TORONTO, March 6,
2024 /CNW/ - Sleep Country Canada Holdings Inc.
("Sleep Country" or the "Company") (TSX: ZZZ) released its
financial results today for its fourth quarter and year
ended December 31, 2023.
All financial results are reported in Canadian dollars unless
otherwise stated.
Fourth Quarter Financial Highlights
- Revenues increased by $12.6
million or 5.2% to $255.6
million in Q4 2023 from $243.0
million in Q4 2022;
- Same Store Sales ("SSS")1 decreased by 3.2%
in Q4 2023 from Q4 2022;
- Revenues attributed to eCommerce increased to 26.4% in Q4 2023
from 21.1% in Q4 2022;
- Gross profit increased by $5.2
million or 5.7% to $96.3
million in Q4 2023 from $91.1
million in Q4 2022;
- Gross profit margin increased to 37.7% in Q4 2023 from 37.5% in
Q4 2022;
- Operating EBITDA1 decreased by $1.6 million or 3.1% to $51.4 million in Q4 2023 from $53.0 million in Q4 2022;
- Operating EBITDA1 margin decreased to 20.1% in Q4
2023 from 21.8% in Q4 2022;
- Net income attributable to the Company decreased by
$18.0 million or 44.5% to
$22.5 million in Q4 2023 from
$40.5 million in Q4 2022;
- Adjusted net income attributable to the Company decreased by
$4.6 million or 19.1% to $19.3 million in Q4 2023 from $23.9 million in Q4 2022;
- Diluted earnings per share ("EPS") decreased by
$0.48 or 42.5% to $0.65 in Q4 2023 from $1.13 in Q4 2022;
- Diluted adjusted EPS1 decreased by $0.11 or 16.4% to $0.56 in Q4 2023 from $0.67 in Q4 2022;
- The Company purchased for cancellation of 1,132,199 common
shares (Q4 2022 – 976,532 common shares) in Q4 2023 for total
consideration of $26.2 million (Q4
2022 – $22.0 million) against the
Company's normal course issuer bid ("NCIB"); and
- Subsequent to quarter-end, on February
5, 2024, the Board declared a dividend of $0.237 per common share that was paid on
February 29, 2024 to holders of the
common shares of record as at the close of business on February 21, 2024.
Annual Financial Highlights
- Revenues increased by $6.3
million or 0.7% to $935.0
million in 2023 from $928.7
million in 2022;
- Revenues attributed to eCommerce increased to 22.7% in 2023
from 19.6% in 2022;
- Gross profit margin increased to 37.2% in 2023 from 36.7% in
2022;
- Operating EBITDA1 margin decreased to 21.0% in 2023
from 23.5% in 2022;
- Net income attributable to the Company decreased by
$39.3 million or 35.6% to
$71.2 million in 2023 from
$110.5 million in 2022;
- Adjusted net income attributable to the Company decreased by
$28.8 million or 27.9% to
$74.1 million in 2023 from
$102.9 million in 2022;
- Diluted EPS decreased by $0.97 or
32.2% to $2.04 in 2023 from
$3.01 in 2022;
- Diluted adjusted EPS1 decreased by $0.69 or 24.6% to $2.12 in 2023 from $2.81 in 2022; and
- The Company purchased for cancellation of 1,596,910 common
shares (2022 – 2,339,409 common shares) in 2023 for total
consideration of $37.3 million (2022
- $57.7 million) against its
NCIB.
Fourth Quarter Business Highlights
- Opened one new Sleep Country store in Calgary, Alberta and one new Dormez-vous store
in Victoriaville, Quebec;
- Opened first-ever brick-and-mortar store for Endy in Sherway
Gardens, Toronto, Ontario;
- Opened first store-within-a-store for Sleep Country and Silk
& Snow in Ottawa,
Ontario;
- Launched first ultra-premium retail concept store, the
rest, in Yorkdale Shopping Centre, Toronto, Ontario; and
- Subsequent to quarter-end, opened two new Sleep Country stores
in Oshawa and Etobicoke, Ontario, and one new Dormez-vous
store in Quebec City, Quebec.
