Q1 2026 DAVIDsTEA Inc Earnings Call
Unknown Executive: Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's first quarter results webcast for fiscal 2025. Today's webcast is being recorded and is in a listen-only mode.
Ladies and gentlemen, welcome to David's keys first quarter results webcast for fiscal 2025, today's webcast is being recorded and is in a listen only mode.
Unknown Executive: Before we begin, I'd like to remind you that this webcast contains forward-looking statements regarding our expectations for the business in the coming quarter and fiscal year. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Additional information on these risks can be found under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A. which was filed with Canadian regulatory authorities and is available on the www.cedarplus.ca as well as in the investor relations section of our website at www.davidstea.com Forward-looking statements speak only as of today's date, and the company undertakes no obligation to update or revise them.
Before we begin I'd like to remind you that this webcast contains forward looking statements regarding our expectations for the business in the coming quarter and fiscal year.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected additional information on these risks can be found under the heading risk factors and uncertainties in the management's discussion and analysis of financial condition and results of operations.
Speaker Change: M D M D.
Unknown Executive: Which was filed with Canadian regulatory authorities and is available on the www.
Speaker Change: Www Dot SEDAR, plus dossier as well as in the Investor Relations section of our website at www.
W. W Dot Davids tea Dot com.
Speaker Change: Forward looking statements speak only as of today's date and the company undertakes no obligation to update or revise them.
Unknown Executive: If any non-IFRS financial measures are referenced during this webcast, you'll find a reconciliation to the most directly comparable IFRS measure in the MDNA. Please note that all dollar amounts discussed are in Canadian dollars unless otherwise indicated.
If any non ifr S financial measures are referenced during this webcast you will find a reconciliation to the most directly comparable I FRS measure in the M. D N a.
Speaker Change: Please note that all dollar amounts discussed are in Canadian dollars, unless otherwise indicated with that I'll now turn the call over to <unk> Segal, Chief Executive Officer, and Chief brand Officer of Davids tea.
Sarah Segal: With that, I'll now 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 today. Fiscal 2025 is off to a strong start, underscoring the momentum of our turnaround strategy and our progress towards sustainable, profitable Our performance this quarter reflects the steady execution of our omni-channel growth strategy and highlights the progress we have made across our operations. I'll address three key achievements. First, we maintain strong momentum in our retail channel sales with 11.5% growth year over year, including 2.8% comparable sales, same store sales growth.
Speaker Change: Thank you operator.
Good morning, everyone and thank you for joining us today.
Speaker Change: Fiscal 'twenty 'twenty five is off to a strong start underscoring the momentum of our turnaround strategy and our progress towards sustainable profitable growth.
Our performance this quarter reflects the steady execution of our Omnichannel growth strategy and highlights the progress we have made across our operations.
Speaker Change: I'll address the key achievements first we maintained strong momentum in our retail channel sales with 11, 5% growth year over year, including 2.8% comparable sales same store sales growth. This marks another strong quarter for our retail operations and we're excited about upcoming store openings more.
Sarah Segal: This marks another strong quarter for our retail operations and we're excited about upcoming store openings. More on that shortly. Second, we achieved meaningful gross profit expansion above 51% of sales. Driven by improved product margins and lower freight shipping and fulfillment costs. Internalizing our fulfillment operations is paying off, reducing costs, improving efficiency, and enhancing the end-to-end consumer experience. Clearly Delivering Value. Third, we reduce selling general and administrative expenses by $1.5 million year over year down to $6.9 million in the quarter. This reduction was largely enabled by transitioning to a more agile and cost-efficient IT platform last fall.
Speaker Change: On that shortly.
Sarah Segal: Second we achieved meaningful gross profit expansion above 51% of sales.
Sarah Segal: Driven by improved product margins and lower freight shipping and fulfillment costs.
Speaker Change: Turning to life in our fulfillment operations is paying off reducing costs, improving efficiency and enhancing the end to end consumer experience clearly delivering value.
Speaker Change: Third we reduced selling general and administrative expenses by $1.5 million year over year down to $6 9 million in the quarter. That's.
Speaker Change: This reduction was largely enabled by transitioning to a more agile and cost efficient platform last fall.
Sarah Segal: As a result, we generated adjusted EBITDA of $1.6 million on sales of $13.5 million, an encouraging margin of 11.7%. That said, we continue to face global uncertainty in the macroeconomic environment. While consumer sentiments provide the challenges for our wholesale and online channels, we've taken targeted steps to address this, including appointing new leadership and refocusing channel strategies to drive future growth. Our new VP of Wholesale brings deep experience in CPG expansion and our incoming VP of Online Sales and Digital Marketing has a proven track record in driving e-commerce growth among many relevant audiences. Looking ahead, we're preparing to open new stores in the fall and to relocate one store to a high-traffic suburban centre on the south shore of Montreal.
Speaker Change: As a result, we generated adjusted EBITDA of $1 6 million on sales of $13 5 million and encouraging margin of 11, 7%.
Speaker Change: That said, we continue to face global uncertainty in the macroeconomic environment.
