TORONTO, Aug. 12, 2020 /CNW/ - Leon's Furniture Limited
("LFL" or the "Company") (TSX: LNF), today announced
financial results for the second quarter of 2020.
Financial Highlights – Q2 - 2020
- Our second quarter performance was strong despite the economic
impact of the COVID 19 pandemic. We proactively aligned our cost
structure to the lower in-store demand while at the same time
expanding our eCommerce solutions to better serve the interests of
our customers.
- Revenue in the quarter was $416.7
million compared to $560.9
million in the second quarter 2019. This reduction in
revenue was primarily driven by the temporary physical store
closures across the country due to the COVID-19 pandemic. eCommerce
initiated sales during the quarter increased by over 500% compared
to the second quarter 2019. These sales significantly mitigated the
reduction in revenue and drove improved gross margins and operating
leverage in the quarter.
- As all the Company's retail stores reopened across Canada in early June
2020, total merchandise sales increased 1.2% during the
month of June 2020 compared to the
prior year, with the largest dollar increases coming from furniture
and appliance sales.
- The results for the month of June
2020, compare favourably to the previous two months of April
and May 2020. The significant sales
reduction that began in late March
2020 continued into the current quarter, as revenues during
April and May 2020 decreased by 46%
and 38%, respectively as compared to the previous year.
- As a result of COVID-19 and the rapid deterioration of customer
demand that began at the end of the previous quarter and in order
to alter its cost structure and operating leverage, the Company
announced in late March 2020
significant but temporary store closures and layoffs of many
of its valued associates across the country.
- In April 2020, the Government of
Canada announced the Canada Emergency Wage Subsidy ("CEWS") program
in order to provide assistance to help employers return and keep
their employees on their payrolls. With this effective
demonstration of leadership in these unprecendented times, this
timely program provided by the Government of Canada allowed the Company to return the
majority of its valued associates back to their previous roles
during the month of June 2020.
- Without the sacrifice, dedication and service by the Company's
valued associates across the country, the Company's results during
the second quarter would not have been achievable. With the steps
taken throughout the quarter to protect the Company's viability and
preserve its liquidity during these highly uncertain times, the
Company was able to produce the following positive operating
results:
-
- Net income increased 88.8% in Q2-2020 to $47.2 million from $25.0
million in Q2-2019.
- Diluted EPS grew by 93.3% to $0.58 in Q2-2020 from $0.30 in Q2-2019.
- The net cash position, excluding lease liabilities, of the
Company as at June 30, 2020 amounted
to $221 million, after generating
over $200 million in free cash flow
in the current quarter.
- Net finance costs decreased 28.4% in Q2-2020 to $4.8 million from $6.7
million in Q2-2019.
- The Directors have decided to seek approval to extend the
Company's Normal Course Issuer Bid for another year.
- The Directors have also approved that the Company's dividend
will be increased from $0.12 per
common share to $0.14 per common
share.
- During the quarter, the Company increased its revolving credit
facility to a total of $175 million
thereby increasing its available and unrestricted liquidity to
approximately $490 million including
the Company's $315 million in cash,
cash equivalents and investments held as at June 30, 2020.
- No amounts were drawn on this expanded revolving credit
facility during the quarter and any amounts borrowed under this
facility would become due in May
2024. Also, the Company's owned real estate portfolio of 4.2
million square feet of retail space, and industrial warehouse
space, and undeveloped land holdings continue to be held on an
unencumbered basis.
On March 11, 2020, the World
Health Organization declared the novel coronavirus, ("COVID-19"),
which has caused severe respiratory illnesses and deaths, a global
pandemic. As an emerging risk, the duration and full financial
effect of the COVID-19 pandemic is unknown at this time, as is the
efficacy of the government and central bank interventions. The
financial impact of COVID-19 pandemic began to be felt in the
Company's store traffic and sales figures commencing in the early
part of March 2020. The Company
cannot predict the timing for when economic conditions will
improve. However, the Company continues to actively monitor the
situation and will continue to respond as the impact of the
COVID-19 pandemic evolves, which will depend on a number of factors
including the course of the virus, our customer and employee
reactions and any further government actions, none of which can be
predicted with any degree of certainty.
