Lifetime Brands, Inc. (LCUT) Earnings

Management highlights

- Overall Q2 2026 Performance * Consolidated net sales grew 7.4% YoY to $141.6 million, in line with management expectations, despite timing delays that shifted revenue from several programs to H2 2026. * Reported results included a $40.1 million pre-tax benefit from IEPA tariff refunds, of which $36.4 million has been received in cash as of Q2 2026; the benefit was recorded as a reduction to cost of goods sold, driving the 65.9% consolidated gross margin this quarter. - Tariff Refund Use of Proceeds * First, the company will pay applicable taxes on the refund income. * Second, proceeds are being used to offset ongoing economy-wide inflationary pressures, and restore growth and product investment spending that was cut in 2025 to protect margins from tariff impacts; investments have already been restored since the start of 2026. * Third, proceeds are being used to strengthen the balance sheet via deleveraging: $40 million of term debt has been repaid since the end of Q1 2026 ($20 million in Q2, $20 million in early July 2026), reducing net debt by ~$39 million year-to-date 2025. - Key Operational Updates * The new Hagerstown, Maryland distribution center is online, but startup inefficiencies and low initial efficiencies negatively impacted Q2 shipments and expenses; smaller disruptions are expected in Q3 2026 during the final ramp, with full operational target by Q4 2026. All currently expected one-time startup costs are already captured in full-year guidance. * New product activity: The redesigned Farberware kitchen tool line relaunched in Q2, with early sell-through performance exceeding expectations; the Dolly Parton licensing agreement was extended for an additional three years, reflecting the strong performance of this partnership. * Debt refinancing: The company is in the final stage of refinancing its existing revolving credit facility and Term Loan B, with the goal of extending debt maturities to 2031, improving debt mix and tenor, and reducing annualized interest expenses. The deal is expected to close imminently, with details to be disclosed via 8-K after signing. * International and restructuring: Project Concord (international turnaround) remains on schedule, and management is actively evaluating options for the UK facility to further improve performance; the segment remains on track to reach pro forma breakeven in full-year 2026. * Strategy: Management will present its long-term corporate strategy at an investor day in New York City in December 2026, with additional details to be released shortly.

Guidance

- Full-year 2026 net sales guidance is maintained at $650 to $700 million, consistent with prior guidance. The wide guidance range reflects management's conservative approach to accounting for end market and macro uncertainty; management expects shifted Q2 revenues to be recognized in H2 and does not expect permanent loss of this business, with upside potential to the current range. - Full-year 2026 adjusted earnings guidance has been upwardly revised to reflect the $40.1 million tariff refund, offset by incremental planned investments in the business and inflationary cost impacts: new guidance is adjusted income from operations of $81.5 to $84 million, adjusted net income of $46 million to $47.5 million, and adjusted EBITDA of $90.5 to $93 million. The upward revision does not reflect a change to the underlying organic business outlook. - All expected one-time startup costs for the Hagerstown distribution center ramp are already incorporated into the current full-year guidance.

Segment performance

U.S. Segment: Net sales increased 7.5% year-over-year to $128.2 million, contributing 90.5% of total consolidated net sales. Gross margin increased to 68.3% from 39.1% YoY, with the improvement driven by the $40.1 million IEPA tariff refund, partially offset by unfavorable product mix from higher volume in lower-margin warehouse club channels. U.S. distribution expense (excluding non-recurring items) was 11.9% of goods shipped, an increase driven by labor inefficiencies from the Hagerstown distribution center relocation; $2.2 million in one-time non-recurring startup costs were recorded this quarter. U.S. selling, general and administrative (SG&A) expense increased $1.7 million to $31.2 million, and fell to 24.3% of net sales from 24.7% YoY due to fixed cost leverage on higher sales volume. International Segment: Net sales increased 6.8% YoY (5.3% in local currency) to $13.4 million, contributing 9.5% of total consolidated net sales. Gross margin increased to 42.5% from 32.5% YoY driven by favorable customer mix. Distribution expense as a percentage of goods shipped improved to 24.2% from 26.8% YoY due to operational efficiencies in export regions. SG&A decreased to $3.3 million from $3.7 million YoY, and fell to 24.6% of net sales from 29.4% YoY driven by lower employee and commission costs and fixed cost leverage on higher sales. The segment continues to narrow year-to-date losses significantly compared to 2025, with most improvement coming in Q2 2026.

Risks & headwinds

- Sustained soft end market demand across most consumer durable categories, which could pressure full-year sales and profitability. - Ongoing geopolitical instability and macro inflation, including recent increases in ocean freight costs, create uncertainty for full-year results. - If operational disruptions at the new Hagerstown distribution center extend longer than currently expected, one-time startup costs could exceed existing guidance estimates, leading to negative downside pressure on full-year earnings. - The remaining ~$3.7 million of accrued tariff refund has not yet been received, and there is uncertainty around the timing and eventual receipt of this remaining amount. - Soft overall consumer durable market conditions, with industry data showing category sales down 2% to 3% year-over-year and unit volumes down 7.5% to 10% year-over-year, which could pressure organic top-line performance.

Analyst Q&A

• Q: With the midpoint of EBITDA guidance rising by ~$37 million against a $40 million tariff refund, what accounts for the $3 million delta, and has all refund been recognized in Q2? /

  A: The $3 million delta reflects the planned reinvestment of refund proceeds back into the business. Management restored compensation and headcount cuts made in 2025, and is funding new product investments that were previously curtailed, which explains the difference between the full refund amount and the guidance increase. Management accrued the full expected $40.1 million refund in Q2, including the remaining ~$4 million not yet received in cash, as the accrued amount is supported by current analysis. $36 million has already been received as of July 2026.

• Q: Can you quantify the operational drag from the Hagerstown distribution center ramp in Q2, and is the current guidance already accounting for these impacts? /

  A: Management anticipated startup inefficiencies from hiring and training new staff, and all expected costs and shipment impacts to date, as well as projected remaining disruptions in Q3, are already fully incorporated into the current full-year guidance. Q2 had incremental labor costs from running extra shifts to keep shipments moving during the ramp, and some shipments were delayed and shifted to later quarters. Management expects most inefficiencies to be resolved within 2-3 weeks, full inventory transfer from New Jersey to Maryland to be complete by early Q4, and full operational capability by Q4 2026, with no change to core full-year guidance.

• Q: Q2 sales beat expectations despite the revenue timing shifts; can you quantify the size of the shifts, and give color on pricing versus volume performance? /

  A: Sizable customer orders shifted from Q2 to Q3 (with a small portion shifting to Q4), driven by customer merchandising scheduling delays and the Hagerstown startup disruptions. Total Q2 performance came in line with management's internal expectations. Industry-wide third-party data shows overall consumer durable category sales down 2% to 3% and unit volumes down 7.5% to 10% YoY, and Lifetime Brands outperformed this market trend, consistent with prior performance expectations.

• Q: With sales near 2024 levels, when can sustainable top-line growth resume, and what is the current size of the Dolly Parton business? /

  A: Full-year guidance already incorporates current visibility, and any recovery in end market growth will benefit Lifetime Brands above the current guidance range. The Dolly Parton line is a ~$20 million annual business for Lifetime, the company's fifth largest brand, and is expected to grow slightly in 2026 after strong growth in prior years. Other growing brands include MACASA (which rebounded in 2026 after a 2025 decline) and the relaunched Farberware line, which is expected to grow meaningfully in H2 2026.