Executive Summary

Sales declined 18.7% year over year to $15.2M on e-commerce normalization post-pandemic; gross margin held essentially flat at 42.5% (42.7% LY) while adjusted EBITDA loss widened to $(2.1)M and diluted EPS was $(0.18) .
Channel mix shifted: e-commerce fell 43.9% to $8.3M, while wholesale grew 238% to $2.7M and brick-and-mortar increased to $4.2M, partially offsetting online weakness .
Liquidity remained solid with $19.0M cash at quarter-end and a new, unused $15.0M revolving credit facility with Scotiabank to fund working capital and omnichannel growth .
No formal numerical guidance was provided; management emphasized wholesale expansion (including a new compostable sachet format) and omnichannel execution amid inflationary/macro headwinds .
Note: This “Q2 2023” request aligns to the company’s Q2 of Fiscal 2022 (quarter ended July 30, 2022); all figures are as reported by DAVIDsTEA for that period .

What Went Well and What Went Wrong

What Went Well
- Wholesale momentum: Canadian wholesale sales “more than doubling” YoY to $2.7M; footprint expanded to over 3,800 doors, with a new individually wrapped, fully compostable sachet format launching late-September to broaden accessibility .
- Brick-and-mortar recovery: Store sales rose to $4.2M (27.6% of sales) on higher same-store comps and fewer pandemic-related closures YoY .
- Liquidity and flexibility: Quarter-end cash of $19.0M and an unused $15.0M Scotiabank revolver bolster working capital and the path to profitability; management highlighted the facility’s role in supporting growth .
What Went Wrong
- E-commerce normalization: Online revenue fell 43.9% to $8.3M (54.6% of sales), driving the majority of the 18.7% YoY total sales decline .
- Cost pressures and mix compress profitability: SG&A rose 23.1% to $11.2M; adjusted SG&A was 65.0% of sales, reflecting IT and transformation costs; adjusted EBITDA loss widened to $(2.1)M .
- Macro headwinds: Management cited “mounting inflationary pressure and recessionary fears” dampening demand, particularly online, and noted the continuing impact of the business model transition .

Financial Results

Metric	Q4 FY2021 (ended Jan 29, 2022)	Q1 FY2022 (ended Apr 30, 2022)	Q2 FY2022 (ended Jul 30, 2022)
Sales ($CAD Thousands)	$39,878	$20,435	$15,225
Gross Profit ($CAD Thousands)	$15,823	$8,964	$6,474
Gross Profit Margin (%)	39.7%	43.9%	42.5%
SG&A ($CAD Thousands)	$14,402	$10,806	$11,219
Adjusted SG&A ($CAD Thousands)	$13,894	$10,051	$9,894
Net Income (Loss) ($CAD Thousands)	$1,291	$(1,974)	$(4,835)
Diluted EPS ($CAD)	$0.05	$(0.07)	$(0.18)
Adjusted EBITDA ($CAD Thousands)	$3,696	$89	$(2,128)
Cash Flows from Operating Activities ($CAD Thousands)	$11,978	$(1,678)	$(2,735)
Cash, End of Period ($CAD Thousands)	$25,107	$22,680	$19,048

Channel/Geography Mix (Q2 FY2022):

Channel Mix
- E-commerce: $8.3M (54.6% of sales)
- Wholesale: $2.7M (17.8% of sales)
- Brick-and-mortar: $4.2M (27.6% of sales)
Geography
- Canada: $12.8M (84.2% of sales)
- U.S.: $2.4M

Additional detail (Q2 FY2022):

YoY change in sales: −18.7% ($3.5M) .
Adjusted operating loss: $(3.4)M vs $(2.0)M LY .
Working capital at quarter-end: $37.3M (down from $43.4M at Jan 29, 2022) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q3+	Not provided	Not provided	N/A (no formal guidance disclosed in Q2 materials)
Gross Margin	FY/Q3+	Not provided	Not provided	N/A
SG&A/OpEx	FY/Q3+	Not provided	Not provided	N/A
EPS	FY/Q3+	Not provided	Not provided	N/A
Capex/Other	FY/Q3+	Not provided	Not provided	N/A