In response to the COVID-19 pandemic, the Company has taken the
following actions to support its current operating environment and
its liquidity position:
- In order to protect the health and safety of our customers and
associates, the Company introduced several measures in the quarter
to provide support to our associates and customers. These measures
included: reduced store hours, contactless home delivery and
customer pickup protocols, enhanced cleaning protocols and actions
to support physical distancing including limiting the number of
customers allowed in-store. The Company continued to operate its
distribution centres and warehouse locations across the country
with enhanced safety protocols.
- As a result of government restrictions during the month of
April 2020, all store showrooms in
Ontario, like some other
provinces, were closed to the public. However, the Company
continued to operate showroom locations in certain provinces with a
significantly reduced store headcount and continued to provide its
customers with the ability to transact on its eCommerce websites
across its various banners.
- The Company applied for the CEWS program, which materially
contributed towards its cost savings initiatives and allowed for
the majority of its temporarily laid off associates to be returned
to work in the second quarter of 2020.
Edward Leon, President and Chief
Executive Officer of LFL Group commented, "Despite significant
top-line impact from COVID-19 during Q2, our team delivered
$0.58 in adjusted diluted EPS – up
significantly from the same quarter last year. These results
highlight both the resilience of our business model as well as the
determination of our associates coast-to-coast. I would like to
thank all of our valued associates for their sacrifices this year.
From a low point where we were forced to temporarily lay-off almost
70% of our national workforce, I am proud to say that every one of
our stores opened in June and we have been able to bring back the
majority of these associates. I would also like to thank the
Government of Canada for its quick
action to support the economy and retailers during this challenging
period through the CEWS program."
Mr. Leon continued, "While the operating environment remains
challenging for all retailers, LFL is uniquely positioned to both
weather ongoing turbulence and to grow in the midst of it. Our
eCommerce division continued to grow strongly during the quarter,
as Canadians prioritized purchases that made their homes more
comfortable and conducive to live, work and learn. The significant
strategic investment we announced in late 2018
to strengthen our e-Commerce business and enhance the customer
online shopping experience, have positioned us to be able to scale
almost infinitely online. Combined with our last mile delivery
teams, which are predominantly in-house, LFL is arguably one of the
best positioned retailers in Canada to both meet shoppers' growing demand
for a broad selection of online products, and to deliver those
products efficiently and quickly to their homes. Backing this
performance is a team of loyal, customer-service focused
associates, unencumbered ownership of over 4.2 million square feet
of real estate, and a rock-solid balance sheet with almost
$500 million of available
unrestricted liquidity."
The Directors have also approved, subject to obtaining
regulatory approvals, the reinstatement of the Company's Normal
Course Issuer Bid, which will expire on September 11, 2020. Pursuant to the bid, the
Company intends, in the twelve months commencing September 14, 2020, to purchase up to the lesser
of 4.99% of its Common Shares outstanding on September 4, 2020, and the amount equal to 4.99%
of its Common Shares outstanding on the date the Toronto Stock
Exchange accepts the notice of intention to make a normal course
issuer bid.
For a full explanation of the Company's use of non-IFRS
financial measures, please refer to the section of this press
release with the heading "Non-IFRS Financial Measures".
Summary financial highlights for the three months ended
June 30, 2020 and June 30, 2019
For
the
|
|
Three months
ended
|
(C$ in thousands
except %, share and per share amounts)
|
June 30,
2020
|
June 30,
2019
|
$ Increase
(Decrease)
|
% Increase
(Decrease)
|
Total system wide
sales (1)
|
509.9
|
667.7
|
(157.8)
|
(23.6%)
|
Franchise sales
(1)
|
93.2
|
106.8
|
(13.6)
|
(12.7%)
|
Revenue
|
416.7
|
560.9
|
(144.2)
|
(25.7%)
|
Same store sales
(1)
|
404.3
|
549.6
|
(145.2)
|
(26.4%)
|
Gross profit margin
as a percentage of revenue
|
43.65%
|
43.53%
|
|
|
SG&A
(2)(3)
|
116.9
|
203.6
|
(86.7)
|
(42.6%)
|
SG&A
(2)(3) as a percentage of revenue
|
28.05%
|
36.30%
|
|
|
Adjusted
EBITDA
|
92.9
|
71.4
|
21.5
|
30.1%
|
Adjusted net income
(1)
|
47.2
|
25.0
|
22.2
|
88.8%
|
Adjusted diluted
earnings per share (1)
|
$0.58
|
$0.30
|
$0.28
|
93.3%
|
Net income
|
47.2
|
25.0
|
22.2
|
88.8%
|
Common share
dividends declared
|
$0.12
|
$0.14
|
$(0.02)
|
(14.3%)
|
(1)
|
Refer to the
"Non-IFRS Financial Measures" section of this press release for
additional information on these measures.
