Tile Shop Hldgs, Inc. Continues Driving Sales Up, Debt Down
Specialty retailerTile Shop Hldgs, Inc.(NASDAQ: TTS) reported financial and operating results on October 18, once again delivering steady growth that's starting to become the norm since CEO Chris Homeister took over at the beginning of 2015.The company reported increased comparable sales, strong revenue growth, and a double-digit increase in profits, as a number of key initiatives continue to pay off for the company.
Here's a closer look at Tile Shop's third-quarter results.
The numbers
| Metric | Q3 2016 | Q3 2015 | Change |
|---|---|---|---|
| Revenue | $78.6 | $257.2 | 8.5% |
| Net Income | $4.6 | $3.8 | 21.1% |
| Gross Margin % | 70.2% | 70% | +20 BPS |
| Earnings Per Share | $0.09 | $0.07 | 28.6% |
| Comparable-Store Sales | 5.7% | 9.7% | N/A |
Revenue and net income in millions. Source: Tile Shop.
What happened in the quarter
Here's a closer look at several keys behind Tile Shop's strong quarter:
- Sales, general, and administrative expenses increased 7.7%, a slower rate than revenue growth.
- Free cash flows through nine months of $31 million.
- Total long-term debt of $24.1 million, down 60% from last year and $3.8 million since the second quarter.
- As a result, interest expense was down 28% versus one year ago.
- Average store employee turnover continues to decline, and average tenure continues to increase.
- Increased resources at store level, including the creation of two new management positions -- market manager and senior assistant store manager -- in the past two years. Management credits this as one of the keys behind improved turnover and sales results.
- Sales to professional customers continues to grow faster than overall sales.
What management said
CEO Chris Homeister, on growing sales to professional customers:
Homeister also talked about the importance of investing in store associates to support the company's growth prospects and long-term results:
CFO Kirk Geadelmann spoke about revised guidance, including higher earnings and store opening expectations, and a tighter expectation for sales, with a slight increase in the bottom end, and a lowering of the top end of the range for the full year:
Looking ahead
Since Homeister took over as CEO to start 2015, Tile Shop has steadily delivered sales and earnings growth, while also improving employee retention and building a bench of future store managers. The company has slowed its pace of store openings, instead using its strong cash flows to pay down debt while still growing the store count at a more moderate pace in a relatively strong economy and housing market.
It may not generate the strong double-digit sales growth of prior years, but this approach is lowering the company's expenses, and that could pay off big down the road, positioning Tile Shop to ride out the inevitable cyclical of the housing market and the greater economy.
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Jason Hall owns shares of Tile Shop Holdings. The Motley Fool owns shares of and recommends Tile Shop Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.