TORONTO, Aug. 10,
2023 /CNW/ - Sleep Country Canada Holdings Inc.
("Sleep Country" or the "Company") (TSX: ZZZ) today
released its financial results for the second quarter ended
June 30, 2023.
All financial results are reported in Canadian dollars unless
otherwise stated.
Second Quarter Financial Highlights
- Revenues decreased by $10.4
million or 4.6% to $217.2
million in Q2 2023 from $227.6
million in Q2 2022;
- Same Store Sales ("SSS")1 decreased by 10.9%
in Q2 2023 from Q2 2022;
- Revenues attributed to eCommerce increased to 21.3% in Q2 2023
from 18.1% in Q2 2022;
- Gross profit decreased by $2.7
million to $79.0 million in Q2
2023 from $81.7 million in Q2
2022;
- Gross profit margin increased to 36.4% in Q2 2023 from 35.9% in
Q2 2022;
- Operating EBITDA 1 decreased by $9.0 million or 17.0% to $44.2 million in Q2 2023 from $53.2 million in Q2 2022;
- Operating EBITDA1 margin decreased to 20.4% in Q2
2023 from 23.4% in Q2 2022;
- Net income attributable to the Company decreased by
$10.0 million or 44.0% to
$12.7 million in Q2 2023 from
$22.7 million in Q2 2022;
- Adjusted net income attributable to the Company1
decreased by $10.9 million or 42.5%
to $14.8 million in Q2 2023 from
$25.7 million in Q2 2022;
- Diluted earnings per share ("EPS") decreased by
$0.25 or 41.0% to $0.36 in Q2 2023 from $0.61 in Q2 2022;
- Diluted adjusted EPS1 decreased by $0.27 or 39.1% to $0.42 in Q2 2023 from $0.69 in Q2 2022; and
- Subsequent to quarter-end, on August 10,
2023, the Company's board of directors declared a dividend
of $0.237 per share payable on
August 31, 2023, to shareholders of
record at the close of business on August
25, 2023. The dividend was designated as an "eligible
dividend" for Canadian tax purposes.
Second Quarter Business Highlights
- The Company acquired the Canadian operations of Casper Sleep
Inc., including six retail stores and its eCommerce platform,
paying $27.5 million (USD
$20.6 million) in cash at close;
- Expanded the Company's partnership with Walmart Canada, opening
an additional two new Sleep Country/Dormez-vous Express stores in
Walmart Supercentres bringing the total number of express stores to
19;
- Endy was certified by Great Place to Work Canada for the
5th year in a row; and
- Hush won Retail Council of Canada's Award for the Best Pop-up
Experience for its Yorkdale Shopping Centre store.
President & CEO Commentary
"We continued to see softness in the second quarter following a
slowdown in consumer spending on large discretionary goods that
began in the second half of 2022. While Canadians adapt to an
environment of higher interest rates and inflation, we feel
consumer spending is still healthy. While our customers have
deferred their large ticketed purchases towards travel and leisure,
we are cautiously optimistic that this shift is temporary." said
Stewart Schaefer, President and CEO
of Sleep Country.
"Our digital platforms continue to experience softness as
customers come back into our retail stores post-pandemic. The shift
we have experienced between our digital platforms and our brick and
mortar over the past few years only reaffirms our long-term
strategic plans to build a seamless omnichannel experience and
allow our customers to shop how they want, when they want and
where they want."
"We are focused on transforming our business by investing in the
growth of all our brands. This quarter, we put in motion plans to
open our very first Endy and Silk & Snow retail locations. With
these store openings planned for Q4, we are excited to bring these
digital brands into a tactile environment."
"At the same time, we are focused on managing costs and driving
efficiencies throughout our organization. We see great
opportunities to leverage our infrastructure and scale as a
consolidated company across the three acquisitions that we have
made in the last 2 years. When our customers are ready to
shop, we will be well positioned to service them in a seamless and
frictionless way."
"With a strong balance sheet, we continue to explore
opportunities to maximize shareholder value and grow our ecosystem
as the country's leading sleep retailer. At the start of the
quarter, we acquired Casper Canada
and we are well underway on putting plans and changes in place to
maximize this investment for years to come."
"We are proud to be releasing our second ESG report this month.
This report, outlines the progress we've made on our commitment to
being a purpose-led, sustainable business focused on helping people
enhance their overall health and well-being, building a
best-in-class company culture, supporting positive social change
and protecting our planet," concluded Schaefer.
