MISSISSAUGA, ON – The Second Cup Ltd. (“Second Cup” or the “company”) has reported financial results for the 13 weeks ended (the “quarter”) and 39 weeks (the “year to date”) ended September 27, 2014.
Highlights
- Same store sales trend improved in Q3 to -2.9% compared with -5% in Q2 and -6.9% in Q1.
- Adjusted earnings per share of $0.04 compared to $0.11 a year ago.
- Basic loss per share of $2.65, including a non-cash impairment charge of $25.7 million or $2.60 per share after-tax, compared with earnings per share of $0.09 a year ago.
- Introduced Flat White, the best new product launch in years.
- Added Vanda Provato to the Leadership Team as Vice President, Marketing.
- Following quarter end, announced intention to acquire 17 cafés in the Toronto area.
Alix Box, President & CEO commented, “Fiscal 2014 has been a year of transition. We have made some difficult decisions in rebuilding our foundation so that we can move forward to create long-term growth. The launch of Flat White this quarter is a great example of the innovation to come from Second Cup. Since I joined in February, we have completed the restructuring of Coffee Central, improved franchisee profitability, built a new management team, and developed plans for the café of the future. While much remains to be done, we are now fully engaged in the process of transformation to restore Second Cup to a place of leadership and greater profitability.”
In the third quarter, Second Cup introduced Flat White via an innovative marketing campaign centered on “Piaggio” sampling vehicles. The Piaggio cross-country tour introduced this authentic espresso-based beverage to Canadians in key markets, and they have embraced this exciting new product. Flat White sales contributed to the trend improvement in same store sales this quarter. Innovation and coffee excellence will be key drivers of the brand’s reinvention and sales growth.
Following quarter end, Second Cup announced its intention to acquire 17 cafés in prime Toronto locations from long-standing franchisees, Debbie and Bob Riche, who will join the Coffee Central team. The combination of financial resources from Second Cup and management talent from the Riches provides a value creation opportunity for the company.
In the coming weeks, key openings include the new café of the future in downtown Toronto and a flagship café in the heart of Montreal.
Impairment of Trademarks
As a result of impairment indicators, mainly the decline in the stock price, the company recorded a non-cash, after-tax trademark impairment charge of $25.7 million, which reduced earnings per share by $2.60.
Second Cup has announced a new three-year strategic plan, with highlights disclosed in a separate press release issued today. “This is a year of change for Second Cup. I am confident that we are taking the necessary steps to rebuild the company. I am optimistic that we will see significant performance improvements beginning next year,” says Ms. Box.
