Over 70% Year-Over-Year Growth in Revenue, 15 Store Openings and Continued Expansion of e-Commerce Revenue
MONTREAL, Aug. 14, 2017 /CNW/ - LXRandCo, Inc. ("LXRandCo" or the "Company") (TSX: LXR, LXR.WT), a rapidly growing, international omni-channel retailer of branded vintage luxury handbags and accessories, today announced financial results for the second quarter ended June 30, 2017.
"Our 73% year-over-year growth in net revenue for the second quarter is the direct result of the continued successful execution of our international omni-channel strategy," said Fred Mannella, Chief Executive Officer. "We opened 15 stores, expanding our retail network to 61 stores at the end of the quarter, and remain on track to meeting our stated target of 122 by year end. At the same time, we meaningfully grew the proportion of e-Commerce revenue. Moving forward, we remain focused on new store openings with both existing and new retailer partners in North America and overseas, and driving continued expansion of our fast-growing e-commerce business, while providing an exceptional consumer experience across all of our channels."
"Our growth this quarter is indicative of the strong interest in the luxury vintage space, and our continued international expansion reaffirms the global appeal for our product offering," added Joe Mimran, Director and chair of the Company's International Business Development Committee.
Unless otherwise indicated, all amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures. See "Non-IFRS Measures" further below. For a reconciliation of non-IFRS measures to their most directly comparable measure calculated in accordance with IFRS, see "Select Consolidated Financial Information" further below.
Highlights for the Second Quarter ended June 30, 2017
(all comparable figures are for the second quarter ended June 30, 2016)
- Net revenue increased 73% to $7.2 million from $4.1 million.
- Opened 15 stores, offset by one closure, expanding the retail network to 61 stores.
- E-Commerce revenue increased to 6.2% of net revenue from 4.3%.
- Gross profit increased 60% to $2.0 million from $1.3 million.
- Adjusted EBITDA (a non-IFRS measure) was $(0.6) million, compared to $(0.2) million.
- Adjusted Net Loss (a non-IFRS measure) was $0.9 million, compared to $0.5 million.
- The number of employees increased to 223.
Discussion of Second Quarter Results
The following provides an overview of LXRandCo's financial results during the three-month period ended June 30, 2017 compared to the three-month period ended June 30, 2016.
Net Revenue
Net revenue increased by 73% to $7.2 million in the three-month period ended June 30, 2017 from $4.1 million in the three-month period ended June 30, 2016. E-Commerce revenue as a percentage of net revenue was 6.2% in the three-month period ended June 30, 2017 compared to 4.3% in the three-month period ended June 30, 2016.
The increase in net revenue was primarily attributable to the increase in sales from LXRandCo operating 39 more stores by the end of the three-month period ended June 30, 2017 compared to the number of stores at the end of the three-month period ended June 30, 2016. LXRandCo's retail network consisted of 61 stores as at June 30, 2017 compared to a retail network of 22 stores as at June 30, 2016. Store openings in the three-month period ended June 30, 2017 consisted of 15 Retail Stores, and there was one Retail Store closure. The increase in net revenue was also due to an increase in wholesale revenue from fewer clients, and an increase in e-Commerce revenue which was primarily attributable to a more favourable customer experience as a result of certain initiatives such as the Company's new web portal which was released in mid-March 2017 and the ongoing benefit of increased marketing activity undertaken in the first quarter of 2017.
Gross Profit
Gross profit increased by 60% to $2.0 million in the three-month period ended June 30, 2017 from $1.3 million in the three-month period ended June 30, 2016. The change was primarily attributable to the increase in net revenue.
Gross profit margin was 28.4% of net revenue in the three-month period ended June 30, 2017, compared to 30.8% of net revenue in the three-month period ended June 30, 2016. The decrease in gross profit margin was primarily due to the implementation of an enhanced commission structure for retail employees at store level, investments in branding, changes in product mix related to the sale of lower margin products, increased freight costs associated with international expansion and e-Commerce activity, the impact of a weaker US dollar against the Canadian dollar in 2017 as compared to the same period in 2016, and promotion activities undertaken in the quarter.
