Lifetime Brands Q2 2024 Earnings Report

Lifetime Brands EPS Results

• Actual EPS: -$0.03
• Consensus EPS: -$0.02
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: -$0.02

Lifetime Brands Revenue Results

• Actual Revenue: $141.67 million
• Expected Revenue: $41.90 million
• Beat/Miss: Beat by +$99.77 million
• YoY Revenue Growth: N/A

Lifetime Brands Announcement Details

• Quarter: Q2 2024
• Date: 8/8/2024
• Time: Before Market Opens
• Conference Call Date: Thursday, August 8, 2024
• Conference Call Time: 11:00AM ET

Lifetime Brands (NASDAQ:LCUT), through its subsidiaries, designs, sources, manufactures and distributes a broad portfolio of consumer products for the home. Headquartered in Garden City, New York, the company operates three primary business segments—Kitchenware, Tabletop & Home Décor and Tools & Storage—providing solutions for food preparation, cooking, serving and storage under both proprietary and licensed brand names.

In the Kitchenware segment, Lifetime Brands offers cookware, bakeware, cutlery and small electric appliances under brands such as Farberware and Chef’sChoice. The Tabletop & Home Décor group produces dinnerware, flatware, glassware and related accessories, including items marketed under the Mikasa and Pfaltzgraff names. Within Tools & Storage, the company’s portfolio spans kitchen gadgets, storage containers, and wine accessories designed for both retail and foodservice customers.

Featuring a global supply chain, Lifetime Brands maintains design and sourcing offices in Asia alongside distribution facilities across North America. Its products are sold through a diverse network of mass‐market retailers, specialty stores, club channels and e-commerce platforms, reaching consumers in over 50 countries. Strategic acquisitions over the past three decades have broadened its brand lineup and enhanced its cross‐channel distribution capabilities.

Since its inception in the mid‐1980s, Lifetime Brands has expanded by integrating complementary businesses and streamlining operations to drive innovation and cost efficiency. The company is led by an experienced executive team with deep expertise in consumer goods manufacturing, sourcing and brand management, positioning it to capitalize on evolving trends in home and kitchenware markets.

Lifetime Brands Q2 2024 Earnings Call Transcript

Key Takeaways

• In Q2 Lifetime Brands reported net sales of $141.7M, down from $146.4M last year but in line with expectations, and achieved a trailing-12-month adjusted EBITDA of $56.6M, causing the company to reiterate its 2024 guidance.
• The newly launched Dolly Parton partner line began shipping $4M in Q2—well above projections—and is now expected to generate over $10M in revenue in 2024 with further customer discussions underway.
• E-commerce continues to drive growth, representing 18.9% of Q2 revenues (versus 18.1% a year ago), and delivering a 23% increase in Amazon Prime Day sales compared to the overall platform’s 11% growth.
• Lifetime expanded its gross margin to 38.5% (up from 38.2%) despite higher ocean freight costs, by lowering product COGS and achieving a favorable product mix.
• The company recorded a $14.2M noncash loss on its equity investment in Grupo Vasconia, driving a Q2 net loss of $18.2M, although this write-down has no cash impact and does not alter the full-year operational outlook.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to Lifetime Brands' second quarter 2024 earnings conference call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speaker's remarks, there will be a question-and-answer portion of the call. If you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to introduce your host for today's conference, Carly King. Ms. King, you may begin.

[Carly King, SVP at KCSA Strategic Communications]

Thank you. Good morning, and thank you for joining Lifetime Brands' second quarter 2024 earnings call. With us today from management are Rob Kay, 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.

[Carly King, SVP at KCSA Strategic Communications]

Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press 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.

[Carly King, SVP at KCSA Strategic Communications]

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 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.

[Robert B. Kay, CEO at Lifetime Brands]

Thank you. Good morning, everyone, and thank you for joining us today. Our second quarter results were in line with our expectations, even though macroeconomic pressures led to weakened demand across end markets. Despite these headwinds, we are pleased to report that we continue to execute on our plan for the full year and are making progress toward completing several strategic initiatives, which will bolster our full-year performance.

