DAVIDsTEA Delivers Strong Turnaround in Fourth Quarter and Full Year Fiscal 2024 Results
/EIN News/ -- Fiscal 2024
- Sales reached $61.8 million, up 2% year-over-year
- Net loss narrows to $3.2 million, a $10.6 million improvement
- Adjusted EBITDA turned positive at $3.9 million, up $9.3 million
- Free cash flow of $7.3 million with year cash of $16.2
Q4 2024
- Sales of $23.2 million
- Net income of $2.5 million, up $6.4 million, despite lower revenue
- Adjusted EBITDA of $4.0 million, a $3.5 million improvement
MONTREAL, May 28, 2025 (GLOBE NEWSWIRE) -- DAVIDsTEA Inc. (TSX-Venture: DTEA) (“DAVIDsTEA” or the “Company”), a leading tea merchant in North America, announced today its fourth quarter and full-year results for the period ended February 1, 2025 (“Fiscal 2024”).
“Fiscal 2024 proved to be a positive turnaround year for DAVIDsTEA, marked by incremental sales growth, gross profit improvement and positive cash flow from operations,” said Sarah Segal, Chief Executive Officer and Chief Brand Officer, DAVIDsTEA. “These encouraging results reflect the disciplined execution of our omnichannel growth strategy by bringing our brand closer to consumers through the opening of two new retail stores and its spillover effect on wholesale and e-commerce sales. These results also confirm that our premium specialty teas remain a comforting purchase despite an unpredictable economic landscape. Demand for healthy tea and matcha products continues to expand globally. With a constant focus on being responsive to our customers, our results validate that moving fulfillment services in-house more than a year ago and transitioning to a more agile, cost-effective IT platform in recent months will positively affect the Company’s operations for years to come. We are pleased with the progress across our omnichannel business towards profitability, stabilizing the business and preparing for the next phase of growth.”
“In the fourth quarter, brick-and-mortar revenues were stable year-over-year despite one less week of sales than the fourth quarter of 2023. For their part, wholesale and e-commerce revenues slightly declined mainly due to the shorter selling season and a strike at Canada Post, respectively. The highlight of the quarter was unquestionably our return to profitability with net income of $2.5 million. We are proud of reaching this latest milestone and are determined to drive profitable growth in 2025 and beyond,” Ms. Segal added.
“Looking ahead to the next three-year cycle, we intend to generate a sales compound annual growth rate between 10 and 12% on the strength of growing our number of Canadian retail stores, accelerating wholesale expansion in the U.S., and enhancing our online presence. We also plan to raise our gross profit margin to 48-50% on a sustained basis by taking advantage of our in-house fulfillment capabilities, focusing on innovation and differentiated product pipeline, and better absorbing our fixed costs on higher sales volume. Finally, we expect to leverage annual cost savings of $4 million from the end of the third quarter of 2024 through the shift to our newly deployed IT platform and tight control on discretionary spending. As a result, we believe that we can achieve an adjusted EBITDA margin in the low double digits by the end of fiscal 2027 from mid-single digits in 2024,” Ms. Segal concluded.
“We are entering fiscal 2025 in a far better position than last year, notwithstanding an uncertain trade environment,” said Frank Zitella, President, Chief Financial and Operating Officer, DAVIDsTEA. “Key building blocks are in place to bolster sales growth; our brick-and-mortar, wholesale and e-commerce businesses are supported by strong unit economics; and we have added financial flexibility with a cash position of $16.2 million at the end of the fiscal year. The threat of U.S. tariffs remains a concern particularly the related impact on the Canadian economy; however, due to many years of diversifying our supply chains, we have demonstrated resilience in mitigating the direct impact to our business. It should also be noted that DAVIDsTEA has limited exposure to sales south of the border, which accounted for 14.3% of total revenue in 2024.”
