The Brand House Collective (KIRK) Q1 2025 earnings summary

Executive summary

• Net sales for Q1 2024 were $91.8 million, down from $96.9 million year-over-year, with comparable sales down 3.5% due to a 19.1% e-commerce decline but a 2.8% increase in store sales.

• Gross profit margin improved by 280 basis points to 29.5%, driven by lower outbound freight, improved merchandise margin, and reduced distribution center costs.

• Net loss improved to $8.8 million ($0.68 per share) from $12.1 million ($0.95 per share) in the prior year quarter.

• Early traction seen in marketing and merchandising strategies, with units sold up nearly 20% year-over-year.

• Cost savings initiatives were announced, and a financial advisor was retained to review strategic alternatives.

Financial highlights

• Operating loss narrowed to $7.5 million from $10.3 million year-over-year.

• Adjusted EBITDA loss improved to $4.5 million from $5.8 million year-over-year.

• Inventory at quarter end was $75.8 million, down 9.1% year-over-year, with cash balance at $3.8 million and $48.9 million in outstanding debt.

• Net cash used in operating activities was $13.7 million, slightly better than $14.8 million in the prior year.

• Capital expenditures were $770,000, focused on store maintenance and technology.

Outlook and guidance

• Management expects cost savings initiatives to yield $6 million in fiscal 2024 and $7 million in ongoing annual pre-tax savings.

• Q2 is expected to be the lowest sales volume quarter, with increased promotional activity and gross margin in the low twenties.

• Targeting positive adjusted EBITDA for 2024 after two years of losses.

• Long-term goal is to achieve $600 million in revenue and mid- to high-single-digit adjusted EBITDA margin by fiscal 2028.

• Management believes current liquidity, credit facilities, and cost actions will support operations for at least the next 12 months, but unforeseen events could require further measures.