President & CEO Commentary
"I am very proud to report a solid finish to our fiscal year
setting a new watermark record in Revenues in our nearly
30-year-old company. Our annual Revenues grew by 0.7% while our Q4
2023 Revenues grew by 5.2% from Q4 2022. Despite ongoing industry
challenges that have seen double-digit unit declines in mattress
purchases across North America, we
delivered strong results. As we execute our multi-year plan of
continuing to grow our house of brands and focus on driving
efficiencies through our resilient omnichannel business model, we
remain razor-focused on innovative ways to grow our market share"
said Stewart Schaefer, President and
CEO of Sleep Country.
"Our omnichannel approach continues to resonate well with our
customers, as successfully demonstrated with the opening of three
new brick-and-mortar concepts, Endy, Silk & Snow, and the
rest, our first luxury retail brand. With all three brands
adding and expanding our merchandising hierarchy, while also
broadening our customer segmentation, it further reinforces our
position as Canada's leading and
most trusted specialty sleep retailer," said Schaefer.
"As we step into fiscal 2024, we remain focused on three key
priorities: growth through innovation, our customer experience and
our operational excellence. We will continue to invest in expanding
our brands with cutting-edge sleep technologies and products, we
will further develop personalized and exceptional customer
experiences, and we will continue to streamline our operations to
maximize synergies across the Company while preserving the unique
identities of each of our brands. I am confident that by staying
true to these priorities, we will continue to create value for all
stakeholders and help Canadians achieve their best sleep every
night," concluded Schaefer.
Summary of Fourth Quarter Financial Results
|
(C$ thousands unless
otherwise stated; other
than store and share data)
|
Q4 2023
|
|
|
Q4 2022
|
|
|
Change
|
2023
|
|
|
2022
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
255,602
|
|
|
$
|
243,028
|
|
|
5.2 %
|
$
|
935,044
|
|
|
$
|
928,657
|
|
|
0.7 %
|
|
SSS(1)
|
|
(3.2 %)
|
|
|
|
(11.5 %)
|
|
|
|
|
(6.4 %)
|
|
|
|
(1.8 %)
|
|
|
|
|
Gross profit margin
(%)
|
|
37.7 %
|
|
|
|
37.5 %
|
|
|
|
|
37.2 %
|
|
|
|
36.7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores
opened(2)
|
|
5
|
|
|
|
2
|
|
|
|
|
14
|
|
|
|
5
|
|
|
|
|
Stores
closed
|
|
-
|
|
|
|
-
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
|
Stores
renovated
|
|
2
|
|
|
|
-
|
|
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA(1)
|
$
|
51,356
|
|
|
$
|
53,005
|
|
|
(3.1 %)
|
$
|
196,758
|
|
|
$
|
218,559
|
|
|
(10.0 %)
|
|
Operating EBITDA margin
(%)(1)
|
|
20.1 %
|
|
|
|
21.8 %
|
|
|
|
|
21.0 %
|
|
|
|
23.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to the Company
|
$
|
22,471
|
|
|
$
|
40,469
|
|
|
(44.5 %)
|
$
|
71,192
|
|
|
$
|
110,471
|
|
|
(35.6 %)
|
|
Adjusted net
income
attributable to the Company(1)
|
$
|
19,308
|
|
|
$
|
23,874
|
|
|
(19.1 %)
|
$
|
74,143
|
|
|
$
|
102,868
|
|
|
(27.9 %)
|
|
Basic EPS
|
$
|
0.66
|
|
|
$
|
1.14
|
|
|
(42.1 %)
|
$
|
2.06
|
|
|
$
|
3.04
|
|
|
(32.2 %)
|
|
Diluted EPS
|
$
|
0.65
|
|
|
$
|
1.13
|
|
|
(42.5 %)
|
$
|
2.04
|
|
|
$
|
3.01
|
|
|
(32.2 %)
|
|
Basic adjusted
EPS(1)
|
$
|
0.57
|
|
|
$
|
0.67
|
|
|
(14.9 %)
|
$
|
2.14
|
|
|
$
|
2.83
|
|
|
(24.4 %)
|
|
Diluted adjusted
EPS(1)
|
$
|
0.56
|
|
|
$
|
0.67
|
|
|
(16.4 %)
|
$
|
2.12
|
|
|
$
|
2.81
|
|
|
(24.6 %)
|
Revenues increased by $12.6
million or 5.2% from $243.0
million in Q4 2022 to $255.6
million in Q4 2023 mainly due to incremental revenue earned
from new stores, wrap stores opened in 2022 and the acquisitions of
Silk & Snow and Casper Canada completed in January 2023 and April
2023 respectively. This increase was partially offset by a
decrease in SSS1 by 3.2%.