Speaker Change: While consumer sentiment provided challenges for our wholesale and online channels, we've taken targeted steps to address this including appointing new leadership and refocusing channel strategies to drive future growth.
Speaker Change: Our new VP of wholesale brings deep experience in CPG expansion and our incoming VP of online sales in digital marketing has a proven track record in driving ecommerce growth among many relevant audiences.
Speaker Change: Looking ahead, we're preparing to open new stores in the fall and to relocate one store to a high traffic suburban center on the so sure of Montreal.
Sarah Segal: These openings are key to our strategic plan to grow revenue at a compound annual growth rate of over 10% across three years, while also driving incremental gains in our online and wholesale In short, we remain committed to sustained profitable growth by optimizing our retail footprint, delivering a compelling omni channel brand experience and deepening customer engagement. To summarize, DAVIDsTEA advanced its turnaround in Q1 2025. We delivered on the goals we set last year, restructuring operations, managing costs, and stabilizing revenue. Now we're positioned for growth with new store openings on the horizon and a clear path to sustainable profitability in all channels.
Speaker Change: <unk> are key to our strategic plan to grow revenue at a compound annual growth rate of over 10% across three years, while also driving incremental gains in our online and wholesale channels.
Speaker Change: In short, we remain committed to sustained profitable growth by optimizing our retail footprint delivering a compelling omnichannel brand experience and deepening customer engagement.
Davids tea: To summarize Davids tea advanced its turnaround in Q1 2025, we delivered on the goals, we set last year restructuring operations managing costs and stabilizing revenues.
Davids tea: Now we're positioned for growth with new store openings on the horizon and a clear path to sustainable profitability in all channels, while always challenging ourselves to innovate ride the waves of interest in tea and wellness and continue to listen to our loyal customers.
Sarah Segal: While always challenging ourselves to innovate, ride the waves of interest in tea and wellness and continue to listen to our loyal.
Sarah Segal: Thank you to all our supporters and Tifa.
Frank: Thank you to all of our supporters and two friends I will now turn the webcast over to Frank to tell our president and Chief financial and operating officer of Davids tea.
Frank Zitella: I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA. Thank you, Sarah. Good morning, everyone. We began fiscal 2025 on a solid footing. Our first quarter reflects incremental sales growth, margin expansion, disciplined cost management, and a substantial reduction in net loss. While we anticipate typical seasonal softness in the second and third quarters, our leaner cost structure, healthy liquidity, and diversified channel mix positions us well for anticipated full-year profitability.
Frank: Thank you Sarah and good morning, everyone. We began fiscal 2025 on a solid footing or.
Frank: Our first quarter reflects incremental sales growth margin expansion and disciplined cost management and a substantial reduction in net loss, while we anticipate typical seasonal softness in the second and third quarters.
Davids tea: Our leaner cost structure healthy liquidity and diversified channel mix positions us well for anticipated full year profitability.
Frank Zitella: Let's take a closer look at our financial performance. Consolidated sales grew by 0.6% year-over-year to $13.5 million, led by the strength in our brick-and-mortar network, offset by declines in our online and wholesale channels amid ongoing macroeconomic uncertainty. On a channel basis, brick-and-mortar sales rose by 0.5 million, or 11.5%, to 5 million, driven by two new store openings in the Montreal area and 2.8% growth in comparable store sales. Online sales declined by 0.3 million, or 4.8% to 6.4 million, and wholesale channel sales decreased by 0.1 million, or 5.3% to 2.1 million. Geographically, Canada accounted for 86% of total sales, while the U.S.
Davids tea: Let's take a closer look at our financial performance.
Frank Zitella: Consolidated sales grew by 6% year over year to $13 5 million led by the strength in our brick and mortar network offset by declines in our online and wholesale channels amid ongoing macroeconomic uncertainty.
Davids tea: On a channel basis brick and mortar sales rose by $5 million were 11, 5% to $5 million.
Davids tea: Driven by two new store openings in the Montreal area, and two 8% growth in comparable store sales.
Davids tea: Online sales declined by <unk> 3 million or four 8% to $6 4 million and wholesale channel sales decreased by $2 1 million were five 3% to $2 1 million.
Davids tea: Geographically, Canada accounted for 86% of total sales, while the U S accounted for 14% with a notable 10, 1% increase year over year.
Frank Zitella: accounted for 14%, with a notable 10.1% increase year-over-year. Gross profit margin improved significantly to 51.1% up from 43.3% in Q1 of 2024. This result exceeds our targeted range of 48 to 50 percent over a three-year horizon and demonstrates the effectiveness of operational discipline. Selling general and administrative expenses declined by 1.5 million year-over-year to 6.9 million, a 17.9% reduction. The most significant contributor was a 1.1 million reduction in IT related expenses. Following the successful conversion of our technology stack to a lower cost platform, a move that has permanently reduced our operating cost base. The prior year quarter included 0.6 million in professional fees related to financing and 0.5 million in asset impairment charges, both of which were non-recurring.