[Robert B. Kay, CEO at Lifetime Brands]

This includes increasing market share in a majority of our categories, delivering year-over-year e-commerce growth in our core U.S. market, and expanding gross margins. Our ability to deliver solid performance despite challenges in our operating environment is a testament to the work we have done to strengthen our business model, and we are pleased to have delivered another quarter of outperformance in comparison to the market and our peers.

[Robert B. Kay, CEO at Lifetime Brands]

In the second quarter, we delivered $141.7 million in net sales, compared to $146.4 million in the same period last year. Over the last 12 months, we have generated Adjusted EBITDA of $56.6 million. The drag on net sales reflected a sluggish market in combination with overall seasonal timing impacts in the second quarter for our core U.S. business. Despite weakened demand, we grew market share across the majority of our categories on a year-over-year basis, a testament to the fact that our leading portfolio of brands continues to resonate with customers.

[Robert B. Kay, CEO at Lifetime Brands]

The level of decline observed this quarter was in line with our expectations, and the macroeconomic headwinds were largely baked into the guidance we provided last year for the full year. We believe that Lifetime's results will improve the back half of the year as we execute our operational plan, and we continue to expect to deliver in line with our expectations for 2024. Turning to our international segment. In Europe, the impact of the U.K.'s economic recession has persisted, which has prevented any meaningful recovery in demand.

[Robert B. Kay, CEO at Lifetime Brands]

We continue to take action to offset the recessionary impacts, including implementing changes to our U.K. sales strategy, to shift our legacy focus away from independent retailers and specialty cook shops and prioritizing larger national accounts. This pivot is already paying dividends as we were able to maintain relatively flat sales for the segment despite turbulent market conditions. We are also seeing the impact of the ongoing conflict in the Red Sea as rerouted shipments are taking longer to reach Europe.

[Robert B. Kay, CEO at Lifetime Brands]

This has resulted in a need to increase safety stock and therefore an increased investment in additional inventory, which will help mitigate these impacts. In Asia Pacific, we continue to gain traction in terms of both listings and brands in Australia and New Zealand as a result of our change in go-to-market strategy. We are now in the second phase of this two-step process, where we would discontinue our partnership with our distributor in the region and move to building out our own infrastructure. Once complete, this will allow us to implement a fully direct APAC sales strategy.

[Robert B. Kay, CEO at Lifetime Brands]

Turning now to some of our growth initiatives. We are pleased with the incredible success of our Dolly Parton line of products, which was successfully launched in this second quarter and has performed above our and our customers' expectations. While last quarter, we signaled that we did not expect to be able to begin shipping until the third quarter, we were able to begin shipments in the second quarter. While the majority of shipments have not yet completed, initial sell-through numbers have greatly exceeded expectations.

[Robert B. Kay, CEO at Lifetime Brands]

We expect that this outperformance will continue through the rest of the year and translate to revenue impact in the third and fourth quarters. We now believe shipments of Dolly to the dollar channel will exceed $10 million in 2024. Building on this strong initial momentum, we are already in discussions with additional customers for 2025 shipments. In our food service business, though we experienced a slight slowdown in these end markets this quarter, we continue to gain market share and remain optimistic, based on the continued new listings that we have won, that we'll see meaningful growth this year and in 2025.

[Robert B. Kay, CEO at Lifetime Brands]

Our e-commerce business continues to be a major growth driver. This quarter, e-commerce sales represented 18.9% of revenues compared to 18.1% in the same period last year. We once again had a very successful Amazon Prime Day, with total company sales up 23% over the prior year. This compares favorably with the overall Amazon Prime Day sales growth of 11%.

[Robert B. Kay, CEO at Lifetime Brands]

Turning now to our supply chain. While ocean freight costs have been increasing as a result of geopolitical conditions and due to vessel and container availability levels, we believe these levels have now stabilized and will remain fixed at the higher base for the foreseeable future. We are managing all input costs across the business and have been successful in decreasing product COGS in many areas. This has translated to margin expansion this quarter, despite these ocean freight increases.

