TANDY LEATHER FACTORY INC Q4 FY2022 earnings call

• 2022 results: Revenues $80.3M, down 2.8% from 2021; operating income $1.4M, net income $1.2M; gross profit declined 1.1% but gross margin rate up 100 basis points; adjusted EBITDA $4M; repurchased 360,000 shares for $1.8M.
• Macroeconomic outlook: Expect current macroeconomic challenges from 2022 to likely continue.
• Profit focus: Focus on rebuilding sustainable profitability, building a business foundation for future growth, and growing profits and cash over the next couple of years, especially amidst economic headwinds.
• Store strategy: Disciplined about closing stores not trending towards four-wall cash positive; view retail stores as competitive advantage and aim for more profitable stores.
• Margin goals: Working towards improving operating margins, plan significant progress in 2023, though no specific date set.
• Share buyback: Believe shares are undervalued, buying opportunistically as they're offered in large blocks due to ongoing transformation to professional retail operations.

Revenues for Tandy in Q4 and Full Year 2022 were $80.3 million, down 2.8% from 2021. Operating income was $1.4 million and net income was $1.2 million. Gross profit declined 1.1% but gross margin rate increased by 100 basis points. Adjusted EBITDA was $4 million. The company repurchased about 360,000 shares of stock for a total of $1.8 million in 2022. Revenue contribution details weren't broken down by specific product segments as the focus was on overall financials.

• Expect macroeconomic challenges to continue.
• Focus on rebuilding sustainable profitability and building a business foundation for growth.
• Aim to grow profits and cash over the next couple of years, especially facing potential economic headwinds.
• Plan to make significant progress in 2023 towards strong profitability and positive cash flow even if sales decline.

• Macroeconomic challenges continuing, which could impact performance.
• Wage and rent increases posing challenges to store profitability.
• Economic headwinds that may hinder efforts to rebuild profitability and grow the business.

Q: Talk a little bit more about the store base now and if you feel you've got it to the size and number of profitable stores that you're comfortable with?

A: Ultimately want store base to grow, but disciplined about closing stores not trending toward four-wall cash positive; want more four-wall cash positive stores as retail stores are competitive advantage.

Q: Historical margins and time frame to get back to eventual goals?

A: Working toward it, no specific date set, plan significant progress in 2023.

Q: After-tax value of real estate still around $15M ballpark?

A: $15M is a reasonable ballpark estimate for the real estate in Fort Worth.

Q: Thought process of buying own stock?

A: Think shares are undervalued, buying opportunistically as offered in large blocks as they're building new foundation for profitable growth.

Q: Extent destiny is in own hands related to environment and competition?

A: Long-term prospects in their hands, see opportunities in leather crafting with younger customers, ability to target them and create distribution model is in control, balance short-term profit/cash with long-term growth