"We at Sleep Country offer our sincere gratitude to the COVID-19 frontline workers, and our thoughts are with the individuals and families who deal with the devastating realities of this crisis every day," said
First Quarter Highlights
- Revenue increased by
$2.3 million (1.5%) to$151.6 million in Q1 2020 from$149.3 million in Q1 2019 - Same Store Sales ("SSS"1) decreased by 0.9% in Q1 2020 compared to Q1 2019
- As of the end of
February 2020 , SSS1 increased by 13.1% compared to the same period in Q1 2019 - Mattress revenue increased by 2.8% to
$122.0 million in Q1 2020 from$118.7 million in Q1 2019 - Accessory revenue decreased by 3.3% to
$29.6 million in Q1 2020 from$30.6 million in Q1 2019 - Gross profit margin decreased to 27.1% in Q1 2020 from 28.4% in Q1 2019
- Operating EBITDA1 decreased by 5.4% to
$27.9 million (18.4% of revenue) in Q1 2020 from$29.5 million (19.7% of revenue) in Q1 2019 - Diluted Earnings Per Share (EPS) of
$0.14 and Adjusted Diluted EPS1 of$0.17 in Q1 2020 - Strong cash position of
$52.7 million as atMarch 31, 2020 compared to$13.6 million as atMarch 31, 2019 - Experienced 143% eCommerce growth across all brands following store closures
Actions Taken to Mitigate COVID-19 and Support the
Following the pandemic-related events of
- Closure of 276 retail stores on
March 21, 2020 - Shift of all business to online operations for Sleep Country, Dormez-vous? and Endy
- Retention of variable workforce at partial income by transitioning employees to paid leave of absence and subsequent application to the
Canada Emergency Wage Subsidy (CEWS) program - Implementation of a contactless delivery process
- Acceleration of digital roadmap and investments in new online capabilities to serve the changing customer
- Launch of Sleep Expert Chat program to help Canadians navigate their purchase of sleep necessities online through chat or phone
- Subsequent to quarter end, a commitment to donate up to
$1.5 million in mattress and bedding essentials to vulnerable communities currently under severe strain due to COVID-19, beginning with$150,000 in product to theCity of Toronto's Rapid Housing Access Initiative
Actions to Manage Liquidity Subsequent to Quarter End
Sleep Country is implementing proactive measures which include the following:
- Expanding the Company's senior secured credit agreement with an incremental
$50 million - Suspending both the dividend and NCIB program, intending to resume both initiatives upon return to normal operating conditions
- Postponing capital expenditure and guidance for 2020 related to the new store openings and renovations, continued investment in a new in-store Point-of-Sale system and Phase 2 of the ERP system
- Qualification and application to the CEWS program, providing the Company with 75% wage subsidy on eligible remuneration for up to 12 weeks, subject to limits per employee and retroactive to
March 15, 2020 - Deferring 100% of the
Board of Director's 2020 unpaid cash compensation - Deferring 50% of the salaries of the Chief Executive Officer and President, Dormez-vous? & Chief Business Development Officer, and 25% of the salaries of remaining named executive officers
- Implementing additional cost-saving measures across the business including marketing, procurement and sales expenditure
- Investing in online capabilities to service customers virtually
The Company continues to actively monitor market conditions and remains in close contact with its landlords and suppliers to assess impacts and mitigate risks.
CEO's Commentary and Outlook
"The story of this year's opening quarter is a dichotomy of before and after COVID-19. Sleep Country began the quarter with powerful growth across our entire company. With rapid eCommerce expansion in all three brands, promising market share capture, solid free cash flow and the strongest same store sales performance we had seen in years, we entered the health crisis from a position of financial strength. Once the full impact of COVID-19 became apparent in mid-March, we swiftly closed our retail stores to protect our associates and customers while also shifting the entirety of our business online," continued Friesema.
"Our past investments in our omnichannel platform across Sleep Country, Dormez-vous? and Endy allowed us to rapidly pivot to serve customers' needs online. Our crisis response has been characterized by agile innovation and acceleration of our digital roadmap, including the immediate launch of a Sleep Expert Chat program. Since the program's inception, we have seen chat sessions grow exponentially, driving a higher average unit selling price and improvement in customer satisfaction.
We have taken proactive measures to manage our financial position, ensuring we remain sustainable and liquid through the COVID-19 pandemic and recovery period. With these prudent initiatives, we are confident that our business will rebound with vigour and remain
Over the past 25 years, we have successfully navigated many challenging economic downturns and each time we have emerged stronger than before. Our resilient model allows our business to be well-positioned as we look to the other side of this valley. We remain focused on our people, our communities, our long-term strategic agenda and delivering shareholder value."
(C$ thousands unless otherwise stated; other than store and share data) | Q1 2020 | Q1 2019 | % Change |
Revenues | 1.5% | ||
SSS1 | (0.9%) | (3.4%) | |
Gross profit margin | 27.1% | 28.4% | |
Stores opened | - | 1 | |
Stores renovated/relocated | 9 | 13 | |
Operating EBITDA1 | (5.4%) | ||
Operating EBITDA margin1 | 18.4% | 19.7% | |
Net Income | (35.8%) | ||
Adjusted Net Income1 | (27.4%) | ||
Earnings per share – Basic | (33.3%) | ||
Adjusted Earnings Per Share – Basic1 | (26.1%) | ||
Adjusted Earnings Per Share – Diluted1 | (26.1%) |
1See the Non-IFRS Measures section of this news release |
Summary of First Quarter Financial Results
The outbreak of the COVID-19 pandemic has adversely impacted the Company's operations and financial results for the month of
Q1 revenue grew by 1.5% to
Gross profit in Q1 2020 decreased by 2.9% to
Total General and Administrative ("G&A") expenses increased by
The G&A depreciation and amortization expense increased by
Finance related expenses increased by
During Q1 2020, Operating EBITDA1 decreased to
Net Income for Q1 2020 decreased by
Adjusted Net Income1 decreased to
Conference Call
About Sleep Country
Sleep Country is
Non-IFRS Measures
This news release makes reference to certain measures that are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. These measures are provided as additional information to complement IFRS measures by providing further understanding of the Company's results of operations from management's perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company's financial information reported under IFRS. The Company uses non-IFRS measures including "Same Store Sales" or "SSS", "EBITDA", "Operating EBITDA", "Adjusted Net Income" and "Adjusted Earnings Per Share" to provide investors with supplemental measures of its operating performance and thus highlight trends in its business that may not otherwise be apparent when relying solely on IFRS financial measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. The Company's management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. For a reconciliation of these non IFRS measures refer to the Company's MD&A for Q1 2020 which is available on SEDAR at www.sedar.com.
Forward-Looking Information
Certain information in this news release contains forward-looking information and forward-looking statements which reflect the current view of management with respect to the Company's objectives, plans, goals, strategies, outlook, results of operations, financial and operating performance, prospects and opportunities. Wherever used, the words "may", "will", "anticipate", "intend", "estimate", "expect", "plan", "believe" and similar expressions identify forward-looking information and forward-looking statements. Forward-looking information and forward-looking statements should not be reads as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the information in this news release containing forward-looking information or forward-looking statements is qualified by these cautionary statements.
Forward-looking information and forward-looking statements are based on information available to management at the time they are made, underlying estimates, opinions and assumptions made by management and management's current good faith belief with respect to future strategies, prospects, events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally. Such risks and uncertainties include, but are not limited to, those described in the Company's 2019 annual information form (the "AIF") filed on
Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and forward-looking statements and are cautioned not to place undue reliance on such information and statements. The Company does not undertake to update any such forward-looking information or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.
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