|
(2)
|
Selling, general and
administrative expenses ("SG&A").
|
(3)
|
SG&A as a
percentage of revenue for the three months ended June 30, 2020,
includes the impact of the CEWS of $29.8 million or 7.1% as a
percentage of revenue in the quarter. Therefore, excluding
the impact of the CEWS, the total SG&A as a percentage of
revenue in the quarter amounted to 35.20%
|
Revenue
For the three months ended June
30, 2020, revenue was $416.7 million compared to $560.9 million in the second quarter 2019.
Revenue decreased $144.2 million or
25.7% as compared to the prior quarter due to decreases in all
product categories which was driven by substantial reductions in
physical store traffic due to COVID-19 retail store closures across
the country. In order to mitigate the effect on sales due to the
drop in store traffic and until all stores reopened in the early
part of June, the Company redeployed store headcount to the
creation of live chat teams in order to service customers virtually
while they navigated the Company's websites and also increased
online conversion rates in a meaningful way. The Company's
continued focus on eCommerce, including its live chat initiative,
generated a 500% increase in eCommerce initiated sales during the
quarter, which significantly offset the overall reduction in
revenue.
In early June, as all the Company's physical stores reopened
across Canada, total merchandise
sales increased 1.2% compared to the month of June in the prior
year's quarter, with the largest sales increases being generated in
furniture and appliance sales. This compares favourably to the
month of April and May during the current quarter, as revenues
during these two months decreased by 46% and 38%, respectively.
With all the Company's retail stores open for business in June, the
eCommerce initiated sales orders subsequent to quarter end continue
to be up over 250% for the third quarter to date 2020 as compared
to the same period last year.
The rapid increase in eCommerce sales in the quarter also
continue to validate that the Company's digital platform is
infinitely scalable and capable of significantly contributing
higher operating profit margin percentages due to its current
operating cost structure. The digital platform is key to allow the
Company to attract new customers as they begin their shopping
experience online and then continue in store to be assisted by our
knowledgeable sales associates.
Same Store Sales (1)
Due to COVID-19 and the subsequent retail store closures across
the country, same store corporate sales decreased 26.4% compared to
the second quarter 2019. Since the Company has over 50% of its
retail store count in Ontario and
Quebec, the mandatory store
closures in these two provinces had a material impact on the
Company's ability to generate positive same store corporate sales
growth, excluding the rapid increase in eCommerce sales. However,
by the end of May, the provincial governments of Ontario and Quebec had lifted their restrictions to open
retail storefronts, which had a very positive impact on the
Company's sales for the last month of the quarter, as the same
store corporate sales for the month of June
2020 were essentially flat as compared to the month of June
2019.
Gross Profit
The gross profit margin increased slightly from the second
quarter 2019 of 43.53% to 43.65% in the current quarter. This was
due primarily to increases in gross profit margin across all
product categories. Notwithstanding a very challenging retail
environment, the higher mix of appliance sales in the quarter, the
500% increase in eCommerce initiated sales in the quarter, and the
volatility in the foreign exchange market of the Canadian dollar
relative to the United States
dollar, the Company was able to improve its gross profit margin on
the revenues generated in the current quarter.
Selling, general and administrative expenses
As a result of COVID-19 and the ensuing rapid deterioration of
customer demand that began at the end of the previous quarter, the
Company announced that 72 stores would be temporarily closed and
over 3,900 associates would be unfortunately laid off. Given that
there continued to be very limited visibility of demand as the
second quarter began, the Company undertook the necessary steps to
right size its operations and preserve its liquidity by putting in
place further cost cutting measures that are summarized below:
- Temporarily laid off an additional 1,900 associates and
temporarily closed an additional 92 of stores, which was also
attributable to provincially mandated orders to cease operating our
retail showrooms that began during the month of April 2020. These incremental lay-offs, including
the previously announced headcount reductions, represented a total
workforce reduction, at its peak, of approximately 70%.