Gross profit margin increased by 20 basis points from 37.5% in
Q4 2022 to 37.7% in Q4 2023 due to an increase in average unit
selling prices, coupled with lower product and transportation
costs, leveraging of occupancy costs and a decrease in supplies
expense. This increase was partially offset by higher delivery
costs mainly driven by growth in eCommerce revenues, and higher
inventory allowances and sales and distribution compensation.
Total G&A expenses increased by $6.8
million or 11.7% from $57.5
million in Q4 2022 to $64.3
million in Q4 2023 mainly due to an increase in media and
advertising costs, credit card and finance charges,
telecommunication and information technology costs, compensation
and other expenses partially offset by a decrease in bonus
expenses.
Operating EBITDA1 was $51.4 million for Q4 2023, or 20.1% of Revenues,
compared to $53.0 million for Q4
2022, or 21.8% of Revenues, representing a decrease of $1.6 million or 3.1% mainly due to an increase in
G&A expenses, which were also impacted by incremental spend due
to the acquisitions of Silk & Snow and Casper Canada, partially
offset by an improved gross profit margin.
Finance related expenses (income) increased by $17.9 million from income of $15.5 million in Q4 2022 to expenses of
$2.4 million in Q4 2023 due to higher
interest expenses on the Company's lease obligations and its senior
secured credit facility, impacted by the higher interest rates and
debt levels, an unrealized loss on the Company's interest rate swap
and lower realized gains on the Company's share repurchases under
the ASPP in Q4 2023. Additionally, this change was positively
impacted by a $4.7 million reduction
to the Hush redemption liabilities in Q4 2023, offset by the
$20.5 million reduction to the
redemption liabilities in Q4 2022. These adjustments to the
redemption liabilities were to reflect the estimated shift in
achievement of the initial EBITDA targets to beyond the redemption
period.
Net income before income taxes in Q4 2023 decreased by
$19.3 million from $49.0 million in Q4 2022 to $29.7 million in Q4 2023. The Company's effective
income tax rate increased by 630 basis points from 16.8% in Q4 2022
to 23.1% in Q4 2023. The change in the effective tax rate is mainly
driven by the $20.5 million
adjustment in Q4 2022 due to the reduction of the Hush redemption
liabilities which was partially offset by a $4.7 million adjustment of the Hush redemption
liabilities in Q4 2023 that are not deductible for tax purposes.
The decrease in net income before tax partially offset by the
increase in effective tax rate resulted in a decrease to income
taxes of $1.3 million in Q4 2023
versus Q4 2022.
Net income attributable to the Company for Q4 2023 decreased by
$18.0 million from $40.5 million ($1.14 per share) in Q4 2022 to $22.5 million ($0.66 per share) in Q4 2023.
Adjusted net income attributable to the
Company1 for Q4 2023 decreased by $4.6 million from $23.9
million ($0.67 per share) in
Q4 2022 to $19.3 million
($0.57 per share) in Q4 2023.
Summary of Annual Financial Results
Revenues increased by $6.3 million
or 0.7% from $928.7 million in 2022
to $935.0 million in 2023. This
increase was mainly due to incremental revenue earned from new
stores, wrap stores opened in 2022 and the acquisitions of Silk
& Snow and Casper Canada completed in January 2023 and April
2023 respectively. This increase was partially offset by a
decrease in SSS1 by 6.4%.
Gross profit margin increased by 50 basis points from 36.7% in
2022 to 37.2% in 2023 due to an increase in average unit selling
prices and lower product costs, partially offset by higher delivery
costs mainly driven by growth in eCommerce Revenues, and higher
inventory allowances, sales and distribution compensation and
deleveraging of occupancy costs, which were also impacted by the
Company's 14 new stores of which six stores were part of the Casper
Canada acquisition.
Total G&A expenses increased by $31.7
million or 16.2% from $196.2
million in 2022 to $227.9
million in 2023 mainly due to an increase in media and
advertising, compensation, credit card and financing,
telecommunication and information technology and other expenses as
well as occupancy and depreciation expenses impacted by the
acquisitions of Silk & Snow and Casper Canada.
Operating EBITDA1 was $196.8 million for 2023, or 21.0% of Revenues,
compared to $218.6 million for 2022,
or 23.5% of Revenues, representing a decrease of $21.8 million or 10.0% mainly due to an increase
in G&A expenses, which were also impacted by the acquisitions
of Silk & Snow and Casper Canada, partially offset by an
improved gross profit margin.
