Q2 2025 DAVIDsTEA Inc Earnings Call
Good morning, ladies and gentlemen, welcome to David's keys second quarter results webcast and for fiscal 2020 for today's webcast is being recorded and is in a listen only mode.
Unknown Executive: Good morning, ladies and gentlemen.
Unknown Executive: Welcome to DAVIDsTEA's second quarter results webcast for fiscal 2024. 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.
Before we get started I would like to remind you of the company's safe Harbor language. This presentation includes forward looking statements about expectations for the performance of the business in the coming quarter and year.
Unknown Executive: This presentation includes four looking statements about expectations for the performance of the business in the coming quarter and year. Each four of looking statements 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 and Uncertainties in the Management, Discussion, and Analysis of Financial Condition and Results of Operation, MD&A, which was filed with Canadian regulatory authorities and is available on www.cdarkplus.ca as well as in the Investor Relations section of the company's website at www.DavidsTEA.com.
Speaker Change: 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.
Speaker Change: Additional information regarding these factors appears under the heading risk factors and uncertainties in the management's discussion and analysis of financial condition and results of operations MD&A, which was filed with Canadian regulatory authorities and is available on www Dot SEDAR plus all see it.
Speaker Change: As well as in the Investor Relations section of the company's website at Www Dot Davids tea dotcom.
Unknown Executive: The four looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements.
Speaker Change: The forward looking statements in this discussion speak only as of today's date and the company undertakes no obligation to update or revise any of these statements.
Unknown Executive: If any non-IFRS financial measure is used during this webcast, a reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A.
Speaker Change: Any non <unk> financial measures used during this webcast.
Speaker Change: A reconciliation to the most directly comparable <unk> financial measure will be detailed in the MD&A.
Unknown Executive: As a reminder, all dollar amounts refer to are in Canadian dollars unless otherwise indicated.
Speaker Change: As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated.
Sarah Siegel: Now, I would like to turn the call over to Sarah Siegel, Chief Executive Officer and Chief Brand Officer of David's team. Thank you, operator. Good morning, everyone. We are pleased to report David's team reached a key inflection point in the second quarter of 2024, with sales increasing 12.8 per cent year over year. We are grateful for the trust of our loyal consumers to seek out the best flavor profiles available on the market as we continue to innovate and introduce new and incredible tasting teablegs to enjoy. This sales growth was driven by a series of actions initiated in recent months to counter challenging economic conditions through a strong focus on product innovation and that collected absorbent of premium teas to attract consumers in stores and online, as well as focused product absorbent management and value focused efforts through smarter purchasing and sourcing.
Speaker Change: Now I would like to turn the call over to Sarah Siegel, Chief Executive Officer, and Chief brand Officer of David's team.
Sarah Siegel: Thank you operator, good morning, everyone. We are pleased to report Davids tea reached a key inflection point in the second quarter of 2024 with sales, increasing 12, 8% year over a year.
Speaker Change: We are grateful for the trust of our loyal consumers, who seek out the best flavor profiles are available in the market as we continue to innovate and introduce new and incredible tasting tea blends.
Sarah Siegel: Enjoy.
Sarah Siegel: This sales growth was driven by a series of actions initiated in recent months to counteract the challenging economic conditions through a strong focus on product innovation.
Sarah Siegel: And the clock tick assortment of premium tier to attract consumers in stores and online as well as focused product assortment management and value focused efforts through smarter purchasing and sourcing.
Sarah Siegel: Given an ongoing inflationary environment coupled with elevated interest rates, we address where needed product margins through various levers. The end result was that we delivered our highest growth profit margin in recent memory at 47.3 per cent in the second quarter, along with double digit sales growth. Equally important, consumer reaction to our product variety and adaptation have been positive. Clearly, consumers still look to David's team as a beacon of excellence in Canada. Early in the third quarter, this momentum continues with revenues up more than 18 percent compared to the same period in 2023. With our continued emphasis on indoor experience and community, we are particularly excited about the opening of a new location earlier this month in Mauiou, Quebec, and another opening slated for early November at the Montreal Eaton Center.
Sarah Siegel: Given and an ongoing inflationary environment, coupled with elevated interest rates, we address where needed product margins through various believers the andrews.
