Q1 2025 Lifetime Brands Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to lifetime Brands' first quarter 2025 earnings conference call.

Unknown Executive: Good morning ladies and gentlemen and welcome to Lifetime Brands first quarter 2025 earnings conference call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speaker's remarks, there will be a question and answer portion of the call.

At this time I would like to inform all participants that their lines will be in listen only mode. 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 one on your telephone keypad.

Unknown Executive: If you would like to ask a question during this time, please press star 1 on your telephone keypad.

Jamie searching: I would now like to introduce your host for today's conference Jamie searching Mr. <unk> you may begin.

Jamie Kirchhen: I would now like to introduce your host for today's conference, Jamie Kirchhen. Mr. Kirchhen, you may begin.

Okay.

Speaker Change: With us today from management are Rob Kay Chief Executive Officer, and Larry went ochre Chief Financial Officer.

Unknown Executive: With us today for management are Rob Kay, Chief Executive Officer, and Larry Winoker, Chief Financial Officer.

Unknown Executive: 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 Security Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in our earnings release and other factors 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 further development.

Speaker Change: 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.

Speaker Change: Any such statements are not guarantees of future performance and factors that could influence. Our results are highlighted in our earnings release and other factors are contained in our filings with the Securities and Exchange Commission.

Speaker Change: Such statements are based upon information available to the company as of the date hereof and are subject to change of course further developments, except as required by law.

Unknown Executive: The acceptance required by law of the company does not undertake any obligation to update such statements.

Speaker Change: Does not undertake any obligation to update such statements.

Unknown Executive: Our remarks this morning and in our earnings 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 with the comparable financial measures calculated in accordance with GAAP.

Speaker Change: Our remarks this morning and in our earnings release also contains 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 with the comparable financial measures calculated in accordance with GAAP.

Speaker Change: With that introduction I'd like to turn the call over to Rob Kay. Please go ahead Rob.

Rob Kay: With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob. Thank you. As we navigate a volatile macro and political environment. We are continuously evaluating options and consequences that impact most aspects of our business.

Rob Kay: Thank you.

Speaker Change: As we navigate a volatile macro and political environment.

Speaker Change: We are continuously evaluating options and consequences that impact most aspects of our business.

Rob Kay: With that in mind, I will start today's call by discussing our first quarter performance. before getting into the current operating environment and Lifetime's strategic position. Sales for the quarter were down slightly year over year, with a more pronounced impact on gross margin due to shifts in customer and product met. Top line performance was primarily affected by challenges in the mass channel, where we experienced declines in certain product categories. These trends mirror broader industry patterns and were driven by slower retail sales and elevated inventory levels at key mass retailers towards the end of the fourth quarter.

Speaker Change: With that in mind I will start today's call by discussing our fourth first quarter performance.

Speaker Change: Before getting into the current operating environment and lifetimes strategic positioning.

Speaker Change: Sales for the quarter were down slightly year over year with a more pronounced impact on gross margin due to shifts in customer and product mix.

Speaker Change: Top line performance was primarily affected by challenges in the mass channel, where we experienced declines in certain product categories.

Speaker Change: These trends mirror broader industry patterns and were driven by slower retail sales and elevated inventory levels at key mass retailers towards the end of the fourth quarter.

Rob Kay: Additionally, ordering patterns softened due to ongoing trade concerns, particularly around tariff. Many retailers pulled back on incentives in response to rising input costs and general uncertainty as a means to prolong inventory levels in the face of potential supply disruptions later in the year. Despite headwinds in the mass channel, we achieved strong gains in e-commerce, the dollar channel and club driven by new product introductions and good point of sale sell. These areas helped. crimes and underscore the resilience of our multi-channel strategy.

Speaker Change: Additionally, order Pat ordering patterns softened due to ongoing trade concerns, particularly around tariffs.

Speaker Change: Many retailers pulled back on incentives in response to rising input costs and general uncertainty as a means to prolong inventory levels in the face of potential supply disruptions later in the year.

Speaker Change: Despite headwinds in the mass channel, we achieved strong gains in E Commerce, the dollar channel and club driven by new product introductions and good point of sale sell through it.

Speaker Change: These areas held off.

Speaker Change: Fines and underscore the resilience of our multi channel strategy.

Speaker Change: Uncertainty continues to define the current operating environment.

Rob Kay: Uncertainty continues to define the current operating environment. Across the board and within the consumer products industry, companies are bracing for further economic headwinds and a volatile tariff policy. For retailers, this creates unpredictability around pricing, promotions and product planning, resulting in slower purchasing, cautious reordering, and extended decision cycle. All of these factors are being addressed by Lifetime as we execute and adopt our business model to maximize performance and flexibility in this environment.

Speaker Change: Across the board and within the consumer products industry companies are bracing for further economic headwinds and a volatile tariff policy.

Speaker Change: For retailers this creates unpredictability around pricing promotions and product planning, resulting in slower purchasing coffee.

Speaker Change: Cautious reordering and extended decision cycles.

Speaker Change: All of these factors are being addressed by lifetime, as we execute and adopt our business model to maximize performance and flexibility in this environment.

Speaker Change: Yeah.

Rob Kay: The first area I would like to comment on related to Lifetime's capability in navigating the rapidly changing operating environment driven by the changes in U.S. trade policy and the trade policy where the company does business. is that Lifetime and its management has a long, successful history of navigating through economic and other external shocks and has the infrastructure to succeed in these environments. This includes substantial experience in moving product manufacturing throughout the world and the appropriate quality supply and logistics organization to continue to implement changes to our manufacturing and sourcing footprint. It is also important to note that the majority of our products that we sell are accessibly priced.

