Q2 2024 DAVIDsTEA Inc Earnings Call
As we navigate todays complex economic landscape I wanted to take the time. This morning to provide an update on the initiatives. We have taken and continue to take to address our post COVID-19 alignment of the business and drive profitable growth.
In response to consumer demand late last year, we launched our innovative in store T bar concept in our store in CF Carrefour Laval, followed by they get any use of that capital the store in early 2023.
Designed to enhance the shopping experience and boost foot traffic our T bars provide new proprietary technologies that accelerate the beverage preparation experience without diluting the specialty component.
T bars offer an exclusively curated and seasonally changing menu that showcases the wide variety of beverages or David's team from hot and iced tea and matcha tea pop N T part lemonade.
During the second quarter in June we added a T bar at our Toronto Eaton Centre location, marking our first in store T bar outside of the Quebec market.
And we have additional T bar locations slated to open later this year in auto was Rideau centre and in Vancouver or specific center.
We have continued to focus on profitable sales in our wholesale channel both in Canada and the U S. We continue to sell our premium sachet product in 3800 locations in Canada and through seasonal offerings in Costco across Canada.
Finally, as you know innovation remains at the core of our strategy from ready to drink beverages T. Pops Superfood powders cold released immunity and wellness products to March a lot of taste and lemonade, we believe that our enhanced product offering will ensure we continue to delight our customers, while also helping drive future sales growth.
While the economic environment remains challenging we are confident that our focus on value creation innovation and elevating our brand will position us for long term success.
We are grateful for your continued support as shareholders and we look forward to sharing the benefits of these initiatives with you in the form of sustainable growth and increase shareholder value.
You for your attention today I will now turn the call over to Frank.
Okay.
Thank you Sarah.
Good morning, everyone.
And Sarah mentioned, our sales for the second quarter were impacted by the current economic climate and by order fulfillment failures back in the fourth quarter.
Total sales for the quarter were down 35, 3% to $9 8 million.
In Canada, which represented 85, 2% of total revenue our sales were down 34, 5%, while our U S sales declined 39, 6%.
Our online sales decreased 41, 4% as we continued to see a leveling out after the pandemic fueled peak, we experienced back in calendar 2020.
Online sales represented 49, 5% of total revenues compared to 54, 8% in the prior year quarter.
Again, we'd also believes that our online sales in the second quarter continued to be impacted by the order fulfillment challenges in Q4.
Sarah had mentioned.
We've taken our fulfillment back in house to ensure online consumers receive experience. So you would expect from our premium brands such as Davids tea.
Wholesale channel sales decreased 47, 5% to $1 4 million, representing 14, 3% of total revenues compared to 17, 6% a year ago, meaning.
Meanwhile, our brick and mortar stores posted a 15.4% sales declined to $3 6 million, representing 36, 2% of total revenues.
Which was up from 27, 6% a year ago.
Our gross profit in the quarter was down slightly to 36, 9% compared to 38, 3% in the prior year quarter due to a per unit increase in freight shipping and fulfillment costs.
Gross profit in Canada was down to 36, 2% from 38%.
While our U S. Gross profit increased to 41, 3% from 40% a year ago.
We're happy to report on the progress to date from our cost containment plan, which amounted to a 25, 1% reduction in selling general and administrative expenses in the quarter compared to the same quarter last year.
SG&A expenses totaled $7 9 million in the quarter, which was down from $10 6 million in the prior year quarter.
In addition to the elimination of software implementation costs, we reduced other costs, including staff compensation costs online marketing expenses and professional and consulting fees.
Through the first six months of the fiscal year, we've reduced our SG&A expenses by $5 million, which has us well on our way to achieving our goal of reducing our annual SG&A costs by between eight and $10 million.
Adjusted EBITDA for the quarter was negative $2 6 million compared to negative $2 1 million for Q2 of last year.
The decrease reflects our lower sales and gross profit partially offset by the reduction in our SG&A expenses.
We finished the quarter with a cash position of $14 2 million working capital of $24 5 million and no interest bearing debt.
Although we're not pleased with our overall financial performance. We are in line with management's expectations as we navigate towards a return to profitability.
We remain committed to delivering long term value for all shareholders and we believe that our value creation initiatives combined with our cost containment plan will help renew the journey towards profitable growth.
This concludes our review of the second quarter.
We encourage investors wishing to obtain additional color on the quarter to contact Investor Relations, who will coordinate axis to management.
On behalf of the entire Davids tea team, we thank you for joining us today.
