Document and Entity DEI Informa
Document and Entity DEI Information - shares | 6 Months Ended | |
Aug. 03, 2019 | Sep. 17, 2019 | |
Document and Entity Information | ||
Entity Registrant Name | DAVIDsTEA Inc. | |
Entity Central Index Key | 0001627606 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 3, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-02 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 26,064,286 | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity File Number | 001-37404 |
INTERIM CONSOLIDATED BALANCE SH
INTERIM CONSOLIDATED BALANCE SHEETS - CAD ($) $ in Thousands | Aug. 03, 2019 | Feb. 02, 2019 |
Current | ||
Cash | $ 29,725 | $ 42,074 |
Accounts and other receivables | 3,913 | 3,681 |
Inventories | 27,893 | 34,353 |
Income tax receivable | 3,946 | 4,107 |
Prepaid expenses and deposits | 9,890 | 8,819 |
Total current assets | 75,367 | 93,034 |
Property and equipment | 21,794 | 23,788 |
Intangible assets | 6,521 | 5,678 |
Right-of-use assets | 68,230 | |
Total assets | 171,912 | 122,500 |
Current | ||
Trade and other payables | 13,810 | 20,951 |
Deferred revenue | 5,763 | 6,241 |
Current portion of provisions | 3,714 | |
Current portion of lease liabilities | 16,416 | |
Total current liabilities | 35,989 | 30,906 |
Deferred rent and lease inducements | 8,698 | |
Provisions | 15,440 | |
Non-current portion of lease liabilities | 78,157 | |
Total liabilities | 114,146 | 55,044 |
Commitments and contingencies | ||
Equity | ||
Share capital | 112,792 | 112,519 |
Contributed surplus | 1,109 | 1,400 |
Deficit | (57,512) | (47,960) |
Accumulated other comprehensive income | 1,377 | 1,497 |
Total equity | 57,766 | 67,456 |
Total liabilities and equity | $ 171,912 | $ 122,500 |
INTERIM CONSOLIDATED STATEMENTS
INTERIM CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Profit or loss [abstract] | ||||
Sales | $ 39,167 | $ 40,167 | $ 83,432 | $ 85,953 |
Cost of sales | 17,362 | 22,824 | 35,291 | 45,918 |
Gross profit | 21,805 | 17,343 | 48,141 | 40,035 |
Selling, general and administration expenses | 27,237 | 31,350 | 55,946 | 55,746 |
Results from operating activities | (5,432) | (14,007) | (7,805) | (15,711) |
Finance costs | 1,781 | 78 | 3,608 | 157 |
Finance income | (195) | (215) | (386) | (452) |
Loss before income taxes | (7,018) | (13,870) | (11,027) | (15,416) |
Provision for income tax (recovery) | (3,872) | (4,216) | ||
Net loss | (7,018) | (9,998) | (11,027) | (11,200) |
Items to be reclassified subsequently to income: | ||||
Unrealized net gain on forward exchange contracts | 87 | 794 | ||
Realized net loss on forward exchange contracts reclassified to inventory | (578) | (140) | ||
Provision for income tax recovery | 131 | (175) | ||
Cumulative translation adjustment | 136 | (90) | (120) | (411) |
Other comprehensive income (loss), net of tax | 136 | (450) | (120) | 68 |
Total comprehensive loss | $ (6,882) | $ (10,448) | $ (11,147) | $ (11,132) |
Net loss per share: | ||||
Basic and fully diluted | $ (0.27) | $ (0.39) | $ (0.42) | $ (0.43) |
Weighted average number of shares outstanding | ||||
Basic and fully diluted | 26,056,520 | 25,910,086 | 26,038,128 | 25,878,982 |
INTERIM CONSOLIDATED STATEMEN_2
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
OPERATING ACTIVITIES | ||||
Net loss | $ (7,018) | $ (9,998) | $ (11,027) | $ (11,200) |
Items not affecting cash: | ||||
Depreciation of property and equipment | 1,359 | 1,722 | 2,684 | 3,408 |
Amortization of intangible assets | 456 | 346 | 855 | 528 |
Amortization of right-of-use assets | 3,813 | 7,604 | ||
Loss on Disposal of Property and equipment | 22 | 14 | 22 | 14 |
Impairment of property and equipment | 2,560 | 2,560 | ||
Interest on lease liabilities | 1,781 | 3,608 | ||
Deferred rent | 46 | (91) | ||
Recovery for onerous contracts | 2,068 | 1,892 | ||
Stock-based compensation expense | 143 | (393) | 270 | (98) |
Amortization of financing fees | 20 | 40 | ||
Accretion on provisions | 58 | 117 | ||
Deferred income taxes | (2,302) | (1,346) | ||
Sub-total | 556 | (5,859) | 4,016 | (4,176) |
Net change in other non-cash working capital balances related to operations | 2,527 | (6,579) | (573) | (15,368) |
Cash flows related to operating activities | 3,083 | (12,438) | 3,443 | (19,544) |
FINANCING ACTIVITIES | ||||
Proceed from issuance of common shares pursuant to exercise of stock options | 74 | 74 | ||
Payment of lease liabilities | (5,799) | (11,622) | ||
Cash flows related to financing activities | (5,799) | 74 | (11,622) | 74 |
INVESTING ACTIVITIES | ||||
Additions to property and equipment | (319) | (740) | (734) | (1,668) |
Additions to intangible assets | (958) | (1,141) | (1,663) | (2,723) |
Loan advance to a Company controlled by executive employee | (1,773) | (1,773) | ||
Cash flows related to investing activities | (3,050) | (1,881) | (4,170) | (4,391) |
Decrease in cash during the period | (5,766) | (14,245) | (12,349) | (23,861) |
Cash, beginning of the period | 53,868 | 42,074 | 63,484 | |
Cash, end of the period | 29,725 | 39,623 | 29,725 | 39,623 |
Cash paid for: | ||||
Income taxes (classified as operating activity) | 2 | 2 | ||
Cash received for: | ||||
Interest | 210 | 210 | 405 | 443 |
Income taxes (classified as operating activity) | $ 168 | $ 168 |
INTERIM CONSOLIDATED STATEMEN_3
INTERIM CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (Unaudited) - CAD ($) $ in Thousands | Share Capital [Member] | Contributed Surplus [Member] | Deficit | Accumulated Derivative Financial Instrument Adjustment | Accumulated Foreign Currency Translation Adjustment | Accumulated Other Comprehensive Income | Total |
Balance, beginning of period at Feb. 03, 2018 | $ 111,692 | $ 2,642 | $ (14,721) | $ (167) | $ 1,922 | $ 1,755 | $ 101,368 |
Statement Line Items [Line Items] | |||||||
Net loss | (11,200) | (11,200) | |||||
Other comprehensive loss | 479 | (411) | 68 | 68 | |||
Total comprehensive loss | (11,200) | 479 | (411) | 68 | (11,132) | ||
Issuance of common shares | 153 | (79) | 74 | ||||
Common shares issued on vesting of restricted stock units | 636 | (1,305) | 282 | (387) | |||
Stock-based compensation expense | (98) | (98) | |||||
Balance, end of period at Aug. 04, 2018 | 112,481 | 1,160 | (25,639) | 312 | 1,511 | 1,823 | 89,825 |
Balance, beginning of period at Feb. 03, 2019 | 112,519 | 1,400 | (47,960) | 1,497 | 1,497 | 67,456 | |
Statement Line Items [Line Items] | |||||||
Excess of onerous lease provision over right-of-use asset | 1,280 | 1,280 | |||||
Adjusted balance at beginning of period | 112,519 | 1,400 | (46,680) | 1,497 | 1,497 | 68,736 | |
Net loss | (11,027) | (11,027) | |||||
Other comprehensive loss | (120) | (120) | (120) | ||||
Total comprehensive loss | (11,027) | (120) | (120) | (11,147) | |||
Issuance of common shares | |||||||
Common shares issued on vesting of restricted stock units | 273 | (561) | 195 | (93) | |||
Write-down of deferred income tax assets | |||||||
Stock-based compensation expense | 270 | 270 | |||||
Balance, end of period at Aug. 03, 2019 | $ 112,792 | $ 1,109 | $ (57,512) | $ 1,377 | $ 1,377 | $ 57,766 |
CORPORATE INFORMATION
CORPORATE INFORMATION | 6 Months Ended |
Aug. 03, 2019 | |
CORPORATE INFORMATION | |