[Robert B. Kay, CEO at Lifetime Brands]

In Mexico, our plastics manufacturing facility remains on schedule to reach full production capacity this year. We have taken a measured approach to ramping up this facility to ensure we achieve high-quality output and Built the appropriate product mix being produced in this facility. Additionally, we continue to drive forward on our efforts to have approximately 25% of our spend on goods being sourced outside of China, and remain on track to meeting this target.

[Robert B. Kay, CEO at Lifetime Brands]

We are focused on expanding our sourcing capability in additional geographies with a primary focus on Southeast Asia, and expect to begin shipping out of new locations in the near term. Our manufacturing partners in the region are working with us to set up new factories outside of China in order to accommodate this expansion, and we are already in the process of transferring production of one of our largest SKUs, which represents nearly 10 million unit sales a year, to one such facility.

[Robert B. Kay, CEO at Lifetime Brands]

I'd now like to provide some high-level color around our balance sheet, which Larry will discuss in greater detail shortly. Typically, liquidity is most strained during the second quarter as a result of seasonal business trends. However, our continued focus on operating the business efficiently and using disciplined cash management has allowed us to maintain strong levels of liquidity.

[Robert B. Kay, CEO at Lifetime Brands]

For example, we are paying close attention to challenges facing retailers in this environment and have placed certain customers on credit hold to limit our exposure. While a credit hold has a negative impact on near-term sales, we believe this is operationally prudent. We are comfortable with our leverage ratio and pleased with our cash generation levels despite headwinds in the environment. We continue to view the market as favorable for acquisitions and have an active slate of M&A opportunities in our pipeline.

[Robert B. Kay, CEO at Lifetime Brands]

We expect to continue to progress discussions regarding these potential opportunities in the coming months, and we'll keep the market updated of all strategic initiatives. I'd like to briefly touch on the non-cash loss we recorded in the second quarter related to our equity investment in Grupo Vasconia, a housewares company in Mexico. In the second quarter, the company discontinued the equity method of accounting for this investment, which resulted in a non-cash loss of $14.2 million to record the investment at its fair value.

[Robert B. Kay, CEO at Lifetime Brands]

It is important to note that this does not negatively impact our cash flow and is consistent with our view that this stranded asset from an investment made in 2007 is not strategic to our company. Let me expand further on our financial guidance for the full year of 2024. In our press release this morning, we revised our guidance for net loss as a result of the non-cash loss related to the non-cash write-down of $14.2 million on our Grupo Vasconia investment.

[Robert B. Kay, CEO at Lifetime Brands]

Apart from this adjustment, we continue to expect results for the full year in line with our previously shared expectations for all other metrics. We are carefully monitoring the headwinds we saw over the last few months, and as we head into the next quarter, however, our reiterated outlook reflects our confidence in our ability to continue executing and delivering results, driven by the strategic initiatives we have in place. As we look ahead to the remainder of the year, we believe we are well-positioned to continue to grow market share and create value as demand rebounds.

[Robert B. Kay, CEO at Lifetime Brands]

We have a strong foundation in place, thanks to the significant work completed over the last several years to increase the resiliency of our business model. We look forward to keeping you updated on our progress as we continue expanding our leading portfolio of brands, driving innovation, and delivering operational excellence. With that, I'll now turn the call over to Larry.

[Laurence Winoker, CFO at Lifetime Brands]

Thanks, Rob. As we reported this morning, the net loss for the second quarter of 2024 was $18.2 million, or $0.85 per diluted share. That's compared to $6.5 million dollar loss, or $0.31 per diluted share in the second quarter of 2023. The net loss for the current period included a non-cash loss of $14.2 million related to our investment in Grupo Vasconia. Adjusted net loss was $0.6 million for the second quarter of 2024, or $0.03 per diluted share, as compared to $0.3 million or $0.02 per diluted share in 2023. Income from operations was $1.2 million in the second quarter of 2024, as compared to income of $4.4 million in the 2023 period.

