Lifetime Brands, ticker symbol LCUT. It is my pleasure to introduce the CEO of the company, Rob Kay, who is with us this morning. We will be doing this as a fireside chat. We will have a total of 30 minutes. I will kick it off with questions, and we'll take questions from the audience as time permits at the end. If you do have some questions, you can type those into the Q&A box at the bottom of your Zoom screen, and I'll incorporate the best I can in this fireside chat format. Rob, again, welcome to the Sidoti Conference. It's great to have you again being part of our conference here.
I guess, you know, first, I think it would be helpful, especially for those new to the Lifetime Brands story, to do a general or high-level overview of the company, talk about your main product segments and your top sales channels and customers.
Sure, Anthony. Again, thank you for hosting us. I'm glad to be here. Lifetime Brands is a consumer durables business. We make stuff used in the home, used every day. Most of our stuff, average ticket is $10 and under. If you go into your kitchen, chances are there's going to be some of our products. Our largest category, and we look at the, while we have many brands and we're mostly a branded business, we look at the business by category. Our largest category is kitchen tools, and our largest brand goes across several categories as Farberware. For instance, if you go into a Walmart and you want a branded consumer kitchen tool, it'll be ours and many other places because we're sold pretty much wherever the consumer shops. Another big category for us is tabletop, and that would be dinnerware, serveware, glassware.
Mikasa is our leading brand in that space. The company started as a cutlery or kitchen knife company. Actually, our ticker symbol LCUT comes from there. Lifetime Cutlery started in 1945, went public in 1991, and then grew, you know, by getting into all these other categories. We make everything from the Rabbit corkscrew, which is fairly famous. Taylor, which is by far the number one player in both kitchen and bathroom measurement, both for consumer and retail and lifestyle. Home decor, beverage containers or water bottles, S'well, a very well-known brand that actually started the beverage category as one of our brands. So many brands we do use. Sometimes other people's brands.
Our biggest license arrangement, which is a 20-year partnership with Whirlpool, is for KitchenAid, where we've developed a line of kitchen tools, sinkware, knives, which gives us, you know, from a good, better, best, very much of a best offering. Phenomenal brand that is driving a lot of growth for us. We do things like we were never in the Dollar Channel. We used that this past year. We used a partnership licensing Dolly Parton's name to get into four categories and launch newness and get into the Dollar Channel. We launched in all 22,000 stores in Dollar General. In just the first year alone, we went from zero because it was new to $7 million at wholesale, $14 million at retail of incremental sales.
Gotcha. You know, last week you reported better than expected results for the fourth quarter. For those that may have missed the results, maybe if you could just provide us a quick recap of that and kind of maybe just go over what you saw from the different sales channels and product categories in 4Q.
Sure. It was a strong quarter. You know, we've done a lot from a product mix perspective and what we're offering also to focus on margin. You know, that continues to benefit us. In general, we saw 130 basis points increase in margin in our core business, in our international business, which is a turnaround. We were selling stuff at low margin, and we've replaced that with a much better product offering. Our margin for the quarter was up an unusual 1,340 basis points to a level that it's now more sustainable and profitable. We saw growth in the international channel, but we also saw growth in the U.S. business, particularly e-commerce. Our e-commerce sales or revenues as a percentage of total revenues was 24% in the quarter.
We saw an interesting trend where people expected a strong holiday season in the fourth quarter, but it was not that strong coming out of the box in October and even November. December was incredibly strong, and a lot of that was, it seems, a lot of consumers waited, shopped online, and, you know, that helped drive the growth. We also saw some nice growth in the club channel, so that really fueled our growth in the fourth quarter, which was around 6% year- over- year. Again, a little stronger international is a little over 7, about 7.2%.
I know you touched on Dolly Parton a little bit. I know you've done some other partnerships and collaborations with Drew Barrymore and some others. Maybe just maybe talk about some of the other partnerships that you've done and whether or not you guys would be open to doing another type of arrangement with perhaps another celebrity or some social media influencer. How do you guys think about that? Just wondering if you could touch on that.
