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Hamilton Beach Brands CompanyYEAR ENDED DECEMBER 31, (in thousands, except per share data) 2021 2020 2019 NET SALES $862,924 $769,169 $734,902 ADJUSTED EBITDA(1) NET INCOME (LOSS) ADJUSTED NET INCOME (2) DILUTED INCOME (LOSS) PER COMMON SHARE ADJUSTED DILUTED INCOME PER COMMON SHARE (2) 95,117 20,801 36,795 $0.94 $1.67 77,326 (3,007) 20,203 $(0.14) 64,064 (44,415) 9,179 $(2.16) $0.95 $0.44 AREAS WHICH CONTINUE TO DRIVE GROWTH HAVE BEEN OUR ABILITY TO ADD NEW PRODUCTS, GROW INTO ADJACENT CATEGORIES, AND EXPAND OUR TRUSTED, CONSUMER FAVORED BRANDS. / 02 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT Adjusted EBITDA of $95.1 Asia Pacific presence grew 47.5% 2021 SHAREHOLDER LETTER Dear Fellow Shareholders: 2021 was a banner year at Lifetime Brands. We demonstrated our remarkable resiliency and ability to effectively manage through a number of macroeconomic challenges. Through it all, we delivered great products for our customers, more opportunities for our employees and record results for our shareholders. Our ability to execute enabled us to generate adjusted EBITDA¹ of $95.1 million, which represents an increase of 23% compared to the prior year. In the face of supply chain disruptions and inflation pressures, we outperformed on net sales and EBITDA compared to 2020, and our full-year financial performance achieved record levels. At the same time, we maintained our commitment to invest in our long-term success as evidenced by several publicly disclosed initiatives. Our impressive results reflect the progress we have made in implementing our transformative strategy – Lifetime 2.0, which we completed in early 2021. Our next five-year strategy – Lifetime 3.0 – seeks to continue executing on our many growth initiatives, while managing costs prudently, as we extend and build upon our leading positions in the marketplace and capitalize on the substantial capacity we have created on our balance sheet to pursue new value added growth opportunities. A RECORD YEAR FOR LIFETIME Throughout 2021, we saw continued strong demand across the majority of our product categories, resulting in robust earnings and cash generation and continued market share gains. The launch of Drew Barrymore’s Beautiful housewares line at Walmart has been received enthusiastically, and we believe the line will continue to grow in volume and expand into additional categories in the years ahead. We also re-launched the Year and Day e-commerce brand we acquired in 2020, and are pleased with the response to its modern offering of dinnerware, flatware and glassware that directly targets the tastes and sensibilities of millennial consumers. Another milestone included our launch of KitchenAid cutlery, which expanded our product offerings for the well-loved KitchenAid brand and contributed to our success in cutlery, which reached an all-time high in net sales in 2021. Other brands, such as Taylor, Rabbit and PlanetBox, also had a banner year in 2021. Since the transformation that we implemented in 2020, we have seen a dramatic improvement in our results. We continue to expand our Asia Pacific presence, which grew 47.5% and achieved full-year positive contribution margin in 2021. Major factors contributing to such success were our sales in Australia and New Zealand, the progress with our e-commerce business in China, as well as the sustained momentum from our successful launch in Tmall. We are taking our experience from the Tmall launch and applying it as we transition even more categories and brands to the Tmall platform. All of these initiatives, combined with our transformed operational footprint internationally, have resulted in Lifetime being well-positioned for the future. We continued to grow our e-commerce sales even as brick and mortar channels came back relatively stronger in 2021 compared to 2020 as COVID-related restrictions eased. Driven by strategic investments in process and people, our e-commerce net sales in total have grown by more than 60% since the start of the pandemic. Over the past year, we also accomplished our goal of transitioning all of our direct-to-consumer websites to the Shopify platform, which will 1Earnings before interest, tax, depreciation and amortization and other non-cash adjustments (Adjusted EBITDA) is a non-GAAP financial measure. For a reconciliation of this non-GAAP financial measure to its most directly comparable measure, net income, see page 42 of the 10-K. One of our greatest accomplishments in 2021 was the continued growth and increased profitability of our international business over the past year “ “ / 03 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT provide a uniform back end for our direct-to-consumer business and create significant operational efficiencies across the organization. RESPONDING TO MACROECONOMIC CHALLENGES Of course, 2021 was also a year of significant macroeconomic headwinds, which were felt across many industries. Lifetime has pursued a proactive approach to managing these headwinds. We took decisive action to effectively mitigate supply chain and inflationary pressures, but we were not immune to the disruptions, and Lifetime felt the impact of increased labor, shipping and material costs, as well as the availability of adequate shipping containers, vessels and trucks throughout the year. Our mitigation efforts were focused on driving down operating costs, increasing prices and investing in inventory levels, while maximizing the availability