Operating Results for the Fourth Quarter of Fiscal 2024
Three Months Ended February 1, 2025 compared to Three Months Ended February 3, 2024
Sales. Sales for the fourth quarter of fiscal 2024 decreased by $1.1 million to $23.2 million, or 4.6%, compared to the prior year quarter. Sale comparability for the quarter is impacted by the additional week in the prior year quarter. Furthermore, our sales were impacted by the postal strike in Canada that began before the heavy Black Friday sales period and continued well into the holiday season.
Sales in Canada, which accounted for 84.3% of total revenue, decreased by $1.1 million, or 5.5%, compared to the same quarter last year. U.S. sales of $3.6 million were the same as the prior year quarter.
Our 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 we deal with the macro-economic headwinds.
Tea and variety box assortment sales decreased by 6.7% or $1.5 million to $20.4 million over the prior year quarter. Tea accessories sales grew by 9.5% or $0.2 million, to $2.3 million over the prior year quarter.
Online sales of $12.4 million decreased by $0.7 million or 5.6% from $13.1 million from the prior year quarter. Online sales represented 53.3% of sales compared to 53.8% of sales in the prior year quarter.
Brick-and-mortar sales of $8.6 million were the same as the prior year quarter. Brick-and-mortar sales represented 36.9% of sales compared to 35.1% of sales in the prior year quarter.
Sales from the wholesale channel of $2.3 million decreased by $0.4 million or 16.1% from $2.7 million in the prior year quarter due partly to our decision to terminate an unprofitable sales account that provided $0.2 million of revenue. Wholesale sales represented 9.8% of sales compared to 11.1% of sales in the prior year quarter.
Gross profit. Gross profit increased by 8.5% to $11.2 million from the prior year quarter due to an increase in product margins, and a decrease in unitized freight, shipping and fulfillment costs. Gross profit as a percentage of sales increased to 48.4% for the quarter compared to 42.6% in the prior year quarter.
Selling, general and administration expenses. Selling, general and administration expenses (“SG&A”) of $8.6 million decreased by $5.6 million or 39.4% compared to the prior year quarter primarily due to a decrease in impairment of property and equipment, intangible assets and right-of-use assets of $3.4 million, a decrease in IT ongoing expenses of $0.9 million, a decrease in wages, salaries and employee benefits of $0.6 million and a decrease in professional and consulting fees of $0.3 million. Partially offsetting these reductions were an increase in credit card fees of $0.2 million and non-recurring software implementation and configuration costs of $0.2 million. As a percentage of sales, SG&A decreased to 37.1% in the quarter from 58.4% in the prior year quarter.
EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense)1. EBITDA was $3.8 million in the quarter compared to negative $2.9 million in the prior year quarter. Adjusted EBITDA was $4.0 million compared to $0.5 million for the same period in the prior year. Adjusted EBITDA (after rent equivalent expense), was $2.8 million in the quarter compared to negative $0.2 million in the prior year quarter. The increases quarter over quarter reflects the impact of an increase in Gross profit and a decrease in ongoing SG&A expenses.
Net income (loss) and Adjusted net income (loss). Net income was $2.5 million in the quarter compared to a net loss of $3.9 million in the prior year quarter. Adjusted net income was $2.7 million in the fourth quarter compared to Adjusted net loss of $0.5 million in the prior year quarter.
Fully diluted net loss per share. Fully diluted net income per common share amounted to $0.09 in the fourth quarter compared to a fully diluted net loss per common share of $0.14 in the prior year quarter. Adjusted fully diluted net income per common share1, which is Adjusted net income on a fully diluted weighted average shares outstanding basis, was $0.10 compared to an Adjusted fully diluted net loss of $0.02 in the prior year quarter.
Cash on hand. At the end of the fourth quarter of Fiscal 2024, the Company had cash amounting to $16.2 million.
Operating Results for the Fiscal Year Ended February 1, 2025 compared to the Fiscal Year Ended February 3, 2024
Sales. Sales for fiscal 2024 increased $1.2 million, or 1.9%, to $61.8 million. Sales in Canada of $53.0 million, representing 85.7% of total revenues, increased $1.1 million or 2.1% over the prior year. U.S. sales of $8.8 million were the same as the prior year.