Sure, Anthony. Now, you know, we spend most of our time on building our own brands, and that is the core of what we do and the core of what we sell. But besides KitchenAid, you know, which again is a 20-year partnership and is integral to our business, we're always looking for opportunities that are a plus one basis. You know, if we looked at, we always like to say we sell wherever the consumer shops, and that's true. What wasn't completely true is we weren't selling in the Dollar Channel. We just couldn't figure out the correct approach. A little over a year ago, we were able to hook up with Dolly Parton's people, and we thought it was a great opportunity to bring her name into our categories, and Dollar General agreed.
While it wasn't a contractual relationship, you know, we launched that product line with Dollar General, and they do have 22,000 stores in this country. It's a big opportunity. Did extremely well. Dollar General said the greatest single biggest launch that they had ever experienced. We were happy. They were happy. We're getting Dolly Parton into now new channels. We always look for opportunities that give us a plus one opportunity, plus one opportunity to take incremental shelf space and be able to sell more product.
That makes sense. If we just go back to the full year 2024 results, obviously you talked about Dolly Parton and some others. Maybe just can you go over some of the additional meaningful products that you view as growth drivers? How do you guys think about that?
Yeah. You know, we're always looking to bring newness both to our retail customers and our consumers. If we look at innovation, a lot of what we do, we do level four, what we call disruptive innovation, and we bring things to the marketplace. We do a lot of what we call level one innovation, which is, you know, just refreshing or, you know, bringing what we call lipstick on a pig and you're sort of making things a little better or you're looking what's on trend. We follow a lot of trend. If you look at right now in knives, you know, we're not inventing a new knife, but we've got a whole new knife set with white handles with trim because that's very popular right now. We do that. There's a lot in between.
One thing that we noticed a little over a year ago in our product development cycle is that charcuterie was really gaining momentum in this country and actually globally. We created a new charcuterie board, which we called Build-A-Board, and it allows with a dome for it to be portable so you can make your charcuterie, bring it to the dinner party. We launched that across many, many channels, except a couple of our, you know, the mass guys did not pick it up in 2024, a big, big part of the marketplace, but we sold $12 million. So 24 at retail. We would have sold a lot more, but we kept on running out of stock. It is a way of staying on trend.
You know, that drove a lot of incremental growth for us and big market share gains in cutlery where we already have a number one position, but grew a lot from that number one position with this new product introduction.
All right. This sounds definitely like an exciting opportunity for you. You know, with the ongoing macroeconomic, geopolitical, and tariff uncertainty, you know, how do you think that Lifetime Brands is positioned with its price points, its products, and potential market share gains?
Yeah. I mean, look, to begin with, there's no visibility. If you look at in different environments, inflationary environments, recessionary environments, and you look historically, this company has always performed well, always made money, always produced cash flow. I like to use the example of our largest SKU that we sell, which is a can opener. We have a very, very large market position in that space. I, you know, like to say whether, you know, someone's buying that for $6 or it's tariffed and they're paying $6.60 for it, or inflation, they're paying, you know, $6.60 or $7 or bad times. You know, people don't go into their tool chest and take out a hammer and screwdriver. They go buy one of our can openers. You know, so there is resiliency to our products. You know, we sell good, better, best.
You know, so we're selling, you know, at different price points to be able to capture the market. It's not, you know, a luxury item. It is affordable. And for that matter, in tough times, people tend to cook more at home, and they need our products to do so. I think we're well positioned. If you look at the tariff environment, we lived through this already, you know, several years ago in the first trade wars. To this day, those products still maintain a 25% tariff. You know, we noticed or came to the conclusion about two years ago that the West and China have decoupled, you know, from an economic perspective. We started shifting production out of China, which is where, you know, traditionally 90% of our production came from. Why?
Because it's just much more efficient and economical to do there if you just looked at this without any macro or other inputs. We have been shifting to many geographies. We will have a lot of our production out of China within 2025. And, you know, we are also in the process, as is the whole market, passing through price increases just to reality that people need to do to mitigate the tariffs. We think we are prudently positioned in what's the reality of the trade war, which seems to change every day.
Right, right. It continues to be a fluid environment for sure. Now, are you also talking with your suppliers, asking them to absorb some of these cost increases as it relates to the tariffs?