Davids tea: Gross profit margin improved significantly to 51, 1% up from 43, 3% in Q1 of 2024.
Davids tea: This result exceeds our targeted range of 40% to 50% over a three year horizon and demonstrates the effectiveness of operational discipline.
Davids tea: Selling general and administrative expenses declined by $1 $5 million year over year to $6 9 million, a 17, 9% reduction.
Davids tea: The most significant contributor was a $1 1 million reduction in it related expenses.
Davids tea: Following the successful conversion of our technology stack to a lower cost platform a move that is permanently reduced our operating cost base.
Davids tea: The prior year quarter included $1 6 million in professional fees related to financing and <unk> 5 million in asset impairment charges, both of which were non recurring.
Frank Zitella: These savings were partially offset by an increase in marketing investments and employee separation costs. As a percentage of sales, SG&A expenses dropped to 51.3%, down from 62.9% in the prior year quarter, reflecting improved cost efficiency and operating leverage.
Davids tea: These savings were partially offset by an increase in marketing investments and employee separation costs.
Davids tea: As a percentage of sales SG&A expenses dropped to 51, 3% down from 62, 9% in the prior year quarter, reflecting improved cost efficiency and operating leverage.
Frank Zitella: In terms of profitability. We reduced our net loss to $0.2 million in Q1 2025, compared to a $2.6 million loss in the first quarter of last year, reflecting ongoing improvements in our business model. As sales momentum builds, we anticipate stronger flow through to the bottom line. Adjusted EBITDA reached 1.6 million, a sharp improvement from negative 0.8 million in the prior year quarter, driven by both margin expansion and SG&A reduction.
Davids tea: In terms of profitability.
Speaker Change: We reduced our net loss for <unk> 2 million in Q1, 2025, compared to a $2 6 million or a loss in the first quarter of last year.
Speaker Change: Selecting ongoing improvements in our business model.
Speaker Change: As sales momentum builds we anticipate stronger flow through to the bottom line.
Speaker Change: Adjusted EBITDA reached $1 6 million, a sharp improvement from negative <unk> 8 million in the prior year quarter.
Frank Zitella: Driven by both margin expansion and SG&A reductions.
Frank Zitella: Moving on to Liquidity and Capital Resources. DAVIDsTEA's cash position improved to $10.4 million at quarter end, up from $8.8 million in Q1 2024. On a sequential basis, our cash declined from $16.2 million in Q4 2024, reflecting the seasonal nature of our business. Cash flow used in operating activities totaled $4.6 million in the first quarter, compared to $2.6 million in the same period last year. This increase reflects the seasonal nature of our business, with higher working capital requirements typical of the first half of the year. Importantly, we remain confident that our current liquidity positions us well to support not only our day-to-day operations, but also our strategic growth initiatives.
Speaker Change: Moving on to liquidity and capital resources.
Speaker Change: David fees cash position improved to $10 4 million at quarter end up from $8 8 million in Q1 2024.
Speaker Change: On a sequential basis, our cash declined from $16 2 million in Q4, 2024, reflecting the seasonal nature of our business.
Speaker Change: Cash flow used in operating activities totaled $4 6 million in the first quarter compared to $2 6 million in the same period last year.
Speaker Change: This increase reflects the seasonal nature of our business with higher working capital requirements typical over the first half of the year.
Speaker Change: Importantly, we remain confident that our current liquidity positions us well to support not only our day to day operations, but also our strategic growth initiatives.
Frank Zitella: We're encouraged by the solid start to Fiscal 25 and the meaningful progress we've achieved, including expanded margins and improved profitability, strategic talent additions aimed at accelerating sales momentum in both online and wholesale channels. and New Store Openings plan for the fall aligned with our three-year revenue growth strategy. Looking ahead, we remain committed to delivering long-term shareholder value through disciplined execution, operational agility, and a customer-first, brand-led approach. We believe the foundation we built positions us well for continued success in the quarters to come.
Speaker Change: We're encouraged by the solid start to fiscal 'twenty, five and the meaningful progress we've achieved including <unk>.
Speaker Change: Expanded margins and improved profitability.
Speaker Change: Strategic talent additions aimed at accelerating sales momentum in both online and wholesale channels.
Speaker Change: And new store openings planned for the fall aligned with our three year revenue growth strategy.
Speaker Change: Looking ahead, we remain committed to delivering long term shareholder value through disciplined execution operational agility and a customer first brand led approach. We believe the foundation, we built positions us well for continued success in the quarters to come.
Speaker Change: Sure.
Frank Zitella: This concludes the review of our Q1 Fiscal 25 results.
Speaker Change: This includes the review of our Q1 fiscal 'twenty five results, if you'd like to learn more about David C explore partnership opportunities where speak with our leadership team. Please reach out to Investor Relations, who will be pleased to facilitate thank.
Frank Zitella: If you'd like to learn more about DAVIDsTEA, explore partnership opportunities, or speak with our leadership team, please reach out to Investor Relations, who will be pleased to facilitate. Thank you for joining us today.
Speaker Change: Thank you for joining us today.