DAVIDsTEA Inc. (TSX-Venture: DTEA) (“DAVIDsTEA” or the “Company”),
a leading tea merchant in North America, announced today its first
quarter results for the period ended May 4, 2024.
“Despite tough economic conditions reducing
overall demand, we are committed to turning our business around,”
said Sarah Segal, Chief Executive Officer and Chief Brand Officer,
DAVIDsTEA. “Brick-and-mortar sales grew by mid-single digits for
the second consecutive quarter in Q1. Our specialty teas and brand
equity resonate strongly with consumers, who want a sensory
experience—smelling and sampling our teas—before buying. Therefore,
we are focused on in-store growth, with two new stores opening this
fall and more expected to follow.”
“We’re encouraged by our growing wholesale
distribution network and we’ve signed agreements with distributors
who have access to over 31,000 grocery stores in the US market.
Additionally, we are optimistic about the recent launch of our cold
brew sparkling iced tea collection, aimed at the
multi-billion-dollar ready-to-drink market in North America, which
is expected to boost online and in-store sales. Altogether, these
growth drivers should increase revenue and lead towards
profitability,” Ms. Segal added.
“The 6.1% sales decrease to $13.4 million in Q1
2024 reflects an unfavourable economic environment affecting online
and wholesale revenues, while in-store sales grew year-over-year on
the strength of higher average ticket values,” said Frank Zitella,
President, Chief Financial and Operating Officer, DAVIDsTEA. “We
saw margin improvements in Q1 with gross profit as a percentage of
sales rising 300 basis points year-over-year to 43.3% due to lower
freight, shipping and fulfillment costs per unit. Our cash position
amounted to $8.8 million at quarter-end. We have terminated
negotiations with a commercial lender for the previously announced
revolving line of credit. Consequently, we will be more
aggressively pursuing cost-reduction and working capital
strategies, while sustaining growth opportunities for upcoming
quarters.”
Operating Results for the First Quarter
of Fiscal 2024
Three Months Ended May 4, 2024 compared to Three
Months Ended April 29, 2023
Sales. Sales decreased 6.1% to
$13.4 million from $14.3 million in the first quarter of fiscal
2024. Sales in Canada of $11.7 million, representing 87.3% of total
revenues, dropped $0.5 million or 3.8% over the prior year quarter.
U.S. sales of $1.7 million declined by $0.4 million or 19.5% over
the prior year quarter.
Sales were negatively impacted by unfavorable
economic conditions that continued to dampen overall consumer
demand. In our online sales channel, notwithstanding an increase in
overall transactions against the prior year quarter, the decrease
in average ticket value resulted in an overall reduction in
revenue. The inverse was true in our retail sales channel where
fewer transactions were offset by higher ticket values over the
prior year quarter.
The Company has taken ownership of the overall
brand experience after in-sourcing order fulfilment since June 2023
and is attempting to recapture and retain consumers with improved
order fulfillment capabilities and an enhanced customer
experience.
________________1 For a reconciliation of
EBITDA, Adjusted EBITDA and Adjusted fully diluted (loss) earnings
per share to the most directly comparable measure calculated in
accordance with “IFRS”, see “Non-IFRS financial measures and
ratios”, in this MD&A.
Tea and variety box assortment sales decreased
by 4.7%, or $0.6 million, to $12.2 million over the prior year
quarter. Tea accessories sales decreased by 27.5%, or $0.4 million,
to $1.0 million over the prior year quarter.
Online sales of $6.7 million decreased by $0.9
million, or 11.9%, from the prior year quarter as we continued to
see a levelling out of pandemic-fueled online sales in addition to
lower average ticket values. E-commerce sales represented 50.2% of
sales compared to 53.4% of sales in the prior year
quarter.
Sales from the wholesale channel decreased by
$0.2 million, or 9.7%, to $2.2 million, from $2.4 million in the
prior year quarter. Wholesale sales represented 16.1% of sales
compared to 16.8% of sales in the prior year quarter.
Brick-and-mortar sales increased by $0.2
million, or 6.2%, to $4.5 million from $4.3 million for the same
period in the prior year. Brick-and-mortar sales
represented 33.7% of sales compared to 29.8% of sales in the prior
year quarter.
Gross profit. Gross profit
increased by 0.8% to $5.8 million in the first quarter of fiscal
2024 from the prior year quarter. Despite lower sales, gross profit
as a percentage of sales increased slightly to 43.3% for the
quarter compared to 40.3% in the prior year quarter due to a
decrease in unitized freight, shipping and fulfillment costs. At a
segment level, Gross profit was 41.8% and 54.0% in the quarter
compared to 40.1% and 41.7% in the prior year quarter in Canada and
U.S., respectively.
