– Second Quarter Highlighted by Continued
Improvements in Both Gross Margin and Cost Management –
MONTREAL, Aug. 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 continued improvement in
its financial results for the second quarter and six-month period
ended June 30, 2019.
"Our second quarter results were again demonstrative of our
focus on the quality of our sales with our smaller but much
healthier store network, highlighted by continued improvements in
both gross margin and cost management," said Steven Goldsmith, President and Chief Executive
Officer, LXRandCo. "Our continued progress on our gross margin
expansion initiatives resulted in significant improvements on both
a year-over-year and sequential basis to 33%. We also
continued to benefit from our cost management program, with
selling, general and administrative expenses down 38% from the same
period a year ago. Our success in each of these regards contributed
to significant improvements in each of our key profitability
measures. Additionally, while cash used in operations for the
quarter was higher year-over-year, our continuing focus on
operating the business for cash contribution resulted in a
significant improvement in cash used in operations in the first
half of this year to $3.3 million
from $8.7 million in the first half
of last year."
"With each quarter, we are seeing strong progress on our
strategic priorities of prudent revenue growth, margin expansion
and positive cash flow generation, with continued improvement
across our key financial metrics, clearly demonstrating the
long-term potential of our business to generate value for our
shareholders. We have a significantly strengthened foundation for
future growth, rooted in our stronger and more profitable network
of LXRandCo-branded stores, and exceptional, mutually beneficial
partner relationships that provide a long runway for expansion of
our store network, as well as opportunities to grow our
e-commerce business, leveraging their online strategies, as well as
through other online partner initiatives. The personal luxury
resale market continues to rapidly grow and LXRandCo, with
its differentiated omni-channel strategy, anchored by the only
national shop-in-shop network in the U.S. and Canada, is well positioned to continue to be a
leader in this market."
Highlights for the Second Quarter Ended June 30, 2019
(All comparable figures
are to the second quarter ended June 30,
2018, unless otherwise stated1)
- The retail network at June 30,
2019 had 22% fewer stores and consisted of 84 stores
compared to 107 (excluding 12 European stores closed in 2018 and
subsequently classified as discontinued operations). This decrease
of 23 stores is in line with the Company's strategic plan to
establish a presence in the 30 largest designated market areas
(DMAs) in Canada and the United States. The decrease is mainly the
result of the closure of four stores during the fourth quarter of
2018, as well as the transition of 12 retail stores to a wholesale
arrangement as part of the Company's retail partner model
optimization strategy;
- Despite the 22% decrease in the number of stores, net revenue
was just 8% lower at $8.6 million
compared $9.3 million, with average
store sales increasing by 13%;
- Gross profit increased 53% to $2.9
million from $1.9
million;
- Gross profit margin increased to 33% of revenue from 20%;
- Selling, general and administrative expenses decreased 38% to
$4.0 million, or 47% of net revenue,
from $6.5 million, or 70% of net
revenue;
- Net loss improved to $2.2 million
from $9.0 million;
- Adjusted EBITDA (a non-IFRS measure) improved to $(1.2) million from $(4.8)
million;
- Adjusted net loss (a non-IFRS measure) improved to $1.6 from $5.7
million; and,
- Cash used in operations was $2.3
million compared with $0.7
million.
Highlights for the Six-Month Period Ended June 30, 2019
(All comparable figures
are to the six-month period ended June 30,
2018, unless otherwise stated1)
- Despite the 22% decrease in the number of retail stores at
June 30, 2019 (as discussed above for
three-month period), net revenue was only 4% lower at $17.3 million compared with $18.1 million, with average sales per store
increasing by 17%;
- Gross profit increased 28% to $5.0
million from $3.9 million.
Excluding the impact of the two sample sales to liquidate
slow-moving inventory in the first quarter of 2019, normalized
gross profit would be $5.3
million;
- Gross profit margin increased to 29% compared to 21%. Excluding
the impact of the two sample sales to liquidate slow-moving
inventory in the first quarter of 2019, normalized gross margin is
33%;
- Selling, general and administrative expenses decreased 24% to
$9.0 million, or 52% of net sales,
from $11.8 million, or 65% of net
sales;
- Net loss improved to $6.0 million
from $12.6 million;
- Adjusted EBITDA (a non-IFRS measure) improved to $(3.4) million from $(7.9)
million;
- Adjusted Net Loss (a non-IFRS measure) improved to $4.2 million from $9.3
million;
- Cash used in operations improved to $3.3
million from $8.7
million.
Discussion of Second Quarter and Six-Month Period Ended
June 30, 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 June 30, 2019, compared with the three-month
period ended June 30, 2018.
Net Revenue
Despite 22% fewer stores, net revenue decreased only 8% to
$8.6 million in the three-month
period ended June 30, 2019, from
$9.3 million in the three-month
period ended June 30, 2018.
LXRandCo's retail network consisted of 84 stores as at June 30, 2019, compared to 107 stores as at
June 30, 2018 (excluding from the
2018 comparative are 12 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 increased 53% to $2.9
million from $1.9 million.
