"Ecommerce will remain a central piece of our omnichannel
approach which will offer customers the best of both
worlds."
TORONTO, May 13, 2021 /CNW/ - Leon's Furniture Limited
("LFL" or the "Company") (TSX: LNF), today announced
record financial results for the first quarter of 2021.
Financial Highlights – Q1-2021
- System wide sales(1) increased 16.6% to a record
$697.1 million in Q1-2021 compared to
$598.1 million in Q1-2020.
- Record revenue in the quarter of $571.1
million compared to $497.6
million in Q1-2020, an increase of 14.8%.
- Same-store sales(1) increased 13.6% in Q1-2021
compared to Q1-2020.
- ecommerce sales growth of 374% in the quarter, continuing the
triple digit growth in our eCommerce business.
- Gross profit margin improved to 43.79% in Q1-2021 from 43.11%
in Q1-2020.
- Adjusted EBITDA(1) increased by 76.5% to
$87.2 million in Q1-2021 compared to
Q1-2020.
- Net income increased by 198.5% to $40.9
million in Q1-2021 compared to Q1-2020.
- Adjusted diluted earnings per share(1) grew by
218.8% to $0.51 in Q1-2021 from
$0.16 in Q1-2020.
Edward Leon, Chief Executive
Officer of LFL Group commented, "The consistent and dedicated
efforts of our national team generated strong financial results
through the first quarter, in what continues to be a challenging
environment for consumers and retailers across the country. During
the quarter, our omnichannel sales platform, supported by one of
the largest last mile delivery services in Canada, drove double-digit same-store sales
growth and a 14.8% increase in revenue compared to the same period
last year. Even more importantly, the flexibility and scalability
built into the continuously improving eCommerce platform,
enabled our team to focus advertising spend toward eCommerce sales
during ongoing provincial store closures, which, in combination
with our top line results, led to a more than tripling of
adjusted diluted earnings per share."
Mr. Leon continued, "The strategic decisions we have made
over the past several years to maintain financial conservatism,
focus on value creation and invest in the tools and infrastructure
to ensure that customers have the ability to shop where, when and
how they want to, have continued to pay off. LFL is solidly
positioned as one of the strongest omnichannel retail groups in
Canada. Our performance in Q1 was
enabled by the same factors that will continue to drive long-term
returns: the relentless customer-service focus of our national team
of associates, a coast-to-coast bricks and mortar network of some
of the most recognizable retail banners in Canada, a solid and rapidly growing eCommerce
platform, unencumbered ownership of over 4.8 million
square feet of real estate, and a rock-solid balance sheet with
almost $560 million of available unrestricted liquidity."
The Company also announced today the retirement of Mr.
Edward F. Leon, the current Chief
Executive Officer of the Company, effective July 1, 2021. He will continue his role as a
Director of the Company. We wish to sincerely thank Edward for
forty-five (45) years of service and leadership. Mr. Mike Walsh has been appointed to the role of
Chief Executive Officer of the Company, in addition to his role as
President. Mike has been President and Chief Operating Officer
since October 2020 and was President
of the Leon's Furniture Division for the prior five years. We
congratulate Mike on his upcoming appointment.
(1) For a full explanation of the Company's
use of non-IFRS financial measures, please refer to the section of
this press release with the heading "Non-IFRS Financial
Measures".
Summary financial highlights for the three months ended
March 31, 2021 and March 31, 2020
For
the
|
Three months
ended
|
(C$ in millions
except %, share and per share amounts)
|
March 31,
2021
|
March 31,
2020
|
$ Increase
(Decrease)
|
% Increase
(Decrease)
|
Total system wide
sales (1)
|
697.1
|
598.1
|
99.0
|
16.6%
|
Franchise sales
(1)
|
126.0
|
100.5
|
25.5
|
25.4%
|
Revenue
|
571.1
|
497.6
|
73.5
|
14.8%
|
Same store sales
(1)
|
541.3
|
476.4
|
64.9
|
13.6%
|
Gross profit margin
as a percentage of revenue
|
43.79%
|
43.11%
|
|
|
SG&A
(2)
|
191.2
|
192.7
|
(1.5)
|
(0.8%)
|
SG&A
(2) as a percentage of revenue
|
33.48%
|
38.73%
|
|
|
Adjusted
EBITDA
|
87.2
|
49.4
|
37.8
|
76.5%
|
Adjusted net income
(1)
|
41.2
|
13.9
|
27.3
|
196.4%
|
Adjusted diluted
earnings per share (1)
|
$0.51
|
$0.16
|
$0.35
|
218.8%
|
Net income
|
40.9
|
13.7
|
27.2
|
198.5%
|
Common share
dividends declared
|
$0.16
|
$0.16
|
-
|
-
|
(1)
|
Refer to the
"Non-IFRS Financial Measures" section of this press release for
additional information on these measures.
|
(2)
|
Selling, general and
administrative expenses ("SG&A").
|
Revenue
For the three months ended March
31, 2021, revenue was $571.1 million compared to $497.6 million in the first quarter 2020.