Selling, general and administration
expenses. Selling, general and administration expenses
(“SG&A”) of $8.4 million increased by $0.6 million, or 7.6%
compared to the prior year quarter. An increase in the impairment
of property and equipment and in professional fees of $0.5 million,
and $0.5 million, respectively, was partially offset by a reduction
of depreciation and amortization of $0.2 million and stock-based
compensation of $0.2 million. As a percentage of sales, SG&A
expenses increased to 62.9% in the first quarter from 54.9% in the
prior year quarter due to a deleveraging of fixed costs as a result
of decreased sales this quarter.
EBITDA1 and
Adjusted EBITDA1. EBITDA was negative $2.0 million in the
quarter ended May 4, 2024, compared to negative $1.2 million in the
prior year quarter, representing a decrease of $0.8 million.
Adjusted EBITDA was negative $0.8 million for the quarter ended May
4, 2024, compared to $0.9 million in the prior year quarter
Net loss. Net loss totaled $2.6
million in the quarter ended May 4, 2024, compared to a net loss of
$2.0 million in the prior year quarter. Adjusted net loss totaled
$1.6 million in the first quarter compared to Adjusted net loss of
$1.9 million in the prior year quarter.
Fully diluted net loss per
share. Fully diluted net loss per common share amounted to
$0.10 in the first quarter compared to a fully diluted net loss per
common share of $0.07 in the prior year quarter. Adjusted fully
diluted net loss per common share1, which is Adjusted net loss on a
fully diluted weighted average shares outstanding basis, was $0.06
compared to an Adjusted fully diluted net loss of $0.07 in the
prior year quarter.
________________1 For a reconciliation of
EBITDA, Adjusted EBITDA and Adjusted fully diluted (loss) earnings
per share to the most directly comparable measure calculated in
accordance with “IFRS”, see “Non-IFRS financial measures and
ratios”, in this MD&A.
LIQUIDITY AND CAPITAL
RESOURCES
As at May 4, 2024, the Company had $8.8 million
of cash held by major Canadian financial institutions.
The Company’s primary source of liquidity is
cash on hand and cashflow generated from operations as it does not
have access to third-party financing to fund its activities and to
meet any future financial obligations. Working capital requirements
are driven by the purchase of inventory, payment of payroll,
ongoing technology expenditures and other operating costs. Working
capital requirements fluctuate during the year, rising in the
second and third fiscal quarters as DAVIDsTEA takes title to
increasing quantities of inventory in anticipation of the peak
selling season in the fourth quarter.
Capital expenditures of $461 in the first
quarter of fiscal 2024, relating to store leasehold improvements of
$137 and computer hardware purchases of $324, were financially
impaired.
________________1 For a reconciliation of
EBITDA, Adjusted EBITDA and Adjusted fully diluted (loss) earnings
per share to the most directly comparable measure calculated in
accordance with “IFRS”, see “Non-IFRS financial measures and
ratios”, in this MD&A.
For the quarter ended May 4, 2024, the Company
reported a net loss of $2.6 million and used $2.6 million of cash
in its operating activities. Also, during the quarter, the
Company’s cash balance decreased by $3.8 million to $8.8
million.
As at May 4, 2024, the Company had financial
commitments in connection with the purchase of goods and services
that are enforceable and legally binding, amounting to $9.4
million, net of $0.7 million of advances (February 3, 2024 - $6.7
million, net of $0.8 million of advances) which are expected to be
discharged within 12 months.
The Company’s ability to continue as a going
concern is dependent on its ability to stabilize its business from
unfavourable revenue declines, reduce its costs so that at a
minimum, they are commensurate with revenues, and manage its
working capital. There is no assurance that such events will occur
and, as a result, this indicates the existence of a material
uncertainty that may cast a significant doubt on the Company’s
ability to continue as a going concern.
