Tandy Leather Factory - Q1 2023

Transcript

Dan Ross (SVP, General Counsel and Corporate Secretary)

Good morning, everyone. Thank you for joining us for a discussion of Tandy's first quarter 2023 financial results. I'm Dan Ross, General Counsel and Corporate Secretary for Tandy. I will co-moderate the discussion today. Our CEO, Janet Carr, will give just a very brief overview of the quarter. 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. Then select Raise Hand. Janet will recognize the questioners. Ask you to unmute your line. You'll 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.

Unlike in past quarters, I will not be reading questions or comments 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. 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. Now, here's Janet Carr.

Janet Carr (CEO and Member of the Board of Directors)

Thanks, Dan. Hi, everyone. Good morning. Our first quarter 2023 sales were $20.4 million, down from $20.5 million or 0.7% in 2022. Gross profit was $11.8 million versus $11.9 million in 2022, with gross margin rate down 10 basis points. As of March 31st, 2023, we held $8.6 million of cash and cash equivalents, up from $8 million at year-end. Inventory was $35.9 million at the end of the quarter, down from $38.2 million as of year-end. We're pleased with our first quarter operating income of $1 million, despite the slight decline in total sales. Our strategy to manage operating expenses, maintain gross margin, and deliver positive cash even in the face of weakening consumer demand is working.

With a number of unprofitable stores pruned from the fleet over the last year, we believe we've made good progress toward our goal of delivering sustainable profit and cash while positioning us to grow future sales as the demand environment improves. I am happy to take your questions or comments.

Dan Ross (SVP, General Counsel and Corporate Secretary)

We have a few people, just entering from the waiting room. If you would like to ask a question, please raise your hand.

Janet Carr (CEO and Member of the Board of Directors)

No questions? I know somebody has a question. We're gonna set the speed record for shortest call ever. Yeah, I mean, look, we disclosed everything in our 10-Q, in our press release, with some commentary. We're looking for these calls to really be a discussion rather than a long scripted blah, blah, driven by whatever your questions, comments are. We're happy to sit here for a little while as people are, you know, pondering what they may want to ask. We are also always available through our investor relations website, or I think my contact info is on press releases, so you can reach out to me directly if something occurs to you later. Always happy to chat.

Dan Ross (SVP, General Counsel and Corporate Secretary)

Again, to raise your hand, you would push the Reactions button at the bottom of your Zoom screen and then select Raise Hand.

Janet Carr (CEO and Member of the Board of Directors)

just unmute yourself and bust in 'cause.

Lenny Fuchs (Managing Partner)

Hi, this is Lenny Fuchs, Spade Partners.

Janet Carr (CEO and Member of the Board of Directors)

Hi, Lenny.

Lenny Fuchs (Managing Partner)

hi, I wonder if you can comment on the store you opened on the military base?

Janet Carr (CEO and Member of the Board of Directors)

Yeah. We opened a very small format store in Fort Bragg in North Carolina. I think it's maybe Fort Liberty now. We opened it in November of last year, and it's been an experiment. We have quite a military customer, and we are really looking to see if being on base gives us an advantage. It is a interesting model. It's a commission model, percentage of sales versus paying a fixed rent. The people who run the concessions there are really supportive, and really helping us reach out. You know, the sales are not sort of, you know, knocking anybody's socks off, but it's been a great learning.

You know, because it's got very low commitment, you know, we agreed to a one-year commitment, and we can continue to renew each year if we believe it's worth it. It's really an experiment for us. There are a lot of bases in the U.S., maybe more importantly, a lot around the world, that could be really attractive to Tandy. I think the international bases in a lot of ways are even more attractive because you do have a little bit more of a captive audience and not as much potential competition. I would say jury's out on whether or not this is a robust model for us in the U.S. We are still learning a lot and looking forward to where we can take this in the future.

Lenny Fuchs (Managing Partner)

Thank you.

Janet Carr (CEO and Member of the Board of Directors)

You're welcome. Anyone else? Shall we call it a day, Dan?

Dan Ross (SVP, General Counsel and Corporate Secretary)

Yeah. Looks like we have no further questions.

Janet Carr (CEO and Member of the Board of Directors)

Okay. As always, you can always reach out to us directly. Thank you again for your support. Thank you for your interest in Tandy. Looking forward to speaking to you next quarter. Bye, everyone.