The Brand House Collective, Inc. Q3 FY2023 earnings call

• Strategic repositioning efforts are showing early signs of resonating with consumers, with sequential improvements in traffic and comparable sales each month of Q3, and a 20% increase in lapsed customer reactivation. - Decorative Accessories category had an 8% sales increase and 23% margin dollars increase in Q3, and early strong selling of holiday product. - Improved inventory flow with 17% less inventory than last year, and supply chain efficiencies increased through technology use, contract negotiations, and process improvements. - Completed end-to-end assessment of ecommerce site, building a new ecommerce strategy for modernized customer experience. - Field team delivered 248 basis point increase in conversion in Q3, with low single-digit positive sales comp increase in November.

For the third quarter, net sales were $116.4 million. Gross profit margin increased 130 basis points to 26.3% of sales. Decorative Accessories category had an 8% increase in sales and a 23% increase in margin dollars. Ecommerce was 27% of total sales, with ecommerce comp sales down 8.5% and store comps down 9.5%. Sales performance was relatively consistent across regions, with better results in Florida and weaker in Texas and the West. Merchandise margin improved 110 basis points to 54%, driven by lower freight rates, inventory levels, and improved product flow.

• Expect solid year-over-year improvement in adjusted EBITDA for Q4. - Goal to get back to mid to high single-digit adjusted EBITDA margins, which was historical average. - Focus on reducing borrowings and reestablishing liquidity, with plans to reinvest in business and consider share repurchases/dividends once liquidity cushion is established.

Q: Jeremy Hamblin asked about margin expectations for Q4, inventory of larger-ticket items, marketing budget for 2023/2024, store closures, and credit line use.

A: Mike Madden said they're in a stronger position going into Q4 with better IMUs, lower freight rates, and less inventory to clear than last year. Amy Sullivan mentioned typical store closings in January and marketing budget at 2.5%-3% of sales, holding flat in 2024.

Q: John Lawrence asked about categories that surprised or disappointed in Q3, and assortment changes in 2024.

A: Amy Sullivan said Decorative Accessories was a standout, Halloween had runaway success, harvest was disappointing due to pull forward, and 2024 will see continuation of seasonally relevant categories and reintroduction of gift impulse category with always something new.