DAVIDsTEA Inc. (TSX-Venture: DTEA) (“DAVIDsTEA” or the “Company”),
a leading tea merchant in North America, announced today its second
quarter results for the period ended August 3, 2024.
“We are pleased to report that DAVIDsTEA reached
a key inflection point in the second quarter of 2024 with sales
increasing by 12.8% year-over-year,” said Sarah Segal, Chief
Executive Officer and Chief Brand Officer, DAVIDsTEA. “We are
grateful for the trust of our loyal consumers who seek out the best
flavour profiles available on the market as we continue to innovate
and introduce new and incredible tasting tea blends for consumers
to enjoy.”
“Sales momentum continues into the early third
quarter with revenues up more than 18% compared to the same period
in 2023. We are excited to mark our renewed focus on
brick-and-mortar retail with the opening of a new location in the
Royalmount Mall in Mount Royal, Quebec, and look forward to
launching a new store in downtown Montreal in early November,
raising the total number of flagship stores to 20. As we prepare
for the revenue-intensive third and fourth quarters, our focus
remains on delivering excellent value, service and innovation to
our consumers,” added Ms. Segal.
“Our financial results are moving in the right
direction as we continue to execute our operational strategy,” said
Frank Zitella, President, Chief Financial and Operating Officer,
DavidsTea. “Revenues are up and costs are down, both year-over-year
and sequentially, across all categories. We also have significant
leverage in our business model, which positions us well for the
second half of the year as we stabilize the business against
unfavourable headwinds and double down on investments in both our
brick-and-mortar and online operations.”
Operating Results for the Second Quarter
of Fiscal 2024
Three Months Ended August 3, 2024 compared to
Three Months Ended July 29, 2023
Sales. Sales for the second
quarter of fiscal 2024 increased by $1.3 million, or 12.8%, to
$11.1 million. Sales in Canada, which accounted for 86.8% of total
revenue, grew by $1.2 million, or 14.9%, compared to the same
quarter last year while U.S. sales remained unchanged at $1.5
million from the prior year quarter.
DAVIDsTEA’s focus has been on delivering a value
proposition that resonates with consumers supported by a memorable
experience, both in person and online in order to generate sales as
the Company deals with macro-economic headwinds.
Tea and variety box assortment sales increased
by13.7% or $1.2 million to $9.9 million over the prior year
quarter. Tea accessories sales decreased by 14.0% or $0.1 million,
to $0.8 million over the prior year quarter.
Online sales of $5.5 million increased by $0.6
million or 12.5% from $4.9 million from the prior year quarter.
E-commerce sales represented 49.4% of sales compared to 49.7% of
sales in the prior year quarter.
Sales from the wholesale channel of $1.4 million
were the same as in the prior year quarter. Wholesale sales
represented 12.8% of sales compared to 14.3% of sales in the prior
year quarter.
Brick-and-mortar sales of $4.2 million increased
by $0.7 million or 17.8%, from $3.5 million for the same period in
the prior year. Brick-and-mortar sales represented 37.8% of sales
compared to 35.9% of sales in the prior year quarter.
Gross profit. Gross profit
increased by 44.6% to $5.3 million from the prior year quarter due
to higher sales and a decrease in unitized freight, shipping and
fulfillment costs. Gross profit as a percentage of sales increased
to 47.3% for the quarter compared to 36.9% in the prior year
quarter. At a segment level, Gross profit as a percentage of sales
reached 45.5% and 59.3% in the quarter compared to 36.2% and 41.3%
in the prior year quarter in Canada and in the U.S.,
respectively.
Selling, general and administration
expenses. Selling, general and administration expenses
(“SG&A”) of $6.7 million decreased by $1.2 million, or 15.2%
compared to the prior year quarter. A decrease in costs related to
internalizing fulfillment services of $0.8 million, marketing
expenses of $0.4 million and depreciation and amortization of $0.3
million was partially offset by an increase in the impairment of
property and equipment of $0.3 million and other selling, general
and administration costs of $0.3 million. As a percentage of sales,
SG&A expenses decreased to 60.5% in the second quarter from
80.6% in the prior year quarter.
EBITDA1 and Adjusted
EBITDA1. EBITDA was negative $0.8 million in the quarter
compared to negative $3.4 million in the prior year quarter.
Adjusted EBITDA was negative $0.3 million compared to negative $2.6
million for the same period in the prior year. The increase in
Adjusted EBITDA of $2.3 million reflects the impact of higher Sales
and Gross profit and a decline in SG&A expenses.
Net loss. Net loss totaled $1.5
million in the quarter compared to a net loss of $4.3 million in
the prior year quarter. Adjusted net loss was $1.0 million in the
second quarter compared to Adjusted net loss of $3.6 million in the
prior year quarter.
Fully diluted net loss per
share. Fully diluted net loss per common share amounted to
$0.06 in the second quarter compared to a fully diluted net loss
per common share of $0.16 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 $0.04
compared to an Adjusted fully diluted net loss of $0.14 in the
prior year quarter.
