Tile Shop Stock Down Following Q2 Earnings on Lower Sales and Margins
TTSH's Earnings Snapshot
Tile Shop posted net sales of $88.3 million in the second quarter of 2025, down 3.4% from $91.4 million in the prior-year period, as comparable store sales declined 3.5% due to lower store traffic. Gross profit fell 5.8% year over year to $56.8 million from $60.3 million, with the gross margin contracting 160 basis points to 64.4% from 66%, pressured by higher discounting and increased product costs.
Net income dropped sharply to $0.4 million, or $0.01 per diluted share, from $1.2 million, or $0.03 per diluted share, a year ago. Adjusted EBITDA also fell 26.7% to $4.9 million from $6.7 million, representing a margin decline from 7.4% to 5.6%. The store count stood at 141 at quarter-end, down from 142 last year.
Tile Shop's Other Key Business Metrics
Operating income margin fell to 0.5% from 2% a year earlier, reflecting both the sales decline and the margin compression. Selling, general and administrative (SG&A) expenses were $56.4 million, down 3.6% from the prior year's $58.5 million. This reduction was driven by cost savings from a prior distribution center closure in New Jersey, lower asset impairment charges, reduced marketing spend and decreased depreciation, partially offset by a merchandising supplies write-off.
Capital structure remained conservative, with no outstanding debt and a cash balance of $27.8 million at quarter-end, up from $20.9 million at 2024-end. Operating cash flow in the first half of 2025 totaled $13.5 million compared with $23.5 million. The company's pretax return on capital employed over the trailing 12 months plunged to 0.0% from 6.8% last year.
Tile Shop Hldgs, Inc. Price, Consensus and EPS Surprise
Tile Shop Hldgs, Inc. price-consensus-eps-surprise-chart | Tile Shop Hldgs, Inc. Quote
TTSH's Management Commentary
CEO Cabell Lolmaugh noted that refinements to Tile Shop's assortment — particularly expanding entry-level and competitively priced products — helped modestly improve unit volumes year over year. However, this gain was offset by increased sales of lower-priced products and heavier discounting. TTSH has broadened its offerings with new product categories such as luxury vinyl tile (including the exclusive Arbour line), laminate and engineered wood flooring, along with large-format tiles and its newly launched Signature line. Management sees these initiatives as positioning the business to capture additional project scope per customer, such as selling flooring for multiple rooms in a single remodeling job.
Factors Influencing Tile Shop's Headline Numbers
The primary headwinds in the quarter were persistently low housing turnover, which curtailed customer traffic and pricing pressure from discounting. Gross margins faced dual challenges of lower average selling prices and higher product costs. However, Tile Shop benefited from a leaner cost structure due to prior and ongoing expense reductions, including workforce reductions and facility closures. The closure of the Spring Valley, WI, distribution center in the second quarter is expected to generate approximately $1 million in annualized SG&A savings.
TTSH's Guidance
While no formal numerical guidance was provided, management indicated that near-term priorities include continued expense control, limiting capital expenditures and identifying operational efficiencies. Tile Shop also emphasized its diversified sourcing from over 20 countries, which it views as a strategic advantage in navigating potential tariff volatility. Higher-than-typical inventory levels further provide flexibility to adapt sourcing should trade conditions change.
Tile Shop's Other Developments
During the second quarter, TTSH closed its Spring Valley, WI, distribution center without incurring material impairment or severance costs. This follows the closure of another distribution center and significant corporate workforce reductions in the past nine months. One retail store was closed at the end of its lease term in the second quarter, with another closure in the third quarter. These actions are part of a broader cost-cutting strategy in response to ongoing demand pressures.
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