We are. You know, there's a lot of press in the media that, you know, Walmart has gotten pushback from their direct purchasing of some private label goods, you know, from Chinese manufacturers. The reason for that is just pure math. There's not much there, right? Which is why you really have to shift geographies and why price increases, you know, are a reality of which, you know, all the big retailers, the public ones have said, "Hey, price increases are coming," and you'll see that. It's not, you're not going to absorb. If you look at China and, you know, we're paying a 25% tariff. Now you're paying 45% because they put the 10 on 10 or they add another 10. That can't be absorbed through cost reductions. You can get a little, but the majority is going to come from the other strategies that I mentioned.
Got it. Just shifting gears. When I look at your business, obviously the vast majority of your business is based in the US, though last year about 8% of your annual sales came from your international segment, which has admittedly struggled with profitability. Last week when you announced your fourth quarter results, you also announced Project Concord. Can you please talk about what's been happening in your international segment and what are your strategies behind Project Concord to improve the profitability of the international segment?
Look, the international segment has struggled for quite some time. When I took over the business, you know, we looked at that and restructured the business dramatically. Most of it, about 90%, is in the U.K. One of the things we need to do first is, as we delved into the details of that business, we were selling money at negative margin. We had to restructure the product offering. We feel comfortable that we've done that. That is actually starting to drive some of the growth you've seen in the last two quarters in that business and a dramatic improvement in gross margin. The bulk of that business, it is losing money, lost, you know, over $9 million in 2024. We need to eliminate that.
A lot of what we have done is going to drive a big improvement in profitability in 2025, but not to break even. The pace is just too slow. That is why we launched Project Concord, which is, as opposed to running it as a complete standalone, which traditionally it was, it will be much more integrated into the global business. Therefore, we can be much more efficient and, you know, remove cost. That will drive us as well as several other things, including reduced inventory of excess inventory that is there. We will monetize that, you know, to improve the cash flow. That we believe will get us to a break-even level in the business run rate by the end of the year because there is going to be a lot of cost to get there and it is going to take some time.
The purpose of Project Concord is we're not comfortable in just improving that business this year. We need to get it to break even and then look at our strategic options to drive value from there.
Can you also talk about what you've seen as far as moving more towards the national accounts in Europe? I know Carrefour is a big retailer based in France. You've had some success there, and some others. I think maybe talk about some of the product lines. I think you have a new line with Jamie Oliver. Maybe can you just speak to that as far as how that's going and how that will help the international segment?
Sure. Two core strategies that you bring up in terms of how we've restructured the business, Anthony. One is that the traditional sales channels that that business was going was the independent, what you see in this country, the independent gourmet or over like in the U.K., it's called, you know, cook and dine shops. Great businesses, wonderful shops, but they're in tremendous decline, both here and particularly over in Europe. We needed to shift into, you know, where people were shopping, and that would be, you know, grocery and large national retailers. If you look at, you know, Dunelm is a great retailer that's doing well in the U.K. that, you know, we're now, you know, building a good business there. Other people like Tesco and Next, and you mentioned a few names.
We shifted from a distributor model to a direct model because we had critical mass and we are selling some large chains like in France, Carrefour and Leclerc, Edeka in Germany, Imerco in Denmark, which I think is 184 stores, about 60% of the market. It is driving a lot of growth. It is one of the things that you have seen in the last six months, and you will see it more in 2025. These are healthier channels and all new. It is all incremental business, and it is going to, you know, drive a lot of what we are doing. The go-to-direct model and selling to these channels is going to improve our business. The other thing is, you know, we needed volume. We look at, you know, where as we, you know, build the portfolio, you know, good product lines that we can offer.
KitchenAid has driven a lot of growth as we extended that relationship internationally and will continue in the international markets. In dinnerware, we hooked up with Jamie Oliver, who, interesting enough, is very popular in the Commonwealth countries. If you look at the book authors in the U.K., the number two selling author is Jamie Oliver, not the number two selling cookbook author, you know, just behind J.K. Rowling. Very, very popular. We launched a new Jamie Oliver line. There are two levels, you know, a better and a best. So far the sell-through has been tremendous. You know, we hope that's a good sign of things to come. It gives us another great offering of a brand that's very popular in a lot of the markets we go after in Australia, which is a big growth opportunity for us, which we've been growing nicely.
Again, we launched with the largest retailer in Australia, Myer. The initial sell and sold through, I believe it was six weeks. I may be incorrect. KitchenAid, Myer, S'well is doing very well internationally. We are trying to get brands that are playing very well and build our portfolio with those brands.
