Shares of The Brand House Collective, Inc. (NASDAQ:TBHC) dropped about 6% on Tuesday after the home furnishings retailer posted third-quarter results that fell well short of market expectations, reflecting pressure from inventory clearance activities and a sharp slowdown in online sales.
The stock was down 5.98% in pre-market trading following the release.
Formerly known as Kirkland’s, the company reported an adjusted loss of $0.61 per share for the quarter, far wider than the consensus forecast of a $0.13 loss. Quarterly revenue totaled $103.5 million, missing analyst expectations of $109.39 million and representing a 9.5% decline from $114.4 million a year earlier.
Performance was weighed down by a 7.4% fall in consolidated comparable sales. This included a steep 34.6% drop in e-commerce revenue, partially offset by a 1.7% increase in comparable in-store sales. Gross margin also came under pressure, falling to 20.4% from 28.1% in the same quarter last year, largely due to inventory liquidation ahead of a broader rollout of Bed Bath & Beyond product assortments.
“Our inventory optimization efforts are strategically supporting our store conversion program, creating space for expanded Bed Bath & Beyond assortments as we transform our retail footprint,” said Amy Sullivan, CEO of Brand House Collective. “The successful conversion of our Tennessee locations to the Bed Bath & Beyond Home format demonstrates the progress we’re making in this evolution.”
Adjusted EBITDA swung to a loss of $9.9 million, compared with a profit of $0.5 million in the prior-year period. During the quarter, the company closed three Kirkland’s Home locations and converted three others into Bed Bath & Beyond Home stores. At quarter-end, it operated 303 Kirkland’s Home stores and three Bed Bath & Beyond Home stores.
Brand House Collective is in the process of merging with Bed Bath & Beyond, which already holds a 40% stake in the business. An earnings call was not held, given the pending transaction.