- Immediately reduced advertising and marketing expenses,
deferred the receipt of most inventory purchase orders, negotiated
rent deferrals and abatements, and worked with all vendor partners
to reduce expenditures and adjust the payment cadence of the
Company's monthly expenses.
- In April 2020, the Government of
Canada announced the CEWS in order
to help employers return and keep their employees on their
payrolls. As at June 30, 2020, the
Company is entitled to total CEWS installments of $29.8 million. There are no unfulfilled
conditions attached to the CEWS, as such the Company has recorded
the full amount of this subsidy as a reduction to its total
SG&A expenses.
- By the end of the second quarter and with the help of this very
timely and extremely important government subsidy, the Company was
able to return the majority of its temporarily laid off associates
back to work.
Therefore, excluding the CEWS, the Company's SG&A as a
percentage of revenue in the second quarter was 35.20%, a decrease
of 110 basis points over the prior year's quarter SG&A of
36.30%. The cost reduction initiatives in the current quarter
continue to demonstrate the Company's ability to adjust and
leverage its cost structure even though total revenues were down
significantly. When including the CEWS, the Company's SG&A as a
percentage of revenue improved significantly, coming in at 28.05%,
an improvement of 825 basis points over the prior year's
quarter.
On July 17, 2020, the Government
of Canada announced that the CEWS
program would be redesigned and extended to December 2020. The Company intends to continue
its participation in this program, subject to meeting the
eligibility requirements.
Adjusted Net Income (1) and Adjusted Diluted
Earnings Per Share (1)
Including the impact of the CEWS, adjusted net income in the
current quarter totalled $47.2
million, an increase of $22.2
million over the prior year's quarter. Adjusted diluted
earnings per share for the Company increased by $0.28 to $0.58 per
share in the current quarter.
Excluding the impact of the CEWS and coupled with the Company's
ability to effectively manage its operating expenses while
experiencing rapidly deteriorating sales decreases in the current
quarter, adjusted net income in the current quarter totaled
$25.3 million or flat to the prior
year's quarter and the adjusted diluted earnings per share in the
current quarter was $0.31 per share
compared to $0.30 per share in the
prior year's quarter.
Net Income and Diluted Earnings Per Share
Net income for the second quarter of 2020 was $47.2 million, or $0.58 per diluted earnings per share as compared
to the net income of $25.0 million in
the prior year's quarter, or $0.30
per diluted earnings per share.
(1)
|
Refer to the
"Non-IFRS Financial Measures" section of this press release for
additional information on these measures.
|
Summary financial highlights for the six months ended
June 30, 2020 and June 30, 2019
For
the
|
Six months
ended
|
(C$ in thousands
except %, share and per share amounts)
|
June 30,
2020
|
June 30,
2019
|
$ Increase
(Decrease)
|
% Increase
(Decrease)
|
Total system wide
sales (1)
|
1,108.0
|
1,264.8
|
(156.8)
|
(12.4%)
|
Franchise sales
(1)
|
193.7
|
204.2
|
(10.5)
|
(5.1%)
|
Revenue
|
914.3
|
1,060.6
|
(146.3)
|
(13.8%)
|
Same store sales
(1)
|
888.0
|
1,038.4
|
(150.4)
|
(14.5%)
|
Gross profit margin
as a percentage of revenue
|
43.37%
|
43.40%
|
|
|
SG&A
(2)(3)
|
309.6
|
400.8
|
(91.2)
|
(22.8%)
|
SG&A
(2)(3) as a percentage of revenue
|
33.86%
|
37.79%
|
|
|
Adjusted
EBITDA
|
142.3
|
122.1
|
20.2
|
16.5%
|
Adjusted net income
(1)
|
61.1
|
34.5
|
26.6
|
77.1%
|
Adjusted diluted
earnings per share (1)
|
$0.74
|
$0.42
|
$0.32
|
76.2%
|
Net income
|
60.9
|
34.4
|
26.5
|
77.0%
|
Common share
dividends declared
|
$0.28
|
$0.28
|
$-
|
0.0%
|
(1)
|
Refer to the
"Non-IFRS Financial Measures" section of this press release for
additional information on these measures.
|
(2)
|
Selling, general and
administrative expenses ("SG&A").
