David's Tea swings to $93.2-million Q1 loss on currency, IPO costs

MONTREAL – David’s Tea swung to a $93.2-million net loss in the first quarter as it absorbed the costs of becoming a publicly traded company and felt the effects of a weaker Canadian dollar.

The Montreal-based company reported after markets closed Tuesday that its loss was equivalent to $7.73 per diluted share for the period ended May 2. That compared with a profit of $1.4-million or seven cents per share in the comparable prior-year period.

Excluding one-time costs, including those related to its initial public offering, David’s Tea earned $1.1 million or four cents per share, down from $1.4 million or six cents per share in the first quarter of 2014.

President and CEO Sylvain Toutant said he was pleased with the results even though they were negatively affected by the weaker Canadian dollar and higher supply chain costs.

“It’s an exciting time at David’s Tea as we continue to build a brand, grow our store and e-commerce footprint, drive profitability and realize the significant potential we believe exists for this business,” he said during the company’s first ever conference call.

Sales grew 29 per cent to $35.8 million as comparable sales for stores open at least a year grew 6.3 per cent.

The company opened seven new stores in the quarter and 35 in the past year, raising its North American total to 161, including 136 in Canada.

Toutant said the company is differentiating itself in the growing specialty tea market and has a potential for 550 stores in North America.

On the Nasdaq, David’s Tea (Nasdaq:DTEA) 23.16 million shares closed up seven per cent at US$29.16 on Tuesday, more than a third above the IPO price.

David’s Tea realized $68.5 million in net proceeds from the IPO, which was used in part to repay debt.

The company said it expects to post an adjusted loss of $1.9 million to $2.2 million in the second quarter on $30 million to $31 million of sales.

For the full year, sales are expected to range between $170 million and $174 million based on opening 40 net new stores, including 25 to 30 in Canada. Adjusted net income is forecast at between $8.8 million and $9.9 million, or 33 cents to 38 cents per share.

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Note to readers: This is a corrected story: A previous version gave an incorrect figure for the number of share sold in its IPO