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01/11 13:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented mixed results: financial performance was weak with declining EBITDA and net income, but there was optimism in product development and strategic initiatives like AI and marketing. The Q&A revealed concerns about price sensitivity and tariff impacts, but also highlighted promising product categories and strategic pricing successes. Overall, the sentiment is balanced, with positive aspects offsetting negatives, leading to a neutral stock price prediction.
Total company comparable sales Decreased 0.9% compared to negative 0.8% last year. The decline was due to lower conversion trends in both direct and store channels.
Total company sales Approximately $151 million, down 0.5% versus Q3 2024. The decline was driven by soft store traffic, although direct sales were up 2%.
Gross profit Approximately $107 million, down $1 million compared to Q3 2024. Gross margin was 70.9%, down 50 basis points due to $2.5 million of net tariff pressure, partially offset by higher average unit retails.
SG&A expenses Approximately $92 million, up from $89 million last year. The increase was driven by nonrecurring costs and shipping expenses associated with ship-from-store operations.
Adjusted EBITDA $24.3 million, down from $26.8 million in Q3 2024. The decline reflects higher SG&A expenses and gross margin pressure.
Interest expense $2.7 million, slightly down from $2.8 million last year.
Adjusted net income per diluted share $0.76 compared to $0.89 last year. The decline was due to lower sales and higher expenses.
Cash from operations Approximately $19 million, resulting in ending cash of about $58 million. The cash flow was supported by disciplined operations.
Inventory Up 8.4% compared to the end of Q3 last year. Excluding $6 million of net tariff costs, inventory was down 1%.
Capital expenditures $3.3 million, down from $5.5 million last year, primarily focused on store-related projects.
New Product Assortments: Positive response to newness in jackets, bottoms, fashion denim, faux suede, and full leather outerwear.
Small Capsules: Introduced small capsules in sleep, travel sets, and cashmere for the holiday season, showing strong full-price results despite promotional trends.
Localized Merchandising: Testing localized merchandising and planning strategy with promising results from New York store pilot.
Retail Expansion: Opened 2 new stores in Q3 (Chicago and Houston) with early positive results. Opened a new store in Pinehurst, North Carolina in November and planning to reopen in Asheville this month.
Marketing Adjustments: Reduced catalog circulation and leaned into digital channels, achieving success in prospecting and growth in new-to-brand customers. Testing small national linear and streaming broadcast pilots.
Cost Actions: Streamlined organization to improve operational efficiencies and prepare for future growth.
New Leadership: Created a Chief Growth Officer role to lead e-commerce, AI initiatives, and strategic roadmap.
Strategic Priorities: Focused on evolving product assortment, enhancing customer journey, and improving operational efficiencies.
Loyalty Program: Plans to launch a non-tender loyalty program by the end of the fiscal year.
Holiday product assortments: The holiday product assortments did not resonate as well as planned, leading to potential revenue challenges during a critical sales period.
Competitive promotional environment: The market became very promotional early, increasing price sensitivity among customers and pressuring margins.
Customer price sensitivity: Customers demonstrated increasing price sensitivity, which could impact sales and profitability.
Tariff pressures: Approximately $2.5 million of net tariff pressure in Q3 and an expected $5 million in Q4, negatively impacting gross margins.
Store traffic trends: Store traffic was soft in Q3, contributing to a decline in store sales by 2.6% compared to the prior year.
Lower conversion trends: Both direct and store channels experienced lower conversion rates, potentially affecting overall sales performance.
SG&A expense pressures: SG&A expenses increased due to nonrecurring costs and shipping expenses, with potential ongoing pressure from new store growth and inflation.
Elevated promotional environment: The elevated promotional environment is expected to continue through Q4, leading to significant gross margin pressure.
Q4 Sales and Comparable Sales: Sales are expected to decline approximately 5% to 7%, with total comparable sales down 6.5% to 8.5%.
Q4 Adjusted EBITDA: Expected to range between $3 million and $5 million, reflecting significant gross margin pressure due to elevated promotional activity and approximately $5 million of net tariffs.
Full Year 2025 Sales and Comparable Sales: Sales are projected to decline about 3%, with comparable sales down approximately 4% compared to fiscal 2024.
Full Year 2025 Adjusted EBITDA: Expected to be between $80 million and $82 million.
Store Expansion: Seven new stores are expected to open in Q4, resulting in a net addition of four stores for fiscal year 2025.
Capital Expenditures: Projected to be approximately $20 million for fiscal 2025.
Product and Marketing Evolution: The company is making adjustments to product assortments and marketing strategies, with the full impact expected to materialize in 2026.
Promotional Environment: The elevated promotional environment is expected to persist through Q4, impacting gross margins.
Ordinary Dividend: The company paid a quarterly dividend of $0.08 per share on October 1, 2025. Additionally, the Board approved the payment of the Q4 dividend on January 7, 2026, to shareholders of record as of December 24, 2025.
Share Buyback Program: The company repurchased 115,612 shares for approximately $2 million in the third quarter of 2025. Year-to-date, the company has repurchased about 371,000 shares for $6.5 million. Approximately $18 million remains on the $25 million share repurchase authorization.
The earnings call presented mixed results: financial performance was weak with declining EBITDA and net income, but there was optimism in product development and strategic initiatives like AI and marketing. The Q&A revealed concerns about price sensitivity and tariff impacts, but also highlighted promising product categories and strategic pricing successes. Overall, the sentiment is balanced, with positive aspects offsetting negatives, leading to a neutral stock price prediction.
The earnings call reveals mixed signals: a decline in adjusted EBITDA and net income per share, but cash flow remains strong. Product performance is promising in certain categories, and strategic pricing is offsetting tariff impacts. However, guidance for Q3 2025 indicates flat to declining sales and margins, and the company's response to price sensitivity is unclear. The Q&A section suggests some optimism but also highlights uncertainties. Without a market cap, the reaction is likely neutral, with minor fluctuations expected.
The earnings call reflects several concerns: declining sales, increased SG&A expenses, and EBITDA decline. Though there are improvements in inventory management and customer response to promotions, the withdrawal of full-year guidance and uncertainty in promotional levels indicate potential risks. Tariff impacts and cautious guidance further contribute to a negative outlook. The new CEO's initiatives are promising but lack immediate impact. The market's reaction may be negative, especially without clear positive catalysts.
The earnings call highlighted several negative factors, including declining sales, reduced guidance, and increased SG&A expenses. The withdrawal of full-year guidance and CEO transition add uncertainty. Despite stable shareholder returns and improved debt management, the overall sentiment is negative due to sales decline, margin pressure, and cautious outlook. The Q&A section further emphasized concerns about merchandise mix and the impact of the OMS cutover. These factors collectively suggest a negative stock price reaction in the short term.
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