DAVIDsTEA reported a 15.6% increase in consolidated sales for the third quarter of 2024, reaching $14 million. Despite a net loss of $1.6 million, the company showed significant improvement over the previous year. The stock price of DAVIDsTEA, listed under the symbol DTEA, saw a slight decline of 0.4% recently, with shares closing at $39.79. The company highlighted a focus on innovation and operational efficiency as key drivers for future growth.
Key Takeaways
- Consolidated sales rose by 15.6% year-over-year.
- Net loss improved to $1.6 million from a larger deficit last year.
- Gross profit margin increased to 51.5%.
- Positive cash flow from operations was recorded for the first time in recent memory.
Company Performance
DAVIDsTEA demonstrated robust performance in Q3 2024, with a notable increase in sales across all channels, including brick-and-mortar, online, and wholesale. The company capitalized on consumer interest in premium tea experiences, expanding its product range with new offerings like ready-to-drink teas and wellness blends. These efforts contributed to a stronger gross profit margin and a positive adjusted EBITDA of $81,000, compared to a negative $2.5 million last year.
Financial Highlights
- Revenue: $14 million, up 15.6% year-over-year
- Net Loss: $1.6 million, improved from a larger loss last year
- Gross Profit Margin: 51.5%, up from 37.9%
- Adjusted EBITDA: $81,000, compared to negative $2.5 million
Company Outlook
Looking ahead, DAVIDsTEA aims to achieve profitability by 2025, with plans to expand its store footprint significantly over the next three years. The company continues to invest in product innovation and operational excellence, anticipating annual cost savings of $4.2 million from recent operational changes. Key priorities include sustaining profitability, expanding the store network, and enhancing customer experience.
Executive Commentary
CEO Sarah Siegel expressed optimism about the company's performance, stating, "We are highly encouraged by the ongoing sales momentum in the Q3 of 2024." President Frank Sotella noted the financial progress, saying, "For the first time in recent memory, DAVIDsTEA generated positive cash flow from operations." Siegel reiterated the company's main objective: "Our main objective remains to reach profitability while delivering long-term value to our stakeholders."
Risks and Challenges
- Economic Uncertainty: Changes in consumer spending could impact sales.
- Market Competition: The premium tea market is competitive, requiring continuous innovation.
- Supply Chain Disruptions: Potential disruptions could affect product availability.
- Inflationary Pressures: Rising costs could impact profitability.
- Expansion Risks: Rapid store expansion may pose operational challenges.
The article provides a comprehensive overview of DAVIDsTEA's Q3 2024 performance, highlighting its strategic initiatives and financial improvements while acknowledging potential risks.
Full transcript - Diana Tea Co BO (DTEA) Q3 2025:
Operator/Moderator: Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's 3rd Quarter Results Webcast for Fiscal 2024. Today's webcast is being recorded and is in a listen only mode. Before we get started, I would like to remind you of the company's safe harbor language. This presentation includes forward looking statements about expectations for the performance of the business in the coming quarter year.
Each forward looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD and A, which was filed with Canadian regulatory authorities and is available on ww www.sedarplus. Ca. The forward looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. If any non IFRS financial measure is used during this webcast, a reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD and A.
As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated. Now, I would like to turn the call over to Sarah Siegel, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA.
Sarah Siegel, Chief Executive Officer and Chief Brand Officer, DAVIDsTEA: Thank you, operator. Good morning, everyone, and thank you for joining us today. I am thrilled to share some exciting updates about DAVIDsTEA's ongoing transformation and our remarkable progress this year. As we enter the We are highly We are highly encouraged by the ongoing sales momentum in the Q3 of 2024 with consolidated sales increasing 15.6% year over year to $14,000,000 This growth was driven by double digit increases across all distribution channels, brick and mortar sales were up 19.2%, online sales rose 11.4% and wholesale channel sales grew 19.3%. These results affirm our value proposition, the appeal of our premium key products and accessories and the unmatched quality that resonates with key levers everywhere.
Equally important, our multifaceted omni channel growth strategy continues to bring traction supported by early signs of an improving economic environment, lower interest rates and easing inflation. By being present everywhere, whether in stores, online or through wholesale, David T. Continues to win over key lovers and those new to the category. Simply put, key lovers are discovering and rediscovering the world the performance of our new retail locations. Our newest location in the Montreal Eaton (NYSE:ETN) Centre, which opened just over a month ago, is perfectly situated at a significant hub of downtown commuter traffic and is already on track to become a top tier location in our 20 store network.
