TORONTO, May 10, 2018 /CNW/ - Leon's Furniture
Limited ("Leon's" or the "Company") (TSX:
LNF), today announced financial results for the first quarter
2018.
Highlights – Q1-2018
- Total system wide sales1 grew 4.7% to $601,142,000 in Q1-2018 compared to $573,988,000 in Q1-2017.
- Revenue grew 3.4% to $500,719,000
in Q1-2018 compared to $484,189,000
in Q1-2017.
- Adjusted EBITDA1 increased 10.7 % to $26,576,000 in Q1-2018 compared to $24,006,000 in Q1-2017.
- Adjusted net income1 increased by 35.1% to
$11,545,000 in Q1-2018 compared to
$8,543,000 in Q1-2017.
- Adjusted diluted earnings per share1 grew 27.3% to
$0.14 in Q1-2018 compared to
$0.11 in Q1-2017.
- Same store corporate sales1 increased by 2.6% in
Q1-2018.
1Refer to the non-IFRS financial measures section
of this press release
"During the first three months of 2018 our team generated
another period of record revenue and strong double-digit bottom
line growth," said Edward Leon,
President and Chief Operating Officer of Leon's. "The strategies we
have laid-out and executed over the past two years to increase
in-store traffic as well as to contain expenses and drive cost
synergies continue to pay off. Over the next 12 months we see
additional opportunity to solidify our leading national market
presence and realize incremental efficiencies across our network.
As a management team and board of directors we would like to thank
all of our long-term shareholders for their ongoing support and we
can confidently say that over our 100-year history there has never
been a more exciting time to be a Leon's shareholder."
For a full explanation of the Company's use of non-IFRS
financial measures, please refer to the next page of this press
release.
Summary of Financial Highlights
|
|
|
For the three
months ended March 31
|
(000's of $ except
% and per share amounts)
|
2018
|
2017
|
$
Increase
|
%
Increase
|
Total system wide
sales(1)
|
601,142
|
573,988
|
27,154
|
4.7%
|
Franchise
sales(1)
|
100,423
|
89,799
|
10,624
|
11.8%
|
Revenue
|
500,719
|
484,189
|
16,530
|
3.4%
|
Same store
sales(1)
|
491,966
|
479,357
|
12,609
|
2.6%
|
Gross profit margin
as a percentage of revenue
|
42.80%
|
41.91%
|
|
|
SG&A(2) (excluding mark-to-market
impact)
|
196,902
|
188,646
|
8,256
|
4.4%
|
SG&A(2) as a percentage of revenue
(excluding mark-to-market impact)
|
39.32%
|
38.96%
|
|
|
Adjusted
EBITDA(1)
|
26,576
|
24,006
|
2,570
|
10.7%
|
Adjusted net
income(1)
|
11,545
|
8,543
|
3,002
|
35.1%
|
Net income
|
14,526
|
8,614
|
5,912
|
68.6%
|
Adjusted basic
earnings per share(1)
|
$
|
0.15
|
$
|
0.12
|
$
|
0.03
|
25.0%
|
Adjusted diluted
earnings per share(1)
|
$
|
0.14
|
$
|
0.11
|
$
|
0.03
|
27.3%
|
Common share
dividends declared
|
$
|
0.12
|
$
|
0.12
|
$
|
-
|
0.0%
|
(1) Non-IFRS
financial measures. Refer to "Non-IFRS Financial Measures" section
in this press release for additional information.
|
(2) Selling, general
and administrative expenses
|
Revenue
For the three months ended March 31,
2018, revenue was $500,719,000
compared to $484,189,000 in the prior
year's first quarter. Revenue increased $16,530,000 or 3.4% between the comparative
quarters as we continued to see growth in most product
categories.
Selling, general and administrative expenses
(SG&A)
Excluding the mark-to-market impact of the Company's financial
derivatives, comprised of foreign exchange forwards and a fixed
interest rate swap, SG&A as a percentage of revenue increased
from 38.96% to 39.32% compared to the prior year's
quarter. This change was due primarily to the increase in
payroll costs which include the minimum wage increase in
Ontario and to the increased cost
from offering longer term customer finance plans, which generated
overall sales and profitability increases.