Speaker Change: The first area I would like to comment on related to lifetimes capability and navigating the rapidly changing operating environment driven by the changes in the U S trade policy and the trade policy, where the company does business.

Speaker Change: Is that lifetime and engine management as a long successful history of navigating to economic and other external shocks and has the infrastructure to succeed in these environments.

Speaker Change: This includes substantial experience in moving product manufacturing throughout the world and the appropriate quality supply and logistics organization to continue to implement changes to our manufacturing and sourcing footprint.

Speaker Change: It is also important to note that the majority of our products that we sell our accessibility accessibly priced with.

Rob Kay: with a selling price below $20. While we have always maintained strict operational discipline, as mentioned on prior earning calls, the current economic environment calls for an additional response. Accordingly, we've taken an even firmer approach to cost management by tightening controls on variable spending, which we expect to see benefits from in the second half of the year. Further, as previously discussed, Lifetime has been moving towards a geographically distributed sourcing and manufacturing model for nearly two years, which is now a linchpin to mitigate the risks from the uncertainty created by changes in U.S. trade policy. We believe this strategy will optimize the flexibility for Lifetime to provide efficient and cost-effective products to our end markets as an alternative to a China-dependent supply chain.

Speaker Change: With the selling price below $20.

Speaker Change: While we have always maintained strict operational discipline.

Speaker Change: As mentioned on prior earning calls the current economic environment calls for an additional response.

Speaker Change: Accordingly, we've taken an even firmer approach to cost management.

Speaker Change: Lightning controls on variable spending, which we expect to see benefits from in the second half of the year.

Speaker Change: Further as previously discussed lifetime has been moving towards a geographically distributed sourcing and manufacturing model for nearly two years, which is now a linchpin to mitigate the risks from the uncertainty created by changes in the U S trade policy.

Speaker Change: Yeah.

Speaker Change: We believe this strategy will optimize the flexibility for lifetime to provide efficient and cost effective products to our end markets as an alternative to a China dependent supply chain.

Speaker Change: This includes an expansion of our Mexico Maquiladora factory in which we acquired a controlling interest a couple of years ago.

Rob Kay: This includes an expansion of our Mexico Maquilador factory in which we acquired a controlling interest a couple of years ago. Aligned with this broader strategy, we are on track to complete the relocation of the majority or 80% of our manufacturing out of China by the end of 2025 and are ramping up sourcing from alternative countries in Southeast Asia and North America, including Malaysia, Indonesia, Vietnam, Cambodia, India, and Mexico. In executing the strategy, we have focused on our high volume runners, which are all included in the strategy, leaving smaller production runs and slow moving items in China where it is not cost efficient to move this product for the time being.

Speaker Change: Aligned with this broader strategy, we are on track to complete the relocation of the majority or 80% of our manufacturing out of China by the end of 2025 and are ramping up sourcing from alternative countries, and South East Asia, and North America, including Malaysia.

Speaker Change: Indonesia, Vietnam, Cambodia, India and Mexico.

Speaker Change: In executing this strategy we are focused on our high volume runners which are all included in this strategy, leaving smaller production runs and slow moving items in China, where it is not cost efficient to move this product for the time being.

Rob Kay: These actions will reduce the current long-term calf exposure and enhance supply chain flexibility. In fact, similar to most retailers that source direct private labor products and nearly all product suppliers in general merchandise categories, we have seized importing from China any products that carry a 145% tariff rate. In conjunction with our retail partners, we will begin shipping some 145% tariff items from China in the end of the second quarter to avoid out-of-stock situations on shelves. These items, as well as any items that are subject to increased U.S. tariffs implemented this year, will carry a higher selling price to offset tariff-related costs.

Speaker Change: These actions will reduce the current long term kind of exposure and enhanced supply chain flexibility.

Speaker Change: In fact <unk>.

Speaker Change: Similar to most retailers that source direct private label products and nearly all product suppliers in general merchandise categories. We have seized importing from China any products that carry 145% tariff rate.

Speaker Change: In conjunction with our retail partners, we will begin shipping some 145% tariff items from China in the ended the second quarter to avoid out of stock situations on shelves.

Speaker Change: These items as well as any items that are subject to increased U S. Tariffs implemented this year will carry a higher selling price to offset tariff related costs.

Rob Kay: We have already agreed on updated pricing with nearly all of our customer base, which reflects the cost of the currently implemented tariffs in place. These price increases begin to go into effect on May 15.

Speaker Change: We have already agreed on updated pricing with nearly all of our customer base, which reflects the cost of the currently implemented tariffs in place.

Speaker Change: These price increases begin to go into effect on may 15th.

Speaker Change: Further as noted on earlier calls we took early action to mitigate tariff risk by starting before the election beginning in October of last year to build an important inventory from China ahead of any increase in tariffs.

Rob Kay: Further, as noted on earlier calls, we took early action to mitigate tariff risk by starting before the election, beginning in October of last year, to build an import inventory from China ahead of any increase in tariffs. A positive development from the recent implemented rule changes in U.S.

Speaker Change: A positive development from the recent implemented rule changes in U S. Trade policy has been the elimination of the de Minimis loophole that allowed an unfair advantage to direct import from Chinese factories to primarily sheen and team in the ecommerce channel.

Rob Kay: trade policy has been the elimination of the de minimis loophole that allowed an unfair advantage to direct import from Chinese factories through primarily Sheen and Timu in the e-commerce channel. The escalation of tariffs on Chinese products was not applied to these transactions, creating a meaningful cost disadvantage for US-based companies paying tariffs against these transactions that allowed for direct sales of products, often of questionable quality, at a much lower price due to having $0 of tariff to pay on these products. The elimination of the de minimis loophole has closed this disadvantage with prices going up on average a couple of hundred percent, as they are now subject to similar tariffs as other products imported from China.