1. CORPORATE INFORMATION | The unaudited condensed interim consolidated financial statements of DAVIDsTEA Inc. and its subsidiary (collectively, the “Company”) for the three and six-month periods ended August 3, 2019 were authorized for issue in accordance with a resolution of the Board of Directors on September 17, 2019. The Company is incorporated and domiciled in Canada and its shares are publicly traded on the NASDAQ Global Market under the symbol “DTEA”. The registered office is located at 5430, Ferrier St., Town of Mount-Royal, Quebec, Canada, H4P 1M2. The Company is engaged in the retail and online sale of tea, tea accessories and food and beverages in Canada and the United States. The results of operations for the interim period are not necessarily indicative of the results of operations for the full year. Sales fluctuate from quarter to quarter. Sales are traditionally higher in the fourth fiscal quarter due to the year-end holiday season, and tend to be lowest in the second and third fiscal quarter because of lower customer traffic during the summer months. |
STATEMENT OF COMPLIANCE AND BAS
STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION | 6 Months Ended |
Aug. 03, 2019 | |
STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION | |
2. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION | These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). Accordingly, these financial statements do not include all of the financial statement disclosures required for annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements for the year ended February 2, 2019, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB. In management’s opinion, the unaudited condensed interim consolidated financial statements reflect all the adjustments that are necessary for a fair presentation of the results for the interim period presented. These unaudited condensed interim consolidated financial statements have been prepared using the accounting policies and methods of computation as outlined in note 3 of the consolidated financial statements for the year ended February 2, 2019, other than as disclosed in note 3 below. |
CHANGES IN ACCOUNTING PRINCIPLE
CHANGES IN ACCOUNTING PRINCIPLES | 6 Months Ended |
Aug. 03, 2019 | |
Changes In Accounting Principles | |
3. CHANGES IN ACCOUNTING PRINCIPLES | IFRS 16 – Leases IFRS 16, “Leases’’ (“IFRS 16’’) replaces IAS 17, “Leases’’ and related interpretations. The standard introduces a single on-balance sheet recognition and measurement model for lessees, eliminating the distinction between operating and finance leases. The lessee recognizes a right-of-use asset representing its control of and right to use the underlying asset and a lease liability representing its obligation to make future lease payments. Lessors continue to classify leases as finance and operating leases. Certain exemptions will apply for short-term leases and leases of low value assets. The new standard became effective for annual periods beginning on or after January 1, 2019. a) Nature of the effect of adoption of IFRS 16 The Company has adopted IFRS 16 as at February 3, 2019. Substantially all of the Company’s existing leases are real estate leases for its retail stores, warehouse and corporate head office. The adoption of IFRS 16 had a significant impact as the Company recognized new assets and liabilities. In addition, the nature and timing of expenses related to those leases will change as IFRS 16 replaces the straight-line operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities. The Company has elected to apply the modified retrospective method by setting right-of-use assets based on the lease liability at the date of initial application, adjusted by the amount of any prepaid or accrued lease payments with no restatement of the prior comparative period. Upon adoption of IFRS 16, the Company has applied the following practical expedients: - applying IFRS 16 exclusively to contracts that were previously identified as leases applying IAS 17 at the date of initial application; - applying a single discount rate to a portfolio of leases with reasonably similar characteristics; - relying on its assessment of whether leases are onerous applying IAS 37 immediately before the date of initial application as an alternative to performing an impairment review of the right-of-use asset; - excluding initial direct costs from the measurement of the right-of-use asset at the date of initial application; and - not separating the lease component and its associated non-lease component. The effect of adoption of IFRS 16 as at February 3, 2019 is as follows: February 2, February 3, 2019 IFRS 16 2019 $ Adoption $ ASSETS Right-of-use assets — 75,596 75,596 Other assets 122,500 — 122,500 Total assets 122,500 75,596 198,096 LIABILITIES Lease liability — 102,168 102,168 Deferred rent and lease inducements 8,698 (8,698 ) — Provisions 19,154 (19,154 ) — Other liabilities 27,192 — 27,192 Total liabilities 55,044 74,316 129,360 EQUITY Deficit (47,960 ) 1,280 (46,680 ) Other 115,416 — 115,416 Total equity 67,456 1,280 68,736 Total liabilities and equity 122,500 75,596 198,096 For leases previously classified as operating leases, the Company recorded the right-of-use assets based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognized. Due to this, the Company derecognized an amount of $8,698 that was previously included under deferred rent and leasehold inducements with a corresponding adjustment to the right-of-use asset. The excess of onerous lease provision under IAS 37 over right-of-use asset at the date of transition (mainly due to the higher discount rate used to calculate the lease liability and related right-of-use asset) amounted to $1,280 and was included in deficit. The lease liabilities as at February 3, 2019 can be reconciled to the operating lease commitments as of February 2, 2019 as follows: February 3, 2019 $ Minimum lease payments under operating lease 116,772 Discounted using a weighted average incremental borrowing rate of 6.63% (24,484 ) Discounted non-lease component associated with lease component pursuant to practical expedient 9,880 102,168 Operating lease payments, which were previously included in cost of sales on the consolidated statement of income, are replaced with depreciation expenses (included in selling, general and administrative expenses) from the right-of-use asset and interest expense (included under finance costs) from the lease liability. b) Summary of new accounting policies Right-of-use assets The Company recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are initially measured at cost, which includes the initial amount of lease liabilities adjusted for any initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term. In addition the right-of-use assets are subject to impairment and adjusted for any remeasurement of lease liabilities. Amortization expense is recorded in selling, general and administrative expense. Lease liabilities At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. Interest accretion is recorded as interest expense in finance costs. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The Company has elected to apply the practical expedient to not separate the lease component and its associated non-lease component. Short-term leases and leases of low-value assets The Company applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below US $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Significant judgement in determining the lease term of contracts with renewal options The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company has the option, under some of its leases to lease the assets for additional terms of three to five years. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal, including store performance, expected future performance and past business practice. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). c) Amounts recognized in the statement of financial position and profit or loss Set out below are the carrying amounts of the Company’s right-of-use assets and lease liabilities and the movements during the period: Right-of use Lease assets liability $ $ Balance, February 3, 2019 75,596 102,168 Amortization expense (7,604 ) — Interest Expense — 3,608 Payments — (11,622 ) CTA 238 419 Balance, August 3, 2019 68,230 94,573 Presented as: Current — 16,416 Non-Current 68,230 78,157 The Company recognizes variable lease payments of $220 and $430 respectively for the three and six months ended August 3, 2019. IFRS 23 – Uncertainty over Income Tax Treatments IFRIC 23, “Uncertainty over Income Tax Treatments” (the “Interpretation”), was issued by the IASB in June 2017. The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Interpretation is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Interpretation requires an entity to: • Contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution; • Reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or recover) an amount for the uncertainty; and • Measure a tax uncertainty based on the most likely amount or expected value depending on whichever method better predicts the amount payable (recoverable). The adoption of this interpretation did not have a significant impact on the Company’s financial statements. |