Gross profit margin was 33% compared to 20%. The three-month period
ended June 30, 2019, reflects an
improvement in gross margin from the previous year as a result of
reduced licensing fees with two major retail partners, a decrease
in inventory obsolescence provisions due to the liquidation of
slow-moving inventory during sample sales that took place in the
first quarter of 2019, in addition to a significant reduction in
inventory shrinkage and freight expense
SG&A Expenses
SG&A expenses were $4.0 million
in the three-month period ended June 30,
2019, compared to $6.5 million
in the three-month period ended June 30,
2018. The improvement in SG&A expenses is mainly the
result of operating fewer stores throughout the period resulting in
decreased store and corporate headcount in addition to the store
closure costs that negatively impacted 2018 results.
The number of employees decreased to 161 in the three-month
period ended June 30, 2019, compared
to 399 as at June 30, 2018. The
significant decrease is mainly the result of the discontinued
operations in Europe and the
smaller retail network.
Net Loss
Net loss improved to $2.2 million in
the three-month period ended June 30,
2019, from a net loss of $9.0
million in the three-month period ended June 30, 2018.
Adjusted Net Loss
Adjusted net loss improved to
$1.6 million in the three-month
period ended June 30, 2019, from an
adjusted net loss of $5.7 million in
the three-month period ended June 30,
2018.
Adjusted EBITDA
Adjusted EBITDA improved to $(1.2)
million in the three-month period ended June 30, 2019 from $(4.8)
million in the three-month period ended June 30, 2018.
The following provides an overview of LXRandCo's financial
results for the six-month period ended June
30, 2019, compared with the six-month period ended
June 30, 2018.
Net Revenue
Despite 22% fewer stores, net revenue decreased only 4% to
$17.3 million in the six-month period
ended June 30, 2019, from
$18.1 million in the six-month period
ended June 30, 2018. LXRandCo's
retail network consisted of 84 stores as at June 30, 2019, compared to 107 stores as at
June 30, 2018 (excluding from the
2018 comparative are 12 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 increased to $5.0
million from $3.9 million.
Gross profit margin was 29% compared to 21%. The six-month period
ended June 30, 2019, reflects an
improvement in gross margin from the previous year as a result of
reduced licensing fees with two major retail partners, a decrease
in inventory obsolescence provisions due to the liquidation of
slow-moving inventory during sample sales that took place in the
first quarter of 2019, in addition to a significant reduction in
inventory shrinkage and freight expense. Excluding the impact of
the two sample sales to liquidate slow-moving inventory in the
first quarter of 2019, normalized gross profit and gross margin
would be $5.3 million and 33%
respectively.
SG&A Expenses
SG&A expenses were $9.0
million in the six-month period ended June 30, 2019, compared to $11.8 million in the six-month period ended
June 30, 2018. The improvement in
SG&A expenses is mainly the result of operating fewer stores
throughout the period resulting in decreased store and corporate
headcount in addition to the store closure costs that negatively
impacted 2018 results.
The number of employees decreased to 161 in the six-month period
ended June 30, 2019, compared to 399
as at June 30, 2018. The significant
decrease is mainly the result of the discontinued operations in
Europe and the smaller retail
network.
Net Loss
Net loss improved to $6.0 million
in the six-month period ended June 30,
2019, from a net loss of $12.6
million in the six-month period ended June 30, 2018.
Adjusted Net Loss
Adjusted net loss improved to $4.2
million in the six-month period ended June 30, 2019, from an adjusted net loss of
$9.3 million in the six-month
period ended June 30, 2018.
Adjusted EBITDA
Adjusted EBITDA improved to $(3.4)
million in the six-month period ended June 30, 2019, from $(7.9)
million in the six-month period ended June 30, 2018.
Consolidated Financial Statements and Management's Discussion
and Analysis
The Company's unaudited interim condensed consolidated financial
statements for the three-month and six-month periods ended
June 30, 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
LXRandCo,
Inc.
