TORONTO, Aug. 3, 2021 /CNW/ - Sleep Country Canada
Holdings Inc. ("Sleep Country" or the "Company") (TSX: ZZZ) today
released financial results for the second quarter and six months
ended June 30, 2021. Sleep Country
continued to advance its strategy, resulting in solid performance
across all key metrics including strong expansion of topline
revenue and a net income increase of $17.5
million. As the Company embarks on the next chapter of its
growth story, the unique combination of its purpose-driven
strategy, capable and agile team, differentiated omnichannel sleep
ecosystem and commitment to exceptional customer experience
position Sleep Country better than ever for a sustained and
profitable future.
All financial results are reported in Canadian dollars unless
otherwise stated.
Second Quarter Highlights
- The Company's retail store network was closed for an average of
32.7% of normal operating days1 as a result of COVID-19
government-mandated closures in Q2 2021 compared to 54.0% of normal
operating days1 in Q2 2020
- Revenues increased by $77.3
million or 67.3% from $114.9
million in Q2 2020 to $192.2
million in Q2 2021; Same store sales (SSS)1 were
65.5% in Q2 2021
- eCommerce sales represented 29.6% of revenue in Q2 2021
- Gross profit margin increased by 2.3% from 32.2% in Q2 2020 to
34.5% in Q2 2021
- Operating EBITDA1 margin increased by 1.4% from
21.3% in Q2 2020 to 22.7% in Q2 2021
- Net income increased by $17.5
million from a net loss of $0.5
million in Q2 2020 to $17.0
million in Q2 2021
- Adjusted diluted earnings per share1 (EPS) increased
by 269.2% from $0.13 in Q2 2020 to
$0.48 in Q2 2021
- Mattresses and accessories revenues grew by 66.6% and 69.8%,
respectively, from Q2 2020 to Q2 2021
- Opened four new stores, bringing total store count to 287
across the country
- Announced the opening of two new storage hubs to increase
overall warehouse capacity by 65.0%; Subsequent to quarter end,
opened the first of the two hubs in July
2021
- Expanded digital footprint in partnership with Best Buy Canada
to retail a selection of sleep solutions on the Best Buy
Marketplace, including exclusive supply of traditional mattresses
on BestBuy.ca
- Launched the Endy Sofa with tremendous success in its first
month on the market
- Launched brand ambassador campaign with tennis Grand Slam
champion, Bianca Andreescu
- Subsequent to quarter end, announced Stewart Schaefer's appointment to CEO and
President of Sleep Country following current CEO Dave Friesema's retirement at the end of fiscal
2021
CEO Commentary and Outlook
"The second quarter was yet another example of how our strategy,
executed by our best-in-class team, delivers solid and sustained
growth. Due to ongoing investments in our omnichannel sleep
ecosystem and disciplined execution, we delivered strong results
this quarter with robust performance in revenue, net income and
gross profit margin – all of which were achieved with store
closures impacting 32.7% of our total quarter's operating days.
Despite these headwinds, our differentiated service model served
the sleep needs of new and loyal customers, underscoring our
ability to adapt, excel and capture market share in any
environment," said Dave Friesema,
CEO, Sleep Country.
"We remain focused on realizing customer-centric growth across
our three strategic platforms. In Q2, we made important progress
with several transformative milestones, including expanding our
digital footprint through an exclusive partnership with Best Buy
Marketplace, our first wellness-focused brand ambassador campaign
with tennis Grand Slam champion Bianca
Andreescu and the expansion of the Endy brand and product
line with the launch of the Endy sofa. In addition, we announced
the opening of two new storage hubs that will drive operational
efficiencies, improve the opportunity for margin expansion and fuel
the next chapter of our exciting growth roadmap," added
Friesema.
