MONTREAL, Nov. 21, 2019 /CNW Telbec/ - Birks Group
Inc. (the "Company" or "Birks Group") (NYSE American: BGI), today
reported its financial results for the twenty-six week period ended
September 28, 2019.
Financial Highlights
All figures presented herein are in Canadian dollars.
During the first half of its fiscal year 2020, the Company took
further steps on its path towards its goal of returning to
profitability and value creation for its shareholders, as it
delivered good results for the twenty-six week period ended
September 28, 2019. This turnaround
in the first half of fiscal year 2020 is driven primarily by the
Company starting to benefit from the significant investments it has
made in its retail network and Birks brand development over the
past two fiscal years in addition to its cost reduction
initiatives.
During the twenty-six week period ended September 28, 2019, the Company reported net
sales of $85.3 million, an increase
of $16.6 million, or 24.2%, compared
to net sales of $68.7 million in the
twenty-six week period ended September 29,
2018. The greater sales were driven by a 12.2% increase in
comparable store sales and by the incremental sales from its
flagship stores and other key locations following their recent
renovations. The Company also reported a gross profit of
$32.6 million for the twenty-six week
period ended September 28, 2019, an
increase of $6.2 million, or 23.5%,
compared to the gross profit of $26.4
for the twenty-six week period ended September 29, 2018. In addition, the Company
generated an EBITDA of $0.3 million,
an improvement of $6.4 million over
the comparable period last year. As planned, during the early phase
of its turnaround strategy, the Company recorded a loss from
continuing operations of $4.5
million, which is an improvement of $5.9 million as compared to a loss of
$10.4 million compared to the
comparable period last year.
Jean-Christophe Bédos, President and Chief Executive Officer of
Birks Group, commented: "As part of the Company's strategic plan,
fiscal year 2020 was poised to reap the benefits of the Company's
investments in its flagship stores in Montreal, Toronto and Vancouver, and other key locations as well as
its cost reduction initiatives during its transformational fiscal
years 2018 and 2019. I would like to take this opportunity to thank
all of our financial and strategic partners as well as our
dedicated employees for their continued support as we go forward
with our strategies in order to achieve a full turnaround. The
completion of our store renovations allows us to feature some of
the most reputable watch and jewelry brands in the world, alongside
the Birks fine jewelry and bridal collections. The return to normal
selling conditions is reflected in the results of the first half of
fiscal 2020. The sales growth we have achieved to date, together
with the sizeable reductions to our corporate overhead structure,
in line with our strategic plan, has allowed us to realize a
positive operating income before depreciation. The Company
continues to focus on the execution of its strategic plan and its
four key initiatives:
- offering our customers access to the most reputable watch and
jewelry brands through a complete omni-channel experience;
- expanding our e-commerce and wholesale channels through key
strategic investments;
- renewing our Birks bridal and fine jewelry product offerings
accentuating quality, design and accessible price points; and
- developing the Birks product brand to position it as an
international brand.
We remain confident that the execution of our strategic
initiatives will lead to long-term value creation."
Financial overview for the twenty-six week period ended
September 28, 2019:
- Net sales for the twenty-six week period ended September 28, 2019 were $85.3 million, an increase of $16.6 million or 24.2%, compared to $68.7 million for the twenty-six week period
ended September 29, 2018. The
$16.6 million increase in net sales
was driven by a strong performance of our retail business mainly
due to a 12.2% increase in comparable store sales and to the recent
renovations of the Company's flagship stores, Montreal in June
2018, Vancouver in
February 2019 and Toronto in March
2019;
- Comparable store sales in the twenty-six week period ended
September 28, 2019 were 12.2% greater
than in the comparable prior year period primarily related to an
increase in sales of third party branded watches driven by the
Company's improved portfolio of third party watch brands, the
Company's successful pointed marketing campaigns which led to
increase in key performance indicators ensuing throughout the
retail network, such as conversion rate, transaction volume and
average sales transaction value;
- Gross profit for the twenty-six week period ended September 28, 2019 increased by $6.2 million to $32.6
million, or 38.2% of net sales, as compared to $26.4 million or 38.4% of net sales, during the
comparable prior year period. The gross profit rate decrease of
approximately 20 basis points was primarily attributable to a shift
in product sales mix towards branded timepieces, partially offset
by a reduction in sales promotions as a result of the re-opening of
the Montreal and Toronto flagship locations
post-renovations;
- Selling, general and administrative ("SG&A") expenses
decreased by $0.2 million to
$32.3 million for the twenty-six week
period ended September 28, 2019
compared to $32.5 for the twenty-six
week period ended September 29, 2018,
a 940 basis points reduction in the percentage of sales, mainly
driven by applying cost containment initiatives to corporate
overhead and shifting marketing projects internally and having more
targeted and productive campaigns, partially offset by increased
occupancy costs, largely due to the new Toronto flagship location. Hence,
SG&A expenses represented 37.8% of sales for the twenty-six
week period ended September 28, 2019
as compared to 47.2% for the comparable period last
year;
- The Company's operating loss during the twenty-six week period
ended September 28, 2019 was
$2.1 million, an improvement of
$6.4 million compared to a loss of
$8.5 million in the comparable prior
year period.; and
- Consequently, the Company used $6.3
million to finance its operating activities from continuing
and discontinued operations and used another $4.0 million to finance its investing activities.
