# Tandy Leather Factory Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [Tandy Leather Factory Inc](/companies/tlf.md) (CIK 909724)
- Form: 10-Q
- Filed: 2025-05-12
- Accepted by EDGAR: May 12, 2025, 16:15 ET
- Period: 2025-03-31
- Accession: 0001140361-25-018382
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/909724/000114036125018382/ef20047588_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/909724/000114036125018382/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $19.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $8.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $10.7m | us-gaap:GrossProfit |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $262.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $4.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $12.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 8,595,320 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$536.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $1.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $12.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $23.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $59.4m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $77.9m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $13.2m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2025-03-31 | $56.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 12,213 characters.

### The Business and Strategy

Tandy Leather Factory, Inc. is one of the world’s largest specialty retailers of leather and leathercraft-related items. Founded in 1919 in Fort Worth, Texas, and organized in 2005 as a Delaware corporation, the Company introduced leathercrafting to millions of American and later Canadian and other international customers and has built a track record as the trusted source of quality leather, tools, hardware, supplies, kits and teaching materials for leatherworkers everywhere. Today, our mission remains to build on our legacy of inspiring the timeless art and trade of leatherworking.

What differentiates Tandy from the competition is our high brand awareness and strong brand equity and loyalty, our network of retail stores that provides convenience, a high-touch customer service experience, and a hub for the local leathercrafting community, and our 100-year heritage. We believe that this combination of qualities is unique to Tandy and gives the brand competitive advantages that are difficult for others to replicate.

We sell our products primarily through company-owned stores and through orders generated from our global websites, and through direct account representatives in our commercial division. We also manufacture leather lace, cut leather pieces and most of the do-it-yourself kits that are sold in our stores and on our websites. We also offer production services to our business customers such as cutting (“clicking”), splitting, and some assembly. We maintain our principal offices at 1900 Southeast Loop 820, Fort Worth, Texas 76140.

Currently, the Company operates a total of 101 retail stores. There are 91 stores in the United States (“U.S,”), nine stores in Canada and one store in Spain.

Tandy Leather has been introducing people to leatherworking for over 100 years. Our stores have been and continue to be our competitive advantage: where our customers learn the craft in classes, open table , and from the expertise of our store staff, where they can touch, feel and test the product, and where they can connect and commune with others passionate about leather. Our websites provide inspiration, detailed product descriptions and specifications, educational information and videos, and a convenient place to also purchase products – especially for those who are far from our retail stores, including a growing international customer base. For many of our retail and web customers, leatherworking evolves from a passion to a trade. Our Commercial Division is tailored to the needs of those customers who build businesses around leather. With dedicated direct account representatives, a direct-from-our-warehouse shipping model, bulk and volume-based competitive pricing, customized product development, and production and pre-production services, we are building long-term, strategic relationships with our largest customers.

In 2019, we began the process of assessing and reinvigorating the business. We focused in three broad strategic initiative areas: 1) improving our brand proposition, 2) rebuilding our foundation: the talent, processes, tools and systems needed to modernize and efficiently operate the business, and 3) creating a vision and road map for long-term growth. We had significant achievements in all of these areas including significantly improving the product quality, breadth of assortment and value, dramatically improving the website and web operations, rebuilding the team, people policies and culture, and replacing all of the key systems, among many other accomplishments.

We have made steady progress to transform and reinvigorate our business even in the face of two very significant obstacles and have been focused on improving our financial sustainability and profitability. In the short-term, we are managing operating expenses and gross margin to deliver free operating cash and operating income even in the face of possible continued economic headwinds. We will also continue to selectively invest in profitable sales growth where it makes sense, but rebuilding a durable, profitable business model is the highest priority.

As disclosed in our 2024 10-K filing, the Company concluded the sale of our corporate headquarters, and the net proceeds of the sale is recorded in ‘Other, net’ in our consolidated statements of operations and comprehensive income.

On January 22, 2025, the Company finalized the sale of its corporate headquarters and distribution facilities in Fort Worth, Texas for a gross sale of $26.5 million before deduction of commission and relevant closing fees as referenced in the Company’s 8-K filed on January 22, 2025. On January 28, 2025, the Company also signed a 10-year lease for new corporate headquarters and distribution facilities in Benbrook, Texas and the Company has the ability to renew the lease for an additional 10 years at market rate.

