The Company delivered an 8% increase in comparable store
sales, and expanded gross margins
MONTREAL, Nov. 30,
2022 /CNW Telbec/ - Birks Group Inc. (the
"Company" or "Birks Group") (NYSE American: BGI), today reported
its financial results for the twenty-six week period ended
September 24, 2022.
Highlights
All figures presented herein are in Canadian dollars.
In the twenty-six week period ended September 24, 2022, the Company delivered
year-over-year comparable store sales growth of 8.2%, and an
increase in gross margin percentage of 110 basis points. Across the
retail network, no shopping days were lost due to temporary store
lockdowns during the twenty-six week period ended September 24, 2022, as compared to 17% of
shopping days lost during the twenty-six week period ended
September 25, 2021 due to COVID-19
related restrictions.
In the twenty-six week period ended September 24, 2022, the Company achieved net
sales of $80.0 million, a decrease of
$4.6 million, or 5.4%, from the
comparable period in fiscal 2022. The Company achieved gross profit
of $33.9 million for the twenty-six
week period ended September 24, 2022,
a decrease of $1.0 million, or 2.9%,
compared to the same period in fiscal 2022. The decrease in sales
and gross profit is driven in part by the Company's investment in a
joint venture with FWI LLC to form RMBG Retail Vancouver ULC
("RMBG" or "RMBG Joint Venture"). RMBG operates a boutique in
Vancouver, retailing
3rd party branded watches, sales of which were
historically recognized at the Company's Vancouver Flagship
location and are now recognized through the joint venture (see
"Investment in RMBG Joint Venture" below for further details). The
decrease in net sales was partially offset by an 8.2% increase in
comparable store sales. Gross profit as a percentage of sales was
42.3%, an increase of 110 basis points from the gross profit as a
percentage of sales of 41.2% in the twenty-six week period ended
September 25, 2021.
Mr. Jean-Christophe Bédos, President and Chief Executive
Officer of Birks Group, commented: "We are pleased with our
performance in the first half of fiscal 2023 when we consider
comparable store sales growth of 8.2% and a continued improvement
in our gross margins, which speaks to the strength of our product
offerings, both in terms of our Birks products and in terms of our
third party branded watches and jewellery, as well as to the
loyalty of our customer base."
Mr. Bédos further commented: "These results were achieved
despite uncertain macroeconomic conditions. It is thanks to our
team's continuous dedication to our customers that we were able to
achieve these results. I believe that our Company is in a strong
position to achieve its long-term strategic objectives as we
continue to run our business in an agile manner in the near-term,
with a clear view and focus on long-term growth."
Financial overview for the twenty-six week period ended
September 24, 2022:
- Total net sales for the twenty-six week period ended
September 24, 2022 were $80.0 million compared to $84.6 million in the twenty-six week period ended
September 25, 2021, which is a
decrease of $4.6 million, or 5.4%.
Net retail sales were $3.9 million
lower than the comparable prior year period, attributable primarily
to the exclusion of the sales of RMBG , partially offset by an 8.2%
increase in comparable store sales;
- Comparable store sales increased by 8.2% compared to the
twenty-six week period ended September 25,
2021. The increase in comparable store sales is in part due
to the reduced impact of COVID-19 (including government-mandated
temporary store closures, traffic declines and capacity
limitations) experienced by the Company during the period as
compared to during the twenty-six week period ended September 25, 2021. No shopping days were lost
due to temporary store closures during the twenty-six week period
ended September 24, 2022, as compared
to approximately 17% during the twenty-six week period ended
September 25, 2021. This increase was
experienced across all product categories, with branded jewelry and
branded timepiece products benefitting from the Company's
continuously improving third party brand portfolio and client
offering. The increase in comparable store sales was also derived
from the performance of the Birks fine jewelry and bridal
collections driven by the impact of pointed digital marketing
campaigns, increases in average sales transaction value, and
increased in-store foot traffic. For the twenty-six week period
ended September 24, 2022, the
Company's Vancouver Flagship store is excluded from the calculation
of comparable store sales as a result of the RMBG Joint
Venture;
- Total gross profit was $33.9
million, or 42.3% of net sales, for the twenty-six week
period ended September 24, 2022
compared to $34.9 million or 41.2% of
net sales for the twenty-six week period ended September 25, 2021. This decrease in gross profit