SIGNIFICANT ACCOUNTING JUDGEMEN
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS | 6 Months Ended |
Aug. 03, 2019 | |
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS | |
4. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS | The preparation of condensed interim consolidated financial statements requires management to make estimates and assumptions using judgment that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense during the reporting period. Estimates and other judgments are continually evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. Actual results may differ from those estimates. In preparing these unaudited condensed interim consolidated financial statements, critical judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those referred to in note 5 of the consolidated financial statements for the year ended February 2, 2019. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Aug. 03, 2019 | |
5. INVENTORIES | August 3, February 2, 2019 2019 $ $ Finished goods 24,673 28,991 Goods in transit 1,352 3,262 Packaging 1,868 2,100 27,893 34,353 |
REVOLVING FACILITY
REVOLVING FACILITY | 6 Months Ended |
Aug. 03, 2019 | |
Revolving Facility | |
6. REVOLVING FACILITY | On June 11, 2018, the Company amended its existing Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a two year revolving facility (“Amended Revolving Facility”) in the principal amount of $15,000 or the equivalent in U.S. dollars, repayable at any time, two years from June 11, 2018, with no accordion feature. Borrowings under the Amended Revolving Facility may not exceed the lesser of the total commitment for the revolving facility and the borrowing base, calculated as 75% of the face value of all eligible receivables plus 50% of the estimated value of all eligible inventory, less any priority payables. The Amended Credit Agreement subjects the Company to certain financial covenants. Without the prior written consent of the lender, the Company’s fixed charge coverage ratio may not be less than 1.10:1.00 and the Company’s leverage ratio may not exceed 3.00:1.00. In addition, the Company’s net tangible worth may not be less than $65,000 and the Company’s minimum excess availability must not be less than $15,000. The Amended Revolving Facility bears interest based on the Company’s adjusted leverage ratio, at the bank’s prime rate, U.S. bank rate or LIBOR plus a range from 0.5% to 2.5% per annum. A standby fee range of 0.3% to 0.5% will be paid on the daily principal amount of the unused portion of the Amended Revolving Facility. The credit facility also contains nonfinancial covenants that, among other things and subject to certain exceptions, restrict the Company’s ability to become guarantor or endorser or otherwise become liable upon any note or other obligation other than in the normal course of business. The Company also cannot make any dividend payments. As at August 3, 2019, the Company did not have any borrowings under the Amended Revolving Facility. As at August 3, 2019, the Company is in breach of its fixed charge coverage ratio and certain nonfinancial covenants. BMO has temporarily agreed to forbear from exercising remedies under the Credit Agreement, however the Company cannot borrow under the facility. The Company is in good faith discussions with BMO to install an asset based lending facility that will provide a revolving facility at commercial reasonable terms. |
SHARE CAPITAL
SHARE CAPITAL | 6 Months Ended |
Aug. 03, 2019 | |
Share Capital | |
7. SHARE CAPITAL | Authorized An unlimited number of Common shares. Issued and outstanding August 3, February 2, 2019 2019 $ $ Share Capital - 26,060,785 Common shares (February 2, 2019 - 26,011,817) 112,792 112,519 During the three and six-month periods ended August 3, 2019 no stock options were exercised for common shares [August 4, 2018 – 78,135 and 78,135 stock options for 78,135 common shares for cash proceeds of $74 and $74, respectively and 36,418 common shares for a non-cash settlement of $121 and $121 respectively]. In addition, during the three and six-month periods ended August 3, 2019, 9,603 and 48,968 common shares, respectively [August 4, 2018 – 39,752 and 69,540 common shares respectively] were issued in relation to the vesting of restricted stock units (“RSU”), resulting in an increase in share capital of $52 and $273, net of tax [August 4, 2018 — $379 and $636, net of tax, respectively] and a reduction in contributed surplus of $122 and $561, respectively [August 4, 2018 — $712 and $1,305, respectively]. Stock-based compensation A summary of the status of the Company’s stock option plan and changes during the six-month period is presented below. For the six months ended August 3, August 4, 2019 2018 Weighted Weighted average average Options exercice Options exercice outstanding price outstanding price # $ # $ Outstanding, beginning of year 137,540 7.17 447,779 7.18 Issued — — — — Exercised — — (78,135 ) 3.02 Forfeitures (28,305 ) 4.84 (189,979 ) 8.51 Outstanding, end of period 109,235 7.73 179,665 7.59 Exercisable, end of period 107,816 7.65 102,572 5.70 No stock options were granted during the three and six-month periods ended August 3, 2019 and August 4, 2018. A summary of the status of the Company’s RSU plan and changes during the six-month period is presented below. For the six months ended August 3, August 4, 2019 2018 RSUs outstanding # Weighted average exercice price (1)$ RSUs outstanding # Weighted average exercice price (1)$ Outstanding, beginning of year 270,976 5.26 289,416 9.70 Granted 804,710 1.93 476,450 3.10 Forfeitures (32,525 ) 5.27 (244,296 ) 6.81 Vested (71,468 ) 5.52 (69,540 ) 9.12 Vested, withheld for tax (50,331 ) 5.72 (67,512 ) 8.97 Outstanding, end of period 921,362 2.30 384,518 5.30 ___________ (1) Weighted average fair value per unit as at date of grant During the six-month period ended August 3, 2019, the Company recognized a stock-based compensation expense of $270 [August 4, 2018 — ($98)]. As at August 3, 2019, 1,650,733 common shares remain available for issuance under the 2015 Omnibus Plan. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Aug. 03, 2019 | |
Income Taxes | |
8. INCOME TAXES | Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full fiscal year. A reconciliation of the statutory income tax rate to the effective tax rate is as follows: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 % $ % $ % $ % $ Income tax recovery statutory rate 26.8 (1,878 ) 26.9 (3,726 ) 26.8 (2,955 ) 26.9 (4,142 ) Increase (decrease) in provision for income tax (recovery) resulting from: Non-deductible items (0.6 ) 43 1.0 (140 ) (0.7 ) 76 0.4 (69 ) Unrecognized deferred income tax assets (26.2 ) 1,835 — — (26.1 ) 2,879 — — Other — — — (6 ) — — — (5 ) Income tax provision (recovery) effective tax rate — — 27.9 (3,872 ) — — 27.3 (4,216 ) A breakdown of the income tax provision (recovery) on the interim consolidated statement of income (loss) is as follows: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Income tax provision (recovery) Current — (1,570 ) — (2,870 ) Deferred — (2,302 ) — (1,346 ) — (3,872 ) — (4,216 ) |