of our products, leveraging our scale, our strong balance sheet and our market share as competitive advantages. On the labor side, our continuous improvement model yielded impressive results in driving labor efficiencies, as evidenced by our warehouse expense remaining flat as a percentage of net sales, notwithstanding the meaningful inflationary cost pressures. Additionally this year, we optimized our distribution center operations by transitioning from the use of predominantly temporary labor to more permanent positions, which has helped us retain talent and keep our operations fully staffed. These mitigating actions have continued to pay off, and we were able to effectively manage for macro headwinds and the multiple obstacles they created in 2021. We expect these pressures to persist in 2022 and anticipate the normalization of supply chain costs in 2023. As we have demonstrated since the beginning of the pandemic, we have been flexible and agile in managing through these challenges, and we remain confident in our ability to continue to deliver industry leading results in the current environment. WELL POSITIONED FOR CONTINUED GROWTH I would like to emphasize that despite all the challenges we faced and our focus on reducing operating costs, 2021 was also a year of significant investment in growth initiatives. The impressive performance of our brands and the strength of our balance sheet enabled us to continue to drive our initiatives forward without missing a beat, and each of our initiatives are progressing at a healthy pace. Our commercial food service business, Mikasa Hospitality, continues to ramp up well. We have staffed the business with world-class professionals, and we saw the results in 2021 as we began to win several significant national accounts. I am incredibly excited about the potential of Mikasa Hospitality for the front-of-house food service market, and I am more confident than ever that this business represents a significant opportunity for Lifetime over the next few years. We expect this business unit to attain profitability in 2022. As mentioned above, our international expansion is progressing very well. We opened a new distribution center in the Netherlands in 2022, which will enhance our ability to ship across Europe and drive greater profitability. Our Asia Pacific markets are poised for continued success, building on the new initiatives we have put in place over the last couple of years. We are proud of what we have accomplished in the turnaround of our international operations and look forward to future contributions from this business segment. In line with our strategic plan, we also expanded into adjacent categories, including outdoor, pet, and storage and organization, and will continue to pursue such opportunities. While we are still in the early stages of establishing these categories, the results in 2021 were promising. Our product development engine is working hard to build out these categories, and we expect incremental net sales contributions beginning in 2022. As you can see, it has been quite an eventful year, and I would like to thank all of our shareholders for your ongoing support of Lifetime Brands. We are proud of our accomplishments in 2021 and I am proud of how our employees continue to deliver excellent results and to exceed expectations. We are even more excited about the opportunities ahead to create significant value for our shareholders. I look forward to keeping you updated on our progress. Robert B. Kay Chief Executive Officer / 04 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT LIFETIME BRANDS IS A LEADING GLOBAL DESIGNER, DEVELOPER, AND MARKETER OF HOME CONSUMER PRODUCTS / 05 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT Lifetime targets its products and brands to achieve #1 market positions, and holds such positions in Kitchen Tools & Gadgets*, Cutlery*, Barware Accessories, and Bath Scales*; and the #2 position across Tabletop categories. This success comes, in part, from an award-winning in-house product design and development team, a strong sales and marketing team, and best-in-class execution and operational capabilities. Additionally, our 2 million-plus square feet of warehouse and manufacturing space across the United States, Europe, China, and Puerto Rico, in combination with our vast distribution network, all well established pre-pandemic, set the company in a strong position to weather potential pitfalls in any economic climate. This capability has allowed the company to continue to show solid performance during the global supply chain crisis that began in 2021 and continues today. Our diversified revenue sources and stable end markets result in significant cash flow generation, which continues to provide the company significant strategic benefits and creates value for our shareholders. Finally, our ability to reach consumers in every sector, along with our solid infrastructure, allow us to efficiently manage our business and grow our market shares in our respective product categories. For Lifetime Brands, 2021 was a year of steady investment in growth, despite the challenging macroeconomic headwinds we faced. Thanks to the continuing success of our brands, our strong balance sheet, and excellent financial performance, we were able to support our long-term growth plans while delivering profitable growth. This resulted in another record year of revenues and growth for Lifetime as we reached $862.9 million in net sales and increased our Adjusted