Lifetime Brands Q1 2023 Earnings Call Transcript

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May 10, 2023

There are 7 speakers on the call.

Operator

Morning, ladies and gentlemen, and welcome to Lifetime Brands First Quarter 2023 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be on a listen only mode. After the speakers' remarks, there will be a question and answer period. I would now like to introduce your host for today's conference, Andrew Squire. Mr.

Operator

Squire, you may begin.

Speaker 1

Thank you. Good morning and thank you for joining Lifetime Brands' Q1 2023 earnings call. With us today from management are Rob Kaye, Chief Executive Officer and Larry Winoker, 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 performance of the company, and these statements are intended to qualify for the Safe Harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission.

Speaker 1

Such statements are based upon information available of the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in today's press 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 GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. With With that introduction, I'd like to turn the call over to Rob Kaye.

Speaker 1

Please go ahead, Rob.

Speaker 2

Thank you. Good morning, everyone, and thank you for joining us today. In line with our expectations, our results for the Q1 2023 continue to be impacted by a combination of macroeconomic and industry specific challenges that remain in factor facing the consumer durables industry. It is important to note that our market shares have remained stable, and in fact, we have slightly gained share in our largest categories, including kitchenware, kitchen measurements and bath scales and in terms of Absa's dollars in food storage. While we expect industry headwinds to remain, we will continue to take actions to best position ourselves during this period of economic uncertainty.

Speaker 2

As we will discuss further today, we continue to successfully navigate the economic and industry specific challenges through a wide array of actions, including balance sheet management, disciplined control of our cost structure, a disciplined and joyful pursuit of investment opportunities such as our foodservice initiative and year and day and a major restructuring of our international operations. These actions will yield short term benefits, but more importantly, positions Lifetime favorably for long term growth and improved profitability. In the Q1, we delivered $145,400,000 in net sales compared to $182,700,000 in the same period last year. Over the last 12 months, we have generated adjusted EBITDA of $50,800,000 As discussed, these results were driven by the ongoing macro and industry including the continued impact of reduced ordering from our largest customers due to inventory rebalancing by retailers. However, Lifetime once again performed well in comparison to the market and our industry peers.

Speaker 2

Let me now turn to our core U. S. Business. As we discussed on our Q4 call, Retailers across channels continue to evaluate their inventory and distribution strategies with a focus on rebalancing stock levels from ordering patterns that were altered by the recent global supply chain crisis. Further, in response to current economic pressures, Many of our largest retailers have been reducing stock levels and, in some cases, paused orders completely in the Q1, leading to softer shipments of products to our customers.

Speaker 2

It's important to note that this slowdown has been felt across the industry and is not unique to Lifetime. In recent weeks, we've begun to see an increase in demand with a pickup in order flow from many of our customers, and we remain optimistic that purchasing levels will normalize in the coming quarters. While this trend related to customer inventory levels is encouraging, we believe that the general economic environment will in many of our end markets. We have also maintained a focus on profitability and not volume, which can be seen in our gross margin percentage, which has improved despite pricing pressures that exist among retailers in response to the normalization of supply chain costs this year. While we have not seen any retail price reductions as wholesale unit prices have declined, we would expect this to have a positive impact on point of sale once these price reductions get passed along to consumers.

Speaker 2

Now turning to our international business. Our international business stabilized in the Q1, driven by the impact on the restructuring of our Europe based international operations that we completed at the end of 2022, which has had an immediate and positive impact on our bottom line. Consistent with our international strategy, we continue to solidify our international positioning, which was driven by the benefit of our direct go to market strategy and the rollout of KitchenAid to more markets and implementing our new go to market strategy in Australia and New Zealand. Starting with KitchenAid. As a reminder, we expanded KitchenAid to international markets by 2021 and focused on building out distribution throughout last year.

Speaker 2

We have seen tremendous consumer enthusiasm for KitchenAid products whenever we have introduced the brand internationally. And as a result, we are gaining incremental distribution channels to sell more KitchenAid products to a wider array of retailers in Europe, many of whom have already begun ordering from us. We believe that this addition to our international product offering we'll serve as a catalyst to increase our distribution among major retailers in Europe and other international markets. In Asia Pacific, which is our 2nd largest international region behind Europe, we are seeing immediate benefits from the changes we have made to our go to market strategy in Australia and New Zealand. Consistent with our direct selling go to market strategy that we are implementing across most major markets.

