Mr. Mike Walsh reports

LFL, CANADA'S LARGEST HOME RETAILER, RELEASES RESULTS FOR THE QUARTER ENDED MARCH 31, 2024; SAME-STORE SALES INCREASE OF 9.0%

Leon's Furniture Ltd. has released financial results for the quarter ended March 31, 2024.

Financial highlights - Q1 2024

These comparisons are with the 2023 first quarter unless stated otherwise.

• System-wide sales for the first quarter 2024 were $677.7-million, an increase of 8.3 per cent.
• Revenue for the first quarter 2024 was $562.3-million, an increase of 9.6 per cent.
• Same-store sales increase of 9 per cent.
• Gross profit margin in the quarter increased 52 basis points to 43.87 per cent.
• Adjusted net income for the quarter totalled $16.4-million, an increase of 27.1 per cent.
• Adjusted diluted earnings per share of 24 cents, an increase of 26.3 per cent.
• On March 31, 2024, unrestricted liquidity was $374.2-million, comprising cash, cash equivalents, debt and equity instruments, and the undrawn revolving credit facility.

Mike Walsh, president and chief executive officer of Leon's, commented: "I am immensely proud of our team's performance in the first quarter. In an environment that is proving challenging for many organizations in our sector, LFL generated outstanding top- and bottom-line results, with system-wide sales up 8.3 per cent, and adjusted diluted EPS growing by 26.3 per cent. Our success at retail during the quarter was a direct result of the strategic decisions we made over a year ago to position the company for a value-focused environment. This further validates our consistent strategy to concentrate on driving higher returns on our existing assets, through four-wall execution, omnichannel and ancillary businesses, while only growing square footage where it truly makes sense to do so. With unmatched scale in our sector across omnichannel and distribution, underpinned by a rock-solid balance sheet with $374-million in unrestricted liquidity, LFL is positioned to continue gaining market share and driving results for shareholders."

Revenue

For the three months ended March 31, 2024, revenue was $562.3-million compared with $513-million in the first quarter of 2023. Revenue increased $49.3-million or 9.6 per cent as compared with the prior-year quarter. The company has seen continued momentum in both retail and commercial sales in the current quarter. The improvement was driven by strong growth in the furniture and appliance categories, which were supported by strong inventory positions and effective promotions.

Same-store sales

Same-store sales in the quarter increased by 9 per cent compared with the prior year's first quarter, driven by factors discussed in the revenue section.

Gross profit

The gross profit margin for the first quarter 2024 was 43.87 per cent compared with 43.35 per cent for the first quarter 2023, an increase of 52 basis points. This increase in gross margin percentage during the quarter was primarily driven by a more favourable business mix, improved furniture margin due to lower inventory and freight costs, and optimized promotional initiatives.

Selling, general and administrative expenses (SG&A)

The company's SG&A as a percentage of revenue for the first quarter of 2024 was 39.32 per cent, an increase of 16 basis points over the first quarter 2023. The company's SG&A as a percentage of revenue for the current quarter increased primarily because of higher point-of-sale retail financing fees due to the higher Bank of Canada interest rates as compared with same quarter last year and provincial minimum wage increases.

Adjusted net income and adjusted diluted earnings per share

Adjusted net income for the quarter totalled $16.4-million, which represents an increase of $3.5-million over the prior year's quarter. The improvement is driven by strong sales and gross profit margin as outlined above.

The adjusted diluted earnings per share in the first quarter of 2024 was 24 cents per share, an increase of 26.3 per cent over the prior year's quarter.

Net income and diluted earnings per share

Net income for the first quarter 2024 was $18.8-million, or 27 cents per diluted earnings per share as compared with 19 cents per diluted earnings per share recorded in the prior year's quarter, an increase of eight cents per share or 42.1 per cent, driven primarily by strong operational results and a mark-to-market gain on financial derivative instruments.

Dividends

As previously announced, the company paid a quarterly dividend of 18 cents per common share on April 8, 2024. Today the directors have declared a quarterly dividend of 18 cents per common share payable on July 8, 2024, to shareholders of record at the close of business on June 10, 2024. As of 2007, dividends paid by Leon's 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, its principal objective is to increase its market share and profitability. Leon's remain focused on our commitment to effectively manage its costs but to also continuously invest in the business to drive growth initiatives that will drive more customers to both its on-line e-commerce sites and its 302 store locations across Canada.

About Leon's Furniture Ltd.

Leon's Furniture is the largest retailer of furniture, appliances and electronics in Canada. Its 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 302 retail stores from coast to coast in Canada under various banners.

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