|
(3)
|
SG&A as a
percentage of revenue for the six months ended June 30, 2020,
includes the impact of the CEWS of $29.8 million or 3.3% as a
percentage of revenue in the six-month period. Therefore, excluding
the impact of the CEWS, the total SG&A as a percentage of
revenue in six-month period amounted to 37.12%.
|
Revenue
For the six months ended June
30, 2020, revenue was $914.3 million compared to $1,060.6 million in the prior year 2019, a
decrease of $146.3 million or
13.8% as compared to the prior year six months ended. This was due
to decreases in all product categories which was driven by
substantial reductions in physical store traffic due to COVID-19
retail store closures across the country during the months of April
and May 2020. In early June, as all
the Company's physical stores reopened across Canada, total merchandise sales increased 1.2%
compared to the month of June 2019,
with the largest sales increases being generated in furniture and
appliance sales.
Same Store Sales (1)
Same store corporate sales decreased 14.5% compared to the six
months ended June 30, 2019. Since the
Company has over 50% of its retail store count in Ontario and Quebec, the mandatory store closures in these
two provinces had a profound impact on the Company's ability to
generate positive same store sales growth. However, by the end of
May, the provincial governments of Ontario and Quebec had lifted their restrictions to open
retail storefronts, which had a very positive impact on the
Company's sales for the last month of the quarter, as the same
store corporate sales for the month of June
2020 were essentially flat to June
2019.
Gross Profit
The gross profit margin decreased slightly from 43.40% for the
six months ended June 30, 2019 to
43.37% in the six-month period ended June
30, 2020. This small decrease was mostly attributable to the
appliance category over indexing relative to the Company's
traditional product mix for the first half of the year.
Selling, general and administrative expenses
As a result of COVID-19 and the ensuing rapid deterioration of
customer demand that began quickly near the end of March 2020, the Company announced that 72 stores
would be temporarily closed and over 3,900 associates would be
unfortunately laid off. Given that there continued to be very
limited visibility of demand as the second quarter began, the
Company undertook the necessary steps to right size its operations
with further store closures to preserve its liquidity.
In April 2020, the Government of
Canada announced the CEWS in order
to help employers return and keep their employees on their
payrolls. The Company determined that it met the eligibility
criteria and applied for the CEWS in order to be better positioned
to return most of its valued associates back to work.
Excluding the CEWS, the Company's SG&A as a percentage of
revenue for the six months ended June 30,
2020 was 37.12%, a decrease of 67 basis points over the
prior year six months ended SG&A percentage of 37.79%.
Including the CEWS, the Company's SG&A as a percentage of
revenue was 33.86%, an improvement of 393 basis points over the
prior year six months ended.
Adjusted Net Income (1) and Adjusted Diluted
Earnings Per Share (1)
Adjusted net income for the six months ended June 30, 2020 totalled $61.1 million, an increase of $26.6 million or 77.1% over the prior year.
Adjusted diluted earnings per share for the Company increased by
$0.32 to $0.74 per share, an increase of 76.2% over
the prior year six months ended.
Excluding the impact of the CEWS, adjusted net income for the
six months ended June 30, 2020
totalled $39.2 million an increase
of $4.7 million or 13.6% over
the prior year six months ended. Adjusted diluted earnings
per share for the Company increased by $0.06 to $0.48 per share, an increase of 14.3% over the
prior year six months ended.
Net Income and Diluted Earnings Per Share
Including the mark-to-market impact of the Company's financial
derivatives, net income for the second quarter of 2020 was
$60.9 million, $0.74 per diluted earnings per share (net income
$34.4 million, $0.42 per diluted earnings per share in
2019).
(1)
|
Refer to the
"Non-IFRS Financial Measures" section of this press release for
additional information on these measures.
|
Dividends
As previously announced, we paid a quarterly dividend of
$0.12 on Monday, July 6, 2020. Today the Directors have
increased the quarterly dividend of $0.12 per common share to $0.14 per common share payable on the 8th day of
October 2020 to shareholders of
record at the close of business on the 8th day of September 2020. As of 2007, dividends paid by
Leon's Furniture Limited are "eligible dividends" pursuant to the
changes to the Income Tax Act under Bill C-28, Canada.
