DAVIDsTEA’s (DTEA) Q1 2017 Results

posted in: Earnings Call, Notes | 0

Joel Silver – President and CEO

They have not given up on the US

“We are in two distinct markets, Canada and the U.S. and it’s clear we’re at different stages of maturity in each. We have a very strong Canadian business underlined by the fact that we do 80% of our sales in Canada. We are extremely confident in Canada, DAVIDsTEA’s has an excellent platform and one we will continue to build upon. There has been significant effort trying to penetrate the U.S. market while there has been some success it has been limited, we will not abandon the U.S. market but we do intend to emulate the Canadian success in the U.S. with the necessary adjustment to perfect our business model.”

They have excess inventory

“with regard to the inventory level it’s in-line with what we expected for Q2, we’re sort of in a glide path to the back at our inventory levels by let’s say Q4, the pressure we expect to experience in Q2 will moderate somewhat in Q3 and Q4 but we’re still going to take a couple of quarters to work through our excess inventory position, we’re working hard with our clearings and our buys to mitigate the impact of some of the inventory levels as well as our gross profit margin pressure but it is in-line with where we thought will be in Q2.”

Very choppy beginning to the year

“It’s been fairly choppy the first four to five months this year, it has been tough to predict which is one of the reasons we’re not giving guidance but there’s nothing specific that we saw that we could point to and say it’s a specific factor. We have seen a general trend improved versus the aggregate Q1 results, as we sit here we are in negative low single digits so it is an improvement in the trend but it’s just been so choppy it’s hard to predict much beyond that at this point.”