[Laurence Winoker, CFO at Lifetime Brands]

Adjusted income from operations for the second quarter of 2024 was $5.6 million, compared to $8.4 million in the 2023 period. Adjusted EBITDA for the trailing twelve-month period ended June 30, 2024, was $56.6 million. Adjusted net loss, adjusted income from operations, and adjusted EBITDA are non-GAAP financial measures, which are reconciled to our GAAP financial measures in the earnings release. The following comments are for the second quarter of 2024 and 2023, unless stated otherwise. Consolidated sales declined by 3.2%. U.S. segment sales decreased by 3.3% to $130.5 million.

[Laurence Winoker, CFO at Lifetime Brands]

As Rob commented, macroeconomic pressures have led to weakened demand across end markets. Within the segment, the decrease occurred in the kitchenware and home solutions categories. Kitchenware decline was from kitchen tools and measurement products. Home solutions decline was due to lower hydration products and Taylor bath measurement products. The segment's decrease was partially offset by sales for a new licensed product brand in the kitchenware and home solution categories, and an increase in the tableware category from a new warehouse club program.

[Laurence Winoker, CFO at Lifetime Brands]

International segment sales were down by 2.6%, or $0.2 million, or $0.3 million in constant U.S. dollars to $11.2 million. As Rob commented, the impact of the U.K.'s economic recession has persisted, which has prevented a meaningful recovery in demand. The decrease was due to lower replenishment orders for e-commerce and brick-and-mortar customers, partially offset by higher sales in Asia. Consolidated gross margin increased to 38.5% from 38.2%.

[Laurence Winoker, CFO at Lifetime Brands]

U.S. segment gross margin increased to 38.7% from 38.3%. This improvement was due to favorable product mix. For international gross margin, which decreased to 36.6% from 37.7%, was driven by higher mix of distributor sales to Australia. U.S. segment distribution expenses as a percentage of goods shipped from its warehouses was 9.5% for 2024 versus 9.7% in 2023. Lower freight out expenses more than offset the impact of lower shipments.

[Laurence Winoker, CFO at Lifetime Brands]

Despite inflationary pressures, continuous improvements in labor and other expense management and lower inventory levels mitigated the impact. International segment distribution expenses as a percentage of goods shipped from its warehouses was 25.1% for both 2024 and 2023, as higher occupancy costs were offset by favorable freight rates.

[Laurence Winoker, CFO at Lifetime Brands]

Consolidated selling, general and administrative expenses increased by 6.7% to $38.3 million. U.S. segment expenses increased by $2 million to $29.4 million. As a percentage of net sales, expenses increased to 22.5% from 20.3%. The increase was driven by inflationary factors, most of which related to employee costs, the largest component of SG&A. Other increases included expenses related to the startup of manufacturing operations in Mexico.

[Laurence Winoker, CFO at Lifetime Brands]

This was partially offset by a decrease in the provision for doubtful accounts. International SG&A expenses decreased by $0.2 million to $3.8 million, and as a percentage of net sales, it decreased to 33.9% from 35.1%. The decrease was driven by lower advertising and commission expenses, partially offset by higher employee expenses.

[Laurence Winoker, CFO at Lifetime Brands]

Unallocated corporate expenses increased by $0.6 million to $5.1 million due to high incentive compensation and professional fees. Our interest expense, excluding mark-to-market adjustment for swaps, decreased by $0.3 million due to lower average borrowings, partially offset by higher interest rates on our variable rate debt. As Rob discussed with respect to Vasconia, due to a reorganization resolution by Vasconia under Mexico bankruptcy law, a company in which we have a 24.7% investment, we determined that we no longer had significant influence over our investment.

[Laurence Winoker, CFO at Lifetime Brands]

This resulted in the discontinuance of the use of the equity method of accounting. Upon discontinuation, $14.2 million of related foreign currency translation losses previously reported in accumulated other comprehensive loss statement were reclassified to the investment balance and then written off. This write-off was non-cash and had no effect on our ongoing operations or business strategy.

