MONTREAL, April 19, 2018 (GLOBE NEWSWIRE) -- DAVIDsTEA Inc. (Nasdaq:DTEA) today announced financial results for the three months and year ended February 3, 2018.

For the three months ended February 3, 2018:

• Sales increased by 0.4% to C$86.7 million from C$86.3 million in the fourth quarter of fiscal 2016. Comparable sales decreased by 8.1%.
  
• E-commerce sales continued to perform well and registered double-digit growth over the fourth quarter of fiscal 2016.
  
• Gross profit decreased by 0.7% to C$44.5 million from C$44.8 million in the fourth quarter of fiscal 2016, while gross profit as a percent of sales decreased to 51.3% from 51.9%. The decrease in gross profit as a percent of sales was primarily due to the deleveraging of fixed costs due to the negative 8.1% comparative sales this quarter.
  
• Fourth quarter results include an impairment charge of C$10.1 million and the impact for onerous contracts of C$13.5 million due to underperforming stores opened in prior years.
  
• Selling, general and administration expenses (“SG&A”), which includes the impairment and onerous contract charges, increased by 21.3% to C$52.9 million from C$43.6 million in the fourth quarter of fiscal 2016. As a percent of sales, SG&A increased to 61.0% from 50.5%. Adjusted SG&A, a non-IFRS measure, which excludes the impairment and onerous contract charges, as well as executive and employee separation costs, increased 3.3% to C$30.9 million from C$29.9 million, due primarily to the hiring of additional staff to support the growth of the Company, including new stores, and higher store operating expenses considering 9 net additional stores. As a percent of sales, adjusted SG&A increased to 35.6% from 34.6%.
  
• Results from operating activities were C$ (8.4) million as compared to C$1.2 million in the fourth quarter of fiscal 2016. Adjusted results from operating activities, a non-IFRS measure, which excludes the adjustments referred to above, decreased to C$13.6 million from C$15.0 million.
  
• Adjusted EBITDA, a non-IFRS measure, was C$16.4 million compared to C$18.1 million in the fourth quarter of fiscal 2016.
  
• Net loss was C$ (16.1) million compared to net income of C$2.0 million in the fourth quarter of fiscal 2016, primarily due to impairment charges, the impact for onerous contracts, a write-down of deferred income tax assets, the impact of the changes in U.S. tax rates, as well as executive and employee separation costs. Adjusted net income, a non-IFRS measure excluding these adjustments, was C$9.7 million compared to C$10.6 million.
  
• Fully diluted loss per common share was C$ (0.62) compared to fully diluted income per common share of C$0.08. Adjusted fully diluted income per common share, a non-IFRS measure, was C$0.37 per share compared to C$0.41.

“We initiated various cost reduction measures across the business and reinvested the savings in new IT systems, including the new e-commerce platform, as well as in merchandising and marketing staff. We believe these operational initiatives will put DAVIDsTEA back on track as we move into the second half of Fiscal 2018.  This translated into a slower rate of decline in our fourth quarter results when compared to previous quarters, including Adjusted EBITDA of $C16.4 million for the period. Our core tea business continued to grow and online sales were robust, registering double-digit growth. However, sales of tea accessories remained a challenge during the Holiday Season as we continued to optimize and improve our assortment mix,” said DAVIDsTEA President and Chief Executive Officer, Joel Silver.

Outlook:
“We begin fiscal 2018 with a strong, focused leadership team, a more stable business and a clear go-forward plan,” Mr. Silver added. “We remain in a solid financial position with a cash balance of C$63.5 million at the end of fiscal 2017. Considering lower anticipated CAPEX for fiscal 2018 and projected free cash flow, our cash position should remain at similar levels through the remainder of fiscal 2018 as compared to fiscal 2017.”

“We anticipate the first half of fiscal 2018 to remain somewhat challenging followed by a stronger second half as some of our initiatives, most notably improved product offering and merchandising gain full traction. We recently launched our new e-commerce website, which is a core part of DAVIDsTEA’s ambitious plans to grow on-line sales. The new website includes marked improvements to enhance the mobile experience, increase speed and traffic, and drive higher conversion, with new enhancements and functionality to follow in 2018. Finally, we are pleased with some of the initiatives related to our new concept stores and expect that several elements will become key components of our future store renovation program,” Mr. Silver concluded.

For the year ended February 3, 2018:

• Sales increased by 3.7% to $224.0 million from C$216.0 million in fiscal 2016. Comparable sales decreased by 6.0%.
• Gross profit decreased by 1.2% to C$107.2 million from C$108.5 million in fiscal 2016, while gross profit as a percent of sales decreased to 47.9% from 50.2%. The decrease in gross profit as a percent of sales was primarily due to additional promotional activity and deleveraging of fixed costs due to the negative 6.0% comparative sales for the year.
  