Speaker Change: And the result was that we delivered our highest gross profit margin in recent memory at 47, 3% in the second quarter, along with double digit sales growth.
Speaker Change: Equally important consumer reaction to our product variety and adaptations have been positive.
Speaker Change: Clearly consumers still look to Davids tea as a beacon of key excellence in Canada.
Speaker Change: Early in the third quarter. This momentum continues with revenues up more than 18% compared to the same period in 2023.
Speaker Change: With our continued emphasis on in store experience and community. We are particularly excited about the opening of a new location earlier. This month in my World, Quebec and another openings slated for early November at the Montreal, Eton Center that will raise our number of flagship stores to 20 in Canada.
Sarah Siegel: That will raise our number of flagship stores to 20. in Canada. As mentioned in my prepared remarks last quarter, we are focused on an in-store growth strategy to support our digital platforms because shoppers are increasingly demanding a sensory experience, touching, smelling, and sampling RTs before making a purchasing decision. In addition, we have witnessed consumers returning to certain shopping centers significantly post-pandemic, particularly premium malls where people can sample products and share impressions with a knowledgeable tea guide. Accordingly, we targeted two high-traffic malls for our store openings in the Montreal area that should bolster sales. As a result, we are highly optimistic that the initiatives outlined earlier, combined with the new store openings, was delivered sustained growth in the revenue-intensive third and fourth quarters.
Speaker Change: As mentioned in my prepared remarks last quarter, we are focused on an in store growth strategy to support our digital platforms, because shoppers are increasingly demanding a sensory experience touching smelling and sampling our team before making a purchasing decision.
Speaker Change: In addition, we have witnessed consumers returning to search and shopping centers significantly post pandemic, particularly premium malls, where people can sample products and share impressions with a knowledgeable tea guide.
Speaker Change: Accordingly, we targeted to high traffic model for our store openings in the Montreal area that should bolster sales.
Speaker Change: As a result, we are highly optimistic that the initiatives outlined earlier combined with the new store openings will deliver sustained growth and the revenue intensive third and fourth quarters.
Sarah Siegel: On the profitability side, we are encouraged by our significant improvement in a second quarter of 2024, as net loss was reduced to $1.5 million, but there is still some lifting that needs to be done to continue the momentum.
On the profitability side, we are encouraged by a significant improvement in the second quarter of 2024 net loss was reduced to one 5 million, but theres still some lifting that needs to be done to continue the momentum.
Speaker Change: Price to tell our president Chief financial and operating officer of David's team will address this topic in his prepared remarks, but I can tell you. It revolves around working capital management and a continued focus on cost reductions and improving operational delivery excellence that should help place the company on the path towards profitable.
Sarah Siegel: Frank Zitella, president, chief financial and operating officer of David's team, will address this topic in his prepared remarks, but I can tell you it revolves around working capital management and a continued focus on cost reduction and improving operational delivery excellence. That should help place the company on the task force profitable growth. In summary, David's team delivered solid second quarter results. Sales rub 12.8% year over year from a culmination of initiatives including product innovation, a wider inventory of teas available, and assortment management. Two new stores in the Montreal area should contribute to sales growth in the second half of the fiscal year, and a working capital management plan has been implemented to preserve our task position and accelerate our return to profitability.
<unk> growth.
Speaker Change: In summary, David's team delivered solid second quarter results sales were up 12, 8% year over year from a combination of initiatives, including product innovation, a wider inventory of teams available and assortment management.
Speaker Change: Two new stores in the Montreal area should contribute to sales growth in the second half of the fiscal year and our working capital management plan has been implemented to preserve our cash position and accelerate our return to profitability.
Sarah Siegel: I am very proud of the extremely hard work of the team at David's team across our Montreal offices towards across Canada and in our fulfillment centers. The turnaround and continued success of our mission to green tea to the world would not be possible without their creativity, tenacity, and overall hard work. I am grateful to our customers who are passionate about the brand. We are encouraged by all the feedback and support.
David: I'm very proud of the extremely hard work of the team of Davids tea across our Montreal offices stores across Canada and in our fulfillment centers. The turnaround and continued success of our mission to bring Tito the world would not be possible without their creativity tenacity and overall hard work I am grateful to our cuts.