EBITDA to $95.1 million, which reflects 23% growth over the prior year. *The NPD Group / Retail Tracking Service, US dollar sales, 12 months ending December 2021 LIFETIME BRANDS IS A LEADING GLOBAL DESIGNER, DEVELOPER, AND MARKETER OF HOME CONSUMER PRODUCTS THE COMPANY IS COMPRISED OF MOSTLY OWNED/CONTROLLED BRANDS AND A MINORITY OF LICENSED AND PRIVATE LABEL CONSUMER BRANDS WITH TARGETED BRAND EQUITY. OUR CUSTOMER BASE INCLUDES MOST RETAILERS THAT CARRY HOUSEWARES PRODUCTS. / 06 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT “ Ecommerce continues to grow for Lifetime even as online sales in general have declined for other categories over the past year “ STRENGTH IN A CHALLENGING ENVIRONMENT The Lifetime 2.0 strategy that the company initiated in 2018 has proven to be quite successful in positioning the company for growth and to effectively manage through various macroeconomic headwinds that have existed since 2019. Over these past several years, Lifetime successfully navigated through a trade war and endured a global pandemic that paralyzed society and the economy, which subsequently created a global supply chain crisis impacting both the availability and price of goods. At the start of 2021, we faced substantial uncertainty regarding numerous aspects of the economy. Despite these significant headwinds, we’ve experienced impressive performance across divisions, with core brands, including KitchenAid and Farberware, doubling in sales and volume over the past five years. Other successes include our cutlery line of business, which hit an all-time revenue high in 2021. Other product lines such as Taylor, Rabbit, and PlanetBox had their most successful year ever in 2021. Areas which continue to drive growth have been our ability to add new products, grow into adjacent categories, and expand our trusted, consumer-favored brands. Some examples include KitchenAid cutlery, which was a new brand we launched in 2021 to further our market position in kitchen knives and cutting boards. We also strengthened our bakeware business with exciting new offerings from Chicago Metallic and a new line of KitchenAid bakeware products. During this past year, we launched Drew Barrymore’s Beautiful housewares line at Walmart. We are enthusiastic about its reception and believe the line will continue to grow in volume and expand into additional categories. We also re-launched the Year and Day website we acquired in 2021, and are pleased with the response of its modern offering of dishware, flatware, and glassware that directly targets the tastes and sensibilities of younger consumers. Other initiatives in 2021 include new product launches in the barbecue category, most notably under our Farberware brand, and in storage and organization, with an innovative collection of storage containers through our Copco brand. We also entered into new categories such as pet products, which contributed to our strong performance. We are still in the early stages of establishing these categories, but the initial launches proved successful, and we are positioned to see more meaningful revenue contributions starting in 2022. / 07 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT At-home and hybrid working has sustained the robust demand for products across our categories in most channels, with a strong lift in ecommerce sales. Our continued investment in ecommerce across pure play, retailer/omni channel, and company-owned sites continues to show significant results. In growing our ecommerce program, we have taken advanced measures to enhance content so as to further differentiate our brands and products. Ecommerce continues to grow for Lifetime even as online sales in general have declined for other categories over the past year, as brick and mortar channels regained some lost market share after having shuttered stores during COVID-related lockdowns in 2020. Driven by strategic investments in process and people, our e-commerce revenues in total have grown by more than 60% since the start of the pandemic, and by more than 70% compared to 2019. In addition to our pure-play e-commerce growth, we continue to see very strong shipments with our omnichannel retailers. Contributing to this growth has been our ability to consistently execute drop shipments, which grew approximately 38% in 2021 after having grown approximately 160% in 2020. With vaccinations implemented and restrictions lifted, we also saw a meaningful increase in brick-and-mortar sales as stores reopened. In 2021, we increased our investment in Mikasa Hospitality, our tableware and serveware offering to the commercial food service industry. We ramped up sales efforts since the start of the pandemic, gaining meaningful traction with distributors and customers. We brought on key talent to bolster sales capabilities and help us successfully execute on this massive opportunity, and our investments in the commercial foodservice business have begun to show results. We are optimistic about the potential for this front of house foodservice initiative to complement our leading position in back of house smallwares. We believe we will see market share gains in this category in 2022 and beyond as the hospitality industry begins to flourish again. / 08 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT As a result of being proactive in the face of adversity, Lifetime has continued to generate significant free cash flow “ “ / 09 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT SUPPLY CHAIN AND INFLATIONARY