Speaker Change: The escalation of tariffs on Chinese products was not applied to these transactions, creating a meaningful cost disadvantage for U S based companies paying tariffs against these transactions that allowed for direct sales of products often have questionable quality at a much lower price due to having zero day.

Speaker Change: A tower to pay on these products.

Speaker Change: The elimination of the de Minimus loophole has closed this disadvantage with prices going up on average a couple of 100% as they are now subject to similar tariffs as other products imported from China.

Rob Kay: Lifetime and other US-based companies can now compete very effectively against these e-commerce platforms and their Chinese sellers.

Speaker Change: Lifetime and other U S. Based companies can now compete very effectively against these e-commerce platforms and their Chinese sellers.

Speaker Change: Turning to segment highlights on certain key initiatives.

Rob Kay: Turning to segment highlights on certain key initiatives. In food service, Lifetime's continued investment in growing our food service platforms continues to show results as this business unit demonstrates ongoing traction with revenue growth for the quarter, notwithstanding a delayed launch of the onus oilier than glass product offering and macro driven delays of capital projects for many, industry participants that has delayed decisions and orders on new tabletop products and curtailed new store openings throughout the industry. We remain optimistic in our plan for this platform in 2025. I believe we can grow revenues considerably compared to prior years.

Speaker Change: In foodservice.

Speaker Change: The times continued investment in growing our foodservice platforms continues to show results as this business unit demonstrates ongoing traction with revenue growth for the quarter notwithstanding a delayed launch of the owners, who really are doomed blast product offering.

Speaker Change: And macro driven delays of capital projects for many many industry participants that has delayed decisions and orders on new tabletop products and curtailed new store openings throughout the industry.

Speaker Change: We remain optimistic in our plan for this platform in 2025, I believe we can grow revenues considerably compared to prior year.

Speaker Change: In international the turnaround of our international operations remains on track.

Rob Kay: and International. The turnaround of our international operations remains on track. Revenue in the first quarter was flat year over year in a challenging end market, while operating results improved, driven by the actions we have implemented to date. Further, we are progressing rapidly on our Project Concord plan, which will drive meaningful improvement to profitability this year. KitchenAid, our newly introduced Jamie Oliver tabletop line, and the La Cafetiera coffee and tea lines all continue to perform well internationally. We continue to focus on what we can control. This year, in response to macroeconomic and tariff-related events, We've identified and eliminated over $10 million in annual costs.

Speaker Change: Revenue in the first quarter was flat year over year in a challenging end market, while operating results improved driven by the actions we have implemented to date.

Speaker Change: Further we are progressing rapidly on our project Concord plan, which will drive meaningful improvement to profitability. This year.

Speaker Change: Kitchenaid are newly introduced Jamie Oliver table top line and the locality are coffee and tea lines, all continue to perform well internationally.

Speaker Change: [laughter].

Speaker Change: We continue to focus on what we can control.

Speaker Change: This year in response to macroeconomic and tariff related events.

Speaker Change: We've identified and eliminated over $10 million in annual costs.

Speaker Change: Paused nonessential marketing and advertising.

Rob Kay: paused non-essential marketing and advertising. Delayed select product launches, which we believe will not produce a positive ROI in this environment. and will focus on optimizing working capital to improve inventory turns and cash preservation. We continue to actively monitor the markets and all inputs and can reverse and or change these actions in response to changes in the current environment. Additionally, our distribution facility transition to the new build-to-suit facility in Maryland remains on track. While this transition carries a short-term financial impact, we are now forecasting lower capital expenditure outlays than previously anticipated and expect to generate significant long-term efficiencies and synergistic opportunities with this new facility.

Speaker Change: Delayed select product launches, which we believe will not produce a positive ROI in this environment.

Speaker Change: And we'll focus on optimizing working capital to improve inventory turns and cash preservation.

Speaker Change: We continue to actively monitor the markets and all inputs and kind of reversed <unk> change. These actions in response to changes in the current environment.

Speaker Change: Additionally, our distribution facility transition to the new built to suit facility in Maryland remains on track.

Speaker Change: While this transition carries a short term financial impact we are now forecasting lower capital expenditure outlays than previously anticipated and expect to generate significant long term efficiencies and synergistic opportunities with this new facility.

Speaker Change: More recently, we have been vocal about one of our growth pillars M&A.

Rob Kay: More recently, we have been vocal about one of our growth pillars, M&A. while we continue to actively pursue M&A opportunities. You can imagine that today, the criteria for such opportunities is continuing to be fine tuned. While valuations are becoming increasingly attractive, this comes at the cost of sacrificing predictability. Therefore, our due diligence is now increasingly conservative, given the changing environment.

Speaker Change: While we continue to actively pursue M&A opportunities.

Speaker Change: Can imagine that today the criteria for such opportunities is continuing to be fine tuned.

Speaker Change: While valuations are becoming increasingly attractive this comes at the cost of sacrificing predictability.

Speaker Change: Therefore, our due diligence and now increasingly conservative given the changing environment.

Speaker Change: We are focused on operating and sustaining our current portfolio first and foremost.

Rob Kay: We are focused on operating and sustaining our current portfolio first and foremost. To this point, we will continue to keep the market well-informed on all strategic initiatives, M&A included. Despite the aforementioned uncertainties, we are well-positioned to absorb near-term pressure and are poised to emerge stronger when economic trends become more predictable. In fact, most of our competitors who face the same macroeconomic challenges are much smaller and less favorably capitalized and will face a high burden to mitigate the impacts should the current external driven economic shocks continue. Our cross-structure is built for flexibility, and our early actions of shifting the geographies from which we source products have significantly reduced exposure to the existing tariff risks.

Speaker Change: To this point, we will continue to keep the market well informed on all strategic initiatives.