Net Loss
Net loss was $16.4 million in the three-month period ended June 30, 2017, compared to a net loss of $0.2 million in the three-month period ended June 30, 2016. The increase in net loss was driven by factors related to the acquisition of LXR Produits de Luxe International Inc. ("LXR International") (the "LXR Acquisition"), in particular, the impact of a non-cash charge of excess of fair value over net assets acquired, and non-recurring acquisition costs.
Adjusted Net Loss
Adjusted Net Loss was $0.9 million in the three-month period ended June 30, 2017, compared to an Adjusted Net Loss of $0.5 million in the three-month period ended June 30, 2016. This increase was primarily a result of a decrease in gross profit margin and higher SG&A expenses resulting from the rapid expansion of LXRandCo's retail network.
Adjusted EBITDA
Adjusted EBITDA was $(0.6) million in the three-month period ended June 30, 2017, compared to $(0.2) million in the three-month period ended June 30, 2016.
Change of Auditor
In connection with the LXR Acquisition, the auditor of LXR International, Ernst & Young LLP, has been appointed the auditor of the Company and PricewaterhouseCoopers LLP has ceased to be the auditor of the Company.
Consolidated Financial Statements and Management's Discussion and Analysis
The Company's unaudited interim condensed consolidated financial statements for the three-month and six-month periods ended June 30, 2017 and Management's Discussion and Analysis ("MD&A") thereon are available on the Company's web site at http://investors.lxrco.com/quarterly-financials and under the Company's profile on SEDAR at www.sedar.com.
Conference Call
A conference call to discuss second quarter results is scheduled for tomorrow, August 15, 2017 at 8:30 a.m. EST. The dial-in number to use for the conference call is +1-647-427-7450, with Conference ID 65973172. The toll free number is +1-888-231-8191.
A replay will be available shortly after the conclusion of the call and will remain available until September 15, 2017. To access the replay, please dial 1-416-849-0833 or toll free 1-855-859-2056 and use passcode 65973172.
About LXRandCo
LXRandCo is a rapidly growing, international omni-channel retailer of branded vintage luxury handbags and accessories. LXRandCo sources and authenticates high quality pre-owned products and sells them through: a retail network of stores located in major department stores in Canada, the United States and Europe; wholesale operations primarily in the United States; and its own e-Commerce website, www.lxrco.com. LXRandCo offers pre-owned products from iconic brands such as Hermès, Louis Vuitton, Gucci and Chanel, among others, at attractive prices and seeks to appeal to the aspirational lifestyle needs of women of all ages. As at June 30, 2017, LXRandCo's retail network consisted of 61 stores with nine located in Canada, 38 in the United States, 10 in the Germany and four in Belgium. LXRandCo has offices in Montréal, Québec, and Tokyo, Japan.
Non-IFRS Measures
This press release makes reference to certain non-IFRS measures. EBITDA, Adjusted EBITDA and Adjusted Net Loss are not measures recognized under international financial reporting standards ("IFRS") and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. These measures should also not be considered in isolation nor used as a substitute for measures of performance prepared in accordance with IFRS. The Company believes that these non-IFRS financial measures provide meaningful supplemental information regarding the Company's underlying performance and may be useful to investors because they allow for greater transparency with respect to key metrics used by the Company in its financial and operational decision making, normalized for non-recurring events. LXRandCO also believes that providing such information to securities analysts, investors and other interested parties who frequently use non-IFRS measures in the evaluation of issuers will allow them to better compare its performance against others in the retailing industry. Please see the Company's MD&A for a detailed description of these measures and a reconciliation of the measures to the nearest IFRS measures.
Caution Regarding Forward-Looking Statements
Certain statements in this press release are prospective in nature and constitute forward-looking information and/or forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements include, but are not limited to, statements concerning the financial results and condition of the Company, expectations regarding market trends, overall market growth rates and the Company's growth rates, future objectives and strategies to achieve those objectives, including, without limitation, store openings, store productivity, margin improvements and e-Commerce penetration as well as other statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, outlook, circumstances, performance or expectations that are not historical facts.
Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "could", "would", "will", "expect", "intend", "estimate", "forecasts", "project", "seek", "anticipate", "believes", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events and the negative of any of these terms.