SELLING, GENERAL AND ADMINISTRA
SELLING, GENERAL AND ADMINISTRATION EXPENSES | 6 Months Ended |
Aug. 03, 2019 | |
Selling General And Administration Expenses | |
9. SELLING, GENERAL AND ADMINISTRATION EXPENSES | For the three months ended For the six months ended August 3, Aug 4, August 3, Aug 4, 2019 2018 2019 2018 $ $ $ $ Wages, salaries and employee benefits 14,792 15,784 31,309 32,264 Depreciation of property and equipment 1,359 1,722 2,684 3,408 Amortization of intangible assets 456 346 855 528 Amortization right-of-use asset 3,813 — 7,604 — Loss on disposal of property and equipment 22 14 22 14 Impairment of property and equipment — 2,560 — 2,560 Utilization of onerous contract — (1,354 ) — (2,694 ) Recovery of provision for onerous contracts — 2,068 — 1,892 Stock-based compensation 143 (393 ) 270 (98 ) Executive separation cost related to salary — 717 — 717 Strategic review and proxy contest — 2,717 — 3,511 ERP project termination — — — 2,496 Other selling, general and administration 6,652 7,169 13,202 13,644 27,237 31,350 55,946 55,746 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Aug. 03, 2019 | |
Net loss per share: | |
10. EARNINGS PER SHARE | Basic earnings per share (“EPS”) amounts are calculated by dividing the net income (loss) for the period attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period. Diluted EPS amounts are calculated by dividing the net income (loss) attributable to ordinary equity holders (after adjusting for dividends) by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares, unless these would be anti-dilutive. The following reflects the income and share data used in the basic and diluted EPS computations: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Net loss for basic EPS Weighted average number of shares outstanding: Basic and fully diluted 26,056,520 25,910,086 26,038,128 25,878,982 Net loss per share: Basic and fully diluted (0.27 ) (0.39 ) (0.42 ) (0.43 ) As a result of the net loss during the three and six-month periods ended August 3, 2019 and August 4, 2018, the stock options and restricted stock units disclosed in Note 7 were anti-dilutive. Accordingly, diluted net loss per share for each period was the same as basic net loss per share. |
RELATED PARTY DISCLOSURES
RELATED PARTY DISCLOSURES | 6 Months Ended |
Aug. 03, 2019 | |
Related Party Disclosures | |
11. RELATED PARTY DISCLOSURES | Transactions with related parties are measured at the exchange amount, being the consideration established and agreed to by the related parties. During the three and six-month periods ended August 3, 2019, the Company purchased merchandise for resale amounting to nil and $15, respectively [August 4, 2018 - $33 and 97, respectively], and provided net infrastructure and administrative services of $41 and $59, respectively[August 4, 2018 - nil and nil, respectively] from and to a company controlled by one of its executive employees, respectively. During the three-month period ended August 3, 2019, the Company purchased a perpetual license rights to a reporting data model and associated intellectual property for $200 [August 4, 2018 – nil] and spend $68 [August 4, 2018 – nil] for consulting services from a related party of the principal shareholder. Loan to a Company controlled by one of the Company’s executive employees During the second quarter of 2019, the Company entered into a secured revolving loan agreement with Oink Oink Candy Inc., doing business as “Squish”, as borrower, and Rainy Day Investments Ltd. (“RDI”), as guarantor, pursuant to which the Company agreed to lend to Squish an amount of up to $2.0M million. The loan bears interest, payable monthly, at a rate of 1% over Bank of Montreal’s prime rate, which currently stands at 3.95% and is repayable no later than December 31, 2019. RDI has guaranteed all of Squish’s obligations to DAVIDsTEA and, as security in full for the guarantee, has given a movable hypothec (or lien) in favour of the Company on its shares of DAVIDsTEA. Squish is a company controlled by Sarah Segal, an officer of DAVIDsTEA. RDI, the principal shareholder of DAVIDsTEA, is controlled by Herschel Segal, Executive Chairman, Interim Chief Executive Officer and director of DAVIDsTEA. Ms. Segal is the daughter of Mr. Segal. The Company and Squish previously entered into a Collaboration and Shared Services Agreement pursuant to which they collaborate on and share various services and infrastructure. Subsequent to August 3, 2019, the Company advanced an additional $0.2 million under the loan facility and subsequently amended the agreement to amend the maximum amount of the facility to $2.0 million repayable no later than December 31, 2019. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Aug. 03, 2019 | |
Segment Information | |
12. SEGMENT INFORMATION | An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The Company has reviewed its operations and determined that each of its retail stores represents an operating segment. However, because its retail stores have similar economic characteristics, sell similar products, have similar types of customers, and use similar distribution channels, the Company has determined that these operating segments can be aggregated at a geographic level. As a result, the Company has concluded that it has two reportable segments, Canada and the U.S., that derive their revenues from the retail and online sale of tea, tea accessories and food and beverages. The Company’s Chief Executive Officer (the chief operating decision maker or “CODM”) makes decisions about resources allocation and assesses performance at the country level, and for which discrete financial information is available. The Company derives revenue from the following products: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Tea 29,306 27,589 62,730 60,819 Tea accessories 6,629 8,787 14,284 17,501 Food and beverages 3,232 3,791 6,418 7,633 39,167 40,167 83,432 85,953 Property and equipment and intangible assets by country are as follows: August 3, February 2, 2019 (1) 2019 $ $ Canada 74,519 27,996 US 22,026 1,470 Total 96,545 29,466 _______________ (1) Includes Right-of-use assets of $47,579 in Canada and $20,651 in US. Results from operating activities before corporate expenses per country are as follows: For the three months ended August 3, 2019 For the six months ended August 3, 2019 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 30,340 8,827 39,167 64,530 18,902 83,432 Cost of sales 13,925 3,437 17,362 28,039 7,252 35,291 Gross profit 16,415 5,390 21,805 36,491 11,650 48,141 Selling, general and administration expenses (allocated) 15,002 4,856 19,858 30,185 10,053 40,238 Results from operating activities before corporate expenses 1,413 534 1,947 6,306 1,597 7,903 Selling, general and administration expenses (non-allocated) 7,379 15,708 Results from operating activities (5,432 ) (7,805 ) Finance costs 1,781 3,608 Finance income (195 ) (386 ) Loss before income taxes (7,018 ) (11,027 ) For the three months ended August 3, 2018 For the six months ended August 3, 2018 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 31,850 8,317 40,167 68,382 17,571 85,953 Cost of sales 17,724 5,100 22,824 35,540 10,378 45,918 Gross profit 14,126 3,217 17,343 32,842 7,193 40,035 Selling, general and administration expenses (allocated) 13,538 4,236 17,774 26,922 8,394 35,316 Impairment of property and equipment 2,371 189 2,560 2,371 189 2,560 Impact of onerous contracts 1,188 (474 ) 714 996 (1,798 ) (802 ) Results from operating activities before corporate expenses (2,971 ) (734 ) (3,705 ) 2,553 408 2,961 Selling, general and administration expenses (non-allocated) 10,302 18,672 Results from operating activities (14,007 ) (15,711 ) Finance costs 78 157 Finance income (215 ) (452 ) Loss before income taxes (13,870 ) (15,416 ) |
