Lifetime Brands CEO on Winning Market Share in a Tough Home Goods Market

SPEAKER_1 (0:00)

For more on this, we welcome in Rob Kay, the CEO of Lifetime Brands. Rob, thank you for being with us today. Let's dive right in to Q2. You recorded a $40.1 million IEPA tariff refund. You then immediately deployed 40 million of that to pay down your term debt. How much breathing room does that balance sheet clean up give you in an environment where interest rates remain a real drag on consumer durables?

Rob Kay (0:24)

Hi, Marlee. Thanks for having me. I appreciate it.

Well, we paid those tariffs and we tightened our belts and cut out a lot of costs so we generated some good cash flow. That money coming in allowed us to replenish what we've already used. We also shortly after that refinanced some debt that we have outstanding. We have a tremendous amount of liquidity as a result on our balance sheet that we're using to invest in the future, both for external and organic opportunities.

SPEAKER_1 (0:57)

And even if we strip out that refund, your sales still grew by more than 7 percent. You were up to about $141.6 million. That's a particularly strong number when you look at overall home category unit volumes were actually down about 8 percent across the broader market. Where are you taking market share from competitors who don't have your scale?

Rob Kay (1:17)

Well, our view is to be agnostic to where the consumer shops. So we want to be available wherever the consumer shops. We've done very well in Off Price. One of our larger customers, TJX and Ross. Those guys have done well. We picked up share with them.

Similar with Costco and Walmart, where we've been able to pick up share. In our industry based on the tariff and the trade wars and the macro environment, we've seen some accelerating consolidation with a lot of people that we compete with that have not been able to continue to deploy capital to invest in new product and growth opportunities, and we've benefited from that.

SPEAKER_1 (2:00)

Rob, you mentioned there that you want to be agnostic to where the shoppers shop. That is not a conversation that I've had before with the CEO. I want to take a look at that. In your US business, a lot of your growth was heavily led by warehouse clubs. You mentioned Costco, their Sam's Club, alongside e-commerce.

Are you seeing a middle class consumer that is trading down from department stores to club channels to get their kitchen where? What are you seeing in terms of trends about where the shopper is shopping?

Rob Kay (2:32)

Yeah, we have seen the consumer be more choiceful in terms of where they're spending their dollars. As inflation and macro impacts have hurt their discretionary spend.

But if you looked at Lifetime 15 years ago, the department store channel was a very big channel. Now, it's less than 3 percent of our sales, and that's basically because the consumer doesn't shop there as much anymore. If you look at off price, if you look at Walmart and mass, if you look at clubs, particularly Costco, those guys have continued to grow and we've grown with them. That's why our view is to be agnostic. Whether you're buying something on our own websites, mccasa.com or swell.com, or you're buying that on Amazon, you're buying that mass, you're buying that Omni Channel, we want to make sure the consumer has the opportunity to buy our product, and that's our philosophy.

SPEAKER_1 (3:29)

You mentioned, Mikasa, there, the tabletop lines after a slower stretch actually rebounded. Are you seeing a return to at home entertaining or trends that are indicating that may be coming back as we're seeing such high restaurant inflation?

Rob Kay (3:45)

Definitely, when the consumer feels the pinch, you know, they eat home more, and we benefit from that. We've also saw a big uptick in COVID, when again, for different reasons, but people were eating home more.

And then there was a downtrend from that over time because there was a tremendous of product purchase in that period. And that product has reached its end of life.

So, we're seeing a benefit from that. But without a doubt, you're seeing a decline in food service, which we do participate in. Smaller part of our business were mainly consumer retail, and an increase in people eating at home. One point in terms of the consumer trends in the overall market, dollar volume is up higher than unit volume, right? So unit volume isn't as robust, but we've been able to grow both.

SPEAKER_1 (4:32)

And you raised your full year EBITDA guidance to more than $90 million, but you kept your full year sales guidance unchanged at $650 to $700 million. As we're kicking off Amazon Prime Days now, and what's arguably the new beginning of the holiday shopping season, are you assuming a zero recovery and broader consumer demand for Q3 and Q4, or are you simply baking in a very cautious holiday outlook here?