Q4 2021 DAVIDsTEA Inc Earnings Call
Welcome to David's cheese fourth quarter and full year fiscal 2021 earnings webcast. Today's webcast is being recorded and is in a listen only mode.
Before we get started I would like to remind you of the company's Safe Harbor language. This presentation includes forward looking statements about our expectations for the performance of our business in the coming quarter and year.
Each forward looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Additional information regarding these factors appears under the heading risk factors in our Form 10-K , which was filed with the Securities and Exchange Commission. This morning and is available at Www Dot FCC dot Gov with the taste and mouth shape yeah.
And on Davids Ts website.
The forward looking statements in this discussion speak only as of today's date and we undertake no obligation to update or revise any of these statements. If any non <unk> financial measure is used on the call a reconciliation to the most directly comparable <unk> measure will be detailed in our Form 10-K .
As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated.
At this point I would like to turn the call over to Sarah Siegel, Chief Executive Officer, and Chief brand Officer of Davids tea.
Hello, everyone and thank you for joining us.
With me today is Frank the Tele David.
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Fiscal 2021 requested that we stayed the course on our long term growth strategy we.
We adapted to a change in consumer habits related to the COVID-19 pandemic by focusing on our digital platform as well as supporting and growing our other channels.
We emerged from a formal restructuring process is a more efficient and more invigorated organization and.
And we managed to surging inflationary pressure supply chain disruptions and labor constraints by developing workarounds plans.
Given this challenging environment, we delivered annual sales of $104 million and a second.
<unk> consecutive year of positive adjusted EBITDA in 2021.
Accelerating our transformation into a digital first omnichannel leader in specialty tea.
Laser marketing Wow Digital index confirmed David <unk> enhanced digital presence in 2021 by ranking the company for its overall for best online customer experience in Canada.
We're continuing to provide two levers with the same high quality products and service, but through more cost efficient and scalable distribution channels.
As a result, we're looking to the future with optimism.
Tempered by a short term.
Macroeconomic headwinds.
Our actions are driven by our vision to become the world's most innovative and purpose driven company, one that inspires greater wellness and sustainability.
All our actions based upon our digital first strategy are designed to respond to growing demand.
Meeting consumers wherever they are and building loyalty with the ability to scale the business without borders.
We are focused on creating a winning culture that has fueled by connecting with consumers and driven to overcome challenging operational and market conditions.
Our vision is centered on sustainable and profitable revenue growth with an unwavering sense of caution purpose and commitment.
More specifically in my role as Chief brand Officer, I am focused on product innovation and excellence to drive revenue growth.
During the past year, we innovated on several fronts, including launching our most extensive quality collection featuring unique pumpkin spice inspired Glenn.
We introduced pumpkin White tea, Pumpkin, Earl Grey and Pumpkin March other complement our best selling pumpkin shy.
We also released our biggest holiday countdown calendar collection with 24 days of <unk>.
We offered three Davis to holiday calendars in 2021, including our March account down in a caffeine free count though.
These iconic calendars were major contributors to increasing our gifting assortment sales, 30% year over year to almost $19 million in the fourth quarter.
We continued our partnership by marketing with brands such as the Glenlivet.
During the holidays, especially package bottles of the Glen Love at 12 year olds.
Our sold with SaaS shave, David T Pumpkin cream boule, one double walled glass.
And a QR code for downloading the cocktail recipes.
In addition, we partnered with the better sleep app to strengthen the connection between <unk> and healthy sleep.
This partnership involves carrying specific wellness tea blends with better sleeps curated collection of guided meditation soothing music and bedtime stories.
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On the health and wellness side, we expanded our powder <unk> to include a super food TMP Hot chocolate powder with three organically certified vegan friendly flavors.
These unique mixtures consist of powder T rich cocoa and energizing Super foods, like what Kumar and ratio mushrooms.
We increased our Assortments and the guard into Cup collection, demonstrating excellence and T sourcing and a desire to work with creative gardens around the world.
Focusing on traditional and flavored teas allows us to balance our assortment of flavor full and creative Glenn to attract customers and give our existing customers new tiers to explore and discover.
