your stock has traded about 9000 shares since the market opened on earnings day. So, Larry, you've been pretty vocal about your view that the stock's undervalued, but, Does it make sense to be a public company? I know it's a big question here, but, you know, investors can't buy it because it doesn't have liquidity. So I'm just curious how you guys think about that in terms of getting the value that you work hard for and that you think you deserve.
Speaker Change: Okay and then on.
Brian Christopher McNamara: It's probably a broader question but.
Brian Christopher McNamara: Your stock is trading at about 9000 shares since the market open on an earnings.
Brian Christopher McNamara: <unk> been pretty vocal about your view that the stock's undervalued, but.
Brian Christopher McNamara: Does it make sense to be a public company.
Brian Christopher McNamara: So it's a big question here, but.
Brian Christopher McNamara: Investors can't buy it because of the fact that liquidity. So I'm just curious how you guys think about that in terms of getting the value that you work hard too.
Brian Christopher McNamara: Thank you deserve.
Robert Bruce Kay: Yeah, we do think there's an intrinsic value gap, and you know management and the board will assess different paths to realize that value, but we do recognize that gap that needs to be addressed.
Speaker Change: Yes, we do think there is an intrinsic value gap and.
Robert Bruce Kay: Management, and the board will assess different pasture realize that value.
Robert Bruce Kay: But we do recognize that gap that needs to be addressed.
Brian Christopher McNamara: And then my last one is, I guess what products do you have out in the marketplace right now that have been, you know, surprises, both pleasant and maybe, you know, not so good, and kind of what's your relative hit or miss rate in a typical year in terms of new product launches?
Robert Bruce Kay: And then my last one is I guess what products do you have out in the marketplace right now that have been surprises both pleasant and maybe not so good and kind of what's your relative hit or Miss in a typical year in terms of new product launches.
Robert Bruce Kay: That's hard to answer. We launched so much and at so many different levels; some of it is just what we refer to as "lipstick on the pig," you know; we're just taking something that we used to sell in blue and selling it in white. And there are different reasons why we're launching things. The, If you look at beautiful, if you look at, you know, totally, you know, green white space, I should, You know, we launch beautiful in multiple categories.
Speaker Change: That's hard to answer we launched so much and.
Robert Bruce Kay: So many different levels. Some of it is just what we refer to as lipstick on the pig and I would just taken something that we used to sell in blue we sell in right now.
Robert Bruce Kay: And there is different reasons why why we're launching things.
Robert Bruce Kay: But.
Robert Bruce Kay: The.
Robert Bruce Kay: If you look at beautiful if you look at totally Green White space I should say.
Robert Bruce Kay: We launched beautiful in multiple categories. It is growing is highly successful and grown.
Robert Bruce Kay: It is growing, it's highly successful, and it has grown where we already have a major share at Walmart in terms of cutlery, but we also launched it in tools at Walmart, where we are the number one provider as well. It did not do so well, so we're no longer selling that, right? So, you know, you got to hit the animatronics, right, in that one.
Robert Bruce Kay: Where we already had major share at Walmart in terms of cutlery, but we also launched it in tools and Walmart, where we are the number one provider as well it did not do so well so we're no longer selling out right. So you've got a hit NMS right in that one.
Robert Bruce Kay: You know, we're highly confident in DALI, which is all incremental. It gets us into a new channel, pretty much the only place we don't sell, which is the Dollar Channel. We're very bullish on the DALI line based upon the tremendous feedback we've gotten from everyone we speak to and the demand for stuff that we're not even selling yet. So, you know, that doesn't guarantee success. But we think that, again, we're very bullish. We think that it'll work.
Robert Bruce Kay: We're highly confident in <unk>, which is all incremental.
Robert Bruce Kay: It's us into a new channel the idea and pretty much Jonathan we don't sell which is dollar channel.
Robert Bruce Kay: But.
Robert Bruce Kay: We're very bullish on the Dalai line.
Robert Bruce Kay: Based upon the tremendous.
Robert Bruce Kay: Feedback we've gotten from everyone we speak to <unk>.
Robert Bruce Kay: Demand of stuff that we're not even selling yet.
Robert Bruce Kay:
Robert Bruce Kay: So.
Robert Bruce Kay: That doesn't guarantee success, but we think that.
Robert Bruce Kay: And, you know, there were things that we launched in the last year that didn't do so well; they were much smaller, so we didn't really talk to them. Fortunately, our biggest one that we're launching seems to have very good traction.
Robert Bruce Kay: Again, we're very bullish we think that that will work and there are things that we've launched in the last year, which didn't they were much smaller so we didn't really talk to them. Fortunately our biggest one that we're launching seems to have very good traction.