Cash Flow
A summary of our cash flows used in operating,
investing, and financing activities is presented in the following
table:
| |
|
|
|
|
|
|
|
|
|
| |
|
For the three-months ended |
|
| |
|
May
4, |
|
April
29, |
|
|
|
|
|
| |
|
2024 |
|
2023 |
|
|
|
|
|
| |
|
$ |
|
$ |
|
$ Change |
|
% Change |
|
| Cash
flows provided by (used in): |
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
(2,587 |
) |
|
(1,465 |
) |
|
(1,122 |
) |
|
(76.6 |
)% |
|
|
Financing activities |
|
(780 |
) |
|
(770 |
) |
|
(10 |
) |
|
(1.3 |
)% |
|
|
Investing activities |
|
(461 |
) |
|
(622 |
) |
|
161 |
|
|
25.9 |
% |
|
|
Decrease in cash |
|
(3,828 |
) |
|
(2,857 |
) |
|
(971 |
) |
|
(34.0 |
)% |
|
| |
|
|
|
|
|
|
|
|
|
Three-months ended May 4, 2024 compared to
three-months ended April 29, 2023
Cash flows used in operating
activities. Net cash used in operating
activities amounted to $2.6 million for the quarter ended May 4,
2024, representing a decrease of $1.1 million from the prior year
quarter. The decrease is mainly due to an increase in Accounts
receivable, Inventory, and Prepaids and Deposits balances,
partially offset by favourable changes in Trade and other payables
over the prior year quarter.
Cash flows used in financing
activities. Net cash flows used in financing activities of
$780 during the quarter ended May 4, 2024 represented an increase
in lease payments of $10 compared to the prior year quarter.
Cash flows used in investing
activities. Net cash flows used in investing activities of
$461 for the quarter ended May 4, 2024 are related to store
leasehold improvements of $137 and computer hardware of $324
compared to $0.6 million in the prior year quarter related to store
leasehold improvements of $0.5 million, as well as furniture and
equipment and computer software of $0.1 million.
Condensed Consolidated Financial
Data
(Canadian dollars, in thousands, except per
share information)
| |
|
|
|
|
|
|
|
| |
|
For the three-months ended |
|
| |
|
May
4, |
|
April
29, |
|
| |
|
2024 |
|
2023 |
|
| |
|
|
|
|
|
|
|
|
Sales |
|
$ |
13,435 |
|
|
$ |
14,313 |
|
|
| Cost of
sales |
|
|
7,615 |
|
|
|
8,541 |
|
|
| Gross
profit |
|
|
5,820 |
|
|
|
5,772 |
|
|
| Selling,
general and administration expenses |
|
|
8,447 |
|
|
|
7,853 |
|
|
| Results from
operating activities |
|
|
2,627 |
|
|
|
(2,081 |
) |
|
| Finance
costs |
|
|
146 |
|
|
|
182 |
|
|
| Finance
income |
|
|
(124 |
) |
|
|
(280 |
) |
|
| Net
loss |
|
$ |
2,649 |
|
|
$ |
(1,983 |
) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - by country |
|
|
|
|
|
|
|
| Canada |
|
$ |
11,729 |
|
|
$ |
12,193 |
|
|
| USA |
|
|
1,706 |
|
|
|
2,120 |
|
|
| |
|
|
|
|
|
|
|
|
Sales - by channel |
|
|
|
|
|
|
|
| Online |
|
|
6,740 |
|
|
|
7,647 |
|
|
| Retail |
|
|
4,528 |
|
|
|
4,265 |
|
|
|
Wholesale |
|
$ |
2,167 |
|
|
$ |
2,401 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| EBITDA1 |
|
$ |
1,980 |
|
|
$ |
(1,230 |
) |
|
| Adjusted
EBITDA1 |
|
|
(820 |
) |
|
|
(887 |
) |
|
| Adjusted net
loss 1 |
|
|
(1,577 |
) |
|
|
(1,883 |
) |
|
| Adjusted
fully diluted loss per common share1 |
|
$ |
(0.06 |
) |
|
$ |
(0.07 |
) |
|
| Gross profit
as a percentage of sales |
|
|
43.3 |
% |
|
|
40.3 |
% |
|
| SG&A
expenses as a percentage of sales |
|
|
62.9 |
% |
|
|
54.9 |
% |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows
used in operating activities |
|
$ |
(2,587 |
) |
|
$ |
(1,465 |
) |
|
| Cash flows
used in financing activities |
|
|
(780 |
) |
|
|
(770 |
) |
|
| Cash used in
investing activities |
|
|
(461 |
) |
|
|
(622 |
) |
|
| Decrease in
cash during the period |
|
|
(3,828 |
) |
|
|
(2,857 |
) |
|
| Cash, end of
period |
|
$ |
8,772 |
|
|
$ |
19,583 |
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
May
4, |
|
|
February
3, |
|
| As
at |
|
|
2024 |
|
|
2024 |
|
| Cash |
|
$ |
8,772 |
|
|
$ |
12,600 |
|
|
| Accounts and
other receivables |
|
|
1,551 |
|
|
|
1,800 |
|
|
| Prepaid
expenses and deposits |
|
|
5,787 |
|
|
|
5,877 |
|
|
|
Inventories |
|
|
17,094 |
|
|
|
15,658 |
|
|
| Trade and
other payables |
|
$ |
8,935 |
|
|
$ |
8,662 |
|
|
| |
|
|
|
|
|
|
|
________________
1 Please refer to “Use of Non-IFRS Financial
Measures” in this press release.