[Laurence Winoker, CFO at Lifetime Brands]

For income taxes in the current period, the effective income tax rate differs from the federal statutory rate, primarily due to equity-based awards, where the book expense exceeded the tax deduction and foreign losses for which no benefit was recognized. The effective tax rate for the prior quarter differs from the federal statutory rate, primarily due to state and local tax expense, the impact of nondeductible expenses, and foreign losses for which no tax benefit is recognized. Turning to our balance sheet, it continues to be quite strong.

[Laurence Winoker, CFO at Lifetime Brands]

As of June 30th, 2024, our liquidity was approximately $119 million, which included cash plus availability under our credit facility and receivable purchase agreement. Since year-end 2023, we further delevered our balance sheet, reducing our net debt by $70 million. And as of June 30 of this year, our net debt to Adjusted EBITDA leverage ratio was 3.3 times. As provided in the release, we are reiterating our financial guidance for the full year 2024, except for the non-cash loss of $14.2 million related to the investment in Vasconia.

[Laurence Winoker, CFO at Lifetime Brands]

The 2024 financial guidance is as follows: Net sales of $690 million-$730 million, adjusted income from operations of $49 million-$54 million, adjusted net income of $15 million-$17 million, and Adjusted EBITDA of $57.5 million-$62.5 million. This concludes our prepared comments. Operator, please open the line for questions.

[Operator]

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star one on your telephone keypad. Your first question comes from the line of Anthony Lebiedzinski with Sidoti. Please go ahead.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Good morning, gentlemen, and thank you for taking the questions. So, Rob, you talked about the sluggish demand in the second quarter, also seasonal timing of shipments. Just wondering if you guys could provide any more details as in regards to that, you know, whether or not, you know, more of the sales decline was because of just market sluggishness or, you know, just help us out, maybe just understand as far as how the quarter progressed.

[Laurence Winoker, CFO at Lifetime Brands]

Yeah, Good morning, Anthony. As we talked about in our remarks, you know, we had saw a lot of this coming when we issued the full year guidance. So we, you know, directionally, we were not surprised. The end market demand was a little greater than we thought, offset by some new initiatives, particularly Dolly and success in growing our e-commerce sales, offset that. And our market shares, as we talked about, overall, increased, which again, offset the greater market direction.

[Laurence Winoker, CFO at Lifetime Brands]

Aside from that, and as we had expected, some timing, which particularly applies to club, which are sizable orders, on a year-over-year basis, will be second half, whereas we had more in the first half of the year, last year in that channel, and that accounts for the remainder of the decline in the second quarter. That is all timing.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Okay, got it. Yeah, that, that's very helpful. And in terms of Dolly Parton products, I mean, did I miss that? Did you guys say how much of that was in the second quarter, or was there anything material to call out?

[Laurence Winoker, CFO at Lifetime Brands]

We didn't expect it to be that much, but we ended up shipping $4 million in the second quarter.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Gotcha. Okay. So for the full year, I think you said you expect to exceed $10 million for Dolly Parton products?

[Laurence Winoker, CFO at Lifetime Brands]

Correct, into the dollar channel. We may have some sales beyond the dollar channel that will hit 2024. Not certain yet whether that'll hit 2024 and 2025 based upon availability, since it's exceeded our expectations, getting availability of product in time.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Gotcha. Good. And then, you know, how would you characterize your own inventories and inventory at retail? I know, you know, one of your competitors last month came out with lower than expected results, and, you know, they had some own internal issues, but they had talked about, you know, just seeing kind of a stretched consumer out there. So, you know, what are your thoughts there, as far as, you know, inventory at retailers and retailers' willingness to replenish orders? What are your thoughts?

[Robert B. Kay, CEO at Lifetime Brands]

Sure. Well, the first part of your question in terms of our own inventories, we've been very focused on the inventories for years now, and our inventory levels are appropriate. And we react very quickly with any changes in volumes, as well as on it, whether it's SKU level or other bases, such as with the outperformance of Dolly, we reacted very quickly to get in more inventory, right? So we think our inventory levels are appropriate, and streamlined.

