– First Quarter Highlighted by 13% Increase in
Average Store Sales, Continued Year-over-Year Gross Margin
Improvement and Continued Progress on Cost Management –
MONTREAL, May 13, 2019 /CNW/ - LXRandCo, Inc.
("LXRandCo" or the "Company") (TSX: LXR, LXR.WT), a
North American omni-channel retailer of branded vintage luxury
handbags and accessories, today reported its financial results for
the first quarter ended March 31,
2019.
"The first quarter was an excellent start to 2019," said
Steven Goldsmith, President and
Chief Executive Officer, LXRandCo. "With a smaller but much
healthier retail network, average store sales were up 13%
year-over-year as our focus on the quality of sales by being in the
right locations with the right partners is clearly yielding the
intended results. This fundamental principle will continue to
guide our decision-making as we expand our presence in the top
designated market areas in the United
States and Canada.
Importantly, our continued focus gross margin expansion and cost
management resulted in solid improvements on both fronts.
Gross margin expanded 200 basis points year-over-year, with the
opportunity for continued improvement going forward. And we
saw both year-over-year and sequential decreases in our selling,
general and administrative expenses, even before the impact of
non-recurring costs. All of this contributed to significantly
improved cash used in operations, which was just $1.0 million – a year-over-year improvement of
$7.1 million."
"We are optimistic for the balance of the year and I look
forward to building on this success throughout the remainder of
2019 as we continue to pursue our strategic priorities of prudent
revenue growth, margin expansion and sustainable cash flow
generation," added Mr. Goldsmith. "With the only national
shop-in-shop network in the U.S. and Canada, LXRandCo occupies a truly unique
position in the rapidly growing vintage luxury handbag and
accessories space. Alongside its own growth potential, it
provides a significant opportunity to expand our e-commerce
business, especially through the platforms of our outstanding group
of retail partners, as well as through opportunities with new
online retail partners."
Highlights for the First Quarter Ended March 31, 2019
(All comparable figures are to the first quarter ended
March 31, 2018 unless otherwise
stated1)
- The retail network at March 31,
2019 had 20% fewer stores and consisted of 85 stores
compared with 106 at March 31, 2018
(which excludes the 27 European stores closed in 2018 and
subsequently re-classified as discontinued operations). This
decrease of 21 stores, which was an integral part of the Company's
strategic plan, is primarily composed of the closure of four stores
and the transition of 12 stores to a wholesale arrangement during
the fourth quarter of 2018, as well as the closure of one store
with an existing retail partner in the first quarter of 2019.
- Despite 20% fewer stores, net revenue was unchanged at
$8.8 million;
- Gross profit increased to $2.2
million from $2.0
million;
- Gross profit margin increased to 25% of revenue from 23%;
- Selling, general and administrative expenses decreased 5% to
$5.0 million from $5.2 million, representing 57% of net revenue,
down from 59%. Excluding non-recurring legal and professional fees
related to the Strategic Review, selling, general and
administration expenses were $4.5
million, or 51% of net revenue;
- Due primarily to a non-cash, foreign exchange related loss
attributable to the European operations, net loss increased to
$3.9 million from $3.6 million;
- Adjusted EBITDA (a non-IFRS measure) was $(2.2) million compared with $(3.1) million;
- Adjusted Net Loss (a non-IFRS measure) was $2.6 million compared with $3.7 million;
- Cash used in operations improved to $1.0
million from $8.1 million;
and,
- On March 4, 2019, pursuant to the
strategic review process launched in August
2018, the Company completed a non-brokered private placement
of 12,500,000 Class B Shares in the capital of the Company at a
price of $0.40 per Share for gross
proceeds of $5,000,000. The net
proceeds will be used to fund the execution of the Company's
strategic plan. As previously reported, completion of the private
placement concluded the mandate of the Company's special committee
of independent directors to identify and evaluate a broad range of
strategic and financing alternatives for the Company and which
unanimously recommended the Private Placement; and,
- The Company's cash balance at March 31,
2019 was $5.1 million.
Discussion of First Quarter 2019 Results
Unless otherwise indicated, all amounts are expressed in
Canadian dollars. Certain metrics, including those expressed on an
adjusted basis, are non-IFRS measures. See "Non-IFRS Measures"
further below. For a reconciliation of non-IFRS measures to their
most directly comparable measure calculated in accordance with
IFRS, see "Select Consolidated Financial Information" further
below.
The following provides an overview of LXRandCo's financial
results for the three-month period ended March 31, 2019 compared with the three-month
period ended March 31, 2018.
Net Revenue
Net revenue remained stable at $8.8
million in the three-month period ended March 31, 2019. LXRandCo's retail network
consisted of 85 stores as at March 31,
2019 compared to 106 stores as at March 31, 2018 (excluding from the 2018
comparative are 27 European stores closed in 2018 and subsequently
classified as discontinued operations). The opening and closings
were within the context of the Company's strategic plan, including
its intention to prudently expand its retail network in the largest
market areas in the United States
and Canada and implement a more
profitable retail partner model across its network.
