Lifetime Brands Q3 2026 Earnings Call - LIFETIME BRANDS INC

Good morning, ladies and gentlemen, and welcome to the Lifetime Brands third quarter of 2026 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would liketo ask a question during this time please press star then one on your telephone keypad. Please note this event is being recorded. I would now like to introduce your host for today's call, Jamie Kirchen. Mr. Kirchen, you may go ahead now. Good morning, and thank you for joining Lifetime Brands' third quarter 2026 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Larry Winokur, Chief Financial Officer. Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future of the company, and these statements are intended to qualify for the safe harbor protection from liability established by the Private Security Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in our earnings release and other factors are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future development. Except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in our release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAP financials measures with the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob. Thank you, Chuck. Thank you and good morning, everyone. The third quarter was a quarter of notable progress for lifetime. Net sales grew 3.4% to $177.7 million. Gross margin expanded 140 basis points to 36.5%, and that is after absorbing a $3.3 million inventory charge tied to a skew rationalization I'll elaborate upon shortly. Adjusted net income was 8.4 million, or 37 cents per diluted share, up from 11 cents a year ago. EBITDA also grew noticeably in the quarter. Note that this morning's press release reported current period adjusted LTM EBITD of approximately $84 million. The number should have read $92.4. LTM adjusted EBITDA before limitations was strong at that $92.4 million compared to prior quarter LTM-adjusted EBITD of $90.1 million, calculated under the terms of our credit agreement. We grew over last year, but we should have grown more. Bringing a distribution center the size of our new Hagertown, Maryland facility online is no small undertaking, and while we planned for startup costs and challenges, the ramp took longer than we had planned. As we noted on our second quarter call, we anticipated carryover of startup issues into the third quarter, and the transition resulted in missed shipments and added cost. These ramp-up issues have been addressed and we are shipping in a normal cadence as of the beginning of the fourth quarter. We are confident the ramp- up phase is complete and now behind us. Hagerstown is a 1 million plus square foot facility built to consolidate our East Coast distribution and to be our most efficient building. It is now positioned as the linchpin of Lifetime's North American operations. Now that it is fully operational, Hagerstown is already contributing to our operational efficiency. In October, our peak shipping month, Lifetime shipped approximately $7 million of product, a near record for our company excluding the COVID period. While the third quarter was adversely impacted by missed shipments due to these ramp-up issues, we do expect to recover some, but not all, of the shipments missed during the fourth quarter. And as we move into 2027, we will have the full efficiency benefit of this building without the startup costs. Notwithstanding the Hagertown ramp up, the underlying business is performing well in an end market that remains soft in consumer durables. The end market continues to exhibit divergent performance across channels. Off price remains the strongest part of the market, and we continue to grow there. MASH is performing solidly, and Club has been a standout. We have grown meaningfully in the Club channel this year, well ahead of the broader category. There is a consistent theme here. When times are tougher, people eat at home more, and they cook and entertain at home more, and that plays directly to our portfolio. Kitchenware, our largest category, is performing well. The Farbleware relaunch, our larger brand, is in the market and performing. As with any relaunch of that scale, we are refining the assortment based on what we're seeing on the shelf, but sell-through has been encouraging. Tableware was our largest growth driver in the quarter, up 31%, led by Flatware and the Warehouse Club channel. Home decor continues to be a growth engine, driving growth in home solutions. Demand for the Dolly partner collection has stepped up significantly, and the line has become something of a collectible. For 2026, we are largely sold through supply of Dolly products. We see strong demand going into 2027, and we expect the program to be a solid contributor. The program has also expanded beyond its launch partner. That launch partner is Dollar General, and it has become one of our best growth stories. We had essentially no business with Dollar General in 2023. This year, we expect wholesale sales to approach $20 million. We are now working with Dollar general on additional brands, and we see a long runway for that relationship. Concord is working. International sales grew 18.8% in the quarter, and the segment approached break-even. Asia-Pacific, which had been losing money, is profitable year-to-date. In Australia and New Zealand, the top line is growing nicely, and we're focused on operations for that locale. We have one significant step left in Concord in the UK, which we expect to contribute meaningfully to the profitability of this segment, and we hope to share more on that in the coming months. This quarter, we took a $3.3 million charge, primarily in the U.S., with a smaller portion in the UK, to mark down and exit slow-moving inventory. This timing was deliberate. When you're closing one building and opening another, it makes no sense to pay to move product which is slow moving this makes us