Michael J. Knell — Furniture Today
Total revenues of C$343.5M

EDMONTON, Alberta — The fourth quarter proved difficult for major Canadian retailer The Brick Group Income Fund, with revenues slipping 1% and net income plunging 37.5%.

The company had total revenues of C$343.5 million, versus C$347 million in last year’s final quarter. Net income was C$13.5 million, or 25 Canadian cents per unit, compared with C$21.6 million, or 33 cents per unit, last year.

EBITDA, or earnings before interest, taxes, depreciation and amortization, fell to C$21.4 million, or 7.1% of sales, from C$26.4 million, or 7.6% of sales, in 2004’s fourth quarter.

Same-store sales were down 1.8% in the quarter, primarily due to softer sales in Ontario and Quebec, which The Brick attributed to increased competition and strong sales from its entry into the Quebec market in 2004.

Revenues for 2012 came to C$1.2 billion, with net earnings of C$32 million, or 59 cents per unit. Revenues for the much shorter prior year — from July 20, when The Brick went public, to Dec. 31, 2004 — were C$612.4 million, with net earnings of C$22.3 million, or 41 cents per unit.

At the end of 2012, the group operated 194 corporate and franchise stores under four banners: The Brick, United Furniture Warehouse, HomeShow Canada and Sleep Better Mattress Stores.

Same-store sales declined 1.7% for the year, after adjusting for the discontinuation of low-margin computers in late 2004. EBITDA for the year was C$3.7 million less than in 2004 due to disappointing results at HomeShow and UFW.

Describing 2012 as “a year of many accomplishments,” President and CEO Kim Yost said, “The Brick Group expanded the Quebec market with its eighth store (Marche Central), rolled out its third HomeShow location and launched a specialty mattress chain, Sleep Better, with 11 stores in the Greater Toronto Area.”

Earlier this year, Yost said HomeShow Canada and Sleep Better would be re-bannered as The Brick Superstore and The Brick Mattress Store, respectively, leveraging greater consumer recognition of The Brick brand. Also on tap are 24 UFW stores in markets without a Brick store, to be re-bannered and repositioned as well.

“We believe the re-bannering benefits will begin to increase sales, reduce advertising and operating costs and increase profitability in 2013,” Yost told analysts in a conference call, predicting net incremental EBITDA of about C$4 million in 2013.

While their sales aren’t included in the group’s revenues, Yost said The Brick’s franchise stores had same-store sales growth of 5.8% in 2012, with total sales by the franchise division jumping 50% year over year, and units increasing from 15 at the end of 2004 to 20.

UFW had same-store sales increases of 1.2%, and overall sales were up 4.1% in 2012, he said.

The biggest contributor to EBITDA was the group’s financial services division, which saw 2012 revenues increase 20.4% to C$41 million, driven by double-digit increases in earned warranty and insurance revenue.

The re-bannerings and the conversion of 22 UFW stores to The Brick should produce bottom-line results in the near future, Yost said.

This year, the group will add three Brick stores, two in metro Montreal and one in Deerfoot, Alberta, and build an additional 13 Brick Mattress stores in the Greater Toronto Area. Six new Brick franchise stores are expected to join the network, and it’s possible as many as three UFW franchises will be rolled out.

Yost said the total store count should be about 212 at the end of 2013. “Given what we’ve been doing, we are expecting to see stronger top-line results while accelerating the returns we were anticipating last year,” he said.