[Robert B. Kay, CEO at Lifetime Brands]

In the UK and Europe, our hub in the Netherlands, we've needed to increase those levels, as a result of the fact that shipments are now coming around the Cape and not through the canal, and the Red Sea. That adds a couple of weeks, so you need to offset that by carrying higher levels of inventories. Not significant, but definitely higher levels. So we've increased there. In terms of the bulk of your question of at retail, you know, in more challenging economic times, particularly the larger and the more sophisticated retailers lower their investment and want more replenishment from their customers.

[Robert B. Kay, CEO at Lifetime Brands]

A bigger player like us, it actually benefits our market position. But, you know, there has been definitely a shift, and we've seen that for quite some time. That always gives a leading indicator of where we see the markets going. So there's definitely some pullback in levels at most of our customers. They are leaner on their inventory levels than they have been in better times.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Gotcha. Okay, and then last question from me. You know, so, you know, as we look to update our models for Q3 and Q4, you know, is there anything that we should be aware of in terms of just timing of shipments other than what you already talked about, or is there anything timing of cost that we should be aware of?

[Robert B. Kay, CEO at Lifetime Brands]

No, I mean, nothing that we haven't stated. You know, the big cost increase besides, you know, overall, you know, inflation, I think the big cost increase has been ocean freight, which we haven't experienced, as we mentioned. It's stabilized. We don't expect it to change from where it is. So on a year-over-year basis, ocean freight is up, stabilized at a level less than our expectations, which is good. So we factored it all in, and we don't expect it to change much. And the big driving factor isn't geopolitical conditions.

[Robert B. Kay, CEO at Lifetime Brands]

The big driving factor are the ocean carriers and them taking a lot of tonnage offline, and therefore, supply and demand, it created, an increase in, the cost that they were able to charge. You know, we've offset that, you know, particularly on a cost of goods sold basis, by driving the cost of what we're paying for our goods. So there should be no change beyond our expectations, and from a timing perspective. There is some upside if we can get more product, you know, for demand on Dolly, but, you know, basically, everything is on track.

[Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company]

Okay. Well, thank you very much, and best of luck.

[Robert B. Kay, CEO at Lifetime Brands]

Thank you, Anthony.

[Operator]

Your next question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please go ahead.

[Linda Bolton Weiser, Analyst at D.A. Davidson]

Yes, hello. Hi. So I was just curious, if you could give us an update on the S'well acquisition, sort of a state of the union on how that brand is doing since you acquired it?

[Robert B. Kay, CEO at Lifetime Brands]

As we talked about at the time of the acquisition, the biggest known challenges centered around, they had stuffed up their overseas channels as well as e-commerce, which is the Amazon. So we knew there'd be a lag. That's all run through and therefore, you know, it's picked up as a result. The other thing that has been successful is, and if you go on, you know, our websites and social media, you'll notice there's been a tremendous amount of new product introductions because we inherited no, no pipeline, basically.

[Robert B. Kay, CEO at Lifetime Brands]

So that's created newness, which is driving new opportunities, particularly in the e-commerce channel, where, when you're just selling the same thing, you know, there, there becomes a decline in, in your demand. But now that we've replenished the offering, we've seen both in S'well.com, Amazon, and other channels, a nice uptick. One thing we did not anticipate, when we bought the business is that we were very interested in, we found the promotional direct corporate channel that S'well had to be very attractive, and we got a lot of talent with that.

[Robert B. Kay, CEO at Lifetime Brands]

The talent has exceeded our expectations, but the relationships that they were selling through needed to be completely redone. That's why we took a charge last year, and that's this year, we're doing much better, and we've seen a tremendous increase, and that helped actually in the second quarter, as we've solved the issues that we faced last year and did that in a manner that exceeded our expectations. So S'well is doing well.

[Robert B. Kay, CEO at Lifetime Brands]

We need to with that division, the whole Build and Swell division is one division. You know, there has been, with the tremendous growth of Stanley, so the category has done well, but besides Stanley, most people have not. You know, there's been a decline in shares, so we've been winning back some share. And that should benefit us on a go-forward basis.

