Headwinds continue to blow over tea retailer Davids Tea. The Montreal company’s sales fell by more than 20% during its fourth quarter.
“Rising inflation and interest rates have significantly reduced consumer demand,” CEO Sarah Segal said during an earnings conference call.
Chief operating officer Frank Zitella added that the company had experienced declining sales amid a “highly promotional” environment and experienced delays in fulfilling customer orders. “We believe these headwinds are temporary and will gradually dissipate over the coming months. »
The company announced in February “temporary layoffs” representing 15% of the workforce at its Montreal headquarters. Management had pointed to cost reductions of 6 million to 8 million.
Ms. Segal now estimates that her recently deployed “cost control plan” would save between $8 million and $10 million annually. Reducing spending “should help alleviate the current macroeconomic uncertainty, while we stimulate long-term demand,” she said.
In the fourth quarter ended Jan. 28, the company’s sales fell 21.4% to 31.4 million. The company recorded a net loss of 3.3 million, compared to a profit of 1.3 million in the same period last year.
Zitella, who also serves as chief financial officer, said Davids Tea had no debt and had a “solid” cash position of $22.4 million.
The company’s troubles led it to exit the US NASDAQ trading floor in March after its stock had fallen below US$1 for more than 30 days. The stock now trades on the TSX Venture Exchange.
Being listed on a Canadian stock exchange “makes a lot of sense,” Zitella believes. “Our brand is very well known in Canada. All of our stores are north of the border and the majority of our revenue is generated in Canada. »
“In addition, listing (on a Canadian stock exchange) allows us to reduce our regulatory and administrative costs while maintaining shareholder confidence,” he adds.
The stock was up 6 cents, or 9.52%, to 69 cents on the TSX Venture Exchange around noon.
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