ISSUES & MITIGATING ACTIONS In 2021, the global supply chain crisis created sizeable roadblocks to manufacture and transport goods around the globe. This significantly impacted the availability of products and affected a corresponding meaningful increase in the cost of transportation across the ocean and into domestic markets. This resulted in Lifetime having limited availability of containers and an increased freight cost to import products. The continued issues of unknown container availability, port delays, and costs of shipping existed throughout the year, and made supply planning difficult as well as increased product costs. Adding to these supply constraints, 2021 showed a noticeable increase in the inputs to cost of goods, including commodity prices, labor costs, and other inflationary pressures. Lifetime effectively managed these macro headwinds through a combination of measures: utilizing our strong balance sheet, active supply chain management, and passing through price increases. Specifically, these strategies included a significant investment in inventory, product cost out initiatives and sourcing strategies to counteract these higher prices, and longer lead times to receive goods. This helped sustain us and assured product availability to our customers and consumers to meet continued strong end market demand for our products. Our strategies included the need to raise selling prices in the second half of fiscal 2021 to aid in the offset part of these cost inputs. As a result of being proactive in the face of adversity, Lifetime has continued to generate significant free cash flow, enabling us to further deleverage while increasing our rapid pace of investment in the business and inventory, as well as funding our strategic growth initiatives. / 10 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT G R O Increased ecommerce revenue by more than 60% Invested more in Mikasa Hospitality to increase penetration in commercial food service Expanded our ecommerce program and team to meet the growing demand / 11 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT W T H Achieved an increase of 38% in drop shipments Expanded our KitchenAid business with the launch of KitchenAid Cutlery Grew our Farberware offerings to include a new BBQ line / 12 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT / 13 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT / 14 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT A warehouse in the Netherlands Increased the number of in-country managers Lifetime’s international business showed growth in top line and meaningful improvement in bottom line “ “ / 15 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT 47.5% APAC growth INTERNATIONAL BUSINESS The transformation of our international business has been a key strategic initiative of Lifetime, and 2021 gave evidence of the success that has been achieved on this initiative. Offset by some Brexit-related impacts as well as the negative end market impacts from COVID in Europe, Lifetime’s international business showed growth in top line and meaningful improvement in bottom line. While still negative, the improvement in EBITDA contribution from this business was $8 million compared to prior year, with the small loss in 2021 being driven by Brexit impacts. We continue to be on-plan in our international business and have now implemented additional steps to offset the previously unknown impacts from Brexit that we experienced in 2021. The turnaround plan included an investment in top talent (6 in-country managers for targeted geographies, with a plan already in place to increase the number of managers in 2022) to target our major geographic markets globally. Our strategies are showing good progress. For example, we grew substantially in APAC, achieving growth of 47.5%. To offset the impediments to trade created by Brexit, we began the establishment of a warehouse in the Netherlands, which will be live by the Q2 2022. This will benefit us from both a cost and a revenue perspective. Overall, the progress of our international strategy was substantial in 2021, and we view the continued execution of this strategy to be a meaningful source of revenue and profit growth in 2022 and beyond. Lifetime continues to be a consistent and important leader in our industry. The macroeconomic challenges of the past couple of years have shown the strength of our strategy and our company, and allowed us to accelerate our strategic plan. Our supply chain is highly dependable, our products and brands remain in strong demand from consumers and retailers, and we continue to invest in new initiatives to provide for future growth and stability. We have gained meaningful market share in the majority of our categories over the past several years, and we continue to capitalize on these successes and pursue incremental growth opportunities. Our progress provides confidence that Lifetime is past an inflection point, where we achieved a new level of performance in our core business, created meaningful value from our international operations, and positioned the company to capitalize on continued profitable growth opportunities. We are enthusiastic about our competitive positioning and the many opportunities we are pursuing to continue to grow within and beyond our existing markets. / 16 / LIFETIME BRANDS, INC. 2021 ANNUAL REPORT Lifetime continues to be a consistent and important leader in our industry “ “
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