TORONTO, Feb. 23, 2021 /CNW/ - Leon's Furniture
Limited ("LFL" or the "Company") (TSX: LNF), today
announced record financial results for the fourth quarter of
2020.
Financial Highlights – Q4-2020
- Total system wide sales(1) increased 10.6% to a
record $830.9 million in Q4-2020
compared to $751.3 million in
Q4-2019.
- Achieved record revenue in the quarter of $675.1 million compared to $621.4 million in Q4-2019, an increase of 8.6%.
With increases across all product categories.
- Same-store sales(1) increased 7.3% in Q4-2020
compared to Q4-2019.
- E-commerce sales growth of 227% in the quarter, continuing the
trend of triple digit growth in our eCommerce business.
- Gross profit margin improved across all product categories to
45.73% in Q4-2020 from 44.88% in Q4-2019.
- Adjusted EBITDA(1) increased by 20.2% to
$106 million in Q4-2020 compared to
Q4-2019.
- Adjusted diluted earnings per share(1) grew by 47.9%
to $0.71 in Q4-2020 from $0.48 in Q4-2019.
Financial Highlights – Fiscal Year 2020
- Achieved free cash flow(1) of $467.9 million in 2020 an increase of
$266.2 million over 2019.
- Adjusted EBITDA(1) increased 18.4% to $344.3 million in 2020 compared to 2019.
- Net income increased by 52.8% to $163.3
million in 2020 compared to 2019.
- Adjusted diluted earnings per share(1) grew by 56.9%
to $2.04 in 2020 from $1.30 in 2019.
- Opened a total of 9 new stores in the year, 7 new corporate
stores and 2 franchise stores comprised of 3 Leon's banner stores
and 6 Brick store locations.
- The Company reached a record $1
Billion in shareholders' equity, after returning
$118.1 million to its shareholders'
with a combination of dividends declared and common share
repurchases in 2020.
- Available and unrestricted liquidity is approximately
$661.5 million which is made up of
the Company's $487.5 million in cash
and investments and $174 million in
undrawn credit facilities as at December 31,
2020.
Edward Leon, Chief Executive
Officer of LFL Group commented, "LFL generated solid financial
results during fiscal 2020, while at the same time adapting to the
challenges presented by the ongoing COVID-19 pandemic. I am
particularly proud of our team's performance in Q4, with targeted
advertising spending driving high single digit growth in revenue
and same store sales, and eCommerce driven sales growth of more
than 200%. Even more importantly, the top line growth during Q4
translated into adjusted diluted earnings per share growth of
47.9%. As we enter 2021, we continue to see momentum across the
business, with annualized eCommerce driven sales exiting 2020 up
more than five-fold compared to our 2019 exit rate. The investments
we made during 2018 to build-out a scalable eCommerce platform
continue to pay off, and we are squarely positioned as one of the
strongest omnichannel retailers in Canada today. Backed by a coast-to-coast
distribution network and one of the country's largest last mile
delivery services, LFL gives customers the chance to shop where
they want, when they want and how they want and that will continue
to deliver great results for our shareholders."
Mr. Leon added, "I would like to personally express my thanks to
all of our associates across the country for their dedication and
work through a very challenging year. We are steadfast in our
commitment to the wellbeing of our people and made the decision
again in Q4 to provide both active and temporarily laid-off staff
with a special payment in addition to Company-paid benefits. In
total for 2020, we have provided just over $10 million in special payments and additional
benefits over and above our customary compensation practices and we
very much look forward to welcoming many of our associates
back."
(1) For a full explanation of the Company's
use of non-IFRS financial measures, please refer to the section of
this press release with the heading "Non-IFRS Financial
Measures".
Summary financial highlights for the three months ended
December 31, 2020 and December 31, 2019
For
the
|
Three months
ended
|
(C$ in millions
except %, share and per share amounts)
|
December 31,
2020
|
December 31,
2019
|
$
Increase
|
%
Increase
|
Total system wide
sales (1)
|
830.9
|
751.3
|
79.6
|
10.6%
|
Franchise sales
(1)
|
155.8
|
129.8
|
26.0
|
20.0%
|
Revenue
|
675.1
|
621.4
|
53.7
|
8.6%
|
Same store sales
(1)
|
653.1
|
608.8
|
44.3
|
7.3%
|
Gross profit margin
as a percentage of revenue
|
45.73%
|
44.88%
|
|
|
SG&A
(2)
|
230.8
|
220.4
|
10.4
|
4.7%
|
SG&A
(2) as a percentage of revenue
|
34.19%
|
35.47%
|
|
|
Adjusted
EBITDA
|
106.0
|
88.2
|
17.8
|
20.2%
|
Adjusted net income
(1)
|
56.3
|
39.3
|
17.0
|
43.3%
|
Adjusted diluted
earnings per share (1)
|
$0.71
|
$0.48
|
$0.23
|
47.9%
|
Net income
|
53.3
|
39.3
|
14.0
|
35.6%
|
Common share
dividends declared
|
$0.46
|
$0.14
|
$0.32
|
228.6%
|
(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 December
31, 2020, revenue was $675.1 million compared to $621.4 million in the fourth quarter 2019.