Speaker Change: <unk>, who are passionate about the brand we are encouraged by all the feedback and support.
Frank Zitella: I will now turn the webcast over to Frank. Thank you, Seth Aaron. Good morning, everyone. Our financial results are moving in the right direction as we continue to execute our operational strategy. We also have significant leverage in our business model, which positions us well for the second half of this year as we stabilize the business again, some favorable headwinds, and double down on investments in our brick and mortar and online operations. Alongside the lip grit, revenue generating initiatives in the second quarter, we focus on working capital management to preserve our short-term task position, which is in a 6.7 million as unit of quarter.
David: I will now turn the webcast over to Frank.
Speaker Change: Thank you Seth and good morning, everyone.
Speaker Change: Our financial results are moving in the right direction as we continue to execute our operational strategies.
Speaker Change: Revenues are up and costs are down both year over year and sequentially across all significant category.
Speaker Change: We also have significant leverage in our business model.
Speaker Change: Which positions us well for the second half of this year as we stabilize the business against unfavorable headwinds and.
Speaker Change: And double down on investments in our brick and mortar and online operations.
Speaker Change: Alongside dilutive for revenue generating initiatives in the second quarter, we put focus on working capital management to preserve our short term cash position, which stood at $6 7 million this quarter.
Frank Zitella: Tea measures undertaken include reducing staff and non-critistic areas, placing head office employees on a 4-day work week or the summer month, eliminating all discretionary incentives. 辨證者, moderating paid marketing efforts toward re-engaging blast consumers, improved processes to ensure we were never at a stocking store and online, and focused efforts to reduce the unit cost of last mile delivery to our end consumers. These decisions and actions enabled us to reduce the net loss of 1.5 million in the second quarter of 2024 from 4.3 million in the second quarter of 2023. Furthermore, working alongside our key vendors to optimize a flow of inventory and protect our supply chain processes will pay dividends in the future months.
Speaker Change: The measures undertaken include reducing staff in nonstrategic areas.
Speaker Change: Boise head office employees on a four day workweek over the summer months.
Speaker Change: Eliminating all discretionary expenditures.
Moderating paid marketing efforts towards re engaging lapsed consumers.
Speaker Change: Improved processes to ensure we were never out of stock in store.
Speaker Change: One.
Speaker Change: And focused efforts to reduce the unit cost of last mile delivery to our end consumers.
Speaker Change: These decisions and actions enabled us to reduce our net loss of $1 5 million in second quarter of 2024 from.
Speaker Change: From $4 3 million in the second quarter of 2023.
Speaker Change: Furthermore, working alongside our key vendors to optimize the flow of inventory and protect our supply chain processes will pay dividends in the future.
Frank Zitella: As well as terminating our head office lease and moving into smaller quarters, will provide savings which are the early part of next year.
Speaker Change: As well as terminating or is it office lease and moving into smaller quarters will provide savings, which will be reported next year.
Frank Zitella: Moving on to our second quarter financial results. Consolidated sales improved 12.28% year-over-year and 1.6% year-to-date in fiscal 2024. Canada, which currently represents our main focus in terms of sales and marketing efforts, accounted for 87% of revenue, while the US totalled 13%. Rick and mortar sales increased 13.8% to 4.2 million, marking the third and fifth quarter of year-over-year revenue growth for the business. Rick and mortar sales represented 30% of sales in the second quarter, compared to 36% in the quarter of 2023. Online sales grew 12.5% to 5.5 million, as management initiatives that share up-lined early-game traction both online and in-sort.
Speaker Change: Moving onto our second quarter financial results.
Speaker Change: Consolidated sales improved 12, 8% year over year.
Speaker Change: And one 6% year to date in fiscal 2024.
Speaker Change: Which currently represents our folks our main focus in terms of sales and marketing efforts.
Speaker Change: Counted 40, some percent of revenue, while the U S totaled 13%.
Speaker Change: Brick and mortar sales increased 17, 8% to $4 2 million, marking the third consecutive quarter of year over year revenue growth for the business.
Speaker Change: Brick and mortar sales represented 38% of sales in the second quarter compared to 36% second quarter of 2023.
Speaker Change: Online sales grew 12, 5% to $5 5 million as management initiatives, a fair of lender would reduce truck goes online and stores.
