TORONTO, Nov. 10, 2021 /CNW/ - Leon's Furniture Limited
("LFL" or the "Company") (TSX: LNF), today announced
record financial results for the third quarter of 2021.
Financial Highlights – Q3-2021
- Total system wide sales(1) increased 8.2% to a
record $825.5 million in Q3-2021
compared to $762.8 million in
Q3-2020.
- Achieved record high revenue of $683.2 million in Q3-2021 compared to
$630.8 million in Q3-2020, an
increase of 8.3%.
- Same-store sales(1) increased 9.7% in Q3-2021
compared to Q3-2020.
- Ecommerce sales grew 48% as compared to the prior year quarter,
which is on top of the 235% growth in eCommerce sales that occurred
in the prior year's quarter as compared to the third quarter of
2019.
- Achieved record net income results in a quarter of
$63.8 million, an increase of 30% in
comparison to Q3-2020.
- Adjusted EBITDA(1) of $113.5
million in Q3-2021 compared to $96.0
million in Q3-2020, an increase of 18.2%.
- Adjusted diluted earnings per share(1) grew by 26.2%
to $0.77 in Q3-2021 from $0.61 in Q3-2020.
Financial Highlights – nine months ended
September 30, 2021
On a year-to-date basis as compared to prior year:
- Revenue increased to $1.8 billion
from $1.5 billion, an increase of
$297.9 million or 19.3%.
- Same store sales(1) increased by 19.3%
- Adjusted EBITDA(1) increased by 43.0%(2)
to $295.4 million compared to
September 2020.
- Net income increased by 73.9%(2) to $150.7 million.
- Adjusted diluted earnings per share(1) grew by 76.7%
to $1.87 from $1.06(2) in year to date September 2020.
- On a trailing twelve month basis, adjusted diluted earnings per
share(1) is at $2.58 as
compared to $1.54(2) in
the prior year's trailing twelve month period, an increase of over
67.5% or $1.04 per share.
- Year to date the Company has returned $193.0 million to shareholders in the form of
dividends declared and common share repurchases as compared to
$73.1 million in the prior year
period.
(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".
|
(2) These financial results exclude
the $31.8 million dollars that was recorded in the Company's Q3
2020 financial results due to the Canada Emergency Wage Subsidy
("CEWS") program. The Company's 2021 financial results do not
include any amounts related to the CEWS program since the Company
did not receive any CEWS in 2021.
|
Mike Walsh, President and CEO of
LFL commented, "During Q3, our team continued to harness the
power of LFL's national omnichannel retail and distribution
platform to generate the best top line results in the Company's
history, as well as record profitability. We are unwavering in our
commitment to ensuring that customers can access a wide selection
of products and services where, when and how they want to shop, and
even more importantly, enabling them to take delivery of those
products as quickly and efficiently as possible during these
unprecedented times. This commitment, along with effective
marketing strategies, translated into 8.3% revenue growth in the
quarter and steady gross margins compared to the same period last
year. Our team also maintained its focus on cost containment and
efficiency, which drove 26.2% growth in adjusted diluted earnings
per share."
Mr. Walsh continued, "This was my first full quarter as the
Company's CEO and I see plenty of opportunity to continue building
on our solid Q3 results, leveraging an exceptional combination of
retail, e-commerce, wholesale, service and distribution assets, and
a rock-solid balance sheet. Our team has a proven track record of
delivering financial performance even in challenging environments,
and now has more tools at its disposal. One of those tools is the
Company's ecommerce platform, which continues to demonstrate its
growth potential and scalability, with 48% growth in Q3 on top of
235% growth in the same period last year. Furthermore, in an
environment of widespread supply chain disruptions, LFL is uniquely
positioned to continue gaining market share in key product
categories, backed by a network of warehouses and efficient
distribution centers across the country, and one of the nation's
largest last mile delivery services. We have one of the most
dedicated teams I have ever had the pleasure of working with, and I
look forward to continuing to work together to delight our
customers while delivering profitable growth for shareholders."
