LIFETIME BRANDS, INC Q3 FY2024 earnings call

• Third quarter financial results: Net sales $183.8M vs $191.7M last year, impacted by end market softness. • Guidance reduction factors: De-stocking, delayed shipments into 2025, soft end markets. • E-commerce strength: Consolidated e-commerce sales up 18.7% YoY in Q3, 18.4% YTD; U.S. e-commerce sales up 10.7% YoY in Q3. • International segment: Sales up 10.9% YoY, successful go-to-market strategy and reorganization, market share expansion despite challenging end markets, expecting international business to turn profitable adding $10M annual EBITDA. • Food service: Slight downturn but gaining share, expanded Mikasa Hospitality product offering with new brands starting shipping in 2025. • M&A pipeline: Actively pursuing M&A opportunities in core business, new product adjacencies, food service, evaluating targets in areas like outdoor sector. • Supply chain: Ocean freight costs stabilized, domestic trucking costs increased, sourced products at reduced costs to maintain margins. • Balance sheet: Increased inventory levels to hedge against potential tariffs post-election, placed certain customers on credit hold to mitigate risk.

For the third quarter of 2024, net sales were $183.8 million compared to $191.7 million in the same period last year. Consolidated e-commerce sales increased to $34.4 million (18.7% of total sales) year-over-year in the third quarter, and to $86.3 million (18.4% of total sales) year-to-date. International segment sales increased 10.9% from the comparable prior year quarter. Food service business experienced a downturn but continued to gain share through national account networks and distributors. U.S. segment sales decreased 5.1% to $170.2 million, with product lines like tableware, kitchen tools, and hydration affected, partially offset by growth in cutlery and home decor. International gross margin increased to 34.6% from 32.5% driven by customer and product mix, while U.S. segment gross margin decreased to 36.8% from 37.3% due to product mix.

• Full-year 2024 net sales expected to be $680 million to $700 million compared to $687 million in 2023. • Adjusted income from operations expected to be $44 million to $47 million. • Adjusted net income expected to be $11 million to $13 million. • Adjusted EBITDA expected to be $54 million to $57 million.

• Macro economic headwinds including soft end markets, slower restocking, de-stocking, and delayed shipments. • Food service market downturn leading to fewer shipments than anticipated. • Supply chain challenges such as domestic trucking cost increase, Longshoremen strike impact, drought in Panama Canal, U.S. hurricane events, geopolitical turmoil in Red Sea diverting shipments. • Uncertainty regarding potential tariffs post-election affecting business interruption and market share. • Credit risk from placing certain customers on credit hold, like Big Lots filing bankruptcy.

Q: Drill down on 3Q sales shortfalls, separating impact of delayed shipments in mass retail and Dolly Parton shipments.

A: Rob Kay said big miss in quarter due to softness in mass channel and Dolly shipments not in Q3 but pushed to Q1, which helped drive guidance change.

Q: Drill down on distribution expenses up 17% from last year.

A: Larry Winoker explained it included non-recurring items like asset time and obligation assessment and new warehouse management system licensing efficiencies, with approximately $2 million of the increase being non-recurring.

Q: Clarifying on $4 million delay and new commercial food product line acceptance.

A: Rob Kay said $4 million shift is from 4Q to 1Q for Dollar General program, which is exceeding expectations; on food service, industry is down but gaining share with new wins starting to ship in 2025 with new commercial product line.