Brick earnings tumble 90.3% in second qtr.
Michael Knell -- Furniture Today, October 28, 2011
EDMONTON, Alberta - A strong performance by its 58-unit franchise division was just enough to eke out a tiny gain in second quarter sales for the Brick Ltd., which also reported improved EBITDA and cash reserves despite a significant drop in earnings.
Total revenue was C$367.6 million up a scant 0.2% over the C$366.7 million rung up for the same period last year. Net income was C$6.4 million or 12 cents per share, down 90.3% from income of C$66.9 million or C$1.19 per share in the same period a year earlier.
Brick President and CEO Bill Gregson told analysts in a conference call that he believed the retailer has "taken market share away from our competitors."
The franchise network continues to be the full line furniture and appliance merchant's star performer, with sales climbing 14.8% to C$42.8 million in the second quarter and same-store sales increasing 6.2%. During the quarter, the Brick converted two corporate stores to franchises and opened another, giving it a total of 58 franchise stores across the country.
Conversely, consolidated sales by corporate stores fell 1.4% to C$324.8 million as same-store sales fell 1.4% year-over-year.
The Brick also reported that sales by its retail segment - which basically covers product on the floor - fell 1.5% to C$303.9 million. However, the segment reversed prior losses to contribute $1.8 million in net income. The earnings uptick was attributed to a sales mix that moved in favor of higher-margin mattresses and away from lower-margin consumer electronics.
"We are shifting our focus to mattresses, furniture and appliances - where the margins are higher," Gregson said.
Also aiding the margin improvement was better inventory control. "We are carrying a lot less inventory that we did two or three years ago," Gregson said, adding, "and more of it is fresh."
For the first time in several years, the company's financial segment - which sells extended warranties, financial services and other add-ons - saw sales fall from a year earlier, albeit a modest 0.6% to C$20.9 million. Net income contribution was flat at C$4.8 million.
Gregson also noted that earnings before interest, taxes, depreciation and amortization (EBITDA) grew 19.7% from a year ago to C$24.6 million.
The Brick also ended the first half with C$100.2 million in cash and equivalents - its largest cash reserve in several years - with no borrowings made against its asset-backed line of credit. Gregson said the company is currently devising a strategic plan, which should be unveiled over the next couple of months, to make the most of this windfall.
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