The stock market value of Montreal retailer DavidsTea doubled on Tuesday after reporting encouraging financial performance.
A “key” inflection point was reached during the months of May, June and July, according to Sarah Segal, CEO and chief brand officer of DavidsTea.
During the conference call to discuss the results, she said DavidsTea just posted its highest profit margin growth “in recent memory.”
Gross profit margin for the quarter was 47% compared to 37% a year ago.
A renewed focus on in-store retail is demonstrated with the opening in early September of a new location at the Royalmount Shopping Centre in Montreal.
Another store will open in early November at the Eaton Centre in downtown Montreal, bringing the total number of stores to 20, all located in Canada.
DavidsTea operated more than 230 stores in the United States and Canada before the pandemic.
We are focused on in-store growth strategy to support our digital platform as consumers increasingly demand an experience where they can touch, smell and taste our tea before making a purchasing decision.
Sarah Segal, CEO and Chief Brand Officer of DavidsTea
The executive says she sees consumers returning to shopping malls after the pandemic, especially high-end malls where they can sample products and share their impressions with knowledgeable specialists.
PHOTO ALAIN ROBERGE, LA PRESSE ARCHIVES
Sarah Segal, CEO and Chief Brand Officer of DavidsTea
“We are very optimistic about our ability to generate sustainable growth.”
Possible return to profitability?
Despite a 13% increase in sales to $11 million and a reduction in expenses, the most recent completed quarter still ended with a net loss of $1.5 million. This is, however, an improvement from the loss of $4.3 million recorded a year ago.
Among the steps taken to further cut costs, management said it has reduced staff, eliminated discretionary spending, moderated marketing efforts and implemented a four-day work week for headquarters employees during the summer months.
Sarah Segal says “sales momentum continues” into the quarter that began last month with revenue up more than 18% from the same period last year.
She says the tea merchant is preparing for a “sales-intensive” third and fourth quarter.
DavidsTea President, CFO and COO Frank Zitella notes that revenue is up and costs are down, both year-over-year and quarter-over-quarter, across all categories.
In addition to sales generated by its twenty or so stores, the Montreal company relies on sales from its website and the Amazon marketplace, as well as on a network of wholesale customers including more than 5,500 grocery stores, pharmacies and convenience stores in the country, and 170 grocery stores in the United States.
First listed on the NASDAQ in 2015 as the organization was growing rapidly, DavidsTea shares are now trading on the Toronto Venture Exchange. The stock doubled midday Tuesday to 35 cents. At that price, the company’s market capitalization remains below $10 million.
DavidsTea was co-founded in 2008 by Montreal entrepreneur Hershel Segal, who previously founded Le Château, a clothing retailer that folded during the pandemic.
Bad Day Investments, Hershel Segal’s private holding company, is DavidsTea’s largest shareholder with a 45% stake. Hershel Segal is the father of CEO Sarah Segal.