is partially attributable to the exclusion of the gross profit of
RMBG, partially offset by the 8.2% increase in comparable store
sales experienced during the period, as well as by an improvement
in gross margin of 110 basis points. The increase of 110 basis
points in gross margin percentage was mainly attributable to the
Company's adjusted pricing strategy on the Birks branded products,
as well as its strategic focus to reduce sales promotions and
discounting, partially offset by foreign currency losses
experienced in the period;
- SG&A expenses in the twenty-six week period ended
September 24, 2022 were $31.9 million, or 39.9% of net sales, compared to
$28.9 million, or 34.1% of net sales
in the twenty-six week period ended September 25, 2021, an increase of $3.0 million. This increase is primarily related
to the reduced impact of COVID-19 (including government-mandated
temporary store lockdowns, traffic declines and capacity
limitations) experienced by the Company during the period as
compared to the twenty-six week period ended September 25, 2021, and therefore there were less
opportunities for cost containment initiatives available to
management in response to the pandemic. The drivers of the increase
in SG&A expenses in the period include greater occupancy costs
($0.6 million) as a result of the
re-opening of stores and expiring non-recurring rent abatements in
the twenty-six week period ended September
25, 2021, greater compensation costs ($0.4 million), higher general operating costs and
variable costs ($0.7 million), lower
wage subsidies ($0.6 million) and
rent subsidies ($0.4 million), as
well as greater stock-based compensation ($1.1 million) driven by gains recorded on the
revaluation of cash-settled DSU and RSU instruments in the
twenty-six week period ended September 25,
2021 which did not reoccur in the twenty-six week period
ended September 24, 2022, partially
offset by lower marketing costs ($0.8
million). As a percentage of sales, SG&A expenses in the
twenty-six week period ended September 24,
2022 have increased by 580 basis points as compared to the
twenty-six week period ended September 25,
2021;
- The Company's EBITDA (1) for twenty-six week period ended
September 24, 2022 was $2.9 million, a decrease of $3.1 million, compared to EBITDA(1) of
$6.0 million for the twenty-six week
period ended September 25 2021;
- The Company reported an operating loss for the twenty-six week
period ended September 24, 2022 of
$0.7 million, a decrease of
$3.3 million, compared to a reported
operating income of $2.7 million in
the twenty-six week period ended September
25, 2021; and
- The Company recognized a net loss for the twenty-six week
period ended September 24, 2022 of
$2.0 million, or ($0.11) per share, compared to net income for the
twenty-six week period ended September 25,
2021 of $1.0 million, or
$0.05 per share.
|
(1)
|
This is
a non-GAAP financial measure defined below
under "Non-GAAP Measures" and accompanied by a
reconciliation to the most directly comparable GAAP financial
measure.
|
Investment in RMBG Joint Venture
In April of 2021, the Company entered into a joint venture with
FWI LLC (FWI) to form RMBG Retail Vancouver ULC ("RMBG"). During
the twenty-six week period ended September
24, 2022, the joint venture became operational. RMBG
operates a boutique in Vancouver,
retailing 3rd party branded watches, sales of which were
historically recognized at the Company's Vancouver Flagship
location and are now recognized through the joint venture. The
Company and FWI both contributed certain assets for a 49% and 51%
equity interest respectively in RMBG, the legal entity comprising
the joint venture. FWI has controlled the joint venture since its
inception. The Company has determined that it has significant
influence but not control over RMBG and therefore has applied the
equity method of accounting to account for its investment in RMBG.
Such accounting treatment has an impact on period-to-period
comparisons of sales, gross profit, operating expenses, and
operating income, as the Company's share of RMBG's profits are now
recorded within Equity in earnings of joint venture, net of
taxes on the Company's condensed consolidated statements of
operations.
About Birks Group Inc.
Birks Group is a leading designer of fine jewellery, timepieces
and gifts and operator of luxury jewellery stores in Canada. The Company operates 23 stores under
the Maison Birks brand in most major metropolitan markets in
Canada, one retail location in
Calgary under the Brinkhaus brand,
one retail location in Vancouver
operated under the Graff brand and one location in Vancouver under the Patek Philippe brand.
Birks fine jewellery collections are also available through select
SAKS Fifth Avenue stores in Canada
and the U.S., select Mappin & Webb and Goldsmiths locations in
the United Kingdom, in Mayors
stores in the United States, in W.
