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Category: Stock Market and DavidsTea
Date: 1 October 2019 Stock Price: $2.06 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of DavidsTea a branded beverage company focusing on selling various types of teas including speciality teas such as Matcha teas.
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About DavidsTea
DAVIDsTEA is a fast-growing branded beverage company, offering a differentiated selection of proprietary loose-leaf teas, pre-packaged teas, tea sachets and tea-related gifts and accessories through our DAVIDsTEA stores and our website, davidstea.com. We are building a brand that seeks to expand the definition of tea with innovative products that consumers can explore in an open and inviting retail environment. The passion for and knowledge of tea permeates our culture and is rooted in an excitement to explore the taste, health and lifestyle elements of tea. We design our stores with a modern and simple aesthetic that, coupled with our teal-colored logo, create an inviting atmosphere and stand in stark contrast to common perceptions of tea as a more traditional product. We strive to make tea a multi-sensory experience by facilitating interaction with our products through education and sampling so that our customers appreciate the compelling attributes of loose-leaf teas as well as the ease of preparation. Our in-store ‘‘Tea Guides’’ help novice and experienced tea drinkers alike select from the approximately 150 varieties of premium teas and tea blends featured on our ‘‘Tea Wall,’’ which is the focal point of our stores. We replicate our store experience online by engaging users with rich content that allows them to easily explore their options amongst our many tea and tea-related offerings.
Our subsidiaries have built powerful brand name awareness for their upscale environments and enjoyable adult entertainment. Anna Nicole Smith met her oil billionaire husband while dancing at Rick's Cabaret and many performers have become Penthouse Pets and Playboy Playmates. Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies since 2008. We have been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York. Options in RICK are traded on the Chicago Board of Options Exchange (CBOE).
Our subsidiaries have built powerful brand name awareness for their upscale environments and enjoyable adult entertainment. Anna Nicole Smith met her oil billionaire husband while dancing at Rick's Cabaret and many performers have become Penthouse Pets and Playboy Playmates. Forbes named RCI Hospitality Holdings one of America's 200 Best Small Companies since 2008. We have been profiled in The Wall Street Journal, Fortune, MarketWatch, Corporate Board Member, Smart Money, USA Today, The New York Daily News and other publications. The Rick's Cabaret-NYC Steakhouse is listed in Zagat's New York Nightlife and included in the TONY 100 list of fine Manhattan dining establishments by Time Out New York. Options in RICK are traded on the Chicago Board of Options Exchange (CBOE).
Overview of DavidsTea's latest earnings report
- Total revenues: $39.167 million (up from $40.167 million for the same quarter of the previous year
- Revenue decreased by -2.48% over the last 12 months
- Cost of sales: $17.362 million (up from $23.161 million for the same quarter of the previous year)
- Cost of sales decreased by -25.03% over the last 12 months
- Net loss -$7.018 million (up from a loss of -$9.998 million for the same quarter of the previous year)
- Diluted loss per share: -$0.27 (up from -$0.39 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 25.992 million (up from 25.635 million for the same quarter of the previous year)
- Cash and cash equivalents: $29.752 million
- Cash and cash equivalents per share: $1.14
- Cash and cash equivalents makes up 55.56% of DavidsTea's market capital
- Cash provided by operating activities: $3.083 million
- Cash provided by operating activities per share: $0.118
DavidsTea's management commentary on the results and earnings guidance
MONTREAL, Sept. 17, 2019 (GLOBE NEWSWIRE) -- DAVIDsTEA Inc. (Nasdaq:DTEA) (DAVIDsTEA or “the Company”), the leading tea merchant in North America, announced its second quarter results for the period ended August 3, 2019 (“Fiscal 2019”). Unless otherwise indicated, the Company’s results for the second quarter of Fiscal 2019 reflect the adoption of IFRS 16, as described below under “Adoption of IFRS 16 - Leases”. All numbers are expressed in Canadian dollars.
“Our second quarter results highlight the solid performance of our e-commerce and wholesale channels with a combined growth of 53% over last year, reflecting the benefits of recent initiatives. Nearly a year into the launch of our tea sachets in major Canadian grocery chains, sales continue to surpass our expectations and reflect high demand for our brand wherever available. In addition, e-commerce continues to be our fastest growing channel as we continue to improve customer engagement,” stated Herschel Segal, Founder, Executive Chairman and Interim Chief Executive Officer.
