TORONTO, Nov. 9, 2023
/CNW/ - Sleep Country Canada Holdings Inc. ("Sleep Country"
or the "Company") (TSX: ZZZ) released its financial results
today for its third quarter ended September
30, 2023.
All financial results are reported in Canadian dollars unless
otherwise stated.
Third Quarter Financial Highlights
- Revenues increased by $4.7
million or 1.9% to $255.7
million in Q3 2023 from $251.0
million in Q3 2022;
- Same Store Sales ("SSS")1 decreased by 5.5%
in Q3 2023 from Q3 2022;
- Revenues attributed to eCommerce increased to 20.4% in Q3 2023
from 18.5% in Q3 2022;
- Gross profit increased by $4.8
million to $101.4 million in
Q3 2023 from $96.6 million in Q3
2022;
- Gross profit margin increased to 39.7% in Q3 2023 from 38.5% in
Q3 2022;
- Operating EBITDA1 decreased by $5.8 million or 8.8% to $59.8 million in Q3 2023 from $65.6 million in Q3 2022;
- Operating EBITDA1 margin decreased to 23.4% in Q3
2023 from 26.1% in Q3 2022;
- Net income attributable to the Company decreased by
$4.2 million or 14.6% to $24.7 million in Q3 2023 from $28.9 million in Q3 2022;
- Adjusted net income attributable to the Company1
decreased by $5.7 million or 17.5% to
$26.8 million in Q3 2023 from
$32.5 million in Q3 2022;
- Diluted earnings per share ("EPS") decreased by
$0.09 or 11.4% to $0.70 in Q3 2023 from $0.79 in Q3 2022;
- Diluted adjusted EPS1 decreased by $0.13 or 14.6% to $0.76 in Q3 2023 from $0.89 in Q3 2022;
- Repurchased for cancellation 165,192 common shares (Q3 2022 –
527,576 common shares) in Q3 2023 for $3.8
million (Q3 2022 – $13.8
million) against the Company's NCIB;
- Subsequent to quarter-end, on November
9, 2023, the Board declared a dividend of $0.237 per share payable on November 30, 2023 to shareholders of record at
the close of business on November 24,
2023; and
- Subsequent to quarter end, the Company repurchased for
cancellation 445,938 shares (YTD - 910,649 common shares) for
$9.9 million (YTD - $21.0 million) in the month of October.
Third Quarter Business Highlights
- Opened a new Sleep Country store in Edmonton, Alberta;
- Silk & Snow was recognized for the third consecutive year
as one of the top 50 fastest-growing businesses in The Globe and
Mail's 2023 Report on Business; and
- Acquired an additional 16% of the common shares of Hush
Blankets Inc. increasing the Company's ownership interest to
68%.
President & CEO Commentary
"We are pleased with our strong performance this quarter amid
this evolving environment, as high interest rates and inflation
continues to have an impact on consumer confidence. We are seeing
pockets of softness in consumer demand, particularly on larger
ticket items, resulting in a deferral of discretionary purchases.
As we navigate through this macro-environment and geo political
uncertainty, we remain cautiously optimistic on our
medium-term outlook, and we are very positive on our long-term
strategic positioning," said Stewart
Schaefer, President and CEO of Sleep Country.
"We are focused on building and strengthening our sleep
ecosystem while investing in the growth of our brands. In the
upcoming month, we are very excited that Endy and Silk & Snow,
two of our highly recognized eCommerce brands, will open their very
first brick-and-mortar locations. These tactile environments will
provide customers with a new opportunity to discover, trial, and
purchase innovative and premium sleep products with the help of our
trusted Sleep Experts," said Schaefer.
"We are also very pleased with the progress that we are making
with our newest acquired banner, Casper
Canada. Over the last five months our team has
invested a significant amount of time and talent in this latest
acquisition and we are excited to see the fruits of our labour in
2024 and beyond," said Schaefer.
"Later this month, we will be launching our new and exciting
luxury sleep banner, "the rest," with its first store opening in
Yorkdale Mall, Toronto. The rest
will offer a uniquely-elevated experience, bringing customers the
world's finest collection of luxurious mattresses and premium
bedding as we redefine luxury and sleep," added Schaefer.
