DAVIDsTEA (DTEA) Q1 2024 earnings summary

Executive summary

• Q1 2024 sales declined 6.1% year-over-year to CAD 13.4 million amid challenging economic conditions, with net loss widening to CAD 2.6 million.

• Brick-and-mortar sales grew 6.2% year-over-year, while online and wholesale channels saw declines.

• Gross profit margin improved by 300 basis points to 43.3% due to lower freight and fulfillment costs.

• Focus is shifting to in-store growth, with plans to double the store footprint in three years and two new stores opening in fall 2024.

• U.S. wholesale expansion and new ready-to-drink product launches, including a cold brew sparkling iced tea collection, are key growth drivers.

Financial highlights

• Consolidated sales fell 6.1% year-over-year to CAD 13.4 million in Q1 2024.

• Net loss increased to CAD 2.6 million from CAD 2 million in Q1 2023; adjusted net loss was CAD 1.6 million versus CAD 1.9 million prior year.

• Adjusted EBITDA was negative CAD 0.8 million, a slight improvement from negative CAD 0.9 million last year.

• SG&A expenses rose 7.6% to CAD 8.4 million, now 62.9% of sales, including CAD 0.6 million in professional fees.

• Cash at quarter end: CAD 8.8 million, down from CAD 12.6 million at the start of the quarter.

Outlook and guidance

• Plans to double store count in Canada over the next three years, with two new stores opening in fall 2024.

• U.S. wholesale market expansion expected to drive channel growth in 2024, with agreements covering over 31,000 grocery stores.

• Ready-to-drink product launch anticipated to boost both online and in-store sales.

• Short-term focus on cost reduction and working capital management to support profitability.

• Optimism around new product launches and growth drivers to increase revenue and move toward profitability.