TLF - Earnings call 2 2022 | Tandy Leather Factory, Inc.

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Daniel Ross

Good morning, everybody. Thank you for joining us for a discussion of Tandy's Q2 financial results. I'm Dan Ross, General Counsel and Corporate Secretary for Tandy, and I will be moderating the discussion today.

Our CEO, Janet Carr, will give a brief overview of the quarter, and we will then open it up for questions and discussion. not this questions time. will from comments I chat the Instructions] be or reading directly [Operator With let's that, get started.

but performance. Securities the Today's than presentation of future information our predictions of XXXX, within statements amended. Exchange on the expectations historical other or XXXX today, the meaning of reflect results that each we the will constitute are forward-looking Act include Securities guarantees Act of statements or not These based and as statements have estimates

involve beyond which and differ which actual They contained unknown factors, other uncertainties to statements known risks, our and in many of this materially results may are from the and presentation. control cause

to not You turn these these undue revise begin statements. required update forward-looking to statements, on Janet? except obligation to law. over reliance our I'll or put that, are presentation. And with as otherwise The cautioned to forward-looking Janet by it no company assumes

Janet Carr

Sorry. Yes, sorry.

Daniel Ross

you We now. hear can

Janet Carr

Let today. me start again. joining Thanks, everyone, for

down was year. noncash items Our loss stock-based adjusted to and for adjusting sales onetime at interest Gross EBITDA as was as restatement $XXX,XXX expenses over depreciation Operating well in came were the compensation such and XX%. QX negative taxes rate $XXX,XXX. and margin X.X% as related last

building million Inventory of to down last million, from last time year end of down quarter sale this the $X similar million, the holiday, for beginning the and bills at QX. and from At second for year, inventory at inventory we're about $X.X July our million year. was so to ended cash quarter $XX.X $XX.X

in opportunity are of to EBITDA, $X.X Spanish year-to-date COVID-related small shares and adjusted versus April. operating and buy stock year, $XXX,XXX down last margin, X.X% On XXX,XXX back sales gross XX.X% a income, our the million. have basis, Tandy back paid and We loan

on. door remains challenging trend But compared San Bruno, inflation, versus California, due channel this X% last environment the QX sales in the public recession, down We in down and war, in to our QX. X% last QX California year closed over health worries to material about store sales improved less our retail closed Our versus retail March on Oxnard, year or we in the one year, than to quarter, of of end also which the no on impact share. in had -- July. Subsequent in and

We when a determining existing to factors number of whether close stores. evaluate

of location projections long-term example, stores of For ongoing size longer-term including cost other for cash quality trend, lease the area, store among other of the and the date proximity to the sales trend the X-wall store, trade of and existing the flow and expiration, the the potential operations, the the variables. store and

overall business customers demand share also channel their We're remains seeing soft. commercial from our Our as in similar stable challenges year-over-year. is

environment the sales right so that to margin rate sales increases QX that challenged capitalized flowing X.X% methodology just last realizing remain of or of profit are valuation. dollars lower been the the cost gross gross Gross forces XX% we've of to due will below over and expect many year now FIFO now. in year We product inventory cost through that reflects due by external last rates. retail at margin and play came our

costs labor addition to same the higher These the margins operating in periods result sorry, in half, mostly both XXXX. QX market. factors gross sales, are with lower result QX, in raised We in average We've price XX% down retail saw over the nominal associated declines only unit already on mix. tight but operating discussed, income loss increase first of of operating about product we've $XXX,XXX seen of the our a in of SKUs, of softer we've and as $XXX,XXX -- in

is and quarter the half, for the Adjusted million. for first EBITDA $X.X X

Just challenging give current believe weather us a the the adaptability of our reminder to we some of environment. that strengths core brief

crafting leather is growing market. large and First, a

market. We market in are the share leader fragmented a only XXX-year-old the and brand very

retail, only stores. multichannel and player commercial, distribution, We XXX have retail over the we're and with web strong

track a managing capable with have through We team a challenges. record proven of business

from we've executive had in Aside the I that no leadership the recruited I arrived turnover shortly after CFO, team here.

in financial to a to have million get position. a strong we plan in operating $XX We long-term have million $XXX sales and income and