FINANCIAL RISK MANAGEMENT
FINANCIAL RISK MANAGEMENT | 6 Months Ended |
Aug. 03, 2019 | |
Financial Risk Management | |
13. FINANCIAL RISK MANAGEMENT | The Company’s activities expose it to a variety of financial risks, including risks related to foreign exchange, interest rate, liquidity and credit. Currency Risk — Foreign Exchange Risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Given that some of its purchases are denominated in U.S. dollars, the Company is exposed to foreign exchange risk. The Company’s foreign exchange risk is largely limited to currency fluctuations between the Canadian and U.S. dollars. The Company is exposed to currency risk through its cash, accounts receivable and accounts payable denominated in U.S. dollars. Assuming that all other variables remain constant, a revaluation of these monetary assets and liabilities due to a 5% rise or fall in the Canadian dollar against the U.S. dollar would have resulted in an increase or decrease to net loss in the amount of $10. The Company’s foreign exchange exposure is as follows: August 3, February 2, 2019 2019 US$ US$ Cash 918 267 Accounts receivable 1,222 1,142 Accounts payable 1,931 3,869 The Company’s U.S. subsidiary’s transactions are denominated in U.S. dollars. The Company had no foreign exchange contracts outstanding as at August 3, 2019. Market Risk — Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial instruments that potentially subject the Company to cash flow interest rate risk include financial assets with variable interest rates. The Company is exposed to cash flow risk under the Revolving Facility which bears interest at variable interest rates (Note 6). As at August 3, 2019, the Company did not have any borrowings on the Revolving Facility. Liquidity Risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company’s approach to managing liquidity risk is to ensure, to the extent possible, that it will always have sufficient liquidity to meet liabilities when due. The Company’s liquidity follows a seasonal pattern based on the timing of inventory purchases and capital expenditures. The Company is exposed to this risk mainly in respect of its trade and other payables. As at August 3, 2019, the Company had $29,725 in cash. In addition, the Company has a Revolving Facility of $15,000, the full amount of which remained un-drawn as at August 3, 2019. Access to this Facility is further described in Note 6. The Company expects to finance its working capital needs, store renovations, and investments in infrastructure through cash flows from operations and cash on hand. The Company expects that its trade and other payables will be discharged within 90 days. Credit Risk The Company is exposed to credit risk resulting from the possibility that counterparties may default on their financial obligations to the Company. The Company’s maximum exposure to credit risk at the reporting date is equal to the carrying value of accounts receivable. Accounts receivable primarily consists of receivables from retail customers who pay by credit card, recoveries of credits from suppliers for returned or damaged products, receivables from other companies for sales of products, gift cards and other services and a loan advance to Squish. Credit card payments have minimal credit risk, the limited number of corporate receivables is closely monitored and the risk for the loan advance is limited as a result of the pledge of DavidsTea’s shares as security. Fair Values Financial assets and financial liabilities are measured on an ongoing basis at fair value or amortized cost, based on the guidance provided in IFRS 9. The fair values of derivative financial instruments have been determined by reference to forward exchange rates at the end of the reporting period and classified in Level 2 of the fair value hierarchy. There are no outstanding derivative financial instruments at August 3, 2019. There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy during the three and six-month periods ended August 3, 2019 and August 4, 2018. |
CHANGES IN ACCOUNTING PRINCIP_2
CHANGES IN ACCOUNTING PRINCIPLES (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Changes In Accounting Principles | |
Effect of adoption of IFRS 16 | The effect of adoption of IFRS 16 as at February 3, 2019 is as follows: February 2, February 3, 2019 IFRS 16 2019 $ Adoption $ ASSETS Right-of-use assets — 75,596 75,596 Other assets 122,500 — 122,500 Total assets 122,500 75,596 198,096 LIABILITIES Lease liability — 102,168 102,168 Deferred rent and lease inducements 8,698 (8,698 ) — Provisions 19,154 (19,154 ) — Other liabilities 27,192 — 27,192 Total liabilities 55,044 74,316 129,360 EQUITY Deficit (47,960 ) 1,280 (46,680 ) Other 115,416 — 115,416 Total equity 67,456 1,280 68,736 Total liabilities and equity 122,500 75,596 198,096 |
Schedule of lease liabilities | The lease liabilities as at February 3, 2019 can be reconciled to the operating lease commitments as of February 2, 2019 as follows: February 3, 2019 $ Minimum lease payments under operating lease 116,772 Discounted using a weighted average incremental borrowing rate of 6.63% (24,484 ) Discounted non-lease component associated with lease component pursuant to practical expedient 9,880 102,168 |
Carrying amounts of right-of-use assets and lease liabilities | Set out below are the carrying amounts of the Company’s right-of-use assets and lease liabilities and the movements during the period: Right-of use Lease assets liability $ $ Balance, February 3, 2019 75,596 102,168 Amortization expense (7,604 ) — Interest Expense — 3,608 Payments — (11,622 ) CTA 238 419 Balance, August 3, 2019 68,230 94,573 Presented as: Current — 16,416 Non-Current 68,230 78,157 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Classes of current inventories [abstract] | |
Schedule of Inventory | August 3, February 2, 2019 2019 $ $ Finished goods 24,673 28,991 Goods in transit 1,352 3,262 Packaging 1,868 2,100 27,893 34,353 |
SHARE CAPITAL (Tables)
SHARE CAPITAL (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Disclosure of classes of share capital [abstract] | |
Summary of authorized, issued, and outstanding shares | August 3, February 2, 2019 2019 $ $ Share Capital - 26,060,785 Common shares (February 2, 2019 - 26,011,817) 112,792 112,519 |
Summary of stock option plan and periodic changes | A summary of the status of the Company’s stock option plan and changes during the six-month period is presented below. For the six months ended August 3, August 4, 2019 2018 Weighted Weighted average average Options exercice Options exercice outstanding price outstanding price # $ # $ Outstanding, beginning of year 137,540 7.17 447,779 7.18 Issued — — — — Exercised — — (78,135 ) 3.02 Forfeitures (28,305 ) 4.84 (189,979 ) 8.51 Outstanding, end of period 109,235 7.73 179,665 7.59 Exercisable, end of period 107,816 7.65 102,572 5.70 |
