Mr. Constantine Pefanis reports

LFL, CANADA'S LARGEST HOME RETAILER, RELEASES FINANCIAL RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2023

Leon's Furniture Ltd. has released its financial results for the quarter ended March 31, 2023.

Financial highlights -- Q1 2023:

• Total system sales in the quarter were $625.6 million, compared to $662.9 million in Q1 2022.
• Revenue for the first quarter 2023 was $513.0 million, a decrease of 6.3% compared to Q1 2022.
• Gross profit margin in the quarter increased 64 basis points to 43.35%, in comparison to Q1 2022.
• Adjusted EBITDA decreased from $65.6 million to $48.1 million in the period, in comparison to Q1 2022.
• Adjusted net income for the quarter totaled $12.9 million, a decrease of 50% over the prior year's quarter.
• Adjusted diluted earnings per share(1) decreased by 50.0% to $0.19 in Q1 2023 from $0.38 in Q1 2022.
• Cash provided by operating activities was a positive $8.9 million for the first quarter 2023 in comparison to an outflow of $114.5 million in the prior year quarter.
• The Company repaid $10 million in long-term debt during the period, resulting in a net debt balance of $36 million as at March 31, 2023.
• As at March 31, 2023, unrestricted liquidity is $291.1 million, comprised of cash, cash equivalents, debt and equity instruments and the undrawn revolving credit facility.

Announces intention to create a Real Estate Investment Trust (the "REIT")

On May 4, 2023, LFL announced that it intended to create a REIT. LFL has an attractive real estate portfolio of approximately 5.2 million square feet of wholly-owned real estate from which it will vend in a significant portfolio of assets to the REIT. The Company intends to maintain a majority ongoing ownership interest in the REIT. Timing of the transaction will be subject to prevailing market conditions and receipt of required regulatory approvals including approval to list the units on the Toronto Stock Exchange.

LFL expects the creation of the REIT to:Unlock value for LFL shareholders by surfacing the market value of the Company's significant portfolio of cash flow generating real estate properties;Create a vehicle that will have a cost of capital advantage, a built-in growth pipeline of future property vend-ins from LFL, and an independent management team focused on growing and optimizing the portfolio; andLower the cost of capital for LFL and provide capital to invest in growth opportunities.

Mike Walsh, President and CEO of LFL, commented, "Q1 was a challenging period for retailers across Canada and LFL was no exception. During the quarter, lower retail sales combined with higher retail financing costs drove lower bottom-line results compared to the same period last year, despite strong gross margins. While we are not happy with this result on an absolute basis, LFL is very well-positioned, and we are optimistic looking forward through the remainder of the year. Our team successfully reduced higher cost inventory during Q4, and as a result we are currently sourcing better pricing on our lineup of products, with freight costs continuing to decrease. This enables us to be nimble, leveraging our national omnichannel presence and marketing expertise to do what we do best - generate revenue within the context of the market, manage gross margins, drive efficiencies and produce bottom line results. LFL has a long-term track record of thriving through cycles. The Company's scale gives it a unique competitive advantage to continue offering customers value on the items they need. We have a clean balance sheet with minimal net debt, and a portfolio of ancillary businesses including insurance, warranty and real estate, which continue to perform strongly. We are positioned to continue gaining share and leveraging our national scale and distribution into unique, profitable deals like the one we signed with Resident in December 2022 and launched during Q1, which outperformed our expectation and theirs, during the quarter."

LFL Management Appointments

The Company is pleased to announce the appointment of four executives to key leadership roles within the Company that are effective May 12, 2023. These appointments are designed to support the future growth of the Company.

Mr. Lewis Leon has been appointed President of the Leon's Furniture Division. Mr. Leon joined the Company full-time in 2005 within the Marketing department and was most recently in the role of Associate Vice President of Marketing for the Leon's Furniture Division. He will be reporting to Mr. Mike Walsh, President and Chief Executive Officer of the LFL Group.Mr. Luke Leon has been appointed Vice-President, Operations and Corporate Strategy of the LFL Group. Mr. Leon joined the Company full-time in 2005. He was most recently in the role of Associate Vice President of IT, Systems & Procedures, Internal Audit and eCommerce. He will be reporting to Mr. Mike Walsh, President and Chief Executive Officer of the LFL Group.Mr. Moe Assaf has been appointed Vice-President, Financial Services of the LFL Group. Mr. Assaf joined the Company's Brick Division in 2002 and has worked in several senior management roles since then, most recently as the Associate Vice President of Financial Services of the LFL Group. He will be reporting to Mr. Constantine Pefanis, Chief Financial Officer of the LFL Group.Mr. Victor Diab will be joining the Company as Vice-President, Finance of the LFL Group. Mr. Diab has many years of experience as a financial executive from a large Canadian retailer and was most recently the Chief Financial Officer of a publicly traded fast casual food Company. He will be reporting to Mr. Constantine Pefanis, Chief Financial Officer of the LFL Group.

