Tandy Leather Factory Q3 2023 Earnings Call Transcript

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November 10, 2023

There are 2 speakers on the call.

Operator

Discussion of Tandy's Q3 2023 financial results. I'm Dan Ross, General Counsel and Corporate Secretary for Tandy, and I will be co moderating the discussion today. Our CEO, Janet Carr, will give just a very brief overview of the quarter, and then we will devote the conference to investors' questions and discussion. If you wish to ask a question or make a comment, please press the reactions button, which is located at the bottom of your Zoom screen, and then select raise hand. Janet will recognize the questioners and ask you to unmute your line.

Operator

You will need to ask your questions out loud yourself through your computer or phone audio. Please be sure to state your name and, if applicable, your company when you begin your question. I will not be reading questions directly from the chat. With that, let's get started. Today's presentation will include statements other than historical results that constitute forward looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, each as amended.

Operator

These statements reflect our expectations or estimates based on the information we have today, but are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and which may cause actual results to differ materially from the statements contained in this presentation. You are cautioned not to put undue reliance on these forward looking statements. The company assumes no obligation to update or otherwise revise these forward looking statements except as required by law. And now here is Janet Carr.

Speaker 1

Thanks, Jan. So as we have been doing the last few quarters, I'm just going to give a very brief summary, And then we'll open for questions. So sales this quarter were tough. Soft demand that we saw at the towards the end of Q2 continued into Q3. So our sales were down in Q3, 8 percent versus last year and now 4.5% year to date.

Speaker 1

Our gross margin rate was up To 64 62.4 percent versus 60.8% last year in Q3, Really driven by full price selling and real cost controls that we have in our warehouse and Cost advantages we're seeing in freight in and duty, all of those costs that we capitalize into cost of sales. Our operating expense was down 5.3% versus Q3 of last year, and it's now down 5 0.9% year to date driven by improvements everywhere. But in Q3, in particular, it was driven by Some real steps that we've taken to improve store labor. Q3 operating income, therefore, was came in at 8 $180,000 versus $976,000 last year. Looking to some key balance sheet Items, we ended the quarter with $8,600,000 in cash, up from $8,000,000 at year end.

Speaker 1

And I like to look at it versus where we were At the end of Q3 last year, which was at $3,000,000 last year. So we're definitely making progress on our goals around cash and profitability. We ended the quarter with $38,600,000 in inventory versus $38,200,000 at year end and down $3,700,000 versus Q3 of last year, we ended with $42,300,000 in inventory. So the bottom line is from a financial perspective, just In short, we've really been quite nimble in responding to softening sales. We're managing our cost of sales.

Speaker 1

We're managing operating expenses. We're managing and adjusting inventory purchases, to match our sales demand, and we are preserving cash. With regard to stores, as we reported last quarter, we opened 1 new store in Ridgewood, Queens, New York. That store has been Meeting our expectations. And if you're in the New York area, you should definitely go visit the team there.

Speaker 1

We will also be closing our store at Fort Liberty at the end of November. We've talked about this as a real opportunity. And I will say that And maybe this is obvious to some people, but it was a good learning for us. And I think the conclusion is you can People can leave the base to shop at Tandy, but if they're not military personnel, they can't come on to the base. So the idea of it was a captive audience is sort of true.

Speaker 1

And the real benefit The audience is sort of true. And the real benefit that came out of this is that we have a lot of learning about Where we can go with military generally, how what the organizations are, who to contact, who to work with to do community engagement. So we've got a lot of great learning from this, and that store will close at the end of November. The last comment I want to make that you can read about in Item 4 in our 10 Q is a big shout out to Edwardis Miguel, our Controller and the whole accounting team, as we reported in our 10 Q, we have remediated all of Our material weaknesses, we have tested and disclosed our controls. We feel Actually, really good about where we are.

Speaker 1

And after 1 more quarter of testing, we feel confident that we'll be able to say our controls are fully effective. So this has been the last puzzle piece, the last bit that needs to be put into place for us to Completely put the restatement behind us, and we feel like we have done that. And it's been quite a journey. So thanks again to Advertis and his whole team. I think I would say, in summary, it's been a tough demand environment, but we're managing our costs As we said we would, we're pleased with our profitability, and we're really looking forward to driving sales in Q4.

Speaker 1

Questions, comments? What do you do again, Deb? You go to How do you raise your hand? You go to reactions. Anyone have any questions, comments?

Speaker 1

Or you can just unmute yourself and ask the question. Forget about raising your hand. Okay. Going once, going twice. Now we have set the record.

Speaker 1

All right, everyone. Last chance, if you have By email, you can always reach out to me or Dan with any questions if you think of something at a later date. But thank you again for your interest in Tandy and your moral support. And we look forward to talking to you after the end of the year.

Operator

Thank you, everyone, for joining us.

Speaker 1

Thank you.

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