leaner and more profitable going forward and we have excluded it from our adjusted results as previously disclosed we completed the full renance refinancing of our debt this year we expanded our low-cost asset-based facility and replaced our larger term line with a much smaller one which can be scaled up if we need it the result is a meaningfully lower cost of capital and a more flexible structure you can already see it in the numbers interest expense was two point million dollars this quarter versus five million dollars a year ago and larry will walk you through the details our new structure also removes restrictions that limited our ability to buy back stock under our old agreement as announced this morning our board has increased our repurchase authorization to 20 million dollars from approximately 11 million remaining under the prior program we view this as an important tool to have in place and we now have the full flexibility to use it opportunistically put simply we have rebuilt our balance sheet and we have significant capacity and flexibility to invest in growth including acquisitions we plan to lay out our full capital allocation strategy at our investor day in new york on december 1st turning to guidance we are raising the low end of our net sales range to 660 million to 700 million dollars we are maintaining our adjusted income from operations and adjusted ebitda ranges our gap earnings guidance reflects the one-time cost discussed today looking ahead we see a number of tailwinds built into 2027. Hagerstown startup costs and disruptions will be behind us. We'll have the full efficiency of that building. We'll add the full year benefit of project Concord in international. And our refinancing lowers our interest costs. Additionally, we are growing with programs with many retailers including Dollar General as I discussed, and we have momentum in many of our categories, as I just described. We look forward to going into detail of our plans and strategies during our upcoming Investor Day. We'll lay all of this out in detail on December 1st, and I hope many of you will join us. With that, I'll turn it over to Larry. Thanks, Rob. As we reported this morning, net loss for the third quarter of 2026 was $4.2 million, or $0.19 per diluted share, as compared to a net loss of $1.2 billion, or five cents per dilute share in the third part of 2025. Just in net income, it was $8.4 million for the third quarter of 26, or $0.37 per diluted shares, compared to net income of $2.5 million, or 11 cents per dilute share in 25. Loss from operations was nil in the third court of 26 as compared to income from operations of $6.7 million in the 2025 period. Lost from operations for the current period included a charge for an inventory reserve for skew rationalization of $3.3 million. Adjusted income from operations with a third quarter of 26 was $13.8 million, as compared to $11.5 million last 2025 period. The 2026 period included adjustments for acquisition related to tangible amortization of 4.3 billion, warehouse relocation and redesign of 5.3 million a skew rationalization of 3.3 million and other expenses approximately 900 000. the 2025 period also included adjustments for acquisition related intangible amortization of 4.4 million restructuring of 300 000 and warehouse and relocation redesign of approximately 100 000. Dr. Dibata, for the trillion 12 months period ended September 30th, 2026, was 92.4 million before limitations. Note that in this morning's earnings release, we reported 84.5 million, which is after limitations. While we had no limitations in the 2Q report, it was our intention to be consistent and report before limitations, the limitations in this quarter will cause or due to one-time expenses incurred for the move of our east coast distribution operations and skew rationalization reporting before limitations is consistent with how we reported our full year guidance again adjusted evita for the thrilling 12-month period ended september of 26 was 92.4 million before limitations an increase of 2.3 million for the current quarter adjusted income adjusted information noted on non-gap financial measures which are reconciled to our gap financial measure in the earnings release the following comments are for the third quarter of 2026 and 2025 unless stated otherwise consolidated net sales increased by 3.4 percent to 177.7 million u.s segment sales increased like two percent to 161.3 million Within the segment, product line increases were in tableware and home solution, driven by warehouse clubs, partially offset by decreases in kitchenware driven by lower warehouse club e-commerce sales, which included the impact to ramp up the new East Coast distribution facility in Hagerstown, Maryland. International segment sales increased by 18.8% to $16.4 million. The increase was driven by higher selling prices in all regions and continued growth with retail customers in Australia and New Zealand. Consolidated gross margin increased to 36.5% from 35.1%. U.S. segment gross margin decreased to 36% from 36.8% from 33.1% from 34.1. The improvement in the gross margin percentage was attributable to lower-cost products resulting from reduced tariffs relative to the prior year. favorable product mix partially offset by a two million dollar skew rationalization charge international gross margin decreased to thirty four point one from thirty five point five driven by the one point three skew rationalization recorded they're partially offset my expanded gross margin resulting from highest selling price in favorable customer mix US segment distribution expenses as a percentage of good ship from its warehouses excluding non-recurring expenses was 11.3 percent versus 8.5 percent the increase was due to lower shipment volume resulting in an unfavorable absorption of fixed expenses higher occupancy and this and depreciation for the new facility also included