“In the first half of 2019, we concentrated our efforts on delivering the best fine tea on the market across all of our distribution channels. We also streamlined our product portfolio to simplify and improve the customer experience. While the second quarter is generally most impacted by seasonality, we nonetheless maintained a strong cash position driven by positive cash flow from operations, optimized inventory levels and a reduction in selling, general and administrative expenses,” said Frank Zitella, Chief Financial and Operating Officer.
“We look forward to significantly expanding our wholesale distribution capabilities in the coming months with the availability of DAVIDsTEA tea sachets in over 2,500 third-party retail locations across Canada. We are also launching several exciting tea collections including a new and expanded wellness offering. I am thrilled by what the leadership team has been able to achieve, and I am confident that we are in a good position ahead of the holiday season. While we continue to face challenges, we are taking tangible steps towards a return to growth and profitability,” concluded Mr. Zitella.
“Our second quarter results highlight the solid performance of our e-commerce and wholesale channels with a combined growth of 53% over last year, reflecting the benefits of recent initiatives. Nearly a year into the launch of our tea sachets in major Canadian grocery chains, sales continue to surpass our expectations and reflect high demand for our brand wherever available. In addition, e-commerce continues to be our fastest growing channel as we continue to improve customer engagement,” stated Herschel Segal, Founder, Executive Chairman and Interim Chief Executive Officer.
“In the first half of 2019, we concentrated our efforts on delivering the best fine tea on the market across all of our distribution channels. We also streamlined our product portfolio to simplify and improve the customer experience. While the second quarter is generally most impacted by seasonality, we nonetheless maintained a strong cash position driven by positive cash flow from operations, optimized inventory levels and a reduction in selling, general and administrative expenses,” said Frank Zitella, Chief Financial and Operating Officer.
“We look forward to significantly expanding our wholesale distribution capabilities in the coming months with the availability of DAVIDsTEA tea sachets in over 2,500 third-party retail locations across Canada. We are also launching several exciting tea collections including a new and expanded wellness offering. I am thrilled by what the leadership team has been able to achieve, and I am confident that we are in a good position ahead of the holiday season. While we continue to face challenges, we are taking tangible steps towards a return to growth and profitability,” concluded Mr. Zitella.
DavidsTea (NASDAQ: DTEA) stock price history
The image below, obtained from Google, shows the stock price history of DavidsTea (NASDAQ: DTEA) since its listing in June 2015. And it's been a pretty torrid time for DavidsTea. At listing the stock was trading at around $27 a stock and it is currently trading at $2.06 a stock. So over a 5 year period the stock of DavidsTea decreased by 92.3%. The stock is however trading at closer to its 52 week low than it is to its 52 week high, which is a indication to us that the short term sentiment and momentum of DavidsTea (NASDAQ: DTEA) is very negative.
DavidsTea (NASDAQ:DTEA) latest stock valuation
So what is DavidsTea (NASDAQ: DTEA) stock worth based on the release of their latest earnings report? It is extremely hard to value a stock that is loss making and generating very little cash. However the company generated a little bit of cash and they have cash on their balance sheet which provided us with enough information to do a valuation on DavidsTea. Based on DavidsTea (NASDAQ: DTEA) earnings report for 2nd quarter of their 2019 fiscal year our valuation models provide a target (full value) price for DavidsTea at $1.90 a stock. We therefore believe that DavidsTea is overvalued.
We usually recommend long term fundamental or value investors buy a company's stock for at least 10% less than our target (full value) price, which for DavidsTea right now is $1.90. A good entry point would therefore be at $1.70 or below. Considering that DavidsTea is loss making and is well above our target and suggest entry price for the stock we rate DavidsTea stock as avoid.
We usually recommend long term fundamental or value investors buy a company's stock for at least 10% less than our target (full value) price, which for DavidsTea right now is $1.90. A good entry point would therefore be at $1.70 or below. Considering that DavidsTea is loss making and is well above our target and suggest entry price for the stock we rate DavidsTea stock as avoid.