Tandy Leather Factory Reports 2nd Quarter 2015 Earnings Down 15%

FORT WORTH, Texas, Aug. 06, 2015 (GLOBE NEWSWIRE) -- Tandy Leather Factory, Inc. (NASDAQ:TLF) today reported financial results for the second quarter of 2015.  Consolidated net income for the quarter ended June 30, 2015 was $1.5 million compared to consolidated net income of $1.8 million for the second quarter of 2014, a decrease of 15%.  Fully diluted earnings per share for the quarter were $0.15, compared to $0.17 in the second quarter of last year.  Total sales for the quarter ended June 30, 2014 were $19.8 million, up 0.4% from $19.7 million in the second quarter last year.  

Consolidated sales for the six months ended June 30, 2015 were $40.6 million, up 3% from 2014’s first half sales of $39.5 million.  Consolidated net income for the first half of 2015 was down 18% to $3.0 million or $0.29 per fully-diluted share versus $3.6 million or $0.35 per fully-diluted share in the comparable period last year.       

Sales in the Retail Leathercraft segment, which consists of the Tandy Leather stores, increased $331,000 in the second quarter, a 3% improvement over last year's second quarter.  Eighty-two stores comprised Tandy Leather's operations on June 30, 2015.  For the first six months of 2014, Retail Leathercraft’s sales increased $1.5 million, or 6%, over the first six months of 2014.  Second quarter sales for the Wholesale Leathercraft segment, which consists of the Leather Factory stores, were down 1%, or $63,000, from the same quarter last year.  For the first six months of 2015, Wholesale Leathercraft’s sales were down $162,000, or 1%, compared to the same period in 2014.  International Leathercraft, consisting of three stores located in the United Kingdom, Spain and Australia, reported a sales decrease of 19%, or $198,000, compared to the second quarter of 2014.  For the year, International Leathercraft’s sales were down 14%, or $302,000, over the same period last year. 

Consolidated gross profit margin for the current quarter was 64.8%, compared to 64.9% for the second quarter of 2014.  For the first two quarters of this year, consolidated gross profit margin was 62.6%, decreasing from last year's gross profit margin of 64.5%.  Consolidated operating expenses rose approximately 4% for both the quarter and the year, or $357,000 in the current quarter and $802,000 for the first six months over the same periods a year ago.  For the second quarter, the significant increases in expenses occurred in employee compensation, depreciation, legal fees, and outside services.  For the year, expenses increases occurred in employee compensation and benefits, depreciation, advertising and marketing, relocation expenses, and store rent.  As a percentage of sales, consolidated operating margin declined for the quarter to 11.8% compared to 13.5% last year’s second quarter.  On a year-to-date basis, consolidated operating margin increased from 14.2% last year to 11.6% in the current year.

Jon Thompson, Chief Executive Officer and President, commented, “We are disappointed with our second quarter results, although there were some improvements from the first quarter.  Our gross profit margin matched that of last year’s second quarter as the majority of the delivery issues we dealt with earlier this year have been resolved, albeit late in the second quarter.  While our June sales were good, the first two months of the quarter were extremely weak, which explains the flat sales for the quarter.  Looking at the last half of the year, the comps are tough, given the inventory levels we were carrying last year.  Those special opportunity purchases of leather that are instrumental to supporting sales and margins were in abundance last year compared to this year.  Unless that changes soon, we are going to have a tough time matching last year’s sales.  The difficulty is that we can’t predict when those purchases might present themselves so we have to plan like they won’t.”

Shannon L. Greene, Chief Financial Officer, added, “Operating expenses are increasing faster than sales and we will be focusing on expense control through the last half of the year.  However, the significant expense increases are in employee compensation and benefits, primarily at the stores due to increased headcount, advertising and marketing, and store rents and utilities, which is the result of the store relocations into larger space.  We believe those expenses contribute to an improved customer experience so it would be difficult to trim them back without a negative impact on our customers. As was the case in the first quarter, the foreign currency exchange rates continue to affect us negatively.  If the exchange rates this year had matched last year’s rates, our International Leathercraft segment would be reporting flat sales this year, rather than a 14% decline.  Unfortunately, we don’t expect the rates to turn around any time soon so the negative impact will continue for the remainder of the year.”

Financial Outlook:

The following statements are based on TLF's current expectations as of August 6, 2015.  These statements are forward-looking statements and should be read in conjunction with the cautionary information about these statements that appears below.

The Company expects to open 1-2 stores in 2015.  Estimated consolidated net sales for 2015 will be in the range of $83-$84 million.  EPS for 2015 are expected to be in the range of $0.60 to $0.63.  Average shares outstanding, both basic and diluted, in 2015 are estimated to be approximately 10.2 million.  The Company assumes an effective tax rate for the year between 35% and 36%.

Tandy Leather Factory, Inc., (http://www.tandyleather.com), headquartered in Fort Worth, Texas, is a specialty retailer and wholesale distributor of a broad product line including leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself kits. The Company distributes its products through its 28 Leather Factory stores, located in 19 states and 3 Canadian provinces, 82 Tandy Leather retail stores, located in 37 states and 6 Canadian provinces, and three combination wholesale/retail stores located in the United Kingdom, Australia, and Spain.  Its common stock trades on the Nasdaq with the symbol "TLF".  To be included on Tandy Leather Factory’s email distribution list, go to http://www.b2i.us/irpass.asp?BzID=1625&to=ea&s=0.

This news release may contain statements regarding future events, occurrences, circumstances, activities, performance, outcomes and results that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Actual results and events may differ from those projected as a result of certain risks and uncertainties. These risks and uncertainties include but are not limited to: changes in general economic conditions, negative trends in general consumer-spending levels, failure to realize the anticipated benefits of opening retail stores; availability of hides and leathers and resultant price fluctuations; change in customer preferences for our product, and other factors disclosed in our filings with the Securities and Exchange Commission.  These forward-looking statements are made only as of the date hereof, and except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Selected financial data:

Tandy Leather Factory, Inc.
Consolidated Balance Sheets

Tandy Leather Factory, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three and Six Months Ended June 30, 2015 and 2014

Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, 2015 and 2014