Executive Summary

Q2 2025 was resilient on topline with net sales $88.26M (-3.4% YoY, +0.3% QoQ), but profitability remained pressured by discounting and product cost inflation; adjusted EBITDA was $4.94M (5.6% margin), down 26.7% YoY, up 8.1% QoQ .
SG&A efficiencies (Spring Valley, WI DC closure; prior NJ DC closure benefits) improved SG&A rate to 63.9% (from 65.8% in Q1), partially offsetting gross margin compression to 64.4% (-160 bps YoY, -160 bps QoQ) .
Management highlighted assortment expansion (LVT including Arbor line; laminate; engineered wood; large-format tile; new Signature wall tile line) as drivers of increased unit volumes, though mix-shift to lower ASPs and higher discounting weighed on average ticket and margins .
No formal quantitative guidance was provided; near-term focus is on expense reductions, capex discipline, and operational efficiencies amid low housing turnover and evolving tariff risks (mitigated by diversified sourcing across 20+ countries and inventory position) .
Stock narrative catalysts: ongoing cost actions (additional ~$1M annual SG&A reduction from Spring Valley DC closure), assortment breadth to capture incremental rooms (e.g., mudroom/basement flooring), and tariff agility; absence of guidance and margin pressure remain overhangs .

What Went Well and What Went Wrong

What Went Well

Assortment refinements lifted unit volumes YoY, driven by expanded LVT (Arbor), laminate, engineered wood, and large-format tile; Signature wall tile line launched and is expected to support 2H25–2026 sales .
SG&A discipline: Q2 SG&A was $56.4M (-$2.1M YoY), with benefits from prior NJ DC closure, lower marketing, depreciation, and smaller impairment; Spring Valley, WI DC closure adds ~$1.0M annualized SG&A savings .
Liquidity: No debt outstanding; cash and cash equivalents increased to $27.8M at quarter-end (from $21.0M at YE24); $75M undrawn line provides flexibility .

What Went Wrong

Comparable store sales declined 3.5% (traffic-driven) and gross margin fell to 64.4% (-160 bps YoY) due to heightened discounting and increased product costs .
Profitability compressed: net income $0.4M vs $1.2M YoY; adjusted EBITDA margin 5.6% vs 7.4% YoY; trailing 12-month pretax ROCE fell to 0.0% (from 6.8% in Q2 2024) .
Housing turnover remains near historic lows, pressuring traffic and average tickets; mix shifted to lower ASP products and higher discounting, weighing on margins and ticket size .

Financial Results

Quarterly Comparison (oldest → newest)

Metric	Q4 2024	Q1 2025	Q2 2025
Net Sales ($USD Millions)	$79.45	$88.01	$88.26
Gross Margin %	64.2%	66.0%	64.4%
SG&A Expense Rate %	65.3%	65.8%	63.9%
Income from Operations Margin %	-1.1%	0.2%	0.5%
Net Income ($USD Millions)	-$0.63	$0.17	$0.39
Diluted EPS ($USD)	-$0.01	$0.00	$0.01
Adjusted EBITDA ($USD Millions)	$3.42	$4.57	$4.94
Adjusted EBITDA Margin %	4.3%	5.2%	5.6%
Cash and Equivalents ($USD Millions, quarter-end)	$21.00	$27.06	$27.76
Number of Stores (period-end)	142	142	141

YoY Comparison (Q2 2024 vs Q2 2025)

Metric	Q2 2024	Q2 2025	YoY Change
Net Sales ($USD Millions)	$91.38	$88.26	-3.4%
Gross Margin %	66.0%	64.4%	-160 bps
Comparable Store Sales %	-6.9%	-3.5%	+340 bps (improvement)
Net Income ($USD Millions)	$1.22	$0.39	-67.9%
Diluted EPS ($USD)	$0.03	$0.01	-$0.02
Adjusted EBITDA ($USD Millions)	$6.73	$4.94	-26.7%
Adjusted EBITDA Margin %	7.4%	5.6%	-180 bps

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Comparable Store Sales %	-5.8%	-4.0%	-3.5%
Pretax ROCE (TTM) %	2.9%	1.2%	0.0%
Line of Credit Utilization ($USD Millions)	$0	$0	$0

Segment breakdown: Not applicable; TTSH reports as a specialty tile and flooring retailer without segment disclosure .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Quarter	None provided	None provided	Maintained (no guidance)
Gross Margin	FY/Quarter	None provided	None provided	Maintained (no guidance)
SG&A	FY/Quarter	Qualitative: ongoing cost actions	Additional ~$1.0M annualized SG&A benefit from Spring Valley DC closure	Raised cost-savings outlook
Capex	FY/Quarter	None provided	Intent to curtail capital spending	Lower (qualitative)
Tax Rate	FY/Quarter	None provided	No formal guidance; Q2 effective tax rate 16.4%	N/A
Dividends	FY/Quarter	None provided	None provided	Maintained (no dividend guidance)

