Executive Summary

Q2 2025 delivered modest top-line growth and margin expansion: revenue rose 2.8% to $17.8M and gross margin improved 150 bps to 59.5% YoY; GAAP net loss was $0.2M and operating income was $0.1M, reflecting higher lease-related opex post-HQ sale .
Management reiterated expectation of full-year 2025 operating losses due to HQ relocation and transition from owned to leased facilities; tariffs are a mounting risk to pricing and demand, potentially pressuring sales and profitability in 2H25 .
No earnings call transcript or Wall Street consensus estimates were available; coverage appears limited, constraining immediate “beat/miss” framing and reducing near-term estimate-driven catalysts [GetEstimates*].
Tactical positives: U.S. retail sales productivity drove Q2 growth; cash increased to $16.4M, bolstered by January HQ sale proceeds, while inventory rose to support operations and move logistics .
Corporate actions remain active: Q1 special dividend ($1.50/share) and subsequent repurchase of 430,897 shares from former CEO at $3.00/share (closed July 18), signaling capital return but reducing cash flexibility amid higher rent commitments .

What Went Well and What Went Wrong

What Went Well

Gross margin expanded to 59.5% (+150 bps YoY), driven by inventoriable cost adjustments and pricing changes to balance tariffs .
Sales growth of 2.8% YoY to $17.8M, primarily from increased sales productivity in U.S. retail stores .
Liquidity strengthened: cash and cash equivalents increased to $16.4M by quarter-end, even after Q1 special dividend and repurchases tied to HQ transition .
CEO tone: “We were pleased to have grown our sales and margin dollars in the second quarter, despite the challenging environment and economic uncertainty…gains were driven primarily by increased sales productivity in our U.S. retail stores” .

What Went Wrong

GAAP bottom line negative: net loss of $0.2M vs income of $0.1M YoY, reflecting higher occupancy (lease) costs and relocation spend; opex up 5.5% YoY to $10.5M .
Operating income flat ($0.066M vs $0.063M YoY), highlighting limited leverage from revenue/margin gains amid increased rent, salaries and relocation costs .
Tariff risk rising: Management warned that newly announced tariffs did not materially affect Q2 product costs but may require price increases and subsequently reduce sales/profits in future periods .

Financial Results

Consolidated P&L vs Prior Year and Prior Quarter

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$17.286	$19.000	$17.773
Gross Profit ($USD Millions)	$10.018	$10.700	$10.573
Gross Margin (%)	58.0%	56.3%	59.5%
Operating Expenses ($USD Millions)	$9.955	$10.500	$10.507
Operating Income ($USD Millions)	$0.063	$0.300	$0.066
Net Income ($USD Millions, GAAP)	$0.101	$12.700 (HQ sale gain)	$(0.199)
Basic EPS ($USD, GAAP)	$0.01	$1.49	$(0.02)
Diluted EPS ($USD, GAAP)	$0.01	$1.47	$(0.02)
Adjusted EBITDA ($USD Millions, non-GAAP)	N/A	$0.6	$0.3

Notes: Q1 2025 GAAP net income and EPS reflect one-time HQ sale gain; management provided adjusted figures to isolate operating performance . Q2 2025 adjusted EBITDA reconciliation provided in press release .

Geographic Revenue Mix (Quarterly)

Region	Q2 2024 ($USD Thousands)	Q2 2025 ($USD Thousands)
United States	$15,300	$15,833
Canada	$1,737	$1,718
Other	$249	$222
Total Net Sales	$17,286	$17,773

KPIs and Balance Sheet Highlights

KPI	Q2 2024	Q1 2025	Q2 2025
Stores Operated (count)	103	100 North America + 1 Spain (context)	101 total; 91 U.S., 9 Canada, 1 Spain
Cash & Cash Equivalents ($USD Millions)	$13.271	$23.6	$16.419
Inventory ($USD Millions)	$35.556 (Dec 31, 2024 reference)	$34.4 (Mar 31, 2025)	$36.199
Operating Lease Liabilities, Current ($USD Millions)	$3.205	N/A	$3.454
Operating Lease Liabilities, Non-Current ($USD Millions)	$7.561	N/A	$7.961

Actual vs Estimates (Q2 2025)

Metric	Actual	Consensus	Beat/Miss
Revenue ($USD Millions)	$17.773	N/A*	N/A
Primary EPS (GAAP) ($USD)	$(0.02)	N/A*	N/A

Values retrieved from S&P Global where marked with an asterisk (consensus unavailable) [GetEstimates*].