Financing for these were obtained mainly from bank
indebtedness.
About Birks Group Inc.
Birks Group is a leading designer of fine jewelry, timepieces
and gifts and operator of luxury jewelry stores in Canada. The Company operates 26 stores under
the Birks brand in most major metropolitan markets in Canada, one retail location in Calgary under the Brinkhaus brand and two
retail locations in Vancouver
under the Graff and Patek Philippe brands. Birks Collections are
available at Mappin & Webb and Goldsmiths in the United Kingdom in addition to several jewelry
retailers across North America.
Birks was founded in 1879 and has become Canada's premier retailer and designer of fine
jewelry, timepieces and gifts. Additional information can be found
on Birks' web site, www.birks.com.
Non-GAAP Measures
The Company reports information in accordance with U.S.
Generally Accepted Accounting Principles ("U.S. GAAP"). The
Company's performance is monitored and evaluated using various
sales and earnings measures that are adjusted to include or exclude
amounts from the most directly comparable GAAP measure ("non-GAAP
measures"). The Company presents such non-GAAP measures in
reporting its financial results to investors and other external
stakeholders to provide them with useful complimentary information
which will allow them to evaluate the Company's operating results
using the same financial measures and metrics used by the Company
in evaluating performance. The Company does not, nor does it
suggest that investors and other external stakeholders should,
consider non-GAAP measures in isolation from, or as a substitute
for, financial information prepared in accordance with U.S. GAAP.
These non-GAAP measures may not be comparable to similarly-titled
measures presented by other companies.
Total operating expenses from continuing operations and
operating loss from continuing operations
The Company evaluates its operating earnings performance using
financial measures which exclude expenses associated with
operational restructuring plans. The Company believes that such
measures provide useful supplemental information with which to
assess the Company's results relative to the corresponding period
in the prior fiscal year and can result in a more meaningful
comparison of the Company's performance between the periods
presented. Given that there were no restructuring costs in the
twenty-six week period ended September 28,
2019, the table below provides a reconciliation of the
non-GAAP measures presented to the most directly comparable
financial measures with GAAP for the twenty-six week period ended
September 29, 2018.
|
|
Reconciliation of
non-GAAP measures
|
26 Weeks Ended
September 29, 2018
|
($'000)
|
GAAP
|
Restructuring
costs (a)
|
Non-GAAP
|
|
|
|
|
Total operating
expenses – from continuing operations
|
34,868
|
(498)
|
34,370
|
as a % of net
sales from continuing operations
|
50.7%
|
|
50.0%
|
|
|
|
|
Operating loss – from
continuing operations
|
(8,495)
|
498
|
(7,997)
|
as a % of net
sales from continuing operations
|
(12.4)%
|
|
(11.6)%
|
|
|
|
|
(a) Expenses associated with the
Company's operational restructuring plan
|
Forward Looking Statements
This press release contains certain "forward-looking" statements
concerning the Company's performance and strategies, including that
the Company is taking further steps on its path towards its goal of
returning to profitability and value creation for its shareholders,
and the execution of the Company's strategic initiatives, will lead
to long-term value creation. Because such statements include
various risks and uncertainties, actual results might differ
materially from those projected in the forward-looking statements
and no assurance can be given that the Company will meet the
results projected in the forward-looking statements. These risks
and uncertainties include, but are not limited to the following:
(i) economic, political and market conditions, including the
economies of Canada, and the U.S.,
which could adversely affect our business, operating results or
financial condition, including our revenue and profitability,
through the impact of changes in the real estate markets, changes
in the equity markets and decreases in consumer confidence and the
related changes in consumer spending patterns, the impact on store
traffic, tourism and sales; (ii) the impact of fluctuations in
foreign exchange rates, increases in commodity prices and borrowing
costs and their related impact on the Company's costs and expenses;
(iii) the Company's ability to maintain and obtain sufficient
sources of liquidity to fund its operations, to achieve planned
sales, gross margin and net income, to keep costs low, to implement
its business strategy, maintain relationships with its primary
vendors, to mitigate fluctuations in the availability and prices of
the Company's merchandise, to compete with other jewelers, to
succeed in its marketing initiatives, and to have a successful
customer service program; (iv) the Company's ability to
continue to borrow under its credit facilities, (v) the Company's
ability to maintain profitable operations as well as maintain
specified excess availability levels under its credit facilities,
(vi) the Company's financial performance in the second half of
fiscal 2020 and the level of capital expenditures requirements
related to renewing store leases, (vii) the Company's ability to
execute its strategic vision, and (viii) the Company's ability
to continue as a going concern. Information concerning factors that
could cause actual results to differ materially is set forth under
the captions "Risk Factors" and "Operating and Financial Review and
Prospects" and elsewhere in the Company's Annual Report on Form
20-F filed with the Securities and Exchange Commission on
June 24, 2019 and subsequent filings
with the Securities and Exchange Commission. The Company undertakes
no obligation to update or release any revisions to these
forward-looking statements to reflect events or circumstances after
the date of this statement or to reflect the occurrence of
unanticipated events, except as required by law.