Outlook
In the short-term, the duration and full financial effect of
COVID-19 is unknown, as is the efficacy of government and central
bank interventions to curb the spread of COVID-19 and stimulate the
economy. Federal and provincial governments have instituted social
distancing requirements, bans on non-essential travel and other
measures that directly led to reductions in store traffic and sales
figures in the quarter. The Company continues to actively monitor
the situation and will continue to respond as the impact of the
COVID-19 pandemic evolves, which will depend on a number of factors
including the course of the virus, our customer and employee
reactions and any further government actions, none of which can be
predicted with any degree of certainty.
Management anticipates that actions taken to date have
positioned the Company strongly to weather the current crisis and
to take advantage of any accretive opportunities that may arise.
Several of the Company's existing attributes are expected to
function as operating positions of strength which will act as
offsets in the current environment:
- Essential nature of some of the Company's products and
services. Household appliances that are necessary to cook and clean
have been deemed essential by provincial governments. The Company
also owns the largest third-party appliance service company in
Canada, Transglobal Service, that
has been operating across the country with enhanced health and
safety protocols to protect both our customers and our
technicians.
- Rapidly scaling our eCommerce business. The Company's eCommerce
revenue has grown significantly in the second quarter and continues
to increase at an annualized rate of more than 250% subsequent to
the quarter end of June 30, 2020.
Since the Company moved its online stores to the Shopify Plus
platform, the eCommerce offering has become a better customer
experience and a more interactive offering. The platform has
resulted in improved scalability and enabled significant operating
leverage, which has and continues to provide a competitive
advantage to the Company.
- Unencumbered ownership of substantial real estate assets across
the country. The Company owns 4.2 million square feet (office,
retail, industrial) of approximately 13 million square feet in use
today by the Company. This is a significant competitive advantage
in the current environment, resulting in a far lower carrying cost
for closed stores or other properties than similar leased
properties. In addition, the value inherent in this portfolio would
enable the Company to readily access additional liquidity to
support existing operations and take advantage of accretive
opportunities as they arise.
- Solid balance sheet as evidenced by the Company's commitment to
repaying over $440 million in various
forms of debt since 2013. The Company has unrestricted liquidity of
approximately $490 million as at
June 30, 2020, with room to expand
further if necessary.
On a longer-term basis, we still believe that the underlying
Canadian economy remains relatively strong. Although it is
difficult to gauge future consumer confidence and what impact it
may have on retail, we remain cautiously optimistic that our sales
and profitability will increase. Given the Company's strong and
continuously improving financial position, our principal objective
is to increase our market share and profitability. We remain
focused on our commitment to effectively manage our costs but to
also continuously invest in digital innovation that we believe will
drive more customers to both our online eCommerce presence and our
304 physical locations across Canada.
Upcoming Management Changes
Mr. Edward Leon, Chief Executive
Officer of the LFL Group is pleased to announce that effective
October 1, 2020, Mr. Mike Walsh will be appointed President and Chief
Operating Officer of the LFL Group. Mike has been President of the
Leon's Furniture Division for the last five years. He is a seasoned
retailer with over 30 years of experience. Mr. Graeme Leon will succeed him as President of the
Leon's Furniture Division. Graeme has been Vice-President of
Merchandising at the Leon's Division for the past five years and he
has worked at the Company for 40 years at various levels of the
operation throughout his career. Mr. Danny
Leon will become Vice-President of Merchandising for the
Leon's Furniture Division. Danny is currently the Vice-President of
Operations for the Brick Division and previously held the position
of Vice-President of Merchandising for that division of the
Company. We congratulate all these gentlemen on their upcoming new
positions.
Store Network
The Company has 304 retail stores in Canada at June 30,
2020. The following table illustrates the Company's store
count continuity from December 31,
2019 to June 30, 2020 by
retail banner:
|
Number of stores
as at
|
|
|
Number of stores
as at
|
Banner
|
At December 31,
2019
|
Opened
|
Closed
|
June 30,
2020
|
Corporate
Stores
|
|
|
|
|
Leon's
|
52
|
-
|
-
|
52
|
Appliance
Canada
|
5
|
-
|
-
|
5
|
The Brick
(1)
|
115
|
2
|
(2)
|
115
|
The Brick Mattress
Store
|
24
|
-
|
-
|
24
|
Brick
Outlet
|
9
|
-
|
-
|
9
|
Corporate
Subtotal
|
205
|
2
|
(2)
|
205
|
|
|
|
|
|
Franchise
Stores
|
|
|
|
|
Leon's
|
34
|
-
|
-
|
34
|
The Brick
|
65
|
1
|
(1)
|
65
|
Franchise
Subtotal
|
99
|
1
|
(1)
|
99
|
|
|
|
|
|
Total Corporate
& Franchise Stores
|
304
|
3
|
(3)
|
304
|
(1)
|
Includes the
Midnorthern Appliance banner.