Speaker Change: M&A included.

Speaker Change: Despite the aforementioned uncertainties, we are well positioned to absorb near term pressure and are poised to emerge stronger when economic trends become more predictable.

Speaker Change: In fact, most of our competitors who face the same macroeconomic challenges are much smaller and less favorably capitalized and will face a high burden to mitigate the impacts should the current external driven economic shocks continue.

Speaker Change: Our cost structure and build some flexibility and our early actions of shifting the geographies from which we source products have significantly reduced exposure to the existing tariff risks.

Speaker Change: Backed by a solid balance sheet and focused management team. We are operating defensively today, while preparing to seize strategic opportunities to separate us from our competitors.

Rob Kay: Backed by a solid balance sheet and focused management team, we are operating defensively today while preparing to seize strategic opportunities to separate us from our competitors. Compared to many peers, we believe we're better positioned for both resilience and long-term growth.

Speaker Change: Compared to many peers. We believe we are better positioned for both resilience and long term growth.

Speaker Change: While the environment is fluid and to position ourselves for the utmost flexibility. We made the decision to not issue formal guidance for the full year 2025.

Rob Kay: While the environment is fluid and to position ourselves for the utmost flexibility, we made the decision to not issue formal guidance for the full year 2025. We will evaluate this decision as the environment progresses with each future earning. With this, we have also decided to pull back from committing to a more formal Investor Day later this year. Again, while we are confident in our positioning and the perseverance of lifetime, this requires flexibility and navigating this short-term environment may curtail some of our initial long-term planning.

Speaker Change: We will evaluate this decision as the environment progresses with each future earning call.

Speaker Change: With this we have also decided to pull back from committing to a more formal investor day later this year.

Speaker Change: Again, while we are confident in our positioning and the perseverance of lifetime. This requires flexibility and navigating the short term environment may curtail some of our initial long term planning.

Speaker Change: I'll now turn the call over to Larry to walk through more details in our financials. Thanks, Rob as we reported this morning net loss for the first quarter of 2025 was $4 $2 million or <unk> 19 per diluted share.

Larry Winoker: I'll now turn the call over to Larry to walk through more details in our finance. Thanks, Rob. As we reported this morning, net loss for the first quarter of 2025 was $4.2 million, or 19 cents for diluted share, as compared to a loss of $6.3 million, or 29 cents for diluted share in the first quarter of 2024. Adjusted net loss was $5.3 million for the first quarter of 2025, or 25 cents for diluted share, as compared to $3.2 million, or 15 cents for diluted share in 2024. Income from operations was $1.1 million in the first quarter of 2025, as compared to $1.8 million in the 2024 period.

Larry: <unk> to a loss of $6 3 million or 29 cents per diluted share in the first quarter 'twenty 'twenty four.

Larry: <unk> net loss was $5 3 million for the first quarter of 25 or 25 cents per diluted share compared to $3 2 million or 15 cents per diluted share 2024.

From operations was $1 1 million in the first quarter of 'twenty, five as compared to $1 8 million and 20.

Larry: 24 period.

Larry: And adjusted loss from operations for the first quarter of 'twenty five was 900000.

Larry Winoker: and adjusted loss from operations for the first quarter of 25 was $900,000 compared to adjusted income from operations of $5.7 million in the 24th period. Adjusted EBITDA for the trillion 12-month period ended March 31, 2025 was $51 million. Adjusted net loss, adjusted loss from operations and adjusted EBITDA and non-GAAP financial measures, which are reconciled to our GAAP financial measures in the earnings release. Following comments for the first quarter of 2025 and 2024, unless stated otherwise.

Larry: Compared to adjusted income from operations of $5 7 million in the 'twenty four period.

Larry: Adjusted EBITDA for the trailing 12 month period ended March 31, 2025 was $51 million.

Larry: Adjusted net loss adjusted loss from operations, and adjusted EBITDA, and non-GAAP financial measures, which are reconciled to our GAAP financial measures in the earnings release.

Larry: Following comments from the first quarter of 2025 and 2024.

Larry: Unless stated otherwise.

Larry Winoker: Consolidated sales declined by 1.5% to $140.1 million. US segment sales decreased by 1.5% to $128.5 million. As Rob commented, net sales was primarily affected by the challenges in the mass channel. Within this segment, the major product line decrease were in kitchenware and largely offset by increases in tableware and home solution products on spring warehouse clubs, e-commerce, and the dollar channel. International segment sales were approximately even with the prior year period. An increase in the Asia-Pacific region was offset by a small decrease from UK national accounts.

Larry: <unk> sales declined by one 5% to $141 million U S segment sales decreased by one 5% to $125 million as Rob commented net sales was primarily affected by the challenges in the mass channel.

Larry: Within this segment the major product line decreased for a kitchen ware and largely offset by increases in tableware and home solution products on strength warehouse clubs E Commerce and the dollar channel.

Larry: International segment sales were.

Larry: Approximately even with the prior year period, an increase in the Asia Pacific region was offset by a small decrease from UK national accounts.

Larry: Gross margin decreased to 36, 1% from 45%.

Larry Winoker: Gross margin decreased to 36.1% from 40.5%. U.S. gross margin decreased to 36.2% from 40.8%. The decline was driven by customer and product net International gross margin looks solid at 35.3% despite a 0.6% decrease versus the prior period. in the US segment distribution expense as a percentage of good ship permits warehouses. was 11.9% versus 10.5%. The decrease is due to an increase in employee expenses as a result of lower labor management efficiencies on higher inventory level and planning for the move to our East Coast distribution facility. as well as software expense for the new warehouse management system in our West Coast distribution facility.

Larry: U S gross margin.

Larry: Decreased to 36, 2% from 48%.

