Q4 2025 DAVIDsTEA Inc Earnings Call
Unknown Executive: Good morning, ladies and gentlemen, and welcome to DAVIDsTEA's fourth quarter and full year results webcast for fiscal 2024. Today's webcast is being recorded and is in listen-only mode. Before we get started, I would like to remind you of the company's Safe Harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward looking statement contained in this webcast 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's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A.
Good morning, ladies and gentlemen.
And welcome to Davids piece fourth quarter and full year 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.
This webcast includes forward looking statements about expectations for the performance of the business in the coming quarter and year.
Each forward looking statement contained in this webcast 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's discussion and analysis of financial condition and results of operations the M D and D.
Unknown Executive: which was filed with Canadian regulatory authorities and is available on www.cdarplus.ca. as well as in the investor relations section of the company's website at www.davidstea.com.
Which was filed with Canadian regulatory authorities and is available on www Dot SEDAR question thoughts as.
As well as in the Investor Relations section of the company's website.
At Www Dot Davids tea Dot com.
Unknown Executive: 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. 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.
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: Any non <unk> financial not sure is used during this webcast 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 referred to are in Canadian dollars unless otherwise indicated.
As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated.
Sarah Segal: Now, I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA. Thank you, operator. Good morning, everyone. And thank you for joining us.
Sara Segal: Now I would like to turn the call over to Sara Segal.
Keith: Keith Executive Officer, and Chief brand Officer of Davids tea.
Speaker Change: Thank you operator.
Speaker Change: Everyone and thank you for joining us.
Sarah Segal: Fiscal 2024 was a pivotal turnaround year for DAVIDsTEA. Through disciplined execution and a sharper focus on customer experience, we made real progress across our omni-channel business towards profitability, stabilizing the business, and preparing for the next phase of growth. In a year filled with uncertainty, our brand continued to resonate. DAVIDsTEA remains the leading destination for specialty loose leaf tea and has provided a reliable, joyful, healthy comfort, which has been especially relevant in today's economic environment.
Speaker Change: Let's call. It 2024 was a pivotal turnaround year for Davids tea.
Speaker Change: Disciplined execution and a sharper focus on customer experience, we made real progress across our omnichannel business towards profitability stabilizing the business and preparing for the next phase of growth.
Speaker Change: In a year filled with uncertainty our brand continues to resonate.
Speaker Change: Davids tea remains the leading destination for specialty loose leaf tea and water.
Speaker Change: It's provided a reliable joyful healthy comfort, which has been especially relevant in today's economic environment.
Sarah Segal: Fiscal 2024 was a significant turnaround in our journey. These results reinforce the strength of our strategy to meet consumers where they are in stores online and through wholesale with products that align with health focused trends. Our new stores at Montreal Eaton Centre and Royal Mount Mall delivered strong momentum. These locations in high traffic malls are key to building visibility and giving customers the ability to discover teas with our expert tea guides. Mall operators are increasingly prioritizing experiential tenants and DAVIDsTEA is a natural fit. Our e-commerce platform remains a vital channel for loyal customers with curated products and seasonal discovery.
Speaker Change: Fiscal 'twenty 'twenty four was a significant turnaround in our journey.
Speaker Change: These results reinforce the strength of our strategy to meet consumers, where they are in stores online and through wholesale with products at a line with helpful. Chris trends.
Speaker Change: Our new stores in Montreal, Eaton Centre, and Royal Mail Mall delivered strong momentum.
Speaker Change: These locations in high traffic malls are key to building visibility and giving customers the ability to discover teased with our expert tea guides.
Speaker Change: Mall operators are increasingly prioritizing experiential tenants and Davids tea is a natural fit.
Speaker Change: Our E Commerce platform remains a vital channel for loyal customers with curated products and seasonal discovery.
Sarah Segal: And on the wholesale side, we expanded our reach through partnerships like our T2Go program with Couchetard, now in over 1,500 stores across Canada. In the U.S., DAVIDsTEA is sold in more than 900 grocery locations. Consumer demand continues to grow in categories like matcha, herbal and functional teas, areas where DAVIDsTEA is already a recognized leader. And even with challenges like the Canada post strike and a shorter fiscal quarter, our brand remained resilient. In fact, without those disruptions, we believe all three channels would have posted year over year growth.
