Release
View printer-friendly version |
<< Back |
First quarter sales increase of 9.4% to C$48.7 million
Announces Departure of Chief Financial Officer,
For the three months ended
- Sales increased by 9.4% to
C$48.7 million fromC$44.5 million a year ago. Comparable sales decreased by 5.7%. - Gross profit increased by 4.3% to
C$24.2 million fromC$23.2 million , while gross profit as a percent of sales decreased to 49.7% from 52.1%. The decrease in gross profit as a percent of sales was driven by additional promotional activity, a shift in product sales mix and the adverse impact from the stronger U.S. dollar on U.S. dollar denominated purchases. - Net loss was
C$(0.4) million compared to net income ofC$1.5 million . Adjusted net income (loss), a non-IFRS measure, which excludes the impact of onerous contracts in the first quarter of 2017 (see Reconciliation of IFRS basis to Adjusted net income (loss) table), wasC$(1.1) million compared toC$1.5 million . - Fully diluted income (loss) per common share was
C$(0.01) compared toC$0.06 . Adjusted fully diluted income (loss) per common share, a non-IFRS measure, which is adjusted net income (loss) on an adjusted fully diluted weighted average shares outstanding basis (see Reconciliation of fully diluted weighted average common shares outstanding table), wasC$(0.04) per share compared toC$0.06 per share.
Other financial metrics
- Selling, general and administration expenses (“SG&A”) increased to
C$24.2 million fromC$21.1 million . As a percent of sales, SG&A increased to 49.6% from 47.5%. Adjusted SG&A, a non-IFRS measure, which excludes the impact of onerous contracts in the first quarter of fiscal 2017 (see Reconciliation of IFRS basis to Adjusted selling, general and administration expenses), increased toC$25.6 million fromC$21.1 , due primarily to the hiring of additional staff to support the growth of the Company, including new stores, and higher store operating expenses to support the operations of 232 stores as ofApril 29, 2017 as compared to 198 stores as ofApril 30, 2016 . As a percent of sales, adjusted SG&A increased to 52.6% from 47.5%. - Results from operating activities were
C$0.0 million as compared toC$2.0 million . Adjusted results from operating activities, a non-IFRS measure, which excludes the impact of onerous contracts in the first quarter of fiscal 2017 (see Reconciliation of IFRS basis to Adjusted results from operating activities), decreased toC$(1.4) million fromC$2.0 million . - Adjusted EBITDA was
C$1.5 million compared toC$4.6 . Adjusted EBITDA, a non-IFRS measure, excludes non-cash or one-time costs in the current and prior year periods (see Reconciliation of Adjusted EBITDA table). - Strong balance sheet with cash of
C$56.3 million and total liquidity (cash plus availability on aC$20.0 million revolving facility) ofC$76.3 million . - The Company opened 1 net new store in the first quarter of fiscal 2017 and ended the quarter with a total of 232 stores in
Canada and the U.S.
Fiscal 2017 Outlook
“We expect continued gross profit margin pressure in the second quarter with some delayed promotions coinciding with our planned annual summer clearance event, as we continue to work through our excess inventory position. Looking ahead to the rest of the year,
“As previously stated, fiscal 2017 will be a reset year and as such, we will not be issuing quarterly and annual guidance through 2017. We will re-evaluate this at the appropriate time. We remain focused on the mid-term vision and realignment of
Chief Financial Officer Departure
The Company also announced today that Chief Financial Officer,
Mr. Silver continued, “On behalf of everyone at
Conference Call Information:
A conference call to discuss the first quarter Fiscal 2017 financial results is scheduled for today,
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 growth prospects, store openings, product offerings and financial guidance for the coming fiscal quarter and 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 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 dated
About
CONSOLIDATED BALANCE SHEETS | ||||||