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Operating Income/Profitability	FY 2025	“Significantly increased costs and likely operating losses for full year 2025”	“Costs…still expect those costs to lead to operating losses for full year 2025”	Maintained (negative)
Tariffs Impact	2H 2025 onward	Tariffs may require price increases, likely declines in sales/profits if levels persist	Tariffs did not materially affect Q2 product costs; may impact sales and profits going forward	Maintained risk; near-term pressure likely
HQ/Flagship Lease Costs	FY 2025–2026	Not quantified previously	Initial combined rent for new HQ and flagship >$1.5M per year, increasing from 2026	Newly quantified; negative opex delta
Capital Returns	1H 2025	Special dividend $1.50/share paid in Q1	Repurchased 430,897 shares from former CEO at $3.00/share; closed July 18, 2025	Continued capital return; cash usage

Earnings Call Themes & Trends

(No Q2 2025 earnings call transcript available; themes based on 8-Ks and 10-Q.)

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Tariffs/Macro	Anticipated need to raise prices; likely declines in sales/profits if tariffs persist (Q1) ; weaker U.S. retail backdrop (FY24)	Tariffs did not materially affect Q2 costs; may impact sales/profits going forward	Risk intensifying; pricing actions and demand elasticity in focus
Store Productivity	Efforts to improve sales in stores and e-commerce (FY24 outlook)	U.S. retail sales productivity drove Q2 gains	Positive momentum in U.S. retail
HQ Sale/Lease Transition	HQ sold in Jan; special dividend; expect opex increase and FY25 operating losses (Q1)	Lease-related opex drove higher operating expenses; move in progress in Q3	Transition costs peaking; opex headwind sustained
Regional Trends	FY24 sales down; aim for improvement in 2025	U.S. up; Canada slightly down; Other down	U.S. resilience; Canada/Other soft
Capital Allocation	Special dividend paid; buyback program refreshed (FY24/Q1)	Private repurchase from former CEO at $3.00/share (closed July)	Continued returns; monitoring liquidity vs opex

Management Commentary

“We were pleased to have grown our sales and margin dollars in the second quarter…driven primarily by increased sales productivity in our U.S. retail stores…we still expect those costs to lead to operating losses for full year 2025…newly-announced tariffs…may impact our sales and profits going forward.” — Johan Hedberg, CEO .
“In the first quarter, we completed the sale of our corporate headquarters…paid our stockholders a substantial dividend of $1.50 per share…significantly increased costs and likely operating losses for full year 2025…If tariffs remain…this will necessarily require us to increase our retail prices and likely lead to unavoidable declines in our sales and profits.” — Johan Hedberg, CEO .
“Looking ahead to 2025…significant costs relating to the move of our headquarters…will negatively impact our ability to be profitable in 2025…position the Company for a rebound in both sales and profits in 2026.” — Johan Hedberg, CEO (FY24 release) .

Q&A Highlights

No Q2 2025 earnings call transcript available. The company invited investor questions via investor relations email, suggesting asynchronous engagement rather than a live call format .

Estimates Context

Wall Street consensus estimates (EPS, revenue) for Q2 2025 appear unavailable; thus, formal beat/miss assessment cannot be made. Coverage and target price consensus also unavailable [GetEstimates*].
Implication: Near-term revisions risk is limited by lack of coverage; fundamental narrative (U.S. store productivity vs opex/tariffs headwinds) likely drives stock moves until coverage expands .

Values retrieved from S&P Global where marked with an asterisk.

Key Takeaways for Investors

U.S. retail strength and pricing actions lifted Q2 revenue and margins; however, higher lease-related opex from HQ/flagship transition capped operating leverage, resulting in a small GAAP loss .
Management expects FY25 operating losses; lease obligations (> $1.5M per year, rising in 2026) create structural opex headwinds until productivity gains or pricing fully offset .
Tariffs represent the key exogenous risk: minimal Q2 cost impact to date, but management flagged potential future price increases and demand softness, which could pressure sales/margins in 2H25 .
Liquidity is adequate ($16.4M cash) post special dividend and share repurchase; watch cash trajectory as lease costs ramp and relocation completes in Q3–Q4 .
Capital return remains active (dividend, private repurchase), but trade-off vs investment/opex needs should be monitored given rising fixed costs .
With limited external estimate coverage, trading catalysts will hinge on disclosed monthly/quarterly trends in U.S. store productivity, tariff pass-through, and opex normalization post-move .
Medium-term thesis depends on the company’s ability to stabilize store traffic, manage tariff-driven pricing, and realize post-relocation efficiencies to restore profitability by 2026 as guided .

TANDY LEATHER FACTORY INC (TLF)·Q2 2025 Earnings Summary