Revenue increased $53.7 million or
8.6% as compared to the prior year quarter due to increases in all
product categories which was driven by increased consumer demand
that began in the second quarter 2020 and continued during most of
the remainder of 2020. The Company's continued focus on eCommerce,
including its live chat initiatives, generated a year over year
227% 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.
However, due to the provincially mandated retail showroom
closures that began on November 12,
2020, in Manitoba for
non-essential items and which then continued to impact the
municipalities of Toronto and Peel
in the province of Ontario
beginning on November 23, 2020, the
Company was forced to temporarily restrict or temporarily close its
retail showrooms in these affected areas. Notwithstanding these
showroom restrictions, the provincial governments continued to
allow the Company to offer curbside pickup at our retail showrooms
and warehouses and to continue to offer home deliveries to our
customers. All the Company's retail showrooms in Ontario and Quebec were temporarily closed to our
customers beginning on December 26,
2020, due to province-wide temporary closures of all
non-essential retail showrooms. These further closures did not
impact curbside pickup at our retail stores and warehouse locations
and it did not impact our ability to perform customer deliveries.
In addition, it did not restrict our ability to provide sales and
service to our customers by phone, to perform repair or
installation services at their required locations or to continue to
maximize the Company's use of our live chat initiatives online.
This continued focus on eCommerce driven sales, has generated a
five-fold increase to the annualized run rate in eCommerce sales
subsequent to the quarter end December 31,
2020. These activities and results are due to the ongoing
dedication and loyalty exhibited by all of our associates across
all divisions and subsidiaries of the Company. Subsequent to the
fourth quarter ended 2020, the vast majority of these provincial
shutdown measures have been lifted and most of the affected retail
stores have been reopened as of February 22,
2021, albeit with certain indoor capacity
restrictions.
The Company is very pleased that we now can recall and return
almost all associates, back to their positions. To financially
assist our associates during these unprecedented times, the Company
approved special payments related to the fourth quarter
totaling several million dollars and distributed these funds
to both active and laid-off associates. Since the start of this
pandemic, the Company chose to provide special payments, assistance
and benefits to both our actively employed and temporarily laid-off
associates. The aggregate total of these Company funded amounts for
the 2020 fiscal year is approximately $10
million over and above the Company's customary compensation
practices. These extra amounts demonstrate how important our
associates financial and physical wellbeing continues to be to the
Company.
Selling, General and Administrative
Expenses ("SG&A")
SG&A as a percentage of revenue in the current quarter was
down by 128 basis points due to effectively managing overall
SG&A expenses throughout the quarter.
Net Income and Diluted Earnings Per Share
Net income for the fourth quarter of 2020 was $53.3 million, or $0.67 per diluted earnings per share as compared
to net income of $39.3 million in the
prior year's quarter, or $0.48 per
diluted earnings per share.
Dividends
As previously announced, the Company paid a quarterly dividend
of $0.16 and a special dividend of
$0.30 per common share on 7th day of
January 2021. Today the Directors
have declared a quarterly dividend of $0.16 per common share payable on the
8th day of April 2021 to
shareholders of record at the close of business on the
8th day of March 2020. 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, temporary store closures, 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.
Management anticipates that actions taken to date have
positioned the Company strongly to weather the current crisis and
to take advantage of any accretive opportunities that may arise,
including:
- The essential nature of some of the Company's products and
services. Household appliances that are necessary to cook and clean
have been acknowledged as essential by provincial governments. The
Company also owns the largest third-party appliance service company
in Canada, Transglobal Service,
that has been operating across the country with enhanced health and
safety protocols to protect both our customers and our
technicians.
- Rapid scalability of our eCommerce business. The Company's
eCommerce driven sales have continued to grow significantly in the
fourth quarter. Since the Company moved its online stores to the
Shopify Plus platform, the eCommerce offering has become a better
customer experience and a more interactive offering. The platform
has resulted in improved scalability and enabled significant
operating leverage, which has and continues to provide a
competitive advantage to the Company.
- Unencumbered ownership of substantial real estate assets across
the country. The Company owns 4.4 million square feet (office,
retail, industrial) of approximately 13 million square feet in use
today by the Company. This is a significant competitive advantage
in the current environment, resulting in a far lower carrying cost
for closed stores or other properties than similar leased
properties. In addition, the value inherent in this portfolio could
enable the Company to readily access additional liquidity to
support existing operations and take advantage of accretive
opportunities as they arise.
- A strong balance sheet as evidenced by the Company's repayment
of over $440 million in various forms
of debt over the last 7 years. The Company has unrestricted
liquidity of approximately $661.5
million as at December 31,
2020, with room to expand further if necessary.
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 304
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.
Free Cash Flow
Free cash flow refers to cash provided by operating activities
less total capital expenditure. Free cash flow 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 financial performance. We believe that disclosing this
measure is meaningful to investors because it serves as an
indicator of the financial strength of the Company.
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 304
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