$XX income, in call. and have June in map and $XXX discussed We in road a operating our we million some clear to million detail sales in

improvements the reminder, cash So fleet, I'm flow teaching and breadth to core continued business, into areas: a our on into a metrics, business, X customers model. and including going tailored just areas one, as optimizing key few as stores to product improve our piloting growing category, big a continuing the X-wall our to in new and our touch and commercial small on focusing offering using formats, quality bringing business of medium with targeting businesses the

key growth where made good progress, and focus chain art of are area initiatives second The Youth, we've wholesale therapy, very international.

the Just to financial that we business a manage key principles perspective, a disciplined about word capital from use the allocation.

balance from require we consider Two, Board on expect three, is out modest and Our the to leverage are them generating from value. long-term capital cash operations. of growth will we investments, expect flows our initiatives only a cash maintain fund focused And on shareholder business. to and we higher do sheet maximizing flows layering conservative when significant not

for highest increasing or will via estate real returning is prospects, thoughtfully from the do our buybacks dividends business' which M&A. We'll so mechanisms our value responsibly priority. without impairing capital to all consider monetizing long-term to We

grow and to and conditions advantages. to quickly. improving And also that to our income several an focusing by prior can in over million with sales years from the us operating $XX and that operating our nimble believe flexible changing on years that million the in building we to an both but and processes systems, proposition about continually can market next We've $XXX leveraging perspective, remain support many scale talked some detail profitable business consumer operating talent, model respond come, that We're calls. we can for to can competitive allow

few proven in years. that last the we've think I

Before a CFO. I note our close about

We I would Mike a time years contributions all have restatement like his us. ably done our be obstacles of X-plus filings with us transitioning at manage will over ERP to excellent Tandy CFO and to at has First, had a new high-performance this He could catch-up SEC system. for thank same Mike, through of tremendous environment. not he Galvan last in the very through steered to the and missed. without here The

lucky right person in that have of job the the accomplished enough to what at in it's Given we've been face clear right the time. these the obstacles, we've

SeatonHill us Partners capably that Our transition. team they proven support has the already can through

our will the help have next restatement the lead capabilities into next our to transition and and us, experience With ERP chapter. us CFO behind

discussion. Now moving to on and questions

directly a ask and to Daniel If question the line. Ross in or make will a comment, he ask you message to you wish chat, unmute your

You tool the ask to yourself. can need to join When you'll on accept have unmute prompt bar. the chat Dan, the you, some we you questions? do

Daniel Ross

do. Thanks, Janet. Yes, we

Our first Eric comes question from Speron.

Unknown Analyst

me? hear you can Janet,

Janet Carr

Yes.

Unknown Analyst

your obviously, runway more you get can do increase but clearly, and press release, business. line you business question we get meaner? So of also can, and is, actually the the with Are want protecting can agility we conserving and cash costs where do of the to leaner in ways we Janet, where like mentioned My less. the managing the there

think you to structure? of I could continue eye So we corporate? it there's Or pretty lean. where ways meaner the mean, on whether that you you're a think you course, at coaches? ways player But having get take think keep Or ways, we it HQ? like cost. Because think your more can Is do seems there you're there's do comp we're to going you -- variabilizing do it's

anyway, cost. my that's So question. It's

Janet Carr

Yes.

pretty walking and spent I you dang know that we're think were when through I time our mean. some we here, facility.

everything. a thought, lot of a good thinking. Everybody walking continually I to around. this. see You suits appreciate does need the we and look at though, don't It's

can. comp variabilizing where we our are We

right So think thought, at need there's good we to nothing it, on obvious moment. this but I I to and that's think continue very really push

Daniel Ross

next Reily. come from Eddie Our will question

Edward Reily

just Janet, and line pressure experiencing Canada. U.S. was bit it more little like the measures. the a Spain wondering fit store, I on than the about top for reduction cost looks strategic they're

know of to portfolio with going forward? in that want the fits Just how kind

Janet Carr

great represents the question. also -- positive. has of wholesale we Yes, approach. model Spain it's is and a been to It flow cash tackle is want quite mostly how a still with international

retail Our same small store all Europe. sells resellers lot businesses to to throughout a small and

strategic and way. a their definitely purpose they So does pay serve it

that So we're capital huge a it's without -- important our jumping investment, to do way. having stores a grow using that open huge -- international in off and without business to we're point and as

Edward Reily

revenue trends in leather wondering Okay. you of more Got sales And the a the if between and I'm is just in unpack overall? differences wondering U.S. if overall macro the maybe Canada could environment or decline the factor crafting you.

