The Brick turns it around in 2010
EDMONTON (22 March 2011) - Sales for The Brick Group Income Fund saw double digit growth in 2010 as the country's largest full-line furniture and appliance retailer clawed its way back out of the black after two consecutive years of fairly heavy losses.
"I am extremely pleased with the Brick Group's fourth quarter and annual 2010 financial results," Brick Group president and chief executive officer Bill Gregson said in a statement. "Our quarterly results remained strong throughout the year, ending with record setting EBITDA of $87.2 million, the highest in the Brick Group's history and $69.8 million cash in the bank."
For the three months ending Dec. 31, the group's consolidated revenue was $421.4 million, up 3.6% over the same period in 2009. Net income was $13.1 million or 23 cents per trust unit, a 4.5% increase from $12.2 million 22 cents per trust unit.
Corporate sales and revenues were $372.2 million, a gain of 3.0% year-over-year as same store sales grew 2.0%.
The group's star performers were its 54 franchise stores which generated sales of $49.2 million during the final three months of 2010, a gain of 8.8%. Same store sales for this group were up 5.7%.
Consolidated same store sales growth was 2.5% compared to negative 7.9% in 2009.
The company noted its gross margin improved from 42.5% to 44.1% as EBITDA (earnings before interest, taxes, depreciation and amortization) jumped 44.9% to $5.8 million.
Brick Group management attributed the margin improvement to a shift in its product mix towards the high margin furniture and mattress category. Increasing early payments to vendors, flooring less clearance inventory and improved vendor rebates also contributed to the higher margin rate.
At the end of the year the company has cash and cash equivalents of $69.8 million and nothing drawn against its asset-based credit facility.
Sales by the company's retail segment - essentially product on the floor - were up 2.4% in the fourth quarter to $350.7 million.
Meanwhile, the financial services segment - including extended warranties, fabric protection and other added-value products - saw gains of 14.1% to $21.5 million.
For the full year also ending Dec. 31, consolidated sales totalled $1.54 billion, an increase of 12.7% year-over-year. Consolidated same store sales growth was 10.5% for the year, compared to negative 19.9% for 2009.
The franchise division saw its sales up 17.0% to $165.6 million while corporate sales advanced 12.2% to $1.37 billion.
The Brick's retail segment has year-end sales of $1.29 billion, a gain of 12.0% while financial services gained 15.3% to $84.2 million.
Although pleased with 2010 results, Gregson played down the prospects for 2011.
"Management is anticipating an increasingly competitive market in 2011, and one that will continue to be largely unpredictable," he told a conference call. "The economic outlook has been forecasted to remain in stable-recovery mode, with GDP growth of 2.9% and historically low interest rates."
Although consumer spending is forecast to rise 2.7% this year - with durables set to grow 5.0% -- higher unemployment rates, stricter mortgage and financing rules, and anticipated decreases in housing starts and home re-sales will probably dampen expectations.
Gregson noted same stores sales for several competing retailers fell in both the third and fourth quarters. Sales in the first half of 2010 were driven by the now-ended Home Renovation Tax Credit and by consumers hurrying to buy in advance of sales tax changes in Ontario and British Columbia that kicked-in on July 1.
"Given these considerations, we acknowledge that sales in first half of 2011 may not match the robust levels experienced in the first half of 2010, and further believe that sales growth is more likely to reflect historically normal levels in the second half of 2011," Gregson said.
This year the Brick's management team will focus on improving same store sales, enhancing the customer service model and training while investing in information systems and improved cost control.
On Jan. 1, 2011, The Brick Group Income Fund converted from an income trust to a public corporation called The Brick Ltd.