Brick Group posts C$12.2M profit in quarter

Reverses loss from 2008 period

Michael J. Knell -- Furniture Today, April 6, 2010

EDMONTON, Alberta — Corporate sales and revenue for the banners operated by The Brick Group Income Fund fell 1% to C$361.4 million during the fourth quarter.

But cost savings and performance enhancements put in place early in the year produced a record quarterly EBITDA and a second consecutive quarter of profitability.

Same-store sales were down 7.3% from the same quarter a year earlier for Canada's largest full-line furniture and appliance retailer, but that was a big improvement from declines of 22%, 33% and 19% in the first, second and third quarters of 2009, respectively.

Net income was C$12.2 million or 13 cents per trust unit, compared with a net loss of C$224.1 million or C$4.14 per unit for the fourth quarter of 2008.

Like most Canadian income trusts, the Brick Group uses EBITDA (earnings before interest, taxes, depreciation and amortization) as its preferred measure of financial performance. In the fourth quarter, EBITDA was a record C$30.8 million.

Consolidated revenues in the quarter totalled C$406.7 million, including franchise sales of C$45.2 million, down 1.6% from the comparable 2008 period.

Product sales at retail were C$342.6 million, off 1.7%, while the financial services segment - involving financing, extended warranties and similar services - had sales of C$18.8 million, up 12.2% year-over-year.

Bill Gregson, Brick Group president and CEO since July, attributed the group's improved performance to its four-point plan, which included increasing sales staff, improving supply chain alignment and marketing initiatives, and a diligent focus on liquidity.

"As well, the Brick Group benefited from a sales shift to higher-margin furniture business, the strength of the Canadian dollar and an improved cost structure. These factors in addition to general economic improvements contributed to strong results in the fourth quarter," he said.

For the full year, corporate sales were down 13.2% from 2008 to C$1.22 billion, while same-store sales were down 20.1%.

The company recorded a net loss of C$163 million or C$2.99 per trust unit for the year, including a goodwill and intangible asset impairment charge of C$158.5 million and C$2.4 million in executive severance costs. However, that was an improvement from 2008, when the loss was C$199.1 or C$3.68 per trust unit.

EBITDA for the year was C$32.8 million, compared with C$68.3 million for 2008, a drop of 51.9%. The 2009 EBITDA was C$35.2 million before executive severance costs.

Retail segment sales were C$1.2 billion, down 15.7% year-over-year, while the financial services segment was up 17.9% to C$72.9 million.

Consolidated sales were C$1.35 billion, including franchise sales C$141.6 million, down 13.2% from 2008.

Gregson told analysts that this year started with corporate same-store sales growth of 4.2% in January and 5.2% in February.

At the end of 2009, the Brick operated 236 stores under its various banners, which include The Brick, The Brick Superstore, The Brick Mattress Store and United Furniture.