We further innovated in 2021 by expanding the Davids tea experience beyond our stores to a virtual community.
We continued building our virtual subscription based community called the T tasting club.
We also launched our own podcast called sleeping together, which is entirely dedicated to the world of tea.
It provides key levers with the opportunity to have a more direct and personal conversation with a global community.
As a leading team merchant, which struck with a strong brand we seek to share our passion and love for achieved by implementing excellence and innovation across the toothpaste from ice tea matcha powders to traditional and specialty loose leaf tea.
Accordingly, the unmatched breadth depth and originality of our lease leaf tea assortments.
<unk> us with a marked competitive advantage in the growing specialty market.
In closing I would like to thank our team members for their dedication and resiliency during the past fiscal year.
Our full confidence the entire David T team is up to the challenge for 2022 and beyond.
Despite inflationary pressure in supply chain constraints, we are ready to face new challenges and opportunities with an ongoing desire.
Leaders and creators in the exciting growth market dedicated to consumers.
At this point I will now turn the call over to Frank who will discuss our financial results in greater detail.
Thank you Sarah and Hello, everyone. We're pleased with our sales performance in the seasonally strong fourth quarter with revenue of $39 9 million.
Our gifting assortment delivered strong results with sales, increasing $4 3 million year over year or 30%.
Sales from our e-commerce , and wholesale channels decreased by $4 4 million or 14, 3%.
As we transition from the previous year's pandemic fuel surge of online sales to serving customers through our omnichannel capabilities.
Brick and mortar sales in Q4, 2021 improved by $4 million from the prior year's fourth quarter due to an increase in same store sales and introduction of pop up shops in strategic locations during the holiday season.
Altogether sales from E Commerce, and wholesale represented 77% of total sales in the fourth quarter of 2021, while brick and mortar sales accounted for 23%.
In Q4, 2021 gross profit totaled $15 8 million up one 1% from last year's fourth quarter the.
The increase in gross profit can be attributed to improved product margins.
And lower delivery and distribution costs.
These items were partially offset by higher retail lease expenses year over year and.
And as a percentage of sales gross profit reached 39, 7% in the fourth quarter of 2021 compared to 38, 9% for the same period in 2020.
In the fourth quarter of 2021.
SG&A expenses increased $3 $8 million year over year to $14 1 million, while adjusted SG&A expenses were up $2 3 million to $13 9 million during the same period.
These higher SG&A expenses are mainly due to increases in online marketing expenses additional staff to support our flagship retail stores as well as incremental professional and recurring software related costs.
As a percentage of sales adjusted SG&A amounted to 34, 8% in the fourth quarter of 2021 compared to 28, 9% in the fourth quarter of 2020.
In the fourth quarter of 2021, adjusted EBITDA, which excludes the impact of stock based compensation impairment of property and equipment and right of use assets.
Structuring plan activities wage and rent subsidies from the Canadian government and non recurring software implementation cost reached.
Reached $3 7 million compared to $5 4 million in Q4 of 2020.
The decrease in adjusted EBITDA in the fourth quarter of 2021 reflects higher adjusted SG&A expenses of $2 zero million.
To accelerate the transition of our business to primarily in e-commerce and wholesale distribution model.
This increase in SG&A costs was partially offset by improved gross profit.
As of January 29, 2022, we had a healthy cash position of $25 1 million and working capital of $43 4 million to support our growth strategy.
As we look ahead.
Some of our value creation initiatives include continuing to fuel our digital first strategy.
By meeting customers wherever they are.
Increasing the marketing and geographic reach of our Amazon platform.
Entering the wholesale channel in the U S to support online sales in this market in line with our successful omni channel strategy in Canada and.
And expanding our successful store within a store concept with our Canadian wholesale customers.
Ultimately, we intend to build a path towards sustainable value creation by focusing on demand creation and product innovation.
Supported by a winning culture with a focus on operational delivery excellence.
This concludes our prepared remarks.
Thank you for joining us today, we look forward to speaking with you all following the release of our first quarter results and 2022.
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