DAVIDsTEA Delivers Strong Start to Fiscal 2025 with Higher Margins and Profitability Gains in Q1
Q1 sales reached $13.5 million, representing a 0.6% increase year-over-year
Gross profit margin rose to 51.1%, up from 43.3% in Q1 2024
Net loss significantly reduced to $0.2 million compared to $2.6 million in Q1 2024
Adjusted EBITDA turned positive at $1.6 million versus negative $0.8 million in Q1 2024
Cash position strengthened to $10.4 million, up from $8.8 million in Q1 2024
MONTREAL, June 17, 2025 (GLOBE NEWSWIRE) -- DAVIDsTEA Inc. (TSX-Venture: DTEA) ("DAVIDsTEA" or the "Company"), a leading North American tea merchant, today announced its financial results for the quarter ended May 3, 2025.
"Our first-quarter performance demonstrates consistent execution of our omni-channel growth strategy and significant operational progress. Retail store sales rose 11.5% year-over-year, including 2.8% comparable store sales growth, while gross profit margin exceeded 51% of sales. With adjusted EBITDA reaching $1.6 million, these are meaningful steps forward in our turnaround journey," said Sarah Segal, Chief Executive Officer and Chief Brand Officer, DAVIDsTEA.
"As we enter the summer season, we are preparing to launch new retail locations this fall—an important milestone in our broader growth strategy. These openings are designed to strengthen revenue performance and support our goal of achieving a compound annual growth rate of more than 10% over the next three years. We also expect positive momentum across our e-commerce and wholesale channels. At the core of our strategy is a commitment to sustainable, long-term growth, through optimizing our retail footprint, elevating the brand experience at every touchpoint, and deepening customer engagement," stated Ms. Segal.
"We began fiscal 2025 on a strong note, delivering incremental sales growth, improved gross margins, tighter expense control, and a significantly reduced net loss in the first quarter. While we anticipate some seasonal softness in the second and third quarters, our leaner cost structure, adequate liquidity, and diversified channel mix positions us to achieve our objective of full-year profitability. We remain focused on disciplined execution and long-term value creation for shareholders. Revenues are up, gross profit is up, and costs are down, a direct result of laser-focused execution of our business plan," said Frank Zitella, President, Chief Financial and Operating Officer, DAVIDsTEA. "Our focus has been on delivering a value proposition that resonates with consumers supported by a memorable experience, both in person and online in order to generate sales as we deal with macro-economic headwinds," Mr. Zitella added.
Operating Results for the First Quarter of Fiscal 2025
Three Months Ended May 3, 2025 compared to Three Months Ended May 4, 2024
Sales. Sales for the first quarter of fiscal 2025 increased by $0.1 million to $13.5 million, or 0.6%, compared to the prior year quarter. Sales in Canada, which accounted for 86.1% of total revenue, decreased by $0.1 million, or 0.8%, compared to the prior year quarter. U.S. sales of $1.9 million increased by $0.2 million or 10.1% compared to the prior year quarter.
Brick-and-mortar sales of $5.0 million increased by $0.5 million or 11.5% from $4.5 million in the prior year quarter. Brick-and-mortar sales represented 37.3% of sales compared to 33.7% of sales in the prior year quarter.
Online sales of $6.4 million decreased by $0.3 million or 4.8% from $6.7 million in the prior year quarter. Online sales represented 47.5% of sales compared to 50.2% of sales in the prior year quarter. Sales from our wholesale channel of $2.1 million decreased by $0.1 million or 5.3% from $2.2 million in the prior year quarter. Wholesale sales represented 15.2% of sales compared to 16.1% of sales in the prior year quarter.
Gross profit. Gross profit increased by 18.6% to $6.9 million from the prior year quarter due to an increase in product margins, and a decrease in unitized freight, shipping and fulfillment costs. Gross profit as a percentage of sales increased to 51.1% for the quarter compared to 43.3% in the prior year quarter.
Selling, general and administration expenses. Selling, general and administrative expenses ("SG&A") were $6.9 million for the quarter, representing a decrease of $1.5 million, or 17.9%, compared to the same quarter in the prior year. The most significant driver of this decrease was a $1.1 million reduction in ongoing IT-related expenses, resulting from the successful conversion of the Company's full technology stack to a lower-cost operating system. This strategic transition has materially and permanently reduced our operating cost base, providing sustainable efficiency gains going forward.
Additionally, the prior year quarter included $0.6 million in professional fees related to financing activities and $0.5 million in impairment charges on property and equipment and intangible assets. These items did not recur in the current quarter, further contributing to the year-over-year reduction in SG&A. These savings were partially offset by an increase in marketing expenses of $0.4 million and employee separation costs of $0.3 million.
As a percentage of sales, SG&A expenses declined to 51.3% in the current quarter from 62.9% in the prior year quarter, reflecting improved cost efficiency and operating leverage.
EBITDA, Adjusted EBITDA and Adjusted EBITDA (after rent equivalent expense)1. EBITDA was $1.1 million in the quarter compared to negative $2.0 million in the prior year quarter. Adjusted EBITDA was $1.6 million compared to negative $0.8 million for the same period in the prior year. Adjusted EBITDA (after rent equivalent expense) was $0.4 million in the quarter compared to negative $1.6 million in the prior year quarter. The increases quarter over quarter reflect the impact of an increase in Gross profit and a decrease in ongoing SG&A expenses.
Net loss and Adjusted net income (loss). Net loss was negative $0.2 million in the quarter compared to a net loss of $2.6 million in the prior year quarter. Adjusted net income was $0.2 million in the first quarter compared to adjusted net loss of $1.6 million in the prior year quarter.
Fully diluted net loss per share and Adjusted fully-diluted net income (loss) per share. Fully diluted net loss per common share amounted to $0.01 in the quarter compared to a fully diluted net loss per common share of $0.10 in the prior year quarter. Adjusted fully diluted net income per common share1, which is Adjusted net income on a fully diluted weighted average shares outstanding basis, was $0.01 compared to an Adjusted fully diluted net loss of $0.06 in the prior year quarter.
Liquidity and Capital Resources
As at May 3, 2025, the Company had $10.4 million of cash held by major Canadian financial institutions.
Working capital was $12.7 million as at May 3, 2025 compared to $12.8 million as at February 1, 2025. The decrease in working capital is substantially explained by a decrease in cash and prepaid expenses and deposits. These are substantially offset by an increase in inventories and a decrease in trade and other payables.
Our primary source of liquidity is cash on hand and cashflow generated from operations. Our working capital requirements are driven by the purchase of inventory, payment of payroll, ongoing technology expenditures and other operating costs.
Our working capital requirements fluctuate during the year, rising in the second and third fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak selling season in the fourth fiscal quarter. Capital expenditures amounted to $34 in the first quarter of fiscal 2025 (May 4, 2024 - $461).
As at May 3, 2025, the Company had financial commitments in connection with the purchase of goods and services that are enforceable and legally binding on the Company, amounting to $9.5 million, net of $1.2 million of advances (fiscal 2024 - $7.4 million, net of $0.5 million of advances) which are expected to be discharged within twelve months. Commitments include variable payments required under certain IT service contacts which are based on sales with minimum committed amounts extending to fiscal 2027 totaling $0.4 million.
Condensed Consolidated Financial Data(Canadian dollars, in thousands, except per share information)
For the three-months ended
May 3,
May 4,
2025
2024
Sales
$
13,518
$
13,435
Cost of sales
6,615
7,615
Gross profit
6,903
5,820
Selling, general and administration expenses
6,932
8,447
Results from operating activities
