CANADA
Montreal-based DAVIDsTEA, a pioneer in specialty tea retail, will close its retail outlets in the US and Canada following bankruptcy filings in both countries.
DAVIDsTEA is the largest chain retailer in North America exclusively offering specialty tea. The company operates 231 outlets, mainly in downtown storefronts and in Canadian suburban malls. The pivot to online with wholesale distribution in grocery stores follows a multi-year decline in brick & mortar sales, writes Frank Zitella, c.f.o. and c.o.o. “The post-COVID-19 retail environment creates significant challenges for our unique in-store customer experience,” writes Zitella. All DAVIDsTEA retailer stores remain closed following a March 17 lockdown to halt the coronavirus's spread.
In an April 27 update, Zitella wrote that “before COVID-19, our path to profitability was predicated on making the business more productive, expanding our product portfolio, and optimizing our sales channels.”
By June eviction proceedings had begun against some of the company's stores for failing to pay rent.
“We ended the fiscal year with a solid financial position, and we have taken decisive action to align our operations with our growing online and wholesale channels. In adapting our business strategy to this new reality, we expect to emerge from this crisis as a leaner and more effective company, able to seize opportunity from a landscape ready for health and wellness tea,” according to Zitella.
Stocks for the publicly traded company plunged on the news. During a quarterly conference call, the company noted that e-commerce sales increased by 127% compared to last year, with wholesale sales up 86% compared to fiscal 2019. Full-year revenue was $196.5 million, down 7.7% compared to FY 2018.
The wholesale side of the business, supplying 1,500 Loblaw grocery stores and 1,000 other grocery locations, also increased in sales. “This could represent a turning point for DAVIDsTEA and accelerate substantially the anticipated evolution towards online sales to drive long-term profitability and connect with a bigger audience than ever,” writes Zitella.