DTEA: Turnaround, New Stores, No Debt, Rev $70M, Very Cheap DTEA's turnaround just began in Q2 2024 and DTEA emphasized that it reached a key inflection point in Q2 2024 with return to YoY growth mode:
https://www.globenewswire.com/news-release/2024/09/17/2947274/0/en/DAVIDsTEA-Reports-Financial-Results-for-Second-Quarter-of-Fiscal-2024.html#:~:text=Sales%20for%20the%20second%20quarter,from%20the%20prior%20year%20quarter.
DTEA also lowered significantly both its cost of sales and SG&A expenses in Q2 2024 compared to prior year period.
Revenue in the first half of 2024 are $24.5 million with Q2 traditionally being DTEA's slowest quarter due to the summer and the hot weather.
According to the guidance, revenue in Q3 2024 are up by more than 18% so far, so its Q3 2024 revenue will be about $15 million, because revenue in Q3 2023 were $12.1 million.
DTEA's business is seasonal with Q4 revenue usually doubling compared to Q3 because tea consumption traditionally skyrockets in winter, so Q4 2024 revenue will be about $30 million. On that front, the two new stores strategically-located in Royalmount mall and Eaton mall will contribute into Q4 revenue.
To sum it up, 2024 revenue will be about $70 million, significantly up from $60.6 million in 2023.
Thanks to the ongoing cost reduction strategy, DTEA will be at least breakeven in Q3, while it's usually solidly profitable and generates positive operating cash flow and positive free cash flow increasing significantly its cash at the end of Q4, which traditionally is its strongest quarter.
Given also that DTEA has zero debt and almost $7 million in cash at the end of Q2 2024, I forecast that its cash will far exceed $10 million with zero debt at the end of Q4 2024.
To sum it up, this year's revenue will be about $70 million, cash will far exceed $10 million at the end of Q4 and debt will of course remain zero.
Market cap at 35 cents is about $9 million.
As a result, current Enterprise Value at 35 cents will be NEGATIVE at the end of Q4 2024, so DTEA at 35 cents is insanely cheap.
On top of this, DTEA recently noted that it plans to expand by opening more stores in 2025 and 2026, as quoted below:
"Despite tough economic conditions reducing overall demand, we are committed to turning our business around,” said Sarah Segal, Chief Executive Officer and Chief Brand Officer, DAVIDsTEA. “Brick-and-mortar sales grew by mid-single digits for the second consecutive quarter in Q1. Our specialty teas and brand equity resonate strongly with consumers, who want a sensory experience—smelling and sampling our teas—before buying. Therefore, we are focused on in-store growth, with two new stores opening this fall and more expected to follow.”