Forward-looking statements reflect management's current beliefs, expectations and assumptions and are based on information currently available to management, which includes assumptions about continued revenues based on historical past performance, management's historical experience, perception of trends and current business conditions, expected future developments and other factors which management considers appropriate. With respect to the forward-looking statements included in this press release, management has made certain assumptions with respect to, among other things, the Company's ability to meet its future objectives and strategies, the Company's ability to achieve its future projects and plans and that such projects and plans will proceed as anticipated, the expected growth of the Company's e-Commerce revenue, the expected number and timing of store openings in North America and internationally, entering into new and/or expanded retail partnerships in North America and internationally, the Company's ability to source products, the Company's competitive position in the vintage luxury industry, and beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the marketing, distribution and sale of the Company's products as well as assumptions concerning general economic and market growth rates, currency exchange and interest rates and competitive intensity.
Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include, but are not limited to, those factors described under the heading "Risk Factors" in Gibraltar Growth Corporation's final non-offering long form prospectus dated May 12, 2017 and as described from time to time in the reports and disclosure documents filed by the Company with the Canadian securities regulatory agencies and commissions. Such list of risk factors is not exhaustive of the factors that may impact the forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on the forward-looking statements in this press release. As a result of the foregoing and other factors, there can be no assurance that actual results will be consistent with these forward-looking statements.
All forward-looking statements included in and incorporated into this press release are qualified by these cautionary statements. Unless otherwise indicated, the forward-looking statements contained herein are made as of the date of this press release, and except as required by applicable law, the Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Readers are cautioned that the actual results achieved will vary from the information provided herein and that such variations may be material. Consequently, there are no representations by LXRandCo that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements.
Selected Consolidated Financial Information
The following table summarizes LXRandCo's recent results for the periods indicated:
| For the Three-Months Ended |
For the Six-Months Ended |
|||||||
| Consolidated statements of loss and comprehensive loss: |
2017 |
2016 |
2017 |
2016 |
||||
| Net revenue |
$7,174,723 |
$4,136,951 |
$13,320,685 |
$7,981,827 |
||||
| Cost of sales |
5,136,572 |
2,861,279 |
9,478,026 |
5,455,033 |
||||
| Gross profit |
2,038,151 |
1,275,672 |
3,842,659 |
2,526,794 |
||||
| Selling, general and administrative expenses |
2,810,809 |
1,513,460 |
4,955,794 |
2,727,904 |
||||
| Amortization and depreciation expenses |
73,395 |
57,149 |
156,387 |
129,684 |
||||
| Results from operating activities |
(846,053) |
(294,937) |
(1,269,522) |
(330,794) |
||||
| Finance costs |
308,222 |
233,746 |
666,793 |
401,141 |
||||
| Debt extinguishment costs |
612,939 |
- |
612,939 |
- |
||||
| Foreign exchange loss (gain) |
(72,355) |
6,593 |
(3,275) |
(53,848) |
||||
| Convertible redeemable preferred share dividends |
- |
- |
61,308 |
- |
||||
| Non-recurring gain on loss of control of a subsidiary |
- |
(363,948) |
- |
(363,948) |
||||
| Non-recurring gain from a step combination |
- |
- |
(2,070,422) |
- |
||||
