DAVIDsTEA Inc. (Nasdaq: DTEA) Q2 2025 Earnings Call | 09/16/2025

Summary of DAVIDsTEA Inc. Q2 2025 Earnings Call (9/16/2025)

Overview: DAVIDsTEA Inc. reported its Q2 2025 financial results, emphasizing its omnichannel growth strategy, with a focus on retail expansion and brand awareness initiatives. The company faced a challenging macroeconomic environment, including U.S. tariffs, higher unemployment, and inflation, but demonstrated resilience.

Financial Performance:

• Sales: Consolidated sales rose 0.5% to CAD 11.1 million, driven by a 9.1% increase in brick-and-mortar sales (CAD 4.6 million, aided by two new Montreal stores and 0.6% comparable store growth) and a 2.5% rise in wholesale channel sales (CAD 1.5 million). Online sales declined 6.7% to CAD 5.1 million due to macroeconomic pressures. Canada accounted for 90% of sales, with U.S. sales down CAD 0.3 million.
• Profitability: Gross profit remained stable at CAD 5.3 million (47.2% of sales), with lower freight and shipping costs offsetting a slight product margin decline. SG&A expenses decreased 1.9% to CAD 6.6 million, driven by lower IT costs, though increased marketing and wages partially offset savings. The net loss was CAD 1.6 million, consistent with the prior year, and adjusted EBITDA improved slightly to negative CAD 0.2 million from negative CAD 0.3 million.
• Liquidity: Cash position improved to CAD 7.6 million from CAD 6.7 million year-over-year but declined from CAD 10.4 million in Q1 2025 due to seasonality. Cash used in operations was CAD 1.5 million, up from CAD 1 million in Q2 2024, due to higher inventories for the peak selling season.

Strategic Highlights:

• Retail Expansion: The company is prioritizing retail stores as the cornerstone of its omnichannel strategy, leveraging in-store experiences to convert casual consumers into tea enthusiasts. Key initiatives include:
  • Renovation of the flagship Montreal South Shore store, set to reopen in mid-November 2025.
  • A new store in Quebec City (Laurier) to complement the existing Galeries de la Capitale location.
  • A planned store at Square One Mall in Mississauga (July 2026), featuring an open-concept design with a tea bar for sampling premium teas and seasonal drinks.
  • Negotiations for additional stores in high-end Canadian malls to expand the store footprint over the next three years.
• Marketing Efforts: Increased investments in online ads, billboards, wellness influencers, affiliate programs, and promotional events to boost brand awareness, particularly for the holiday season, which drives over 60% of annual sales.
• Outlook: DAVIDsTEA anticipates strong ROI from marketing and store investments, aiming for profitable growth in Q3 and Q4 2025. The company is preparing for the peak selling season with new collections and innovative gifts.

Other Developments:

• Auditor Change: Ernst & Young LLP resigned as auditors at the company’s request, with Richter LLP appointed as the new auditors.
• Challenges: Macroeconomic headwinds, including tariffs and inflation, impacted online sales and U.S. revenue, but the brand remains resilient.

Conclusion: DAVIDsTEA reported stable Q2 2025 results, aligning with expectations for its seasonally driven business. The company is focused on expanding its retail footprint, enhancing marketing efforts, and driving sustainable profitability, with optimism for a strong holiday season. Investors are encouraged to contact Investor Relations for further details.