Management focused commentary on omnichannel investments and wholesale expansion; no quantitative guidance ranges were included in the press release/8-K .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2021 and Q1 FY2022)	Current Period (Q2 FY2022)	Trend
Macro/Inflation/Supply Chain	Emphasized navigating “surging inflationary pressure, supply-chain disruptions and labour constraints” in FY2021 and Q4; Q1 reiterated “mounting inflation, supply-chain issues and labour shortages” .	Cited “uncertain macroeconomic environment… mounting inflationary pressure and recessionary fears” impacting e-commerce demand .	Worsening impact on online demand .
Omnichannel Strategy	Q4: digital-first transformation; Q1: continued transformation to a digital-first organization .	Continued emphasis on omnichannel; brick-and-mortar comps improved; IT spend noted in adjusted SG&A .	Ongoing execution .
Wholesale Expansion	Q4: U.S. wholesale entry by year-end; Amazon reach expansion .	Canadian wholesale more than doubled; ~2.7M sales; over 3,800 doors; new sachet format to broaden access .	Accelerating growth .
Channel Mix Normalization	Q4 and Q1: e-commerce/wholesale down vs prior-year pandemic surge; brick-and-mortar recovering .	E-commerce −43.9% YoY; wholesale +238%; brick-and-mortar up YoY .	Normalization persists; mix rebalancing .
Liquidity/Financing	Q4 cash $25.1M; strong balance sheet .	Added $15M Scotiabank revolver; quarter-end cash $19.0M .	Improved flexibility despite lower cash .

Management Commentary

“Our wholesale business in Canada expanded… sales more than doubling year-over-year… to over 3,800 doors… We are launching a new sachet format… individually wrapped, fully compostable… to elevate the consumer experience and make DAVIDsTEA accessible to more consumers.” — Sarah Segal, CEO & CBO .
“Primarily within our online channel, we experienced a slowdown… mainly due to an uncertain macroeconomic environment… and the effect of restructuring to a new business model… we are now coping with… mounting inflationary pressure and recessionary fears.” — Sarah Segal .
“Our second quarter sales declined 18.7% year-over-year… The silver lining is that sales from wholesale and brick-and-mortar channels improved… We have secured a $15 million line of credit… to assist with working capital needs and help us along our path to profitability.” — Frank Zitella, President, CFO & COO .
On facility purpose: “It provides DAVIDsTEA with the financial flexibility to accelerate its omnichannel growth strategy.” — Frank Zitella .

Q&A Highlights

No Q2 earnings call transcript was available in the source set; the press release provided call details but no published transcript was found for the quarter, so no Q&A disclosures to report .

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY2022 revenue/EPS was unavailable in our session (no retrievable estimates), so comparisons to estimates are N/A. Where available, we anchor on S&P Global; in this case, treat estimates as unavailable for this period (N/A).
Implication: Given microcap coverage and absence of estimates, focus turns to sequential/YoY trends and liquidity trajectory.

Key Takeaways for Investors

Mix shift continues: e-commerce normalization (-43.9% to $8.3M) pressured the top line, but wholesale (+238% to $2.7M) and stores ($4.2M) provided partial offsets; watch for continued wholesale door growth and sachet adoption to stabilize revenue .
Margins resilient at the gross line (42.5% vs 42.7% LY), indicating product/pricing and delivery/distribution logistics remain controlled; the profit delta stems primarily from volume and SG&A intensity .
Cost discipline is critical: adjusted SG&A at 65% of sales and adjusted EBITDA loss $(2.1)M highlight the need for operating leverage as wholesale/retail scale; monitor IT spend normalization and marketing efficiency .
Liquidity/capacity to execute: $19.0M cash plus a $15M undrawn facility enhance flexibility into peak season; covenant/borrowing base dynamics merit monitoring alongside inventory and working capital turns .
Near-term setup: absent formal guidance or consensus, the holiday quarter’s sell-through (gifting assortment historically strong) and wholesale reorder cadence will be primary catalysts; execution on sachet rollout a potential upside driver .
Medium-term thesis: a durable omnichannel model with a larger wholesale footprint could improve fixed-cost absorption and reduce volatility, but requires sustained demand recovery and SG&A control to restore consistent positive EBITDA .
Risk checks: macro sensitivity (inflation/recession fears) and U.S. demand softness linger; continued e-commerce softness without commensurate wholesale/store gains would pressure cash flows .

Appendix: Additional KPIs and Detail (Q2 FY2022)

E-commerce, wholesale, and brick-and-mortar comprised 54.6%, 17.8%, and 27.6% of sales, respectively .
Canada represented 84.2% of sales ($12.8M); U.S. sales were $2.4M .
Adjusted operating loss $(3.4)M; finance costs $167K; finance income $77K .
Working capital $37.3M (vs $43.4M at Jan 29, 2022) .

Sources: Q2 FY2022 8-K and press release (Form 8-K, Item 2.02 and Exhibit 99.1) ; Scotiabank credit facility press release (8-K) ; Q1 FY2022 8-K press release ; Q4 FY2021 8-K press release .

DAVIDsTEA Inc. (DTEAF)·Q2 2023 Earnings Summary