Meanwhile, our September opening in Canada's newest luxury mall, Montreal Royal Mount Mall is also delivering impressive financial results as tenant occupancy improves leading to greater height and mall traffic. These successes highlight the importance of choosing the right location for our stores and reflect the readiness of consumers to indulge in affordable luxuries like our premium seats. Our ability to deliver a heightened in store experience for shoppers along with the passion of our ski guides enables us to connect with customers in person to listen to their requests and provide guidance. Looking ahead, we are reiterating our intent to significantly increase our store footprint over the next 3 years to drive sustained profitable growth. That said, delivering sustainable profitability remains our primary goal.
Despite recent revenue expansion, including 2 consecutive quarters of double digit year over year growth, we continue to focus on profitability. DAVIDsTEA reported a net loss of $1,600,000 in the Q3 of 2024 and 5 $700,000 after 9 months of the fiscal year. While these results represent an improvement over last year, it is not sufficient to secure our long term success. To address this profitability issue in September, we terminated our head office lease and relocated our headquarters into one of our warehouses and in early November converted all our IT systems to a more agile and cost effective platform. These moves are expected to generate annual savings of a little over $4,000,000 bolstering our efforts to achieve sustained profitability in 2025.
Frank Sotella, our President, Chief Financial and Operating Officer will provide more details about these initiatives in his prepared comments. I want to emphasize that the main objective of our leadership team remains to reach profitability while delivering long term value to our stakeholders. Our company relies on innovative people, creative ideation and a desire to push the envelope in a category that is an exciting space to be in. Our customers love tea for the taste, the health benefits, the way it makes you feel and the constant discovery. We invest in our people and rely on constant feedback from our customers.
We listen and react in a way that leads us into adjacent key categories like ready to drink, functional tea powder and the use of functional ingredients to boost our loose leaf tea benefits with healing organic and high quality wellness blends that have been embraced by customers looking to expand their tea journey. We continue to drive innovation by relying on our team's connection with our customers as well as global inspiration to bring new new seasonal drops, limited edition blends and exclusive partnership teams with a constant strategy to always test and confirm our innovation with customer appreciation and data insights. Our product development cycle and latest collections mean there is always a new reason to drop into David's piece. Lastly, I'd like to touch on the impact of the recent Canada Post strike on our operations. While order volumes tracked according to plan until mid November, the strike caused a decline in online orders and delays in holiday season deliveries.
I want to reassure you that these delays are unrelated to the fulfillment challenges we experienced a few years ago. Those have been fully resolved by bringing order fulfillment in house. And this season, our distribution team has been able to keep up with all order volumes and deliver excellent service. Any delays are due to carrier capacity and we are actively working with alternative carriers to resolve any lingering backlog and expect to mitigate much of the impact by increased volumes in our stores and wholesale channels. The disruption in delivery capabilities has led us to innovate and diversify our delivery partners, resulting in faster options being added and even next day delivery in major Canadian metropolitan cities.
We continue to innovate on delivery capacity to make our products even more accessible faster. In summary, faster. In summary, Davis Tea delivered a strong 3rd quarter performance. Sales increased 15.6% year over year, driven by a resonating value proposition and an improving economic environment. Our new Eaton Center store is off to a phenomenal start, complementing the earlier success of our Royal Mound Hall location.
We implemented a key cost saving initiative with the IT system transition expected to generate $4,000,000 in annual savings. And we remain committed to achieving sustained profitability by 2025. I will now turn the webcast over to Frank.
Frank Sotella, President, Chief Financial and Operating Officer, DAVIDsTEA: Thank you, Sarah, and good morning, everyone. I'm pleased to join you today to share the results of our Q3 performance as well as the progress we're making in positioning DAVIDsTE for long term success. As we reflect on this quarter, one thing is clear. We are a company in motion. From operational enhancements to financial performance improvements, DAVIDsTE is taking both enhancements to financial performance improvements, DAVIDsTEA is taking both steps towards becoming a stronger, more resilient business that delivers value for both our consumers and our shareholders.