Speaker 2

By eliminating third parties who only sold a limited assortment, we are now able to sell all of our products and add an increased margin. We expect this to have a positive impact on sales in the back half of the year with even more opportunities to increase sales in 2024. To an even greater degree than in our core U. S. Business.

Speaker 2

We expect macroeconomic factors to continue to impact our international business, most notably in the U. K. We believe the actions we have taken to restructure our European operations, to expand our offerings and revamp our Asia Pacific go to market strategy. We'll position the business well for long term growth, to show a favorable improvement in contribution margin in 2023 and become profitable in 2024. Given the continued significantly depressed consumer environment in Europe, we don't anticipate seeing a significant impact to the top line until 2024.

Speaker 2

While the environment remains challenging, I'd like to now touch on a few areas of business where we do anticipate growth in the near term. The first is our foodservice business, which consists of Mokasa Hospitality for front of the house products and Taylor Smallwares used in professional kitchens. These end markets have been relatively unimpaired by macroeconomic trends. Our foodservice business continues to gain traction, and we expect Foodservice to reach nearly $30,000,000 in revenues by the end of 2023, and we continue to see this as a potential $60,000,000 business by 2026. We remain excited about the long term potential of our expansion into Commercial Foodservice because of the consistent recurring revenue characteristics of the business.

Speaker 2

We are also building momentum in year end debt, which we will soon be expanding into the wholesale channel, which we view as critical to digitally native brands in response to the change in acquisition cost of customers, driven by algorithmic and IO changes that have materially impacted e commerce sites over the past year and a half. With this initiative, combined with our investments, we expect year and day sales to grow more than 90% year over year. In e commerce, our direct to consumer sites have performed well and grew 18.6% year over year. Our model has proven successful, and we have maintained a positive contribution margin since 2021. While our total e commerce business was relatively flat at 18.7 percent of sales, The overall e commerce business is down 22.6% in dollars compared to 2022.

Speaker 2

As a result of Amazon, our largest pure play e commerce customer, pausing purchasing in the quarter. Again, this trend concerning Amazon shipments is not unique to Lifetime and is impacting most vendors who sell products on Amazon. I would like to inform everyone of some steps we have taken as part of our strategy to diversify our supply chain and reduce exposure to China. We are in the process of acquiring manufacturing operations, which does business as a maquiladora under the IMAX program in Mexico. This acquisition will allow Lifetime to manufacture some of our plastic molded kitchenware products in Mexico and import them to the U.

Speaker 2

S. Duty free. We closed this transaction on May 3, and it is our expectation that the facility will be fully online in 2023, enabling us to begin a process by which a greater volume of products are either made or sourced in Mexico. As we continue navigating these uncertain times, we remain focused on executing on our growth initiatives and removing inefficiencies and costs from the business. To that end, we are starting to see the benefits of our U.

Speaker 2

K. Restructuring, which we expect to generate $2,300,000 of cost savings by the end of the year. We have also eliminated several senior management positions in our corporate structure, generating savings of $1,300,000 Looking ahead, we are taking a phased approach to the rest of the business and expect to eliminate another $1,500,000 of costs during the Q2, and we have also developed additional levers we can pull as the year progresses. We expect these actions to have an immediate impact on our bottom line and also favorably position the company for 2024. On that note, let me now turn to our financial guidance.

Speaker 2

We issued our full year guidance for 2023 in our press release this morning. To recap, we expect the top and bottom line to be down in 20 23, driven by the assumption that lower end market demand will persist throughout the year as a result of inflation dampening the markets, continued stress on the consumer and the recessionary environment, both internationally and in the U. S. Again, these issues are not unique to Lifetime, and we are confident in the resilience of our business model and the actions we are taking to position ourselves for growth next year. I also wanted to point out that we have written off all exposure to Bed Bath and Beyond, which was nearly all related to private label dinnerware.

Speaker 2

This was a charge of approximately $1,500,000 in the first quarter related to our open accounts receivable balance, and our 2023 guidance assumes no sales to Bed Bath and Beyond. Before I turn the call over to Larry, I want to touch on our balance sheet. At the end of last quarter, we were at our highest level of liquidity in our history, and we increased that by $5,000,000 in the Q1 of 2023. Larry will speak more about our balance sheets and liquidity as well. Given the strength of our balance that we continue to evaluate value enhancing opportunities, including M and A as a potential avenue for accretive growth.