Gross Profit
Gross profit was $2.2 million
compared to $2.0 million, a
$0.2 million increase. Gross profit
margin was 24.9% compared to 22.9%.
SG&A Expenses
SG&A expenses were $5.0
million in the three-month period ended March 31, 2019, compared to $5.2 million in the three-month period ended
March 31, 2018. Excluding
non-recurring legal fees and professional fees related to the
strategic review, SG&A expenses were $4.5 million, or 51.4% of net revenue;
Net Loss
Net loss was $3.9 million in the
three-month period ended March 31,
2019, compared to a net loss of $3.6
million in the three-month period ended March 31, 2018.
Adjusted Net Loss
Adjusted Net Loss was $2.6 million
in the three-month period ended March 31,
2019, compared to adjusted net loss of $3.7 million in the three-month period ended
March 31, 2018.
Adjusted EBITDA
Adjusted EBITDA was $(2.2) million
in the three-month period ended March 31,
2019, compared to $(3.1)
million in the three-month period ended March 31, 2018. Adjusted EBITDA Margin was (25.3)
% of net revenue in the three-month period ended March 31, 2019, compared to (35.5) % of net
revenue in the three- month period ended March 31, 2018.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's unaudited interim condensed consolidated financial
statements for the three-month period ended March 31, 2019 and Management's Discussion and
Analysis ("MD&A") thereon are available on the Company's web
site at http://investors.lxrco.com/financials-reports-information
and under the Company's profile on SEDAR at www.sedar.com.
Selected Consolidated Financial Information
The following table summarizes LXRandCo's recent results for the
periods indicated:
Consolidated
statements of loss and comprehensive loss
|
(in Canadian dollars,
except per share amounts, unaudited)
|
|
|
|
|
|
For the 3-month
period ended March 31,
|
|
|
|
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Net
revenue
|
|
|
|
|
8,756,063
|
8,791,998
|
Cost of
sales
|
|
|
|
|
6,578,400
|
6,778,350
|
Gross
profit
|
|
|
|
|
2,177,663
|
2,013,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
|
|
4,974,901
|
5,222,967
|
Amortization and
depreciation expenses
|
|
|
|
|
218,444
|
246,970
|
Results from
operating activities
|
|
|
|
|
(3,015,682)
|
(3,456,289)
|
|
|
|
|
|
|
|
Other income and
expenses
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
|
113,341
|
277,415
|
Foreign exchange loss
(gain)
|
|
|
|
|
690,668
|
(176,919)
|
Loss before income
taxes
|
|
|
|
|
(3,819,691)
|
(3,556,785)
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
|
|
|
|
Current
|
|
|
|
|
39,865
|
—
|
Deferred
|
|
|
|
|
—
|
44,000
|
|
|
|
|
|
39,865
|
44,000
|
Net loss from
continuing operations
|
|
|
|
|
(3,859,556)
|
(3,600,785)
|
Net loss from
discontinued operations
|
|
|
|
|
(7,621)
|
(725,618)
|
Net loss for the
period
|
|
|
|
|
(3,867,177)
|
(4,326,403)
|
The following table provides a reconciliation of net loss to
EBITDA and Adjusted EBITDA in addition to Net Loss to Adjusted Net
Loss for the periods indicated:
|
|
|
For the 3-month
period ended March 31,
|
|
|
|
2019
|
2018
|
|
|
|
|
|
Reconciliation of
net loss to Adjusted EBITDA
|
|
|
|
|
Net Loss
|
|
|
(3,867,177)
|
(4,326,403)
|
Add: Amortization and
depreciation expense
|
|
|
218,444
|
246,970
|
Add: Finance
Costs
|
|
|
113,341
|
277,415
|
Add: Income Tax
Expense
|
|
|
39,865
|
44,000
|
EBITDA
|
|
|
(3,495,527)
|
(3,758,018)
|
|
|
|
|
|
Adjustments to
EBITDA:
|
|
|
|
|
Foreign exchange loss
(gain)
|
|
|
690,668
|
(176,919)
|
Stock-Based
Compensation Expense
|
|
|
79,373
|
88,507
|
Professional fees
related to strategic review and private placement
|
|
|
474,853
|
—
|
Store closing
costs
|
|
|
30,318
|
—
|
Loss from
discontinued operations
|
|
|
7,621
|
725,618
|
Adjusted
EBITDA
|
|
|
(2,212,694)
|
(3,120,812)
|
Adjusted EBITDA as
a percentage of net revenue
|
|
|
(25.3%)
|
(35.5%)
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Loss to Adjusted Net Loss
|
|
|
|
|
Net Loss
|
|
|
(3,867,177)
|
(4,326,403)
|
Adjustments to Net
Income:
|
|
|
|
|
Foreign exchange loss
(gain)
|
|
|
690,668
|
(176,919)
|
Stock-Based
Compensation Expense
|
|
|
79,373
|
88,507
|
Professional fees
related to strategic review and private placement
|
|
|
474,853
|
—
|
Store closing
cost
|
|
|
30,318
|
—
|
Loss from
discontinued operations
|
|
|
7,621
|
725,618
|
Adjusted Net
Loss
|
|
|
(2,584,344)
|
(3,689,197)
|
Adjusted Net Loss
as a percentage of net revenue
|
|
|
(29.5%)
|
(42.0%)
|
Notes
- As at September 30, 2018, the
Company ceased the operations of its European based subsidiaries,
LXR&Co Germany GmbH, LXR&Co UK Limited, and LXRandCo
Netherlands B.V. As the cash flows related to the operations of the
European based subsidiaries are clearly distinguished, both
operationally, geographically and for financial reporting purposes
from the rest of the entity, the financial performance within these
entities for the comparative periods has been reclassified and
presented separately as discontinued operations in the consolidated
statements of comprehensive loss and cash flows.
