TLF - Tandy Leather Factory Reports Q4 and FY 2018 Financial Results

FORT WORTH, Texas, March 06, 2019 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ: TLF) today reported financial results for the fourth quarter and year ended December 31, 2018.  A conference call will be conducted by senior management at 10:00 am Eastern Time on March 7, 2019.  Dial-in details are referenced below.

• Total sales for the fourth quarter of 2018 were $24.7 million, up 1.0% over fourth quarter 2017.  North America reported comparable store sales increase of 0.7%, while new stores added $0.3 million of sales. International reported comparable store sales decline of 1.3%.
• Q4’18 gross profit margin decreased to 57.4% (after adjusting for a $1.4 million write down for damaged and slow-moving items) compared to prior year’s 62.4%.
• Q4’18 operating loss was approximately $237,000 due to higher costs associated with its recent change in management, exit costs associated with store closures, and impairment charges for underperforming stores. 
• At December 31, 2018, cash totaled $24.1 million.  During 2018, cash provided by operations equaled $6.9 million, while 243,387 treasury shares were repurchased at an average price of $6.79.  These stock repurchases were primarily funded by the Company’s line of credit which totaled $9.0 million and bore interest at 4.0%.  To date in 2019, the Company has fully repaid its debt and repurchased an additional 53,626 shares totaling $306,000 under its buy-back program.

Commenting on the results, Janet Carr, Chief Executive Officer, said, “As expected, our fourth-quarter 2018 results reflected the glide path of the business leading into the quarter with some transition and clean-up layered on.  More importantly, in Q4 we began the process of revitalizing our brand and building the operating model and infrastructure that will support our long-term vision for the business.  This work and these investments will continue into 2019 as we put the Company on the right foundation for exciting future growth.”

Consolidated net loss for the quarter ended December 31, 2018 was $0.6 million compared to $1.7 million consolidated net income for the fourth quarter of 2017.  Fully diluted (loss) earnings per share (“EPS”) for the fourth quarter of 2018 were ($0.07), compared to $0.18 in last year’s fourth quarter.  Included in fourth quarter 2018’s results were the following discrete items:

• $1.4 million write down of inventory to net realizable value for damaged and slow-moving inventory to be disposed or sold through in the first half of 2019.
• $0.6 million of non-recurring charges related to separation agreements executed with its former officers that included accelerated vesting of restricted stock units, as well as severance payments and other benefits. 
• $0.2 million of exit costs associated with the recent closure of its Irving, TX; Fort Wayne, IN; and Minto, Australia stores consisting of involuntary termination benefits and lease exit obligation costs.
• $0.3 million of impairment charges related to four underperforming stores.
• $0.2 million of additional taxes related to cross-border intercompany transactions with its Canadian subsidiary.

Consolidated net income for full year 2018 decreased to $2.0 million or EPS of $0.21 versus $4.5 million or $0.48 in the comparable period last year.  In addition to the discrete items included in the fourth quarter results mentioned above, 2018 results also include $0.6 million of higher costs associated with the five stores that have opened since April 2017, $0.8 million of higher labor costs for increases in store associate wages and testing extending store operating hours, partially offset by $0.9 million of lower print and postage costs.

At December 31, 2018, inventory totaled $33.9 million, a decrease of $3.4 million from the beginning of the year.  The Company plans to continue to improve its inventory turnover. 

Key Initiatives

Strategic plans to drive future sales growth and long-term profitability include the following key actions that are currently being undertaken: 

• We are developing a new operating model to better serve our retail and wholesale/business customers and align the cost structure with the related margin earned from those customers.   
• Enhancing our business processes and infrastructure to support our new operating model requires additional headcount in areas such as human resources, technology and marketing.  We expect that 2019 will be a year of investment and change as we rebuild our infrastructure, and there may be some overlap of old and new systems and people during this transition, which will inflate our 2019 operating expenses.  We believe that these investments in talent and technology will drive future sales growth and cost savings in 2020 and beyond.    
• Going forward, our retail fleet will be managed primarily for cash flow which may result in an additional four to six store closures in 2019.
• To support our business priorities, we have made changes to our Retail field organization and incentives, including reducing our store management structure, which allows us to invest in other areas of the business.
• We are improving our brand proposition, with a focus on our products, promotion and pricing.  Our goal is to ensure that we are investing in the right areas to drive sales growth. 

Conference Call Information

A conference call will be conducted by senior management at 10:00 a.m. Eastern Time on March 7, 2019, and will be accessible to the public by calling 877-312-5524 or 253-237-1144.  Callers should dial in approximately 5 minutes before the call begins. A conference call replay will be available through 12:00 p.m. Eastern Time on March 12, 2019 and can be accessed by calling 855-859-2056 or 404-537-3406.  For both, reference conference ID number 9687767.  This call will be webcast and can be accessed at the company’s web site at www.tandyleather.com.   

Tandy Leather Factory, Inc., (http://www.tandyleather.com), headquartered in Fort Worth, Texas, is a specialty retailer of a broad product line including leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits. The Company distributes its products through its 115 North American stores located in 42 US states and 7 Canadian provinces, and two International stores located in the United Kingdom and Spain.  Its common stock trades on the Nasdaq with the symbol "TLF".  To be included on Tandy Leather Factory’s email distribution list, go to http://www.b2i.us/irpass.asp?BzID=1625&to=ea&s=0.

This news release may contain statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: changes in general economic conditions, negative trends in general consumer-spending levels, failure to realize the anticipated benefits of opening retail stores; availability of hides and leathers and resultant price fluctuations; change in customer preferences for our product, and other factors disclosed in our filings with the Securities and Exchange Commission.  These forward-looking statements are made only as of the date hereof, and except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Selected financial data (UNAUDITED):

*Same store sales are defined as sales from existing stores that were opened during the same comparable fiscal period

TANDY LEATHER FACTORY, INC.
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CONSOLIDATED BALANCE SHEETS

TANDY LEATHER FACTORY, INC.
CONSOLIDATED STATEMENTS OF INCOME
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FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31,

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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE YEAR ENDED DECEMBER 31,