DAVIDsTEA Inc. (Nasdaq:DTEA) (“DAVIDsTEA” or the “Company”), a
leading tea merchant in North America, provided an update today on
how it is navigating through the ongoing coronavirus (COVID-19)
pandemic. The Company continues to work to ensure the safety and
support of its employees, customers and communities during this
challenging time.
“DAVIDsTEA was born out of a true passion for
connecting consumers to the tea they love, and we are grateful that
tea lovers can take comfort in our tea products and the health and
wellness benefits they offer during these uncertain times. We
continue to monitor the evolving situation in order to make the
right decisions to align our business and operations to a new
reality,” stated Herschel Segal, Founder, Chairman and Interim CEO
of DAVIDsTEA.
The Company started the First Quarter of Fiscal
2020 with $46.1 million of cash and, as previously announced,
temporarily closed all of its 231 stores in Canada and the United
States effective March 17, 2020. As of this date, all stores remain
closed, and management is monitoring the situation closely. The
Company continues to offer its products directly to consumers
through its online platform and in over 2,500 supermarkets and
drugstores across Canada.
As the Company adapts its business strategy to
the current environment, it has reduced costs to align expenses
with its online and wholesale sales channels. This includes
temporarily furloughing all of its store related employees, and
moving substantially all non-essential remaining employees to a
four-day work week. In addition, management and members of the
Board have agreed to reduced compensation during this crisis. These
measures, among others, are intended to better align the Company’s
cost structure with its current sales and help preserve its
financial position.
“Prior to COVID-19, our path to profitability
was predicated on making the business more effective, expanding our
product portfolio and optimizing our sales channels. The crisis has
accelerated the actions required to ensure the long-term relevance
of our brand, which continues to resonate with consumers across
North America. We ended the fiscal year with a solid financial
position, and we have taken decisive action to align our operations
with our growing online and wholesale channels. In adapting our
business strategy to this new reality, we expect to emerge from
this crisis as a leaner and more effective company, able to seize
opportunity from a landscape ready for health and wellness tea”
added Frank Zitella, COO and CFO.
“Our online sales have grown significantly in
recent weeks as a growing number of our customers have transitioned
from stores to our website. This could represent a turning point
for DAVIDsTEA and significantly accelerate the anticipated
evolution towards online sales to drive long-term profitability and
connect with a bigger audience than ever. As we grow our position
as a leading provider of tea, we are also strengthening our
commitment to offering a healthful alternative to other beverages
through our exceptional blends, and our extensive range in herbal
and wellness remedies” concluded Herschel Segal.
Financial Performance
Update
The COVID-19 crisis and related events have
resulted in management devoting significant time and attention to
managing the business in this new, rapidly evolving environment.
Consequently, DAVIDsTEA will avail itself of a 45-day blanket
extension granted by the regulatory authorities in the United
States and Canada and file its audited financial statements,
management’s discussion and analysis and annual information form
for the fiscal year ended February 1, 2020 (collectively, the
“Fiscal Year 2019 Reports”), originally due by May 1, 2020, no
later than June 15, 2020. The financial information contained
in this section is preliminary and unaudited and thus still subject
to change and is presented in Canadian dollars.
The Company is pre-releasing the following
unaudited key metrics regarding its performance in the Fourth
Quarter of Fiscal 2019 and full-year Fiscal 2019:
- Fourth Quarter of Fiscal 2019: sales of $73.5 million, down
11.6% compared to the prior year.
- E-commerce and wholesale revenues of $17.8 million for the
quarter, representing 24.2% of total revenue for the quarter,
increased 18.5% over the prior year quarter.
- Full-year Fiscal 2019: sales of $196.5 million, down 7.7%
compared to the prior year.
- E-commerce and wholesale revenues of $42.2 million for the
year, representing 21.5% of total revenue for Fiscal 2019,
increased 20.9% over the prior year.
- Cash position of $46.1 million as at February 1, 2020.
Sales during the first 11 weeks of Fiscal 2020,
ended April 18, 2020, amounting to $28.9 million, were down 23%
compared to the same period last year and were impacted by the
closure of all retail locations as previously noted. More
specifically, during this period, e-commerce sales increased by
127% compared to the same period last year, and wholesale sales
increased 86% compared to the same period last year, as a result of
being present in now over 2,500 retail locations across Canada,
which remain open as essential businesses during the COVID-19
pandemic.