Summary of the status of the RSU plan and periodic changes | A summary of the status of the Company’s RSU plan and changes during the six-month period is presented below. For the six months ended August 3, August 4, 2019 2018 RSUs outstanding # Weighted average exercice price (1)$ RSUs outstanding # Weighted average exercice price (1)$ Outstanding, beginning of year 270,976 5.26 289,416 9.70 Granted 804,710 1.93 476,450 3.10 Forfeitures (32,525 ) 5.27 (244,296 ) 6.81 Vested (71,468 ) 5.52 (69,540 ) 9.12 Vested, withheld for tax (50,331 ) 5.72 (67,512 ) 8.97 Outstanding, end of period 921,362 2.30 384,518 5.30 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Major components of tax expense (income) [abstract] | |
Schedule of the reconciliation of the statutory income tax rate to the effective tax rate | A reconciliation of the statutory income tax rate to the effective tax rate is as follows: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 % $ % $ % $ % $ Income tax recovery statutory rate 26.8 (1,878 ) 26.9 (3,726 ) 26.8 (2,955 ) 26.9 (4,142 ) Increase (decrease) in provision for income tax (recovery) resulting from: Non-deductible items (0.6 ) 43 1.0 (140 ) (0.7 ) 76 0.4 (69 ) Unrecognized deferred income tax assets (26.2 ) 1,835 — — (26.1 ) 2,879 — — Other — — — (6 ) — — — (5 ) Income tax provision (recovery) effective tax rate — — 27.9 (3,872 ) — — 27.3 (4,216 ) |
Schedule of the breakdown of the income tax provision (recovery) | A breakdown of the income tax provision (recovery) on the interim consolidated statement of income (loss) is as follows: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Income tax provision (recovery) Current — (1,570 ) — (2,870 ) Deferred — (2,302 ) — (1,346 ) — (3,872 ) — (4,216 ) |
SELLING, GENERAL AND ADMINIST_2
SELLING, GENERAL AND ADMINISTRATION EXPENSES (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Expenses by nature [abstract] | |
Schedule of selling, general and administrative expenses | For the three months ended For the six months ended August 3, Aug 4, August 3, Aug 4, 2019 2018 2019 2018 $ $ $ $ Wages, salaries and employee benefits 14,792 15,784 31,309 32,264 Depreciation of property and equipment 1,359 1,722 2,684 3,408 Amortization of intangible assets 456 346 855 528 Amortization right-of-use asset 3,813 — 7,604 — Loss on disposal of property and equipment 22 14 22 14 Impairment of property and equipment — 2,560 — 2,560 Utilization of onerous contract — (1,354 ) — (2,694 ) Recovery of provision for onerous contracts — 2,068 — 1,892 Stock-based compensation 143 (393 ) 270 (98 ) Executive separation cost related to salary — 717 — 717 Strategic review and proxy contest — 2,717 — 3,511 ERP project termination — — — 2,496 Other selling, general and administration 6,652 7,169 13,202 13,644 27,237 31,350 55,946 55,746 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Net loss per share: | |
Schedule of reconciliation of basic and diluted EPS | The following reflects the income and share data used in the basic and diluted EPS computations: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Net loss for basic EPS Weighted average number of shares outstanding: Basic and fully diluted 26,056,520 25,910,086 26,038,128 25,878,982 Net loss per share: Basic and fully diluted (0.27 ) (0.39 ) (0.42 ) (0.43 ) |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Disclosure of operating segments [abstract] | |
Schedule of revenue by product | The Company derives revenue from the following products: For the three months ended For the six months ended August 3, August 4, August 3, August 4, 2019 2018 2019 2018 $ $ $ $ Tea 29,306 27,589 62,730 60,819 Tea accessories 6,629 8,787 14,284 17,501 Food and beverages 3,232 3,791 6,418 7,633 39,167 40,167 83,432 85,953 |
Schedule of property and equipment and intangible assets by country | Property and equipment and intangible assets by country are as follows: August 3, February 2, 2019 (1) 2019 $ $ Canada 74,519 27,996 US 22,026 1,470 Total 96,545 29,466 |
Schedule of gross profit per country | Results from operating activities before corporate expenses per country are as follows: For the three months ended August 3, 2019 For the six months ended August 3, 2019 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 30,340 8,827 39,167 64,530 18,902 83,432 Cost of sales 13,925 3,437 17,362 28,039 7,252 35,291 Gross profit 16,415 5,390 21,805 36,491 11,650 48,141 Selling, general and administration expenses (allocated) 15,002 4,856 19,858 30,185 10,053 40,238 Results from operating activities before corporate expenses 1,413 534 1,947 6,306 1,597 7,903 Selling, general and administration expenses (non-allocated) 7,379 15,708 Results from operating activities (5,432 ) (7,805 ) Finance costs 1,781 3,608 Finance income (195 ) (386 ) Loss before income taxes (7,018 ) (11,027 ) For the three months ended August 3, 2018 For the six months ended August 3, 2018 Canada US Consolidated Canada US Consolidated $ $ $ $ $ $ Sales 31,850 8,317 40,167 68,382 17,571 85,953 Cost of sales 17,724 5,100 22,824 35,540 10,378 45,918 Gross profit 14,126 3,217 17,343 32,842 7,193 40,035 Selling, general and administration expenses (allocated) 13,538 4,236 17,774 26,922 8,394 35,316 Impairment of property and equipment 2,371 189 2,560 2,371 189 2,560 Impact of onerous contracts 1,188 (474 ) 714 996 (1,798 ) (802 ) Results from operating activities before corporate expenses (2,971 ) (734 ) (3,705 ) 2,553 408 2,961 Selling, general and administration expenses (non-allocated) 10,302 18,672 Results from operating activities (14,007 ) (15,711 ) Finance costs 78 157 Finance income (215 ) (452 ) Loss before income taxes (13,870 ) (15,416 ) |
FINANCIAL RISK MANAGEMENT (Tabl
FINANCIAL RISK MANAGEMENT (Tables) | 6 Months Ended |
Aug. 03, 2019 | |
Disclosure of nature and extent of risks arising from financial instruments [abstract] | |
Summary of foreign exchange exposure | The Company’s foreign exchange exposure is as follows: August 3, February 2, 2019 2019 US$ US$ Cash 918 267 Accounts receivable 1,222 1,142 Accounts payable 1,931 3,869 |
CHANGES IN ACCOUNTING POLICIES
CHANGES IN ACCOUNTING POLICIES (Details) - CAD ($) $ in Thousands | Aug. 03, 2019 | Feb. 02, 2019 |
Assets | ||
Right-of-use assets | $ 68,230 | |
Total assets | 171,912 | 122,500 |
LIABILITIES | ||
Total liabilities | 114,146 | 55,044 |
EQUITY | ||
Deficit | (57,512) | (47,960) |
Total liabilities and equity | $ 171,912 | 122,500 |
Changes In Accounting Policies [Member] | ||
Assets | ||
Right-of-use assets | ||
Other assets | 122,500 | |
Total assets | 122,500 | |
LIABILITIES | ||
Lease liability | ||
Deferred rent and lease inducements | 8,698 | |
Provisions | 19,154 | |
Other liabilities | 27,192 | |
Total liabilities | 55,044 | |
EQUITY | ||
Deficit | (47,960) | |
Other | 115,416 | |
Total equity | 67,456 | |
Total liabilities and equity | 122,500 | |
Changes In Accounting Policies [Member] | February 3, 2019 [Member] | ||
Assets | ||
Right-of-use assets | 75,596 | |
Other assets | 122,500 | |
Total assets | 198,096 | |
LIABILITIES | ||
Lease liability | 102,168 | |
Deferred rent and lease inducements | ||
Provisions | ||
Other liabilities | 27,192 | |
Total liabilities | 129,360 | |
EQUITY | ||
Deficit | (46,680) | |
Other | 115,416 | |
Total equity | 68,736 | |
Total liabilities and equity | 198,096 | |
Changes In Accounting Policies [Member] | IFRS 16 Adoption [Member] | ||
Assets | ||
Right-of-use assets | 75,596 | |
Other assets | ||
Total assets | 75,596 | |
LIABILITIES | ||
Lease liability | 102,168 | |
Deferred rent and lease inducements | (8,698) | |
Provisions | (19,154) | |
Other liabilities | ||
Total liabilities | 74,316 | |
EQUITY | ||
Deficit | 1,280 | |
Other | ||
Total equity | 1,280 | |
Total liabilities and equity | $ 75,596 |
CHANGES IN ACCOUNTING POLICIE_2
CHANGES IN ACCOUNTING POLICIES (Details 1) - Changes In Accounting Policies [Member] $ in Thousands | Feb. 02, 2019CAD ($) |
