BRAND HOUSE COLLECTIVE, INC. Q2 FY2023 earnings call

• Ann Joyce expressed gratitude for associates' efforts, noted macroeconomic headwinds, and mentioned refocusing brand voice toward value and seasonally relevant home décor, with Decorative Accessories showing strong comp growth. Inventory was reduced by 30% year-over-year, and operating expenses were cut by over $5 million. - Amy Sullivan discussed customer engagement, stating the core customer finds joy in decorating and entertaining, and marketing is undergoing an overhaul with a focus on localization and in-store strategies. Direct mail is a key driver in marketing, and product assortment is being rebalanced to emphasize value home décor. - Mike Madden detailed financial performance, including net sales, gross profit margin components, and operating expenses, noting improvements in adjusted EBITDA excluding impairments.

For the second quarter, net sales were $89.5 million compared to $102.1 million in the prior year quarter. Comparable sales were down 9.7%. Ecommerce was 27% of total sales during the quarter, with stores outperforming ecommerce on a year-over-year basis (comps down 7% vs. 17% for ecommerce). Merchandise-wise, the outdoor category had the largest decline, while Decorative Accessories and holiday saw gains. Gross profit margin increased 140 basis points to 19.5% of sales. Merchandise margin increased 320 basis points to 51.2%, driven by lower freight rates, lower inventory levels, and improved product flow.

• Management not providing specific guidance but noted early Q3 environment is challenging with traffic as a headwind, but conversion rates are improving. Expect sales to stabilize in Q3 and improve in Q4 as marketing and merchandise adjustments take hold. Merchandise margin improvement is expected in the back half, with supply chain efficiency normalizing. Goal is to return to positive adjusted EBITDA in the back half of 2023, with bulk of improvement in Q4. Aim to get back to mid to high single-digit adjusted EBITDA margins long-term, starting with topline improvements from customer base restoration and ecommerce growth.

• Macroeconomic headwinds such as inflation, consumers spending on necessities and experiences, persistent inflation, mounting credit card debt, and higher interest rates. - Challenges in executing marketing and merchandise strategies effectively, including ensuring marketing dollars are allocated efficiently and product assortment is well-positioned.

Q: Jeremy Hamblin asked about same-store sales trends, magnitude of compare easing, borrowing costs, and marketing expense budget.

A: Mike Madden and Amy Sullivan responded, discussing Q3 trends, compare easing due to prior year inventory clearance, borrowing costs expected to be up vs. last year, and marketing expense budget around $13 million.

Q: John Lawrence inquired about holiday and harvest category impacts, quantify of positive categories, and marketing efforts with direct mail.

A: Amy Sullivan and Mike Madden replied, talking about Christmas assortment growth, Decorative Accessories double-digit comp increase, Halloween product success with minimal discount, and customer survey and direct mail responses showing promising engagement from lapsed customers