"As we execute against our strategic growth initiatives, we are
also doubling down on our efforts to drive efficiency throughout
our house of brands, while working to build the best-in-class
synergies and invest in the scalability of our sleep ecosystem,"
concluded Schaefer.
Summary of Third Quarter Financial Results
(C$ thousands unless
otherwise stated; other than store and share data)
|
Q3 2023
|
|
|
Q3 2022
|
|
|
Change
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
255,748
|
|
|
$
|
251,026
|
|
|
1.9 %
|
SSS(1)
|
|
(5.5 %)
|
|
|
|
(11.1 %)
|
|
|
|
Gross profit margin
(%)
|
|
39.7 %
|
|
|
|
38.5 %)
|
|
|
|
|
|
|
|
|
|
|
|
Stores
opened(2)
|
|
1
|
|
|
|
1
|
|
|
|
Stores
closed
|
|
-
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA(1)
|
$
|
59,839
|
|
|
$
|
65,603
|
|
|
(8.8 %)
|
Operating EBITDA margin
(%)(1)
|
|
23.4 %
|
|
|
|
26.1 %
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
24,705
|
|
|
$
|
28,926
|
|
|
(14.6 %)
|
Adjusted net income
attributable to the Company(1)
|
$
|
26,790
|
|
|
$
|
32,457
|
|
|
(17.5 %)
|
Basic EPS
|
$
|
0.71
|
|
|
$
|
0.80
|
|
|
(11.3 %)
|
Diluted EPS
|
$
|
0.70
|
|
|
$
|
0.79
|
|
|
(11.4 %)
|
Basic adjusted
EPS(1)
|
$
|
0.77
|
|
|
$
|
0.90
|
|
|
(14.4 %)
|
Diluted adjusted
EPS(1)
|
$
|
0.76
|
|
|
$
|
0.89
|
|
|
(14.6 %)
|
Note:
|
(1)
See the "Non-IFRS and Other Measures" section of this news
release.
|
(2)
This figure includes the six Casper stores acquired through the
Casper Canada acquisition in April 2023.
|
Revenues increased by $4.7 million
or 1.9% from $251.0 million in Q3
2022 to $255.7 million in Q3 2023
mainly due to incremental revenue earned from new stores, wrap
stores opened in 2022, and the acquisitions of Silk & Snow and
Casper Canada completed in
January 2023 and April 2023 respectively. This increase was
partially offset by a decrease in SSS1 by 5.5%.
Gross profit margin increased by 120 basis points from 38.5% for
Q3 2022 to 39.7% for Q3 2023 mainly due to higher average unit
selling prices and lower product costs, partially offset by higher
sales and distribution compensation costs, and deleveraging of
occupancy costs which were also impacted by the Company's nine new
stores of which six locations were added as part of the acquisition
of Casper Canada.
Total G&A expenses increased by $10.9
million or 22.0% from $49.8
million in Q3 2022 to $60.7
million in Q3 2023 mainly driven the acquisitions of Silk
& Snow and Casper Canada as well
as increases in advertising, compensation and information
technology costs incurred in the normal course of business.
Operating EBITDA1 was $59.8
million for Q3 2023, or 23.4% of Revenues, compared to
$65.6 million for Q3 2022, or 26.1%
of Revenues, representing a decrease of $5.8
million or 8.8% mainly due to an increase in G&A
expenses, partly impacted by incremental G&A expenses incurred
by Silk & Snow and Casper
Canada; partially offset by an improved gross margin in Q3
2023.
Finance related expenses increased by $1.7 million from $6.3
million in Q3 2022 to $8.0
million in Q3 2023 mainly due to an increase in interest
expense on the Company's lease obligations and its senior secured
credit facility, impacted by the higher interest rates and debt
levels in addition to a decrease in the unrealized gain on the
Company's interest rate swap. This increase was partially offset by
a decrease in accretion expense as a result of lower redemption
liabilities related to the Hush acquisition.
Other expenses (income) decreased by $1.2
million from expenses of $0.2
million in Q3 2022 to income of $1.0
million in Q3 2023 mainly due to foreign exchange gains and
interest income earned on investments in Q3 2023.
Income taxes decreased by $2.2
million from Q3 2022 to Q3 2023. This change is driven by
the decrease in net income before taxes of $6.5 million from $40.3
million in Q3 2022 to $33.8
million in Q3 2023, and a decrease in the Company's
effective income tax rate by 110 basis points from 28.1% in Q3 2022
to 27.0% in Q3 2023.
