TANDY LEATHER FACTORY INC Q1 FY2023 earnings call

• First quarter operating income was $1 million despite slight decline in total sales. - Strategy to manage operating expenses, maintain gross margin, and deliver positive cash in weak consumer demand is working. - Pruned a number of unprofitable stores over the last year. - Opened a small format store in November last year on Fort Bragg (now Fort Liberty) military base, which is a commission model experiment to see if being on base gives an advantage.

First quarter 2023 sales were $20.4 million, down from $20.5 million in 2022. Gross profit was $11.8 million versus $11.9 million in 2022, with gross margin rate down 10 basis points. As of March 31, 2023, cash and cash equivalents were $8.6 million, up from $8 million at year-end. Inventory was $35.9 million at quarter-end, down from $38.2 million at year-end.

• The military base store is an experiment with a 1-year commitment that can be renewed, and they are still learning about its potential as a robust model.

• Forward-looking statements involve known and unknown risks, uncertainties, and other factors beyond control that may cause actual results to differ materially from statements in the presentation.

Q: Could you comment on the store you opened on the military base?

A: Yes. We opened a very small format store in Fort Bragg (now Fort Liberty) in North Carolina in November last year. It's a commission model experiment. Sales aren't spectacular but it's a great learning. It's a 1-year commitment renewable each year. International military bases could be attractive. Jury is out on if it's a robust model in the U.S. as we're still learning.