BIRKS GROUP
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(In
thousands)
|
|
|
26 weeks ended
September 28, 2019
|
|
26 weeks ended
September 29, 2018
|
|
|
|
|
Net sales
|
$
|
85,343
|
|
$
|
68,728
|
Cost of
sales
|
|
52,719
|
|
|
42,355
|
|
|
|
|
|
|
Gross
profit
|
|
32,624
|
|
|
26,373
|
|
|
Selling, general and
administrative expenses
|
|
32,289
|
|
|
32,471
|
Restructuring
charges
|
|
-
|
|
|
498
|
Depreciation and
amortization
|
|
2,386
|
|
|
1,899
|
Total operating
expenses
|
|
34,675
|
|
|
34,868
|
Operating
loss
|
|
(2,051)
|
|
|
(8,495)
|
Interest and other
financial costs
|
|
2,417
|
|
|
1,866
|
Loss from continuing
operations
|
|
(4,468)
|
|
|
(10,361)
|
Income taxes
(benefits)
|
|
-
|
|
|
-
|
Net loss from
continuing operations
|
|
(4,468)
|
|
|
(10,361)
|
(Loss) income from
discontinued operations, net of tax
|
|
(117)
|
|
|
(444)
|
Net loss
|
|
(4,585)
|
|
|
(10,805)
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
Basic
|
|
17,965
|
|
|
17,961
|
Diluted
|
|
17,965
|
|
|
17,961
|
Net loss per common
share
|
|
|
|
|
|
Basic
|
$
|
(0.26)
|
|
$
|
(0.60)
|
Diluted
|
$
|
(0.26)
|
|
$
|
(0.60)
|
Net loss from
continuing operations per common share
|
|
|
|
|
|
Basic
|
$
|
(0.25)
|
|
$
|
(0.58)
|
Diluted
|
$
|
(0.25)
|
|
$
|
(0.58)
|
BIRKS GROUP
INC. CONDENSED CONSOLIDATED BALANCE SHEETS –
UNAUDITED (In thousands)
|
|
|
As
of
|
|
September
28, 2019
|
|
March
30, 2019
|
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
1,588
|
|
$
|
1,179
|
Accounts receivable
and other receivables
|
|
6,161
|
|
|
3,537
|
Inventories
|
|
101,655
|
|
|
91,541
|
Prepaid expenses and
other current assets
|
|
1,998
|
|
|
2,142
|
Total current
assets
|
|
111,402
|
|
|
98,399
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
receivables
|
|
3,912
|
|
|
1,266
|
Property and
equipment
|
|
29,254
|
|
|
29,727
|
|
|
|
|
|
|
Operating lease
right-of-use asset
|
|
63,753
|
|
|
-
|
Intangible assets and
other assets
|
|
4,372
|
|
|
4,403
|
Total non-current
assets
|
|
101,291
|
|
|
35,396
|
Total
assets
|
$
|
212,693
|
|
$
|
133,795
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Bank
indebtedness
|
$
|
58,740
|
|
$
|
47,021
|
Accounts
payable
|
|
40,135
|
|
|
33,264
|
Accrued
liabilities
|
|
7,603
|
|
|
9,657
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
1,791
|
|
|
993
|
Current portion of
operating lease liabilities
|
|
4,459
|
|
|
-
|
Total current
liabilities
|
|
112,728
|
|
|
90,935
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
14,470
|
|
|
16,111
|
Long-term portion of
operating lease liabilities
|
|
71,631
|
|
|
-
|
Other long-term
liabilities
|
|
2,193
|
|
|
12,966
|
Total long-term
liabilities
|
|
88,294
|
|
|
29,077
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Class A common
stock – no par value, unlimited shares authorized, issued and
outstanding 10,252,911
|
|
35,603
|
|
|
35,593
|
Class B common stock –
no par value, unlimited shares authorized, issued and outstanding
7,717,970
|
|
57,755
|
|
|
57,755
|
Preferred stock – no
par value, Unlimited shares authorized, none issued
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
19,137
|
|
|
19,120
|
Accumulated
deficit
|
|
(100,668)
|
|
|
(98,473)
|
Accumulated other
comprehensive loss
|
|
(156)
|
|
|
(212)
|
Total stockholders'
equity
|
|
11,671
|
|
|
13,783
|
Total liabilities and
stockholders' equity
|
$
|
212,693
|
|
$
|
133,795
|
SOURCE Birks Group Inc.