LL Flooring Holdings, Inc. ("LL Flooring" or "Company") (NYSE:
LL), a leading specialty retailer of flooring in the U.S., today
announced financial results for the quarter ended March 31,
2024.
"First quarter business conditions remain difficult as we
continue to experience the impact of weaker home sales, elevated
interest rates and inflation, which have led to softness in home
improvement, remodel and big ticket discretionary spending. 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. Despite external headwinds, we are
focused on our ability to deliver the high-touch service of an
independent flooring retailer combined with the value, assortment,
and convenience of a national brand," said President and Chief
Executive Officer Charles Tyson.
Tyson continued, "The challenging macroeconomic factors have
pushed home improvement spend per housing unit below its 50-year
average, impacting the remodel industry. The leading indicators
continue to predict that spending on remodel activity will remain
challenged through the full year. However, the long-term tailwinds
regarding home improvement spending remain driven by aging housing
stock, increased household formation and rising home values. To
that end, we remain focused on executing on our strategic
initiatives that we believe will have LL Flooring well positioned
in the marketplace when the cycle for home improvement spending
normalizes."
First Quarter Financial Highlights
- Net sales of $188.5 million decreased $52.2 million, or
21.7%, versus the first quarter of 2023, driven by lower
transaction counts and average ticket size in both the Pro and
Consumer channels as a result of continued headwinds from the
difficult macroeconomic environment and ongoing brand awareness
challenges.
- Total comparable store sales decreased 21.5% versus the
same period last year.
- Gross margin increased 120 basis points to 37.8% and
adjusted gross margin1 decreased 40 basis points to 37.1% compared
to the first quarter of last year. The increase in gross margin was
primarily driven by vinyl cost recoveries associated with Uyghur
Forced Labor Prevention Act ("UFLPA"), lower transportation costs
as inbound container costs have come down, partially offset by
higher vinyl sourcing costs as we increased sourcing from domestic
vendors and lower average selling price due to challenges with
industry driven pricing pressure. The decrease in adjusted gross
margin1 is primarily driven by lower average selling price due to
challenges with industry driven pricing pressures.
- SG&A expense as a percentage of net sales was 52.3%
and adjusted SG&A1 as a percentage of net sales was 52.3%
compared to an SG&A, and adjusted SG&A1, as a percentage of
net sales of 42.0% and 41.9%, respectively, in the first quarter of
last year. The increases in both SG&A, and adjusted SG&A1,
as a percentage of net sales were due primarily to expense
deleverage from lower sales volumes.
- Operating margin loss was 14.5% compared to an operating
margin loss of 5.5% in the first quarter of last year. Adjusted
operating margin loss1 was 15.2% compared to an adjusted operating
margin loss1 of 4.5% in the first quarter of last year.
- Loss per diluted share increased $0.63 to $1.00 and
adjusted loss per diluted share1 increased $0.73 to $1.04 compared
to the first quarter of last year.
- We've continued to evaluate our store portfolio, resulting in
the closure of two stores during the first quarter, bringing
our total store portfolio to 435 stores as of March 31, 2024.
1Please refer to the "Non-GAAP and Other Information" section
and the GAAP to non-GAAP reconciliation tables below for more
information.
Cash Flow & Liquidity
As of March 31, 2024, the Company had liquidity of $63.3
million, consisting of excess availability under its Credit
Agreement of $57.3 million, and cash and cash equivalents of $6.0
million.
During the first three months of 2024, the Company used $23.7
million in cash flows from operating activities primarily driven by
our net losses in the quarter.
2024 Business Outlook
The Company continues to navigate uncertainty in the
macroeconomic environment due to low consumer confidence,
inflation, a volatile interest and mortgage rate environment and
continued declines in existing home sales. As a result, the Company
is not providing financial guidance at this time.
The Company is, however, providing the following commentary:
- In terms of our sales outlook for 2024, while we strongly
believe that our strategic initiatives of our CRM and Pro
initiatives will improve the customer experience and help drive
traffic to stores, our visibility is limited as to when the
macroeconomic environment will normalize.
- Adjusted gross margins1 are expected to maintain
year-over-year, driven primarily by potential reductions in
transportation costs, offset by higher vinyl sourcing costs as we
increased sourcing from domestic vendors and lower average selling
price due to industry pricing pressure as input costs have declined
compared to last year. The Company will continue to monitor the
competitive pricing environment to inform its pricing and promotion
strategies.
- SG&A dollar spend is expected to decrease for the full year
primarily due to management's strategic review of our cost
structure.
- Capital expenditures of approximately $13 million in 2024,
primarily related to our strategic initiatives such as the rollout
of carpet, and maintenance capital investments.