"Looking ahead, we are guided by the entrepreneurial spirit,
strategic mindset and disciplined focus that has driven our storied
growth over the last 27 years. We remain committed to our purpose
of transforming lives through sleep and to our promise of providing
new and loyal customers with world-class experiences across our
sleep ecosystem. As we emerge from the pandemic, we are seeing
Canadians investing in sleep as a pillar of their wellbeing, and
our Sleep Country Canada, Dormez-vous and Endy brands are uniquely
poised to capture this investment for years to come. We are
executing against an exciting strategic plan and are confident in
our ability to deliver sustained, profitable growth for our
customers, communities, associates and shareholders," said
Stewart Schaefer, President, Sleep
Country.
(C$ thousands unless
otherwise stated; other than store and share data)
|
Q2
2021
|
Q2
2020
|
%
Change
|
Revenues
|
$192,175
|
$114,900
|
67.3%
|
SSS1
|
65.6%
|
N/A
|
|
Gross profit
margin
|
34.5%
|
32.2%
|
|
Stores
opened
|
4
|
-
|
|
Stores
renovated/relocated
|
5
|
-
|
|
Operating
EBITDA1
|
$43,706
|
$24,470
|
78.6%
|
Operating EBITDA
margin1
|
22.7%
|
21.3%
|
|
Net
Income (Loss)
|
$17,019
|
($471)
|
n.m.f.2
|
Adjusted Net
Income1
|
$18,036
|
$4,866
|
270.7%
|
Earnings (Loss)
per share – Basic
|
$0.46
|
($0.01)
|
n.m.f.2
|
Adjusted Earnings
Per Share – Basic1
|
$0.49
|
$0.13
|
276.9%
|
Adjusted Earnings
Per Share – Diluted1
|
$0.48
|
$0.13
|
269.2%
|
1 See
the Non-IFRS Measures section of this news release
|
2 No
meaningful figure
|
Dividend Declaration
On August
3, 2021, the Board declared a dividend of $0.195 per share, payable on August 30, 2021 to shareholders of record at the
close of business on August 20, 2021.
The dividend is designated as an "eligible dividend" for Canadian
tax purposes.
Summary of Second Quarter Financial Results
Revenues increased by $77.3
million or 67.3% from $114.9
million in Q2 2020 to $192.2
million in Q2 2021. This increase was mainly driven by a
65.5% increase in SSS1, four new stores and wrap stores
while the Company's retail store network was temporarily closed for
an average of 32.7% of its normal operating days1 in Q2
2021 versus 54.0% of its normal operating days in Q2 2020. In Q2
2021, eCommerce sales were 29.6% of revenues.
Gross profit increased by $29.4
million from $37.0 million in
Q2 2020 to $66.4 million in Q2 2021.
The gross profit margin increased by 2.3% from 32.2% in Q2 2020 to
34.5% in Q2 2021 primarily due to an increase in average unit
selling prices, lower product costs, leveraging of fixed
distribution, occupancy and depreciation costs. These efficiencies
were partially offset by higher COVID-19 PPE, delivery and
inventory adjustment costs, in addition to higher compensation
costs that were favourably impacted by wage subsidies under the
Canada Emergency Wage Subsidy
(CEWS) program in Q2 2020.
Total G&A expenses increased by $11.3
million or 40.4% from $27.8
million in Q2 2020 to $39.1
million in Q2 2021. This change was mainly driven by an
increase in media and advertising, compensation that was favourably
impacted by wage subsidies under the CEWS program in Q2 2020,
telecommunication and information technology and occupancy
expenses.
Finance related expenses decreased by $5.1 million from $9.7
million in Q2 2020 to $4.6
million in Q2 2021. This change was mainly due to decreases
in the Company's interest expense on its senior secured credit
facility and a one-time $4.3 million
adjustment in Q2 2020 on Endy's contingent consideration liability,
in addition to the $0.7 million
periodic accretion expense related to the Endy acquisition. These
decreases were partly offset by increases in the revolver
commitment fees and interest expense on the Company's lease
liabilities.