were inefficiencies associated with operating the old and new facility concurrently braid out expenses increased due to higher freight rates and customer mix now recurring warehouse expenses for the current period were 5.3 million which related to one-time expenses to start up a new facility and exit the old one these included labor relocation of inventory recruiting and training set up costs and duplicate rent for the non-operational portion of the two facilities international segment distribution expenses as the percentage of goods shipped from its warehouses improved to 24.4 percent from 22.6 the approval was due to higher sales resulting in a favorable impact on fixed expenses selling general and administrative expenses increased by 7.6 percent to 38.2 million u.s segment expenses increased 1.7 million or six percent 30.1 million as a percentage of net sales expenses increased to 18.7 percent from 18. the increase in expenses was driven by higher incentive compensation international sdna increased to 3.7 billion from 3.4 million this increase was driven by foreign currency exchange losses as a percentage of net sales expenses decreased to 22.6 from 24.6 the increase the decreased percentage was due to the impact of fixed costs on higher sales volume and unallocated corporate expenses was 4.4 million compared to 3.7 million in 25. the increase was was due to incentive compensation and higher professional fees in addition we restored salary cuts implemented last year to partially mitigate the adverse impact of tariffs restructuring expenses were 600 000 compared to 300 000 last year in in the current year 500 000 was for employee severance related to exiting the old facility facility and 100 000 was for the uk project concord employee severance interest expense excluding mark-to-market adjustments for swaps decreased from 5 million to 2.1 million due to lower average outstanding borrowings favorable mix of the new debt structure and 1.4 million of interest income received from tariff refunds the loss on extinguishment of debt of 2.5 million relates to the write-off of the unamortized issuance costs related to the recent refinancing defective tax rate was 9.3 percent and 171.1 percent last year these rates differ from the federal statutory rate of 21 percent primarily due to the impact of non-deductible expenses in the current quarter and a partial valuation allowance recorded on deferred tax uh deferred taxes related to goodwill impairment in the 2025 period Looking at debt and our liquidity, our balance sheet was further strengthened by the August debt refinancing. We amended our revolving credit facility and refinanced our term loan, which, among other things, extended all our debt maturities to 2031. A new term loan like the credit facility is asset-based. The terms of the agreement will provide us with more liquidity and flexibility in the use of our capital. To order end, our liquidity was approximately $123 million, which included cash plus availability under our credit facility and receivable purchase agreement. This concludes our prepared comments. Operator, please open the line for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star, then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star then 2 if you would like to remove yourself from the question queue. For participants using a speakerphone, it may be necessary to pick up the handset before pressing the keys. And our first question for today will come from Matt Coranda with Roth Capital. Please go ahead. Hey, guys. Good morning. Thanks for taking the questions. You mentioned, I think, in the prepared remarks about $5.3 million in adjustments for warehouse startup costs. So I assume that's all for Hagerstown. Are there any inefficiencies, I guess, at that facility that you can call out that weren't added back? And then now that it's shipping normally as of the fourth quarter, can you just call out the benefits to operating expenses, how those show up in the P&L going forward? So hi, Matt. All of the costs are related to Hagerestown. um you know larry went through a lot of the costs there's different buckets of those costs but there's inefficiencies as you're ramping up um no not everything is added back you know particularly lost revenues when we had problems from the ramp up experience that's just lost and flows to our numbers and it's not not added back it's really just the cost of ramping up facility the redundancy um from a labor perspective having two facilities and a lot things that larry walked through um the the biggest benefit we're going to see on a go forward basis is you know now that the facility is up and running we won't have the ramp up costs and and robinville the new jersey facility is empty will be shut um by the end of the year uh so it's just clean up and dilapidation at this point and uh that that will all disappear and we'll be on a you know pristine clean basis on a go-forward basis with no no noise yeah imagine just to um just to make um let me just add something you know um in response to your question so um what we didn't add that would be more specific that i can is that in the new facility because i want to get it to uh gap issues here but because we have a new lease you have to straight line the rent over the least period 15 years so your rent expense is going up but our cash rent is actually approximately what we're paying in in our old facility but nevertheless you know um you know cap you have to record it that way so that's going to be that will persist as well as we bought new equipment um for the facility so our depreciation expense will be higher both of those don't get added back the other thing is that it's just inherent inefficiency operating two facilities and normally that would be very efficient right you move them to one but during this period we just have normal inefficiencies not because of the actual