Speaker Change: And on the wholesale side, we expanded our reach through partnerships like our T to go program with Cusco now in over 1500 stores across Canada.
Speaker Change: In the U S. Davids tea has sold in more than 900 grocery locations.
Speaker Change: Consumer demand continues to grow in categories like March a horrible and functional teas areas, where my Davids tea is already a recognized leader.
Speaker Change: And even with challenges like the Canada post strike and a shorter fiscal quarter our brands remains resilient.
Speaker Change: In fact without those disruptions, we believe all three channels would've posted year over year growth.
Sarah Segal: Looking to fiscal 2025, Canada remains our growth engine. We plan to open a more profitable stores with quick payback economic These new locations will amplify brand presence and drive omni-channel synergy. Longer term, we're targeting 10 to 12% compound annual growth over the next three years, driven by doubling our retail footprint in Canada, expanding wholesale in the US, and scaling our digital capabilities. We're also aiming to sustain gross margins in the 48 to 50% range powered by in-house fulfillment, supply chain optimization, and continued process and technology innovation.
Speaker Change: Looking to fiscal 'twenty twenty-five Canada remains a growth engine, we plan to open a more profitable stores with quick payback economics.
Speaker Change: These new locations will amplified brand presence and drive omni channel synergies.
Speaker Change: Longer term, we're targeting 10% to 12% compound annual growth over the next three years driven by doubling our retail footprint in Canada, expanding wholesale in the U S and scaling our digital capabilities.
Speaker Change: We're also aiming to sustain gross margins in the 48 to 50 per cent range powered by in house fulfillment supply chain optimization and continued process and technology innovation.
Sarah Segal: Before I hand it over to Frank, I want to acknowledge the hard work, dedication and talent of our team members across the organization and across the country. I recognize the combined results of our passion for bringing the joy of tea to more people every day. Thank you for a great year and look forward to building on our success in 2025.
Frank: Before I hand, it over to Frank I wanted to acknowledge the hard work dedication and talent of our team members across the organization and across the country.
Frank: Recognize the combined results of our passion for bringing the joy of tea to more people every day.
Frank: Thank you for a great year and look forward to building on our success in 2025.
Frank Zitella: With that, I'll now hand it over to Frank to walk you through our operational and financial performance in more detail.
Frank: With that I'll now hand, it over to Frank to walk you through our operational and financial performance in more detail.
Frank Zitella: Thank you, Sarah, and good morning, everyone. Fiscal 2024 was truly transformational for DAVIDsTEA. From the inside out, we improve how we operate and how we serve customers. Our team completed significant transformational initiatives, setting the stage for scalable growth, stronger operations, and a better customer experience. We've also strengthened our culture, fostering agility, accountability and focus so the organization is ready to adapt, execute and grow with confidence. Operationally, we exited our legacy head office lease and relocated our administrative team to a right-sized space integrated with our inventory operation. We streamlined our supply chain by consolidating from three warehouses to two and enhanced our inventory management processes and systems to improve visibility and control.
Frank: Thank you Sarah and good morning, everyone.
Speaker Change: Fiscal 2024 was truly transformational for Davids tea.
Speaker Change: From the inside out we improved how we operate and how we serve customers.
Speaker Change: Our team completed significant transformational initiatives setting the stage for scalable growth stronger operations and a better customer experience.
Speaker Change: We've also strengthened our culture fostering agility accountability and focus so the organization is ready to adapt execute and grow with confidence.
Speaker Change: Operationally, we exited our legacy head office lease and relocated our administrative team to our right size space integrated with our inventory of operations.
Speaker Change: We streamlined our supply chain by consolidating from three warehouses to too.
Speaker Change: And enhanced our inventory management processes and systems to improve visibility and control.
