The Brand House Collective, Inc. Q4 FY2025 earnings call

Key Points

• Over the past 1.5 years, Kirkland’s Home has focused on transforming the brand, reengaging core customers, refocusing product assortment, and strengthening omni-channel capabilities, with five consecutive quarters of positive brick-and-mortar comparable sales growth.
• Fiscal 2024 results showed a $6 million year-over-year EBITDA improvement. The strategic partnership with Beyond helped recapitalize the balance sheet and opened growth avenues.
• Bed Bath & Beyond Home stores are seen as a sister brand to Kirkland’s Home, with a differentiated assortment, expected to drive consistent foot traffic and improved inventory turns. Overstock is viewed as an off-price brand with potential for 2x revenue of current Kirkland’s Home stores.
• A multibrand national real estate strategy is being roadmapped, with Nashville identified as the first Bed Bath & Beyond Home conversion and four initial Overstock locations. The store conversion strategy is capital-light.
• E-commerce channel saw improvements in conversion rates but revenue decline due to drop-ship business; focus on e-commerce profitability.
• Navigating tariff challenges, with 70% sourcing from China, teams are partnering with vendors to manage tariff impact and exploring sourcing from other countries.

In the fourth quarter of fiscal 2024, net sales declined to $148.9 million versus $165.9 million in the prior year quarter. On a 13-week shifted basis, comparable sales decreased 0.6%. Gross profit margin decreased 180 basis points to 30.3% of sales. Adjusted EBITDA was $12 million compared to $14.2 million in the prior year quarter. Net income was $7.9 million for the quarter compared to $10.1 million in the prior year quarter. Inventory ended the quarter at $81.9 million, a 10.5% increase from the prior year.

• No formal guidance provided, but noted a soft start to fiscal 2025 with February impacted by weather and consumer sentiment. Store channel was flat in March-April but softer later, and e-commerce remains a headwind.
• Actively working on a $5 million term loan expansion with Beyond expected to close next week for general working capital and store conversion strategy.
• Believes the partnership with Beyond has the potential to accelerate achieving long-term targeted margins and growth.

• Current consumer and operating environment challenges.
• Uncertainties in tariff policy impacting sourcing, pricing, and inventory flow.
• Liquidity concerns due to tariff impact and debt covenant compliance issues over the next 12 months.

Q: Could you clarify the same-store sales for March and April, and whether it was for retail stores or total?

A: That comment was related to the brick-and-mortar channel, with combined March-April same-store sales roughly flat but with more weakness later in the period.

Q: What is Kirkland’s Home doing regarding tariffs and new inventory?

A: Teams are going through every PO, partnering with vendors to discuss paths like holding goods, sharing tariff costs, and metering seasonally relevant goods. Sourcing from other countries like India, Vietnam, etc., is being prioritized, with a fluid situation monitored day by day.

Q: Timing on when Bed Bath & Beyond Home and Overstock stores in Nashville might be ready for banner changeover?

A: The Nashville location for Bed Bath & Beyond Home has alignment with the landlord, and they are in the process of pricing signage and modifying floor plans, with the conversion to happen in the very near future.