Frank Zitella: Online sales represent 49% of total revenues in the second quarter, compared to 50% in the same period launching. For their part, wholesale channel sales remains stable at 1.4 million in the second quarter, accounting for 13% of total revenues. We retain high hopes for our expansion into the US. The building blocks have been put in place with a new agent and a series of distributors, but it's going to take some time to generate material results. We expect to see some growth in 2025. Growth profit margin improved to 47.3% in the second quarter, from 36.9% in the second quarter of 2023.
Speaker Change: Online sales represented 49% of total revenues in the second quarter compared to 50% with same period last year.
Speaker Change: So therefore wholesale channel sales remained stable at $1 4 million in the second quarter accounting for 13% of the pool revenues.
We retain high hopes for.
Speaker Change: For our expansion into the U S.
Speaker Change: The building blocks have been put in place with the new agents and a series of distributors.
Speaker Change: But it's going to take some time to generate material results.
We expect to see some growth in 2025.
Speaker Change: Gross profit margin improved to 47, 3% in the second quarter from 36, 9% in the second quarter of 2023.
Frank Zitella: The significant year-over-year increase is largely due to increased sales, combined with lower freight shipping and fulfillment costs per unit. In terms of S-GNA, they declined 15.2%, or 1.2 million, to 6.7 million in the second quarter of 2024. The increase costs related to internalizing fulfillment services, lower marketing expenses, and reduced depreciation and amortization growth improvements. These factors were partially offset by an increase in the impairment of property and equipment and other selling in general in the United States stock. As a percentage of sales, S-GNA expenses amounted to 60.5% in the second quarter. Starting to the bottom line, adjusted in the second quarter was negative 0.3 million compared to negative 2.6 million in the second quarter of 2023.
The significant year over year increase was largely due to increased sales combined with lower free shipping and fulfillment costs per unit.
Speaker Change: In terms of SG&A.
Speaker Change: They declined 15, 2% or $1 2 million to $6 7 million in the second quarter of 2024.
Speaker Change: Decreased costs related to internalize and fulfillment services.
Speaker Change: Lower marketing expenses and reduced depreciation and amortization drove the improvement.
Speaker Change: These factors were partially offset by an increase in the impairment of property and equipment.
Other selling and general and administrative costs.
Speaker Change: As a percentage of sales SG&A expenses analysis of 65% in the second quarter.
Speaker Change: Turning to the bottom line.
Speaker Change: Adjusted EBITDA for the second quarter was negative <unk> 3 million compared to negative <unk> 6 million in the second quarter of 2023.
Frank Zitella: The improvement in the adjusted in the job can be attributed to increased sales and higher growth profit, along with lower S-GNA.
Speaker Change: The improvement in adjusted EBITDA can be attributed to increased sales and higher gross profit.
Speaker Change: Lower SG&A expenses.
Frank Zitella: A wrap-up for highly encouraged by a second quarter financial result in operating performance. Failed to recurrent the growth load, the new addition has been implemented to seeing that growth, and we have executed a discipline working capital management plan to protect a cash position and accelerate our recurrent profitability.
Speaker Change: To wrap up.
Speaker Change: We're highly encouraged by our second quarter financial results and operating performance.
Speaker Change: Sales have returned to growth mode, new initiatives have been implemented to sustain that growth.
And we have executed a disciplined working capital management plan to protect our cash position to accelerate our return to profitability.
Frank Zitella: This concludes the review of a second quarter result.
Speaker Change: This concludes the review of our second quarter results.
Unknown Executive: We encourage investors wishing to obtain additional colorings that they would see to contact investor relations, who will coordinate access to men's youth.
Speaker Change: We encourage investors wishing to obtain additional quarter, you would see the contract Investor relations, who will coordinate access to them.
Unknown Executive: Thank you for joining us today.
Speaker Change: Thank you for joining us today.
[music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Yeah.
Speaker Change: <unk> and <unk>.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Hum.
Speaker Change: Oh, okay.
Speaker Change: Uh huh.
Speaker Change: We will.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Hum.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Thank you.
Speaker Change: All right.
Speaker Change: [music].
Unknown Executive: Thank you for joining us today, thank you Thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today Thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining us today, thank you for joining
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: [music] occurring.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.