The Company hired Johan Hedberg as its new Chief Executive Officer as of January 6, 2025. Prior to the hiring of Mr. Hedberg, Janet Carr resigned as Chief Executive Officer, effective January 3, 2025; she remained employed by the Company to assist with transition until March 31, 2025.

### Results of Operations

### Three Months Ended March 31, 2025 and 2024

The following table presents selected financial data:

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Sales | $19,036 | $19,275 | $(239) | (1.2)% |
| Gross profit | 10,718 | 10,920 | (202) | (1.8)% |
| Gross margin percentage | 56.3% | 56.7% |  | (0.4)% |
| Operating expenses | 10,456 | 10,271 | 185 | 1.8% |
| Income from operations | $262 | $649 | $(387) | (59.6)% |

### Net Sales

Consolidated net sales for the quarter ended March 31, 2025 decreased $0.2 million, or 1.2%, compared to the corresponding prior year period. We believe the decrease in sales was due in small part to temporary store closures related to store relocation and ongoing weak consumer demand compared to a year ago resulting from uncertainty related to global political, economic and other uncontrollable factors.

We evaluate a number of factors when determining whether to close existing stores, including the 4-wall cash flow trend and longer-term projection for the store, the long-term sales trend, ongoing cost of store operations, date of lease expiration, quality of the store and location, and the size and potential of the trade area including proximity to other existing stores, among other variables. We use similar factors to determine whether to open new stores.

### Gross Profit

Gross profit for the quarter decreased by $0.2 million, or 1.8%, compared to the same period in 2024. While gross margin percentage for the quarter ended March 31, 2025, remains practically the same year-over-year, the slight decrease of 40 basis points due to increased promotional activity in the first quarter of both years.

### Operating expenses

Operating expenses for the quarter increased by $0.2 million or 1.8% compared to the corresponding prior year period, primarily as a result of an increase in employment costs of $0.3 million due to the combination of higher insurance costs, merit increases, and some key personnel hired in the second half of 2024, an increase in occupancy of $0.1 million mainly attributed to rental of our corporate headquarters; partially offset by a decrease in professional services of $0.1 million and a decrease in depreciation expense of $0.1 million due to the disposal of our owned corporate headquarters.

### Income Taxes

Our effective tax rate for the three months ended March 31, 2025 and March 31, 2024 was 24.8% and 25.7% respectively. Our effective tax rate differs from the federal statutory rate primarily due to U.S. state income tax expense, expenses that are non-deductible for tax purposes, and the estimates in our valuation allowance associated with our deferred tax assets.

### Capital Resources, Liquidity and Financial Condition

We require cash principally for day-to-day operations, to purchase inventory and to finance capital investments. We expect to fund our operating and liquidity needs primarily from a combination of current cash balances and cash generated from operating activities. Any excess cash will be invested as determined by our Board of Directors in accordance with its approved investment policy. Our cash balances as of March 31, 2025 totaled $23.6 million.

On October 30, 2024, the Company renewed the promissory note under its credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. through October 31, 2025. Under the Credit Agreement, the bank will provide the Company a credit facility of up to $5,000,000 on standard terms and conditions, including affirmative and negative covenants set forth in the Credit Agreement. As security for the credit facility, the Company has pledged as collateral certain of its assets, including the Company’s cash in deposit accounts, inventory and equipment. The interest rate is based on CME term SOFR + 210 basis points and the maturity is 1 year. As of the date of this filing, no funds had been borrowed under this facility.

### Share Repurchase Program and Share Repurchase

On August 7, 2022, the Board of Directors approved a new program to repurchase up to $5.0 million of the Company’s common stock between that date and August 31, 2024. As of August 31, 2024, the Company had purchased less than $10,000 of shares under this plan.

On September 17, 2024, the Board of Directors approved the renewal of the stock plan and the Company shall be authorized to repurchase up to $5 million (at then-current market value) of the Company’s common stock in open-market transactions at prevailing market prices upon periodic instructions from the Board or an authorized sub-committee of the Board until September 30, 2026. As of March 31, 2025, $5.0 million remained available for repurchase under this new program.

