Good day, ladies and gentlemen and welcome to the Q3 2018 Tandy Leather Factory Inc. Earnings Conference Call. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Tina Castillo. Ms. Castillo, you may begin.

Thanks, Meryl. Good morning and welcome to Tandy Leather’s third quarter 2018 earnings conference call. Joining me today is Janet Carr, our new CEO, who I am pleased to introduce to you. This morning, I will start with our third quarter 2018 results and then speak briefly about our outlook for Q4 and full year 2018 and then I will turn the call over to Janet, who will discuss some of our initial observations and preliminary strategy thoughts. We will then provide some time to take your questions. Before we get started, our earnings release and related SEC filings are available on our Investor Relations section of our website and a replay of this webcast will be available later today. Please keep in mind that there may be forward-looking statements on this call today. Statements would include words like expect, believe, anticipate, plan, intend or words with similar meaning and are based on our beliefs and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from our forward-looking statements about those results. These risks are detailed in our various filings with the SEC such as the most recent Form 10-K and 10-Q as well as in news releases and other communications. We do not undertake to update or revise any forward-looking statements which speak only as of the time they are made. As you may have seen in our earnings release, looking at third quarter results, while sales and gross profit improved, our operating expenses grew faster. As a result, our operating income is not where we want it to be. Drilling down, certainly there were some encouraging factors this quarter over last year’s third quarter. North America same-store sales rose 2.8%. Gross margin dollars were up 1.8%, and our average ticket…

Thanks, Tina, and hello everyone. First, let me tell you that I am honored and delighted to join this revered brand and talented team. It’s been an exciting first 5 weeks. I have immersed myself in the business with the team, visited stores, met and talked with key vendors and spent a lot of time in spirited two-way communication with a broad cross-section of employees. That said it’s only been 5 weeks. So I’d like to share some of my initial observations and the emerging vision for our future. It will feel like I am speaking in generality, but I want to give you a sense of where I see the opportunities without getting ahead of the full robust business and financial analysis that will accompany any major decisions. I don’t need to tell you that this is an amazing brand. With the 100-year anniversary coming up next year, we are the definition of leather crafting with both consumers and the trade, whether it’s Al Stohlman, Jim Linnell or Parker Lichfield, many of the best leather crafters in the country have grown up in Tandy or otherwise had long and proud association with the brand. We need to strengthen these long relationships and build new ones to reestablish our credentials and rebuild our expertise in the art of quality leather crafting. This expertise in leather crafting needs to be on full display in our stores. You all know the drumbeat of what’s happening in retail today. Winners are those who create an emotional, engaging experience who give consumers a reason to get off their couch and into stores and we are not competing with other retailers who sell stuff. We are competing with movies, restaurants, yoga, live music, in a nutshell, entertainment. If you have ever seen people working on…

Thank you. [Operator Instructions] Our first question comes from George Kelley, who is a Private Investor. Your line is now open.

Hi, everyone. Hi, Janet. Congrats on the new role.

Hi, George, thank you. Nice to meet you.

You as well. So, just a couple of questions for me. First, a lot of things that you went through for sort of key priorities and where you see the biggest opportunities are. I guess if you could just go to 10,000 feet and start on the retail side and how big – have you done studies since joining or before joining, what is the customer market, how big is leather crafting? What kind of growth do you see? How big is what you are going after, I guess is the question and how healthy is the overall market?

We are actually in the process of doing some consumer research right now to try to understand a bit about how big is the potential market. It’s hard, because it is a fairly niche market and it’s difficult to quantify. In addition, it’s really diverse, lots and lots of people doing a lot of very different things with leather. So, it’s not a monolith by any stretch. That said there are these broader trends out there, as I mentioned, this maker trend still continuing to grow and strong. So I feel confident that the retail consumer is definitely out there. And I think that the thinking is that this has been a sort of a pastime, a passion really for people from the beginning of time practically. And I think that it’s something that where we can actually help to grow the market by really engaging consumers in this really emotional retail experience.

Okay, okay. And then on the other side of the business, the business customers, what’s happened in the last couple of years that has caused that business to be up and down, I guess mostly down for the last couple of years? Is it you are less competitive in pricing or have there been – are there just fewer business customers in general, fewer people making this for their career?

It’s a good question. It’s part of this work that we are doing. We are really trying to get a sense of who that business customer is, how big that customer is, where they have gone. We have had some anecdotes around things like price and the offering, what we are carrying for them and I think that we can get a lot more tailored and a lot more specific to what their needs are. But again, we are taking a little more of a systematic approach to really surveying them and understanding what their needs are and then we will be working on how do we go after that.

Okay, okay. And then just more specific to the third quarter, you did report I believe same-store sales were positive close to 3% and there has been a lot of initiatives recently around having new higher-priced items and Sunday store hours. How have those – and other initiatives is there anything you can flag for driving that 3% growth in the quarter?

Absolutely, George and you nailed it. It is those new small machines. We have introduced three of them so far and they have been very well received. We sold just $200,000 this quarter alone. We do think that the Sunday hours are helping. When we first started our Sunday hours, it was $80,000 in sales and now that’s grown to about $125,000 on Sundays and we are excited about the Sundays as we approach the holiday season. So, there is probably a few initiatives that we have in terms of trying to grow our average ticket and it’s just in our assortment and really working to win back some of those business customers with more targeted offerings to them. So lots of good things happening to help us lift those same-store sales and yes, we are excited about fourth quarter.

Okay. And then the last question for me, just back to your – places of where you are most focused, Janet, should we expect any kind of timeline? Will there be a plan that you articulate any kind of these business model changes and other changes that you are considering? Maybe by the next quarter or a couple of quarters from now, do you expect to have a more formal here is what we are going to do, here is how much it’s going to – here is the financial goals we are shooting for any of that kind of stuff?

Yes, absolutely. In our next call and this may not be 100% fully fleshed out, but we will have substantial pieces of this to talk to you about in our next call. And what we think the financial impacts will be more importantly, what our targets are for any changes, what do we want to measure to know if it’s successful, if it’s not successful? So definitely, we will have more to talk about and we are really working hard on both understanding the lay of the land and starting to formulate how do we start to change to address that?

Okay, great. So more later. Thank you.

Thank you.

Thanks, George.

And I am not showing any further questions at this time. I would now like to turn the call back over to Janet Carr for any further remarks.

Well, thank you again for your time and participation. We are thrilled as I have said before to be embarking on this adventure. The team is very excited. We are really looking forward. And as I said in response to George’s question, next time we all are together, we will have a lot more to share. Have a great holiday season and we will see you next year.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program and you may all disconnect. Everyone have a wonderful day.