[Unaudited and in thousands of Canadian dollars] | ||||||
As at | As at | |||||
April 29, 2017 |
January 28, 2017 |
|||||
$ | $ | |||||
ASSETS | ||||||
Current | ||||||
Cash | 56,348 | 64,440 | ||||
Accounts and other receivables | 3,960 | 3,485 | ||||
Inventories | 28,574 | 31,264 | ||||
Income tax receivable | 1,629 | 539 | ||||
Prepaid expenses and deposits | 8,159 | 5,659 | ||||
Derivative financial instruments | 1,200 | 454 | ||||
Total current assets | 99,870 | 105,841 | ||||
Property and equipment | 51,407 | 51,160 | ||||
Intangible assets | 3,106 | 2,958 | ||||
Deferred income tax assets | 13,522 | 14,375 | ||||
Total assets | 167,905 | 174,334 | ||||
LIABILITIES AND EQUITY | ||||||
Current | ||||||
Trade and other payables | 13,131 | 19,681 | ||||
Deferred revenue | 3,899 | 4,885 | ||||
Current portion of provisions | 2,123 | 2,562 | ||||
Total current liabilities | 19,153 | 27,128 | ||||
Deferred rent and lease inducements | 7,908 | 7,824 | ||||
Provisions | 5,369 | 5,932 | ||||
Total liabilities | 32,430 | 40,884 | ||||
Equity | ||||||
Share capital | 265,564 | 263,828 | ||||
Contributed surplus | 8,200 | 8,833 | ||||
Deficit | (142,746 | ) | (142,398 | ) | ||
Accumulated other comprehensive income | 4,457 | 3,187 | ||||
Total equity | 135,475 | 133,450 | ||||
167,905 | 174,334 | |||||
CONSOLIDATED STATEMENTS OF INCOME (LOSS) | ||||||
AND COMPREHENSIVE INCOME (LOSS) | ||||||
[Unaudited and in thousands of Canadian dollars, except share and per share information] | ||||||
For the three months ended | ||||||
April 29, 2017 |
April 30, 2016 |
|||||
$ | $ | |||||
Sales | 48,669 | 44,469 | ||||
Cost of sales | 24,487 | 21,314 | ||||
Gross profit | 24,182 | 23,155 | ||||
Selling, general and administration expenses | 24,153 | 21,119 | ||||
Results from operating activities | 29 | 2,036 | ||||
Finance costs | 131 | 17 | ||||
Finance income | (136 | ) | (121 | ) | ||
Income before income taxes | 34 | 2,140 | ||||
Provision for income tax | 396 | 626 | ||||
Net income (loss) | (362 | ) | 1,514 | |||
Other comprehensive income (loss) | ||||||
Items to be reclassified subsequently to income: | ||||||
Unrealized net gain (loss) on forward exchange contracts | 1,200 | (4,197 | ) | |||
Realized net gain on forward exchange contracts reclassified to inventory | (453 | ) | (968 | ) | ||
Provision for income tax recovery (income tax) on comprehensive income | (199 | ) | 1,371 | |||
Cumulative translation adjustment | 722 | (2,322 | ) | |||
Other comprehensive income (loss), net of tax | 1,270 | (6,116 | ) | |||
Total comprehensive income (loss) | 908 | (4,602 | ) | |||
Net income (loss) per share: | ||||||
Basic | (0.01 | ) | 0.06 | |||
Fully diluted | (0.01 | ) | 0.06 | |||
Weighted average number of shares outstanding | ||||||
— basic | 25,402,543 | 24,134,285 | ||||
— fully diluted | 25,402,543 | 25,892,598 | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
[Unaudited and in thousands of Canadian dollars] | ||||||
For the three months ended | ||||||
April 29, 2017 |
April 30, 2016 |
|||||
$ | $ | |||||
OPERATING ACTIVITIES | ||||||
Net income (loss) | (362 | ) | 1,514 | |||
Items not affecting cash: | ||||||
Depreciation of property and equipment | 2,064 | 1,787 | ||||
Amortization of intangible assets | 282 | 161 | ||||
Loss on disposal of property and equipment | 6 | — | ||||
Deferred rent | 3 | 280 | ||||
Recovery for onerous contracts | (886 | ) | — | |||
Stock-based compensation expense | 574 | 316 | ||||
Amortization of financing fees | 20 | 18 | ||||
Accretion on provisions | 112 | — | ||||
Deferred income taxes (recovered) | 1,000 | (30 | ) | |||
2,813 | 4,046 | |||||
Net change in other non-cash working capital balances related to operations | (9,474 | ) | (4,834 | ) | ||
Cash flows related to operating activities | (6,661 | ) | (788 | ) | ||
FINANCING ACTIVITIES | ||||||
Proceeds from issuance of common shares pursuant to exercise of stock options | 815 | 344 | ||||
Cash flows related to financing activities | 815 | 344 | ||||
INVESTING ACTIVITIES | ||||||
Additions to property and equipment | (1,821 | ) | (2,846 | ) | ||
