DAVIDsTEA to Implement Restructuring Plan Under Companies’ Creditors Arrangement Act
July 08 2020 - 8:30AM
DAVIDsTEA Inc. (Nasdaq:DTEA) (“DAVIDsTEA” or the “Company”), a
leading tea merchant in North America, announces that it is
implementing a restructuring plan under the Companies’ Creditors
Arrangement Act (Canada) (the “CCAA”) in order to accelerate
its transition to an online retailer and wholesaler of high-quality
tea and accessories. The Company expects that its application for
an initial order under the CCAA will be heard by the Québec
Superior Court today. The Company intends to apply for similar
orders for its wholly-owned U.S. subsidiary under Chapter 15
of the United States Bankruptcy Code.
During the restructuring process, DAVIDsTEA will
continue to operate its online business through its e-commerce
platform at www.davidstea.com and its wholesale distribution
channel, through which it sells a selection of DAVIDsTEA products
in grocery stores and pharmacies across Canada. The Company will
work to complete its restructuring in a timely fashion, better
positioned for long-term growth. The Company does not expect to
issue any shares in the restructuring process or that the
restructuring will have any impact on its share structure.
Following a careful review of available options
to stem the losses from its brick & mortar footprint, the
Company’s Management and Board of Directors determined that a
formal restructuring process is the best option in the context of
an increasingly challenging retail environment, further exacerbated
by the COVID-19 pandemic. DAVIDsTEA intends to create a leaner and
more efficient company and to accelerate its transition to an
online retailer and wholesaler of high-quality tea and
accessories.
“As we indicated before, our challenge is to
restructure our North American retail footprint in order to
decrease the ongoing losses caused by unprofitable stores,” stated
Herschel Segal, Founder, Chairman and Interim CEO of
DAVIDsTEA. “Through a restructuring, we intend to achieve that
objective and complement our successful e-commerce and wholesale
distribution channels. Both Management and the Board of Directors
believe that a formal restructuring leading to a significant
reduction in our brick & mortar presence is the best path
forward to ensure the long-term success and sustainability of
DAVIDsTEA and our beloved brand. With all stores closed since
mid-March, many of our loyal tea-loving customers have already
shifted to buying our products online, and in supermarkets and
pharmacies across Canada. We look forward to continuing to offer an
unrivalled selection of health and wellness teas, and virtual
access to our tea experts, as we transition our business to focus
primarily on being an online retailer and wholesaler of
high-quality tea, adapting to evolving consumer expectations.”
Mr. Segal added: “I sincerely regret the
impact the restructuring of our business will have on some of our
exceptional and passionate employees. This has been an incredibly
difficult decision to take, but a necessary one to ensure the
long-term viability of our Company. I would like to sincerely thank
our impacted employees for their contributions and for their
passion for our brand through the years.”
“The transformation of our business model is
necessary to position the Company for a return to profitability,”
said Frank Zitella, CFO and COO of DAVIDsTEA. “DAVIDsTEA has
experienced a multi-year decline in brick & mortar sales and
the post COVID-19 retail environment creates significant challenges
for our unique in-store customer experience. As a result, we have
to accelerate the transition of our business away from brick &
mortar and focus on becoming the leading online purveyor of
loose-leaf tea and accessories in North America, complemented by
our growing wholesale business. We are committed to continuing to
serve our loyal tea-loving customers with passion and ensure that
their favorite blends of tea are available online and in grocery
stores and pharmacies both during and after this restructuring
process.”
Mr. Zitella added: “The impact of the COVID-19
pandemic on consumer confidence and the way in which people shop
may further affect the extent and timing of a recovery in brick
& mortar retail traffic, placing further pressure on the
Company’s store footprint. We expect to pursue discussions with our
landlords regarding our network of stores. We will assess a number
of factors, including whether we can reach agreements with
landlords on more favorable lease conditions, and ultimately may
terminate a significant number of our 222 leases as we seek to
right-size our retail footprint.” All DAVIDsTEA retail stores have
been closed since March 17, 2020 due to the COVID-19 pandemic
and will remain so until further notice.
The Company will provide updates throughout the
restructuring process as events warrant.
Cautionary 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
restructuring process, the COVID-19 pandemic, our strategy of
transitioning to e-commerce and wholesale sales, future sales
through our e-commerce and wholesale channels, the closing of
certain of our retail stores, future lease liabilities, our results
of operations, financial condition, liquidity and prospects, the
impact of the COVID-19 pandemic on the global macroeconomic
environment, and our ability to avoid the delisting of the
Company’s common stock by Nasdaq due to the restructuring or our
inability to maintain compliance with Nasdaq listing
requirements.
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 factors set forth in our
annual report on Form 10-K for the fiscal year ended
February 1, 2020, filed with the United States Securities and
Exchange Commission and with the Autorité des marchés
financiers.
About DAVIDsTEA
DAVIDsTEA is a leading online retailer and
growing mass wholesaler of specialty tea, offering a differentiated
selection of proprietary loose-leaf teas, pre-packaged teas, tea
sachets and tea-related gifts and accessories through over 220
company-owned and operated retail stores in Canada and the United
States, as well as its e-commerce platform at www.davidstea.com. A
selection of DAVIDsTEA products are also available in over 2,500
grocery stores and pharmacies across Canada. 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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