Brian Christopher McNamara: All right, I'll leave it there. Thanks a lot, guys. Best of luck.
Speaker Change: Alright ill leave it there. Thanks, a lot guys best of luck.
Brian Christopher McNamara: Thanks.
Operator: The next question comes from Linda Weir from Davidson. Your line is now open.
Brian Christopher McNamara: Next question comes from Joe.
Linda Ann Bolton: Yeah from Davidson Your line is now open.
Linda Ann Bolton: Yes, hi. Um, so I was curious, in the markets where the consumer is particularly weak, I guess, the UK, especially, are you thinking about making some changes to your merchandising plans or your product mix, your marketing plans, like maybe introducing more lower price point items? I know that your items are relatively low in price point anyways, but just how are you changing your plans? I mean, given sort of the sustaining, sustaining consumer weakness in some regions. Yeah, um, well, you...
Linda Ann Bolton: Yes, hi.
Linda Ann Bolton: In the markets, where the consumers, particularly weak I guess UK, especially are you thinking about making some changes to your <unk>.
Linda Ann Bolton: Merchandising plans of your your product mix of your marketing plans like maybe introducing more lower price point items I know that.
Linda Ann Bolton: Your items are relatively low and price point anyways, but just how are you changing your plans I mean, given sort of the sustaining sustaining consumer weakness in some regions.
Robert Bruce Kay: Yeah, well, starting with the UK that you talked about, the business historically was very dependent on independence and specialty, what they call cook stops. And what we've done is to reposition what we're selling and where we're selling. So we've picked up and are doing more with Dunelm and Next and the national retailers there. We're doing a similar strategy in continental Europe, picking up Etica and Carrefour and larger players in the major geographies.
Linda Ann Bolton: Yes.
Linda Ann Bolton: Using starting with the UK that you talked about.
Robert Bruce Kay: The business historically was very dependent upon independence, and specialty and what they cost hooked up.
Robert Bruce Kay: And what we've done is to reposition.
Robert Bruce Kay: What we're selling in where we're selling so we picked up and we're doing more work done elm in next.
Robert Bruce Kay: And the national retailers, there, we're doing a similar strategy in Continental Europe.
Robert Bruce Kay: Picking up abaca in car for.
Robert Bruce Kay: Larger players in the major geographies. So it's really the strategy is more shifted to channel that has a price implication in terms of yourself points as well and what they are selling so we had to have the right product for that secondarily is.
Robert Bruce Kay: So it's really a strategy that's more shifted to the channel that has a price implications in terms of your selling points as well and what you're selling. So we had to have the right product for that. We've been exploiting because we didn't know we'd have KitchenAid International. And when we got that, you know, we've been selling that, and we're now positioning, and that's giving us a B-check because many, particularly retailers and larger retailers, are very interested in and want the KitchenAid brand, and now that we're getting that in there, we're now selling our complete portfolio. So those are the two main changes that we've implemented, which is different from how we did business in the past.
Robert Bruce Kay: We have been exploiting because we didn't always have kitchenaid internationally and when we got that.
Robert Bruce Kay: Now we've been selling that and we are now positioning and that's giving us a beachhead because many.
Robert Bruce Kay: Particularly retailers and larger retailers are.
Robert Bruce Kay: Very interested and want the kitchenaid brand and now that we're getting that in there. We're now selling our complete portfolio. So those are two main.
Robert Bruce Kay: Prongs that we have implemented which is different from how we did business in the past.
Robert Bruce Kay: Okay.
Robert Bruce Kay: And then.
Robert Bruce Kay: <unk>.
Robert Bruce Kay: and then there is Mikasa Hospitality. Is there any way of telling us roughly the sales level in 2023? And then what kind of growth rate you're expecting in 2024?
Robert Bruce Kay: And Mcarthur hospitality is there any way of telling us roughly the sales level roughly in 2023, and then what kind of growth rate you're expecting in 2024.
Robert Bruce Kay: So, yeah, our food service business was in the neighborhood of $20 million, of which Macasa Hospitality, you know, was a very small piece of that in 2023. It'll grow five-fold in 2024 at a minimum, based upon what we believe we've already achieved. That means the Macasa Hospitality piece. The rest of the business will grow like 5%, and that combined will get us, we believe,
Speaker Change: So yeah there.
Robert Bruce Kay: Our foodservice business was in the neighborhood of $20 million of wish Macarthur hospitality was a very small piece of that for 2023.
Robert Bruce Kay: It'll grow fivefold in 2024 at a minimum based upon what we believe we have already achieved that means the macarthur hospitality piece the rest of the business will grow like 5%.
