Tile Shop Holdings, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Sequential improvement in comparable store sales from the third quarter, though facing challenges in the housing backdrop with low existing home sales.
• In 2024, took actions like closing a distribution center, reducing corporate office staffing, and closing the China trading company office; ended 2024 with no debt and $21 million in cash.
• In 2025, plan to be selective with investments, no new store openings, and close 2 unprofitable stores, reducing store count to 140 by year-end.
• Saw improvement in Superior product line sales in the second half of 2024 and expanded entry-level competitively priced products to attract more customers and strengthen competitive position with pros.
• Committed to curating the best tile product assortment, providing exceptional service, and positioning well for 2025.

Segment Performance

• Comparable Store Sales: Q4 comparable store sales decreased by 5.8%; full year comparable store sales decreased by 7.8% (primarily due to softer store traffic).
• Gross Margin: Q4 gross margin rate was 64.2% (down 50 basis points) due to inventory write-offs from product transitions, partially offset by sourcing at lower price points; full year gross margin rate was 65.7% (up 130 basis points) driven by stabilizing international freight rates and lower inventory purchasing costs.
• SG&A: Q4 SG&A expenses were $51.9 million, $1.3 million lower than Q4 2023; full year SG&A expenses were $224.4 million, $2.5 million lower than 2023, with decreases in depreciation, variable compensation, and advertising costs partially offset by increases in occupancy, IT-related, transportation, and audit/accounting costs.

Guidance

• 2025 plans include being very selective with incremental investments and not opening any new stores.
• Anticipate closing 2 unprofitable stores in 2025, reducing store count to 140 by year-end.
• Continue to build on the improvement in Superior product line sales and expansion of entry-level products.

Risks

• Uncertainty in the housing market due to low existing home sales, influenced by elevated interest rates, political landscape affecting tariffs, consumer sentiment, and jobs.
• Inventory write-offs due to product transitions as moving out of old product lines to make room for new items.

Question and Answer

Q: No questions posed during the call A: No questions answered