LL Flooring Reports First Quarter 2024 Financial Results

LL Flooring Holdings, Inc. (“LL Flooring” or “Company”), a leading specialty retailer of flooring in the U.S., 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.

For full results click here.

About LL Flooring

LL Flooring is one of the country’s leading specialty retailers of hard-surface flooring with more than 430 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.

Contact:

Bruce Williams – Investor Relations, ICR – ir@llflooring.com – (804) 420-9801

Source: LL Flooring Holdings, Inc.