Adjusted Net Income and Adjusted Diluted Earnings Per
Share
As a result of the above, adjusted net income for the first
quarter of 2018 was $11,545,000,
$0.14 adjusted diluted
earnings per share ($8,543,000,
$0.11 adjusted diluted earnings per
share in 2017), an increase of 27.3% per share.
Dividends
As previously announced, we paid a quarterly 12¢ dividend on
April 9, 2018. Today we are happy to
announce that the Directors have declared a quarterly dividend of
12¢ per common share payable on the 6th day of July 2018 to shareholders of record at the close
of business on the 6th day of June
2018. 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
Overall, we are pleased that we were able to improve our
financial results in the first quarter of 2018. Our strong
financial position will allow us to focus on increasing market
share in existing and new markets going forward. Along with
our continuing strong growth in online sales, we expect to see
continued revenue growth this year, to maintain gross margins and
continue to drive efficiencies.
Store Network
The Company has 303 retail stores from coast to coast in
Canada under the various banners
indicated below which also includes over 100 franchise locations.
Including our franchises, we have over 10,000 employees
across Canada.
|
Number of
Stores
|
|
|
Number of
Stores
|
|
as at December
31,
|
|
|
as at March
31,
|
Banner
|
2017
|
Opened
|
Closed
|
2018
|
Leon's banner
corporate stores
|
50
|
—
|
—
|
50
|
Leon's banner
franchise stores
|
36
|
—
|
—
|
36
|
Appliance Canada
banner stores
|
4
|
—
|
—
|
4
|
The Brick banner
corporate stores1
|
114
|
—
|
—
|
114
|
The Brick banner
franchise stores
|
65
|
—
|
(1)
|
64
|
The Brick Mattress
Store banner locations
|
23
|
—
|
—
|
23
|
Brick
Outlet
|
12
|
—
|
—
|
12
|
Total number of
stores
|
304
|
0
|
(1)
|
303
|
|
|
|
|
|
1Includes
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
|
For a reconciliation of the Company's non-IFRS financial
measures please refer to the Company's MD&A for the quarter
ended March 31, 2018, which is
available on SEDAR at www.sedar.com.
Adjusted Net Income
Leon's calculates comparable measures by excluding the effect
of:
- the mark-to-market adjustments included in the Company's
SG&A income statement line item, related to the net effect of
USD-denominated forward contracts and an interest rate swap on the
Company's term credit facility;
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. Similarly, excluding from
income the effect of non-recurring expenses better reflects Leon's
normalized SG&A as a percentage of revenue in the period.
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 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 entities, but in management's view appropriately reflects
Leon'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.
Same Store Sales
Same store sales are defined as sales generated by stores that
have been open or closed for more than 12 months on a fiscal basis.
Same store sales is 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
press release 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 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, total system wide sales as discussed in this
press release 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 press
release. 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 press release 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 303 retail stores from coast to coast in Canada under various banners. The Company
operates three websites: leons.ca, thebrick.com and
furniture.ca.
Forward-Looking Statements
Information in this press release that is not current or
historical factual information may constitute forward-looking
information within the meaning of securities laws, including
future-oriented financial information and financial outlooks. This
information is based on certain assumptions regarding expected
growth, results of operations, performance, and business prospects
and opportunities. While the Company considers these assumptions to
be reasonable, based on information currently available, they may
prove to be incorrect. Forward-looking information is subject to a
number of risks, uncertainties and other factors that could cause
actual results to differ materially from what the Company currently
expects. These risks, uncertainties and other factors include, but
are not limited to: credit, market, currency, operational,
liquidity and funding risks, including changes in economic
conditions, interest rates or tax rates, the timing and market
acceptance of future products, and competition in the Company's
markets.
To the extent any forward-looking information in this press
release constitutes future-oriented financial information or
financial outlooks, within the meaning of securities laws, such
information is being provided to demonstrate the potential of the
Company and readers are cautioned that this information may not be
appropriate for any other purpose. Future-oriented financial
information and financial outlooks, as with forward-looking
information generally, are based on assumptions and subject to
risks, uncertainties and other factors. Actual results may differ
materially from what the Company currently expects. Other than as
required under applicable securities laws, the Company does not
undertake to update any forward-looking information at any
particular time. The reader should not place undue importance on
forward-looking information and should not rely upon this
information as of any other date. All forward-looking information
contained in this press release is expressly qualified in its
entirety by this cautionary statement.
SOURCE Leon's Furniture Limited