Brick Group returns to profitability despite revenue decline
CEO says slim profit of C$465,000 shows success of plan
Michael Knell -- Furniture Today, November 10, 2009
EDMONTON, Alberta — The Brick Group Income Fund, parent to Canada's largest full-line furniture and appliance retailer, reported a return to profitability in the third quarter, although revenue continued to fall.Consolidated revenue including franchise sales were C$370.8 million, down 11% from the same period in 2008. Same-store sales fell 19%.
Corporate stores took the hardest hit, with sales down 12% to C$334.9 million. The Brick's retail segment was down 13.3% with sales of C$316.3 million, while the financial services segment had sales of C$18.6 million, up 17.9% year-over-year.
Sales by The Brick's 51 franchise stores held their own at C$35.9 million, essentially flat with the 2008 third quarter.
Net income for the quarter was C$465,000 or 1 cent per trust unit, down from net earnings of C$13.1 million or 24 cents per unit a year ago. The 2008 third quarter was the last profitable period for The Brick until now.
"I am very pleased with the Brick Group's return to profitable operations in the third quarter," President and CEO Bill Gregson told a conference call. "After disappointing results during the first half of 2009, in the third quarter we generated both positive EBITDA and net income."
Like most Canadian income trusts, the Brick Group uses EBITDA (earnings before interest, taxes, depreciation and amortization) to measure performance. EBITDA for the latest quarter was C$12.1 million and while was down 41.5% year-over-year, it was the first positive EBITDA figure reported for the 2009 fiscal year.
"These results demonstrate that the fund has turned the corner," Gregson said.
He attributed the improvement to two drivers, the most significant of which was a strategy launched earlier this year after he assumed the CEO's position with the departure of Kim Yost. The initiative included an increased sales force, better purchasing and supply chain alignment, a more strategic marketing focus and improved liquidity.
Gregson said the second driver was the start of an economic recovery during the third quarter, with improvements in measures such as home sales and unemployment.
"We achieved better liquidity during the third quarter by improving the fund's financial position," Gregson added. This past August the Brick Group negotiated a C$25 million letter of credit facility with Fairfax Financial Holdings Ltd. under the existing $130 million asset-backed loan facility with GE Capital. At the end of the third quarter, the company's remaining unused GE credit totalled C$48 million, and was C$60 million at the end of October.
For the nine months ended Sept. 30, the Brick Group reported revenue of C$958.9 million, down 17.3% from the same period in 2008. Same-store sales were down 24.1%.
Corporate store sales totalled C$862.1 million, down 18.8%, while franchise sales were C$96.3 million, off 0.5% from last year.
The Brick's net loss year-to-date totals C$178.3 million or $3.23 per trust unit, compared with net earnings of C$25 million or 46 cents per unit for the first nine months of 2008.
The Brick reports 3Q growth spurt of 12.5%
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