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Sarah Segal: As we navigate today's complex economic landscape, I wanted to take the time this morning to provide an update on the initiatives we have taken and continue to take to address our post-COVID alignment of the business and drive profitable growth. In response to consumer demand, late last year we launched our innovative in-store T-Bar concept in our store in CF-Carole-Foyle-Valle, followed by the Kennedy to that capital store in early 2023. Designed to enhance the shopping experience and boost foot traffic, our T-bars provide new proprietary technologies that accelerate the beverage preparation experience without diluting with specialty components.
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Sarah Segal: The T-bars offer an exclusively curated and seasonally changing menu that showcases the wide variety of beverages at David's team, from hot and iced tea and matcha to teapop and teapot lemonade. During the second quarter, in June, we added a T-Bar at our Toronto Eton Center location, marking our first in-store T-Bar outside of the Quebec market. And we have additional T-Bar locations planed to open later this year in Ottawa's RIDO Center and in Vancouver's Pacific Center.
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Sarah Segal: We have continued to focus on profitable sales in our premium sachet products in 3,800 locations in Canada and through seasonal offerings and cost go across Canada. Finally, as you know, innovation remains at the core of our strategy. From ready-to-drink beverages, teapops, superfood powders, cold relief, immunity, and wellness products to matcha lattes and lemonade, we believe that our enhanced product offering will ensure we continue to delight our customers while also helping drive future sales growth. While the economic environment remains challenging, we are confident that our focus on value creation, innovation, and elevating our brand will position us for long-term success.
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Sarah Segal: We are grateful for your continued support of shareholders and we look forward to sharing the benefits of these initiatives with you in the form of sustainable growth and increased shareholder value. Thank you for your attention today.
Sarah Segal: I will now turn the call over to Frank. Thank you, Sarah.
Frank Zitella: And good morning, everyone. As Sarah mentioned, our sales for the second quarter were impacted by the current economic climate and by order fulfillment failures back in the fourth quarter. So we'll sales for the quarter were down 35.3% to 9.8 million. In Canada, which represented 85.2% of total revenue, our sales were down 34.5% while our U.S, sales declined 39.6%. Our online sales decreased 41.4% as we continue to see a leveling out after the pandemic field peak week experience back in Canada 2020.
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Frank Zitella: Online sales represented 49.5% of total revenue is compared to 54.8% in the prior year quarter. Again, we also believe that our online sales in the second quarter continue to be impacted by the Sarah had mentioned. We've taken our full film but back in house to ensure our online consumers receive the experience they would expect from a premium brand such as DataState. Full field channel sales decreased 47.5% to 1.4 million representing 14.3% of total revenue is compared to 17.6% a year ago.
Frank Zitella: Meanwhile, our brick and mortar stores posted a 15.4% sales decline to 3.6 million representing 36.2% of total revenues. Which was up from 27.6% a year ago. Our gross profit in the quarter was down slightly to 36.9% compared to 38.3% in the prior year quarter due to a per unit increase in freight shipping and fulfillment costs. Gross profit in Canada was down to 36.2% from 38% while our US gross profit increased to 41.3% from 40% a year ago.
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Frank Zitella: We're happy to report on the progress to date from our cost containment plan which amounted to a 25.1% reduction in selling, general and administrative expenses in the quarter compared to the same quarter last year. SGNA expenses totaled 7.9 million in the quarter which was down from 10.6 million in the prior year quarter. In addition to the elimination of software implementation costs, we reduced other costs including staff compensation costs, online marketing expenses, and professional consulting fees.
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Frank Zitella: Importantly, for the first six months of the fiscal year, we reduced our SGNA expenses by $5 million which has, let's dwell on our way to achieving our goal of reducing our annual SGNA costs by between 8 and 10 million dollars. Adjusted negative 2.1 million for Q2 of last year. The decrease reflects our lower sales and gross profit partially offset by the reduction in our SGNA expenses. We finished the quarter with a cash position of 14.2 million, working capital of 24.5 million, and no interest bearing debt.
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Frank Zitella: Although we're not pleased with our overall financial performance, we are in line with management's expectation as we navigate towards a return for profitability. We remain committed to delivering long-term value for all shareholders, and we believe that our value creation initiatives, combined with our cost-continent plan, will help renew the journey towards profitable growth.
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Frank Zitella: This concludes our review of the second quarter. We encourage investors wishing to obtain additional color on the quarter to contact investor relations who accord need access to management. On behalf of the entire David's P team, we thank you for joining us today.
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Unknown Executive: [inaudible] But I'm not[inaudible] Thank you for joining us today, and we'll see you in the next video.
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