Net income attributable to the Company for Q3 2023 decreased by
$4.2 million from $28.9 million ($0.80 per share) in Q3 2022 to $24.7 million ($0.71 per share) in Q3 2023.
Adjusted net income attributable to the Company1 for
Q3 2023 decreased by $5.7 million
from $32.5 million ($0.90 per share) in Q3 2022 to $26.8 million ($0.77 per share) in Q3 2023.
Summary of Year-to-date Financial Results
Revenues decreased by $6.2 million
or 0.9% from $685.6 million in YTD
2022 to $679.4 million in YTD 2023
mainly due to a decrease in SSS1 by 7.5%, which was
partially offset by incremental revenue earned from new stores,
wrap stores in 2022 and the acquisitions of Silk & Snow and
Casper Canada.
Gross profit margin increased by 50 basis points from 36.5% in
YTD 2022 to 37.0% in YTD 2023 mainly due to higher average unit
selling prices and lower product costs, partially offset by higher
sales and distribution compensation costs, and deleveraging of
occupancy costs which were also impacted by the Company's nine new
stores of which six locations were added as part of the acquisition
of Casper Canada.
Total G&A expenses increased by $25.0
million or 18.0% from $138.6
million in YTD 2022 to $163.6
million in YTD 2023 mainly driven by the acquisitions of
Silk & Snow and Casper Canada as
well as increases in advertising, compensation, information
technology costs incurred in the normal course business.
Operating EBITDA1 was $145.4
million for YTD 2023, or 21.4% of Revenues, compared to
$165.6 million for YTD 2022, or 24.1%
of Revenues, representing a decrease of $20.2 million or 12.2% mainly due to an increase
in G&A expenses, partly impacted by incremental G&A
expenses incurred by Silk & Snow and Casper Canada; partially offset by an improved
gross margin in YTD 2023.
Finance related expenses increased by $6.5 million from $14.6
million in YTD 2022 to $21.1
million in YTD 2023 mainly due to an increase in interest
expense on the Company's lease obligations and its senior secured
credit facility impacted by the higher interest rates and debt
levels, in addition, to a decrease in the unrealized gain on the
Company's interest rate swap. These changes were partially offset
by a decrease in accretion expense as a result of lower redemption
liabilities related to the Hush acquisition.
Income taxes decreased by $8.8
million from YTD 2022 to YTD 2023. The change is driven by
the decrease in net income before taxes of $30.0 million from $97.0
million in YTD 2022 to $67.0
million in YTD 2023, and a decrease in the Company's
effective income tax rate by 70 basis points from 28.0% in YTD 2022
to 27.3% in YTD 2023.
Net Income attributable to the Company for YTD 2023 decreased by
$21.3 million from $70.0 million ($1.91 per share) in YTD 2022 to $48.7 million ($1.40 per share) in YTD 2023.
Adjusted net Income attributable to the Company1 for
YTD 2023 decreased by $24.2 million
from $79.0 million ($2.16 per share) in YTD 2022 to $54.8 million ($1.58 per share) in YTD 2023.
Conference Call
Sleep Country's President and CEO, Stewart Schaefer, and CFO, Craig De Pratto, will host a conference call for
analysts and investors on November 10
at 8:00 a.m. ET. The dial-in numbers
for the conference call are 416-764-8659 or 888-664-6392. This
conference call will be recorded and available for replay until
November 17, 2023, 23:59 ET. To listen to the replay, please dial
416-764-8677 or 888-390-0541 and use passcode 483452#.
About Sleep Country
Sleep Country is Canada's leading specialty sleep retailer with
a purpose to transform lives by awakening Canadians to the power of
sleep. Sleep Country operates under the retail banners; Sleep
Country Canada, Dormez-vous, Endy, Silk & Snow, Hush, and most
recently acquired, Casper Canada.
The Company has omnichannel and eCommerce operations, including 299
corporate-owned stores and 19 warehouses across Canada. Recognized
as one of Canada's Most Admired Corporate Cultures in 2022 by
Waterstone Human Capital, Sleep Country is committed to building a
company culture of inclusion and diversity where differences are
embraced and valued. The Company actively invests in its sleep
ecosystem, innovative products, world-class customer experience,
communities and its people. For more information about Sleep
Country, please visit ir.sleepcountry.ca.
