Release Date: May 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operating expense leverage improved significantly, expected to continue throughout the year.
- Gross margin profit increased to 48.1% from 45.5% a year ago.
- G&A expenses decreased to $1 million from $4.5 million a year ago.
- Sales and marketing expenses decreased to $700,000 from $1 million a year ago.
- Net operating loss significantly reduced to $225,000 from $3.7 million a year ago.
Negative Points
- Revenues decreased to $3.6 million from $4.4 million a year ago due to shipment delays.
- Net loss was $684,000 or $0.46 per diluted share, compared to a loss of $6.1 million or $27.8 per diluted share a year ago.
- Significant delays in wholesale shipments due to customs issues impacted revenue.
- High interest expenses are currently a burden, though expected to decrease in the future.
- The company had to raise additional capital to address NASDAQ listing concerns, despite previous statements about no equity raises in 2024.
Q & A Highlights
Q: What is the company's competitive advantage or approach to the retail market, especially with the opening of one store and pivoting from e-commerce?
A: We are not pivoting from e-commerce but rather integrating multiple channels. Our strategy involves having wholesale, e-commerce, and physical stores. Apparel is a physical product where touch, feel, and fit matter, so having a presence in all channels is crucial. The store is an outlet location with minimal cost, and we are monitoring its performance to decide on future retail expansions. Our competitive advantage lies in design and price point, particularly with the Sundry brand, which has been sharpened in price and design.
Q: Can you clarify the recent equity activity despite a press release stating no equity raises in 2024?
A: The equity activity was driven by a NASDAQ delisting notice due to non-cash charges affecting our shareholder equity. To ensure compliance and mitigate risk, we raised additional capital. This was a precautionary measure to maintain our NASDAQ listing and demonstrate our ability to manage burn rates effectively.
Q: Are there any plans to develop a statistical probability model to analyze revenue growth?
A: We do not use a statistical probability model due to the high variability in revenue drivers. Wholesale purchases are influenced by market conditions, making them unpredictable. E-commerce is more steady-state, and store performance is still being evaluated. However, we are seeing a positive trend as our customer base grows, leading to increased repeat purchases and a higher revenue slope.
Q: Do you anticipate being cash flow positive soon?
A: Yes, we expect to be internally cash flow positive soon. Significant reductions in interest expenses and amortization costs will benefit us starting in Q4 this year and into next year. This, combined with our G&A leverage, positions us well for positive cash flow.
Q: How do you respond to critics who say a digital company opening physical stores will not work?
A: Many successful digital-first companies like Warby Parker and Allbirds have opened physical stores. Apparel requires a physical presence for customers to experience the product. Our strategy involves a mix of digital, wholesale, and physical stores to meet customer preferences and drive revenue. Ignoring physical stores would be a mistake, as customer behavior shows a desire to shop in-store post-COVID.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