- We are pursuing a potential sale leaseback of our approximately
1 million square foot Sandston, VA Distribution Center, which is in
a highly desirable location. This action, along with our Dallas
distribution center, positions us to execute on our long-term
supply chain network strategy by optimizing our distribution
footprint and will provide additional liquidity for the
Company.
1 Please refer to the "Non-GAAP and Other Information" section
and the GAAP to non-GAAP reconciliation tables below for more
information.
Learn More about LL Flooring
- Our commitment to quality, compliance, the communities we serve
and corporate giving: https://llflooring.com/corp/quality.html
- Follow us on social media: Facebook, Instagram and
Twitter.
Conference Call and Webcast Information
The Company plans to host a conference call and audio webcast on
May 8, 2024, at 8:00 a.m. Eastern Time. The conference may be
accessed by dialing (833) 470-1428 or (404) 975-4839 and entering
pin number 387152. You may also use this website
https://events.q4inc.com/attendee/546341559 in lieu of speaking to
an operator. A replay will be available approximately two hours
after the call ends through May 15, 2024 and may be accessed by
dialing (929) 458-6194 and entering pin number 430159. The live
conference call and replay can also be accessed via audio webcast
at the Investor Relations section of the Company's website,
www.LLFlooring.com.
About LL Flooring
LL Flooring is one of the country’s leading specialty retailers
of hard-surface flooring with 435 stores nationwide. The Company
seeks to offer the best customer experience online and in stores,
with more than 500 varieties of hard and soft surface floors
featuring a range of quality styles and on-trend designs. LL
Flooring's online tools also help empower customers to find the
right solution for the space they've envisioned. LL Flooring's
extensive selection includes waterproof hybrid resilient,
waterproof vinyl plank, solid and engineered hardwood, laminate,
bamboo, porcelain tile, and cork, with a wide range of flooring
enhancements and accessories to complement. LL Flooring stores are
staffed with flooring experts who provide advice, Pro partnership
services and installation options for all of LL Flooring's
products, the majority of which is in stock and ready for
delivery.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release includes statements of the Company’s
expectations, intentions, plans and beliefs that constitute
"forward-looking statements" within the meanings of the Private
Securities Litigation Reform Act of 1995. These statements, which
may be identified by words such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "assumes,"
"believes," "thinks," "estimates," "seeks," "predicts," "could,"
"projects," "targets," "potential," "will likely result," and other
similar terms and phrases, are based on the beliefs of the
Company’s management, as well as assumptions made by, and
information currently available to, the Company’s management as of
the date of such statements. These statements are subject to risks
and uncertainties, all of which are difficult to predict and many
of which are beyond the Company’s control.
The Company specifically disclaims any obligation to update
these statements, which speak only as of the dates on which such
statements are made, except as may be required under the federal
securities laws. For a discussion of the risks and uncertainties
that could cause actual results to differ from those contained in
the forward-looking statements, see the "Risk Factors" section of
the Company’s annual report on Form 10-K for the year ended
December 31, 2023, and the Company’s other filings with the
Securities and Exchange Commission ("SEC"). Such filings are
available on the SEC’s website at www.sec.gov and the Company’s
Investor Relations website at https://investors.llflooring.com.
Non-GAAP and Other Information
To supplement the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), the Company
uses the following non-GAAP financial measures in the body of this
press release and in the supplemental tables at the end of the
release: (i) Adjusted Gross Profit; (ii) Adjusted Gross Margin;
(iii) Adjusted SG&A; (iv) Adjusted SG&A as a Percentage of
Net Sales; (v) Adjusted Operating Loss; (vi) Adjusted Operating
Loss; (vii) Adjusted Other Expense; (viii) Adjusted Other Expense
as a Percentage of Net Sales; (ix) Adjusted Loss; and (x) Adjusted
Loss per Diluted Share. These non-GAAP financial measures should be
viewed in addition to, and not in lieu of, financial measures
calculated in accordance with GAAP. These supplemental measures may
vary from, and may not be comparable to, similarly titled measures
by other companies.
The non-GAAP financial measures are presented because we believe
the non-GAAP financial measures provide useful information to
management and investors regarding certain financial and business
trends related to our financial condition and results of
operations, These measures provide an additional tool for investors
to use in evaluating our ongoing operating performance, and
management, in certain cases, uses them to determine incentive
compensation. The presented non-GAAP financial measures exclude
items that management does not believe reflect our core operating
performance, which include incremental costs of sales and
associated legal costs related to disruptions to supply chain and
other trade regulations and changes in antidumping and
countervailing duties, as such items are outside of our control or
due to their inherent unusual, non-operating, unpredictable,
non-routine, or non-cash nature. Reconciliations of these non-GAAP
financial measures are provided on the pages that follow.
Reconciliations of certain forward-looking non-GAAP financial
measures to comparable GAAP measures are not available due to the
challenges and impracticability with estimating some of the items.