Kruk stores in Poland as well as
several jewellery retailers across North
America. Birks was founded in 1879 and has become
Canada's premier retailer and
designer of fine jewellery, timepieces and gifts. Additional
information can be found on Birks' web site, www.birks.com.
NON-GAAP MEASURES
The Company reports financial information in accordance with
U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The
Company's performance is monitored and evaluated using various
sales and earnings measures that are adjusted to include or exclude
amounts from the most directly comparable
GAAP measure ("non-GAAP measures"). The Company
presents such non-GAAP measures in reporting
its financial results to assist in business decision making and to
provide key performance information to senior management. The
Company believes that this additional information provided to
investors and other external stakeholders will allow them to
evaluate the Company's operating results using the same financial
measures and metrics used by the Company in evaluating performance.
The Company does not, nor does it suggest that investors and other
external stakeholders
should, consider non-GAAP measures in isolation
from, or as a substitute for, financial information prepared in
accordance with U.S.
GAAP. These non-GAAP measures may not be
comparable to similarly-titled measures presented by other
companies. In addition to our results determined in accordance with
U.S. GAAP, we use non-GAAP measures including
"EBITDA".
EBITDA
"EBITDA" is defined as net income (loss) from continuing
operations before interest expense and other financing costs,
income taxes expense (recovery) and depreciation and
amortization.
EBITDA
|
For the twenty-six
week period ended
|
|
September 24,
2022
|
September 25,
2021
|
|
|
|
Net (loss) income
(U.S. GAAP measure)
|
(1,996)
|
990
|
as a % of net
sales
|
-2.5 %
|
1.2 %
|
Add the impact
of:
|
|
|
Interest expense and
other financing costs
|
2,266
|
1,684
|
Depreciation and
amortization
|
2,620
|
3,324
|
|
|
|
EBITDA (non-GAAP
measure)
|
$
2,890
|
$
5,998
|
as a % of net
sales
|
3.6 %
|
7.1 %
|
Forward Looking Statements
This press release contains forward- looking statements which
can be identified by their use of words like "plans," "expects,"
"believes," "will," "anticipates," "intends," "projects,"
"estimates," "could," "would," "may," "planned," "goal," and other
words of similar meaning. All statements that address expectations,
possibilities or projections about the future, including without
limitation, statements about anticipated economic conditions,
availability under our Amended Credit Facility and Amended Term
Loan, anticipated distributions of profits, and our strategies for
growth, performance drivers, expansion plans, sources or adequacy
of capital, expenditures and financial results are forward-looking
statements.
Because such statements include various risks and uncertainties,
actual results might differ materially from those projected in the
forward- looking statements and no assurance can be given that the
Company will meet the results projected in the forward-looking
statements. These risks and uncertainties include, but are not
limited to the following: (i) the magnitude and length of economic
disruption as a result of the worldwide COVID-19 outbreak,
including its impact on macroeconomic conditions, generally, as
well as its impact on the results of operations and financial
condition of the Company and the trading price of the shares; (ii)
general economic, political and market conditions, including the
economies of Canada and the U.S.,
which could adversely affect our business, operating results or
financial condition, including our revenue and profitability,
through the impact of changes in the real estate markets, changes
in the equity markets and decreases in consumer confidence and the
related changes in consumer spending patterns, the impact on store
traffic, tourism and sales; (iii) the impact of fluctuations in
foreign exchange rates, inflation, increases in commodity prices
and borrowing or operating costs, or other pricing environment
factors and their related impact on the Company's costs and
expenses; (iv) changes in interest rates; (v) the Company's ability
to maintain and obtain sufficient sources of liquidity to fund its
operations, to achieve planned sales, gross margin and net income,
to keep costs low, to implement its business strategy, maintain
relationships with its primary vendors, to mitigate fluctuations in
the availability and prices of the Company's merchandise, to
compete with other jewelers, to succeed in its marketing
initiatives, and to have a successful customer service program;
(vi) the Company's ability to continue to borrow under the Amended
Credit Facility; (vii) the Company's ability to maintain profitable
operations, as well as maintain specified excess availability
levels under the Amended Credit Facility, make scheduled payments
of principal and interest, and fund capital expenditures; (viii)
the Company's ability to execute its strategic vision; (ix) the
geopolitical environment and increased political uncertainty; * the
impact of weather-related incidents, natural disasters, strikes,
protests, riots or terrorism, acts of war or another public health
crisis or disease outbreak, epidemic or pandemic on the Company's
business; and * the Company's ability to continue as a going
concern.