Summary of Second Quarter Financial Results
(C$ thousands unless
otherwise stated; other than store and share data)
|
Q2 2023
|
|
Q2 2022
|
|
Change
|
|
|
|
|
|
|
Revenues
|
$
|
217,199
|
|
$
|
227,575
|
|
(4.6 %)
|
SSS1
|
|
(10.9 %)
|
|
|
15.1 %
|
|
|
Gross profit margin
(%)
|
|
36.4 %
|
|
|
35.9 %
|
|
|
|
|
|
|
|
|
Stores
opened2
|
|
6
|
|
|
1
|
|
|
Stores
closed
|
|
1
|
|
|
-
|
|
|
Stores
renovated/relocated
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Operating
EBITDA1
|
$
|
44,204
|
|
$
|
53,242
|
|
(17.0 %)
|
Operating EBITDA margin
(%)1
|
|
20.4 %
|
|
|
23.4 %
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
12,685
|
|
$
|
22,665
|
|
(44.0 %)
|
Adjusted net income
attributable to the Company1
|
$
|
14,796
|
|
$
|
25,739
|
|
(42.5 %)
|
Basic EPS
|
$
|
0.36
|
|
$
|
0.61
|
|
(41.0 %)
|
Diluted EPS
|
$
|
0.36
|
|
$
|
0.61
|
|
(41.0 %)
|
Basic adjusted
EPS1
|
$
|
0.43
|
|
$
|
0.70
|
|
(38.6 %)
|
Diluted adjusted
EPS1
|
$
|
0.42
|
|
$
|
0.69
|
|
(39.1 %)
|
Notes:
|
1 See
the "Non-IFRS and Other Measures" section of this news
release.
|
2 This
figure includes the six Casper stores acquired through the Casper
Canada acquisition in April 2023.
|
Revenues decreased by $10.4 million
or 4.6% from $227.6 million in Q2
2022 to $217.2 million in Q2 2023
mainly due to a decrease in SSS1 by 10.9%, which was
partially offset by incremental revenue earned from Silk & Snow
(acquired in January 2023),
Casper Canada (acquired in
April 2023) and wrap stores opened in
2022.
Gross profit margin increased by 50 basis points from 35.9% for
Q2 2022 to 36.4% for Q2 2023 mainly due to higher average unit
selling prices and lower product costs, partially offset by higher
sales and distribution compensation costs, and deleveraging tied to
occupancy and depreciation costs which were also impacted by the
six Casper stores acquired in April
2023.
Total G&A expenses increased by $9.0
million or 19.7% from $45.7
million in Q2 2022 to $54.7
million in Q2 2023. This change was mainly driven by an
increase in advertising and compensation expenses primarily from
Silk & Snow (acquired in January
2023) and Casper Canada
(acquired in April 2023). In
addition, the increase was impacted by higher professional fees
mainly related to acquisition activities, software licensing and
support costs, credit card and finance charges, travel, meals and
entertainment and intangible depreciation costs.
Operating EBITDA1 was $44.2
million for Q2 2023, or 20.4% of Revenues, compared to
$53.2 million for Q2 2022, or 23.4%
of Revenues, representing a decrease of $9.0
million or 17.0% mainly due to lower revenues in Q2 2023
combined with an increase in G&A expenses, impacted by
incremental G&A expenses incurred by Silk & Snow (acquired
in January 2023) and Casper Canada (acquired in April 2023) which is mainly driven by advertising
spend and compensation costs. These changes were partially offset
by an improved gross margin.
Finance related expenses increased by $1.3 million from $5.3
million in Q2 2022 to $6.6
million in Q2 2023 mainly due to a decrease in the
unrealized gain on the Company's interest rate swap and an increase
in interest expense on the Company's lease obligations and its
senior secured credit facility, impacted by higher interest rates
and debt levels. These changes were partially offset by a decrease
in accretion expense as a result of lower redemption liabilities
related to the Hush acquisition.
Other expenses (income) increased by $0.7
million from income of $0.6
million in Q2 2022 to expenses of $0.1 million in Q2 2023. This change was mainly
due to foreign exchange losses in Q2 2023 partially offset by
interest income earned on investments.
Income taxes decreased by $4.1
million from Q2 2022 to Q2 2023. The change is driven by the
decrease in net income before taxes of $13.8
million from $31.3 million in
Q2 2022 to $17.5 million in Q2 2023
and a decrease in the Company's effective income tax rate by 120
basis points from 28.4% in Q2 2022 to 27.2% in Q2 2023.
Net income attributable to the Company for Q2 2023 decreased by
$10.0 million from $22.7 million ($0.61 per share) in Q2 2022 to $12.7 million ($0.36 per share) in Q2 2023.
Adjusted net income attributable to the Company1 for
Q2 2023 decreased by $10.9 million
from $25.7 million ($0.70 per share) in Q2 2022 to $14.8 million ($0.43 per share) in Q2 2023.
Summary of Year-to-date Financial Results
Revenues decreased by $10.9
million or 2.5% from $434.6
million in YTD 2022 to $423.7
million in YTD 2023 mainly due to a decrease in
SSS1 by 8.7%, which was partially offset by incremental
revenue earned from Silk & Snow (acquired in January 2023) and Casper
Canada (acquired in April
2023), in addition to wrap stores opened in 2022.
Gross profit margin remained unchanged at 35.3% for YTD 2022 and
YTD 2023. Gross profit margin was impacted in YTD 2023 versus YTD
2022 by higher average unit selling prices and lower product costs,
which was partially offset by higher sales and distribution
compensation costs, and deleveraging tied to occupancy and
depreciation costs which were also impacted by the six Casper
stores acquired in April 2023.