Speaker 2

However, given the current economic environment, we expect to focus more on deleveraging in the near term, and will be conservative with how we deploy capital. But as always, we will be prudent and opportunistic should the right transaction arise and take actions that we believe to be in the best interest of our shareholders. Once again, our business model has proved resilient, and the strategic actions we have taken have positioned us well to grow in 2024. Our position in the markets we serve remains strong, and recent data from Surcona, formerly NPD, validates this. Lifetime 2.0 transformation, which we began in 2018, has created a solid foundation for the company to weather difficult economic environments such as the one we are in now.

Speaker 2

Our efforts to produce a leading portfolio of strong recognizable brands with multichannel growth opportunities develop opportunities to drive growth, implement a more focused and efficient global platform with scale and enhanced operational effectiveness And generate strong cash flow to enable financial flexibility have positioned the company well for the future. We are confident that the tremendous progress we have made over the past several years to transform the business will enable us to achieve our long term goals as we effectively manage through current and future challenges. Our entire team remains laser focused on executing on our objectives, and I am thankful for their continued efforts and hard work. With that, I'll now turn the call over to Larry.

Speaker 3

Thanks, Rob. As we reported this morning, our net loss for the Q1 of 2023 was $8,800,000 or $0.41 per diluted share compared to net income of 400,000 or $0.02 per diluted share in the Q1 of 'twenty two. Adjusted net loss was $2,600,000 for the Q1 of 'twenty 3 or $0.12 per diluted share as compared to adjusted net income of $4,100,000 or $0.18 per diluted share last year. Loss from operations was $1,800,000 in the first quarter of $23,000,000 as compared to income from operations that we have reached $4,400,000 last year. Adjusted net income from operations for the 1st Quarter 'twenty three was $3,400,000 compared to $10,200,000 last year.

Speaker 3

Adjusted EBITDA The trailing 12 month period ended March 31, 2023 was $50,800,000 before limitations. Beginning the Q1 of 2023, for all periods presented, our adjusted net income or loss and adjusted income from operations that excludes acquisition intangible amortization. We believe this presentation provides useful information to stakeholders regarding financial results and trends and provide additional perspective regarding the impact of the amortization expense on applicable income and earnings for share measures. Adjusted net income or loss adjusted income from operations and adjusted EBITDA that our non GAAP financial measures and are reconciled to our GAAP financial measures in the earnings release. Following comments are for the Q1 of 2023 versus 2022, unless stated otherwise.

Speaker 3

Consolidated sales declined by 20.4% from 2022. As Rob discussed, macroeconomic and industry specific challenges negatively affected the consumer durable industry. The U. S. Segment sales decreased by 19.7 percent to 133,500,000 the decrease occurred in all product categories.

Speaker 3

This was attributable to slowing replenishment orders as retailers reduce their safety stock and weeks of supply on hand. In addition, consumer spending reduction has reduced the overall market size, which exacerbated the decline in retailers ordering. International segment sales were down by 28 to 11,900,000 but 18% on a constant U. S. Dollar basis.

Speaker 3

The decrease is driven by similar factors noted for the U. S. Consolidated gross margin percentage increased 37% from 34.5%. For the U. S.

Speaker 3

Segment, gross margin increased to 36.6% from 34.7%. The improvement was due to lower inbound freight cost in favorable product mix. For international, gross margin increased to 42% from 32.7 the improvement reflected higher selling prices implemented in late 2022, lower inbound freight costs, Also, lower duty on goods from EU customers now imported to our U. K. Distribution facility in the Netherlands rather than the U.

Speaker 3

K. And the benefit of foreign exchange hedging gains. For the U. S. Distribution expense, as some percentage of goods shipped from its warehouses were 10.5% versus 9.9% last year.

Speaker 3

The increase was driven by lower shipment volume, resulting in under absorption of fixed expenses, higher inventory storage costs and higher real estate taxes. This increase was partially offset by a decrease in pallet and other warehouse supply expenses. For international, distribution expenses as a percentage of goods shipped from its warehouses were 24% versus 21.7% last year. The increase was due to lower shipment volume, partially offset by lower cost of shipments to EU customers, which are now shipped from the Netherlands. Selling, general and administrative expenses declined to $37,900,000 in 2023 from $39,500,000 last year.

Speaker 3

U. S. Segment expenses increased by $800,000 to $29,300,000 due to the higher allowance of doubtful accounts related to Bed Bath and Beyond, partially offset by integration costs for S'well that were incurred in the prior year. For international, SG and A expenses decreased by $1,500,000 to $3,600,000 on lower foreign currency exchange losses and lower employee expenses. The reduction in employee expenses was the result of the restructuring action implemented in the Q4 of last year.