Finance related expenses (income) increased by $24.4 million from income of $0.9 million in 2022 to expenses of $23.5 million in 2023 due to higher interest
expenses on the Company's lease obligations and its senior secured
credit facility, impacted by the higher interest rates and debt
levels, in addition to an unrealized loss on the Company's interest
rate swap in 2023. Additionally, this change was positively
impacted by a $4.7 million reduction
to the Hush redemption liabilities in 2023, offset by the
$20.5 million reduction to the
redemption liabilities in 2022. These adjustments to the redemption
liabilities were to reflect the estimated shift in achievement of
the initial EBITDA targets to beyond the redemption period.
Net income before income taxes in 2023 decreased by $49.3 million from $146.0
million in 2022 to $96.7
million in 2023. The Company's effective income tax rate
increased by 180 basis points from 24.2% in 2022 to 26.0% in 2023.
The change in the effective tax rate is mainly driven by the
$20.5 million adjustment in Q4 2022
due to the reduction of the Hush redemption liabilities which was
partially offset by a $4.7 million
adjustment of the Hush redemption liabilities in Q4 2023 that are
not deductible for tax purposes. The decrease in net income before
tax partially offset by the increase in effective tax rate resulted
in a decrease to income taxes of $10.2
million in 2023 versus 2022.
Net Income attributable to the Company for 2023 decreased by
$39.3 million from $110.5 million ($3.04 per share) in 2022 to $71.2 million ($2.06 per share) in 2023.
Adjusted net income attributable to the
Company1 for 2023 decreased by $28.8 million from $102.9
million ($2.83 per share) in
2022 to $74.1 million ($2.14 per share) in 2023.
Notes:
1 See the "Non-IFRS and Other Measures" section
of this news release.
2 Stores opened includes the six Casper stores
acquired through the Casper Canada acquisition in April 2023.
Conference Call
Sleep Country's President and CEO, Stewart Schaefer, and
CFO, Craig De Pratto, will host a conference call for analysts
and investors on March 7, 2024 at 8:00 a.m. ET. The
dial-in numbers for the conference call are 416-764-8659 or
888-664-6392. This conference call will be recorded and available
for replay until March 14, 2024, 23:59 ET. To listen to
the replay, please dial 416-764-8677 or 888-390-0541 and use
passcode 713010#.
About Sleep Country
Sleep Country is Canada's
leading specialty sleep retailer with a purpose to transform lives
by awakening Canadians to the power of sleep. Sleep Country
operates under the retail banners Sleep Country, Dormez-vous, Endy,
Silk & Snow, Hush, and most recently acquired, Casper
Canada. The Company has omnichannel and eCommerce operations,
including 304 corporate-owned stores and 19 warehouses across
Canada. Recognized as one of
Canada's Most Admired Corporate
Cultures by Waterstone Human Capital, Sleep Country is committed to
building a company culture of inclusion and diversity where
differences are embraced and valued. The Company actively invests
in its sleep ecosystem, innovative products, world-class customer
experience, communities and its people. For more information about
Sleep Country, please visit ir.sleepcountry.ca.
Non-IFRS and Other Measures
This news release refers to certain measures that are not
recognized under IFRS® Accounting Standards
and do not have a standardized meaning prescribed by IFRS
Accounting Standards, including Same Store Sales or SSS, EBITDA,
Operating EBITDA, Operating EBITDA margin, Adjusted net income
attributable to the Company, Basic adjusted EPS and Diluted
adjusted EPS. For more information on these Non-IFRS and other
measures refer to "Non-IFRS and Other Measures" in the Company's
MD&A for Q4 2023, which is available on SEDAR+
at sedarplus.ca.