|
Non-IFRS Financial Measures
The Company uses financial measures that do not have
standardized meaning under IFRS and may not be comparable to
similar measures presented by other entities. The Company
calculates the non-IFRS financial measures by adjusting certain
IFRS measures for specific items the Company believes are
significant, but not reflective of underlying operations in the
period, as detailed below:
Non-IFRS
Measure
|
IFRS
Measure
|
Adjusted net
income
|
Net income
|
Adjusted income
before income taxes
|
Income before income
taxes
|
Adjusted earnings per
share - basic
|
Earnings per share -
basic
|
Adjusted earnings per
share - diluted
|
Earnings per share -
diluted
|
Adjusted
EBITDA
|
Net income
|
Adjusted Net Income
Leon's calculates comparable measures by excluding the effect of
changes in fair value of derivative instruments, related to the net
effect of USD-denominated forward contracts and an interest rate
swap on the Company's term credit facility. The Company uses
forward currency contracts to manage the risk associated with its
USD-denominated purchases and an interest rate swap to manage
interest rate risk on its term credit facility in accordance with
the Company's corporate treasury policy. Management believes
excluding from income the effect of these mark-to-market valuations
and changes thereto, until settlement, better aligns the intent and
financial effect of these contracts with the underlying cash
flows.
The following is a reconciliation of reported net income to
adjusted net income, basic and diluted earnings per share to
adjusted basic and diluted earnings per share:
For
the
|
Three months
ended
|
Six months
ended
|
(C$ in millions
except per share amounts)
|
June 30,
2020
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
Net
Income
|
47.2
|
25.0
|
60.9
|
34.4
|
After-tax
mark-to-market (gain)/loss on financial derivative instruments
|
-
|
-
|
0.2
|
0.1
|
Adjusted net
income
|
47.2
|
25.0
|
61.1
|
34.5
|
Basic earnings per
share
|
$0.59
|
$0.32
|
$0.76
|
$0.44
|
Diluted earnings per
share
|
$0.58
|
$0.30
|
$0.74
|
$0.42
|
Adjusted basic
earnings per share
|
$0.59
|
$0.32
|
$0.76
|
$0.44
|
Adjusted diluted
earnings per share
|
$0.58
|
$0.30
|
$0.74
|
$0.42
|
Adjusted EBITDA
Adjusted earnings before interest, income taxes, depreciation
and amortization, mark-to-market adjustment due to the changes in
the fair value of the Company's financial derivative instruments
and any non-recurring charges to income ("Adjusted EBITDA") is a
non-IFRS financial measure used by the Company. The Company
considers Adjusted EBITDA to be an effective measure of
profitability on an operational basis and is commonly regarded as
an indirect measure of operating cash flow, a significant indicator
of success for many businesses. Adjusted EBITDA is a non-IFRS
financial measure used by the Company. The Company's Adjusted
EBITDA may not be comparable to the Adjusted EBITDA measure of
other companies, but in management's view appropriately reflects
LFL's specific financial condition. This measure is not intended to
replace net income, which, as determined in accordance with IFRS,
is an indicator of operating performance.
The following is a reconciliation of reported net income to
adjusted EBITDA:
For
the
|
Three months
ended
|
Six months
ended
|
(C$ in
millions)
|
June 30,
2020
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
Net
Income
|
47.2
|
25.0
|
60.9
|
34.4
|
Income tax
expense
|
13.2
|
8.9
|
16.1
|
12.1
|
Net finance
costs
|
4.8
|
6.7
|
9.6
|
13.0
|
Depreciation and
amortization
|
27.8
|
30.8
|
55.4
|
62.5
|
Mark-to-market
(gain)/loss on financial
derivative instruments
|
(0.1)
|
-
|
0.3
|
0.1
|
Adjusted
EBITDA
|
92.9
|
71.4
|
142.3
|
122.1
|
Same Store Sales
Same store sales are defined as sales generated by stores, both
in store and through online transactions, that have been open for
more than 12 months on a fiscal basis. Same store sales are not an
earnings measure recognized by IFRS, and does not have a
standardized meaning prescribed by IFRS, but it is a key indicator
used by the Company to measure performance against prior period
results. Same store sales as discussed in this MD&A may not be
comparable to similar measures presented by other issuers, however
this measure is commonly used in the retail industry. We believe
that disclosing this measure is meaningful to investors because it
enables them to better understand the level of growth of our
business.