move in training people but because you have to you know let's say you have a line and two lines in each location and you normally have one supervisor well if you have one in Maryland you have also one in New Jersey so those inefficancies you don't get to add back over let's see maybe not the fourth quarter but I think Certainly in 2027, you'll see the distribution expense as a percent of shipping be pretty much as it had been before we moved. Okay. Very clear. Appreciate the color on that stuff, guys. And then just for the – I guess the implied outlook for the fourth quarter looks good on sales, but you kind of held the adjusted EBIT outlook on change for 26. Maybe just wanted to hear a little bit about the drivers there that underpin the implied fourth quarter outlook and how to think about the margin sort of flow through the end of the year. Yeah, I think the big unknown that will play out in the quarter is any hangover from now that Hagerstown is operating as normal. and, you know, recovery of some, as I said, you know, but definitely not all of some missed shipments that we had. So there's definitely upside, but, you know, there's a lot of unknowns. So we left things unchanged in terms of our guidance. But sales, we saw, you know, we were definitely running ahead, and that's why we wanted to narrow the range and moved up from the low end. Okay. Makes sense. Maybe this last one on Project Concord, just an update there, I guess. Since we're kind of hitting break-even in terms of profit contribution there, wanted to hear a little bit about sort of how that may shift to a contributor in 27 versus being a drag for the last couple of years. And then what's driving the really strong growth in the EU region? it looks really positive in the quarter and how sustainable is that sort of growth rate that you put up? So I'm going to punt on the first question mostly by saying that we'll give you full details of a lot of, you know, next year in December 1st on investor day. But, but the business actually on a pro forma basis was breakeven for the quarter um and um a lot of the growth is you know we changed the business strategy we also changed the product offering um and if you look at the uk historically which is the bulk of the business uh historically that business was sold to uh dining cook shops which be the equivalent in the u.s of you know independent gourmet shops um and you know it's taken time but we've transition that to the larger national accounts, such as Dunelm and Next and Tesco and the like, and we're getting good traction there, and that's, you know, which we've talked about, but those wins that we've had there are running through our shipments and financial statements now, and we'RE getting the benefit from that. So, that's been driving us. Unfortunately, the independent sector, you know, has particularly since COVID continued to decline. So it's really the shift. And as we've shifted our product strategy to really products, a lot of them from the U.S., such as KitchenAid, is driving a lot of growth throughout the whole European continent for us. Okay. Actually, internationally as well. So it's driving, you know, a lot of growth in Asia Pacific and Australia and New Zealand for us as well. Okay. I appreciate that color, Rob. I'm looking forward to hearing more from you guys on the outlook in December. Thanks, man. The next question will come from Anthony Lebozinski with Sidoti & Company. Please go ahead. Good morning, everyone, and thanks for taking the questions. So, yeah, as we look at the reported numbers for revenue, how do we think about the pricing impact versus unit volumes overall for the quarter? Yeah, there was some substance in pricing reflective of the lower cost in sourcing the goods because of tariffs. It would, by the way, help our margins just because we kept the gross profit the same, just as when we implemented higher prices. We only increased it by the amount of our costs, so the gross proper percentage went down. So it's had, obviously, the opposite effect. Anyone talk about units? Yeah, I mean, in general, the market is being relatively flat on a dollar basis, but down unit, like, overall. And we've seen some of that, you know, so we've been able to pick up some share. We've had some successes, as I talked about, and that's been helping us on both, but stronger on dollar than unit. That's a very helpful context. And as we think about the skew rationalization that you guys did in the third quarter, so on a go-forward basis, how do we think about the structural gross margin benefits from this skew-rationalization? um so our go forward margin profiles should be you know as we've expected and experienced in the past um you know if you look at what we did is again you know when you're moving facilities in one big facility you know there's stuff that we could sell but you know we didn't uh it's more efficient and ultimately more economically beneficial to write it off and we're preparing to do something similar in the uk so the uk facility um that we operate in uh is maybe 50 utilized so the last step in project concord is we're looking to exit that facility um and in anticipation of that we we did a ski rack there as well and we we're doing it all at once okay that's very helpful okay and then um you guys mentioned that you had some missed shipments and added costs in Q3 because of the move to the Hagerstown facility. Any way to kind of try to quantify that or just basically how impactful do you think that was in a quarter? Not very easy to quantify it in total detail. So we're still working on that, But we believe it to be between $7 and $10 million in impact, negatively, obviously, in the third quarter. Okay. So that's why my comments, you know, Anthony, was, you Know, we did well and we grew. We would have done a lot better. Okay. Well, all right. So that certainly helps to kind of frame