Frank Zitella: These changes position us to strategically optimize the flow of inventory, enabling better turnover and more responsive replenishment. At the same time, we strengthened our in-house fulfilling capabilities in both B2C and B2B, transitioned to a leaner, more agile IT platform. and onboarded two new last mile delivery partners, reducing our dependency on Canada Post and enhancing delivery reliability. These changes reduce cost and complexity and empower our teams with better tools. We also simplified our organizational design and added an important leadership position. Vice President of Wholesale to help us further accelerate growth in that channel.
Speaker Change: These changes position us to strategically optimize the flow of inventory, enabling better turnover and more responsive replenishment.
Speaker Change: At the same time, we strengthened our in house fulfillment capabilities in both B, the <unk> transition to a leaner more agile platform.
Speaker Change: And on boarded two new last mile delivery partners, reducing our dependency on Canada post and enhancing delivery reliability.
Speaker Change: These changes reduce costs and complexity and empower our teams with better tools.
Speaker Change: We also simplified our organizational design and added an important leadership position.
Speaker Change: Vice president of wholesale to help us further accelerate growth in that channel.
Frank Zitella: Let's talk numbers. Revenue reached $61.8 million, up $1.1 million and just shy of 2% compared to last year. Adjusted EBITDA was $3.9 million, a positive swing of $9.3 million year-over-year. Net income in Q4 came in at $2.5 million compared to a loss of $3.9 million a year ago. And we close the year with $16.2 million in cash, strengthening our financial flexibility. These results speak to the discipline and alignment across our organization.
Now, let's talk numbers.
Speaker Change: Revenue reached $61 8 million up $1 1 million.
Speaker Change: And just shy of 2% compared to last year.
Speaker Change: Adjusted EBITDA was $3 9 million a positive swing.
Speaker Change: Of $9 $3 million year over year.
Speaker Change: Net income in Q4 came in at $2 5 million.
Speaker Change: Compared to a loss of $3 9 million a year ago.
Speaker Change: We closed the year with $16 $2 million in cash strengthening our financial flexibility.
Speaker Change: These results speak to the discipline and alignment across our organization.
Frank Zitella: Now turning to Q4 specifically. Revenue was $23.2 million, down 4.6% year-over-year, mostly due to one less selling week and the impact of the Canada Post disruption. Now here's how each channel performs. Brick and Mortar held steady at $8.6 million, supported by our two Montreal area stores. Comparable store sales rose 6.9% for the full year, despite a 4.7% decline in Q4, showing the strength of our physical footprint. ecommerce dip to 5.6% to 12.4 million while wholesale declined to 2.3 million partly due to a shorter selling period and management's decision to exit an unprofitable account.
Speaker Change: Now turning to Q4, specifically.
Speaker Change: Revenue was $23 2 million down four 6% year over year, mostly due to one less selling week and the impact of the Canada post disruption.
Speaker Change: Now here's how each channel performed.
Speaker Change: Brick and mortar held steady at $8 6 million supported by our two Montreal area stores.
Speaker Change: Comparable store sales rose six 9% for the full year. Despite a four 7% decline in Q4, showing the strength of our physical footprint.
Speaker Change: E Commerce is up to five 6% to $12 4 million, while wholesale declined to $2 3 million, partly due to a shorter selling period and management's decision to exit and unprofitable account.
Frank Zitella: Profitability was a bright spot. Gross profit margin increased to 48.4% in Q4, driven by stronger product margins and a lower shipping and fulfillment cost per unit. Sales general and administrative expenses fell by nearly 40% or $5.6 million. Driven by lower impairment charges, IT costs and staff. partially offset by one time software. As a result, adjusted EBITDA for Q4 rose to $4 million, up from just $500,000 last year.
Speaker Change: Profitability was a bright spot.
Speaker Change: Gross profit margin increased to 48, 4% in Q4, driven by stronger product margins and a lower shipping and fulfillment costs per unit.
Speaker Change: Sales general and administrative expenses fell by nearly 40% were $5 6 million.
Speaker Change: Driven by lower impairment charges costs and staffing.
Speaker Change: Partially offset by one time software costs.
Speaker Change: As a result, adjusted EBITDA for Q4 rose to $4 million up from just $500000 last year.