### Cash Flows

*(amounts in thousands)*

|  | 2025 | 2024 |
| --- | ---: | ---: |
| Net cash used by operating activities | $(536) | $1,086 |
| Net cash from investing activities | 23,566 | (1,227) |
| Net cash used in financing activities | (12,745) | (1) |
| Effect of exchange rate changes on cash and cash equivalents | 38 | 298 |
| **Net increase in cash and cash equivalents** | **$10,323** | **$156** |

21

For the three months ended March 31, 2025, cash used in operations generated $0.5 million driven by a net income from operations of $0.3 million , non-cash expense of $1.4 million, including depreciation, amortization, and stock-based compensation, a decrease in inventory of $1.2 million, a decrease in prepaid expenses of $0.2 million; partially offset by a reduction in lease liability payments of $1.4 million, a decrease in accrued expenses of $0.9 million, an increase in other assets of $0.2 million, and a decrease in accounts payable of $0.1 million. Cash provided from our investing activities was $23.3 million, which included net proceeds from sale of our corporate headquarters of $24.9 million and purchase of assets for our new corporate facility of $1.3 million. We paid dividends in the amount of $12.7 million. The above activities, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $10.3 million.

For the three months ended March 31, 2024, cash from operations generated $1.1 million driven by a net income of $0.5 million, non-cash expense of $1.4 million, including depreciation, amortization, and stock-based compensation, a net reduction in inventory of $1.2 million and a decrease in prepaid expense of $0.1 million, partially offset by a reduction to working capital including a net $1.1 million decrease in accrued expense and other liabilities, a reduction in lease liability payments of $0.9 million, and a decrease in accounts payable trade of $0.1 million. We invested $1.2 million in capital expenditure primarily related to replacing a new roof at our corporate headquarters and other new capital investments due to new store openings and store relocations. The activities above, in addition to the effect of exchange rate changes, resulted in a net increase in cash of $0.2 million

## Controls and procedures

As filed, 1,918 characters.

### Evaluation of Disclosure Controls and Procedures

Our management team, under the supervision and with the participation of our Chief Executive Officer (who serves as our principal executive officer and principal financial officer) , evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the last day of the fiscal period covered by this report, March 31, 2025. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our management, with the participation of our Chief Executive Officer, concluded that, as of March 31, 2025, our disclosure controls and procedures were effective at a reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,652 characters.

Our Risk Factors are discussed fully in Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and incorporated herein by reference. In addition, we have identified the following additional risk factors:

***Recent Changes to U.S. Tariff Rates.*** The manufacturing of our products is primarily outsourced to third parties across multiple countries, most notably China. In March and April 2025, the U.S. increased tariff rates on imported goods from numerous countries, including China. On April 9, the U.S. temporarily delayed implementation of those new tariffs by 90 days, resulting in a 10% tariff for most countries, but these delays excluded products imported from China. At the conclusion of that 90-day period, tariffs on products imported from those countries may again increase significantly. We continue to focus on opportunities to mitigate negative impacts and increase efficiencies and scale within our supply chain. However, significant increases in tariff rates, particularly for products imported mainly from China, would substantially increase our cost for those products. These increases may likely force the Company to increase our prices to customers for those products to maintain profitability, which could in turn lead to a decrease in our sales. Even if we are able to avoid raising the prices of our own products, the macro-economic inflationary impact from tariffs of substantially higher prices on other products sold in this country could also harm our sales by reducing our customers’ ability to make discretionary purchases of items such as our products. The global tariff environment is changing rapidly, and we cannot be assured that we will not be materially negatively impacted by these changes.

***Increased Expenses from Renting Headquarters Facilities and Flagship Store.*** Until January 2025, the Company owned the buildings housing its principal offices, distribution center and flagship retail store in Fort Worth, Texas. Since closing the sale of those buildings in January 2025, the Company has leased its current spaces, and we plan to relocate our facilities to new rented spaces during the second half of 2025. Excluding buildout, furniture, equipment and other costs associated with the move itself, the Company expects to pay initial combined rent for new headquarters and flagship store facilities in excess of $1.5 million per year (increasing annually beginning in 2026). If the Company is unable to generate additional sales and profits to offset these added expenses, this could have a material adverse effect on the Company and its operations.

Filed May 12, 2025.
Source: SEC EDGAR, the filing index for accession 0001140361-25-018382. Last ingested by Listed: Nov 11, 2026, 02:24 ET. No prices; not investment advice.