| Excess of fair value over net assets acquired |
14,089,742 |
- |
14,089,742 |
- |
||||
| Non-recurring acquisition costs |
774,785 |
- |
774,785 |
- |
||||
| Gain on expiration of warrants |
- |
- |
(3,195,459) |
- |
||||
| Loss before income taxes |
(16,559,386) |
(171,328) |
(12,205,933) |
(314,139) |
||||
| Income tax expense |
||||||||
| Current |
85,876 |
(186,084) |
86,996 |
14,054 |
||||
| Deferred |
(197,531) |
186,236 |
(197,531) |
- |
||||
| (111,655) |
152 |
(110,535) |
14,054 |
|||||
| Net loss for the period |
(16,447,731) |
(171,480) |
(12,095,398) |
(328,193) |
||||
| Other comprehensive income (loss) |
||||||||
| Cumulative translation adjustment |
127,987 |
34,842 |
32,263 |
69,122 |
||||
| Comprehensive loss for the period |
(16,319,744) |
(136,638) |
(12,063,135) |
(259,071) |
||||
The following table provides a reconciliation of net loss to EBITDA and Adjusted EBITDA for the periods indicated:
| For the Three-Months Ended June 30, |
For the Six-Months Ended June 30, |
|||||||
| Reconciliation of net loss to EBITDA and Adjusted EBITDA: |
2017 |
2016 |
2017 |
2016 |
||||
| Net loss |
$(16,447,731) |
$(171,480) |
$(12,095,398) |
$(328,193) |
||||
| Amortization and depreciation expense |
73,395 |
57,149 |
156,387 |
129,684 |
||||
| Finance Costs |
308,222 |
233,746 |
666,793 |
401,141 |
||||
| Income tax expense |
(111,655) |
152 |
(110,535) |
14,054 |
||||
| EBITDA |
(16,177,769) |
119,567 |
(11,382,753) |
216,686 |
||||
| Adjustments to EBITDA: |
||||||||
| Debt extinguishment costs |
612,939 |
- |
612,939 |
- |
||||
| Foreign exchange loss (gain) |
(72,355) |
6,593 |
(3,275) |
(53,848) |
||||
| Convertible redeemable preferred share dividends |
- |
- |
61,308 |
- |
||||
| Non-recurring gain on loss of control of a subsidiary |
- |
(363,948) |
- |
(363,948) |
||||
| Non-recurring gain from a step combination |
- |
- |
(2,070,422) |
- |
||||
| Excess of fair value over net assets acquired |
14,089,742 |
- |
14,089,742 |
- |
||||
| Non-recurring acquisition costs |
774,785 |
- |
774,785 |
- |
||||
| Gain on expiration of warrants |
- |
- |
(3,195,459) |
- |
||||
| Stock-based compensation expense |
185,731 |
- |
236,626 |
- |
||||
| Adjusted EBITDA |
(586,927) |
(237,788) |
(876,509) |
(201,110) |
||||
The following table provides a reconciliation of net loss to Adjusted Net Loss for the periods indicated:
| For the Three-Months Ended |
For the Six-Months Ended June 30, |
|||||||
| Reconciliation of net loss to Adjusted Net Loss: |
2017 |
2016 |
2017 |
2016 |
||||
| Net loss |
$(16,447,731) |
$(171,480) |
$(12,095,398) |
$(328,193) |
||||
| Adjustments to net loss: |
||||||||
| Debt extinguishment costs |
612,939 |
- |
612,939 |
- |
||||
| Foreign exchange loss (gain) |
(72,355) |
6,593 |
(3,275) |
(53,848) |
||||
| Convertible redeemable preferred share dividends |
- |
- |
61,308 |
- |
||||
| Non-recurring gain on loss of control of a subsidiary |
- |
(363,948) |
- |
(363,948) |
||||
| Non-recurring gain from a step combination |
- |
- |
(2,070,422) |
- |
||||
| Excess of fair value over net assets acquired |
14,089,742 |
- |
14,089,742 |
- |
||||
| Non-recurring acquisition costs |
774,785 |
- |
774,785 |
- |
||||
| Gain on expiration of warrants |
- |
- |
(3,195,459) |
- |
||||
| Stock-based compensation expense |
185,731 |
- |
236,626 |
- |
||||
| Adjusted Net Loss |
(856,889) |
(528,835) |
(1,589,154) |
(745,989) |
||||
The following table provides selected retail network data for the periods indicated:
| For the Three-Months Ended |
For the Six-Months Ended June 30, |
|||||||
| Selected retail network data: |
2017 |
2016 |
2017 |
2016 |
||||
| Number of stores, beginning of period |
47 |
18 |
46 |
15 |
||||
| Store openings |
15 |
4 |
18 |
7 |
||||
| Store closures |
1 |
- |
3 |
- |
||||
| Number of stores, end of period |
61 |
22 |
61 |
22 |
||||
SOURCE LXRandCo, Inc.
For further information: Jeremy Stepak, Interim Chief Financial Officer, +1 (416) 301-1333
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