Note: Company did not issue quantitative guidance; emphasis on expense reduction, capex discipline, and efficiencies .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Housing/macro	Sequential improvement vs Q3 in comps; continued sector challenges	Housing turnover near historic lows; traffic headwind persists	Macro pressure persistent
Assortment strategy	Enhanced Superior install products; refined LVT; expanded opening price points	LVT (Arbor), laminate, engineered wood, large-format tile; Signature wall tile line launched	Broader assortment; unit volume tailwind
Pricing/Discounting	Modest AOV increase QoQ in Q4 2024; gross margin impacted by write-offs	Higher discounting and lower ASP mix pressured margins and tickets	Margin headwinds from price/mix
Tariffs/regulatory	Monitoring increased tariffs; diversified supplier base to mitigate	Tariff volatility acknowledged; diversified sourcing across 20+ countries; inventory levels provide agility	Risk manageable with sourcing agility
Cost actions/footprint	2 DC closures over 9 months; workforce reduction; budget cuts	Spring Valley, WI DC closed (≈$1M annual SG&A savings); 1 store closed in Q2 and 1 in Q3	Continued cost discipline
Liquidity/capital	No debt; $21.0M cash YE24	No debt; $27.8M cash at Q2; $75M undrawn LOC	Strengthened liquidity

Management Commentary

CEO Cabell Lolmaugh: “We believe the steps we’ve taken to expand our assortment of entry level, competitively priced products have contributed to a modest improvement in unit volumes… offset due to increased demand for products carrying lower average selling prices and an increase in discounting… Housing turnover remains near historic lows…” .
CEO: “The refinements we've made to our assortment… include the expansion of our LVT offerings… added laminate and engineered wood flooring… expanded large format tile offerings… Signature line… robust offering of over 250 different wall tile…” .
CEO: “We recognize the uncertainty and volatility tariffs have presented… we are well positioned… source products from well over 20 countries… carry more inventory than the typical retailer… seasoned purchasing team…” .
CFO Mark Davis: “Second quarter SG&A expense of $56.4M was $2.1M lower… primarily due to an $0.8M decrease in asset impairment, $0.7M reduction from NJ DC closure, $0.7M decrease in marketing, and $0.4M decrease in depreciation… partially offset by a $0.4M write-off…” .
CFO: “We closed our distribution center in Spring Valley, Wisconsin… anticipate this action will reduce our annual SG&A expense by approximately $1.0M… generated $13.5M of operating cash flow; cash grew to $27.8M” .

Q&A Highlights

The call featured prepared remarks; there were no substantive Q&A exchanges or guidance clarifications. Operator closed the Q&A without questions, and IR noted the Form 10-Q would be filed later that day .

Estimates Context

Wall Street consensus (S&P Global) coverage appears limited or unavailable for Q2 2025; no consensus mean values were retrievable for EPS or revenue to compare against reported results. One estimate was recorded historically for Q3 2024 (EPS and revenue) but not sufficient for robust consensus comparisons (Primary EPS - # of Estimates: 1; Revenue - # of Estimates: 1). Values retrieved from S&P Global.*
Implication: With sparse coverage, estimate-based beat/miss analysis is not possible; investor focus should remain on sequential trends and management actions.

Metric	Period	Consensus Mean	# of Estimates
Primary EPS Consensus Mean	Q2 2025	Unavailable*	Unavailable*
Revenue Consensus Mean ($USD)	Q2 2025	Unavailable*	Unavailable*
Primary EPS - # of Estimates	Q3 2024	—	1*
Revenue - # of Estimates	Q3 2024	—	1*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Mix and discounting pressure margins despite unit volume improvements; watch for margin stabilization as assortments mature and promotional cadence normalizes .
SG&A progress is tangible; Spring Valley DC closure adds ~$1M annual savings; further efficiency initiatives likely in the absence of housing turnover improvement .
Assortment expansion (LVT, laminate, engineered wood, large-format, Signature wall tile) should help capture multi-room projects and broaden customer appeal, supporting square footage growth .
Liquidity is strong (no debt; $27.8M cash; $75M LOC); provides flexibility to navigate macro/tariff volatility and fund targeted merchandising initiatives .
Trailing ROCE has deteriorated (0.0% TTM); improving margins and asset turns will be key to restoring returns; consider valuation sensitivity to profitability recovery .
Near-term trading setup: absence of guidance and margin compression may cap upside; monitor monthly comps, gross margin cadence, and tariff developments; cost actions offer downside support .
Medium-term thesis: diversified sourcing and broader product portfolio position TTSH to benefit when housing turnover normalizes; execution on cost and merchandising can drive operating leverage .

TILE SHOP HOLDINGS, INC. (TTSH)·Q2 2025 Earnings Summary