Increased demand for leather hurts Tandy
US-based Tandy Leather Factory has explained to shareholders that its income fell 22% in the first quarter mainly due to its significant rise in sales of leather.
Even though sales roles 5% to $19.8 million, the profits shrunk because of leather’s margins.
CEO Jon Thompson said: "Leather is the lowest margin item we sell and we sold significantly more leather this quarter compared to a year ago. While we want to be a leading supplier of leather to our customers, we need to sell our non-leather products to help support margins.
“We were not impacted in the fourth quarter of 2014 by the West Coast port slow down due to our high inventory levels at that time, but we have been affected in this first quarter. Deliveries have been significantly delayed and therefore, we didn't have many of our non-leather products to sell consistently throughout the quarter."
Chief financial officer Shannon Greene added: "We are still battling the foreign currency headwinds which contributed negatively to our results. If the exchange rates this year had matched last year's rates, our International Leathercraft segment would have reported a 3% sales increase, rather than a 10% decline. Further, our consolidated gross profit would have been up $91,000, rather than down $133,000. Our investment in inventory is down $2.5 million from year-end – partly due to the West Coast port issue – but will begin to build as we move through the second quarter."