Klein: Klein was driven by customer and product mix.

Klein: International gross margin was solid at 35, 3%, despite a 6% decrease versus the prior period.

Klein: In the U S segment distribution expense as a percentage of goods shipped from its warehouses.

Klein: 11, 9% versus 10, 5%. The decrease was due to an increase in employee expenses as a result of lower labor management efficiencies on higher inventory level.

Klein: In planning for the move to our East coast distribution facility.

Klein: Software expense for the new warehouse management system, and our West Coast distribution facility. These.

Larry Winoker: These increases were partially offset by a lower freight out expense. In the international segment, distribution as a percentage of good ship from warehouses was 25% versus 23.6%. The increase is due to higher warehouse rent, partially offset by lower freight rate.

Klein: <unk> increases were partially offset by lower freight out expense.

Klein: In the international segment distribution as a percentage of goods shipped from warehouses was 25% versus $23 six the increase was due to higher warehouse rent, partially offset by lower freight rates.

Larry Winoker: Looking at selling general and administrative expenses, they decreased by 20.3% to $31.5 million. US segment expenses decreased by $800,000 to $30 million. And as a percentage of net sales, expense decreased 23.3% from 23.6%. The decrease is driven by lower employee costs, including incentive compensation and lower legal expenses. This is partially offset by an increase in provision for doubtful accounts and an increase in amortization related to an indefinite trade name, indefinite live trade name, which was reclassified to indefinite live trade name in the fourth quarter of 2024. International SG&A decreased by $500,000 to $3.7 million. As a percentage of net sales, it decreased to 31.9% and 35.9%.

Klein: Looking at selling general and administrative expenses decreased by 23% to $31 5 million.

Klein: U S segment expenses decreased by 800000 to $30 million.

Klein: As a percentage of net sales expense decreased 23, 3% from $23 six.

Klein: Decrease was driven by lower employee costs, including incentive compensation and lower legal expenses.

Klein: This is partially offset by an increase in provision for doubtful accounts and an increase in amortization related to an indefinite trade.

Klein: Trade name definitely <unk> trade name, which was reclassified to definite life trade name in the fourth quarter of 2024.

Klein: International SG&A decreased by 500000 to $3 7 million.

Klein: And as a percentage of net sales decreased 31, 9% 35, 9%.

Larry Winoker: This decrease was due to lower commissions, expense, and foreign currency exchange gain versus a loss in the prior year.

Klein: This decrease was due to lower <unk>.

Klein: Lower commissions expense and foreign currency exchange gain personal loss in the prior year.

Larry Winoker: Unallocated corporate income was $2.2 million versus an expense of $4.5 million. Last year, this is due to a legal settlement gain as well as lower incentive compensation. Interest expense excluding market to market adjustment for swaps decreased to 700 decreased by 700,000 due to lower average outstanding borrowings and lower interest rates on outstanding debt. Looking at income taxes for the current quarter, the effective tax rate differs from the federal statutory rate, primarily due to farm losses for which no tax benefit was recognized. For the prior quarter, the rate differed primarily due to equity-based awards, where the book expense exceeded the tax deduction, and foreign losses for which no tax benefit is recognized.

Klein: Unallocated corporate income was $2 2 million versus an expense of $4 5 million.

Klein: Last year Institute to a legal settlement gain as well as lower incentive compensation.

Klein: Interest expense, excluding mark to market adjustment for swaps decreased to 700 decreased by 700000 due to lower average outstanding borrowings and lower interest rates on outstanding debt.

Klein: Debt.

Klein: Yeah.

Klein: Looking at income taxes for the current quarter effective tax rate differs from the federal statutory rate, primarily due to foreign losses for which no tax benefit was recognized.

Klein: For the prior quarter, primarily due to equity based awards, where the book expense exceeded the tax deduction and foreign losses for which no tax benefit is recognized.

Klein: Given the imposition of extremely high tariff rates and uncertainty as to when or if they will be lowered or.

Larry Winoker: Given the imposition of extremely high tariff rates and uncertainty as to when or if they will be lowered, we're especially focused on liquidity. Our balance sheet continues to be strong. At quarter end, our liquidity was approximately $90 million, which included cash plus availability under our credit facility and receivable purchase agreement. Our adjusted EBITDA to net debt ratio as of the end of March was 3.69. We have been through exogenous economic shocks before, namely the Great Recession of 2008 and COVID-19, and we carefully and quickly addressed them. In those situations, the lengths of the events were unknown, so we prepared for the unknown.

Klein: Especially focused on liquidity our balance sheet continues to be strong at quarter end, our liquidity was approximately $90 million, which includes cash plus availability under our credit facility and receivable purchase agreement.

Klein: Our adjusted EBITDA to net debt ratio as at the end of March was three six times.

Klein: We have been through exhaustion economic shocks before namely the great recession of 2008.

Klein: And COVID-19, and we carefully and quickly address them in those situations the lengths of the events were unknown. So we prepared for the unknown.

Larry Winoker: We are using our past experience to help prepare us again.

Klein: We are using our past experience to help prepare us again.

Larry Winoker: As Rob commented, to mitigate the impact of continuing high tariff regime until we can complete our resourcing plan, among other actions, we have identified and are eliminating over ten million dollars of annualized expenses and a focus on optimizing working capital through increasing our inventory terms. This concludes our prepared comments.

Klein: As Rob commented to mitigate the impact of continuing high tariff regime to we can complete our resourcing plan. Among other actions, we have identified and are eliminating over $10 billion of annualized expenses and a focus on optimizing working capital through <unk>.

Klein: Leasing our inventory turns.

Klein: This concludes our prepared comments operator, please open the line for questions.

Unknown Executive: Operator, please open the line for questions. Thank you. Well, now we will be conducting a question and answer session.