LIQUIDITY AND CAPITAL
RESOURCES
As at August 3, 2024, the Company had $6.7
million of cash held by major Canadian financial institutions.
Working capital was $15.5 million as at August
3, 2024 compared to $19.7 million as at February 3, 2024. The
decrease in working capital can be attributed to a decrease in
cash, accounts receivable and prepaid expenses and deposits,
partially offset by a decline in accounts payable and deferred
revenue.
The Company’s primary source of liquidity is
cash on hand and cash flow generated from operations. 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 fiscal
quarter. Capital expenditures of $312 thousand in the second
quarter of fiscal 2024 includes the purchase of furniture and
equipment of $29 thousand, store leasehold improvements of $270
thousand and computer hardware purchases of $13 thousand. Capital
expenditures in the second quarter of fiscal 2023 amounted to $321
thousand comprised of furniture and equipment of $153 thousand,
store leasehold improvements of $70 thousand, computer hardware of
$21 thousand and intangible assets of $77 thousand.
As at August 3, 2024, the Company had financial
commitments in connection with the purchase of goods and services
that are enforceable and legally binding, amounting to $10.2
million, net of $0.5 million of advances (February 3, 2024 - $9.9
million, net of $0.4 million of advances) which are expected to be
discharged within 12 months.
Cash Flow
A summary of our cash flows used in operating,
investing, and financing activities is presented in the following
table (amounts in thousands of Canadian dollars):
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For the three-months ended |
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For the six-months ended |
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August 3, |
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July 29, |
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August 3, |
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July 29, |
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2024 |
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2023 |
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2024 |
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2023 |
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$ |
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$ |
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$ Change |
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% Change |
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$ |
|
$ |
|
$ Change |
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|
% Change |
| Cash
flows provided by (used in): |
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|
|
|
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|
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|
|
|
|
|
|
Operating activities |
|
(970 |
) |
|
(4,297 |
) |
|
3,327 |
|
|
77.4 |
% |
|
(3,557 |
) |
|
(5,762 |
) |
|
2,205 |
|
|
38.3 |
% |
|
Financing activities |
|
(780 |
) |
|
(772 |
) |
|
(8 |
) |
|
(1.0 |
)% |
|
(1,560 |
) |
|
(1,542 |
) |
|
(18 |
) |
|
(1.2 |
)% |
|
Investing activities |
|
(312 |
) |
|
(321 |
) |
|
9 |
|
|
2.8 |
% |
|
(773 |
) |
|
(943 |
) |
|
170 |
|
|
18.0 |
% |
|
Decrease in cash |
|
(2,062 |
) |
|
(5,390 |
) |
|
3,328 |
|
|
61.7 |
% |
|
(5,890 |
) |
|
(8,247 |
) |
|
2,357 |
|
|
28.6 |
% |
Three-months ended August 3, 2024 compared to
three-months ended July 29, 2023
Cash flows used in operating
activities. Net cash used in operating
activities amounted to $1.0 million for the quarter ended August 3,
2024, representing an improvement of $3.3 million versus the amount
used in the prior year quarter. The Company is seeing the benefit
of actively managing working capital and improving financial
performance in the quarter.
Cash flows used in financing
activities. Net cash flows used in financing activities of
$780 thousand during the quarter ended August 3, 2024, represents
an increase in lease payments of $8 thousand compared to the prior
year quarter.
Cash flows used in investing
activities. Net cash flows used in investing activities
are comprised of capital expenditures primarily related to store
openings and renovations. Capital expenditures of $312 thousand
includes furniture and equipment of $29 thousand, store leasehold
improvements of $270 thousand and computer hardware of $13 thousand
in the second quarter compared to furniture and equipment of $153
thousand, store leasehold improvements of $70 thousand, computer
hardware of $21 thousand and intangible assets of $77 thousand in
prior year quarter.