Gotcha. Okay. That makes a lot of sense. Looking at your professional food service program, let's talk about that, you know, how that started and like where was that in 2024? What are your expectations for 2025? Maybe also touch on also the margin profile of that business as well. We'd love to hear that.
Sure. Starting with the margin profile, if you look at the gross margin of that business, it is absolutely phenomenal, but it's a multi-step distribution model. We may sell Chili's or Brinker's, but then they'll say, "Hey, go buy that through a large distributor like Edward Don." There are a lot of program costs to do that. Once you're specked on, you're selling that same product for five years, so it becomes an annuity. Very, very different from the consumer side of the business, but the gross margin is really, really good, and the net margin is also strong. The net margin is in line with the higher points of the margin that we sell in retail. It's a good business.
If you looked at, you know, when we combined the company that I was running, Filament Brands, into Lifetime, you know, back in the middle of 2018, Filament had a long relationship through Taylor in what's called the back of the house, stuff used in the kitchen. You know, we knew food service very well. It is a great market. As a matter of fact, if you look at over the long term, it grows at a faster pace, you know, 6% or so, than the GDP and then the core retail business. Great market, but Lifetime had never been in that market because they did not necessarily understand, but how do all the products and the price points for what's called the front of the house, serveware, dinnerware, glassware, we are a big player. We have brands that matter. We can hit all different price points.
We saw an opportunity to launch a much bigger presence in that area where a bigger player that had the distribution capabilities that understood food service because we do it from the back of the house could be a meaningful player over the long term in what is roughly a $2.3 billion addressable market where there's a limited number of large players. Flatware, we're the largest player in this country on the consumer side. You just don't take your flatware and take a knife and a fork and sell that into food service because they're really trashing it, right? They're cleaning it all the time. You make thicker millimeter, right? A thicker product. We redesigned it and we launched it. We launched it just when COVID hit, you know, perfect timing. We continued to invest in the business. Losing money because we're building infrastructure.
Now we've gotten credibility. I think we've established, I know we've established ourselves as a player. We'll see big growth in that business. In 2024, we sold around $25 million in food service, most of that being in the back of the house. We'll see nice growth, particularly in front of the house, four-fold growth in what we call Mikasa Hospitality, which is our front of the house offering in 2025. A big piece of that growth is also going to be driven by a partnership we announced last year with Luigi Bormioli, which is a phenomenal glass manufacturer, which we're distributing their products now in North America. That already has established distribution by taking that over. That's going to seamlessly add a lot of growth to our food service portfolio.
Gotcha. Okay. That makes a lot of sense. Looking back a few weeks ago, you guys announced a new distribution center in Maryland. Can you talk about how this will help with the expected growth of your business and managing your distribution costs?
Yep. The driving factor of moving to Maryland from Southern New Jersey is really cost containment. You know, we'll avoid tens of million dollars of cost increase as opposed to just driving down cost tens of million dollars. You know, the benefit is really staying cost neutral. We also specced a facility that is 50% greater than our New Jersey facility. That 50% incremental space, because it's a build to suit, our builder slash landlord has agreed to 100% of that incremental cost we will not be charged for for the first three years. That gives us the ability to grow into that space. We can use it day one. You know, obviously we're paying nothing for a big part of our distribution center. That'll be a benefit. We'll get some automation, some efficiencies, and we'll utilize that space.
We have plans to, which will improve efficiencies. Maryland, we work with on a very cooperative basis. They are giving us $13 million of subsidies to offset our costs, which would include $10 million of capital that we will be spending for this facility over 2025 and 2026, roughly evenly between those two years.
Gotcha. Got it. Okay. Just wanted to incorporate one quick question that we did get from the audience. As you look to do all these sourcing changes in terms of your product sourcing, moving away from China, what do you think as far as your ability to maintain or expand gross margins this year and next?
Yeah. Now it's a great question. You know, we're focused on execution risk, and we have substantial systems, particularly on the quality side, that are proprietary, you know, that have managed these moves. And you know, that's really our focus, you know, in 2025 is, you know, continuity, which we think we're well positioned and positioned extremely favorably versus most of our competition. You know, really also with the price increases that are happening in the marketplace, our focus is to maintain and then grow through product and market share gain, our gross margin dollars. So we're not looking and we're not focused on increasing our gross margin percent in this environment as we've been dramatically increasing through the changes that we've discussed over the last couple of years.