Klein: Thank you.

Speaker Change: But now we will be conducting a question and answer session.

Unknown Executive: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 start key. One moment, please, while we poll for questions.

Klein: If you would like to ask a question. Please press star one on your telephone keypad a.

Speaker Change: A confirmation tone will indicate your line is in the question queue.

Speaker Change: You May press star two if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions.

Speaker Change: Yeah.

Anthony Lebiedzinski: Our first question comes from Anthony Lebiedzinski with Sudoti and Company. Please go ahead. Good morning, everyone. And thank you for taking the questions. So first, looking at the top line, is there a way that you guys can provide some additional numbers as far as you just wanted to get a sense of the magnitude of the sales decline at mass retail and conversely, the sales increase that you saw in e-commerce club and the dollar store channel? Yeah, it's the swing was like in the range of about 15 million.

Anthony: Our first question comes from Anthony <unk> with Sidoti and company. Please go ahead.

Anthony: Hi, good morning, everyone and thank you for taking the questions.

Anthony: So first you know looking at the top line.

Anthony: Is there a way that you guys can provide some additional numbers as far as your just wanted to get a sense of the magnitude of the sales decline at mass retail and Conversely, the sales increase that you saw in E Commerce club in the dollar store channel.

Anthony: Yes.

Anthony: This language like in the range of about $15 million.

Larry: Okay, Yeah, Thanks, Larry Okay, and then.

Rob Kay: Okay, yeah, thanks, Larry. Okay, and then Can you give us an update on Dolly Parton? Did you guys see those shipments shifting from Q4 to Q1 as you previously expected? And any additional thoughts on that? Um, yes, it occurred and shipped just as expected. and the program remains very strong. If you actually look at Dollar General's releases, it usually includes a comment on Dolly Parton. So it's very important to them, so they say, and we continue to work with them on new programs. So we remain very bullish, and there will be year-over-year growth in Dolly Parton at Dollar General.

Speaker Change: Can you give us an update on Dolly Parton did.

Speaker Change: Did you guys see those those shipments shifting from Q4 to Q1 as you previously expected and any additional thoughts on that.

Speaker Change: Yes.

Speaker Change: Occurred in shape just as expected.

Speaker Change: And Ah the program remains very strong and if you actually look at dollar generals releases. It usually includes a comment on Dolly Parton.

So it's.

Speaker Change: Very important to them so they say them and they continue we continue to work with them on new programs. So we remain very bullish.

Speaker Change: And there will be year over year growth and Dolly Parton at dollar general.

Rob Kay: as well as other retailers.

Speaker Change: As well as other areas.

Speaker Change: Our retailers.

Rob Kay: Thanks, Rob. And then, you know, in terms of the price increases that you're planning to do, I believe that you said May 15th, which is next week. Can you give us any sense of the magnitude of those price increases and any ideas to like what the volume impact will be once you raise the prices? I know there's a lot of uncertainty out there, but any thoughts on that would be appreciated. So the bulk of the increases are between 6% and 16%, and that excludes the 145, which is much higher. Unknown, in terms of the impact, as I mentioned in my remarks, the average ticket of what we sell is rather small.

Speaker Change: Thanks, Rob.

Speaker Change: And then in terms of the price increases that you're planning to do I believe that you said may 15th which is next week.

Speaker Change: Can you give us any sense of the magnitude of those price increases and.

Speaker Change: Any idea as to like what the volume impact will be one well you know once you raise the prices are I know, there's a lot of uncertainty out there, but any thoughts on that would be appreciated.

Speaker Change: So the bulk of the increases are between 6% and 16% that excludes the $1 45, which is much higher.

Speaker Change: Hum.

Speaker Change: None.

Speaker Change: In terms of the impact you know as I mentioned in my remarks, the average ticket of what we sell is rather small so just six dollar item. It may go up to $6 $87 right. So it's not within the realm of the.

Rob Kay: So if it's a $6 item, it may go up to $6.80, $7, right? It's not within the realm of the consumer's affordability. There's no visibility.

Speaker Change: Consumers affordability.

Speaker Change: But.

Speaker Change: If there's no visibility.

Speaker Change: Right, Okay and then.

Unknown Executive: Right.

Unknown Executive: Okay.

Unknown Executive: And then last one for me before I pass it on to others. So, Rob, you also mentioned that the CapEx for the new DC will be lower. Any sort of way to put a number on that as to how to think about CapEx for this year? So, um, I can't put the bucket this year versus next year, because as you know, we're, you know, spending between the two years on the Capitol, you know, I think that a lot of Why the numbers coming down is more driven from over-promise, right, or under-promise, over-deliver, I should say.

Speaker Change: Last one for me before I pass it onto others.

Speaker Change: Rob you also mentioned that the.

Speaker Change: The capex for the new DC will be lower any sort of.

Speaker Change: Wait to put a number on that as to how to think about capex for this year.

Speaker Change: So.

Speaker Change: I can't put the bucket this year versus next year, because as you know where I'm spending.

Speaker Change: Between the two years on the capital I think a lot of.

Speaker Change: Why the numbers coming down is more driven from over promise right or under promise over deliver I should say.

Rob Kay: So, you know, we were conservative in our approach to this, but now as we solidify the actual contractual arrangements, and, you know, racking and other machinery, those numbers were sourcing or ordering at a much lower rate than we had talked about and put in our plan. And that's because it's now reality. And we had, I think, were conservative in our approach. It's seven figures, low seven figures impact, but we're still working.

Speaker Change: So yeah, we were conservative in our approach to this but now as we solidify the actual contractual arrangements and racking.

Speaker Change: Racking and other machinery those numbers our sourcing or.