things. Okay. Got it. All right. And then, you know, lastly, as far as the share buyback that you announced today here, is this something that you think you'll be looking to do right away? Or what's the timeframe for that, you think, as long as you can put that to use? um so you know as we've discussed with the whole public and in view you know we believe that the intrinsic value the economic value is not reflected currently in this trading price um so we would use um stock buyback uh to we think create value to all of our shareholders by by um buying back the stock at this level okay all right well uh thank you and yeah i look forward to seeing you guys in early december likewise thank you the next question will come from linda bolton weiser with water tower research please go ahead yes hi um so you mentioned maybe a quarter or two ago on your call that you were still looking to um diversify your your outsourced manufacturing base um you know we'll probably hear more about this in December, but can you talk about what areas you're looking at? And also, can you remind us what you're doing with the facility in Mexico? I think there was something there that you were working on, and I haven't heard you mention it. So could you give us a little update on that? Thanks. Sure, Linda. Hi. You know, when we looked throughout the world, You know, over, you know, starting a bunch of years ago when we came to the conclusion that the West, I guess now U.S., has decoupled with China. And so we started, you Know, everything from Turkey, which we didn't do much. We didn't find for a lot of reasons that to be appropriate. Mexico, as you mentioned, we looked at resourcing the U. S. And made no economic sense. What made most economic sense was to, throughout many geographies in Southeast Asia, is where we moved a lot of our facilities. And we did that in conjunction with our key factory vendor relationships where we had not a controlling ownership interest, but we controlled the majority of the output of those factories. And those factories invested throughout Southeast Asia, Malaysia, Cambodia, Vietnam, which we've already had a big presence, but other things moved there, and built new factories with their capital and their management. And these had ramped up, however, in 2025, because the all-in tariff impacted cost of shipping product was cheaper coming out of China. we moved a lot of that stuff back um now in almost all those cases it was to a factory that um might have been in malaysia same ownership same factory that we moved back in china so uh you know it's within the same vendor um but we shipped mostly out of china in 2025 because the economics made more sense, right? That's not, we believe, sustainable from a political environment, and that will ultimately migrate back to all these geographies. In China, sorry, in Mexico, we had an opportunity to make a small acquisition of a factory that we knew had a lot of benefits. And at the time that we did this, it was very cost beneficial because of the various tariffs throughout the world to move product there. Over time, as trade and tariffs shifted throughout the World, it became uneconomical. It was very small, and it led us to the conclusion, as there's more stability in terms of outlook from relative trade situation, we shut that down. So that's why you don't hear us talking. It was small. We were looking to, you know, ramp it up as we were looking at all different avenues several years ago. But as things worked out over time, it was not economical. We shut it down. okay thank you and then um you talk you're talking a lot about the success of the club channel and your programs there i am curious sometimes for companies club channel sales can be lumpy because there's programs that come in and out do you have a fair amount of regular program presence at the club channel or is it just these programs that are going to come in and out? And how should we think about the sustainability of that growth that we're seeing there? Yeah, that's a great question. And we like to use the word, it's like quicksand in the club channel. So you could have a great program. It does really well and it doesn't, doesn't anniversary. Our relationship and the club channel has done very well over time. And there might be programs that we run that shift you know like uh rabbit for a long time running i think four straight years had big programs uh at costco um and you know the volumes are obviously very big it did not anniversary but we still grew at cost co because we're doing other things so uh one of the competitive advantages of a company like lifetime versus a lot of of our peers that we compete against is we can offer many brands many different price points many different categories and that is how we operate in in the club channels so the mix may change uh and there are certain things that do um like mikasa has a very strong presence there um you know that that do uh stay as a brand category but the product does change um but we we shift what we're selling so we're very confident in terms of where we are and the future. Like home decor has done very well in club. If you look several years ago, we did nothing. So it shifts and we should have a steady progression. But that's how we get around the lumpiness of what you see traditionally in other companies. Okay. Well, thanks for that. That's all for me. We'll see you in December. Thanks, Linda. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rob Kay for any closing remarks. Please go ahead. Thanks, Chuck. Well, thank you, everyone, for participating in our call. I will remind people once again that on December 1st, in our NASDAQ site in New York City, we will be hosting an investor day starting at 11 a.m. We hope to see people there. You can always listen in, and again, thank you for your interest and support. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.