Thank you, Sarah and good afternoon everyone.
We have also just celebrated DAVIDsTEA’s 13th anniversary. After a year of turnaround and transformation, we can be proud of continuing our original mission of making tea fun and accessible to all. I’m so proud that we have created one of the most recognized and trusted brands in Canada. I’m continually amazed that the original drive for creativity and tea excellence continues today and is as strong as ever. There would be no DAVIDsTEA without the belief in that mission by our Co-founder and principal shareholder, Herschel Segal, whose contribution over the last 13 years have been invaluable to the building of this Company. On behalf of the whole team and the Board of Directors, I want to acknowledge that contribution and give a heartfelt thanks to Herschel for helping to build, guide the growth and the steadfast belief in the power of tea to change the world. He has earned his retirement from the Board and we are pleased to be able to continue to count on his support as a strategic adviser. And to fill the Board vacancy, the Board has appointed Jane Silverstone Segal as director and Chair, effective immediately. Jane brings her leadership, knowledge of DAVIDsTEA and deep experience in the retail industry to the Board and will help guide DAVIDsTEA as we fulfill our ambition of becoming a global tea company.
Our transformational journey continues and it’s truly been a team effort.
Our associates share a common passion, love and knowledge of team. We thank each and every one of them, our team members for their commitment to DAVIDsTEA, and we all believe that the best is yet to come.
With the CCAA process now behind us, the management team can fully dedicate its time and energy towards unleashing the full value and potential of the DAVIDsTEA brand.
Looking to the future and to support our digital first strategy, we’re making strategic investments in our technology stack and in our distribution capabilities. We want to be able to provide our customers with an engaging, personalized and ultimately, a frictionless customer experience, both from a product and service excellence perspective, creating a more meaningful and personal connection with consumers and improving the speed and accuracy of purchase fulfillment are key factors that will further distinguish us and continue to delight our loyal customers in addition to helping us acquiring new tea lovers. The decline in second quarter sales reflects last year’s pandemic-fueled surge of online sales and a transition back to omni-channel sales this year, which includes the contribution of our 18 flagship stores in Canada.
Our results were also impacted by necessary investments in our operations to accelerate our transformation to a digital-first company.
Now, looking at our Q2 results in more detail, sales decreased 18.6% to $18.7 million from $23 million in the prior year quarter. Brick-and-mortar sales for the quarter compared favorably to the prior year quarter by $3.1 million since no stores were opened last year. Sales from e-commerce and wholesale channels decreased by $7.4 million or 32.2% to $15.6 million, the closure of all stores last year created an initial pent-up demand on the e-commerce side of the business. E-commerce and wholesale sales represented 83.4% of sales compared to 100% of sales in the prior year quarter.
For the quarter, gross profit was $8 million, down 4.1% or $0.3 million from the prior year due primarily to lower sales, which was substantially offset by lower delivery and distribution costs and lower lease expenses compared to the previous year quarter.
As a percentage of sales, gross profit increased to 42.7% for the quarter compared to 36.2% last year. And for the quarter, SG&A increased by $1.7 million or 22.6% to $9.1 million, while adjusted SG&A was up $1.5 million and results from an increase in online marketing expense, software costs and staffing as we continue to pursue our digital-first strategy.
As a percentage of sales, adjusted SG&A increased to 53.5% from 37.2% in the prior year quarter. In Q2, we recognized a non-cash gain of $75.6 million from the settlement of our liability subject to compromise and is included in EBITDA, which was $75.5 million, up by $70.1 million from $5.4 million in Q2 of last year. Adjusted EBITDA for the quarter, which excludes the impact of restructuring plan activities, stock-based compensation expense, impairment of property and equipment and right-of-use assets, wage subsidies received from the Canadian government under the COVID-19 economic response plan and software implementation costs, was negative $0.6 million compared to $1.4 million in Q2 of 2020. The decrease in adjusted EBITDA of $2 million reflects the decline in sales from the last year’s pandemic-fueled surge of online sales, planned increases in online marketing and staffing costs, partially offset by an improved delivery and distribution cost structure. With a large, addressable and growing market, we are confident in our continuing transformation efforts to realign the business model to primarily an e-commerce and wholesale distributor of the finest tea and accessories.
As at July 31, 2021, we had a cash position of $12.1 million and working capital of $43 million.
With the completion of all matters in connection with CCAA proceedings, we have a healthy cash position to support continuing innovation, meet our working capital needs and make the right strategic investments to grow our business as we drive towards sustained profitable growth. In conclusion, our vision is to become the world’s most innovative tea company, inspiring greater wellness and sustainability.
Our past success was supported by the pillars of an exceptional brand and innovative blends of high-quality teas, combined with a unique and exceptional in-store experience.
Our goal is to replicate that success in the digital world and through the right partnerships with other retailers, supported by best-in-class technology and customer engagement.
As indicated before, 2021 will be a year of rebuilding. We look forward to becoming a leaner, more agile and more responsive DAVIDsTEA that is market-driven and focused on growing revenue.
Our drive towards sustained profitable growth is directed by making the right strategic investments that create demand for our products in establishing world-class fulfillment and by continuing to surprise our customers through quality innovations that we bring to the marketplace. In short, we are thrilled about the future of DAVIDsTEA. This concludes our remarks, and thank you for joining us today. Have a wonderful day. [No Q&A session for this event]