DAVIDsTEA Inc. (NASDAQ: DTEA) shares climbed 12.5% to $2.25 in the after-hours trading as the company revealed new appointments and the Earnings results.
The company reported third-quarter 2020 results for the period ending October 31, 2020. It also announced the appointment of Sarah Segal as Chief Executive Officer and Frank Zitella as President. Herschel Segal will be stepping down as interim CEO and will remain Chairman of the Board of Directors. Frank Zitella will remain CFO pending the appointment of a new CFO. The appointments of Sarah Segal and Frank Zitella will be effective from December 16, 2020.
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During the three-month period ended October 31, 2020, a gross profit of $10.8 million declined by $10.5 million or 49.3% compared to the prior-year quarter primarily due to the decline in sales. Since the Company is shifting toward a digital-first strategy, the gross profit margin was drastically impacted by delivery and distribution cost since the prior period was mainly devoted to retail sales distribution. Having increased e-commerce sales significantly, delivery and distribution expenses increased by 4.2 million, lowering the gross profit percentage. For the three months ended October 31, 2020, gross profit as a percentage of sales dropped to 41.3% from 54.1% the year prior.
In the three months ended October 31, 2020, SG&A decreased $23.6 million or 76.8% to $7.1 million. Without the 1.4 million wage subsidy received under the Canadian government’s COVID-19 Economic Response Plan in Fiscal 2020 and the $21 million impairment of property and equipment and right-of-use assets in Fiscal 2019, Adjusted SG&A decreased by $20.1 million. As part of our restructuring plan, the company terminated the leases for all of our North American stores except 18 Canadian stores, which reopened on August 21, 2020.
The quarter’s operating income was $14.4 million compared to a loss of $9.3 million for the previous year quarter.
During the three months ending October 31, 2020, finance costs amounted to almost nil, a decrease of $1.7 million from the prior-year quarter. Interest expense came from lease liabilities and decreased slightly from the prior-year quarter.
In the most recent quarter, $0.1 million’s finance income was derived principally from interest on cash on hand.