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DAVIDsTEA Inc. Announces Second Quarter Fiscal 2016 Financial Results

Second quarter sales growth of 25.3% to C $41.1 million; comparable sales increase of 5.1%

Reiterates Fiscal 2016 outlook

MONTREAL, Sept. 07, 2016 (GLOBE NEWSWIRE) -- DAVIDsTEA Inc. (Nasdaq:DTEA) today announced financial results for the three months and six months ended July 30, 2016.

For the three months ended July 30, 2016:

  • Sales increased by 25.3% to C$41.1 million from C$32.8 million in the second quarter of fiscal 2015. Comparable sales increased by 5.1%.
  • Gross profit increased by 23.6% to C$19.9 million from C$16.1 million in the second quarter of fiscal 2015, while gross profit as a percent of sales decreased to 48.5% from 49.0% in the second quarter of fiscal 2015. The decrease in gross profit as a percent of sales was driven primarily by the adverse impact of the stronger U.S. dollar on U.S. dollar denominated purchases, partially offset by supply chain efficiencies. On a constant currency basis, gross profit as a percent of sales increased 10 basis points to 49.1%.
  • Selling, general and administration expenses ("SG&A") increased to C$22.8 million from C$18.2 million in the second quarter of fiscal 2015, due primarily to the hiring of additional staff to support the growth of the Company, higher store operating expenses to support the operations of 208 stores as of July 30, 2016 as compared to 165 stores as of August 1, 2015, as well as newly incurred public company costs. As a percent of sales, SG&A decreased to 55.5% from 55.6% in the second quarter of fiscal 2015. Excluding the loss on disposal of property and equipment in the prior year period, SG&A increased to C$22.8 million from C$17.9 million in the second quarter of fiscal 2015. As a percent of sales, SG&A excluding the loss on disposal of property and equipment in the prior year period increased to 55.5% from 54.6%.
  • Results from operating activities were C$(2.9) million as compared to C$(2.2) million in the second quarter of fiscal 2015. Excluding the loss on disposal of property and equipment in the prior year period, results from operating activities decreased to C$(2.9) million from C$(1.9) million in the second quarter of fiscal 2015.
  • The Company opened 10 net new stores in the second quarter of fiscal 2016 and ended the quarter with a total of 208 stores in Canada and the U.S. This represents an increase of 26% from the end of the second quarter of fiscal 2015.
  • Net income was C$(2.3) million compared to C$(52.1) million in the second quarter of fiscal 2015 which, as previously stated, includes a C$50.2 million non-cash loss associated with the embedded derivative on Series A, A-1 and A-2 preferred shares as all preferred shares were converted into common shares in conjunction with the IPO transaction (see Reconciliation of IFRS basis to Adjusted net income (loss) table). Adjusted net income, which excludes IPO-related and other one-time income or expenses in the prior year period (see Reconciliation of IFRS basis to Adjusted net income (loss) table), was C$(2.3) million compared to C$(1.6) million in the second quarter of fiscal 2015.
  • Adjusted EBITDA was C$0.2 million compared to C$0.2 million in the second quarter of fiscal 2015. Adjusted EBITDA excludes IPO-related and other non-cash or one-time costs (see Reconciliation of Adjusted EBITDA table).
  • Fully diluted income per common share was C$(0.09) compared to C$(2.73) in the second quarter of fiscal 2015. Adjusted fully diluted income per common share, which is adjusted net income on an adjusted fully diluted weighted average shares outstanding basis (see Reconciliation of fully diluted weighted average common shares outstanding table), was C$(0.09) per share compared to C$(0.07) per share in the second quarter of fiscal 2015.

Sylvain Toutant
, President and Chief Executive Officer, stated, "We are pleased with our second quarter results which are a testament to the strength of our brand and the progress we continue to make on our goals. In the U.S., strong e-commerce sales were offset by our store sales which were lower than expected. We continue to refine the U.S. model, learn from our customers and remain enthusiastic and focused on the expansion opportunity we see for our brand."

Mr. Toutant concluded, "Given our first half performance and our outlook for the rest of the year, we are reaffirming our previously provided FY16 guidance. We are excited about our innovative product pipeline and marketing line-up for holiday that we believe will resonate with our customers, and we remain focused on delivering continued progress against our strategic priorities of building the brand, growing our store base and e-commerce footprint, driving profitability and realizing the significant potential we believe exists for this business."

For the six months ended July 30, 2016:

  • Sales increased by 24.6% to C$85.5 million from C$68.6 million in the comparable period in fiscal 2015. Comparable sales increased by 5.0%.
  • Gross profit increased by 22.8% to C$43.1 million from C$35.1 million in the comparable period in fiscal 2015, while gross profit as a percent of sales decreased to 50.3% from 51.2% in the comparable period in fiscal 2015. The decrease in gross profit as a percent of sales was driven primarily by the adverse impact of the stronger U.S. dollar on U.S. dollar denominated purchases, partially offset by supply chain efficiencies. On a constant currency basis, gross profit as a percent of sales increased 60 basis points to 51.8%.
  • Selling, general and administration expenses ("SG&A") increased to C$43.9 million from C$35.2 million in the comparable period in fiscal 2015, due primarily to the hiring of additional staff to support the growth of the Company, higher store operating expenses to support the operations of 208 stores as of July 30, 2016 as compared to 165 stores as of August 1, 2015, as well as newly incurred public company costs. As a percent of sales, SG&A increased to 51.4% from 51.3% in the comparable period in fiscal 2015. Excluding the loss on disposal of property and equipment in the prior year period, SG&A increased to C$43.9 million from C$34.9 million in the comparable period in fiscal 2015. As a percent of sales, SG&A excluding the loss on disposal of property and equipment in the prior year period increased to 51.4% from 50.9%.
  • Results from operating activities were C$(0.9) million as compared to C$(4.1) million in the comparable period in fiscal 2015. Excluding the stock-based compensation expense related to cashless exercise and the loss on disposal of property and equipment in the prior year period, results from operating activities decreased to C$(0.9) million from C$0.2 million in the comparable period in fiscal 2015.
  • The Company opened 15 net new stores in the comparable period in fiscal 2016 and ended the period with a total of 208 stores in Canada and the U.S. This represents an increase of 26% from the end of the comparable period in fiscal 2015.
  • Net income was C$(0.8) million compared to net income of C$(145.3) million in the comparable period in fiscal 2015 which, as previously stated, includes a C$140.9 million non-cash loss associated with the embedded derivative on Series A, A-1 and A-2 preferred shares as all preferred shares were converted into common shares in conjunction with the IPO transaction (see Reconciliation of IFRS basis to Adjusted net income (loss) table). Adjusted net income, which excludes IPO-related and other one-time income or expenses in the prior year period (see Reconciliation of IFRS basis to Adjusted net income (loss) table), was C$(0.8) million compared to C$(0.5) million in the comparable period in fiscal 2015.
  • Adjusted EBITDA was C$4.7 million compared to C$4.2 million in the comparable period in fiscal 2015. Adjusted EBITDA excludes IPO-related and other non-cash or one-time costs (see Reconciliation of Adjusted EBITDA table).
  • Fully diluted income per common share was C$(0.03) compared to C$(9.35) in the comparable period in fiscal 2015. Adjusted fully diluted income per common share, which is adjusted net income on an adjusted fully diluted weighted average shares outstanding basis (see Reconciliation of fully diluted weighted average common shares outstanding table), was C$(0.03) per share...

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