Tea and variety box assortment sales increased by 1.5% or $0.8 million to $55.2 million over the prior year. Tea accessories sales decreased by 4.0% or $0.2 million, to $5.1 million over the prior year.
Online sales of $31.0 million decreased by $0.3 million or 1.2% from $31.3 million from the prior year. Online sales represented 50.1% of sales compared to 51.7% of sales in the prior year.
Brick-and-mortar sales of $22.0 million increased by $1.7 million or 8.4%, from $20.3 million in the prior year. Brick-and-mortar sales represented 35.6% of sales compared to 33.5% of sales in the prior year.
Sales from the wholesale channel of $8.8 million decreased by $0.2 million or 2.0%, from $9.0 million in the prior year. Adjusting Fiscal 2023 for our decision to terminate an unprofitable sales account that provided $1.5 million of revenue, comparable sales for the year would have increased by $1.3 million or 17.0%. Sales from the wholesale channel represented 14.3% of sales compared to 14.8% of sales in the prior year.
Gross profit. Gross profit increased by 21.9% to $29.5 million from the prior year due to higher sales, higher product margin and a decrease in unitized freight, shipping and fulfillment costs. Gross profit as a percentage of sales increased to 47.8% compared to 39.9% in the prior year.
Selling, general and administration expenses. Selling, general and administration expenses (“SG&A”) of $32.5 million decreased by $5.7 million or 14.9% compared to the prior year. Excluding the impact of non-recurring SG&A expenses, ongoing SG&A expenses of $29.2 million decreased by $4.1 million or 12.4% and explained by a concerted effort to reduce costs in line with revenues. Significant items include decreases in marketing costs of $0.8 million, IT ongoing expenses of $0.8 million, wages, salaries and employee costs of $0.5 million, stock-based compensation of $0.5 million, and professional and consulting fees of $0.5 million. As a percentage of sales, SG&A decreased to 52.6% in the quarter from 62.9% in the prior year.
During the third quarter, the Company transitioned its complete IT infrastructure to a lower cost and more agile set of solutions. Existing service contracts for technology no longer in use were fully recognized resulting in a loss of $3.1 million.
The resulting pro-forma annualized cost savings is estimated at $4.0 million which triggered a review of previously recorded impairment of property and equipment in our retail stores, each of which is considered a cash generating unit (“CGU”). The recoverable amount of each CGU was assessed by taking a fair value less cost of disposal method and calculated based on an EBITDA multiple. The resulting recoverable amount was then compared to the carrying amount of each CGU, which led the Company to reverse impairments related primarily to leasehold improvements expensed in both the prior and current year. A reversal of previously impaired property and equipment of $1.4 million was recorded in the third quarter of fiscal 2024.
EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense)1. EBITDA was $0.4 million in Fiscal 2024 compared to negative $10.4 million in the prior year. Adjusted EBITDA for Fiscal 2024 was $3.9 million compared to negative $5.4 million in the prior year. Adjusted EBITDA (after rent equivalent expense), was $0.1 million in the year compared to negative $8.5 million in the prior year. The increases year over year reflects the impact of an increase in Gross profit and a decrease in ongoing SG&A expenses.
Net loss and Adjusted net income (loss). Net loss was $3.2 million in Fiscal 2024 compared to a Net loss of $13.8 million in the prior year. Adjusted net income amounted to $0.1 million compared to an Adjusted net loss of $9.5 million in the prior year.
Fully diluted net loss per share. Fully diluted net loss per common share was $0.12 in Fiscal 2024 compared to a fully diluted net loss per share of $0.52 in Fiscal 2023. Adjusted fully diluted income (loss) per common share, which is Adjusted net loss on a fully diluted weighted average shares outstanding basis, was $nil, compared to $(0.36) in the prior year.
