LFL pleased after challenging Q1
TORONTO- Leon’s Furniture Limited, this country’s largest furniture retailer, appears optimistic after emerging from the first quarter of 2019 on solid financial footing.
The brand says revenue in the quarter was effectively at par at $499.7 million compared to $500.7 million in the prior year’s first quarter, but that gross profit margin improved by 46 base points to 43.26 per cent from 42.80 per cent in the first quarter of 2018, with a favourable product mix of furniture sales.
The company says adjusted diluted earnings per share grew by 21.4 per cent to $0.17 year-over-year from $0.14, while adjusted earnings before interest, tax, depreciation and amortization increased 90.7% to $50.7 million from $26.6 million. Adjusted earnings increased by 8.1% to $28.7 million.
In the first quarter of 2019, The Brick division of the company opened two corporate stores.
“I am very proud of all the Company’s associates across the country for generating solid bottom line results in what was a challenging quarter in our industry. In Q1, we invested in targeted and innovative marketing initiatives from which we expect to receive further benefits throughout the year,” Edward Leon, President and Chief Executive Officer of LFL Group, said in a statement.
“2019 and 2020 will be exciting years for our Company, with plans to continue to leverage our solid online and national bricks & mortar footprint into results for shareholders, while strategically growing our presence on both Canadian coasts.”
Leon says the company’s e-commerce retail channel continues to generate a double-digit growth rate and credits its success to the brand’s internal development team and the “rapid and successful platform shift” Leon’s initiated and completed in 2018. Leon says the platform shift enabled the company to focus on value-add customization, which drove traffic growth and increased customer satisfaction.
The company is also expanding Leon’s banner in the BC market by introducing a smaller-scale, tech-forward prototype store in Coquitlam, which is scheduled to open in the second half of the year.
More expansion is on the way, with plans to expand the presence of The Brick division in the Maritimes with three new full-line corporate stores over the next two years.
The company says that selling, general and administrative (SG&A) expenses as a percentage of revenue in the current quarter were relatively flat as compared to the prior year’s first quarter when normalized for the impact of IFRS 16 in the current quarter. The implementation of IFRS 16 in the quarter resulted in added depreciation and amortization expense which was approximately $522,000 greater than the reduction in rent expense. Normalized for these impacts, the company’s SG&A as a percentage of revenue in the current quarter was 39.36% as compared to 39.32% in the prior year’s quarter.
“This was due to effectively managing payroll costs and digital commerce expenses while at the same time increasing advertising spend in the current quarter that was targeted to drive customers to the Company’s websites and retail stores,” the company said in a statement.
The company says it’s optimistic about the company’s future going forward.
“Despite the uncertainty over certain key economic indicators, we believe that the overall economy remains relatively strong. Although it is difficult to gauge future consumer confidence and what impact it may have on retail, we remain confident that our sales and profitability will increase. Given the Company’s strong financial position, our principal objective is to increase market share and profitability. We remain focused on our commitment to continuously invest in digital innovation that will drive more customers to both our online eCommerce presence and our 302 physical locations across Canada.”