The Company is not able to provide reconciliations of such
forward-looking non-GAAP financial measures because certain items
required for such reconciliations are outside of the Company's
control and/or cannot be reasonably predicted. Because of those
challenges, reconciliations of such forward-looking non-GAAP
financial measures are not available without unreasonable
effort.
(Tables Follow)
LL Flooring Holdings, Inc. Condensed
Consolidated Balance Sheets (Unaudited) In Thousands
March 31,
December 31,
2024
2023
Assets
Current Assets:
Cash and Cash Equivalents
$
5,968
$
8,772
Merchandise Inventories, Net
248,271
265,290
Prepaid Expenses
7,889
5,658
Other Current Assets
9,167
8,473
Total Current Assets
271,295
288,193
Property and Equipment, Net
99,518
100,490
Operating Lease Right-of-Use Assets
146,713
141,210
Other Assets
5,568
5,681
Total Assets
$
523,094
$
535,574
Liabilities and Stockholders’
Equity
Current Liabilities:
Accounts Payable
$
50,686
$
67,195
Customer Deposits and Store Credits
41,926
39,468
Accrued Compensation
6,043
6,915
Sales and Income Tax Liabilities
2,273
2,103
Accrual for Legal Matters and
Settlements
14,321
15,344
Operating Lease Liabilities - Current
32,083
31,815
Other Current Liabilities
27,279
24,382
Total Current Liabilities
174,611
187,222
Other Long-Term Liabilities
8,332
8,391
Operating Lease Liabilities -
Long-Term
121,668
116,651
Credit Agreement
89,000
66,000
Total Liabilities
393,611
378,264
Commitments and Contingencies
Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000
shares authorized; 31,389 and 30,983 shares issued and 29,118 and
28,849 shares outstanding at March 31, 2024 and December 31, 2023,
respectively)
31
31
Treasury Stock, at cost (2,271 and 2,134
shares, respectively)
(153,877
)
(153,617
)
Additional Capital
238,251
236,848
Retained Earnings
45,078
74,048
Total Stockholders’ Equity
129,483
157,310
Total Liabilities and Stockholders’
Equity
$
523,094
$
535,574
LL Flooring Holdings, Inc. Condensed
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited) In Thousands, Except Per Share Data
Three Months Ended March
31,
2024
2023
Net Sales
Net Merchandise Sales
$
164,715
$
210,497
Net Services Sales
23,775
30,201
Total Net Sales
188,490
240,698
Cost of Sales
Cost of Merchandise Sold
96,711
128,397
Cost of Services Sold
20,606
24,301
Total Cost of Sales
117,317
152,698
Gross Profit
71,173
88,000
Selling, General and Administrative
Expenses
98,565
101,185
Operating Loss
(27,392
)
(13,185
)
Other Expense
1,526
1,159
Loss Before Income Taxes
(28,918
)
(14,344
)
Income Tax Expense (Benefit)
52
(3,759
)
Net Loss and Comprehensive Loss
$
(28,970
)
$
(10,585
)
Net Loss per Common Share—Basic
$
(1.00
)
$
(0.37
)
Net Loss per Common
Share—Diluted
$
(1.00
)
$
(0.37
)
Weighted Average Common Shares
Outstanding:
Basic
28,896
28,717
Diluted
28,896
28,717
LL Flooring Holdings, Inc. Condensed
Consolidated Statements of Cash Flows (Unaudited) In
Thousands
Three Months Ended March
31,
2024
2023
Cash Flows from Operating
Activities:
Net Loss
$
(28,970
)
$
(10,585
)
Adjustments to Reconcile Net Loss:
Depreciation and Amortization
4,761
4,669
Deferred Income Taxes (Benefit)
Provision
—
(3,836
)
Income on Redeemed Vouchers for Legal
Settlements
(377
)
(253
)
Stock-Based Compensation Expense
1,404
1,051
Provision for Inventory Obsolescence
Reserves
746
572
(Gain) Loss on Disposal of Fixed
Assets
(6
)
—
Changes in Operating Assets and
Liabilities:
Merchandise Inventories
15,647
23,574
Accounts Payable
(18,438
)
8,045
Customer Deposits and Store Credits
2,458
2,793
Prepaid Expenses and Other Current
Assets
(2,925
)
1,826
Accrued Compensation
(872
)
(2,641
)
Accrual (Payment) for Legal Matters and
Settlements
(20
)
—
Other Assets and Liabilities
2,903
934
Net Cash (Used in) Provided by
Operating Activities
(23,689
)
26,149
Cash Flows from Investing
Activities:
Purchases of Property and Equipment
(1,861
)
(4,741
)
Other Investing Activities
6
—
Net Cash Used in Investing
Activities
(1,855
)
(4,741
)
Cash Flows from Financing
