Executive Summary

Q1 revenue declined 21.7% to $188.5M with comparable store sales down 21.5% amid weaker home sales, elevated rates, and softer big-ticket remodeling demand; GAAP gross margin rose 120 bps to 37.8% on UFLPA vinyl cost recoveries and lower transportation, but adjusted gross margin fell 40 bps to 37.1% due to pricing pressure and mix .
Operating margin deteriorated sequentially to -14.5% (Q4: -8.3%) on SG&A deleverage to 52.3% of sales; GAAP EPS was -$1.00 and adjusted EPS -$1.04 .
Guidance: Still no formal financial guidance; however, FY24 commentary improved on cost: SG&A dollar spend expected to decrease (vs Q4 view of SG&A rising), capex lowered to ~$13M (from ~$15M), and the company is pursuing a sale‑leaseback of its Sandston, VA DC to bolster liquidity .
Liquidity fell to $63.3M (vs $118.2M at 12/31/23) as operating cash flow was -$23.7M in the quarter; management highlighted macro and brand-awareness headwinds and continued store portfolio pruning (435 stores, -2 q/q) .
Potential stock reaction catalysts: deeper comps decline and SG&A deleverage, lack of formal guidance, capex cut and sale‑leaseback for liquidity, and adjusted margin pressure from industry pricing .

What Went Well and What Went Wrong

What Went Well
- GAAP gross margin expanded 120 bps YoY to 37.8% driven by UFLPA-related vinyl cost recoveries and lower inbound container costs; management continues to adjust sourcing and pricing to navigate industry pressures .
- FY24 operating cost outlook improved: management now expects SG&A dollar spend to decrease for the full year, reflecting an ongoing strategic review of the cost structure .
- Management reaffirmed long-term tailwinds (aging housing stock, household formation, rising home values) and emphasized strategic initiatives (CRM and Pro) to position the business for a normalized spending cycle; “we remain focused on executing on our strategic initiatives…when the cycle…normalizes” — CEO Charles Tyson .
What Went Wrong
- Comps fell 21.5%, with continued declines in traffic and lower average project sizes across Consumer and Pro; net sales fell 21.7% YoY to $188.5M .
- SG&A deleverage to 52.3% of sales drove operating margin loss of -14.5% (adjusted -15.2%), a step down from Q4, reflecting lower volumes over fixed cost base .
- Liquidity contracted to $63.3M and operating cash flow was -$23.7M; visibility remains limited and no formal guidance is provided amid macro uncertainty and brand awareness challenges .

Financial Results

Metric	Q3 2023	Q4 2023	Q1 2024
Net Sales ($USD Millions)	$215.846	$211.780	$188.490
Gross Margin % (GAAP)	31.7%	38.6%	37.8%
Adjusted Gross Margin %	37.5%	38.3%	37.1%
SG&A % of Net Sales (GAAP)	45.5%	46.8%	52.3%
Operating Margin % (GAAP)	-13.7%	-8.3%	-14.5%
Adjusted Operating Margin %	-7.9%	-8.6%	-15.2%
EPS (GAAP)	-$1.25	-$0.62	-$1.00
Adjusted EPS	-$0.78	-$0.64	-$1.04

Segment/Revenue Mix

Revenue ($USD Millions)	Q3 2023	Q4 2023	Q1 2024
Net Merchandise Sales	$183.579	$183.059	$164.715
Net Services Sales	$32.267	$28.721	$23.775
Total Net Sales	$215.846	$211.780	$188.490

KPIs and Balance Sheet/Cash Flow

KPI/Metric	Q3 2023	Q4 2023	Q1 2024
Comparable Store Sales YoY	-20.5%	-20.2%	-21.5%
Store Count (end of period)	443	437	435
Liquidity ($USD Millions)	$120.2	$118.2	$63.3
Cash from Operations (period)	n/a	n/a	-$23.689M

Non-GAAP context: In Q1, GAAP gross margin benefitted from $1.304M vinyl recoveries (UFLPA); adjusted gross margin removes this, resulting in 37.1% vs 37.8% GAAP .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal Financial Guidance	FY2024	Not providing guidance	Not providing guidance	Maintained
Adjusted Gross Margin	FY2024	Expected to maintain YoY; driven by transportation cost reductions	Expected to maintain YoY; drivers include potential transport cost reductions, offset by higher domestic vinyl sourcing costs and lower ASP amid pricing pressure	Maintained (drivers updated)
SG&A Dollar Spend	FY2024	SG&A $ and % of sales expected to increase YoY	SG&A dollar spend expected to decrease for full year	Lowered (more cost discipline)
Capital Expenditures	FY2024	~ $15M	~ $13M	Lowered
Liquidity Initiative (DC Sale‑Leaseback)	FY2024	Not disclosed	Pursuing sale‑leaseback of ~1M sq ft Sandston, VA DC; positions network strategy and adds liquidity; also addresses Dallas DC	New

Earnings Call Themes & Trends

Note: Full Q1 2024 transcript could not be retrieved from the document system; themes reflect management disclosures in press releases across periods.