Summary of Consolidated Results
For
the
|
Three months
ended
|
|
|
(C$ in millions
except %, share and per share amounts)
|
September 30,
2021
|
September 30,
2020
|
$ Increase
(Decrease)
|
% Increase
(Decrease)
|
|
|
|
|
|
Total system-wide
sales (1)
|
825.5
|
762.8
|
62.7
|
8.2%
|
Franchise sales
(1)
|
142.3
|
132.0
|
10.3
|
7.8%
|
|
|
|
|
|
Revenue
|
683.2
|
630.8
|
52.4
|
8.3%
|
Cost of
sales
|
381.3
|
352.0
|
29.3
|
8.3%
|
Gross
profit
|
301.9
|
278.8
|
23.1
|
8.3%
|
Gross profit margin
as a percentage of revenue
|
44.19%
|
44.20%
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses (2) (3)
|
216.3
|
210.6
|
5.7
|
2.7%
|
SG&A as a
percentage of revenue (3)
|
31.66%
|
33.39%
|
|
|
|
|
|
|
|
Income before net
finance costs and income tax expense
|
85.6
|
68.2
|
17.4
|
25.5%
|
Net finance
costs
|
(4.1)
|
(4.3)
|
(0.2)
|
(4.7%)
|
Income before income
taxes
|
81.5
|
63.9
|
17.6
|
27.5%
|
Income tax
expense
|
20.9
|
14.6
|
6.3
|
43.2%
|
Adjusted net income
(1)
|
60.6
|
49.3
|
11.3
|
22.9%
|
Adjusted net income
as a percentage of revenue (1)
|
8.87%
|
7.82%
|
|
|
|
|
|
|
|
After-tax
mark-to-market (gain)/loss on financial
|
|
|
|
|
derivative
instruments (1)
|
(3.2)
|
0.2
|
3.3
|
1650%
|
Net
income
|
63.8
|
49.1
|
14.7
|
29.9%
|
|
|
|
|
|
Basic
weighted average number of common shares
|
77,026,816
|
79,412,546
|
|
|
Basic earnings per
share
|
$0.83
|
$0.62
|
$0.21
|
33.9%
|
Adjusted basic
earnings per share (1)
|
$0.79
|
$0.62
|
$0.17
|
27.4%
|
|
|
|
|
|
Diluted weighted
average number of common shares
|
78,386,090
|
81,427,770
|
|
|
Diluted earnings per
share
|
$0.81
|
$0.60
|
$0.21
|
35.0%
|
Adjusted diluted
earnings per share (1)
|
$0.77
|
$0.61
|
$0.16
|
26.2%
|
|
|
|
|
|
Common share
dividends declared
|
$1.41
|
$0.14
|
$1.27
|
907.1%
|
(1)
|
Refer to the Non-IFRS
financial measures section for additional information.
|
(2)
|
Selling, general and
administrative expenses ("SG&A").
|
(3)
|
SG&A for the
three months ended September 30, 2020 includes the impact of the
CEWS of $2 million or 0.3% as a percentage of revenue for the
three-month period.
|
Same Store Sales (1)
For
the
|
Three months
ended
|
|
|
(C$ in millions,
except %)
|
September 30,
2021
|
September 30,
2020
|
$
Increase
|
%
Increase
|
Same store sales
(1)
|
676.3
|
616.6
|
59.7
|
9.7%
|
(1) Refer to the
Non-IFRS financial measures section for additional
information.
|
Revenue
For the three months ended September
30, 2021, revenue was $683.2 million compared to $630.8 million in the third quarter 2020.
Revenue increased $52.4 million or
8.3% as compared to the prior year quarter due to increases across
all product categories. The Company's continued focus on eCommerce,
including its live chat initiatives, generated a quarter over
quarter 48% increase in eCommerce driven sales during the quarter,
which is on top of the growth in eCommerce sales of 235% in the
third quarter of 2020 as compared to the third quarter of 2019.
The ongoing strength in eCommerce sales in the quarter also
continue to validate that the Company's digital platform is very
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.
Same Store Sales (1)
The Company was able to achieve a 9.7% increase in same store
sales in the quarter compared to the third quarter 2020.
Gross Profit
The gross profit margin of 44.19% in the quarter remained
relatively consistent as compared to 44.20% from the third quarter
of 2020.
Selling, General and Administrative
Expenses ("SG&A")
During the third quarter of 2021 the Company did not apply or
receive any wage subsidies under the CEWS program, as compared to
third quarter of 2020, whereby the Company recorded a wage subsidy
of $2 million dollars. Therefore,
excluding the impact of CEWS from the prior year third quarter, the
Company's SG&A as a percentage of revenue for the third quarter
2020 was 33.70% compared to 31.66% for the third quarter of 2021,
an improvement of 204 basis points over the third quarter 2020.
This improvement in operating cost leverage and continued cost
reduction initiatives in the quarter demonstrate the Company's
ability to adjust and monitor its cost structure during the
quarter.
Net Income and Diluted Earnings Per Share
Net income for the third quarter of 2021 was $63.8 million, or $0.81 per diluted earnings per share as compared
to the $0.60 per diluted earnings per
share recorded in the prior year's quarter, an increase of
$0.21 per share or 35%.
(1) Refer to the
Non-IFRS financial measures section for additional
information.
|
Dividends
As previously announced, the Company paid a quarterly dividend
of $0.16 per common share as well as
a special dividend of $1.25 per
common share on October 8, 2021.
Today the Directors have declared a quarterly dividend of
$0.16 per common share payable on the
7th day of January 2022 to
shareholders of record at the close of business on the 7th day of
December 2021. In addition, the
annual dividend on the convertible non-voting preferred shares of
$0.32 will be payable on the 7th day
of January 2022 to the shareholders
of record at the close of business on the 7th day of December 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 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 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.
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