Activities:
Borrowings on Credit Agreement
93,000
66,000
Payments on Credit Agreement
(70,000
)
(91,000
)
Common Stock Repurchased
(260
)
(231
)
Net Cash Provided by (Used in)
Financing Activities
22,740
(25,231
)
Net Decrease in Cash and Cash
Equivalents
(2,804
)
(3,823
)
Cash and Cash Equivalents, Beginning of
Period
8,772
10,800
Cash and Cash Equivalents, End of
Period
$
5,968
$
6,977
Supplemental Disclosure of Non-Cash
Operating and Financing Activities:
Cash paid for interest
$
1,823
$
1,163
Relief of Inventory for Vouchers Redeemed
for Legal Settlements
$
626
$
412
Tenant Improvement Allowance for
Leases
—
(66
)
LL Flooring Holdings, Inc. GAAP to
Non-GAAP Reconciliation
Items impacting gross margin with comparisons to the prior-year
periods include:
Three Months Ended March
31,
2024
2023
$
% of Sales
$
% of Sales
(in thousands, except
percentage data)
Gross Profit/Margin, as reported
(GAAP)
$
71,173
37.8
%
$
88,000
36.6
%
Vinyl Charges1
(1,304
)
(0.7
)%
2,138
0.9
%
Adjustment Items Subtotal
(1,304
)
(0.7
)%
2,138
0.9
%
Adjusted Gross Profit/Margin (non-GAAP
measures)
$
69,869
37.1
%
$
90,138
37.5
%
1 This amount represents costs (recoveries) related to CBP
detentions on flooring products that contain PVC as a consequence
of the UFLPA. In the first quarter of 2024, we recovered charges
previously incurred from vendors for vinyl flooring products
affected under the UFLPA.
Items impacting SG&A with comparisons to the prior-year
periods include:
Three Months Ended March
31,
2024
2023
$
% of Sales
$
% of Sales
(in thousands, except
percentage data)
SG&A, as reported (GAAP)
$
98,565
52.3
%
$
101,184
42.0
%
Legal and Professional Fees1
—
0.0
%
280
0.1
%
Adjusted SG&A (a non-GAAP measure)
$
98,565
52.3
%
$
100,904
41.9
%
1 This amount represents incremental legal and professional fees
charged to earnings related to the vinyl CBP detentions. This does
not include all legal costs incurred by the Company.
LL Flooring Holdings, Inc. GAAP to
Non-GAAP Reconciliation
Items impacting operating (loss) income and operating margin
with comparisons to the prior-year periods include:
Three Months Ended March
31,
2024
2023
$
% of Sales
$
% of Sales
(in thousands, except
percentage data)
Operating Loss, as reported (GAAP)
$
(27,392
)
(14.5
)%
$
(13,185
)
(5.5
)%
Gross Profit/Margin Adjustment Items:
Vinyl Charges1
(1,304
)
(0.7
)%
2,138
0.9
%
Gross Profit/Margin Adjustment Items
Subtotal
(1,304
)
(0.7
)%
2,138
0.9
%
SG&A Adjustment Items:
Legal and Professional Fees2
—
0.0
%
280
0.1
%
Adjusted Operating Loss / Margin (a
non-GAAP measure)
$
(28,696
)
(15.2
)%
$
(10,767
)
(4.5
)%
1,2 See the Gross Profit/Margin and SG&A sections above for
more detailed explanations of these individual items.
LL Flooring Holdings, Inc. GAAP to
Non-GAAP Reconciliation
Items impacting loss per diluted share with comparisons to the
prior-year periods include:
Three Months Ended March
31,
2024
2023
(in thousands, except per
share data)
Net Loss, as reported (GAAP)
$
(28,970
)
$
(10,585
)
Net Loss per Diluted Share (GAAP)
$
(1.00
)
$
(0.37
)
Gross Profit/Margin Adjustment Items:
Vinyl Charges1
(1,304
)
2,138
Gross Profit/Margin Adjustment Items
Subtotal
(1,304
)
2,138
SG&A Adjustment Items:
Legal and Professional Fees2
—
280
SG&A Adjustment Items Subtotal
—
280
Income Tax Adjustment3
333
(636
)
Adjusted Loss
$
(29,941
)
$
(8,803
)
Adjusted Loss per Diluted Share (a
non-GAAP measure)
$
(1.04
)
$
(0.31
)
1,2 See the Gross Profit/Margin, SG&A and Other Expense
sections above for more detailed explanations of these individual
items. 3 Income tax adjustment is defined as the sum of Gross
Profit/Margin, SG&A, and Other Expense adjustment items
multiplied by the Company’s federal incremental rate, which was
25.6% and 26.3% for the three month period ended March 31, 2024 and
2023, respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508523517/en/
For further information: LL Flooring Investor Relations
ICR Bruce Williams ir@llflooring.com Tel: 804-420-9801
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