Gotcha. All right. Shifting gears now to acquisitions. You have done some acquisitions in the past. You know, how do you guys think about that in the current environment of, you know, what types of companies would you be looking for to acquire? To me, it seems like maybe in the commercial food service business may make sense. Also, can you just talk about valuation multiples as to what you are seeing nowadays?
We've seen multiples in general come down across the different types of end markets that you're looking at. Food service is definitely somewhere where we want to be aggressive. It does carry, you know, slightly higher multiples. And you know, I talked about the end markets being slightly higher than GDP. It makes sense that you're paying a higher multiple for it. You know, the math all works out. You know, we're always looking at fold-in acquisitions that are highly accretive, you know, from day one. Our strategy is core to be looking for businesses that give us either margin expansion or growth opportunities on the top line and get us into new categories. We've been actively looking in the outdoor space in pet, you know, which we're not players in. We just sort of dabble a little bit.
We figure we think we would do much better with a brand that's established in that place and people that are active in that space more than we are. That's why an acquisition would be good. In food service, it's really speed to market and, you know, to be able to grow faster and, you know, get a good return with that investment because we've built this infrastructure. We've been funding it, you know, for the past couple of years. We're extremely well positioned and we'll get there, but we'll get there faster if we include acquisitions in our growth.
Gotcha. So you know, historically, your business has generated very healthy free cash flows. Obviously, you're going to be spending a little bit more than usual on CapEx this year and next because of the new distribution center. After you get past that, you know, CapEx is still going to be fairly minimal. So you know, fairly asset-like model, pretty good free cash flow. So you know, can you just talk about what your top capital allocations priorities are?
Sure, Anthony. So look, it's in our mind, very, very strong free cash flow model, right? As you point out, it's asset-like. You know, we have occasionally, like we're doing in Hagerstown, Maryland, you know, some uses of capital short-term, you know, still will generate cash. It is a very strong, you know, which is why, you know, we always delever in all environments. You know, we continue to delever, you know, on an absolute basis every year and all the time. We also, though, pay a dividend. You know, we have no intention of changing that and, you know, we'll maintain our dividend. So we're using, you know, a bit of cash for that. We do use our balance sheet for working capital on a competitive basis from time to time, you know.
When, you know, we picked up nice market share, you know, a few years ago in the global supply chain crisis, because we could use our balance sheet, you know, to build up inventory. A lot of our competition can't, you know, for that matter, you know, we'll do something similar as we ship production against people that don't have that capability. We do use it as an offensive weapon. Obviously, in, you know, bad times, you know, we use it as a defensive weapon because it's very strong. You know, we have a tremendous amount of liquidity while we're very disciplined. You know, we do see M&A as a good value creation vehicle for us. You know, we'll use money for that.
You know, obviously, you know, we will, you know, look to quickly delever for any lever that we would take, leverage that we would take on in conjunction with an acquisition.
Got it. Got it. All right. As we look to, you know, wrap up this presentation or this fireside chat, just wondering if you had any, you know, closing remarks or anything else that we may have missed that you want to highlight to investors as they look at the Lifetime Brands story?
Anthony, look, we appreciate, you know, your coverage and interest. I think for us, you know, we are really focused on trying to get our story out there. We view that our story is just not necessarily understood and not necessarily spread out. You know, we appreciate the opportunity to be here so that people can understand the story. As we were just talking about, you know, it's a very, very strong cash flow company that will, in good times and bads, you know, generate good, good cash flow, which we think you talk about food service. We talk about just fixing international, add, you know, $9 million plus to the cash flow line and EBITDA line. There is a lot of avenues for growth beyond the core business. We have, you know, continued to innovate and gain market share. We think it's a good story.
More importantly, we want to try to get it out there and let people evaluate for themselves and appreciate this opportunity.
All right. Yeah, absolutely. You know, great to hear an update here from you and hope you have a productive day of meetings. I know you have a busy day at our conference. Thank you very much for joining us and sharing your thoughts. Thank you, everyone also listening and participating as well. With that, we'll wrap it up and have a great day.
Thank you.
All right. Thank you.