Condensed Consolidated Financial
Data(Canadian dollars, in thousands, except per share
information)
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For the three-months ended |
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For the six-months ended |
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August 3, |
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July 29, |
|
August 3, |
|
July 29, |
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2024 |
|
2023 |
|
2024 |
|
2023 |
| |
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|
Sales |
|
$ |
11,091 |
|
|
$ |
9,834 |
|
|
$ |
24,526 |
|
|
$ |
24,147 |
|
| Cost of
sales |
|
|
5,840 |
|
|
|
6,203 |
|
|
|
13,455 |
|
|
|
14,889 |
|
| Gross
profit |
|
|
5,251 |
|
|
|
3,631 |
|
|
|
11,071 |
|
|
|
9,258 |
|
| Selling,
general and administration expenses |
|
|
6,714 |
|
|
|
7,922 |
|
|
|
15,161 |
|
|
|
15,630 |
|
| Results from
operating activities |
|
|
(1,463 |
) |
|
|
(4,291 |
) |
|
|
(4,090 |
) |
|
|
(6,372 |
) |
| Finance
costs |
|
|
119 |
|
|
|
177 |
|
|
|
265 |
|
|
|
359 |
|
| Finance
income |
|
|
(95 |
) |
|
|
(216 |
) |
|
|
(219 |
) |
|
|
(496 |
) |
| Net
loss |
|
$ |
(1,487 |
) |
|
$ |
(4,252 |
) |
|
$ |
(4,136 |
) |
|
$ |
(6,235 |
) |
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|
Sales - by country |
|
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|
|
|
| Canada |
|
$ |
9,630 |
|
|
$ |
8,383 |
|
|
$ |
21,359 |
|
|
$ |
20,576 |
|
| USA |
|
|
1,461 |
|
|
|
1,451 |
|
|
|
3,167 |
|
|
|
3,571 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales - by channel |
|
|
|
|
|
|
|
|
|
|
|
|
| Online |
|
|
5,485 |
|
|
|
4,874 |
|
|
|
12,225 |
|
|
|
12,521 |
|
| Retail |
|
|
4,188 |
|
|
|
3,555 |
|
|
|
8,716 |
|
|
|
7,820 |
|
|
Wholesale |
|
$ |
1,418 |
|
|
$ |
1,405 |
|
|
$ |
3,585 |
|
|
$ |
3,806 |
|
| |
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|
|
|
|
| EBITDA1 |
|
$ |
(800 |
) |
|
$ |
(3,400 |
) |
|
$ |
(2,780 |
) |
|
$ |
(4,629 |
) |
| Adjusted
EBITDA1 |
|
|
(308 |
) |
|
|
(2,593 |
) |
|
|
(1,128 |
) |
|
|
(3,479 |
) |
| Adjusted net
loss 1 |
|
|
(1,033 |
) |
|
|
(3,622 |
) |
|
|
(2,610 |
) |
|
|
(5,505 |
) |
| Adjusted
fully diluted loss per common share1 |
|
$ |
(0.04 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.21 |
) |
| Gross profit
as a percentage of sales |
|
|
47.3 |
% |
|
|
36.9 |
% |
|
|
45.1 |
% |
|
|
38.3 |
% |
| SG&A
expenses as a percentage of sales |
|
|
60.5 |
% |
|
|
80.6 |
% |
|
|
61.8 |
% |
|
|
64.7 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flows
used in operating activities |
|
$ |
(970 |
) |
|
$ |
(4,297 |
) |
|
$ |
(3,557 |
) |
|
$ |
(5,762 |
) |
| Cash flows
used in financing activities |
|
|
(780 |
) |
|
|
(772 |
) |
|
|
(1,560 |
) |
|
|
(1,542 |
) |
| Cash used in
investing activities |
|
|
(312 |
) |
|
|
(321 |
) |
|
|
(773 |
) |
|
|
(943 |
) |
| Decrease in
cash during the period |
|
|
(2,062 |
) |
|
|
(5,390 |
) |
|
|
(5,890 |
) |
|
|
(8,247 |
) |
| Cash, end of
period |
|
$ |
6,710 |
|
|
$ |
14,193 |
|
|
$ |
6,710 |
|
|
$ |
14,193 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
August 3, |
|
|
May 4, |
|
|
February 3, |
|
|
October 28, |
| As
at |
|
|
2024 |
|
|
2024 |
|
|
2024 |
|
|
2023 |
| Cash |
|
$ |
6,710 |
|
|
$ |
8,772 |
|
|
$ |
12,600 |
|
|
$ |
11,734 |
|
| Accounts and
other receivables |
|
|
1,523 |
|
|
|
1,551 |
|
|
|
1,800 |
|
|
|
2,420 |
|
| Prepaid
expenses and deposits |
|
|
4,326 |
|
|
|
5,687 |
|
|
|
5,877 |
|
|
|
6,042 |
|
|
Inventories |
|
|
16,024 |
|
|
|
17,094 |
|
|
|
15,658 |
|
|
|
18,106 |
|
| Trade and
other payables |
|
$ |
6,553 |
|
|
$ |
8,935 |
|
|
$ |
8,662 |
|
|
$ |
10,722 |
|
________________1 Please refer to “Use of
Non-IFRS Financial Measures” in this press release.
Use of Non-IFRS Financial Measures and
RatiosThis 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.
NoteThis 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
StatementsThis 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. The Company can give no assurance that it will 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 3, 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 InformationA
conference call to discuss the second quarter Fiscal 2024 financial
results is scheduled for September 17, 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.
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,
over 1,500 convenience stores in Canada and 170 grocery stores in
the United States, as well as 19 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 Boucher514-731-0000 |
DAVIDsTEA Investor Relationsinvestors@davidstea.com |
1 Please refer to “Use of Non-IFRS Financial Measures” in this
press release.
DavidsTea (TSXV:DTEA)
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