Revenue increased $73.5 million or
14.8% as compared to the prior year quarter due to double-digit
increases in most product categories. The Company's continued
focus on eCommerce, including its live chat initiatives, generated
a year over year 374% increase in eCommerce driven sales during the
quarter. The ongoing strength in eCommerce sales in the quarter
also continue to validate that the Company's digital platform is
quite scalable and capable of significantly contributing higher
operating profit margin percentages due to its current operating
cost structure. The digital platform is key to allowing the Company
to attract new customers as they begin their shopping experience
online and then continue in store to be assisted by our
knowledgeable sales associates, both virtually in stores that have
been temporarily closed and in-person for stores that remained open
in the quarter.
Same Store Sales (1)
The company was able to achieve a 13.6% increase in same store
sales in the quarter compared to the first quarter 2020. This was
despite the fact that during a majority of this period there were
on-going store closures due to restrictions imposed by the
provincial governments of Ontario
and Quebec.
Gross Profit
The gross profit margin of 43.79% in the quarter increased by 68
basis points from the first quarter 2020. This was due to increases
in gross profit margin percentages across most of the Company's
product categories.
Selling, General and Administrative
Expenses ("SG&A")
SG&A as a percentage of revenue in the current quarter was
down by 525 basis points due to effectively managing overall
SG&A expenses throughout the quarter while at the same time
adjusting advertising spend towards eCommerce sales during the
on-going provincial closures.
The Company's SG&A expenses in the current quarter and the
prior year quarter, do not include any subsidy income related to
the Federal Government's Canada
Emergency Wage Subsidy program, that was introduced last year at
the beginning of April 2020.
Adjusted Net Income (1) and Adjusted Diluted
Earnings Per Share (1)
As a result of the above and a continued reduction in net
finance costs, adjusted net income in the current quarter totaled
$41.2 million, an increase of
$27.3 million over the prior year's
quarter. This resulted in adjusted diluted earnings per share to
increase to $0.51 per share in the
current quarter, an increase of 218.8% over the prior year's
quarter.
Net Income and Diluted Earnings Per Share
Net income for the first quarter of 2021 was $40.9 million, or $0.51 per diluted earnings per share as compared
to the net income of $13.7 million in
the prior year's quarter, or $0.17
per diluted earnings per share.
(1)
|
Non-IFRS financial
measure. Refer to section 14 in this MD&A for additional
information.
|
Dividends
As previously announced, the Company paid a quarterly dividend
of $0.16 per common share on
April 8, 2021. Today the Directors
have declared a quarterly dividend of $0.16 per common share payable on the 8th day of
July 2021 to shareholders of record
at the close of business on the 8th day of June 2021. As of 2007, dividends paid by Leon's
Furniture Limited are "eligible dividends" pursuant to the changes
to the Income Tax Act under Bill C-28, Canada.
Outlook
In the short term, the duration and full financial effect of
COVID-19 is unknown, as is the efficacy of government and central
bank interventions to curb the spread of COVID-19 and stimulate the
economy. Federal and provincial governments have instituted social
distancing requirements, bans on non-essential travel and other
measures that have directly led to uncertainty regarding customer
demand. The Company continues to actively monitor the situation and
will continue to respond as the impact of the COVID-19 pandemic
evolves, which will depend on a number of factors including the
course of the virus, our customer and employee reactions and any
further government actions, none of which can be predicted with any
degree of certainty.
On a longer-term basis, we still believe that the underlying
Canadian economy remains relatively strong. Although it is
difficult to gauge future consumer confidence and what impact it
may have on retail, we remain cautiously optimistic that our sales
and profitability will increase. Given the Company's strong and
continuously improving financial position, our principal objective
is to increase our market share and profitability. We remain
focused on our commitment to effectively manage our costs but to
also continuously invest in digital innovation that we believe will
drive more customers to both our online eCommerce sites and our 303
store locations across Canada.
Non-IFRS Financial Measures
The Company uses financial measures that do not have
standardized meaning under IFRS and may not be comparable to
similar measures presented by other entities. The Company
calculates the non-IFRS financial measures by adjusting certain
IFRS measures for specific items the Company believes are
significant, but not reflective of underlying operations in the
period, as detailed below:
Non-IFRS
Measure
|
IFRS
Measure
|
Adjusted net
income
|
Net income
|
Adjusted income
before income taxes
|
Income before income
taxes
|
Adjusted earnings per
share - basic
|
Earnings per share -
basic
|
Adjusted earnings per
share - diluted
|
Earnings per share -
diluted
|
Adjusted
EBITDA
|
Net income
|
Adjusted Net Income
Leon's calculates comparable measures by excluding the effect of
changes in fair value of derivative instruments, related to the net
effect of USD-denominated forward contracts. The Company uses
derivative instruments to manage its financial risk in accordance
with the Company's corporate treasury policy. Management believes
excluding from income the effect of these mark-to-market valuations
and changes thereto, until settlement, better aligns the intent and
financial effect of these contracts with the underlying cash
flows.