Speaker 3

Unallocated corporate expenses decreased by $900,000 to $5,000,000 on lower stock compensation expenses, legal and professional fees and reduced salary for our Executive Chairman during his transition employment contract period, which ended on March 31. In the 2023 period, we recorded $800,000 for restructuring expense related to a contract termination payment for our Executive pursuant to the transition employment period. Interest expense increased by 1.5 that of 18% differs from the federal statutory rate of 21%, primarily due to state and local income local tax expense, the impact of nondeductible expenses and foreign losses to which no tax benefit is recognized. Related to Grupo Bastonia, our 24% owned investee, the company recorded a loss of 700,000 In the 'twenty three period versus $400,000 last year excuse me, versus earnings of $400,000 last year, that Sonya's results were negatively affected by its aluminum business. In the Q1, we also recorded a noncash a payment charge of $2,100,000 to write down our investment in Vascoevia.

Speaker 3

This charge is prompted by a decline in its public trading price below our carry value. The carry value of the company's investment after the recorded impairment is 10,400,000 And looking at our debt liquidity, notwithstanding the current challenges, I'm pleased to report our liquidity released an all time high of approximately $205,000,000 at March 31. This was comprised of $41,000,000 of cash and cash equivalents plus availability under our credit facility and receivable purchase agreement. In this difficult and uncertain business Climate, we are especially focused on continuing to maintain a strong liquidity position and take appropriate action to generate positive cash flow. Our primary capital allocation priorities are to support our current businesses and delever our balance sheet.

Speaker 3

At quarter end, our net debt was $225,500,000 and leverage ratio was 4.4x. As reported in the release this morning, we are issuing financial guidance for the full year of 2023 as follows: Net sales of $660,000,000 to $720,000,000 adjusted income from operations of $41,500,000 to 46 $500,000 adjusted net income of $12,500,000 to $15,000,000 and adjusted EBITDA of $50,000,000 to 55,000,000 This concludes our prepared comments. Operator, please open the line for questions.

Operator

Thank you. Ladies and gentlemen, at this time, we it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Linda Bolton Weiser with D. A. Davidson.

Operator

Please proceed with your questions.

Speaker 4

Yes. Hi. So I have several questions. First, you mentioned in the beginning of your remarks, Rob, that something about wholesale unit price decline. So I wasn't quite understanding that.

Speaker 4

Are you talking about rolling back some of the price increases you made previously? Are you talking about promotions

Speaker 2

Yes. The prices of goods that we're selling through retailers, we lowered. So You could call rollbacks of the increased prices that were passed through when that supply chain costs were very, very high. So as the lower retailers were looking for those money and to date, that those have not been passed through to the consumer. We do expect that to ultimately happen, which would lower retail prices, which

Speaker 4

So just to be clear, you're saying the previous price increases were never passed through. So now you're giving back the price to the retailer because they never passed it through. Is that correct?

Speaker 2

Technically, no. Technically, we didn't give back the increases we took, but that's what it's related to. So we did pass through increases as was discussed during the supply chain crisis. In this environment, as the particularly ocean freight costs are way down Products they buy as a result, and we've it's a negotiation. So we have passed through already those price decreases.

Speaker 2

Did I articulate that?

Speaker 4

Yes, yes, you did. But I guess Some of the other companies I follow, yes, like freight and even plastic resin is down a lot, but companies are talking about other costs still being quite escalated, other cost inflation components. So they haven't some companies are actually still taking price increases. So I guess I'm a little surprised about what you're saying. Okay.

Speaker 4

So

Speaker 2

yes, I mean, there's a lot of pluses and minuses. But as you see, even with these price increases, our overall margin is up. So we're getting the benefit. We're not passing through everything, but ocean freight is down, and that's what they're really looking compensation for not just from us, from everyone in our industry. According to like we were recently at the Board of the IHA, which is most of the people in the industry, and everyone is saying the same thing.

Speaker 2

This is what we're seeing in consumer durables. And it's not blanket. It's select, but there have been reductions which are already in our numbers that we've given to retailers. I'm not sure what the other people are telling you, but the people who are competing against in our categories are doing the same thing to our knowledge.

Speaker 4

Okay. All right. So just a couple of real quick ones. How much in revenue in 2022, did you have 2 Bed Bath and Beyond?

Speaker 3

It's about 1% of our business, maybe $7,000,000

Speaker 4

Okay. And then On the Mexican manufacturing, that sounds like a good thing. When will those products be ready to be started shipping into the U. S? And when will we See some maybe margin improvement related to it and what categories is that manufacturing going to be in?