[Linda Bolton Weiser, Analyst at D.A. Davidson]

Okay. And then, you know, we get the Nielsen data, the POS data, which covers just the U.S., and it doesn't include e-commerce, so it's only tracked channels, so it only covers some of your sales. But nevertheless, it shows a really bad trend, like really big year-over-year declines. You know, so this would be at Walmart and Target, you know, other channels. Is there any way you can explain to us why the declines in the Nielsen data look so much bigger than the decline in revenue you actually report?

[Robert B. Kay, CEO at Lifetime Brands]

So again, it's well covered. We purchase a lot of data, and it's all Circana data, right, so NPD IRI. And that's, you know, covers a lot of the universe. There is, to your point, less data overseas. We do have some, but not as much. So part of it is what's channeled. You know, so, like, we had growth in the dollar channel. You know, I'm not sure if that's captured in Nielsen, right? Which explains, you know, part of what you're talking about. In Walmart.

[Robert B. Kay, CEO at Lifetime Brands]

So if we look at the data that we purchase and we compare that on a 12-month versus 12-month basis this year versus last year, not every category, but by far the majority of our categories, we've increased share. In Walmart and Target, we've gained in a lot of areas, but we did, as talked about, we lost some share in the KitchenAid line with those retailers, which we saw an impact on a year-over-year basis in the second quarter alone, right? So just those three months. That might be skewing what you see versus what we actually shipped.

[Linda Bolton Weiser, Analyst at D.A. Davidson]

Okay. And then, given, I guess, we're expecting around $6 million of shipments of the Dolly Parton, at least, maybe more in the second half. I would think more of that would come in the third quarter than in the fourth quarter. So is it fair to say your sales growth and year-over-year change in third quarter will be maybe better than in fourth quarter? Is that a right thing for me to assume?

[Robert B. Kay, CEO at Lifetime Brands]

It's a good question. I don't have the answer. I can say that we will exceed the $10 million, right? So you can expect more than the six and as we're not sure how that all falls in the third quarter versus fourth quarter yet, we're still working on that, based upon, again, time of shipments and the like. Most of it is replenishment, so, the majority of that comes through our warehouses and not, you know, not directed for it, right? So that's not necessarily the case.

[Linda Bolton Weiser, Analyst at D.A. Davidson]

Okay. And then my last question has to do with, when you talked about a little bit of a change in your marketing focus in Europe, to go a little bit more for the larger retailer accounts instead of the smaller ones. I'm wondering if that changes the margin profile of the business there. Do you expect similar margins or lower or higher as you kind of change that channel, strategy? Thanks.

[Robert B. Kay, CEO at Lifetime Brands]

Yeah, no, good question. So just to explain, the core businesses that Lifetime had acquired, you know, their core customers were independent stores and what's called cook shops, particularly in the UK. They're in big decline, so we've been shifting to the larger accounts, you know, like Dunelm and Next, who are doing well. And the growth in those has been offsetting the general growth in, or decline in, the housewares market in there. In general, the answer definitely is yes, that the margins that you're selling to those customers will be lower than you're getting in a cook shop.

[Robert B. Kay, CEO at Lifetime Brands]

Though, the caveat is the reason why we're not necessarily experiencing that, and what you're seeing flowing through the numbers, is we've cleaned up a lot of business and improved the gross margin in what we sell and, you know, in terms of what we're selling product-wise. So that's picking up and offsetting what you're seeing. Otherwise, if you were just substituting one for the other, you would've seen a bigger decline in margin. That make sense, Linda?

[Linda Bolton Weiser, Analyst at D.A. Davidson]

Yeah. Yeah, thank you. Thanks very much, and good luck with everything.

[Robert B. Kay, CEO at Lifetime Brands]

Thank you.

[Operator]

Your next question comes from the line of Brian McNamara with Canaccord Genuity. Please go ahead.

[Brian McNamara, Managing Director at Canaccord Genuity]

Good morning, guys. Thanks for taking the questions.

[Robert B. Kay, CEO at Lifetime Brands]

Thanks, Brian, for being here.