Janet Carr

I our last we've QX, strong think and a slowdown arrows positive direction really coming and saw year, of out where we terms pointing customers in broader in Tandy of then all are trends been category. in we that the the our of had and doing what in

macro believe environment. to beyond anything believe no the have we we if that So reason

Edward Reily

why there, Okay. provide Got you maybe you. versus you'd could if Canadian to U.S.? you was like revenue go into color have And just any up If us.

Janet Carr

lot been up deal great XXXX. in pandemic. it except we to In more they a Canada think down of a that took why have lot was the don't from a recover I longer into has XXXX, insight

little they're that bit of think compare. easier a I having So an

Daniel Ross

Okay.

Shai just does read and opportunity perceive has the next so shareholder [ text, question comes real the the me Our unmuted holdings? to asks not Dardashti by estate it. question value company's from who I'll the from company Shai ] unlock sent how

Janet Carr

Yes. Great Shai. question,

of we real strategic But real them. all considering valuable decision that in the considering some now this cautious we profile we up, that. sort Board we want maintain value monetize that the some Fort to have very for right At And We point it. how are on to about extracting are the an very is the today, ways -- monetizing and is And we of don't here at the thing best point, definitely value Regularly, Today, from future, assets maintaining the like and consider and that right the one we We're we we risk have our estate. the can a holding long-term have business. it. basis. ongoing being leveraging in would is feel are potentially we of estate Worth. unlock

we you're for a us. should risk question, that our decision right up? right no, The is a answer perspective the from does us if now But we like property asking not or feel should specific sell it for leverage

Daniel Ross

plan, repurchase directly received has he chat share question discussed who's [ next have XX. which Josh the on extension thinks said whether through July The Womack he Board from is expired may one ], the of an another I asking the

So that. on I can did are plan you that July in just answer Josh, expire XX. that we had place the correct

the the recently $X renewal but We XXXX. the of we the extend and has not end certainly that announced Board can seeing same of approved filed, don't the plan. And plan Board that you for the August blame shares the a renewed million but that we that new will recently has plan with repurchase of value until XX-Q I in it,

Our come from Tim Heitman. question next will

If you can yourself, Tim? unmute

Unknown Analyst

a out guys you the little shipping changed I warehouse, hear describe business success customers you've that that in that on maybe in questions give the of long that the using business. force space operate know now maybe on run? because you couple of they should of commercial? And and the me? the store example grow maybe opportunity terms an of perspective us types might pretty direct to changing base then Can the more commercial. how or the be in of There. A kind Maybe sales growing still of and a focus consider

Janet Carr

Absolutely.

the and business, and year we To commercial $XX,XXX get The have don't $X,XXX business. are our customers customers per are being which direct our above from preferential businesses. commercial come the of to on by into served out sales. are in So above above representatives mostly pricing served still define place shipped store our directly is call $X,XXX directly because and be primarily account product who are their to their that we as group, warehouse stores who of

They pass number sheet also makers, We've pricing. makers. are bag holster And knife of various. they examples upholstery. And get got shoemakers, preferential -- and the are

it us factory buying food cover by fast We but example who with been out An jewelry. of our chain in large are upholster. upholstery knife. a customer of leather with a And have does they have they leather commercial their it with and a been is who they others, doing cutting barstools guys a among working for hand kind had this and with

know able for And say, one in do our that to we we you We do the factory. of better could is did that things little you. a were

from had we not in template and labor but have the big they we customer clickers out been So that had for a are Tandy costs, may who's which as customer a service to is that dye appreciative our because click leather a using of providing well, we those their us sort of commercial only been total made, and not super not now case buying loyalty them save all if pieces, as well.

an going kind So be thing to that's of forward doing as that the want we example.

