LFL sales flat for 2022

TORONTO – Leon’s Furniture Limited (LFL) remains this country’s largest full-full line furniture retailer despite a sag in fourth quarter revenue coupled with a somewhat bigger drop in net income and earnings per share. Full year results were essentially flat when compared to 2021 but were still considerably higher than in pre-pandemic 2019.

The parent of Leon’s, Appliance Canada and The Brick said system-wide sales for the three months ending December 31, 2022, were $804.4 million, off 2.0% from the $820.5 million for same period of 2021.

Corporate stores sales were $661.2 million, down 1.3% from $669.8 million as same store sales fell 1.0%. E-commerce sales were estimated at 9% of revenue – roughly $59.5 million. That’s half of the estimated $129.3 million those platforms generated during the fourth quarter of 2021.

“The current quarter compares favorably to the company’s historical results before the COVID pandemic began in the early part of the 2020 fiscal year,” management reported to shareholders. “The company is continuing to show increases across all product categories for the three months ended December 31, 2022, when compared to pre-pandemic results.”

They noted sales were 6.4% higher than those achieved in the fourth quarter of pre-pandemic 2019.

Meanwhile, sales by the retailer’s 102-unit franchise network totalled $143.2 million, down 5.0% from the prior year’s $150.7 million.

Net income for the fourth quarter of 2022 was $43.2 million or 65 cents per diluted share as compared to $56.5 million or 73 cents per diluted share – an 11.0% decline on a per diluted share basis.

For the full year ending December 31, 2022, LFL system-wide sales were $3.05 billion, off a very slight 0.2% from the previous year’s $3.06 billion. However, they were 11.9% higher than the pre-pandemic year of 2019.

Based on the latest data from Statistics Canada, this gave Leon’s Furniture Limited a market share of 21.3% last year, down slightly from the prior year’s 22%.

Corporate store sales tallied $2.52 billion, up a very modest 0.2% from $2.51 billion the year before as same store sales were essentially flat. Management attributed the roughly $10 million uptick in sales to strong performance in the mattress category.

E-commerce accounted for $245 million – or 9.7% of total revenue. While still higher than before the pandemic’s onset in 2020, it’s a 60% drop from the estimated $603 million in digital sales in 2021 and seen as a sign consumers really do prefer buying furniture, mattresses, appliances and electronics in-store.

Franchise network sales were $535.3 million for the year, a 1.8% slide from 2021’s $544.9 million.

Net income for the year was $179.4 million or $2.64 per diluted share compared to $207.2 million or $2.62 per diluted share – an 0.8% advance on a per share basis.

It should be noted there were almost 14% fewer issued and outstanding shares in the company at the end of 2022 compared to the prior year. LFL spent $200 million during the fourth quarter of 2021 buying back some eight million shares which it cancelled in January 2022.

“During 2022, our LFL team continued to execute in a progressively more challenging macro and customer environment,” LFL president and chief executive officer Mike Walsh said in his report to shareholders. “For the year, we generated $3.1 billion in total system-wide sales and $2.60 in adjusted diluted earnings per share, both similar to the record results of 2021, which benefitted from COVID-related spending growth primarily focused on the home.”

Effective use of promotions enabled the company to reduce inventory by approximately $91 million during the fourth quarter, putting it in a stronger position to face whatever winds of change it  faces in 2023.

“Our company was built upon environments like this. With dominant national scale, coast -to-coast integration, Canada’s most recognized retail banners and related online properties, our team has all the tools at its disposal to continue generating growth and profitability for shareholders,” Walsh continued, adding, “We see plenty of opportunity to leverage our scale into additional revenue. Our recent agreement with Resident, the largest direct-to-consumer mattress company in North America, to offer Nectar and DreamCloud mattresses both online and in-store at Leon's and The Brick, is one example of this.

“For 2023, we will remain focused on growing the top line in the context of the market, maintaining gross margins within a reasonable range and executing on our multi-year efficiency program to drive profitability. We believe we are entering 2023 on solid footing, positioned to gain share as retail sales in general continue to disproportionately feel pressure in the current market environment.”

At the end of 2022, LFL operated 304 stores – including 102 franchises - across five banners including Leon’s, Appliance Canada, The Brick, The Brick Mattress Store and Brick Outlet.

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