Speaker 2

So it's all in Kitchenware. It's not a very big facility. And our main goal in this transaction is twofold. It's to establish a beachhead in Mexico. And once we're physically with a presence there as a manufacturer, it will greatly facilitate our ability to source effectively there in addition to manufacturing our own products.

Speaker 2

And this is related to a strategy we've been working on to derisk our dependence upon China and derisk the political risk and the interruption risk, should there be conflict between the U. S. And China or should that escalate, I should say. So in terms of margin enhancement, we're not counting on that today, Particularly in an environment where ocean freight rates now are at they're almost at historic lows, quite the opposite. It's boomeranged, And that will normalize.

Speaker 2

It can't remain this well. So our goal is to basically remain neutral. We do eliminate the manufacturing margin, right, because there's no third party manufacturer there. And we just closed on the transaction. We to ramp up production, and that will ramp up throughout 2023 and be at full Capacity towards the end of the year.

Speaker 4

Okay. And then The year and day, you said that would be a really big increase in revenue as you go wholesale. What would be the base of sales? Like, is it like just a few $1,000,000? Like, how big is it?

Speaker 2

Yes. It's such a big increase percentage wise 90% Because we are getting traction, but also on a very low base, right? So it's still very low single digits. But I think the point we're trying to make there is digitally native Brands need to go wholesale. That's what we're good at.

Speaker 2

So we're taking them wholesale. It's a good opportunity. We're getting good feedback and direction to it was an incubation investment, and we're showing you the path to get it to positive contribution.

Speaker 4

Okay. And then my last question is Just a clarification on the cost savings. You had mentioned a couple of things, dollars 2,300,000 is that the total cost savings? And then you mentioned A couple of other things. Those other things were included?

Speaker 4

No,

Speaker 2

those were all individual, which would be added together. I think I mentioned 3 in particular, the U. K, the corporate position elimination. And then the 3rd bucket is just that's just out of the U. S.

Speaker 2

Business cost spend that we're eliminating. So those are 3 different buckets. That we're all together.

Speaker 4

Yes. So it's like $5,000,000 roughly?

Speaker 2

Roughly, yes.

Speaker 4

Okay. That's it for me. Thank you and good luck with everything.

Speaker 2

Thanks Linda. Our next question comes from

Operator

the line of Brian McNamara with Canaccord Genuity. Please proceed with your question.

Speaker 5

Hey, thanks for taking the question guys. So first, the midpoint of your sales guidance implies sales for the balance The year will be roughly flat. How should we think about the cadence of sales growth for both Q2 and H2? Is Q2 another down and then We're flatlining or any holiday would be helpful.

Speaker 2

Sure. So we would pick up Momentum in the second half of the year, Q3 and Q4. So yes, I would expect the seasonality to be similar to Traditional years, last year not being a traditional year.

Speaker 5

Got it. And then second, I guess your sales guidance at the midpoint is both below 20192018 levels, 2018 You mentioned end market demand is lower, but is it below kind of 2018 2019 levels? Is that a fair way to kind of look at it?

Speaker 2

I mean, as we talked about, if you look at and not us, just The data from SIRKCONA, which is a combination of MPD and IRI, our market share actually increased a quarter point. So we are not expecting a pickup until 2024, driven by where the market is, which is kind of flat to 'nineteen.

Speaker 5

Okay. Is it fair to say the current headwinds are temporary? Like how low can retailers go with inventories? I mean, is this something that's like unprecedented for you guys? I mean, you've been around a while.

Speaker 2

So just to emphasize what we were trying to say We've seen a lot of inventory rebalancing continued in Q1, but what we're also seeing and which is incorporated in our guidance is between the POS data, so the sell through and the sell in. So our shipments did not match that, which is not a sustainable situation. That is normalizing and we're seeing that. Amazon, it had it normalized and they had a lot of capacity and they've been very public about pairing back their warehouse capacity and sites and their growth of additional warehouse capabilities. So we they stopped ordering for that we saw the same trend and we're starting to see a pickup.

Speaker 2

Because ultimately, right, you need to sell goods.

Speaker 3

Brian, let me clarify something. I don't have all the Your comment about sales being lower than they were in 'eighteen. So you got to separate U. S. And international.

Speaker 3

I suspect you can see it's all international for two reasons Because of the restructuring we did, getting out of private label, unprofitable private label in the U. K. And the U. K, the pound has gotten crushed in terms of exchange rate versus the dollar. It sounds like $1.18 probably back in 2018 was more like 140.

