Q2 2022 DAVIDsTEA Inc Earnings Call
Executive Officer, and Chief brand Officer of Davids tea.
Thank you operator, good afternoon, everyone.
David T experienced volatility in our channels retail and wholesale channels were stable. However, primarily in our online channels. There was a slowdown in the second quarter of 2022 with sales and profitability decreasing year over year, mainly due to an uncertain macroeconomic environment dampening.
Demand.
After successfully navigating through the COVID-19 pandemic, we are coping with additional headwinds, notably announcing inflationary pressure and recessionary fears that are affecting consumer habits, and possibly discretionary spending in North America.
Despite these temporary challenges our wholesale business in Canada expanded in the second quarter with sales more than doubling year over year on the strength of a growing footprint at grocery chain drug stores and big box locations to 3800 doors, including a wider assortment of wellness focused and organic products.
We have complemented our wholesale strategy with store in store concepts and drug stores like Rexall, London drugs and neighbourly.
We are currently selling 30 T assortments within store in store concepts across 230 doors in Canada and plan to reach 40, Assortments and nearly 300 doors early into calendar 2023.
Our entire wholesale strategy is predicated on selling through these customers to consumers at an attractive product margin to.
Build on the success story, we will launch the new Sashayed format that will soon be available throughout our wholesale channel the new convenience driven individually rapped fully compostable sachet offering will elevate the consumer experience as peak, even more to the brand value and excessive.
Except the ability of the liquidity.
Beginning in the fourth quarter, we plan to start replicating the wholesale success in the United States with a gradual step by step launch at select locations.
The plan is to release, a curated assortment of loose leaf tea product learn from the outcome and expand accordingly.
We anticipate it will take two to three years to penetrate the U S wholesale market and leverage the expected high volume sales it will generate.
In addition, we intend to introduce our plans based ready to drink beverages in the first quarter of 2023. According to our current projections and fluctuating supply chain constraints, which tend to length and new initiatives.
He is helpful benefit driven T based RTD beverages will build on our expanded wholesale presence and we will target a large addressable market with mark differentiation in terms of health and wellness and convenience.
David T continues to excel in T sourcing lending and expertise in T knowledge education and community building, both in our stores and online.
The brand's continued focus on excellence and expanding the market for premium loose leaf tea remains our team's focus.
Notwithstanding industry wide supply chain challenges David She is moving forward with its growth strategy based on allocating resources to demand creation product innovation and operational excellence and an entrepreneurial culture, we will focus on what we can control while taking precautionary.
To manage market volatility.
Thank you for your attention today I will now turn the call over to Frank to tell our president and Chief financial and operating Officer David.
Thank you Christopher and good afternoon, everyone.
Sales decreased 18, 7% to $15 2 million in the second quarter of 2022, mainly due to a decline in e-commerce sales of $6 5 million.
As COVID-19 restrictions loosened in 2022 consumer spending shifted from online to brick and mortar we.
We believe e-commerce sales will stabilize coming out of this uncertain macroeconomic environment.
So we will continue to build on the wellness trend for healthier beverages.
With our target market.
Brick and mortar sales grew 35, 5% year over year to $4 2 million in the second quarter of 2022.
Partially due to the absence of pandemic related restrictions in Q2 compared.
Compared to the same periods last year.
Are there parts sales from our wholesale channels more than doubled to $2 7 million in the second quarter as mentioned earlier in.
In terms of revenue breakdown e-commerce brick and mortar and wholesale channels accounted for 55.
<unk>, 27% and 18% of total sales respectively in the second quarter.
Gross profit reached $6 5 million in the second quarter.
2022 down $1 5 million from Q2 of 'twenty, one mainly due to the sales shortfall, partially offset by lower delivery and distribution costs as a percentage of sales adjusted SG&A expenses in the second quarter of 2022, attaining 65% compared to 53, 5% in the same period last year.
Net loss in the second quarter of 2022 totaled $4 8 million compared to net income of $75 5 million in the second quarter of 2021.
Adjusted net loss, which excludes the impact of restructuring plan activities, the wage and rent subsidies from the Canadian government.
As well as software implementation that configuration costs amounted to $3 5 million compared to an adjusted net loss of $2 million in the same period last year.
Adjusted EBITDA, Meanwhile, amounted to negative $2 1 million compared to a negative $6 million in Q2 of 2021.
The decrease in adjusted EBITDA reflects the impact of sales decline resulted in a lower gross profit combined with an increase in online marketing expenses.
These factors were partially offset by Atlas administrative staff and professional fees.
At quarter end, we had $19 million in cash held by major Canadian financial institutions.
Backed by a strong growth plan. We also recently secured a $15 million line of credit.
With the bank of Nova Scotia to assist with working capital needs and to help us along our path to profitability.
This concludes our Q2.
2022 webcast on behalf of the entire David <unk>.
Thank you for joining the call today.
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