Tile Shop Holdings, Inc. Q1 FY2024 earnings call

• Macro conditions posed challenges with weakness in existing home sales affecting the home improvement industry, including hard surface flooring category, leading to traffic decrease in stores in Q1 2024 compared to prior year. - Strong relationships with professional customer network tempered the impact on comparable store sales; pro loyalty program with discounts and cash rebates is a differentiator. - Relaunched private label superior line of backshelf products in Q2, enhanced formulas and product quality, offering to pros at good price points. - Focused on introducing competitively priced tile products for middle market customers seeking smaller remodel projects on a budget. - E-commerce sales increased over 25% in Q1 2024, with investment in e-commerce capabilities ongoing. - Intend to focus on enhancing professional customer relationships, expanding middle market product assortment, and investing in e-commerce capabilities.

Comparable store sales decreased by 10.2% in the first quarter due to lower store traffic. Gross margin rate was 65.8% in the first quarter, a 160 basis point increase compared to Q1 2023. Ended the quarter with $88.8 million of inventory and no debt. E-commerce sales increased by over 25% in Q1 2024 compared to Q1 2023, with e-commerce sales now about the size of one of the larger stores. Revenue contribution details for different segments not explicitly broken down in terms of exact percentages beyond the overall sales and margin info.

• International freight rates have decreased but recent higher rates due to Panama Canal water levels and Red Sea hostilities may pressure gross margin rate in coming quarters. - Pursuing growth in LVT and backshelf products which have lower gross margin rate profile; outperforming goals for these sales may contract gross margin rate but increase gross profit dollars and improve leverage on fixed SG&A expenses. - Continue to actively pursue expense management initiatives to reduce controllable expenses.

• International freight rates could continue to rise due to factors like Panama Canal water levels and Red Sea hostilities, potentially putting pressure on gross margin rate. - If LVT and backshelf sales do not outperform goals as expected, it may lead to contraction of gross margin rate despite potential increase in gross profit dollars.

Q: None A: None