Topic	Q3 2023 (Q-2)	Q4 2023 (Q-1)	Q1 2024 (Current)	Trend
Macro: existing home sales, rates, discretionary spend	Macro headwinds and lower existing home sales impacting demand	Ongoing weakness in existing home sales; home improvement softness	“Weaker home sales, elevated interest rates and inflation” pressuring traffic and project size	Deteriorating in Q1
Pricing/ASP pressure	Freight relief; pricing/mix pressures noted in adjustments	Vendor cost outs and lower transportation help; higher vinyl sourcing costs	Lower ASP from industry pricing pressure despite transport cost relief	Persistent pressure
Supply chain/UFLPA & duties	UFLPA vinyl detentions and antidumping duty impacts	Smaller vinyl/duties impacts; margins improved	Vinyl cost recoveries benefit GAAP; adjusted removes benefit	Risk moderating, one-time recoveries
CRM & Pro initiatives	CRM rollout and Pro focus as growth levers	CRM for all customers by year-end; focus on customer experience, NPS, Pro	CRM and Pro expected to improve traffic; timing uncertain	Execution ongoing
Carpet rollout/product expansion	Carpet expansion underway	Carpet rollout highlighted	Capex prioritized for carpet rollout	Continuing
Distribution footprint/liquidity	Added Dallas DC; cost structure review	Dallas DC investment; liquidity stable	Pursuing Sandston VA DC sale‑leaseback; liquidity support	Liquidity actions ramping
Brand awareness	Internal challenges and brand transformation need	Brand campaign to grow awareness	Ongoing “brand awareness challenges” impacting sales	Still a headwind

Management Commentary

“We reported comparable store sales down 21.5% as we saw continued declines in traffic and lower average project sizes from our consumer and Pro customers.” — Charles Tyson, President & CEO .
“The challenging macroeconomic factors have pushed home improvement spend per housing unit below its 50-year average… However, the long-term tailwinds…remain… We remain focused on executing on our strategic initiatives…” — Charles Tyson .
Margin context: GAAP gross margin up 120 bps to 37.8% on vinyl cost recoveries and lower transportation costs; adjusted gross margin down 40 bps to 37.1% on lower ASP amid industry pricing pressure .
Cost discipline: SG&A dollar spend expected to decrease in FY24 following a strategic cost review .
Liquidity actions: Pursuing sale‑leaseback of Sandston VA DC to optimize the network and provide additional liquidity .

Q&A Highlights

Full Q1 2024 earnings call transcript was not retrievable from the document system (database inconsistency), so Q&A highlights are unavailable based on primary sources in this environment.

Estimates Context

Wall Street consensus (S&P Global) for Q1 2024: Data unavailable via tool due to CIQ mapping issue; as a result, we cannot assess revenue/EPS beat/miss versus S&P Global consensus at this time (Values retrieved from S&P Global were unavailable).
Given deteriorating comps, SG&A deleverage, and liquidity decline, sell-side models may revisit FY24 SG&A levels (lower) and capex ($13M), and reflect adjusted gross margin holding YoY with pricing pressure headwinds per management commentary .

Key Takeaways for Investors

Demand remains under acute pressure: comps -21.5%, traffic and average ticket down; sales fell 21.7% YoY to $188.5M .
Margin quality mixed: GAAP gross margin aided by one‑time vinyl recoveries; adjusted gross margin declined on pricing pressure—watch sustainability as industry pricing remains competitive .
Cost actions intensify: management now expects FY24 SG&A dollars to decrease (vs Q4 view of rising), a constructive pivot on expense control .
Liquidity focus: operating cash use of ~$23.7M and liquidity down to $63.3M; sale‑leaseback of Sandston VA DC is a near‑term lever to bolster liquidity while progressing network optimization .
Investment pace trimmed: FY24 capex cut to ~$13M from ~$15M, prioritizing carpet rollout and strategic initiatives .
Narrative still cautious: no formal guidance; brand awareness challenges and macro drag persist, making inflection timing uncertain despite CRM/Pro initiatives .
Near‑term setup: Absent estimate data, catalysts skew to execution on cost/working capital and progress on liquidity actions; risk remains from pricing pressure and continued macro softness .

Appendix: Additional Detail From Q1 2024 Release

Operating expense leverage: SG&A 52.3% of sales (vs 42.0% prior year), reflecting volume deleverage; adjusted SG&A also 52.3% .
Operating loss widened to -$27.4M (adjusted -$28.7M); other expense $1.5M; net loss -$29.0M (adjusted -$29.9M) .
Balance sheet: Cash $6.0M; credit agreement borrowings $89.0M at quarter end; inventory $248.3M (down from $265.3M at 12/31/23) .

Sources: LL Flooring Q1 2024 8‑K and press release (Ex. 99.1), Q4 2023 and Q3 2023 8‑K press releases and tables .

LL Flooring Holdings, Inc. (LL)·Q1 2024 Earnings Summary