|
|
|
|
|
|
|
Condensed
consolidated statements of loss
|
|
|
|
|
|
|
(in Canadian dollars,
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 3-month
period ended June 30,
|
|
For the 6-month
period ended June 30,
|
|
|
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
|
|
|
Net
revenue
|
|
|
|
8,558,435
|
9,286,767
|
|
17,314,498
|
18,078,765
|
Cost of
sales
|
|
|
|
5,697,725
|
7,432,632
|
|
12,276,123
|
14,210,982
|
Gross
profit
|
|
|
|
2,860,710
|
1,854,135
|
|
5,038,375
|
3,867,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
|
|
|
4,020,531
|
6,538,602
|
|
8,995,432
|
11,761,569
|
Amortization and
depreciation expenses
|
|
|
|
289,261
|
361,957
|
|
507,704
|
608,927
|
Impairment of
goodwill
|
|
|
|
—
|
3,683,987
|
|
—
|
3,683,987
|
Results from
operating activities
|
|
|
|
(1,449,082)
|
(8,730,411)
|
|
(4,464,761)
|
(12,186,700)
|
|
|
|
|
|
|
|
|
|
Other income and
expenses
|
|
|
|
|
|
|
|
|
Finance
costs
|
|
|
|
112,939
|
496,959
|
|
226,280
|
774,374
|
Foreign exchange loss
(gain)
|
|
|
|
455,982
|
(224,860)
|
|
1,146,650
|
(401,779)
|
Loss on disposition
of assets
|
|
|
|
132,777
|
—
|
|
132,777
|
—
|
Loss on disposition
of subsidiaries
|
|
|
|
19,542
|
—
|
|
19,542
|
—
|
Loss before income
taxes
|
|
|
|
(2,170,322)
|
(9,002,510)
|
|
(5,990,010)
|
(12,559,295)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
8,338
|
38,661
|
|
48,203
|
38,661
|
Deferred
|
|
|
|
—
|
—
|
|
—
|
44,000
|
|
|
|
|
8,338
|
38,661
|
|
48,203
|
82,661
|
Net loss from
continuing operations
|
|
|
|
(2,178,660)
|
(9,041,171)
|
|
(6,038,213)
|
(12,641,956)
|
Net loss from
discontinued operations
|
|
|
|
(30,396)
|
(1,654,379)
|
|
(38,017)
|
(2,379,997)
|
Net loss for the
period
|
|
|
|
(2,209,056)
|
(10,695,550)
|
|
(6,076,230)
|
(15,021,953)
|
|
|
|
|
|
|
|
|
|
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
three-month period ended June 30,
|
|
For the six-month
period ended June 30,
|
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
|
|
|
|
Reconciliation of
net loss to Adjusted EBITDA
|
|
|
|
|
|
|
Net Loss
|
|
(2,209,056)
|
(10,695,550)
|
|
(6,076,230)
|
(15,021,953)
|
Add: Amortization and
depreciation expenses
|
|
289,261
|
361,957
|
|
507,704
|
608,927
|
Add: Finance
Costs
|
|
112,939
|
496,959
|
|
226,280
|
774,374
|
Add: Income Tax
Expense
|
|
8,338
|
38,661
|
|
48,203
|
82,661
|
EBITDA
|
|
(1,798,518)
|
(9,797,973)
|
|
(5,294,043)
|
(13,555,991)
|
|
|
|
|
|
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
|
Foreign exchange loss
(gain)
|
|
455,982
|
(224,860)
|
|
1,146,650
|
(401,779)
|
Loss on disposition
of assets
|
|
132,777
|
—
|
|
132,777
|
—
|
Impairment of
goodwill
|
|
—
|
3,683,987
|
|
—
|
3,683,987
|
Stock-based
compensation expense
|
|
(69,953)
|
(74,008)
|
|
9,420
|
14,498
|
Loss on disposition
of subsidiaries
|
|
19,542
|
—
|
|
19,542
|
—
|
Professional fees
related to strategic review and private placement
|
|
—
|
—
|
|
474,853
|
—
|
Store closing
costs
|
|
43,603
|
—
|
|
73,921
|
—
|
Loss from
discontinued operations
|
|
30,396
|
1,654,379
|
|
38,017
|
2,379,997
|
Adjusted
EBITDA
|
|
(1,186,171)
|
(4,758,475)
|
|
(3,398,863)
|
(7,879,288)
|
Adjusted EBITDA as
a percentage of net revenue
|
|
(13.9%)
|
(51.2%)
|
|
(19.6%)
|
(43.6%)
|
|
|
|
|
|
|
|
Reconciliation of
Net Loss to Adjusted Net Loss
|
|
|
|
|
|
|
Net Loss
|
|
(2,209,056)
|
(10,695,550)
|
|
(6,076,230)
|
(15,021,953)
|
Adjustments to Net
Income:
|
|
|
|
|
|
|
Foreign exchange loss
(gain)
|
|
455,982
|
(224,860)
|
|
1,146,650
|
(401,779)
|
Impairment of
goodwill
|
|
—
|
3,683,987
|
|
—
|
3,683,987
|
Loss on disposition
of assets
|
|
132,777
|
—
|
|
132,777
|
—
|
Stock-based
compensation expense
|
|
(69,953)
|
(74,008)
|
|
9,420
|
14,498
|
Loss on disposition
of subsidiaries
|
|
19,542
|
—
|
|
19,542
|
—
|
Professional fees
related to strategic review and private placement
|
|
—
|
—
|
|
474,853
|
—
|
Store closing
cost
|
|
43,603
|
—
|
|
73,921
|
—
|
Loss from
discontinued operations
|
|
30,396
|
1,654,379
|
|
38,017
|
2,379,997
|
Adjusted Net
Loss
|
|
(1,596,708)
|
(5,656,052)
|
|
(4,181,050)
|
(9,345,250)
|
Adjusted Net Loss
as a percentage of net revenue
|
|
(18.7%)
|
(60.9%)
|
|
(24.1%)
|
(51.7%)
|
|
|
|
|
|
|
|
Notes
|
1. 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 second quarter 2019
results is scheduled for today, Tuesday,
August 13, 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 7754105 followed by the pound key. The
telephone replay will be available until Tuesday, August 20, 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, as well as the e-commerce
platforms of its retail partners.
Caution Regarding Forward-Looking Statements
Certain statements in this press release are prospective in
nature and constitute forward-looking information èor
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.