Robert Bruce Kay: And that combined will get us, we believe close to where the $30 million of botox.
Robert Bruce Kay: So for 30 million total in 2024? Yes. Okay, great. And then
Robert Bruce Kay: So for 30 million total in 2024.
Robert Bruce Kay: Yes.
Robert Bruce Kay: Okay.
Robert Bruce Kay: Great.
Robert Bruce Kay: And then.
Linda Ann Bolton: Versus 20 million and 23, right Linda?
Robert Bruce Kay: Versus $20 million and 23 right Linda.
Robert Bruce Kay: Yeah, gotcha. Yep. Thank you.
Linda: Gotcha. Thank you.
Robert Bruce Kay: And then.
Speaker Change: Sorry, I missed a little bit or I didn't understand the Dolly Parton, you said theres a possibility of expanding yet did you say into another retailer in the dollar channel or even beyond the dollar channel I didn't quite catch that.
Linda Ann Bolton: And then, um, sorry, I missed this a little bit or I didn't understand Dolly Parton. You said there was a possibility of expanding it. Did you say into another retailer in the dollar channel or even beyond the dollar channel? I didn't quite catch that. Yes.
Robert Bruce Kay: Yeah, so when we launched Dolly, it wasn't an exclusive in the dollar channel, but we did it. It allowed us to get into the dollar channel, so we launched it first in the dollar channel with one retailer, the largest player in the world. We are in conversation to sell it to many other customers that we traditionally do business with outside the dollar.
Speaker Change: Yes so.
Robert Bruce Kay: When we launched Dolly, it's not an exclusive in the dollar channel, but we did it.
Robert Bruce Kay: It allowed us to get into the dollar channel. So we launched it first in the dollar channel with one retailer and the largest player in adoption.
Robert Bruce Kay: We.
Robert Bruce Kay: In conversations to sell it in many other too many other customers that we traditionally do business with outside the dollar channel.
Linda Ann Bolton: Okay, and what would be the timing of that potential expansion? Would it be not till next year 2025, or not? There might be.
Speaker Change: Okay, and what would be the timing of that potential expansion would it be not till next year 2025 or.
Robert Bruce Kay: There might be some that ships, likely 2025, yes. But there's a chance of some in 2024, but it's most likely,
Linda Ann Bolton: There might be some that ship.
Robert Bruce Kay: Likely 2025, yes.
Robert Bruce Kay: There is a chance of some in 2024, but but most.
Robert Bruce Kay: Most likely 2020.
Linda Ann Bolton: Okay, um, and then I was curious, um, on the cost side, you mentioned the freight that you contracted for that to be fairly flattish going into the next year, which is good. What are you seeing more on the commodity side? Um, just given that there's been some little increase in oil and things like that, or what are you seeing in the rest of the cost base?
Robert Bruce Kay: Okay.
Speaker Change: And then I was curious.
Linda Ann Bolton: On the cost side, you mentioned the rate that you had contracted for that to be fairly flat is going in the next year, which is good what are you seeing more on the commodity side.
Linda Ann Bolton: Just given that theres been some little increase in oil and things like that or what are you seeing in the rest of the cost base.
Robert Bruce Kay: We have been very effective in reducing our cost of goods sold, not just in freight, and we don't see inflationary pressures on that. And in this end market environment, it's kind of a buyer's market, and you can translate that into being more aggressive on cost.
Linda Ann Bolton: We have been very effective in reducing our cost of goods sold not just in freight and we don't see inflationary pressures on that.
Robert Bruce Kay:
Robert Bruce Kay: And in.
Robert Bruce Kay: This end market environment.
Robert Bruce Kay: It's kind of a buyer's market and you can translate that into being more aggressive on cost.
Linda Ann Bolton: Okay, that's it for me. Thank you very much.
Robert Bruce Kay: Okay.
Linda Ann Bolton: That's it for me thank you very much.
Speaker Change: Thank you Daniel.
Robert Bruce Kay: As of right now, we don't have any raised hands, and I'd like to hand it back over to Rob Kay for final remarks.
Linda Ann Bolton: As of right now, we don't have any raised hands and now like to hand back over to Rob Kay for final remarks.
Robert Bruce Kay: Thank you and thank you to everyone for spending your time and listening to our call, and we look forward to continued dialogue. Have a great day.
Robert Bruce Kay: Thank you and thank you for to everyone for spending your time in listening on our call and we look forward to continued dialogue have a great day.
Operator: Thank you so much for attending today's call. Have a wonderful day. You may now disconnect.
Robert Bruce Kay: Thank you so much for attending today's call have a wonderful day you may now disconnect.
Operator: Yeah.