Information concerning factors that could cause actual results
to differ materially is set forth under the captions "Risk Factors"
and "Operating and Financial Review and Prospects" and elsewhere in
the Company's Annual Report on Form 20-F filed with the Securities
and Exchange Commission on June 24,
2022 and subsequent filings with the Securities and Exchange
Commission. The Company undertakes no obligation to update or
release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this statement or
to reflect the occurrence of unanticipated events, except as
required by law.
BIRKS GROUP INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS – UNAUDITED
(In
thousands, except per share amounts)
|
26 weeks
ended
|
26 weeks
ended
|
|
September 24,
2022
|
September 25,
2021
|
Net sales
|
$
80,040
|
$
84,615
|
Cost of sales
|
46,170
|
49,731
|
Gross profit
|
33,870
|
34,884
|
Selling, general and
administrative expenses
|
31,923
|
28,886
|
Depreciation and
amortization
|
2,620
|
3,324
|
Total
operating expenses
|
34,543
|
32,210
|
|
|
|
Operating (loss)
income
|
(673)
|
2,674
|
|
|
|
|
|
|
|
|
|
Interest and other
financial costs
|
2,266
|
1,684
|
|
|
|
(Loss) income before
taxes and equity in earnings of joint venture
|
(2,939)
|
990
|
|
|
|
Income taxes
(benefits)
|
—
|
—
|
|
|
|
Equity in earnings of
joint venture, net of taxes
|
943
|
—
|
|
|
|
Net (loss)
income
|
(1,996)
|
990
|
|
|
|
|
|
|
Weighted average common
shares outstanding
|
|
|
Basic
|
18,627
|
18,329
|
Diluted
|
18,627
|
18,634
|
Net (loss) income per
common share
|
|
|
Basic
|
$
(0.11)
|
$
0.05
|
Diluted
|
$
(0.11)
|
$
0.05
|
BIRKS GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
|
September 24,
2022
|
|
March 26,
2022
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
Cash and cash
equivalents
|
$1,576
|
|
$2,013
|
Accounts receivable
and other receivables
|
12,117
|
|
8,037
|
Inventories
|
77,881
|
|
78,907
|
Prepaid expenses and
other current assets
|
2,660
|
|
1,822
|
Total current
assets
|
94,234
|
|
90,779
|
Long-term
receivables
|
3,642
|
|
5,599
|
Equity investment in
joint venture
|
943
|
|
—
|
Property and
equipment
|
24,581
|
|
22,781
|
Operating lease
right-of-use asset
|
57,421
|
|
58,071
|
Intangible assets and
other assets
|
5,963
|
|
6,031
|
Total non-current
assets
|
92,550
|
|
92,482
|
Total assets
|
$186,784
|
|
$183,261
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
Bank
indebtedness
|
$51,718
|
|
$43,157
|
Accounts
payable
|
26,880
|
|
28,291
|
Accrued
liabilities
|
6,828
|
|
8,340
|
Current portion of
long-term debt
|
2,134
|
|
2,129
|
Current portion of
operating lease liabilities
|
6,839
|
|
6,963
|
Total current
liabilities
|
94,399
|
|
88,880
|
Long-term
debt
|
22,019
|
|
21,371
|
Long-term portion of
operating lease liabilities
|
65,613
|
|
66,757
|
Other long-term
liabilities
|
373
|
|
389
|
Total long-term
liabilities Stockholders' equity:
Class A common stock –
no par value, unlimited
shares authorized, issued and outstanding 11,012,999 (10,795,443 as of March 26,
2022)
|
88,005
38,520
|
|
88,517
37,883
|
Class B common stock –
no par value, unlimited
shares authorized, issued and outstanding
7,717,970
|
57,755
|
|
57,755
|
Preferred stock – no
par value, Unlimited shares authorized, none issued
|
—
|
|
—
|
Additional paid-in
capital
|
23,625
|
|
23,669
|
Accumulated
deficit
|
(115,409)
|
|
(113,413)
|
Accumulated other
comprehensive loss
|
(111)
|
|
(30)
|
Total stockholders'
deficiency
|
4,380
|
|
5,864
|
Total liabilities and
stockholders' deficiency
|
$
186,784
|
|
$
183,261
|
SOURCE Birks Group Inc.