Disclosure of financial assets [line items] | |
Lease liability | |
February 3, 2019 [Member] | |
Disclosure of financial assets [line items] | |
Minimum lease payments under operating lease | 116,772 |
Discounted using a weighted average incremental borrowing rate of 6.63% | (24,484) |
Discounted non-lease component associated with lease component pursuant to practical expedient election | 9,880 |
Lease liability | $ 102,168 |
CHANGES IN ACCOUNTING POLICIE_3
CHANGES IN ACCOUNTING POLICIES (Details 2) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | Feb. 02, 2019 | |
Disclosure of financial assets [line items] | |||||
Amortization expense | $ 3,813 | $ 7,604 | |||
Presented as: | |||||
Right-of use asset | 68,230 | 68,230 | |||
Lease liability | 78,157 | 78,157 | |||
Right-of use asset [Member] | |||||
Disclosure of financial assets [line items] | |||||
Balance, February 3, 2019 | 75,596 | ||||
Amortization expense | (7,604) | ||||
Interest expense | |||||
Payments | |||||
CTA | 238 | ||||
Balance, August 3, 2019 | 68,230 | 68,230 | |||
Right-of use asset [Member] | Current [Member] | |||||
Presented as: | |||||
Right-of use asset | |||||
Lease liability | 68,230 | 68,230 | |||
Lease liability [Member] | |||||
Disclosure of financial assets [line items] | |||||
Balance, February 3, 2019 | 102,168 | ||||
Amortization expense | |||||
Interest expense | 3,608 | ||||
Payments | (11,622) | ||||
CTA | 419 | ||||
Balance, August 3, 2019 | 94,573 | 94,573 | |||
Lease liability [Member] | Non-Current [Member] | |||||
Presented as: | |||||
Right-of use asset | 16,416 | 16,416 | |||
Lease liability | $ 78,157 | $ 78,157 |
CHANGES IN ACCOUNTING POLICIE_4
CHANGES IN ACCOUNTING POLICIES (Details Narrative) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Aug. 03, 2019 | Aug. 03, 2019 | Feb. 02, 2019 | |
Changes In Accounting Policies | |||
Deferred rent and lease inducements | $ 8,698 | ||
Excess of onerous lease provision over right-of-use asset | 1,280 | ||
Variable lease payments | $ 220 | $ 430 |
INVENTORIES (Details)
INVENTORIES (Details) - CAD ($) $ in Thousands | Aug. 03, 2019 | Feb. 02, 2019 |
Inventories Details Abstract | ||
Finished goods | $ 24,673 | $ 28,991 |
Goods in transit | 1,352 | 3,262 |
Packaging | 1,868 | 2,100 |
Total current inventories | $ 27,893 | $ 34,353 |
REVOLVING FACILITY - Terms (Det
REVOLVING FACILITY - Terms (Details Narrative) - Credit Agreement Bank Of Montreal [Member] - CAD ($) $ in Thousands | Jun. 11, 2018 | Aug. 03, 2019 |
Agreement terms | ||
Borrowings threshold, percentage of face value of all eligible receivables | 75.00% | |
Borrowings threshold, percentage of face value of all eligible inventory | 50.00% | |
Financial covenant, minimum fixed charge coverage ratio | 1.10 | |
Financial covenant, minimum leverage ratio | 3 | |
Financial covenant, minimum tangible net worth | $ 65,000 | |
Financial covenant, minimum excess availability | $ 15,000 | |
Term of facility | 2 years | |
Principal amount | $ 15,000 | |
Interest rate basis | The Amended Revolving Facility bears interest based on the Company's adjusted leverage ratio, at the bank's prime rate, U.S. bank rate or LIBOR plus a range from 0.5% to 2.5% per annum. | |
Description of standby fee range | A standby fee range of 0.3% to 0.5% will be paid on the daily principal amount of the unused portion of the Amended Revolving Facility. | |
Borrowings | $ 0 |
SHARE CAPITAL (Details)
SHARE CAPITAL (Details) - CAD ($) $ in Thousands | Aug. 03, 2019 | Feb. 02, 2019 |
Disclosure of classes of share capital [line items] | ||
Issued and outstanding | $ 112,792 | $ 112,519 |
Share Capital [Member] | ||
Disclosure of classes of share capital [line items] | ||
Issued and outstanding | $ 112,792 | $ 112,519 |
SHARE CAPITAL (Details 1)
SHARE CAPITAL (Details 1) - $ / shares | 6 Months Ended | |
Aug. 03, 2019 | Aug. 04, 2018 | |
Change in options outstanding | ||
Outstanding, beginning of period (in shares) | 447,779 | |
Issued (in shares) | ||
Exercised (in shares) | (78,135) | |
Forfeitures (in shares) | (28,305) | (189,979) |
Outstanding, end of period (in shares) | 109,235 | 179,665 |
Exercisable, end of period (in shares) | 107,816 | 102,572 |
Changes in the weighted average exercise price | ||
Outstanding, beginning of period (in dollars per share) | $ 7.18 | |
Issued (in dollars per share) | ||
Exercised (in dollars per share) | 3.02 | |
Forfeitures (in dollars per share) | 4.84 | 8.51 |
Weighted average exercise price of share options outstanding in share-based payment arrangement at end of period | 7.73 | 7.59 |
Weighted average exercise price, exercisable (in dollars per share) | $ 7.56 | $ 5.70 |
SHARE CAPITAL (Details 2)
SHARE CAPITAL (Details 2) - $ / shares | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | ||
Change in RSUs outstanding | |||
Outstanding, beginning of period (in shares) | 447,779 | ||
Outstanding, end of period (in shares) | 109,235 | 179,665 | |
Change in the Weighted average fair value per unit | |||
Outstanding, beginning of period (in dollars per share) | $ 7.18 | ||
Forfeitures (in dollars per share) | $ 4.84 | $ 8.51 | |
Restricted Stock Units Rsus [Member] | |||
Change in RSUs outstanding | |||
Outstanding, beginning of period (in shares) | 270,976 | 289,416 | |
Granted (in shares) | 804,710 | 476,450 | |
Forfeited (in shares) | (32,525) | (244,296) | |
Vested (in shares) | (71,468) | (69,540) | |
Vested, withheld for tax (in shares) | (50,331) | (67,512) | |
Outstanding, end of period (in shares) | 921,362 | 384,518 | |
Change in the Weighted average fair value per unit | |||
Outstanding, beginning of period (in dollars per share) | $ 5.26 | $ 9.70 | [1] |
Granted (in dollars per share) | 1.93 | 3.10 | |
Forfeitures (in dollars per share) | 5.27 | 6.81 | |
Vested (in dollars per share) | 5.52 | 9.12 | |
Vested, withheld for tax (in dollars per share) | 5.72 | 8.97 | |
Outstanding, end of period (in dollars per share) | $ 2.30 | $ 5.30 | |
[1] | Weighted average fair value per unit as at date of grant. |
SHARE CAPITAL (Details Narrativ
SHARE CAPITAL (Details Narrative) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Statement Line Items [Line Items] | ||||
Stock option exercised for common shares | 0 | 78,135 | 0 | 78,135 |
Cash proceeds | $ 74 | $ 74 | ||
Stock option for common shares | 78,135 | |||
Non-cash settlement | $ 121 | $ 121 | ||
Common shares issued | 36,418 | 36,418 | ||
Common shares issued on vesting of restricted stock units, Shares | 9,603 | 39,752 | 48,968 | 69,540 |
Reduction in the contributed surplus | $ 122 | $ 712 | $ 561 | $ 1,305 |
Stock-based compensation expense | $ 270 | $ (98) | ||
2015 Omnibus Plan [Member] | ||||
Statement Line Items [Line Items] | ||||
Issuance of common shares available | 1,650,733 |
INCOME TAXES (Details)
INCOME TAXES (Details) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Statutory income tax rate reconciliation, percent | ||||
Income tax recovery - statutory rate (as a percent) | 26.80% | 26.90% | 26.80% | 26.90% |
Increase (decrease) in provision for income tax (recovery) resulting from: | ||||
Non-deductible items (as a percent) | (60.00%) | 100.00% | (70.00%) | 40.00% |
Unrecognized deferred income tax asset (as a percent) | (2620.00%) | (26.10%) | ||
Other (as a percent) | (600.00%) | (500.00%) | ||
Income tax provision (recovery) - effective tax rate (as a percent) | (27.90%) | (27.30%) | ||
Statutory income tax rate reconciliation, amount | ||||
Income tax provision — statutory rate | $ 1,878 | $ (3,726) | $ (2,955) | $ (4,142) |
Non-deductible items | 43 | (140) | 76 | (69) |
Unrecognized deferred income tax asset | 1,835 | 2,879 | ||
Other | ||||