Total G&A expenses increased by $14.0
million or 15.7% from $88.9
million in YTD 2022 to $102.9
million in YTD 2023. This change was mainly driven by
an increase in advertising and compensation expenses primarily from
Silk & Snow (acquired in January
2023) and Casper Canada
(acquired in April 2023). In
addition, the increase was impacted by higher professional fees
mainly related to acquisition activities, software licensing and
support costs, credit card and finance charges, travel, meals and
entertainment and intangible depreciation costs.
Operating EBITDA1 was $85.6
million for YTD 2023, or 20.2% of Revenues, compared to
$100.0 million for YTD 2022, or 23.0%
of Revenues, representing a decrease of $14.4 million or 14.4% mainly due to lower
revenues in YTD 2023 combined with an increase in G&A expenses,
impacted by incremental G&A expenses incurred by Silk &
Snow (acquired in January 2023) and
Casper Canada (acquired in April Q2
2023), which is mainly driven by advertising spend and compensation
costs. These changes were partially offset by an improved gross
margin.
Finance related expenses increased by $4.8 million from $8.3
million in YTD 2022 to $13.1
million in YTD 2023 mainly due to a decrease in the
unrealized gain on the Company's interest rate swap and an increase
in interest expense on the Company's lease obligations and its
senior secured credit facility, impacted by higher interest rates
and debt levels. These changes were partially offset by a decrease
in accretion on the redemption liabilities related to the Hush
acquisition.
Other expenses (income) increased by $1.2
million from income of $0.6
million in YTD 2022 to expenses of $0.6 million in YTD 2023. This change was mainly
due to foreign exchange losses in YTD 2023 partially offset by
interest income earned on investments.
Income taxes decreased by $6.7
million from YTD 2022 to YTD 2023. The change is driven by
the decrease in net income before taxes of $23.5 million from $56.7
million in YTD 2022 to $33.2
million in YTD 2023, as well as a decrease in the Company's
effective income tax rate by 40 basis points from 27.9% in YTD 2022
to 27.5% in YTD 2023.
Net Income attributable to the Company for YTD 2023 decreased by
$17.1 million from $41.1 million ($1.11 per share) in YTD 2022 to $24.0 million ($0.69 per share) in YTD 2023.
Adjusted net Income attributable to the Company1 for
YTD 2023 decreased by $18.5 million
from $46.5 million ($1.26 per share) in YTD 2022 to $28.0 million ($0.81 per share) in YTD 2023.
Conference Call
Sleep Country's President and CEO, Stewart Schaefer, and CFO, Craig De Pratto, will host a conference call for
analysts and investors on August 11
at 8:00 a.m. ET. The dial-in numbers
for the conference call are 416-764-8659 or 888-664-6392. This
conference call will be recorded and available for replay until
August 18, 2023, 23:59 ET. To listen to the replay, please dial
416-764-8677 or 888-390-0541 and use passcode 917921#.
About Sleep Country
Sleep Country is Canada's leading specialty sleep retailer with
a purpose to transform lives by awakening Canadians to the power of
sleep. Sleep Country operates under the retailer banners; Sleep
Country Canada, Dormez-vous, Endy, Silk & Snow, Hush and most
recently acquired, Casper Canada.
The Company has omnichannel and eCommerce operations, including 295
corporate-owned stores and 19 warehouses across Canada. Recognized
as one of Canada's Most Admired Corporate Cultures in 2022 by
Waterstone Human Capital, Sleep Country is committed to building a
company culture of inclusion and diversity where differences are
embraced and valued. The Company actively invests in its sleep
ecosystem, innovative products, world-class customer experience,
communities and its people. For more information about Sleep
Country, please visit ir.sleepcountry.ca.
Non-IFRS and Other Measures
This news release refers to certain measures that are not
recognized under IFRS and do not have a standardized meaning
prescribed by IFRS, including Same Store Sales or SSS, EBITDA,
Operating EBITDA, Operating EBITDA margin, Adjusted net income
attributable to the Company, Basic adjusted EPS and Diluted
adjusted EPS. For more information on these Non-IFRS and other
measures as well as a reconciliation to the most comparable IFRS
measure, refer to "Non-IFRS and Other Measures" in the Company's
MD&A for Q2 2023, which is available on SEDAR+ at
www.sedarplus.ca.
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 in the Company's
MD&A for Q2 2023 under the sections "Risk Factors" and those
described in the Company's 2022 annual information form (the
"AIF") filed on March 2, 2023,
both of which can be accessed under the Company's profile on SEDAR+
at www.sedarplus.ca. 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.
The Company cautions that the list of risk factors and
uncertainties described in the MD&A for Q2 2023 and the AIF are
not exhaustive and that should certain risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual strategies, prospects, events, performance and results may
vary significantly from those expected. There can be no assurance
that the actual strategies, prospects, results, performance, events
or activities anticipated by the Company will be realized or even
if substantially realized, that they will have the expected
consequences to, or effects on, 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