Brick Group's third-quarter sales up

Gross margins also improve

Michael J. Knell -- Furniture Today, November 9, 2010

EDMONTON, Alberta — The Brick Group Income Fund has reported upticks in sales, earnings and EBITDA for both the third quarter and the year-to-date with improvements seen in all three segments of the full-line furniture and appliance retailer's business.

Total sales for the three months ending Sept. 30, 2010, were up 10.3% to C$408.9 million with a blended (corporate and franchise) same store sales gains of 9.1%. Net income for the period was C$16.8 million or 30 Canadian cents be trust unit, compared to C$465,000 or one cent per unit for the same period a year ago.

The publicly-held merchant also reported gains on other key performance benchmarks such as gross margin, which averaged 42.7% for the third quarter of 2010, compared to 40.8% while SG&A (selling, general and administrative expenses) fell 2.1 percentage points to 37.2% of sales. The company also said it has cash-on-hand of C$44.8 million at the end of September with no borrowings outstanding from its C$87.4 million asset-based credit facility.

Like most income trusts, the Brick Group's preferred measure of performance is EBITDA (earnings before interest, taxes, depreciation and amortization), which increased to C$27.6 million from C$12.1 million in the third quarter of 2009. The company noted that this "represents the highest third quarter EBITDA in the Brick Group's history, surpassing the Q3 2007 record of C$26.1 million."

Sales by the Brick's 52 franchise stores were C$41.1 million for the third quarter, an increase of 14.3% year-over-year. Meanwhile, corporate sales totalled C$367.8 million, a gain of 9.8%.

The company's retail segment - which sells the product on the floor - had sales of C$345.8 million, up 9.3% year-over-year and had net income of C$6.7 million, reversing an operating loss of C$7.9 million for the third quarter of 2009.

Meanwhile, the company's financial services segment - which sells everything from financing to extended warranties - continued its stellar performance with a year-over-year improvement of 18.1% to reach sales of C$21.9 million. Net income for this segment was C$10.1 million, a gain of 19.8%.

In a conference call, Brick Group president and chief executive officer Bill Gregson noted sales in Eastern Canada have been stronger than those in Western Canada for much of the year.

"Appliances and furniture are our strongest categories," he said, adding that "electronics continues to be our most challenging category primarily because of deflating pricing."

For the nine months that also ended Sept. 30, 2010, the Brick Group had total sales of C$1.12 billion, up 15% from the C$958.5 million for the year-to-date in 2009. Net income was C$25.6 million or 46 cents per unit, a reversal from last year's net loss of C$175.3 million or C$3.23 per unit.

Franchise sales were up 20.8% to C$116.4 million while corporate store sales gained 16.0% to C$1.0 billion. Blended same store sales were up 13.9%.

The retail segment had sales of C$937.6 million, a gain of 16%, and improved its net loss to C$4.0 million from the comparable period's net loss of C$201.5 million. The financial services segment had year-to-date sales uptick of 15.8% to reach C$62.6 million, as its net income climbed 12.9% to C$29.6 million.

"I am very pleased with the Brick Group's third quarter and year to date 2010 financial results," Bill Gregson said in a statement.

"For the remainder of 2010, management's focus remains on organic growth through improved same store sales, an enhanced customer service model, investments in both information systems and supply chain and cost control," he added.

The Brick also said it intends to close one corporate store and open two franchise stores in the fourth quarter of 2010. At the end of the third quarter, the company operated a total of 236 stores, including 52 franchises.