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The Brick reverses Q3 loss while building cash reserves

Michael J. Knell -- Furniture Today, November 17, 2011

EDMONTON, Alberta — Profits and cash reserves improved considerably for The Brick Group during the third quarter even though total revenues grew at a more modest rate as same-store sales advances 1.3%.

For the three months ending Sept. 30, The Brick reported total sales and revenue of C$419.1 million, up 2.5% over the C$408.9 million for the comparable period in 2010.

Sales by the company's 173 corporate stores were C$370.9 million, a gain of 0.9% from the C$367.8 million booked for the third quarter of 2010. However, the company's franchise network again proved itself to be its star performer as sales jumped 17.0% year-over-year to C$48.2 million - compared with C$41.1 million for the prior period.

Net earnings were C$15.1 million or 12 Canadian cents per common share, reversing the loss of C$20.8 million or 37 cents per share recorded for last year's third quarter.

Same-store corporate sales gained 1.3% during the July to September period, while consolidated same-store sales (including franchises) gained 2.1%.

The Brick also reported that sales by its retail segment - which is essentially product on the floor - was up 1.2% to C$350.0 million. For the second consecutive quarter, the retail segment made a contribution to overall profitability, adding C$11.1 million to the bottom line and reversing the segment's year-ago loss of C$25.7 million.

Its financial services segment, which sells extended warranties and other financial products, had sales of C$20.9 million, a drop of 4.7% year-over-year. Its contribution to net income fell 17.7% to C$4.0 million.

For the nine months that ended Sept. 30, The Brick had total sales and revenue of C$1.12 billion, essentially unchanged from the comparable period of 2010.

Corporate stores sales were C$989.3 million, compared to C$1.0 billion, a decline of 1.4%. Meanwhile franchise sales increased 11.2% to C$129.4 million.

Retail segment sales were down 1.5% to C$926.4 million while financial service segment sales were up by a modest 0.4% to C$62.9 million. Corporate same-store sales growth was negative 1.6% for the year-to-date.

Net income for the year-to-date was C$22.7 million or 29 cents per share, reversing a loss of C$67.2 million or $1.20 per share.

The company also reported substantial improvements to its cash position, saying it had C$139.5 million in cash and cash equivalents on Sept. 30, compared with C$44.8 million at the same date in 2010 and has not borrowed under its asset-based credit facility since the second quarter of 2010.

"We performed extremely well this quarter, despite turbulent economic conditions, with a continuation of strong results and a healthy financial position," Brick Group President and CEO Bill Gregson said in a statement. "Our total system sales increase of 2.5% and gross margin rate increase of 100 basis points demonstrates the sustainability of our prior initiatives.

"Management has also directed available cash towards capital expenditures to ensure the company is investing in its assets and infrastructure for a better tomorrow," he continued, adding new uses for the cash on hand will be focused on enhancing shareholder value.

"Our use of cash strategy also includes maintaining prudent cash reserves as a minimum safeguard against any potential macroeconomic risks in Canada and corresponding consumer reaction," he said.

At the end of September, The Brick operated 233 stores under its banners, which include The Brick, Urban Brick, Brick Mattress Store, Brick Clearance Centres, Brick Superstore and United Furniture Warehouse, a net reduction in the store count from last year's 236. During the third quarter, the company closed one corporate store, one superstore and four UFW outlets.

It opened two corporate and two franchise stores during the period.

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