Non-IFRS and Other Measures
This news release refers to certain measures that are not
recognized under IFRS and do not have a standardized meaning
prescribed by IFRS, including Same Store Sales or SSS, EBITDA,
Operating EBITDA, Operating EBITDA margin, Adjusted net income
attributable to the Company, Basic adjusted EPS and Diluted
adjusted EPS. For more information on these Non-IFRS and other
measures refer to "Non-IFRS and Other Measures" in the Company's
MD&A for Q3 2023, which is available on SEDAR+ at
sedarplus.ca.
Calculation of Non-IFRS and Other Measures
|
|
|
|
Q3
|
|
|
|
YTD
|
(C$ thousands unless
otherwise stated, except EPS)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reconciliation of
net income attributable to the Company
to EBITDA and Operating EBITDA:
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
24,705
|
$
|
28,926
|
$
|
48,721
|
$
|
70,004
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
(55)
|
|
55
|
|
(10)
|
|
(88)
|
Other expenses (income)
|
|
(1,018)
|
|
215
|
|
(424)
|
|
(361)
|
Finance related expenses
|
|
7,950
|
|
6,319
|
|
21,055
|
|
14,643
|
Income taxes
|
|
9,138
|
|
11,315
|
|
18,276
|
|
27,129
|
Depreciation and amortization
|
|
17,173
|
|
16,853
|
|
51,373
|
|
48,458
|
EBITDA
|
|
57,893
|
|
63,683
|
|
138,991
|
|
159,785
|
Adjustments:
|
|
|
|
|
|
|
|
|
Acquisition costs
|
|
-
|
|
-
|
|
1,255
|
|
-
|
ERP implementation costs
|
|
-
|
|
844
|
|
-
|
|
2,034
|
Share-based compensation
|
|
1,946
|
|
1,076
|
|
5,159
|
|
3,736
|
Total
adjustments
|
$
|
1,946
|
$
|
1,920
|
$
|
6,414
|
$
|
5,770
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA
|
$
|
59,839
|
$
|
65,603
|
$
|
145,405
|
$
|
165,555
|
Operating EBITDA
margin (%)
|
|
23.4 %
|
|
26.1 %
|
|
21.4 %
|
|
24.1 %
|
|
|
|
|
|
|
|
|
|
Reconciliation of
net income attributable to the Company
to adjusted net income attributable to the
Company:
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
24,705
|
$
|
28,926
|
$
|
48,721
|
$
|
70,004
|
Adjustments:
|
|
|
|
|
|
|
|
|
Acquisition costs
|
|
-
|
|
-
|
|
1,255
|
|
-
|
ERP implementation costs
|
|
-
|
|
844
|
|
-
|
|
2,034
|
Share-based compensation
|
|
1,946
|
|
1,076
|
|
5,159
|
|
3,736
|
Accretion expense
|
|
595
|
|
2,061
|
|
1,190
|
|
4,520
|
Tax impact of all adjustments
|
|
(456)
|
|
(450)
|
$
|
(1,490)
|
$
|
(1,299)
|
Total
adjustments
|
$
|
2,085
|
$
|
3,531
|
$
|
6,114
|
$
|
8,991
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to the Company
|
$
|
26,790
|
$
|
32,457
|
$
|
54,835
|
$
|
78,995
|
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 read 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
MD&A for Q3 2023 under the sections "Risk Factors" and those
described in the Company's 2022 annual information form (the
"AIF") filed on March 2, 2023,
both of which can be accessed under the Company's profile on SEDAR+
at sedarplus.ca. Additional risks and uncertainties not presently
known to the Company or that the Company currently believes to be
less significant may also adversely affect the Company.
The Company cautions that the list of risk factors and
uncertainties described in the MD&A for Q3 2023 and the AIF are
not exhaustive and that should certain risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual strategies, prospects, events, performance and results may
vary significantly from those expected. There can be no assurance
that the actual strategies, prospects, results, performance, events
or activities anticipated by the Company will be realized or even
if substantially realized, that they will have the expected
consequences to, or effects on, the Company. 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.
SOURCE Sleep Country Canada Holdings Inc. Investor Relations