The Brand House Collective, Inc. Q1 FY2024 earnings call

• Returning to value heritage and reengaging core customer, with 36% reactivation of lapsed customers since Q4 start.
• Refocusing product assortment, with decorative accessories, floral, gift and seasonal sales up, while reducing penetration of furniture category.
• Strengthening omnichannel capabilities, with SMS and email campaigns driving results, and working on 2025 e-commerce replatform.
• Deployed cost savings initiatives to deliver $6 million in expense savings inside the fiscal year, including reducing corporate overhead, store payroll, marketing and third-party IT expenses.
• Retained Consensus, an investment banking firm, to assist the Board in evaluating potential strategic opportunities.

For the first quarter, net sales were $91.8 million versus $96.9 million in the prior year quarter. The average store count was down 4% compared to the prior year quarter and comparable sales decreased 3.5% for the quarter. Store channel delivered a 2.8% comparable sales increase. E-commerce sales declined 19.1%, accounting for 24% of total sales in the quarter compared to 27% in the prior year quarter. Decorative accessories, floral, gift and seasonal saw increases, but higher ticket categories like furniture, mirrors, rugs and outdoor declined. Gross profit margin increased 280 basis points to 29.5% of sales. Adjusted EBITDA improved $1.3 million compared to last year.

• Expect improvement in sales toward holiday season, with May comps a slight improvement from April.
• Anticipate gross margin expansion in Q2 but below Q1's level, with promotional activity expected to continue.
• Plan to achieve positive adjusted EBITDA in 2024 after two years of losses.
• Aim for $600 million in revenue in the next five years, with adjusted EBITDA margin in the mid- to high single-digit range.

• Tightening conditions around ocean shipping from China and Southeast Asia, driving ocean rates higher.
• Intensifying promotional activity may impact gross margin.
• Challenges in managing supply chain labor and outbound transportation costs.

Q: Jeremy Hamblin asked about May trends and Q2 seasonality, and gross margin expectations.

A: Mike Madden said May is assumed to be slightly better than April, Q2 is typically the lowest volume quarter historically, and gross margin will be more promotional in near-term with freight impacts.

Q: John Lawrence inquired about store base variability, e-commerce platform opportunities, and store relocations.

A: Amy Sullivan said store performance was largely consistent across the board with some regional product allocation adjustments. Mike Madden mentioned e-commerce needs assortment cleanup and technology investment for profitability, and store relocations are early with focus on historic core markets while building liquidity.