Birks(US:BGI)2023-11-30 22:00Sales Performance - Comparable store sales increased by 4.3% for the 26 weeks ended September 23, 2023, compared to an increase of 8.2% for the same period in 2022, driven by strong performance in branded watches and jewelry [29]. - Total net sales for the twenty-six week period ended September 23, 2023 were $87.8 million, an increase of $7.8 million, or 9.7%, compared to $80.0 million for the same period in 2022 [31]. - Retail segment sales to external customers increased to $82,508 thousand for the 26 weeks ended September 23, 2023, compared to $74,712 thousand for the same period in 2022, representing a growth of 10.4% [100]. - The increase in comparable store sales is attributed to the improving third-party brand portfolio and client offerings [29]. - The company operates 21 retail stores across Canada and has reported total net sales of $87.8 million for the 26 weeks ended September 23, 2023, compared to $80.0 million for the same period in 2022, representing a year-over-year increase of 9.8% [99]. Financial Performance - Gross profit was $36.1 million, representing a gross margin of 41.1%, down from 42.3% in the prior year, primarily due to a shift in product mix and lower foreign exchange gains [32]. - EBITDA for the twenty-six week period was $4.96 million, or 5.6% of net sales, compared to $2.89 million, or 3.6% of net sales, in the prior year [47]. - Operating income improved to $495,000, a significant turnaround from an operating loss of $673,000 in the previous year [74]. - The company reported a net loss of $1,482,000 for the 26 weeks ended September 23, 2023, an improvement from a net loss of $1,996,000 in the same period last year [74]. - The company recorded a net loss of $1.5 million for the twenty-six week period ended September 23, 2023, compared to a net loss of $2.0 million for the same period in 2022, representing a 25% improvement in net loss year-over-year [90]. Expenses and Costs - Marketing expenses represented approximately 4.2% of sales during the 26 weeks ended September 23, 2023, down from 4.6% during the same period in 2022 [22]. - SG&A expenses increased to $32.5 million, or 37.0% of net sales, down from 39.9% in the prior year, driven by higher operating costs but offset by lower stock-based compensation [33]. - Depreciation and amortization expense rose to $3.1 million from $2.6 million, attributed to increased capital expenditures for store renovations and e-commerce improvements [34]. - Interest and other financing costs increased to $3.4 million, primarily due to a 340 basis point rise in the weighted average interest rate and higher outstanding amounts on the Amended Credit Facility [35]. Cash Flow and Liquidity - Net cash provided by operating activities was $0.5 million for the twenty-six week period ended September 23, 2023, a $5.2 million increase compared to a net cash used of $4.8 million in the same period last year [58]. - The company reported a decrease in net cash used in investing activities to $4.3 million for the twenty-six week period ended September 23, 2023, down from $4.9 million in the prior year [59]. - Financing activities provided $4.6 million in cash during the twenty-six week period ended September 23, 2023, compared to $9.3 million in the same period last year, reflecting a decrease in bank indebtedness [60]. - As of September 23, 2023, the Company had $72.9 million in credit facility availability, with $59.8 million borrowed and an excess borrowing capacity of $13.1 million [53]. - The company expects to maintain excess availability of at least $8.5 million for the next twelve months, ensuring compliance with its financing covenants [90]. Debt and Financing - The company entered into an Amended Credit Facility with Wells Fargo Canada Corporation, extending the maturity date to December 2026 and allowing for an increase in commitments by up to $5.0 million [49]. - The company has $72.1 million of floating-rate debt, with a potential annual interest expense change of approximately $0.7 million for a 100 basis point fluctuation in interest rates [62]. - The company has $5.9 million outstanding on a term loan with Investissement Québec, which is part of a $10 million loan secured to fund working capital needs [90]. - The weighted average interest rate for the 26 weeks ended September 23, 2023, was 7.8%, significantly higher than 4.4% for the same period in 2022 [97]. Inventory and Assets - Total current assets increased to $105,803,000 as of September 23, 2023, compared to $103,690,000 as of March 25, 2023 [71]. - The company’s inventories increased to $92,025,000 from $88,357,000, showing a rise of 1.9% [71]. - Total assets rose to $197,300,000 from $196,981,000, reflecting a slight increase in the company's overall asset base [71]. - The company recorded a valuation allowance of $25.8 million against its net deferred tax assets as of September 23, 2023, unchanged from $24.8 million as of March 25, 2023 [93]. Economic and Market Conditions - Inflationary pressures may affect the Company's ability to maintain SG&A expenses as a percentage of revenues in future periods [16]. - The company will continue to monitor economic conditions that may impact consumer spending and discretionary income [16]. - The company anticipates that rising inflation and interest rates may impact consumer spending and discretionary income, potentially affecting future sales [89]. - The company experienced no government-mandated closures during the twenty-six week period ended September 23, 2023, contrasting with previous years affected by pandemic restrictions [89]. Strategic Initiatives - The Company aims to grow sales, gross margin, and optimize profitability and cash flow to enhance EBITDA [23]. - The Company plans to expand its Birks product brand through international channels and e-commerce to drive long-term growth [24]. - The company expects to evaluate the productivity of existing stores and plans to close unproductive stores while opening new ones in prime retail locations [68]. - The joint venture with FWI LLC, RMBG Retail Vancouver ULC, became operational in Fiscal 2023, impacting sales recognition through the equity method of accounting [20].