The Brand House Collective, Inc. Q4 FY2023 earnings call

• Strategic repositioning initiatives centered around returning to value heritage, with initial strategies taking hold during holiday season.
• Customer at center: 39% reactivation of lapsed customers during holiday, improved marketing tactics driving store traffic shift from down 10% in first half to up 2% in Q4.
• Product obsession: Decorative accessories, seasonal, gift categories showed strong growth; lower ticket categories turning faster.
• Omnichannel strategy: In-store traffic improving, e-commerce in need of replatform with vendor selection process for fiscal 2025 relaunch; evaluating store operating hours.
• Disciplined operational effectiveness: Focus on must haves, improved planning and pricing, inventory effectiveness to drive margin.
• High-performance organization: Recognizing associate dedication, working towards unlocking Kirkland's potential.

For the fourth quarter, net sales were $165.9 million compared to $162.5 million in the prior year quarter. Comparable sales increased 1.7% using a 13-week comparison. Store sales drove the comparable sales increase with a 5% increase, while e-commerce was down 8%. E-commerce accounted for 23% of total sales in the quarter, down from 26% in the prior year quarter. Decorative accessories, seasonal, gift, and lamps had strong increases, while wall categories, furniture, and housewares declined. Gross profit margin increased to 32% of sales, up 720 basis points from the prior year quarter. Merchandise margin increased 410 basis points, central distribution costs decreased 160 basis points, outbound freight costs decreased 130 basis points, store occupancy costs increased 20 basis points, and depreciation decreased 40 basis points.

No specific guidance given due to macroeconomic uncertainty. Expect improvement in sales, gross margin, supply chain costs. Anticipate adjusted EBITDA positive in 2024. Goal to return to mid to high single digit adjusted EBITDA margin. Long-term goals include returning store profitability and enhancing e-commerce technology.

• Weather impact: January business hampered by winter weather affecting store footprint.
• Macroeconomic uncertainties: Impact on traffic, conversion, and sales.
• E-commerce challenges: Traffic and conversion issues, higher ticket categories affecting online sales.
• Inventory and supply chain: Need for better inventory optimization and management.

Q: Jeremy Hamblin asked about near-term results, e-commerce relaunch, CapEx, and balance sheet.

A: Amy Sullivan provided context on March and April comparisons, Mike Madden discussed margin trends and CapEx expectations.

Q: John Lawrence inquired about holiday performance, January weather impact, and store fleet.

A: Amy Sullivan talked about strong holiday categories and furniture/wall category challenges; Mike Madden mentioned weather impact on January sales and store fleet improvements