Operating EBITDA1 was $43.7
million for Q2 2021, or 22.7% of revenue, compared to
$24.5 million for Q2 2020, or 21.3%
of revenue, representing an increase of $19.2 million or 78.6% mainly due to strong
revenue growth in Q2 2021 combined with an improved gross profit
margin and partially offset by an increase in G&A expenses.
Net Income increased by $17.5
million from a net loss of $0.5
million (($0.01) per share) in
Q2 2020 to $17.0 million
($0.46 per share) in Q2 2021. This
increase was mainly driven by the increase in EBITDA1
and decrease in finance related expenses and partially offset by an
increase in income taxes.
Adjusted Net Income1 for Q2 2021 increased by
$13.1 million from $4.9 million ($0.13
per share) in Q2 2020 to $18.0
million ($0.49 per share) in
Q2 2021.
Summary of YTD 2021 Financial Results
Revenues increased by $108.7
million or 40.8% from $266.5
million in YTD 2020 to $375.2
million in YTD 2021. This increase was mainly driven by a
39.4% increase in SSS1, six new stores and wrap stores
while the Company's retail store network was temporarily closed for
an average of 33.3% of its normal operating days1 in YTD
2021 similar to 33.0% of its normal operating days1 in
YTD 2020. In YTD 2021, eCommerce sales were 29.4% of revenues.
Gross profit increased by $38.5
million from $78.1 million in
YTD 2020 to $116.6 million in YTD
2021. The gross profit margin increased by 1.8% from 29.3% in YTD
2020 to 31.1% in YTD 2021 primarily due to lower product costs,
leveraging of fixed distribution, occupancy and depreciation costs.
These decreases were partially offset by higher delivery and
inventory adjustment costs, in addition, to higher compensation
costs that were favourably impacted by wage subsidies under the
CEWS program in YTD 2020.
Total G&A expenses increased by $16.3
million or 28.7% from $56.8
million in YTD 2020 to $73.1
million in YTD 2021. This change was mainly driven by an
increase in media and advertising expenses, compensation expenses
that were favourably impacted by wage subsidies under the CEWS
program in YTD 2020, in addition to telecommunication and
information technology and occupancy expenses.
Finance related expenses decreased by $6.6 million from $15.2
million in YTD 2020 to $8.6
million in YTD 2021. This change was mainly due to decreases
in the Company's interest expense on its senior secured credit
facility and a one-time $4.3 million
adjustment in Q2 2020 on Endy's contingent consideration liability,
in addition to the $1.4 million
periodic accretion expense related to the Endy acquisition. The
contingent liability was subsequently paid in March 2021 in full. These decreases were partly
offset by increases in the revolver commitment fees and interest
expense on the Company's lease liabilities.
Operating EBITDA1 was $75.2
million for YTD 2021, or 20.0% of revenue, compared to
$52.3 million for YTD 2020, or 19.6%
of revenue, representing an increase of $22.9 million or 43.6% mainly due to strong
revenue growth in YTD 2021 combined with an improved gross profit
margin and partially offset by an increase in G&A expenses.
Net Income increased by $21.2
million from $4.5 million
($0.12 per share) in YTD 2020 to
$25.7 million ($0.70 per share) in YTD 2021. This increase was
mainly driven by the increase in EBITDA1 and decrease in
finance related expenses and partially offset by an increase in
income taxes.
Adjusted Net Income1 for YTD 2021 increased by
$16.7 million from $11.0 million ($0.30 per share) in YTD 2020 to $27.7 million ($0.75 per share) in YTD 2021.
Conference Call
Sleep Country's CEO, Dave Friesema, and President, Stewart Schaefer, will host a conference call
for analysts and investors on August 4,
2021 at 8:00 a.m. ET. The
dial-in numbers for the conference call are (888) 664-6392 or (416)
764-8659. This conference call will be recorded and available for
replay until August 11, 2021
23:59 ET. To listen to the replay,
please dial (416) 764-8677 or (888) 390-0541 and use passcode
448781.