Income tax recovery - effective tax rate | $ (3,872) | $ (4,216) |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Income tax provision (recovery) | ||||
Current | $ (1,570) | $ (2,870) | ||
Deferred | (2,302) | (1,346) | ||
Income tax recovery - effective tax rate | $ (3,872) | $ (4,216) |
SELLING, GENERAL AND ADMINIST_3
SELLING, GENERAL AND ADMINISTRATION EXPENSES (Details) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Expenses by nature [abstract] | ||||
Wages, salaries and employee benefits | $ 14,792 | $ 15,784 | $ 31,309 | $ 32,264 |
Depreciation of property and equipment | 1,359 | 1,722 | 2,684 | 3,408 |
Amortization of intangible assets | 456 | 346 | 855 | 528 |
Amortization right-of-use asset | 3,813 | 7,604 | ||
Loss on disposal of property and equipment | 22 | 14 | 22 | 14 |
Impairment of property and equipment | 2,560 | 2,560 | ||
Utilization of onerous contract | (1,354) | (2,694) | ||
Recovery of provision for onerous contracts | 2,068 | 1,892 | ||
Stock-based compensation | 143 | (393) | 270 | (98) |
Executive separation cost related to salary | 717 | 717 | ||
Strategic review and proxy contest costs | 2,717 | 3,511 | ||
ERP project termination | 2,496 | |||
Other selling, general and administration | 6,652 | 7,169 | 13,202 | 13,644 |
Selling, general and administrative expense | $ 27,237 | $ 31,350 | $ 55,946 | $ 55,746 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - CAD ($) | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Net loss per share: | ||||
Net loss for basic EPS | ||||
Weighted average number of shares outstanding - basic and fully diluted | 26,056,520 | 25,910,086 | 26,038,128 | 25,878,982 |
Net loss per share: | ||||
Basic and fully diluted | $ (0.27) | $ (0.39) | $ (0.42) | $ (0.43) |
RELATED PARTY DISCLOSURES (Deta
RELATED PARTY DISCLOSURES (Details Narrative) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Disclosure of transactions between related parties [abstract] | ||||
Merchandise purchased from related party | $ 0 | $ 33 | $ 15 | $ 97 |
Infrastructure and administrative services | 59 | 0 | 41 | 0 |
Perpetual license rights | 200 | $ 0 | ||
Consulting services from related party | $ 68 | $ 0 | ||
Revolving loan interest rate description | the Company agreed to lend to Squish an amount of up to $2.0M million. The loan bears interest, payable monthly, at a rate of 1% over Bank of Montreals prime rate, which currently stands at 3.95% and is repayable no later than December 31, 2019. | |||
Additional borrowing under loan facility | $ 200 | $ 200 | ||
Agreement amendement description | Amended the agreement to amend the maximum amount of the facility to $2.0 million repayable no later than December 31, 2019. |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | |
Disclosure of operating segments [line items] | ||||
Revenue | $ 39,167 | $ 40,167 | $ 83,432 | $ 85,953 |
Tea [Member] | ||||
Disclosure of operating segments [line items] | ||||
Revenue | 29,306 | 27,589 | 62,730 | 60,819 |
Tea Accessories [Member] | ||||
Disclosure of operating segments [line items] | ||||
Revenue | 6,629 | 8,787 | 14,284 | 17,501 |
Food And Beverages [Member] | ||||
Disclosure of operating segments [line items] | ||||
Revenue | $ 3,232 | $ 3,791 | $ 6,418 | $ 7,633 |
SEGMENT INFORMATION (Details 1)
SEGMENT INFORMATION (Details 1) - CAD ($) $ in Thousands | Aug. 03, 2019 | [1] | Feb. 02, 2019 |
IFRS Segment Reporting Information [Line Items] | |||
Property and equipment and intangible assets | $ 96,545 | $ 29,466 | |
Canada Segment [Member] | |||
IFRS Segment Reporting Information [Line Items] | |||
Property and equipment and intangible assets | 74,519 | 27,996 | |
United States Segment [Member] | |||
IFRS Segment Reporting Information [Line Items] | |||
Property and equipment and intangible assets | $ 22,026 | $ 1,470 | |
[1] | Includes Right-of-use assets of $47,579 in Canada and $20,651 in US. |
SEGMENT INFORMATION (Details 2)
SEGMENT INFORMATION (Details 2) - CAD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2018 | Aug. 03, 2019 | Aug. 04, 2018 | Aug. 03, 2018 | |
Segment information | ||||||
Sales | $ 39,167 | $ 40,167 | $ 83,432 | $ 85,953 | ||
Cost of sales | 17,362 | 22,824 | 35,291 | 45,918 | ||
Gross profit | 21,805 | 17,343 | 48,141 | 40,035 | ||
Selling, general and administration expenses (allocated) | 27,237 | 31,350 | 55,946 | 55,746 | ||
Results from operating activities | (5,432) | (14,007) | (7,805) | (15,711) | ||
Finance costs | 1,781 | 78 | 3,608 | 157 | ||
Finance income | (195) | (215) | (386) | (452) | ||
Loss before income taxes | (7,018) | $ (13,870) | (11,027) | $ (15,416) | ||
Operating Segments [Member] | ||||||
Segment information | ||||||
Sales | 39,167 | $ 40,167 | 83,432 | $ 85,953 | ||
Cost of sales | 17,362 | 22,824 | 35,291 | 45,918 | ||
Gross profit | 21,805 | 17,343 | 48,141 | 40,035 | ||
Selling, general and administration expenses (allocated) | 19,858 | 17,774 | 40,238 | 35,316 | ||
Impairment of property and equipment | 2,560 | 2,560 | ||||
Impact of onerous contracts | 714 | (802) | ||||
Results from operating activities before corporate expenses | 1,947 | (3,705) | 7,903 | 2,961 | ||
Selling, general and administration expenses (non-allocated) | 7,379 | 10,302 | 15,708 | 18,672 | ||
Results from operating activities | (5,432) | (14,007) | (7,805) | (15,711) | ||
Finance costs | 1,781 | 78 | 3,608 | 157 | ||
Finance income | (195) | (215) | (386) | (452) | ||
Loss before income taxes | (7,018) | (13,870) | (11,027) | (15,416) | ||
Operating Segments [Member] | Canada Segment [Member] | ||||||
Segment information | ||||||
Sales | 30,340 | 31,850 | 64,530 | 68,382 | ||
Cost of sales | 13,925 | 17,724 | 28,039 | 35,540 | ||
Gross profit | 16,415 | 14,126 | 36,491 | 32,842 | ||
Selling, general and administration expenses (allocated) | 15,002 | 13,538 | 30,185 | 26,922 | ||
Impairment of property and equipment | 2,371 | 2,371 | ||||
Impact of onerous contracts | 1,188 | 996 | ||||
Results from operating activities before corporate expenses | 1,413 | (2,971) | 6,306 | 2,553 | ||
Operating Segments [Member] | United States Segment [Member] | ||||||
Segment information | ||||||
Sales | 8,827 | 8,317 | 18,902 | 17,571 | ||
Cost of sales | 3,437 | 5,100 | 7,252 | 10,378 | ||
Gross profit | 5,390 | 3,217 | 11,650 | 7,193 | ||
Selling, general and administration expenses (allocated) | 4,856 | 4,236 | 10,053 | 8,394 | ||
Impairment of property and equipment | 189 | 189 | ||||
Impact of onerous contracts | (474) | (1,798) | ||||
Results from operating activities before corporate expenses | $ 534 | $ (734) | $ 1,597 | $ 408 |
FINANCIAL RISK MANAGEMENT (Deta
FINANCIAL RISK MANAGEMENT (Details) - Currency Risk - Foreign Exchange Risk [Member] - CAD ($) $ in Thousands | Aug. 03, 2019 | Feb. 02, 2019 |
Statement Line Items [Line Items] | ||
Foreign exchange exposure, cash | $ 918 | $ 267 |
Foreign exchange exposure, accounts receivable | 1,222 | 1,142 |
Foreign exchange exposure, accounts payable | $ 1,931 | $ 3,869 |
FINANCIAL RISK MANAGEMENT (De_2
FINANCIAL RISK MANAGEMENT (Details Narrative) - CAD ($) $ in Thousands | 6 Months Ended | |||||
Aug. 03, 2019 | Feb. 03, 2019 | Feb. 02, 2019 | Aug. 04, 2018 | May 03, 2018 | Feb. 03, 2018 | |
Statement Line Items [Line Items] | ||||||
Cash | $ 29,725 | $ 42,074 | $ 42,074 | $ 39,623 | $ 53,868 | $ 63,484 |
Currency Risk - Foreign Exchange Risk [Member] | ||||||
Statement Line Items [Line Items] | ||||||
Increase (decrease) in CAD against USD | 5.00% | |||||
Increase (decrease) in net loss due to change in exchange rate | $ 10 | |||||
Liquidity Risk [Member] | ||||||
Statement Line Items [Line Items] | ||||||
Cash | 29,725 | |||||
Revolving credit faciltiy, borrowing capacity | $ 15,000 | |||||
Trade and other payables payment period | 90 days |