Consolidated gross profit margin for the current quarter was 57.5%, improving slightly from 57.2% for the second quarter of 2006. For the first two quarters, consolidated gross profit margin for the current year was 58.4%, improving over last year's gross profit margin of 56.6%.
Consolidated operating expenses rose $1 million in the current quarter and $1.6 million for the first six months over the same periods a year ago. Personnel costs, advertising and marketing expenses, and legal and professional fees are the primary drivers of the increases. Consolidated operating margins declined for the quarter and year to 5.3% and 9.5%, respectively, compared to 12.7% and 13.4% a year ago.
Ron Morgan, Chief Executive Officer and President, commented, "I don't have anything positive to say about the second quarter except that it's over. We knew our sales were flat and we did a poor job of managing expenses. The costs of store openings account for only a small portion of the increase in expenses.”
“We spent more on advertising and marketing expenses in an attempt to boost sales - probably tried too hard. More significant is the fact that our employee headcount is up and most of the increase is in our central warehouse and factory, not in the store system. That concerns me as our goal is to keep expenses as lean as possible to maximize earnings at the store level."
Chief Financial Officer, Shannon Greene, added, "I echo Ron's comments. Except for a minimal improvement in gross profit margins, I can't find anything positive about our second quarter results. I'm not too concerned about the advertising expenses. Those efforts will pay dividends down the road."
"Besides our personnel costs, our legal and professional expenses are up in the 2nd quarter due to the negotiations on our recent real estate purchase, as well as some trademark and copyright enforcement actions we've taken. Regardless, the bottom line is we performed miserably in the second quarter."
Tandy Leather Factory Inc
marketing@alchempro.com
