Mr. Mike Walsh reports

LFL, CANADA'S LARGEST HOME RETAILER, RELEASES FINANCIAL RESULTS FOR THE SECOND QUARTER ENDED JUNE 30, 2023

Leon's Furniture Ltd. has released financial results for the quarter ended June 30, 2023.

Financial Highlights - Q2-2023 (All comparisons are made to Q2-2022 unless otherwise indicated)

• Total system sales in the quarter were $717.6 million, a decrease of 8.5%.
• Revenue for the quarter was $593.8 million, a decrease of 8.2%.
• Gross profit margin in the quarter increased 12 basis points to 43.94% due to a favorable product mix and reduced inbound freight.
• Adjusted EBITDA(1) decreased from $95.9 million to $68.1 million in the period, primarily due to lower sales.
• Adjusted net income(1) for the quarter totaled $28.0 million, a decrease of 41.1%.
• Adjusted diluted earnings per share(1) decreased by 41.4% to $0.41 in Q2 2023.Cash provided by operating activities was $54.7 million for the second quarter in comparison to a cash outflow of $13.2 million.
• The Company repaid $14.4 million in long-term debt during the period, resulting in a net debt balance of $26.9 million as at June 30, 2023.
• At June 30, 2023, unrestricted liquidity was $306.2 million, comprised of cash, cash equivalents, debt and equity instruments and the undrawn revolving credit facility.
• Subsequent to the quarter ended June 30, 2023, the Company completed an amendment to its existing credit agreement to improve various terms and extend the term to May 31, 2025.

Mike Walsh, President and CEO of LFL, commented, "While macro-pressures remain and have impacted our results in the quarter including lower sales and higher financing costs, they seem to be stabilizing. Exiting Q2 we began to see some improvement in consumer demand, which has carried over into early Q3, giving us a more positive outlook for the second half of the year. LFL is very well positioned going into the balance of 2023. Our team's efforts to manage the cost of incoming inventory despite continued inflationary pressures contributed to solid gross margins while allowing us to offer value to our customers. Our organization has a long history of leveraging challenging environments to gain share, emerge stronger and drive results as cyclical pressures abate. This proven operating expertise along with our national scale, nimble omnichannel model, portfolio of synergistic, profitable ancillary businesses, and a rock-solid balance sheet underpinned by a portfolio of real estate coast-to-coast, gives us the flexibility and strength to rise above short-term pressures to generate sustainable long-term results and value for shareholders."

Revenue

For the three months ended June 30, 2023, revenue was $593.8 million compared to $647.0 million in the second quarter of 2022. Revenue decreased $53.2 million or 8.2% as compared to the prior year quarter. The decline is primarily driven by a macro-economic environment that has continued to pressure consumer household spend, along with comparing to a very strong quarter in Q2 2022 where same-store sales were up 10%.

Same Store Sales (1)

Same store sales in the quarter decreased by 8.1% compared to the prior year's second quarter driven by factors discussed in the revenue section.

Gross Profit

The gross profit margin for the second quarter 2023 was 43.94% compared to 43.82% for the second quarter of 2022, an increase of 12 basis points. This gross margin increase was driven mainly by a favorable product mix and reduced inbound freight costs.

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

The Company's SG&A as a percentage of revenue for the second quarter of 2023 was 36.97%, an increase of 371 basis points over the second quarter of 2022. The Company's SG&A as a percentage of revenue for the current quarter increased due to a decline in sales, increase in point-of-sale retail financing fees due to the continuing Bank of Canada interest rate increases and marketing spend to drive balance of year revenue.

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

Adjusted net income for the quarter totaled $28.0 million, a decrease of $19.5 million over the prior year's quarter.

The adjusted diluted earnings per share in the second quarter of 2022 was $0.70 per share, compared to $0.41 per share in the current quarter, a decrease of $0.29 per share or 41.4%.

Net Income and Diluted Earnings Per Share

Net income for the second quarter 2023 was $27.4 million, or $0.40 per diluted earnings per share as compared to $0.74 per diluted earnings per share recorded in the prior year's quarter, a decrease of $0.34 per share or 46.0% (net income of $50.1 million in the second quarter of 2022).

Dividends

As previously announced, the Company paid a quarterly dividend of $0.16 per common share on 10th day of July 2023. Today the Directors have declared a quarterly dividend of $0.16 per common share payable on the 10th day of October 2023 to shareholders of record at the close of business on the 8th day of September 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

Despite the prevailing consumer environment during the second quarter, the market is showing resilience and the Company began to see a more constructive demand picture emerge during the final weeks of Q2 that has continued into early Q3, giving the Company a more positive outlook for the second half of 2023. Over the long-term, we remain focused on our commitment to effectively manage our costs but to also continuously invest in the business to drive growth initiatives that will drive more customers to both our online eCommerce sites and our 304 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 304 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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