Additions to intangible assets | (425 | ) | (156 | ) | ||
Cash flows related to investing activities | (2,246 | ) | (3,002 | ) | ||
Decrease in cash during the period | (8,092 | ) | (3,446 | ) | ||
Cash, beginning of period | 64,440 | 72,514 | ||||
Cash, end of period | 56,348 | 69,068 |
Reconciliation of Adjusted EBITDA | ||||||||
[Unaudited and in thousands of Canadian dollars] | ||||||||
For the three months ended |
||||||||
April 29, 2017 |
April 30, 2016 |
|||||||
Net income (loss) | $ | (362 | ) | $ | 1,514 | |||
Finance costs | 131 | 17 | ||||||
Finance income | (136 | ) | (121 | ) | ||||
Depreciation and amortization | 2,346 | 1,948 | ||||||
Loss on disposal of property and equipment | 6 | — | ||||||
Provision for income tax | 396 | 626 | ||||||
EBITDA | $ | 2,381 | $ | 3,984 | ||||
Additional adjustments : | ||||||||
Stock-based compensation expense (a) | 574 | 316 | ||||||
Impact of onerous contracts (b) | (1,415 | ) | — | |||||
Deferred rent (c) | 3 | 280 | ||||||
Adjusted EBITDA | $ | 1,543 | $ | 4,580 | ||||
_____________________
(a) Represents non-cash stock-based compensation expense.
(b) Represents utilization and non-cash reversals of provisions related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract.
(c) Represents the extent to which our annual rent expense has been above or below our cash rent payments.
Reconciliation of IFRS basis to Adjusted net income (loss) | |||||||
[Unaudited and in thousands of Canadian dollars] | |||||||
For the three months ended | |||||||
April 29, 2017 |
April 30, 2016 |
||||||
Net Income (loss) | $ | (362 | ) | $ | 1,514 | ||
Impact of onerous contracts (a) | (1,303 | ) | — | ||||
Income tax expense adjustment (b) | 523 | — | |||||
Adjusted net income (loss) | $ | (1,142 | ) | $ | 1,514 | ||
_____________________
(a) Represents utilization and non-cash reversals of, as well as the accretion expense on, provisions related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract. The accretion expense on provisions for onerous contracts is included in Finance costs on the Consolidated Statement of Comprehensive Income (Loss) for the three months ended April 29, 2017.
(b) Removes the income tax impact of the impact of onerous contracts referenced in note (a).
Reconciliation of IFRS basis to Adjusted results from operating activities | |||||||
[Unaudited and in thousands of Canadian dollars] | |||||||
For the three months ended | |||||||
April 29, 2017 |
April 30, 2016 |
||||||
Results from operating activities | 29 | 2,036 | |||||
Impact of onerous contracts (a) | (1,415 | ) | — | ||||
Adjusted results from operating activities | $ | (1,386 | ) | $ | 2,036 | ||
_____________________
(a) Represents utilization and non-cash reversals of provisions related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract.
Reconciliation of IFRS basis to Adjusted selling, general and administration expenses | ||||||
[Unaudited and in thousands of Canadian dollars] | ||||||
For the three months ended | ||||||
April 29, 2017 |
April 30, 2016 |
|||||
Selling, general and administration expenses | 24,153 | 21,119 | ||||
Impact of onerous contracts (a) | 1,415 | — | ||||
Adjusted selling, general and administration expenses | $ | 25,568 | $ | 21,119 | ||
_____________________
(a) Represents utilization and non-cash reversals of provisions related to certain stores where the unavoidable costs of meeting the obligations under the lease agreements are expected to exceed the economic benefits expected to be received from the contract.
Reconciliation of fully diluted weighted average common shares outstanding, as reported, adjusted fully diluted weighted average common shares outstanding |
|||||
[Unaudited and in thousands of Canadian dollars, except per share] | |||||
For the three months ended | |||||
April 29, 2017 |
April 30, 2016 |
||||
Weighted average number of shares outstanding, fully diluted | 25,402,543 | 25,892,598 | |||
Net income (loss) per share, fully diluted | (0.01 | ) | 0.06 | ||
Adjusted net income (loss) per share, fully diluted | (0.04 | ) | 0.06 |
Investor ContactICR Inc. Rachel Schacter (203) 682-8200 investors@davidstea.com