Total System Wide Sales
Total system wide sales refer to the aggregation of revenue
recognized in the Company's consolidated financial statements plus
the franchise sales occurring at franchise stores to their
customers which are not included in the revenue figure presented in
the Company's consolidated financial statements. Total system wide
sales are not a measure recognized by IFRS and does not have a
standardized meaning prescribed by IFRS, but it is a key indicator
used by the Company to measure performance against prior period
results. Therefore, total system wide sales as discussed in this
MD&A may not be comparable to similar measures presented by
other issuers. We believe that disclosing this measure is
meaningful to investors because it serves as an indicator of the
strength of the Company's overall store network, which ultimately
impacts financial performance.
Franchise Sales
Franchise sales figures refer to sales occurring at franchise
stores to their customers which are not included in the revenue
figures presented in the Company's consolidated financial
statements, or in the same store sales figures in this MD&A.
Franchise sales is not a measure recognized by IFRS, and does not
have a standardized meaning prescribed by IFRS, but it is a key
indicator used by the Company to measure performance against prior
period results. Therefore, franchise sales as discussed in this
MD&A may not be comparable to similar measures presented by
other issuers. Once again, we believe that disclosing this measure
is meaningful to investors because it serves as an indicator of the
strength of the Company's brands, which ultimately impacts
financial performance.
About Leon's Furniture Limited
Leon's Furniture Limited is the largest retailer of furniture,
appliances and electronics in Canada. Our retail banners include: Leon's;
The Brick; Brick Outlet; and The Brick Mattress Store. Finally,
with The Brick's Midnorthern Appliance banner alongside with Leon's
Appliance Canada banner, this makes the Company the country's
largest commercial retailer of appliances to builders, developers,
hotels and property management companies. The Company has 304
retail stores from coast to coast in Canada under various banners. The Company
operates three websites: leons.ca, thebrick.com and
furniture.ca.
Cautionary Statement
This press release may contain forward-looking statements that
are subject to known and unknown risks and uncertainties that could
cause actual results to vary materially from targeted results. Such
risks and uncertainties include those described in Leon's Furniture
Limited's periodic reports including the annual report or in the
filings made by Leon's Furniture Limited from time to time with
securities regulatory authorities.
This News Release may include certain "forward-looking
statements" which are not comprised of historical facts.
Forward-looking statements include estimates and statements that
describe the Company's future plans, objectives or goals, including
words to the effect that the Company or management expects a stated
condition or result to occur. Forward-looking statements may be
identified by such terms as "believes", "anticipates", "expects",
"estimates", "may", "could", "would", "will", or "plan". Since
forward-looking statements are based on assumptions and address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Although these statements are
based on information currently available to the Company, the
Company provides no assurance that actual results will meet
management's expectations. Risks, uncertainties and other factors
involved with forward-looking information could cause actual
events, results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward-looking
information. Forward looking information in this news release
includes, but is not limited to, the Company's objectives, goals or
future plans, and estimates of market conditions. Factors that
could cause actual results to differ materially from such
forward-looking information include, but are not limited to failure
to identify beneficial business opportunities, failure to convert
the potential in the pursued business opportunities to tangible
benefits to the Company or its shareholders, the ability of the
Company to counteract the potential impact of the COVID-19
coronavirus on factors relevant to the Company's business, delays
in obtaining or failures to obtain required shareholder and TSX
approvals, changes in equity markets, inflation, changes in
exchange rates, fluctuations in commodity prices, delays in the
development of projects, and those risks set out in the Company's
public documents filed on SEDAR. Although the Company believes that
the assumptions and factors used in preparing the forward-looking
information in this news release are reasonable, undue reliance
should not be placed on such information, which only applies as of
the date of this news release, and no assurance can be given that
such events will occur in the disclosed time frames or at all. The
Company disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new
information, future events or otherwise, other than as required by
law.
SOURCE Leon's Furniture Limited