• SG&A increased to C$131.9 million from C$114.8 million in fiscal 2016. As a percent of sales, SG&A increased to 58.9% from 53.1%. Adjusted SG&A, a non-IFRS measure which excludes the adjustments referred to above, increased 9.5% to C$106.8 million from C$97.5, due primarily to the hiring of additional staff to support the Company’s growth, including new stores, and higher operating expenses to support the operations of 240 stores as of February 3, 2018 as compared to 231 stores as of January 28, 2017. As a percent of sales, adjusted SG&A increased to 47.7% from 45.1%.
  
• Results from operating activities were C$ (24.7) million as compared to C$ (6.3) million in fiscal 2016. Adjusted results from operating activities, a non-IFRS measure which excludes the adjustments referred to above, decreased to C$0.5 million from C$10.9 million.
  
• Net loss was C$ (28.5) million compared to a net loss of C$ (3.7) million in fiscal 2016. Adjusted net income (loss), a non-IFRS measure which excludes the adjustments referred to above, was C$ (0.1) million compared to C$7.5 million.
  
• Fully diluted loss per common share was C$ (1.11) compared to C$ (0.15) in fiscal 2016. Adjusted fully diluted income (loss) per common share, a non-IFRS measure, was C$ (0.00) per share compared to C$0.29.

Conference Call Information:
A conference call to discuss the fourth quarter and Fiscal 2017 financial results is scheduled for today, April 19, 2018, at 4:30 p.m. Eastern Time. Interested parties can join the call by dialling 1-866-521-4909 or 1-647-427-2311. The conference call can also be accessed via live webcast in the Company’s Investor Relations section of its website at www.davidstea.com.

An online archive of the webcast will be available within two hours of the conclusion of the call and will remain available for 30 days.

Non-IFRS Information:
This press release includes non-IFRS measures including Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss), and Adjusted fully diluted income (loss) per share. Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss) and Adjusted fully diluted income (loss) per share are not presentations made in accordance with IFRS, and the use of the terms Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss) and Adjusted fully diluted income (loss) per share may differ from similar measures reported by other companies. We believe that Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss) and Adjusted fully diluted income (loss) per share provide investors with useful information with respect to our historical operations. We present Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss) and Adjusted fully diluted income (loss) per share 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. Specifically, Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss) and Adjusted fully diluted income (loss) per share allow for an assessment of our operating performance, including new store costs, without the effect of non-cash charges of the period or other one-time charges, such as depreciation, amortization, finance costs, deferred rent, non-cash compensation expense, costs related to onerous contracts or contracts where we expect the costs of the obligations to exceed the economic benefit, gain (loss) on derivative financial instruments, loss on disposal of property and equipment, impairment of property and equipment, and certain non-recurring expenses. These measures also function as benchmarks to evaluate our operating performance. Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss), and Adjusted fully diluted income (loss) per share are not measurements of our financial performance under IFRS and should not be considered in isolation or as alternatives to net income, net cash provided by operating, investing or financing activities or any other financial statement data presented as indicators of financial performance or liquidity, each as presented in accordance with IFRS. We understand that although Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss), and Adjusted fully diluted income (loss) per share are frequently used by securities analysts, lenders and others in their evaluation of companies, they have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under IFRS. Some of these limitations are:

• Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss), and Adjusted fully diluted income (loss) per share do not reflect changes in, or cash requirements for, our working capital needs; and
  
  
• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

Because of these limitations, Adjusted selling, general and administration expenses, Adjusted results from operating activities, Adjusted EBITDA, Adjusted net income (loss), and Adjusted fully diluted income (loss) per share should not be considered as discretionary cash available to us to reinvest in the growth of our business or as a measure of cash that will be available to us to meet our obligations.

Forward-Looking Statements:
This press release includes forward-looking statements. 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, product offerings, strategic plans and financial guidance for the coming fiscal year. 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 fiscal quarter to results of operations for the entire fiscal year; and other risks set forth in the Company’s Annual Report on Form 10-K f0or the year ended February 3, 2018 and filed with the Securities and Exchange Commission on April 19, 2018. 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 DAVIDsTEA:
DAVIDsTEA is a retailer of specialty tea, offering a differentiated selection of proprietary loose-leaf teas, pre-packaged teas, tea sachets and tea-related gifts, accessories and food and beverages, primarily through 240 company-operated DAVIDsTEA stores throughout Canada and the United States as of February 3, 2018, and its website, davidstea.com. The Company is headquartered in Montréal, Canada.

__________________________

__________________________

__________________________

__________________________

__________________________

Investor Contact
MaisonBrison Communications
Pierre Boucher
514.207.0000
investors@davidstea.com 

Media Contact
Edelman
Nina Godard
416.455.6324
nina.godard@edelman.com