Liquidity and Capital Resources
As at February 1, 2025, we had $16.2 million of cash held by major Canadian financial institutions.
Working capital was $12.8 million as at February 1, 2025 compared to $19.7 million as at February 3, 2024. The decrease in working capital is substantially explained by a decrease in inventories and prepaid expenses and deposits and an increase trade and other payables. These are partially offset by an increase in cash.
Our primary source of liquidity is cash on hand and cashflow generated from operations. Our working capital requirements are driven by the purchase of inventory, payment of payroll, ongoing technology expenditures and other operating costs.
Our working capital requirements fluctuate during the year, rising in the second and third fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak selling season in the fourth fiscal quarter. Capital expenditures amounted to $1.6 million in Fiscal 2024 (Fiscal 2023 - $2.2 million), which was attributed to $1.0 million to leasehold improvements, $0.2 million to furniture and equipment and $0.4 million to computer hardware.
As at February 1, 2025, the Company had financial commitments in connection with the purchase of goods and services that are enforceable and legally binding on the Company, amounting to $7.4 million, net of $0.5 million of advances (Fiscal 2023 - $8.6 million, net of $0.4 million of advances) which are expected to be discharged within 12 months. Commitments include variable payments required under certain IT service contacts which are based on sales with minimum committed amounts beyond the next year amounting to $0.3 million and $0.2 million for the fiscal years 2026 and 2027, respectively.
Although uncertainty remains regarding the timing of a return to sustained profitability, management remains focused on executing the Company’s strategic plan. The business continues to operate in a challenging environment characterized by changing consumer behavior and ongoing inflationary pressures that impact consumer confidence.
1 For a reconciliation of EBITDA, Adjusted EBITDA, Adjusted EBITDA (after rent equivalent expense) and Adjusted fully diluted net income (loss) per common share to the most directly comparable measure calculated in accordance with “IFRS”, see “Non-IFRS financial measures and ratios”, in the related MD&A.
| Condensed Consolidated Financial Data | ||||||||||||||||
| (Canadian dollars, in thousands, except per share information) | ||||||||||||||||
| For the three-months ended | For the year ended | |||||||||||||||
| February 1, | February 3, | February 1, | February 3, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Sales | $ | 23,236 | $ | 24,351 | $ | 61,801 | $ | 60,643 | ||||||||
| Cost of sales | 11,994 | 13,987 | 32,264 | 36,419 | ||||||||||||
| Gross profit | 11,242 | 10,364 | 29,537 | 24,224 | ||||||||||||
| Selling, general and administration expenses | 8,617 | 14,223 | 32,477 | 38,173 | ||||||||||||
| Results from operating activities | 2,625 | (3,859 | ) | (2,940 | ) | (13,949 | ) | |||||||||
| Finance costs | 221 | 147 | 671 | 649 | ||||||||||||
| Finance income | (95 | ) | (143 | ) | (401 | ) | (771 | ) | ||||||||
| Net income (loss) | $ | 2,499 | $ | (3,863 | ) | $ | (3,210 | ) | $ | (13,827 | ) | |||||
| Sales - by country | ||||||||||||||||
| Canada | $ | 19,599 | $ | 20,729 | $ | 52,965 | $ | 51,858 | ||||||||
| USA | 3,637 | 3,622 | 8,836 | 8,785 | ||||||||||||
| Sales - by channel | ||||||||||||||||
| Online | 12,382 | 13,111 | 30,965 | 31,337 | ||||||||||||
| Retail | 8,584 | 8,535 | 22,026 | 20,319 | ||||||||||||
| Wholesale | $ | 2,270 | $ | 2,705 | $ | 8,810 | $ | 8,987 | ||||||||
