The Company’s financial results for the twenty-six week period ended September 26, 2020, were significantly impacted by the COVID-19 pandemic, most notably by the temporary closure of the Company’s stores from the start of the fiscal year through June 2020 as a consequence of the restrictions imposed by provincial government authorities.
In the twenty-six week period ended September 26, 2020, the Company achieved net sales of $57.0 million, a decrease of $28.3 million, or 33.2%, from the comparable prior period in fiscal 2020, yielding a gross profit of $22.8 million, a decrease of $9.8 million, or 30.0%, compared to the same period in fiscal 2020, as a direct result of the negative impact of COVID-19. Gross profit as a percentage of sales was 40.1%, an increase of 190 basis points from the gross profit as a percentage of sales of 38.2% in the twenty-six week period ended September 28, 2019. Despite the decline in sales and gross profit volumes, the Company was able, through its proactive management of the impact of the pandemic, to control costs. Total operating expenses was $24.2 million in the twenty-six week period ended September 26, 2020, representing a decrease of $10.4 million, or 30.1%, as compared to the same period in fiscal 2020. Overall, the Company reported a net loss of $2.8 million, an improvement of $1.8 million, or 38.3%, compared to the twenty-six week period ended September 28, 2019. A significant factor leading to the overall improvement was the fact that during the second thirteen-week period ended September 26, 2020, subsequent to the re-opening of our store network, the Company generated a 4% increase in comparable-store sales.
As of July 2020, the Company had re-opened all of its 30 stores, albeit at reduced operating hours. As a result of provincial restrictions to address the “second wave” of the COVID-19 pandemic, our Winnipeg store is currently temporarily closed for in-person shopping for a four-week period since November 12, 2020, and six of our Ontario stores, including our Bloor street flagship store, are also temporarily closed for in-person shopping, for a four-week period since November 23, 2020. However, all of the affected stores remain available for concierge telephone service and curbside pickup.
Mr. Jean-Christophe Bédos, President and Chief Executive Officer of Birks Group, commented: “Since the start of the fiscal year, we have shown great resilience and agility in taking the necessary steps to mitigate the negative impacts of the COVID-19 pandemic on the Company, notably by managing liquidity tightly, by working with our various partners and stakeholders to contain costs, by increasing our focus on generating revenues from our e-commerce business and concierge service, and by adapting to emerging trends to better serve our clients. At the outset of the pandemic, we established a cross-functional management team that reviewed business goals, objectives and processes in order to steer the Company through this global crisis and protect the well-being of our employees, clients, partners and communities. The cross-functional management team continues to monitor the situation very closely, on a provincial, national and global basis.”
Mr. Bédos further commented: “Thanks to the dedication of our employees and the support from our key stakeholders and partners, we have been able to achieve improved results in the twenty-six week period ended September 26, 2020, as compared to last year. Our fiscal discipline during the period has also allowed us to deliver improvements to results from operations. As we continue to navigate through the pandemic, I believe that the actions we have taken since the start of the fiscal year and during the pandemic has better positioned the Company for managing challenges through uncertain times.”
Financial overview for the twenty-six week period ended September 26, 2020:
- Net sales for the twenty-six week period ended September 26, 2020, were $57.0 million, a decrease of $28.3 million, or 33.2%, compared to $85.3 million for the twenty-six week period ended September 28, 2019. The decrease in net sales was primarily attributable to the effects of COVID-19, and the resulting temporary closures of all stores across the retail channel during the first quarter of fiscal 2021. The overall decrease was partially offset by strong e-commerce sales, representing approximately 4.5% of total net sales, as compared to approximately 1.0% in the same period in fiscal 2020;
- Comparable store sales decreased by 32% compared to the twenty-six week period ended September 28, 2019, primarily due to the negative impact of COVID-19 during the period, including the temporary store closures. During the first quarter of the fiscal year, during which time the Company’s stores were temporarily closed, the Company experienced a 65% decrease in comparable-store sales. In the second quarter of fiscal 2021, during which time the Company’s stores were fully re-opened, albeit operating at reduced hours and with lower levels of foot traffic, the Company experienced a 4% increase in comparable-store sales. This increase was driven in part by the sales performance of third party-branded watches resulting from the Company’s improved portfolio of third party watch brands, and the Company’s successful targeted marketing campaigns which we believe led to increases in average sales transaction value throughout the retail network;
- Gross profit for the twenty-six week period ended September 26, 2020, decreased by $9.8 million to $22.8 million, or 40.1% of net sales, as compared to $32.6 million or 38.2% of net sales, during the twenty-six week period ended September 28, 2019. This decrease was primarily due to the reduction of sales volume caused by COVID-19, partially offset by an improvement of gross margin of 190 basis points. The increase of 190 basis points in gross margin percentage was mainly attributable to the Company’s strategic focus to reduce sales promotions and discounting, partially offset by a shift in product sales mix towards branded timepieces;
- SG&A expenses were $21.4 million, or 37.5% of net sales, in the twenty-six week period ended September 26, 2020, compared to $32.3 million, or 37.8% of net sales, in the twenty-six week period ended September 28, 2019. SG&A expenses in the twenty-six week period ended September 26, 2020, decreased by $10.9 million versus SG&A expenses in the prior comparable period in fiscal 2020. This variance is driven primarily by cost containment initiatives undertaken by management as a proactive measure against the potential impact of COVID-19, which initiatives included lower occupancy costs driven by the negotiation of rent abatements with the Company’s landlords, lower compensation costs are driven by the impact of temporary lay-offs, the receipt of the federal government’s wage subsidies reduced operating hours at retail locations, temporary wage reductions at the corporate head office, lower marketing costs and lower general expenses; and
- The Company’s operating loss from continuing operations during the twenty-six week period ended September 26, 2020, was $1.4 million, an improvement of $0.7 million compared to an operating loss of $2.1 million in the comparable prior-year period. The Company’s total net loss was $2.8 million during the twenty-six week period ended September 26, 2020, an improvement of $1.8 million compared to a net loss of $4.6 million in the twenty-six week period ended September 28, 2019.