Unknown Analyst

your financials guys to looking one all to another Just of try that credit current? line maybe other Are now are follow-up get unrelated. quick you

Janet Carr

active institutions, of in working number are we capital coming the a in to credit expect discussions Great in with and have And Yes. something yes, financial months. line question. of we place

Daniel Ross

Okay. queue don't At read X in own I have people the who asking point, of I this do more any to their chat. questions. are have

McCann, read to You're question? you Dave your able to want unmute. do

read to one Janet. Okay. this have mic. a he doesn't I'll

trends can gas mic costs? as you sales my inflationary then recent Sorry, have prices retreated July no are sorry, on trends in asks, -- Also, He cowhide especially August, right? in somewhat? and And you any end. seeing discuss what

Janet Carr

what been sales perspective, a From QX. and Okay. saw similar trend August in July have to we

continuing to are We adapt.

trying things. lot are different a We of

things. not of same on necessarily what again We're we generally is the "Jesus, insights report able that consumers sitting different And working coming just in But thing so experimentation, in way. trying seeing but different of environment at when our be to out old not you saying, completely were doing a lot end we'll now." responding we're the on a to of of talk back not we're some our the we hands QX,

XX question, The significant in cost seen, and especially part over second increases material so the last of we on have the cost of in the raw was sorry, leather. Yes, or months leather. of

with raw of as actually struggle of still many have to obtaining one material. had these Our challenges simply tanneries struggling have the biggest markets well short they've cost the COVID That's labor are that of been continued as as with labor. and of

those possible freight, more the costs going cost the So sourced that coming again, is doing and moving low quintupled. continue you to from costs possible. we've before many as as we, have, many, and COVID. to tanneries has as really are everything up, been and than know, from containers now Where I keep juggling Xx word all are overseas think, the They

So that through that flow cost. all has for is and to representing a of us challenge product

Daniel Ross

A Eddie question Okay. from follow-up Reily.

Edward Reily

for cost taking was additional on for maybe you another if maybe I wondering one freight, of any me, are action pricing Just sorry. planning offset the guys ]? SKUs the to [ XX%

Janet Carr

did. We Yes.

keeping We're most We're taking eye customers also our we because it's do. selective. are increases. doing And seeing We it pricing action the Eddie. we're the competition can, our on significant product where where on

we're competitive that. can to And we places as in we maintain have So doing that do pricing, follow, some where we well. where

off not staying going one. This We'll we take making is of So where XX%. We're they a competitive right? our be benchmark looking XX%, entire price that sort we're they at gone has where sure necessarily of sensitive. portfolio of and that -- doing our customer one that, up those. think the that it's products know product price for to making those we judgments items, less we're We're key with up

-- continue to through happen. mix. can it at we will get also it also So product It's

And very for the emphasizing impact we an example, been that of have machine and area been by other promotion. can have -- where has sales, is different strong, our types products, in helpful. Our

We end, AUR. So some the take higher regular may the we some retails result mix can up. can do promotion a in in

Daniel Ross

The to me on additional who He any also so next ask asks, a question from plans NASDAQ? updates is read doesn't microphone, any Bradley, Eric to to have there are uplift it.

Janet Carr

Yes. answer Dan? Do you to want that,

Daniel Ross

we for submitted now everything relisting NASDAQ. Sure. have on Eric,

us We consider that we another of file approval. show XX-Q to week NASDAQ out do The they the it longer before to asked timely our has quarter's are taken coming restatement, this did waiting application, them on Monday. and we application for because can to just

And of final in will be this so review they the part at process. hopefully, point, the

for I'm to just Speron, moment follow-up. Eric in going a a unmute you

Unknown Analyst

gross the these that clear profit XXs. be totally did dealing is hang seeing on to percentages high guys going Just profit, FIFO, mired don't Did function to way here mean gross further? imply me. going the you mentioned of to how and that Eddie's can I you to price. profit, I how I big it Q as gross managing business know a is and are mix section this gross question were... read also best The in today. if that the mean about to you that It is fact the you're in wasn't probably to profit it but percentage grasped with that for was you it is we're outlook Or just imply out the of

Janet Carr

that -- We promote and where would in of it high I we extreme if think very, that's then our we regular retail, that competitors was about the frequently deeply. sort very problem you and the were what We with Yes. back not And model low. had high call what model XXXX, is do.

expensive. as perceived us up them Our as ripping consumers

of so And Strategy. Everyday to sort this modified EDLP, shifted we Low Price

those promote crafting to consumables, business, part, milk right, every leather competitive we be promote items. to for don't that really key the had bring we the people the day. those of we the of And things all on don't the on, most So key

able and when example, come that you up. use then to key be So in sales. just they people and buy those want And day, you every and up and key use dies wedged them, hardware, wait not leather, need liquids to stock on key for

of So what that was we kind strategically did.

was impact margin it about roughly is credibility We take probably investment with to but gave sort That mix where our this movement that play, customers. will to to is that. strategy. be is to gross was the rebuild today market, And share is that EDLP gross our market margin up expect be. where to I going this the of that dwindling an do back -- was comes There continue an to away of

