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Layoffs at DavidsTea headquarters

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Struggling to stem falling sales, retailer DavidsTea announces cost-cutting measures including layoffs affecting 15% of the workforce at its Montreal headquarters.

Management speaks of “temporary” layoffs and refers to the reduction of other costs in the range of $6 to $8 million, in particular the elimination of investments in the transformation of information technologies undertaken during the fiscal year 2022 which will be in “maintenance mode” during fiscal year 2023.

It was not immediately possible to know the number of employees at the head office. Management maintains, however, that details surrounding the cost reduction measures will be unveiled at the end of April at the same time as the publication of the year-end financial performance.

For the fourth quarter of this fiscal year, which has just ended at the end of January, management warns that sales should show a drop of approximately 25% compared to a year ago.

Like many other retail brands, we experienced challenging market conditions in the fourth quarter as consumer wallets were impacted by rising inflation and interest rates, reducing demand.

DavidsTea CEO and Chief Brand Officer Sarah Segal via statement

She says the company is in the process of addressing “certain operational issues” that impacted the overall consumer experience during the quarter.

“Our wholesale and retail channels in Canada performed well, with sales increases over the prior year in both channels, but not enough to offset the decline in our online sales results,” said Frank Zitella, President, Chief Financial Officer and Chief Operating Officer of DavidsTea.

In December, the second largest shareholder of Davidstea had mentioned in an interview with La Presse that the company was to be put up for sale.

American investor Justin Dopierala, a portfolio manager at Domo Capital – a Wisconsin-based firm – claimed the DavidsTea brand is worth “hundreds of millions” but financial results and customer feedback show execution is not is not on the agenda.

With a stake of more than 11%, Domo Capital is the second largest shareholder in DavidsTea behind Placements Mauvais Jours, the private holding company of DavidsTea co-founder Herschel Segal.

Founded in 2008 and listed on NASDAQ seven years later, DavidsTea has grown rapidly. The retailer operated more than 230 stores before the pandemic. There are only 18 left today.

The business model transition continues. The company now relies heavily on online sales and a network of wholesale customers that include some 3,800 grocery stores and pharmacies.

After hovering around US$30 in 2015, DavidsTea’s stock fell as low as US72 cents last month. The stock closed Thursday’s session at 98 cents US.



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