On Tuesday, June 16, DAVIDsTEA Inc. (NASDAQ/DTEA) announced disappointing quarterly results, indicating the fast-growing beverage chain is struggling to control costs. (Source: DAVIDsTEA, June 16, 2015.)
Sales figures were decent for the first quarter, coming in at CDN$25.8 million, 29% higher compared to same quarter last year. However, those results did not translate to the bottom line; the company lost a staggering CDN$93.2 million in the first quarter, or CDN$7.73 per share, compared to a profit of CDN$1.4 million or CDN$0.07 per share during the same period last year.
The poor results turned out to be a surprise to the market, as investors were hoping for solid improvement in the company’s earnings. The company had just turned profitable in fiscal 2014, making nearly CDN$6.5 million in profits, or a profit of CDN$1.52 per share.
The results shocked the market. DAVIDsTEA shares went on a roller coaster ride following the announcement, plunging 24.55% on Wednesday and closing the trading session at $22.00.
Part of the huge loss in the quarter came from an increase in selling, general, and administration expenses (SG&A). These costs totaled a whopping CDN$21.0 million, a 57.9% increase year-over-year. After excluding one-time costs related to the company’s initial public-related expenses, SG&A still clocked in at CDN$17.0 million.
The company’s outlook didn’t do much to cheer investors up, either. For the second quarter of fiscal 2015, DAVIDsTEA expects sales to be between CDN$30.0 and CDN$31.0 million. Adjusted loss is expected to be in the range of CDN$1.9 million and CDN$2.2 million, translating to a loss between CDN$0.08 and CDN$0.09 a share. Given that the company went public less than two weeks ago with such high hopes, today’s results are disappointing.