The Brand House Collective, Inc. Q2 FY2024 earnings call

Re-engaging Core Customer - Positive re-activation rates of lapsed customers (39% over 12 months). - Enhanced Cake Love loyalty program with birthday rewards and profile completion incentives. - SMS text program with 1.2 million subscribers, using triggered campaigns for improved conversion. - Expanded social media presence with over 3 million followers, focusing on video content and growing TikTok presence. ### Refocusing Product Assortment - Frequent new product launches in key categories like floral and decorative accessories. - Holiday and floral categories saw double-digit sales growth, with Halloween being a standout. - Continued to adjust high ticket furnishings categories to meet customer value demands. ### Strengthening Omnichannel Capabilities - Ecommerce faced challenges with higher ticket categories but saw conversion improvement in holiday/floral. - Implemented new pricing tool for ecommerce merchants. - Store channel saw positive traffic, conversion, and items per transaction; re-aligned store leadership; upcoming holiday/gift products to drive back half results.

For the second quarter, net sales were $86.3 million versus $89.5 million in the prior year quarter. Comparable sales decreased 1.7%, with comparable store sales up 1.8% and ecommerce sales down 10.6%. Merchandise-wise, holiday, gift, floral, decorative accessories and fragrance saw year-over-year increases, while furniture, mirrors, wall décor and art declined. Gross profit margin increased to 20.5% of sales from 19.5% in the prior year quarter. Adjusted EBITDA improved to negative $10.2 million versus negative $13.5 million prior year.

• Fiscal calendar shift impacts Q3 and Q4 results, with Q3 expected to benefit and Q4 negatively impacted. - Anticipate sales improvement in second half of the year. - Continue to benefit from assortment shift to faster turning categories. - Expect promotional environment in Q3 to be consistent with Q2, with slight freight pressure. - Aim for positive adjusted EBITDA in 2024 and long-term goal of $600 million in revenue with mid to high single digit adjusted EBITDA margin by fiscal 2028.

• Challenges in ecommerce, particularly with drop ship business in high ticket categories. - Consumer backdrop remains challenging in the home sector. - Higher marketing and promotional costs. - Tightening freight conditions, especially impacting imports from China and Southeast Asia. - IT outages affecting POS in July.

Q: Could you give clarity on quarter-to-date comp trends, compare stack up for remainder of quarter, and ecomm vs retail store outlook?

A: Amy Sullivan states quarter-to-date has similar comp trend to Q2, finished August strong, optimistic about back half; Michael Madden mentions Q3 expected to have more margin leverage due to calendar shift.

Q: How should we think about gross margin in back half of year?

A: Michael Madden says promotional environment and freight costs may exert pressure, but expect merchandise margin and other cost line item improvements to drive gross profit expansion in back half, with more opportunity in Q3.

Q: Did Halloween get into stores earlier this year, and talk about store fleet and positive comps?

A: Amy Sullivan says Halloween was brought in about a week early; Michael Madden states stores are slightly positive year-to-date with positive traffic across board, consistent performance geographically.

Q: Plan on new stores in trade area?

A: Michael Madden says largely waiting for capital, but identified locations, couple actively being pursued, excited to return to key markets.