Birks(BGI) - 2026 Q2 - Quarterly Report

Financial Performance - The Company recorded a net loss of $2.6 million for the twenty-six week period ended September 27, 2025, compared to a net loss of $3.1 million for the same period in 2024[10]. - The Company recorded a net loss per common share of ($0.13) for the 26-week period ended September 27, 2025, compared to a net loss of ($0.16) for the same period in 2024[37][38]. - The Company reported total sales of $93,117 thousand for the 26 weeks ended September 27, 2025, compared to $80,118 thousand in the prior year, representing a growth of 16.2%[66]. - The unadjusted gross profit for the Retail segment increased to $34,866 thousand from $29,890 thousand, marking a rise of 16.7%[66]. Cash Flow and Liquidity - The Company used net cash flows from operations of $4.3 million for the twenty-six week period ended September 27, 2025, compared to $3.5 million for the same period in 2024[10]. - Management plans include cost reductions and obtaining favorable payment terms from suppliers to manage liquidity actively[26]. - Cash outflows from operating activities for operating leases were $6,187,000 for the 26 weeks ended September 27, 2025, compared to $6,559,000 for the same period in 2024, representing a decrease of approximately 5.7%[70]. Debt and Financing - The Company has a bank indebtedness balance of $73.5 million as of September 27, 2025, with no equity cash injection for several years, resulting in a shareholders' deficiency of $20.5 million[10]. - The Company's bank indebtedness under the Amended Credit Facility was $73.5 million as of September 27, 2025, with an excess borrowing capacity of $14.9 million[40]. - The Amended Credit Facility allows for a maximum borrowing capacity of $90 million, with interest rates based on the Canadian Overnight Repo Rate Average plus a spread[41]. - The Company has secured a six-year term loan of $10.0 million from Investissement Québec, with $1.8 million outstanding as of September 27, 2025[12]. - An additional term loan of $13.5 million was provided by SLR to fund the European Acquisition and ordinary course working capital, repayable in December 2026[18]. - The Company has a cash advance outstanding of U.S. $1.5 million (approximately CAD $2.0 million) from a controlling shareholder, with an annual interest rate of 11%[57]. - The Company has a cash advance outstanding from Montel S.a.r.l. of $1.5 million, with an annual interest rate of 11%, resulting in an effective interest rate of approximately 12%[72]. - A Shareholder Support Letter from Mangrove provides financial support of up to $3.75 million, available until July 31, 2025, with amounts drawn bearing an interest rate of 15%[73]. - The Mangrove Loan, effective June 26, 2025, advanced $3.75 million at an annual interest rate of 15%, repayable in full by December 24, 2026[74]. - The Company obtained a deferral of interest payments on the cash advance and Mangrove Loan, up to a maximum of $813,227, effective through July 31, 2026[75]. - Additional support letters from Mangrove and other executives provide up to $1.5 million in financial support, with similar terms and interest rates as previous support[76]. Assets and Valuation - As of September 27, 2025, the Company had negative working capital of $18.8 million, an improvement from $23.1 million as of March 29, 2025[10]. - As of September 27, 2025, the Company had a valuation allowance of $29.9 million against its net deferred tax assets, unchanged from the previous period[36]. - Inventories increased to $123.5 million as of September 27, 2025, up from $116.3 million as of March 29, 2025[39]. - The total minimum lease payments as of September 27, 2025, amount to $72,223,000, with the present value of future total minimum lease payments at $52,987,000 after accounting for interest[71]. Acquisitions - The Company acquired 1067830 Ontario Limited for a total purchase price of $10.8 million, with $9.7 million paid in cash at closing and a $1.1 million note payable[31]. - The Company acquired 7 retail locations through a European acquisition during the 26-week period ending September 27, 2025[65]. - European, acquired by the Company, generated a net profit of $0.1 million and revenue of $6.0 million for the period from July 8 to September 27, 2025[35]. - The Company incurred $0.4 million in acquisition-related costs associated with the European acquisition, recorded as SG&A[31]. - The Company expects to finalize the allocation of the purchase price for the European acquisition by March 28, 2026[33]. Interest Rates and Borrowing Costs - The weighted average interest rate for the 26 weeks decreased to 5.4% from 7.7% in the previous year, showing a reduction of 30.6%[52]. - The average outstanding borrowed balance during the 26 weeks was $74,074 thousand, up from $67,572 thousand in the prior year, indicating a year-over-year increase of 9.5%[52]. - Maximum borrowing outstanding during the 26 weeks ended September 27, 2025, was $78,011 thousand, compared to $73,760 thousand for the same period in 2024, reflecting an increase of 3.4%[52].