Revenue

For the three months ended March 31, 2023, revenue was $513.0 million compared to $547.2 million in the first quarter 2022. Revenue decreased $34.2 million or 6.3% as compared to the prior year quarter. A softening macro-economic environment primarily in Ontario has led to this reduction in revenue. Despite the overall reduction in revenue, the mattress product category has shown significant strength for the first quarter of 2023, which can in part be attributed to our partnership with Resident, the largest direct-to-consumer mattress company in North America.

Same Store Sales (1)

Same store sales in the quarter decreased by 5.9% compared to the prior year's first quarter.

Gross Profit

The gross profit margin for the first quarter of 2033 was 43.35% compared to 42.71% for the first quarter 2022, an increase of 64 basis points. This increase in gross margin was driven by a relatively strong performance in the furniture and mattress categories. This is partly due to the Company's tight controls in relation to product costs and on-going reductions in freight costs as compared to the first quarter of 2022. In addition, the Company's credit insurance business that is conducted by Trans Global Insurance, has also contributed to an incremental improvement of gross margin dollars in the quarter as insurance premiums have increased due to sales gains created by additional sales channels.

Selling, General and Administrative Expenses ("SG&A")

The Company's SG&A as a percentage of revenue for the first quarter 2022 was 35.82% compared to 39.16% for the first quarter of 2023, an increase of 334 basis points over the first quarter 2022. The Company's SG&A as a percentage of revenue for the current quarter increased due to the increased cost of point-of-sale retail financing due to the Bank of Canada interest rate increases and the increased marketing costs.

Adjusted Net Income (2) and Adjusted Diluted Earnings Per Share (2)

Adjusted net income for the quarter totaled $12.9 million, a decrease of $12.9 million over the prior year's quarter.

The adjusted diluted earnings per share in the first quarter 2022 was $0.38 per share, compared to $0.19 per share in the current quarter, a decrease of $0.19 per share or 50%.

Net Income and Diluted Earnings Per Share

Net income for the first quarter 2023 was $12.9 million, or $0.19 per diluted earnings per share as compared to $0.36 per diluted earnings per share recorded in the prior year's quarter, a decrease of $0.17 per share or 47.2% (net income of $24.8 million in the first quarter of 2022).

(1) Supplementary financial measures

(2) Non-IFRS financial measures

Dividends

As previously announced, the Company paid a quarterly dividend of $0.16 per common share on 6th day of April 2023. Today the Directors have declared a quarterly dividend of $0.16 per common share payable on the 10th day of July 2023 to shareholders of record at the close of business on the 9th day of June 2023. As of 2007, dividends paid by Leon's Furniture Limited are "eligible dividends" pursuant to the changes to the Income Tax Act under Bill C-28, Canada.

Outlook

Given the Company's strong and continuously improving financial position, our principal objective is to increase our market share and profitability. We remain focused on our commitment to effectively manage our costs but to also continuously invest in digital innovation that we believe will drive more customers to both our online eCommerce sites and our 303 store locations across Canada.

About Leon's Furniture Limited

Leon's Furniture Limited is the largest retailer of furniture, appliances and electronics in Canada. Our retail banners include: Leon's; The Brick; Brick Outlet; and The Brick Mattress Store. Finally, with The Brick's Midnorthern Appliance banner alongside with Leon's Appliance Canada banner, this makes the Company the country's largest commercial retailer of appliances to builders, developers, hotels and property management companies. The Company has 303 retail stores from coast to coast in Canada under various banners. The Company operates six websites: leons.ca, thebrick.com, furniture.ca, midnorthern.com, transglobalservice.com and appliancecanada.com.

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