COVID-19 Impact
The Company continues to assess the impact the
COVID-19 pandemic will have on its business and results of
operations, including on its First Quarter and full-year Fiscal
2020 results, but we anticipate that the impact will be
significant. Although we continue to offer our products directly to
consumers through our online store and in supermarkets and
drugstores across Canada, there is no assurance that customers will
purchase our products at previous volumes through these alternative
channels or that the increase in our e-commerce sales will
continue. The ultimate impact of COVID-19 on the Company’s
business and results of operations is unknown at this time and is
largely dependent upon future developments that are out of the
Company’s control, including but not limited to the duration and
spread of COVID-19, the impact on local and global economies,
changes in customer demand, the duration of current mitigation
strategies and/or the implementation of additional mitigation
strategies by public authorities at the local, state, provincial
and federal levels in the U.S. and Canada, as well as restrictions
on the activities of our European based suppliers and on the
shipment of goods.
Nasdaq Global Market Non-Compliance with
Minimum Bid Price Requirement Notice
On April 21, 2020, the Company was notified by
Nasdaq Stock Market LLC (“Nasdaq”) that the Company is not in
compliance with the minimum bid price requirement under Nasdaq
Listing Rule 5450(a)(1). The notification has no immediate effect
on the listing of the Company’s common stock on Nasdaq and the
Company has until December 28, 2020 to regain compliance. The
failure to regain compliance prior to December 28, 2020 may result
in the Company’s common stock being delisted from Nasdaq.
Board Composition
On February 11, 2020, the Company was notified
by Ludwig Max Fischer of his intention to not stand for re-election
at the Company’s 2020 annual meeting of shareholders. The
Board of Directors and management would like to thank Mr. Fischer
for his valued contribution and wish him well in his future
endeavors.
Extension for Filing Fiscal Year 2019
Reports
In connection with the 45-day extension referred
to above, the Company confirms that its management and other
insiders are subject to an insider trading black-out policy that
reflects the principles in section 9 of Canadian National
Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in
Multiple Jurisdictions. As noted above, the Company expects to file
the Fiscal Year 2019 Reports by June 15, 2020. The Company
confirms that material business developments since November 2,
2019, being the date of the last interim financial statements filed
by the Company, are as set out above and in the Company’s material
change report filed on SEDAR on March 24, 2020, relating to
the closing by the Company of its stores in North America,
effective immediately and until further notice, in response to the
continued spread of COVID-19.
Forward-Looking Statements
This press release includes statements that
express our opinions, expectations, beliefs, plans or assumptions
regarding future events or future results and there are, or may be
deemed to be, “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995 (the “Act”).
The following cautionary statements are being made pursuant to the
provisions of the Act and with the intention of obtaining the
benefits of the “safe harbor” provisions of the Act. These
forward-looking statements can generally be identified by the use
of forward-looking terminology, including the terms “believes,”
“expects,” “may,” “will,” “should,” “approximately,” “intends,”
“plans,” “estimates” or “anticipates,” or, in each case, their
negatives or other variations or comparable terminology. These
forward-looking statements include all matters that are not
historical facts and include statements regarding our intentions,
beliefs or current expectations concerning, among other things, our
ability to regain and maintain compliance with the Nasdaq Listing
Rules, the COVID-19 pandemic, our results of operations, financial
condition, liquidity, prospects and the impact of the COVID-19
pandemic on the global macroeconomic environment.
While we believe these opinions and expectations
are based on reasonable assumptions, such forward-looking
statements are inherently subject to risks, uncertainties and
assumptions about us, including the risk factor set forth in our
Form 8-K filed with the SEC today and the factors set forth in our
Form 10-K for the fiscal year ended February 2, 2019, filed with
the SEC on May 2, 2019.
These statements are based upon information
available to us as of the date of this press release, and while we
believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and our
statements should not be read to indicate that we have conducted an
exhaustive inquiry into, or review of, all potentially-available
relevant information. In light of these risks, uncertainties and
assumptions, investors are cautioned not to unduly rely upon these
statements.
Except as required under federal securities laws
and the rules and regulations of the SEC, we do not have any
intention to update any forward-looking statements to reflect
events or circumstances arising after the date of this press
release, whether as a result of new information, future events or
otherwise.
About DAVIDsTEA
DAVIDsTEA is a leading retailer of specialty
tea, offering a differentiated selection of proprietary loose-leaf
teas, pre-packaged teas, tea sachets and tea-related gifts,
accessories and food and beverages through over 230 company-owned
and operated DAVIDsTEA retail stores in Canada and the United
States, as well as through its e-commerce platform at
davidstea.com. A selection of DAVIDsTEA products is also available
in grocery stores across Canada through its growing wholesale
distribution channel. The Company is headquartered in Montréal,
Canada.
Investor Contact |
Media Contact |
MaisonBrison Communications |
PELICAN PR |
Pierre Boucher |
Lyla Radmanovich |
514-731-0000 |
514-845-8763 |
investors@davidstea.com |
media@rppelican.ca |
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