The Brick reports 0.6% sales decline, 3.4% income gain in 4Q
Michael J. Knell -- Furniture Today, March 22, 2013
EDMONTON, Alberta — In what was probably its final quarterly report as a standalone furniture, mattress and major appliance retailer, The Brick said sales in the fourth quarter were off slightly while profits improved slightly.
Sales for the full year of 2012 were essentially flat, but profits were down over 2011. The high-impact promoter will become a wholly owned subsidiary of archrival Leon's Furniture on March 28.
For the three months ending Dec. 31, The Brick said total system sales were C$414.1 million, down 0.6% from the C$416.7 million rung up for the fourth quarter of 2011.
Sales by the company's 162 corporate store sales were down 2% to C$355.1 million, which was partially attributed to store closures as sales by its retail segment - that is, product sold on the floor - decreased by 2.1% to C$335.2 million. Same-store sales were off 1.3%, which the company noted was an improvement over the comparable quarter when same store sales fell 1.8%
"Retail sales in the fourth quarter were below management's expectations, causing year-end inventories to increase," Vi Konkle, The Brick's president and CEO, said in a note to shareholders. "Inventory levels were also increased due to strategic purchases of electronics, primarily TVs, to support anticipated sales in the first quarter of 2013."
However, she also noted that for the first quarter of 2013 to March 17, same-store sales growth has been a strong 4.4% as inventory levels declined to a normal range.
The Brick's franchise network continued to be the company's strongest performer as sales increased 8.5% to C$59 million, due to the addition of three new franchise locations. Same-store sales fell 4.9%.
Net income for the fourth quarter was C$13.7 million or 11 cents per share, a 3.4% improvement from C$13.2 million or 10 cents per share for the comparable period.
Net income includes C$4 million in costs related to the Leon's acquisition and approximately C$400,000 in non-recurring expenses. Without these expenses, net income would have been C$16.9 million or 14 cents per share.
For the full year, The Brick had total system sales of C$1.53 billion, essentially unchanged from the prior year.
Corporate stores were C$1.34 billion, a decline of 0.8% from 2011. This was driven by a 0.6% decline in retail segment sales to C$1.26 billion thanks to a lower store count, 162 units compared with 172 units in 2011. Same-store sales were up 0.4%.
The company's financial services segment - which covers items such as extended warranties and financing - reported sales of $79.4 million, a decline of 4.1%.
Sales by the franchise network were up 4.8% to C$192.5 million, due to the addition of new stores. The Brick ended the year with 69 franchise units, up nine from 2011. Same-store sales for franchise stores decreased by 4.2% while in 2011 same-store sales for franchise stores increased by 4.4%.
Net income for the year was down 5.2% to C$35.9 million, compared to C$35.9 million in 2011. Net income was impacted by C$17.1 million relating to the debenture redemption of last April, while net income in 2011 was impacted by C$2.3 million in costs for the December 2011 debenture redemption.
Excluding these items, net income for 2012 would have been C$40.8 million, compared with C$37.6 million for 2011.
Basic earnings per share were 28 cents for 2012, a 30% drop from the 40 cents per share recorded for the prior year.
"2012 proved to be another successful year for the Brick Group. Our Q4 results yet again demonstrate the Brick team's success in outperforming our retail sector, despite a challenging retail environment," Konkle said. "Against this challenging backdrop, the Brick team has consistently gained market share, outperforming prior year market share results in each of the first three quarters of 2012, based on the most recent Statistics Canada market data available."
"Our continued performance only promises to strengthen as we join the Leon's team on March 28, 2013," she added. "We believe that the combined capabilities and best practices of two great Canadian companies will not only result in better product, value and service for our customers, but more opportunities for our employees as we continue to operate as distinct but better equipped destinations for stylish home solutions, at exceptional value, backed by unbeatable end-to-end service and quality."
At the end of 2012, The Brick Group operated a total of 231 corporate and franchise stores under four banners: The Brick, United Furniture Warehouse, The Brick Mattress Store, and Urban Brick. Stores are located in every Canadian province and territory except Nunavut and Newfoundland & Labrador.
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