Adjusted EBITDA
Adjusted earnings before interest, income taxes, depreciation
and amortization, mark-to-market adjustment due to the changes in
the fair value of the Company's financial derivative instruments
and any non-recurring charges to income ("Adjusted EBITDA") is a
non-IFRS financial measure used by the Company. The Company
considers Adjusted EBITDA to be an effective measure of
profitability on an operational basis and is commonly regarded as
an indirect measure of operating cash flow, a significant indicator
of success for many businesses. Adjusted EBITDA is a non-IFRS
financial measure used by the Company. The Company's Adjusted
EBITDA may not be comparable to the Adjusted EBITDA measure of
other companies, but in management's view appropriately reflects
LFL's specific financial condition. This measure is not intended to
replace net income, which, as determined in accordance with IFRS,
is an indicator of operating performance.
Same Store Sales
Same store sales are defined as sales generated by stores, both
in store and through online transactions, that have been open for
more than 12 months on a fiscal basis. Same store sales is not an
earnings measure recognized by IFRS, and does not have a
standardized meaning prescribed by IFRS, but it is a key indicator
used by the Company to measure performance against prior period
results. Same store sales as discussed in this MD&A may not be
comparable to similar measures presented by other issuers, however
this measure is commonly used in the retail industry. We believe
that disclosing this measure is meaningful to investors because it
enables them to better understand the level of growth of our
business.
Total System Wide Sales
Total system wide sales refer to the aggregation of revenue
recognized in the Company's consolidated financial statements plus
the franchise sales occurring at franchise stores to their
customers which are not included in the revenue figure presented in
the Company's consolidated financial statements. Total system wide
sales is not a measure recognized by IFRS and does not have a
standardized meaning prescribed by IFRS, but it is a key indicator
used by the Company to measure performance against prior period
results. Therefore, total system wide sales as discussed in this
MD&A may not be comparable to similar measures presented by
other issuers. We believe that disclosing this measure is
meaningful to investors because it serves as an indicator of the
strength of the Company's overall store network, which ultimately
impacts financial performance.
Franchise Sales
Franchise sales figures refer to sales occurring at franchise
stores to their customers which are not included in the revenue
figures presented in the Company's consolidated financial
statements, or in the same store sales figures in this MD&A.
Franchise sales is not a measure recognized by IFRS, and does not
have a standardized meaning prescribed by IFRS, but it is a key
indicator used by the Company to measure performance against prior
period results. Therefore, franchise sales as discussed in this
MD&A may not be comparable to similar measures presented by
other issuers. Once again, we believe that disclosing this measure
is meaningful to investors because it serves as an indicator of the
strength of the Company's brands, which ultimately impacts
financial performance.
About Leon's Furniture Limited
Leon's Furniture Limited is the largest retailer of furniture,
appliances and electronics in Canada. Our retail banners include: Leon's;
The Brick; Brick Outlet; and The Brick Mattress Store. Finally,
with The Brick's Midnorthern Appliance banner alongside with Leon's
Appliance Canada banner, this makes the Company the country's
largest commercial retailer of appliances to builders, developers,
hotels and property management companies. The Company has 303
retail stores from coast to coast in Canada under various banners. The Company
operates three websites: leons.ca, thebrick.com and
furniture.ca.
Cautionary Statement
This press release may contain forward-looking statements that
are subject to known and unknown risks and uncertainties that could
cause actual results to vary materially from targeted results. Such
risks and uncertainties include those described in Leon's Furniture
Limited's periodic reports including the annual report or in the
filings made by Leon's Furniture Limited from time to time with
securities regulatory authorities.
This News Release may include certain "forward-looking
statements" which are not comprised of historical facts.
Forward-looking statements include estimates and statements that
describe the Company's future plans, objectives or goals, including
words to the effect that the Company or management expects a stated
condition or result to occur. Forward-looking statements may be
identified by such terms as "believes", "anticipates", "expects",
"estimates", "may", "could", "would", "will", or "plan". Since
forward-looking statements are based on assumptions and address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Although these statements are
based on information currently available to the Company, the
Company provides no assurance that actual results will meet
management's expectations. Risks, uncertainties and other factors
involved with forward-looking information could cause actual
events, results, performance, prospects and opportunities to differ
materially from those expressed or implied by such forward-looking
information. Forward looking information in this news release
includes, but is not limited to, the Company's objectives, goals or
future plans, and estimates of market conditions. Factors that
could cause actual results to differ materially from such
forward-looking information include, but are not limited to failure
to identify beneficial business opportunities, failure to convert
the potential in the pursued business opportunities to tangible
benefits to the Company or its shareholders, the ability of the
Company to counteract the potential impact of the COVID-19
coronavirus on factors relevant to the Company's business, delays
in obtaining or failures to obtain required shareholder and TSX
approvals, changes in equity markets, inflation, changes in
exchange rates, fluctuations in commodity prices, delays in the
development of projects, and those risks set out in the Company's
public documents filed on SEDAR. Although the Company believes that
the assumptions and factors used in preparing the forward-looking
information in this news release are reasonable, undue reliance
should not be placed on such information, which only applies as of
the date of this news release, and no assurance can be given that
such events will occur in the disclosed time frames or at all. The
Company disclaims any intention or obligation to update or revise
any forward-looking information, whether as a result of new
information, future events or otherwise, other than as required by
law.
SOURCE Leon's Furniture Limited