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- 52.8% increase in wholesale and e-commerce revenues
- Operating loss of
$5.4 million compared to loss of$14.0 million - EBITDA1 of
$0.2 million compared to a negative$11.9 million - Positive cash flow from operations of
$3.1 million compared to negative$12.4 million - Net cash position of
$29.7 million - Basic and fully diluted loss per share of
$0.27
“Our second quarter results highlight the solid performance of our e-commerce and wholesale channels with a combined growth of 53% over last year, reflecting the benefits of recent initiatives. Nearly a year into the launch of our tea sachets in major Canadian grocery chains, sales continue to surpass our expectations and reflect high demand for our brand wherever available. In addition, e-commerce continues to be our fastest growing channel as we continue to improve customer engagement,” stated
“In the first half of 2019, we concentrated our efforts on delivering the best fine tea on the market across all of our distribution channels. We also streamlined our product portfolio to simplify and improve the customer experience. While the second quarter is generally most impacted by seasonality, we nonetheless maintained a strong cash position driven by positive cash flow from operations, optimized inventory levels and a reduction in selling, general and administrative expenses,” said
“We look forward to significantly expanding our wholesale distribution capabilities in the coming months with the availability of
Operating Results for the Second Quarter of Fiscal 2019
The Company reported a net loss of
Sales for the three months ended
Operating loss decreased by
Selling, general and administration expenses (“SG&A”) decreased by 13.1%, or
EBITDA, which excludes non-cash and other items in the current and prior periods, was
Fully diluted loss per common share was
As at
Net cash provided by operating activities amounted to
Cash flows used in financing activities was
Cash flows used in investing activities was
Adoption of IFRS 16 - Leases
The Company adopted IFRS 16 - Leases, replacing IAS 17 - Leases and Related interpretations, using the modified retrospective approach, effective for the annual reporting period beginning on
Loan Agreement
The Company also announces that it entered into a secured loan agreement with
The Loan Agreement constitutes a related-party transaction under Québec Regulation 61-101Respecting Protection of Minority Security Holders in Special Transactions but is exempt from the formal valuation and minority approval requirements thereof as neither the fair market value of the loan nor the fair market value of the consideration for the loan exceeds 25% of DAVIDsTEA’s market capitalization.
Board Resignation
The Company announces that Anne Darche has resigned as a member of the Board of Directors due to time constraints. The Board of Directors and management would like to thank Ms. Darche for her valued contributions and wish her well in her future endeavors.
Note
This release should be read in conjunction with the Company’s Management’s Discussion and Analysis, which will be filed by the Company with the Canadian securities regulatory authorities on www.sedar.com and with the
Use of Non-IFRS Financial Measures
This press release includes “non-IFRS financial measures” defined as including: 1) EBITDA and Adjusted EBITDA, 2) Adjusted operating loss, 3) Adjusted selling, general and administration expenses, 4) Adjusted net loss, 5) Adjusted fully diluted loss per share and 6) Adjusted selling, general and administration expenses as a percentage of sales. These non-IFRS financial measures are not defined by and in accordance with IFRS and may differ from similar measures reported by other companies. We believe that these non-IFRS financial measures provide knowledgeable investors with useful information with respect to our historical operations. We present these non-IFRS financial measures as supplemental performance measures because we believe they facilitate a comparative assessment of our operating performance relative to our performance based on our results under IFRS, while isolating the effects of some items that vary from period-to-period but not in substitution to IFRS financial measures.
Please refer to the non-IFRS financial measures section in Management’s Discussion and Analysis section of our Form 10-Q for a reconciliation to IFRS financial measures.
Conference Call Information
A conference call to discuss the second quarter Fiscal 2019 financial results is scheduled for today,
Condensed Consolidated Financial Data | |||||||||||||||||||||||
(Canadian dollars, in thousands, except per share information) | |||||||||||||||||||||||
For the three months ended |
For the six months ended |
||||||||||||||||||||||
August 3, 2019 |
August 3, 2019 |
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August 3, |
Excluding impact |
August 4, |
August 3, |
Excluding impact |
August 4, |
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2019 |
of IFRS 16 (1) |
2018 |
2019 |
of IFRS 16 (1) |
2018 |