| Comparable store sales growth | -4.7 | % | 6.6 | % | 6.9 | % | -4.6 | % | ||||||||
| Comparable retail sales per square foot | $ | 527 | $ | 553 | $ | 1,406 | $ | 1,316 | ||||||||
| EBITDA (1) | 3,794 | (2,948 | ) | 423 | (10,395 | ) | ||||||||||
| Adjusted EBITDA (1) | 4,029 | 519 | 3,912 | (5,427 | ) | |||||||||||
| Adjusted EBITDA (after rent equivalent expense) (1) | 2,799 | (236 | ) | 98 | (8,541 | ) | ||||||||||
| Adjusted net income (loss) (1) | 2,703 | (487 | ) | 106 | (9,536 | ) | ||||||||||
| Adjusted fully diluted income (loss) per common share(1) | $ | 0.10 | $ | (0.02 | ) | $ | 0.00 | $ | (0.36 | ) | ||||||
| Gross profit as a percentage of sales | 48.4 | % | 42.6 | % | 47.8 | % | 39.9 | % | ||||||||
| SG&A expenses as a percentage of sales | 37.1 | % | 58.4 | % | 52.6 | % | 62.9 | % | ||||||||
| Cash flows provided by (used in) operating activities | $ | 9,563 | $ | 1,771 | $ | 8,847 | $ | (4,613 | ) | |||||||
| Cash flows used in financing activities | (1,130 | ) | (743 | ) | (3,691 | ) | (3,073 | ) | ||||||||
| Cash used in investing activities | (188 | ) | (162 | ) | (1,569 | ) | (2,154 | ) | ||||||||
| Increase (decrease) in cash during the period | 8,245 | 866 | 3,587 | (9,840 | ) | |||||||||||
| Cash, end of period | $ | 16,187 | $ | 12,600 | $ | 16,187 | $ | 12,600 | ||||||||
| Free cash flow | $ | 9,375 | $ | 1,609 | $ | 7,278 | $ | (6,767 | ) | |||||||
| Inventory turnover | 0.49 | 0.46 | 1.26 | 1.12 | ||||||||||||
| CAPEX | $ | 188 | $ | 162 | $ | 1,569 | $ | 2,154 | ||||||||
| Number of stores | 20 | 18 | 20 | 18 | ||||||||||||
| February 1, |
November 2, |
August 3, |
May 4, |
|||||||||||||
| As at | 2025 | 2024 | 2024 | 2024 | ||||||||||||
| Cash | $ | 16,187 | $ | 7,942 | $ | 6,710 | $ | 8,772 | ||||||||
| Accounts and other receivables | 1,775 | 2,974 | 1,523 | 1,551 | ||||||||||||
| Prepaid expenses and deposits | 1,468 | 1,672 | 3,773 | 5,024 | ||||||||||||
| Inventories | 12,736 | 16,364 | 16,577 | 17,757 | ||||||||||||
| Trade and other payables | $ | 11,814 | $ | 11,687 | $ | 6,553 | $ | 8,935 | ||||||||
________________
1 Please refer to “Use of Non-IFRS Financial Measures” in this press release.
Use of Non-IFRS Financial Measures
This press release includes “non-IFRS financial measures” defined as including: 1) EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense), 2) Adjusted net income (loss), and 3) Adjusted fully diluted income (loss) 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. In particular, the proposed revolving line of credit with a commercial lender referred to in this press release is subject to numerous conditions, including completion of business and legal due diligence and final credit committee approval by the lender, negotiating and signing satisfactory loan documentation, and other terms and conditions customary for loan facilities of this type. Accordingly, there can be no assurance that the Company will enter into the revolving line of credit on the timetable or on the terms and conditions contemplated, or at all.
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 1, 2025, filed with the Autorité des marchés financiers, on May 28, 2025.
Conference Call Information
A conference call to discuss the fourth quarter Fiscal 2024 financial results is scheduled for May 28, 2025, 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 DAVIDsTEA
DAVIDsTEA 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 over 900 grocery stores in the United States, as well as 20 company-owned stores across Canada. It 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 Advisors Pierre Boucher 514-731-0000 |
DAVIDsTEA Investor Relations investors@davidstea.com |
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