[Brian McNamara, Managing Director at Canaccord Genuity]

So sales growth has proven a bit elusive over the last few years, kind of post-COVID, and your H2 guide, I think, implies a +8% kind of run rate. What gives you confidence in that kind of hockey stick recovery, particularly with $4 million of Dolly Parton product maybe being pulled ahead, as we haven't seen kind of growth like that since 2021?

[Robert B. Kay, CEO at Lifetime Brands]

So, two things that are driving that, I guess three things. You know, one is just seasonal timing, on a year-over-year basis, right? So it's, it's, some of it is what shipped, first half 2023 versus second half 2023, and the cadence of what's shipping this year. So that's driving, you know, some of the growth. You know, some of it is, newness, such as Dolly, you know, which is all incremental business.

[Robert B. Kay, CEO at Lifetime Brands]

A little bit is, you know, we changed our a lot of what we were doing online, which we were doing fine in terms of our E-commerce sales, and we've already seen, you know, tremendous outperformance and, and, and that is should continue, and we have a high degree of confidence in executing on that, which will drive that. And the other is, just as we continue to roll out, you know, while the markets that were particularly in Europe and the continent and the U.K., you know, have. We don't expect that to pick up. We've gained new listings in E.Leclerc, Carrefour, Lidl in Australia, New Zealand.

[Robert B. Kay, CEO at Lifetime Brands]

We used to, through the way we went to market, we were basically selling only one brand to one customer. Now, granted, in Australia, there's one major retailer, and that's who was being sold to, and they're very big. But now we're selling to many people, and to that one major retailer, we're selling many products and many brands. So that's all just rolling through, and will drive incremental growth, versus prior year. So we're not expecting a market pickup to drive this.

[Brian McNamara, Managing Director at Canaccord Genuity]

Okay. What's your view on innovation in light of today's consumer expectations for products that kind of perpetually keeps increasing? Are you guys investing more in R&D to kind of propel sustainable growth?

[Robert B. Kay, CEO at Lifetime Brands]

Without a doubt, and actually one of the things that I didn't really talk about that is driving substantial growth and will this year based upon, you know, what we have in firm orders is, you know, provision. You know, we introduced the Farberware Build-A-Board, and it's been unbelievably successful. It will be the single, we expect it when we add up all the numbers at the year, the single biggest launch that Lifetime has ever made, and it's all incremental product and incremental business, obviously, to existing customers. It's all U.S. We're gonna look to expand that internationally, but at this point, it's all U.S.

[Brian McNamara, Managing Director at Canaccord Genuity]

All right, then just one more. International just, it continues to be kind of a tough, a tough slog there. I'm wondering if it still makes sense to be there, despite your strong internal efforts to restructure the business. You've done, you've made a lot of effort there. It's a $55 million kind of annual run rate business, despite, you know, these new listings that you're talking about. Does it require too much management focus, just given size relative to the total business?

[Robert B. Kay, CEO at Lifetime Brands]

No, management focus is not the issue there. It is not training management resources. That is not the problem. We do recognize that we need to show progress there, and take action accordingly based upon how it rolls out.

[Brian McNamara, Managing Director at Canaccord Genuity]

Okay, great. Thanks, guys. Appreciate the call.

[Robert B. Kay, CEO at Lifetime Brands]

Thank you, Brian.

[Operator]

Again, if you would like to ask a question, press star one on your telephone keypad. There are no further questions. I will now turn the call over to Mr. Rob Kay for the closing remarks. Please go ahead.

[Robert B. Kay, CEO at Lifetime Brands]

Thank you, Angela. Thank you, everyone, for listening to our call today and for participating in this and your interest in Lifetime Brands. We hope that we were able to answer your questions on the second quarter and for the full year, and we look forward to further discussions with everyone in the future. Have a good day.

Participants

Executives

• Robert B. Kay, CEO

Analysts

• Anthony Lebiedzinski, Senior Equity Analyst at Sidoti & Company
• Brian McNamara, Managing Director at Canaccord Genuity
• Carly King, SVP at KCSA Strategic Communications
• Laurence Winoker, CFO at Lifetime Brands
• Linda Bolton Weiser, Analyst at D.A. Davidson