TANDY LEATHER FACTORY INC Q4 FY2023 earnings call

• Revisited 2023 outlook, focusing on weathering challenging consumer demand by managing costs, operating expenses, CapEx, and optimizing the retail fleet.
• Sales were down 5.1% due to weak consumer demand, but there were new store openings: Queens, New York store (test of new model), Margate, Florida store expected to open soon to recoup Miami store sales loss, and Richmond, Virginia store opening in late April/early May.
• New Queens store has a smaller footprint, better leather merchandising, workshop/class area focused on classes, and is a full-service model.
• Key principles include disciplined capital allocation, conservative balance sheet, and focus on long-term shareholder value along with attention to consumer proposition, operating model building.

In the fourth quarter of 2023, Tandy's sales were $76.2 million, a decrease of 5.1% compared to 2022. Gross profit dollars were down 2.9% to $45.2 million, but the gross margin rate improved by 130 basis points. Operating income was $4.4 million, an increase of $3 million from the previous year. Adjusted EBITDA was $6.5 million, up $2.5 million year-over-year. Cash increased by over $4 million to $12.2 million, inventory was essentially flat, and the company had no debt. Revenue contribution from segments was not explicitly broken down into multiple product segments but primarily centered around retail sales.

• In 2024, focus on profitability and cash, with a focus on growing sales through retail and targeting 3 to 5 new stores.
• Exploring the sale of the Fort Worth property, with the Board considering options for deploying excess cash, including potentially returning some to shareholders.

• Ongoing process of optimizing the retail fleet with about 38 leases expiring in the next 18 months needing review.
• Interest income on cash was low due to investing in risk-free securities and timing of cash balances, with interest income in the neighborhood of ~$90,000 last year as a result of the T-Bill investment program started in June.

Q: How far along do you think you are in the process of optimizing the retail fleet?

A: It's an ongoing process. There are about 38 leases expiring and up for renewal in the next 18 months, so there's a lot to come.

Q: Why are you showing such a low level of interest income on your cash balances?

A: We invested in risk-free securities with our cash, and the cash reaches a low point in Q3. Interest income on cash was in the neighborhood of about $90,000 last year, and it should improve as balances grow better going forward as we began our T-Bill investment program around June of last year.

Q: About future other revenue avenues, with the new store model, is that the focus for the foreseeable future?

A: There are potential other things down the road, but in the next couple of years, we're really going to be focused on our core business and growing sales within our existing stores and finding the right number of total stores for our fleet, with an emphasis on the 3 to 5 new stores this year.

Q: Could you confirm that interest in the sale of your headquarters has been strong?

A: Yes