Use of Non-IFRS Financial Measures and
Ratios
This press release includes “non-IFRS financial
measures” defined as including: 1) EBITDA and Adjusted EBITDA, 2)
Adjusted net (loss) income, and 3) Adjusted fully diluted (loss)
income per common share. These non-IFRS financial measures are not
defined by or 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 the Company’s Management Discussion and Analysis for a
reconciliation to IFRS financial measures.
Note
This release should be read in conjunction with
the Company’s Management Discussion and Analysis, which is filed by
the Company with the Canadian securities regulatory authorities on
SEDAR+ at www.sedarplus.ca and will also be available in the
Investor Relations section of the Company’s website at
www.davidstea.com.
Caution Regarding Forward-Looking
Statements
This press release includes statements that
express our opinions, expectations, beliefs, plans or assumptions
regarding future events or future results and there are, or may be
deemed to be, “forward-looking statements” within the meaning of
applicable Canadian securities law. These forward-looking
statements can generally be identified by the use of
forward-looking terminology, including the terms “believes”,
“expects”, “may”, “will”, “should”, “approximately”, “intends”,
“plans”, “estimates” or “anticipates” or, in each case, their
negatives or other variations or comparable terminology. These
forward-looking statements include all matters that are not
historical facts and include statements regarding our intentions,
beliefs or current expectations concerning, among other things, our
strategy of transitioning to e-commerce and wholesale sales, future
sales through our e-commerce and wholesale channels, and our
results of operations, financial condition, liquidity and
prospects. Failure by the Company to secure a line of credit or
other loan facility on a timely basis could have a material adverse
effect on the Company’s cash position and liquidity. As well, the
Company can give no assurance that it will complete the opening of
two new stores in the province of Quebec in the fall of 2024 or
more than double its Canadian store footprint in the next three
years.
While we believe these opinions and expectations
are based on reasonable assumptions, such forward-looking
statements are inherently subject to risks, uncertainties and
assumptions about us, including the risk factors discussed in
Management Discussion and Analysis of Financial Condition and
Results of Operations for our fiscal year ended February 4, 2024,
filed with the Autorité des marchés financiers, on May 2, 2024
which could materially affect our business, financial condition or
future results.
Conference Call Information
A conference call to discuss the first quarter
Fiscal 2024 financial results is scheduled for June 18, 2024, at
8:30 am Eastern Time. The conference call will be webcast and may
be accessed via the Investor Relations section of the Company’s
website at ir.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 one year.
About DAVIDsTEADAVIDsTEA offers
a specialty branded selection of high-quality proprietary
loose-leaf teas, pre-packaged teas, tea sachets, tea-related
accessories and gifts through its e-commerce platform at
www.davidstea.com and the Amazon Marketplace, its wholesale
customers which include over 4,000 grocery stores and pharmacies in
Canada and 170 grocery stores in the United States, as well as 18
company-owned stores across Canada. The Company offers primarily
proprietary tea blends that are exclusive to the Company, as well
as traditional single-origin teas and herbs. The team’s passion for
and knowledge of tea permeates the Company’s culture and is rooted
in an excitement to explore the taste, health and lifestyle
elements of tea. With a focus on innovative flavours,
wellness-driven ingredients and organic tea, the Company launches
seasonally driven “collections” with a mission of making tea fun
and accessible to all. The Company is headquartered in Montréal,
Canada.
|
Contact information |
|
MBC Capital Markets AdvisorsPierre Boucher514-731-0000DAVIDsTEA
Investor Relations |
|
investors@davidstea.com |
DavidsTea (TSXV:DTEA)
Graphique Historique de l'Action
De Nov 2024 à Déc 2024
DavidsTea (TSXV:DTEA)
Graphique Historique de l'Action
De Déc 2023 à Déc 2024