Frank Zitella: Now looking ahead. We're entering 2025 from a position of strength. Each of our business channels has very solid unit economics. We're seeing positive momentum carry into Q1 and we're confident in our ability to build on this foundation. We remain aware of the macro risks, particularly around global trade and potential US terrorists. However, our direct exposure to the US is limited just 14% of revenue in 2024. So we feel that we're in a solid position to manage through it all.
Speaker Change: Now looking ahead.
Speaker Change: We're entering 2025 from a position of strength.
Speaker Change: Each of our business channels has very solid unit economics.
Speaker Change: We're seeing positive momentum carrying into Q1, and we're confident in our ability to build on this foundation.
Speaker Change: We remain aware of the macro risks, particularly around global trade and potential U S. Tariffs. However, our direct exposure to the U S is limited.
Speaker Change: Just 14% of revenue in 2024.
Speaker Change: So we feel that we're in a solid position to manage through it all.
Frank Zitella: In summary, 2024 was a defining year in the company's transformation. We built the foundation. We've proven our model. And we're focused on delivering sustainable, profitable growth across retail, wholesale and digital channels for the benefit of all shareholders. As we look ahead with momentum and confidence. We also take a moment to reflect on the legacy that brought us here.
Speaker Change: In summary.
Speaker Change: 2024, it was a defining year in the company's transformation.
Speaker Change: We built the foundation, we've proven our model.
Speaker Change: And we're focused on delivering sustainable profitable growth across retail wholesale and digital channels for the benefit of all shareholders.
Speaker Change: As we look ahead with momentum and confidence.
Speaker Change: We also take a moment to reflect on the legacy that brought us here.
Frank Zitella: Earlier this month, we were deeply saddened by the passing of our founder, Herschel Segal. Herschel was a pioneering force in Canadian retail and a true visionary. is the founder of Le Chateau. and co-founder of DAVIDsTEA. He brought a bold and imaginative spirit to everything that he did. At DAVIDsTEA, Hirsch will help redefine how a new generation connects with tea. through innovation, inclusivity, and a deep sense of community. Unwavering belief in accessibility and customer experience shape the core of our brand. His entrepreneurial legacy has left an indelible mark not only on this company. but on Canadian business as a whole.
Speaker Change: Earlier this month, we were deeply saddened.
Speaker Change: By the passing of our founder Herschel Segal.
Speaker Change: Virtual was a pioneering force in Canadian retail and a true visionary.
Speaker Change: As the founder of Le Chateau.
Speaker Change: And co founder of Davids tea here.
Speaker Change: He brought a bold and imaginative spirit to everything that he touched.
Speaker Change: Davids tea.
Speaker Change: Herschel help redefine our new generation connects with T.
Speaker Change: Through innovation, inclusivity, and a deep sense of community.
Speaker Change: Is unwavering belief and accessibility and customer experience shaped the core of our brand.
Speaker Change: His entrepreneurial legacy has left an indelible mark not only on this company.
Speaker Change: But on Canadian business as a whole.
Frank Zitella: On behalf of everyone at DAVIDsTEA.
Speaker Change: On behalf of everyone at <unk> I.
Frank Zitella: I extend our heartfelt condolences to the Segal family. We are profoundly grateful for Herschel's leadership, his values. and his enduring vision for what DAVIDsTEA could become. His spirit will always be part of who we are and it continues to inspire our work every day.
Speaker Change: Extend our heartfelt condolences to the single family.
Speaker Change: We are profoundly grateful for herschel's leadership as values.
Speaker Change: And as enduring vision for what <unk> could become.
Speaker Change: His spirit will always be part of who we are and it continues to inspire our work every day.
Unknown Executive: This concludes our review of the fourth quarter and full year results. If you'd like to learn more, explore opportunities with DAVIDsTEA or connect with our leadership team. Please reach out to Investor Relations, who will be pleased to coordinate action.
Speaker Change: This concludes our review of the fourth quarter and full year results, if you'd like to learn more.
Speaker Change: Explore opportunities with Davids tea or connect with our leadership team.
Speaker Change: Please reach out to Investor relations, who will be pleased to coordinate axes.
Unknown Executive: Thank you again for joining us today.
Speaker Change: Thank you again for joining us today.