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(Unaudited) |
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Sales | $ | 39,167 | $ | 39,167 | $ | 40,167 | $ | 83,432 | $ | 83,432 | $ | 85,953 | |||||||||||
Cost of sales | 17,362 | 23,161 | 22,824 | 35,291 | 46,913 | 45,918 | |||||||||||||||||
Gross profit | 21,805 | 16,006 | 17,343 | 48,141 | 36,519 | 40,035 | |||||||||||||||||
SG&A expenses | 27,237 | 23,424 | 31,350 | 55,946 | 48,342 | 55,746 | |||||||||||||||||
Operating loss | (5,432 | ) | (7,418 | ) | (14,007 | ) | (7,805 | ) | (11,823 | ) | (15,711 | ) | |||||||||||
Finance costs | 1,781 | — | 78 | 3,608 | — | 157 | |||||||||||||||||
Finance income | (195 | ) | (195 | ) | (215 | ) | (386 | ) | (386 | ) | (452 | ) | |||||||||||
Recovery of income tax | — | — | (3,872 | ) | — | — | (4,216 | ) | |||||||||||||||
Net loss | $ | (7,018 | ) | $ | (7,223 | ) | $ | (9,998 | ) | $ | (11,027 | ) | $ | (11,437 | ) | $ | (11,200 | ) | |||||
EBITDA1 | $ | 196 | $ | (5,603 | ) | $ | (11,939 | ) | $ | 3,338 | $ | (8,284 | ) | $ | (11,775 | ) | |||||||
Adjusted SG&A1 | 27,237 | 23,424 | 24,642 | 55,946 | 48,342 | 49,760 | |||||||||||||||||
Adjusted operating loss1 | (5,432 | ) | (7,418 | ) | (7,299 | ) | (7,805 | ) | (11,823 | ) | (9,725 | ) | |||||||||||
Adjusted EBITDA1 | 361 | (5,438 | ) | (5,564 | ) | 3,630 | (7,992 | ) | (5,964 | ) | |||||||||||||
Adjusted net loss1 | (7,018 | ) | (7,223 | ) | (3,290 | ) | (11,027 | ) | (11,437 | ) | (5,214 | ) | |||||||||||
Fully diluted loss per common share | $ | (0.27 | ) | $ | (0.28 | ) | $ | (0.39 | ) | $ | (0.42 | ) | $ | (0.42 | ) | $ | (0.43 | ) | |||||
Adjusted fully diluted loss per common share1 | $ | (0.27 | ) | $ | (0.28 | ) | $ | (0.13 | ) | $ | (0.42 | ) | $ | (0.42 | ) | $ | (0.20 | ) | |||||
Gross profit as a percentage of sales | 55.7 | % | 40.9 | % | 43.2 | % | 57.7 | % | 43.8 | % | 46.6 | % | |||||||||||
SG&A as a percentage of sales | 69.5 | % | 59.8 | % | 78.0 | % | 67.1 | % | 57.9 | % | 64.9 | % | |||||||||||
Adjusted SG&A as a percentage of sales1 | 69.5 | % | 59.8 | % | 61.3 | % | 67.1 | % | 57.9 | % | 57.9 | % | |||||||||||
Number of stores at end of period | 233 | 233 | 239 | 233 | 233 | 239 | |||||||||||||||||
Comparable sales decline for the period | (9.4 | %) | (9.4 | %) | (14.8 | %) | (7.7 | %) | (7.7 | %) | (10.8 | %) | |||||||||||
Cash provided by (used in) operating activities | $ | 3,083 | $ | (2,716 | ) | $ | (12,438 | ) | $ | 3,443 | $ | (8,179 | ) | $ | (19,544 | ) | |||||||
Cash provided by (used in) financing activities | (5,799 | ) | — | 74 | (11,622 | ) | — | 74 | |||||||||||||||
Cash used in investing activities | (3,050 | ) | (3,050 | ) | (1,881 | ) | (4,170 | ) | (4,170 | ) | (4,391 | ) | |||||||||||
Decrease in cash during the period | (5,766 | ) | (5,766 | ) | (14,245 | ) | (12,349 | ) | (12,349 | ) | (23,861 | ) | |||||||||||
Cash, end of period | $ | 29,725 | $ | 29,725 | $ | 39,623 | $ | 29,725 | $ | 29,725 | $ | 39,623 | |||||||||||
August 3, |
Feb 2, |
August 4, |
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As at | 2019 | 2019 | 2018 | ||||||||||||||||||||
Inventories | $ | 27,893 | $ | 34,353 | $ | 33,680 | |||||||||||||||||
Accounts receivable | $ | 2,140 | $ | 3,681 | $ | 3,201 | |||||||||||||||||
Cautionary Forward-Looking Statements
Certain material presented in this press release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. These forward-looking statements address various matters including management’s beliefs about the Company’s prospects, management’s turn-around strategy, plans for investment in marketing initiatives, changes to product offerings and assortment, and strategic plans. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks and uncertainties including: the Company’s ability to implement its strategy, the Company’s ability to maintain and enhance its brand image, particularly in new markets; the Company’s ability to compete in the specialty tea and beverage category; the Company’s ability to expand and improve its operations; changes in the Company’s executive management team; levels of foot traffic in locations in which the Company’s stores are located; changes in consumer trends and preferences; fluctuations in foreign currency exchange rates; general economic conditions and consumer confidence; minimum wage laws; the importance of the Company’s first and second fiscal quarters to results of operations for the entire fiscal year; and other risks set forth in the Company’s Annual Report on Form 10-K. If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
About
Investor Contact | Media Contact |
MaisonBrison Communications | PELICAN PR |
Pierre Boucher | Lyla Radmanovich |
514.731.0000 | 514-845-8763 |
investors@davidstea.com | media@rppelican.ca |
___________________
1 Please refer to “Use of Non-IFRS financial measures” in this press release.
2 Adjusted Items related to executive separation cost, impairment of property and equipment, the impact of onerous contracts and costs related to the strategic review and proxy contest incurred during the second quarter of 2018.
Source: DAVIDsTEA