Let's begin with the highlights of our financial performance. For the first time in recent memory, DAVIDsTEA generated positive cash flow from operations, representing a significant milestone in our journey and as a result, strengthened our cash position on a sequential basis to $7,900,000 at the end of the quarter. It reflects our team's disciplined financial management and relentless commitment to operational excellence, providing a strong foundation for continued growth and success. Consolidated sales grew by 15.6 percent year over year to $14,000,000 in the Q3. This growth reflects the effectiveness of our value proposition, a unique combination of premium key products, unmatched product quality and a memorable customer experience both online and in store.
We saw a robust growth in all channels. Brick and mortar sales increased by 19.2 percent to 4,700,000, representing the 4th consecutive quarter of growth in this channel. This growth highlights the value of a physical presence, allowing key enthusiasts to connect with our brand in a more personal and immersive way. Online sales rose 11.4 percent to 6,300,000 showcasing the continuous strength of our digital capabilities in a world where convenience and accessibility matter more than ever. Wholesale channel sales grew by 19 0.3 percent to $3,000,000 driving a strong driven by strong partnerships and replenishment orders from existing Canadian customers.
Notably, gross profit margin improved significantly to 51.5 percent, up from 37.9 percent in the prior year. This improvement was driven by higher sales, better product margins and a reduction in freight, shipping and fulfillment costs. This is not just a financial metric. It's a testament to the effectiveness of our operational efficiency initiatives. Let me be clear.
While we made meaningful progress, there's still work to be done. Despite 2 consecutive quarters of double digit revenue growth and significant improvement in sequential gross profit margin, we are not yet profitable. In the Q3, we reported a net loss of $1,600,000 This represents, however, a significant improvement compared to the net loss of 3,700,000 in the same quarter last year. To ensure we achieve the same profitability by 2025, we've taken decisive actions. In early November, we transitioned all of our IT systems to a more agile and cost effective set of applications.
These systems enable us to better engage with new customers, relationships with existing ones. While this move required a $3,100,000 write offs in the quarter, it's a forward looking investment that is expected to generate annual cost savings of approximately $4,000,000 These cost savings will improve our SG and A expense run rate and the additional system capabilities will allow us to drive growth and deliver value to our consumers. Additionally, this transition triggered a reassessment of previously impaired property and equipment, resulting in a reversal of $2,100,000 It's worth noting that this reversal is not just an accounting adjustment. It reflects the tangible progress we're making on improving our financial health and operational efficiency. In September, we terminated our head office lease and relocated our headquarters into one of our warehouses.
Following one time relocation costs, this move is expected to generate annual cost savings of approximately $200,000 Selling, general and administrative expenses increased by $400,000 or 4.5 percent to $8,700,000 However, when adjusted for one time expenses to affect the financial change, SG and A expenses actually the financial change, SG and A expenses actually decreased by $1,000,000 or 12.6 percent compared to the prior year. This reduction is a testament to our commitment to operational efficiency and our ability to do more with less. Turning to the bottom line. Adjusted EBITDA for the 3rd quarter was 800 $1,000 compared to a negative $2,500,000 in the same period last year. This $3,300,000 improvement reflects higher sales, better margins and a disciplined cost management approach.
And as we look forward to the future, our priorities are clear. 1st, sustain profitability. We remain focused on achieving positive earnings in 2025. And to get there, we're laser focused on revenue growth from all of our distribution channels, improving margins and maintaining a disciplined cost management process. 2nd, store expansion.
Over the next 3 years, we plan to significantly grow our store footprint, allowing us to meet the increasing demand for premium key products and bring our brands even more community. And finally, operational excellence. From our new IT platform to refining our omnichannel strategy and relentlessly driving cost efficiencies in our supply chain, we're laying the groundwork for longer term success. With these priorities guiding us, DAVIDsTEA is making steady progress, delivering improving financial results, streamlining operations and staying true to our mission of making CEE fun and accessible to all. We are confident in our ability to achieve sustainable growth and create lasting value for our customers, partners and shareholders.
We want to thank all of our passionate employees, our loyal customers and patient shareholders for their continued support. This concludes the review of our 3rd quarter results. We encourage investors wishing to obtain additional color about DAVIDsTEA to contact wishing to obtain additional color about DAVIDsTEA to contact Investor Relations who will help coordinate access to management. Thank you for joining us today.
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