Speaker Change: Ordering at a much lower rate than we had talked about and put in our plan.

Speaker Change: And.

Speaker Change: That's because it's now a reality and we had a I think we're conservative in our approach in.

Speaker Change: Seven figures low seven figures impact, but we're still working.

Speaker Change: Got it I appreciate the color.

Unknown Executive: Got it.

Unknown Executive: I appreciate the call.

Speaker Change: Gotcha, Okay got it alright, well, thanks, a lot and best of luck navigating through this current environment.

Unknown Executive: Gotcha.

Unknown Executive: Okay.

Unknown Executive: Got it.

Unknown Executive: All right.

Unknown Executive: Well, thanks a lot and best of luck navigating through this current environment.

Unknown Executive: Thanks, Anthony.

Speaker Change: Thanks Anthony.

Speaker Change: Thank you.

Brian McNamara: Thank you. Our next question comes from Brian McNamara with Canaccord Genuity. Please go ahead. Hey, good morning, guys. Thanks for taking the question.

Speaker Change: Our next question comes from Brian Mcnamara with Canaccord Genuity. Please go ahead.

Brian McNamara: Hey, good morning, guys. Thanks for taking the questions.

Speaker Change: Hey, Brian.

Brian McNamara: I guess to start off, look, I don't think this is an easy thing to do, but I'm curious what went into the decision to not provide guidance. We've seen other, arguably more exposed companies to China kind of give a kind of a best guess. And just given the fact that you guys typically provide guidance in Q1, investors kind of have to wait an extra quarter. So can you walk through kind of the puts and takes there on not giving some kind of directional indicator? Sure. Yeah. Yeah, sure, Brian. And we understand the benefit, you know, quickly from your seat and why we've always given guidance.

Speaker Change: To start off I look I don't think this is an easy thing to do but I'm curious what went into the decision to not provide guidance. We've seen other arguably more exposed companies to China kind of give a kind of a best our best guess.

Speaker Change: And just given the fact that you guys typically provide guidance in Q1, the investors going to have to wait an extra quarter. So can you walk through kind of the puts and takes there I'm not giving some kind of directional indicators.

Speaker Change: Yeah, sure, Brian and we understand that benefit.

Speaker Change: Basically from your seat.

Speaker Change: Why we've always given guidance.

Rob Kay: But you know, in two things, we did look at the rest of the world and people have provided people have not I think the main reason is there's lack of visibility. So, you know, if one was to guide in this environment, you know, it's a bit of a swag. And maybe we're a bit more conservative. But you know, we felt that with a tremendous lack of visibility, here's what's going to happen tomorrow and change and the like.

Speaker Change: But two things.

Speaker Change: Look at the rest of the World and you know people have provided people have not.

Speaker Change:

Speaker Change: I think the main reason is there is lack of visibility so.

Speaker Change: One was to guide in this environment is a bit of a swag.

Speaker Change: And maybe we're a bit more conservative, but we felt that with a tremendous lack of visibility here is what's going to happen tomorrow and change and alike.

Rob Kay: So it was driven from that perspective, we thought it best to withhold at this point.

Speaker Change: So it was driven from that perspective, we thought it best to withhold at this point guidance.

Speaker Change: And then secondly, just trying to see your aggressive push to kind of move out of China.

Rob Kay: And then secondly, it's great to see your aggressive push to kind of move out of China. But I guess the counterpoint to that would be why hasn't it been done already? And obviously, I'm not making it sound like this is easy to do. But that's a question we expect to get. Yeah, no, absolutely understand. So yeah, a lot of it has, you know, I mentioned a bunch of geographies, we're already shipping from them. So a lot of it has, you know, you know, I mentioned the Mexico facility, which, you know, you know, we ramped that up, or we acquired that, you know, and we've been ramping it up.

Speaker Change: I guess, the counterpoint to that would be why hasn't that been done already and obviously I'm asking.

Speaker Change: Making it sound like this is easy to do but that's a question we expect to get from folks.

Speaker Change: Yeah, no absolutely understand so yeah, a lot of it has a you know I mentioned a bunch of geographies, we're already shipping from them.

Speaker Change: So a lot of it has you know I mentioned, the Mexico facility, which we've ramped that up or we acquired.

Speaker Change: That you know and we've been ramping up and Unfortunately, you know we hit full production, which we are now expanding the sides point hit.

Rob Kay: And fortunately, you know, it hit full production, which we are now expanding the size point, hit full production, just before the tariffs started getting implemented. So we've been ramping this up, you know, the, we could have ramped it up quicker, if we were going to spend a lot of capital in actually investing in these facilities, but we're not using our capital and using third party, you know, partners to do this. So that slows you down a little bit, because obviously, they're reluctant to until they wait to see that situation where they had to do it.

Speaker Change: Hit full production.

Speaker Change: Before the tariff started getting implemented.

Speaker Change: So we've been ramping this up.

Speaker Change: The we could've ramped it up quicker if we were going to spend a lot of capital in actually investing in these facilities, but we're not using our capital and using third party.

Speaker Change: Our partners to do this.

Speaker Change: So.

Speaker Change: That slows you down a little bit because obviously theyre reluctant Ah.

Speaker Change: Until they wait to see that a situation where they had to do it.

Speaker Change: So I <unk>.

Rob Kay: So I can say that the feedback that we've gotten from our retail customer basis, because we've shared the detail and the transition plans, because if you think we're, you know, we're passing the price increases, but we're also showing, look, this is, you know, we're, you know, you're covered by inventory and covered by new stuff on a lower geography coming in. So the feedback we've gotten universally is that we're substantially ahead of the industry in terms of moving product out of China.

