LFL sales drop in Q1
TORONTO – A softening macro-economic environment, primarily in Ontario, was cited as the primary reason why sales slumped in the first three months of 2023 for Leon’s Furniture Limited (LFL), this country’s largest full-line furniture, mattress and appliance retailer which unveiled its quarterly results earlier this month.
The publicly held merchant said system wide sales for the three months ended March 31, 2023, totalled $625.6 million, down 5.6% when compared to $662.9 million for the same period last year.
Revenue generated by the company’s 202 corporate stores was set at $513.0 million, a decrease of 6.3% from the $547.2 million for the comparable period as same store sales fell 5.9%.
Meanwhile, sales by its 101-unit strong franchise network were $112.6 million, a decline of 2.7% from last year’s $115.7 million.
E-commerce sales also sagged during the first quarter, accounting for an estimated 13% of corporate sales, compared to 15% for the same quarter of 2022. In dollar terms, that’s a 18.8% drop to an estimated $66.7 million from $82.1 million. It should be noted, LFL doesn’t detail these figures in either its quarterly or annual reports.
However, management noted that despite the overall revenue decline, the mattress category showed significant strength in the first quarter of 2023, which they attributed to LFL’s recently signed partnership with Resident, billed as the largest direct-to-consumer mattress company in North America. In a deal announced last December, the Indiana-based mattress producer will see its Nectar and DreamCloud mattress brands sold on the floors of most Leon’s and The Brick stores from coast-to-coast.
Indeed, LFL president and chief executive officer Mike Walsh pointed out in his remarks to shareholders that launch of the Resident program “outperformed our expectations and theirs, during the quarter.”
Net income for the first quarter was $12.9 million or 19 cents per share, compared to $24.8 million or 37 cents per share – a 48.7% drop on a per share basis.
Walsh noted the first quarter “was a challenging period for retailers across Canada and LFL was no exception. During the quarter, lower retail sales combined with higher retail financing costs drove lower bottom-line results compared to the same period last year, despite strong gross margins.
“While we are not happy with this result on an absolute basis, LFL is very well-positioned, and we are optimistic looking forward through the remainder of the year,” he continued, adding, “Our team successfully reduced higher cost inventory during Q4, and as a result we are currently sourcing better pricing on our lineup of products, with freight costs continuing to decrease. This enables us to be nimble, leveraging our national omnichannel presence and marketing expertise to do what we do best – generate revenue within the context of the market, manage gross margins, drive efficiencies and produce bottom line results.”
At the end of March, LFL operated a total of 303 brick-and-mortar stores under five different banners including Leon’s, The Brick, The Brick Mattress Store, Brick Outlet and Appliance Canada. It also operates six ecommerce sites: leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservices.com and applicancecanada.com.
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