Daniel Ross

Heitman. question is Our Tim from next

Unknown Analyst

going the inventory. that be X ahead on year, made retailers much inventory parts. inflation, dollars between of unit to great turned question X average kind their there's results. Or guys back Another to that peakish just plus be versus since the of there's a of forward bunch and "extra levels you sense inventory had and is out convert maybe you other inventory" inventory a you then and maybe So carrying a you're the Last to of $XX ensure months? of cash X search extra of regardless think that to decision could in your you cost of capitalized, gross in million relative working buy kind how to decision few a kind carrying to difference Could One, might inventory? do you give sales? us of you million a

Janet Carr

What vendors. enough and categories is we'll inventory some we new we least about which transition. And we many There hard that up is to old weeks a we much do as are puts have way have hand on, say make to for of that to FIFO, our vendors of it's we the key product which at a on I sell through many know answer, question our So that stocked sure have on transitioned this many, stage. will have I Tim. takes, not many, too

actually long get In challenges is addition how the increasing them of us. costs, with it's product vendors taking to to to one

of of delays delivering. in shipment, they're Some but is it lot a is it not just

received. orders purchase we've haven't have still that ago a year We written we -- still

before did switching product. some how these we categories long were to were vendors, was be knowing new we So vendor the not stock where -- up in going have product receiving of their to it to new was we

increase bit offering. there, level little So that in there's I inventory as product but we going the to a broaden think is

we as our as increase And well. overall sales

-- need have So I'm be. it this product derived where be analytically not this We we not sales enough in some year material. and but I'm about in is that QX purchasing, feeling, come in not to as is our we would our back and about are softer did that pull X where

Daniel Ross

who Jeff, don't he's Janet, our question I you read. of for Chairman a that know, those think got going to

Jefferson Gramm

Director value just the to -- value for a all the not leverage conservatism or I'm got also And taxes, of property Gramm, with that and of the or here. question. about be I in on tune not. more want Jeff how not clarification probably a estate We just clear it's Yes. real to whole it's that know worth is. after I Tandy. very of Sure. whether It's valuable we're it's public X/X market question the

well, the not monetize subdividing of we this more proposition. flexibility our sale using. we part sale is We intact. now. term. valuable looked it trying in long-term of our keep hesitation just good that limit -- think a seem lot see at And property ourselves into if a And entering that pieces a actively we're to really we like do are like, leaseback doesn't don't We've leaseback like like or property a to a value options want the something something But to by property value don't is long it

maximum And from value -- that's know property, want I the so we there. it's create we mean, long-term that here and to view is this our that

the just like juncture not immediately it. maximum from is just we we're we're the not of also It's right in of terms this or property. the monetizing not that leveraging create like the at operations issue value or think to So business, a conservatism

Janet Carr

Any Dan? Thank you, other questions, Jeff.

Daniel Ross

were I working most gone? products, the has been is says accomplished inventory just more from on think quality have I of the upgrading the one that chat, of the which you old

Janet Carr

is not we and that. of the to continue were, old we gone. inventory do Yes, Most

depending biggest that probably our the category, through was are category. Hardware way on product the We working still product

are our through. way we So working

another We working number We have in categories other still place. have product of new that on. vendors we're

we've of forward, steps from a our every it's but made customers getting day. So tremendous that kind work-in-progress, and we're

Daniel Ross

any do inventory? on further Again, plans to write-downs the

Janet Carr

No. is We damage. an is which Leather a product, business. is -- of regular perishable -- sensitive it's kind very the housekeeping especially UV organic leather, to of part should of the it veg-tanned

So rigorous we thrown instituting but around to more product. get just organic guidelines -- of storage are leather, it some it's an out has

So and that some of thrown we're it we're period. minimal, on get to every is out keeping has up really But -- that.

So there should be no write-down.

Daniel Ross

Okay. this That's in queue all the have questions I the at point.

Janet Carr

this All Jeff right. to Either questions -- or reach Well, -- us. can out you we're or conversation. to this have participating. continue any Dan to for all, But of as have well. it. here, If other And end Bye. format to looking we we're you happy thank other and evolve answer works going I or QX any the forward, any for you again at do

Daniel Ross

everyone. Bye,

Tandy Leather Factory (TLF) 17 Aug 222022 Q2 Earnings call transcript