Speaker Change: And say that the feedback that we've gotten from our retail customer base is because we've shared the detail and the transition plans because if you think were pass through price increases, but we're also selling and look this is where you know you've covered by inventory and covered by new stuff on a lower geography coming in.

Speaker Change: So the feedback we've gotten universally is that we're substantially ahead of the industry in terms of moving product out of China. So we may have phrased. It in a way that that gave you the wrong impression, but we are actively moving and have already shipping for many of these geographies.

Rob Kay: So we may have raised it in a way that gave me the wrong impression, but we are actively moving and have already shipping from many of these geographies.

Speaker Change: And given your kind of relatively low price point.

Rob Kay: Given your kind of relatively low price point, What do you think the elasticity of a, you know, a significant price increase would be on demand relative to your history? And this is obviously understanding this is a unique time, but there's a school of thought that suggests that maybe this pushes more. Demand into you know, private label and things like that. How would you how would you expect your products to react to or your markets to react to significant price? Yeah, historically, you know, there's been, you know, relatively healthy ability for our products to sell similarly in high rising cost environments.

Speaker Change: What do you think the elasticity.

Speaker Change: A significant price increase would be.

Speaker Change: On demand relative to your history and this is obviously understanding it's a unique time if there is a school of thought.

Speaker Change: Does that suggest that maybe there's pushes more.

Speaker Change: Demand into private label and things like that how would you how would you expect.

Speaker Change: Your products to react or your markets to react to significant price increases.

Speaker Change: Historically, you know there has been a relatively.

Speaker Change: Healthy ability for our products to sell.

Speaker Change: Shell seemingly in high rising cost environment.

Rob Kay: I always use the example people have heard me, you know, on can openers, which is our biggest skew, and people don't exactly, if they need a can opener, and it's $6, and now that can opener is, let's be extreme, say it's $9. They're not going to go and use a, you know, hammer and screwdriver to open up. can. So we've seen historically, and again, we're not a startup, we've got a lot of data that has been, you know, relative little impact in many of our product categories. you know, food service. Well, it's relatively inelastic for any price increases.

I mean I always use. The example of people have heard me on can help bridge that.

Speaker Change: Our biggest SKU and people don't exactly they need a can opener and at $6 an hour that can help or is that should be extreme say its $9.

Speaker Change: They're not going to go and use a hammer and screwdriver to open up.

Speaker Change: Ken.

We've seen historically and again, we're not a startup with a lot of data.

Speaker Change: There's been relative.

Speaker Change: Little impact in many of our categories.

Speaker Change: Foodservice.

Speaker Change: While its relatively inelastic for any price increases in other words, they don't really be act at all for price increases, but in rising cost environment people tend to eat more at home that will help us but in foodservice right.

Rob Kay: In other words, they don't really react at all for price increases. But in rising cost environments, people tend to eat more at home. That will help us. But if food service rate tends to do worse, people spend less money in restaurants and traveling. But again, historically, if you look at poor economic environments and rising cost environments, people tend to eat home. That means they need our products.

Speaker Change: Tends to do worse people spend less money in restaurants and traveling.

Speaker Change: But again historically, if you look at.

Speaker Change: Core economic environments, and rising cost environment people tend to eat home that means they need our products.

Speaker Change: Great and then finally I'm just curious as long as the stock hasn't performed well and a lot of it is outside of your control, but I'm just curious what your message to shareholders or potential shareholders at these levels here.

Unknown Executive: Great.

Unknown Executive: And then finally, I'm just curious, look, the stock hasn't performed well. You know, a lot of this stuff's out of your control.

Rob Kay: I'm just curious what your message would be to shareholders or potential shareholders at these levels here. Thank you. Yeah, look, we strongly believe there's a big intrinsic value gap, you know, as you know, we, you know, insiders, including the board control, you know, about 40% of the company, you know, so we think there's a big intrinsic value gap. And, you know, in the right conditions, we will work hard to make sure that gap is realized in the stock. We think there's a lot of upside, but, you know. short term and, you know, it appears that the segment is not in favor.

Speaker Change: <unk>.

Speaker Change: Yeah look we strongly believe is a big intrinsic value gap as you know we are.

Insiders.

Speaker Change: The board control about 40% of the company.

Speaker Change: So we think theres, a big intrinsic value gap and in the right conditions.

Speaker Change: We will work hard to make sure that gap is realized in the stock price.

Speaker Change: So we think theres a lot of upside, but you know.

Speaker Change: Short term and you know.

Speaker Change: It appears that the segment is not in favor.

Rob Kay: But the fundamentals are very strong. It's a big value play, tremendous cash flow generation. So we think it's a very strong story over the long term.

Speaker Change: But the fundamentals are very strong is a big value play.

Speaker Change: Tremendous cash flow generation.

Speaker Change: So we think it's a very strong story over the long term.

Speaker Change: Thanks, very much I appreciate the color and best of luck.

Unknown Executive: Thanks very much, appreciate the call and best of luck.

Brian McNamara: Thank you Brian.

Unknown Executive: Thank you, bye. Thank you.

Speaker Change: Thank you.

Rob Kay: As there are no further questions, I would now like to hand the conference over to Robert Kay for closing comments. Thank you very much. Thank you, everyone, for listening in on our call, and we hope to be in touch shortly with continued updates. Have a good day. Thank you.

Speaker Change: There are no further questions I would now like to hand, the conference or Robert Keane for closing comments.

Robert Keane: Thank you very much. Thank you everyone for listening in on our call and we hope to be in touch shortly with continued updates have a good day.

Speaker Change: Thank you that concludes today's call. Thank you all for joining US you may disconnect. Your lines now thank you.

Unknown Executive: That concludes today's call. Thank you all for joining us. You may disconnect your lines now. Thank you.

Speaker Change: Everyone else has left us.

Speaker Change: Yeah.