Speaker 3

This is off top of my head, but

Speaker 5

if you go drill in, I think you got to look at the U. S. That the U.

Speaker 2

S. Segment has gone below 19%. And as Larry pointed out, we walked away before he started following us, we walked away from

Speaker 5

Go forward. To us, it feels like your business is still pretty depressed and like we're going to kind of jump off that At some point, is that fair to kind of think about it that way?

Speaker 2

At some point, absolutely. The market will be back, and we will benefit significantly from that. We didn't We were more conservative in our guidance that we put out for the year. When the market bounces back, if it bounces back Sooner than we've incorporated in our guidance, we will benefit as others will as well.

Speaker 5

And can you comment on in stock levels of some of your larger customers? Are you still kind of below where you've been historically? Or have you kind

Speaker 2

It's improved. We are a little below. And also with a lot of the major guys, they also cut their levels due to economic concerns, right? They We'll cut back a bit. That's one time, obviously, which will ultimately as you step down, right, from stopping shipments, but then it picks up.

Speaker 2

But our in stock levels with our major customers are much closer to normal than they were last year, but not quite Our next question comes from

Operator

the line of Anthony Lebiedzinski with Sidoti. Please proceed with your question.

Speaker 6

Good morning and thank you for taking the questions. So firstly, a question in terms of your guidance for revenue, if we take the midpoint of the revenue guidance roughly $690,000,000 So that implies roughly a 5% decline from 20 22. I know a small portion of that is related to Bed Bath and Beyond. But beyond that, just wanted to get a better sense as how much of that anticipated revenue decline is because of pricing decreases or rollbacks Versus unit volumes that you expect?

Speaker 2

It's substantially volume and very little price.

Speaker 6

Got you. Okay. All right. And then in terms of the comments about the international segment, So you said that you expect that the International segment to be profitable next year. So curious as to what's embedded in your 2023 guidance as far as how much you think that will be a drag on profitability in this fiscal year?

Speaker 3

Yes. Hi, Anthony. We're not breaking out guidance international versus U. S, but we have said and continue to say that we We're approaching breakeven by the end of 'twenty three. Sales were down in the Q1, so that creates a headwind.

Speaker 2

We were on plan at the end of the Q1 bottom line, not on the top line.

Speaker 6

Okay. That's helpful. Thanks, guys, for that. As far as the Mexico initiative, that sounds certainly interesting. Can you just to share with us how much you're spending on this initiative.

Speaker 6

I assume it's mostly CapEx or I'm not sure, if you could just kind of Phil talk about that as well.

Speaker 2

Yes, very little, like about $500,000 We're just acquiring the assets of a facility that we've had a long relationship with. So it's not a very big capital investment, And it definitely is a very important strategic move on our part as we continue to key risk from a dependence on the China supply chain.

Speaker 6

Okay. That makes a lot of sense. And then last question for me, As far as your inventory, so good sort of progress sequentially and on a year over year basis. I know you guys talked about in your release about trying to improve inventory turns. So where Where do you want to get to by year end as far as either inventory turns or just overall inventory?

Speaker 6

What are your objectives there?

Speaker 2

Yes. I'll turn it over to Larry, but a couple of comments, Anthony, is one is, as you've seen, we've aggressively attacked Our investment that we had made in inventory in REDUCE ITILAT IN 22 continued in the Q1. However, with our revenues slowing down a bit, that has increased Our stock levels in our warehouses once again. So we're looking at how fast we want to to decrease that. And said another way, we can decrease it faster by taking much lower margin, but also bear in mind, There's a lot of extra inventory floating around the system.

Speaker 2

You've got retailers that have gone bankrupt and the liquidators trying to sell off all that stuff. Plus you have a lot of people that are stuck with inventory that are discounting it significantly, including certain there's a Significant they were at one point a significant housewares provider in our category called Robinson that just went to liquidation. So that stuff is in. So there's a lot of inventory flooding the channel right now channels, particularly the off price and discount

Speaker 6

color. Thank you very much and best of luck.

Speaker 2

Thanks, Anthony. Thank you.

Speaker 5

There are no further questions in

Operator

the queue. I'd like

Speaker 5

to hand the call back

Operator

to Rob Kelly for closing remarks.

Speaker 2

Thanks, Doug. Thank you, everyone, as always, for your interest and for dialing in on today's call. We look forward to further discourse and conversation. Have a good day.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a

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Earnings Conference Call
Lifetime Brands Q1 2023
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