Calculation of Non-IFRS and Other Measures
|
|
|
|
Q4
|
|
|
|
Annual
|
|
(C$ thousands unless
otherwise stated, except EPS)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
Reconciliation of
net income attributable to the Company
to EBITDA and Operating EBITDA:
|
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
22,471
|
$
|
40,469
|
$
|
71,192
|
$
|
110,471
|
|
Add impact of the
following:
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
354
|
|
314
|
|
343
|
|
225
|
|
Other expenses (income)
|
|
(127)
|
|
65
|
|
(550)
|
|
(292)
|
|
Finance related expenses (income)
|
|
2,416
|
|
(15,533)
|
|
23,471
|
|
(889)
|
|
Income taxes
|
|
6,860
|
|
8,220
|
|
25,135
|
|
35,346
|
|
Depreciation and amortization
|
|
18,244
|
|
17,176
|
|
69,615
|
|
65,633
|
|
EBITDA
|
|
50,218
|
|
50,711
|
|
189,206
|
|
210,494
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
|
-
|
|
449
|
|
1,255
|
|
449
|
|
ERP implementation costs
|
|
-
|
|
603
|
|
-
|
|
2,637
|
|
Share-based compensation
|
|
1,138
|
|
1,242
|
|
6,297
|
|
4,979
|
|
Total
adjustments
|
$
|
1,138
|
$
|
2,294
|
$
|
7,552
|
$
|
8,065
|
|
|
|
|
|
|
|
|
|
|
Operating
EBITDA
|
$
|
51,356
|
$
|
53,005
|
$
|
196,758
|
$
|
218,559
|
|
Operating EBITDA
margin (%)
|
|
20.1 %
|
|
21.8 %
|
|
21.0 %
|
|
23.5 %
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
net income attributable to the Company
to adjusted net income attributable to the
Company:
|
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company
|
$
|
22,471
|
$
|
40,469
|
$
|
71,192
|
$
|
110,471
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
|
-
|
|
449
|
|
1,255
|
|
449
|
|
ERP implementation costs
|
|
-
|
|
603
|
|
-
|
|
2,637
|
|
Share-based compensation
|
|
1,138
|
|
1,242
|
|
6,297
|
|
4,979
|
|
Accretion expense
|
|
(4,070)
|
|
(18,370)
|
|
(2,880)
|
|
(13,850)
|
|
Tax impact of all adjustments
|
|
(231)
|
|
(519)
|
$
|
(1,721)
|
$
|
(1,818)
|
|
Total
adjustments
|
$
|
(3,163)
|
$
|
(16,595)
|
$
|
2,951
|
$
|
(7,603)
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
attributable to the Company
|
$
|
19,308
|
$
|
23,874
|
$
|
74,143
|
$
|
102,868
|
Forward-Looking Information
Certain information in this news release contains
forward-looking information and forward-looking statements, which
reflect the current view of management with respect to the
Company's objectives, plans, goals, strategies, outlook, results of
operations, financial and operating performance, prospects and
opportunities. Wherever used, the words "may", "will",
"anticipate", "intend", "estimate", "expect", "plan", "believe" and
similar expressions, identify forward-looking information and
forward-looking statements. Forward-looking information and
forward-looking statements should not be read as guarantees of
future events, performance or results, and will not necessarily be
accurate indications of whether, or the times at which, such
events, performance or results will be achieved. All of the
information in this news release, containing forward-looking
information or forward-looking statements, is qualified by these
cautionary statements.
Forward-looking information and forward-looking statements are
based on information available to management at the time they are
made, underlying estimates, opinions and assumptions made by
management and management's current good faith belief with respect
to future strategies, prospects, events, performance and results,
and are subject to inherent risks and uncertainties surrounding
future expectations generally. Such risks and uncertainties
include, but are not limited to, those described in the Company's
MD&A for Q4 2023 under the sections "Risk Factors" and those
described in the Company's 2023 annual information form (the "AIF")
filed on March 6, 2024, both of which can be accessed under
the Company's profile on SEDAR+ at sedarplus.ca. Additional
risks and uncertainties not presently known to the Company or that
the Company currently believes to be less significant may also
adversely affect the Company.
The Company cautions that the list of risk factors and
uncertainties described in the MD&A for Q4 2024 and the AIF are
not exhaustive and that should certain risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual strategies, prospects, events, performance and results may
vary significantly from those expected. There can be no assurance
that the actual strategies, prospects, results, performance, events
or activities anticipated by the Company will be realized or even
if substantially realized, that they will have the expected
consequences to, or effects on, the Company. Readers are urged to
consider the risks, uncertainties, and assumptions carefully in
evaluating the forward-looking information and forward-looking
statements and are cautioned not to place undue reliance on such
information and statements. The Company does not undertake to
update any such forward-looking information or forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by applicable laws.
SOURCE Sleep Country Canada Holdings Inc. Investor Relations