About Sleep Country
Sleep Country is Canada's leading omnichannel specialty sleep
retailer with a national retail store network and robust eCommerce
platforms. The Company operates under three retail banners: "Sleep
Country Canada", with omnichannel operations in Canada excluding Québec; "Dormez-vous?" with
omnichannel operations in Québec and "Endy", Canada's leading direct-to-consumer online
sleep solutions retailer. As of August 3,
2021, Sleep Country has 287 stores, 17 fulfillment centres
and 1 storage hub across Canada.
Sleep Country is a purpose-led company dedicated to transforming
lives by awakening Canadians to the power of sleep. The company is
committed to meaningfully and positively supporting its
environment, people and communities including operating a
comprehensive Mattress Recycling Program and working closely with
Canadian charities to donate new and gently used mattresses to
families and children in need.
For more information about the Company
visit www.sleepcountryir.ca
Non-IFRS Measures
This news release refers to certain
measures that are not recognized under IFRS and do not have a
standardized meaning prescribed by IFRS. They are therefore
unlikely to be comparable to similar measures presented by other
companies. These measures are provided as additional information to
complement IFRS measures by providing further understanding of the
Company's results of operations from management's perspective.
Accordingly, they should not be considered in isolation nor as a
substitute for analysis of the Company's financial information
reported under IFRS. The Company uses non-IFRS measures including
"Same Store Sales" or "SSS", "Operating Days", "EBITDA", "Operating
EBITDA", "Adjusted Net Income" and "Adjusted Earnings Per Share" to
provide investors with supplemental measures of its operating
performance and thus highlight trends in its business that may not
otherwise be apparent when relying solely on IFRS financial
measures. The Company also believes that securities analysts,
investors and other interested parties frequently use non-IFRS
measures in the evaluation of issuers. The Company's management
also uses non-IFRS measures in order to facilitate operating
performance comparisons from period to period, to prepare annual
operating budgets and forecasts, and to determine components of
management compensation. For a reconciliation of these non-IFRS
measures refer to the Company's MD&A for Q2 2021 which is
available on SEDAR at www.sedar.com.
Forward-Looking Information
Certain information in
this news release contains forward-looking information and
forward-looking statements which reflect the current view of
management with respect to the Company's objectives, plans, goals,
strategies, outlook, results of operations, financial and operating
performance, prospects and opportunities. Wherever used, the words
"may", "will", "anticipate", "intend", "estimate", "expect",
"plan", "believe" and similar expressions identify forward-looking
information and forward-looking statements. Forward-looking
information and forward-looking statements should not be read as
guarantees of future events, performance or results, and will not
necessarily be accurate indications of whether, or the times at
which, such events, performance or results will be achieved. All of
the information in this news release containing forward-looking
information or forward-looking statements is qualified by these
cautionary statements.
Forward-looking information and forward-looking statements are
based on information available to management at the time they are
made, underlying estimates, opinions and assumptions made by
management and management's current good faith belief with respect
to future strategies, prospects, events, performance and results,
and are subject to inherent risks and uncertainties surrounding
future expectations generally. Such risks and uncertainties
include, but are not limited to, those described below under the
sections "Risk Factors" and "COVID-19 Business Update", the impact
of the novel coronavirus ("COVID-19") pandemic and those described
in the Company's 2020 annual information form (the "AIF") filed on
March 2, 2021. A copy of the AIF can
be accessed under the Company's profile on SEDAR
at www.sedar.com. Additional risks and uncertainties not
presently known to the Company or that the Company currently
believes to be less significant may also adversely affect the
Company.
Readers are urged to consider the risks, uncertainties, and
assumptions carefully in evaluating the forward-looking information
and forward-looking statements and are cautioned not to place undue
reliance on such information and statements. The Company does not
undertake to update any such forward-looking information or
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable
laws.
SOURCE Sleep Country Canada Holdings Inc. Investor Relations