Polished.com Inc.

Net product sales were $77.8 million versus $143.6 million in the third quarter of 2022. Gross profit was $15.3 million with a 19.7% margin, compared with $21.1 million and a 14.7% margin a year ago. Operating expenses were about $21.3 million versus $32 million last year; net loss was $6.6 million, or $3.14 per diluted share, versus a loss of $5.2 million, or $2.46 per diluted share; adjusted EBITDA was minus $0.8 million. Management lowered full-year net sales outlook to $330 million-$350 million and reiterated low-single-digit adjusted EBITDA margins for 2023.

Rick Bunka described 2023 as a “fix and rebuild year,” saying the company is focused on stabilizing the business and strengthening its foundation. He said the sales decline is tied to macro headwinds such as inflation and higher interest rates, plus continued weakness in luxury/remodeling, but emphasized that the company is acting to improve profitability and cash flow into 2024 and beyond. He also highlighted operational changes, including a warehouse closure, an imminent warehouse relocation, tighter advertising oversight, new financing options for customers, and efforts to improve vendor terms.

Bob Barry said gross profit improved to $15.3 million with a 19.7% margin, up 500 basis points from 14.7% last year, because the company is prioritizing profitability over revenue growth. He pointed to lower operating expenses of about $21.3 million versus $32 million, including personnel costs of $5.9 million, advertising costs of $5.1 million, bank and credit card fees of $2.6 million, and G&A of $6.7 million. He also reported a net loss of $6.6 million ($3.14 per diluted share) and adjusted EBITDA of minus $0.8 million.

The main analyst question focused on whether the 46% sales decline implied market-share loss given that the U.S. core appliances industry was improving. Management said the business had been heavily exposed to original construction, housing, and remodeling demand in the prior year, and that those segments have fallen the most. They acknowledged the market’s shift toward replacement demand and said they are trying to benefit from that trend, but it is currently hurting sales results.