DAVIDsTEA’s Earnings Call Highlights Turnaround and Growth

Davidstea Inc. ((TSE:DTEA)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for DAVIDsTEA Inc. painted a picture of a significant turnaround year for the company, marked by achievements in profitability, revenue growth, and operational improvements. Despite facing challenges such as a Q4 revenue decline and specific channel performance issues, the overall sentiment was positive, highlighting the company’s strategic progress and resilience.

Profitable Turnaround Year

Fiscal 2024 was a pivotal year for DAVIDsTEA as the company achieved a profitable turnaround. Through disciplined execution, the business not only stabilized but also reached profitability, marking a significant milestone in its operational journey.

Revenue Growth

DAVIDsTEA reported a revenue increase to $61.8 million, reflecting a year-over-year growth of just under 2%. This growth, although modest, signifies a positive trajectory compared to the previous year’s performance.

Strong Adjusted EBITDA

The company’s adjusted EBITDA showcased a remarkable $9.3 million positive swing, reaching $3.9 million year-over-year. This improvement underscores the company’s enhanced operational efficiency and cost management.

Net Income Improvement

In Q4, DAVIDsTEA reported a net income of $2.5 million, a significant improvement from a loss of $3.9 million in the same quarter the previous year, highlighting the company’s successful financial recovery.

Successful Retail Strategy

The company’s brick-and-mortar retail strategy proved effective, with comparable store sales rising by 6.9% for the full year. This success was driven by new store openings in high-traffic locations, enhancing the company’s physical presence.

Gross Profit Margin Increase

DAVIDsTEA achieved a gross profit margin of 48.4% in Q4, attributed to stronger product margins and reduced shipping and fulfillment costs, showcasing the company’s focus on improving profitability.

Revenue Decline in Q4

Despite overall growth, Q4 revenue declined by 4.6% year-over-year to $23.2 million, impacted by one less selling week and disruptions from Canada Post, highlighting challenges in the final quarter.

E-commerce and Wholesale Decline

E-commerce revenue saw a 5.6% dip to $12.4 million, while wholesale revenue declined to $2.3 million, affected by a shorter selling period and strategic exits from unprofitable accounts.

Forward-Looking Guidance

Looking ahead to fiscal 2025, DAVIDsTEA aims for a 10% to 12% compound annual growth rate over the next three years. The company plans to double its retail footprint in Canada, expand U.S. wholesale operations, and enhance digital capabilities, while maintaining gross margins in the 48% to 50% range.

In summary, DAVIDsTEA’s earnings call reflected a year of significant progress and strategic achievements. Despite some challenges, the company demonstrated resilience and a clear path forward, with ambitious growth plans and a focus on enhancing profitability and operational efficiency.