Conference Call
A conference call to discuss the Company's first quarter 2019
results is scheduled for tomorrow, Tuesday, May 14, 2019 at
8:30 a.m. (ET). Participants
can access the conference call by telephone by dialing 647-427-7450
or 1-888-231-8191, or via the Internet at
http://investors.lxrco.com/events-and-webcasts.
The conference call will be archived for replay both by
telephone and via the Internet beginning approximately one hour
following completion of the call. To access the archived conference
call by telephone, dial 1-855-859-2056 or 416-849-0833 and enter
the pass code 3287833 followed by the pound key. The
telephone replay will be available until Tuesday, May 21, 2019 at midnight. To access the
archived conference call via the Internet, go to
http://investors.lxrco.com/events-and-webcasts.
About LXRandCo
LXRandCo is a North American omni-channel retailer of branded
vintage luxury handbags and other personal luxury products.
LXRandCo sources and authenticates high-quality, pre-owned products
from iconic brands such as Hermès, Louis
Vuitton, Gucci and Chanel, among others, and sells them at
attractive prices through a retail network of stores located
primarily in major department stores in the United States and Canada, wholesale operations primarily in
the United States, and its own
e-commerce website, www.lxrco.com.
Caution Regarding Forward-Looking Statements
Certain statements in this press release are prospective in
nature and constitute forward-looking information and/or
forward-looking statements within the meaning of applicable
securities laws (collectively, "forward-looking
statements"). Forward-looking statements generally, but not
always, can be identified by the use of forward-looking terminology
such as "outlook", "objective", "may", "could", "would", "will",
"expect", "intend", "estimate", "forecasts", "project", "seek",
"anticipate", "believes", "should", "plans" or "continue", or
similar expressions suggesting future outcomes or events and the
negative of any of these terms. Forward-looking statements in this
news release include, but are not limited to, statements concerning
future objectives and strategies to achieve those objectives,
including, without limitation, store openings, as well as other
statements with respect to management's beliefs, plans, estimates
and intentions, and similar statements concerning anticipated
future events, results, outlook, circumstances, performance or
expectations that are not historical facts. Forward-looking
statements reflect management's current beliefs, expectations and
assumptions and are based on information currently available to
management, which includes assumptions about continued revenues
based on historical past performance, management's historical
experience, perception of trends and current business conditions,
expected future developments and other factors which management
considers appropriate. With respect to the forward-looking
statements included in this press release, management has made
certain assumptions with respect to, among other things, the
Company's ability to meet its future objectives and strategies, the
Company's ability to achieve its future projects and plans and that
such projects and plans will proceed as anticipated, the expected
growth of the Company's e-Commerce revenue, the expected number and
timing of store openings in North
America and internationally, entering into new and/or
expanded retail partnerships in North
America and internationally, the Company's ability to source
products, the Company's competitive position in the vintage luxury
industry, and beliefs and intentions regarding the ownership of
material trademarks and domain names used in connection with the
marketing, distribution and sale of the Company's products as well
as assumptions concerning general economic and market growth rates,
currency exchange and interest rates and competitive intensity.
Readers are cautioned not to place undue reliance on
forward-looking statements, as there can be no assurance that the
future circumstances, outcomes or results anticipated or implied by
such forward-looking statements will occur or that plans,
intentions or expectations upon which the forward-looking
statements are based will occur.
All forward-looking statements included in and incorporated into
this press release are qualified by these cautionary statements.
Unless otherwise indicated, the forward-looking statements
contained herein are made as of the date of this press release, and
except as required by applicable law, the Company does not
undertake any obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
Readers are cautioned that the actual results achieved will vary
from the information provided herein and that such variations may
be material. Consequently, there are no representations by LXRandCo
that actual results achieved will be the same in whole or in part
as those set out in the forward-looking statements.
SOURCE LXRandCo, Inc.