Goodfood Reports Record Annual Net Sales of $379 Million, Fourth Quarter Net Sales of $79 Million and Launched On-Demand Grocery Service and Meal Solution Offering with One-Hour Delivery
-- Net sales reached $379.2 million, an increase of $93.9 million, or 33%
year-over-year
-- Gross margin reached 30.6%, an improvement of 0.3 percentage points and
gross profit reached $116.1 million, an increase of $29.7 million, or 34%
year-over-year
-- Net loss of $31.8 million compared to $5.3 million last year
-- Adjusted EBITDA margin (1) was negative 4.0%, a decrease of 5.2
percentage points year-over-year
-- Launch of on-demand 1-hour or less delivery with updated digital store
supporting over 1,000 grocery products and meal-solutions to active
customers (1)
-- Continued investments in fulfilment network expansion (13 facilities
across Canada), product selection, and order orchestration technology to
support faster online delivery beginning with our recent launch in
Toronto and to be followed with our Montreal launch in the coming days
-- Strong financial position with $125.5 million of cash on the balance
sheet
MONTREAL, Nov. 17, 2021 (GLOBE NEWSWIRE) --
Goodfood Market Corp. ("Goodfood" or "the Company") (TSX: FOOD), a leading online grocery company in Canada, today announced record financial results for the fiscal year ended August 31, 2021, and significant progress in building out its grocery offering and rapid delivery capabilities beginning with the launch of its first one-hour or less grocery delivery service in a first Toronto market.
"Fiscal 2021 was marked by strong year-over-year growth as we continued our investments and evolution into an on-demand online grocery and meal-solutions provider. We have made significant progress against our long-term objectives and are now firmly positioned as an online, on-demand grocery and meal solution source, providing deliveries within one hour or less in Toronto and soon Montreal, and offering over 1,000 products through our expanding distributed fulfillment network," said Chief Executive Officer Jonathan Ferrari. "Supported by our improved technology backbone, the growing breadth of our selection and speed of delivery, reaching more than 30% of the Canadian population via same-day and one-hour or less delivery, position Goodfood in a leadership role in the expected rapid digitalization of the online grocery industry in Canada. This year's record annual net sales and gross profit have helped lay the foundation for the next phase of our growth and evolution, despite the headwinds faced in the fourth quarter, as easing COVID restrictions reduced consumer demand and appeared to magnify expected Q4 seasonality. We are confident and excited by the enhanced value proposition we offer Canadians and our prospects to capture a significant portion of Canadians' increasing demand for online grocery and meal solutions. Our strategic investments in both people and infrastructure to continually add grocery selection and reduce delivery times and friction position us for the digital future of grocery and meal solutions delivery in Canada."
We generated record net sales of $379 million for the full year, up 33% over Fiscal 2020. The increase was driven by a growing active customer and subscriber (1) base, higher average basket sizes as well as an increasing order frequency, coupled with lower incentives and credits as a percentage of net sales. Fourth quarter net sales of $79 million decreased 5% year-over-year as the impact of re-opening and the return of seasonality stemming from the removal of COVID-19 restrictions and the increased vaccination rate impacted this quarter's top line. We expect these headwinds to stabilize as the year progresses and the return to normalcy continues, with our newly launched one-hour on-demand delivery providing the key platform for growth.
Turning to our operating performance, "We are pleased with our performance this year given the growing operational investments made to build-out our on-demand network, expand our product offering and continuously reduce delivery times for our subscribers, despite the volume de-leverage faced in the fourth quarter. Once again, our team demonstrated outstanding execution capabilities as our gross profit grew 34% year-over-year and gross margin expanded 0.3 percentage points, generating record gross profit of $116.1 million," added Neil Cuggy, President and Chief Operating Officer. "In the fourth quarter, gross profit was $18 million for a margin of 22.9%, a decrease of 9.9 percentage points versus the prior year, as the decrease in net sales combined with our continued investments in people to position ourselves to be the leader in on-demand online grocery and meal solutions in key Canadian markets, along with the absorption of labour inflation and other supply chain costs, including food, led to the margin decline."
Selling, general and administrative expenses as a percentage of net sales increased from 29.8% in 2020 to 36.0% in 2021. The year-over-year increase is primarily due to higher wages and salaries resulting from the expansion of the management team, including mainly our technology, operations management and marketing groups, and related administrative functions needed to build out the physical and digital on-demand fulfillment infrastructure, including the growing product offering required to support the Company's growth plan. In addition, a higher marketing spend was incurred in 2021, as the prior year spend was positively impacted by COVID-19 restrictions. Also of note, we changed our accounting policy related to configuration and customization in a cloud computing arrangement to align with the April 2021 International Financial Reporting Interpretations Committee agenda decision, resulting in a $1.6 million and $1.4 million increase in 2021 and 2020 SG&A offset by an adjustment to intangible assets. Taken together with our gross profit and ramp up costs associated with our on-demand fulfilment network, this led to Adjusted EBITDA (1) margin of negative 4.0% versus a positive margin of 1.2% in Fiscal 2020.
In the fourth quarter, selling, general and administrative expenses increased to 47.2% of net sales compared 27.5% last year, primarily due to higher wages and salaries to support investments in the Company's aforementioned on-demand fulfillment infrastructure as well as higher marketing spend compared to the same period in 2020. This translated to an Adjusted EBITDA (1) margin of negative 22.4% compared to positive 5.8% last year.
Looking forward, 2022 will be the year in which our multi-year effort of preparing for the launch of on-demand grocery and meal-solution offering, supported by an optimized digital store platform is realized. Over the past two years, our cost structure has included a growing and material amount of operating expenses related to this initiative, and when coupled with a subscriber-centric ready-to-cook revenue base that has not yet benefited from the additional revenue stream an on-demand meal solution and grocery offering can generate, our net loss and Adjusted EBITDA (1) have been materially negatively impacted. In 2022, we expect investments to continue and to open on-demand micro-fulfillment centers that can support significant incremental net sales. This will begin with the recent completion of construction at our Vancouver facility, followed by the recently-announced launch of one-hour or less meal-solution and grocery deliveries out of our new Toronto facility, to be followed in short-order by a similar facility in Montreal, in addition to our automated local fulfilment centre in Ottawa which will begin delivering orders early in the new calendar year, as well as additional facilities in key urban areas throughout the year. In addition, we expect an improved cost structure through realized efficiencies, further aligning it with our on-demand one-hour grocery initiative, and we expect progressive improvement in profitability throughout the year.
"With the grocery industry increasingly shifting online, we have invested capital and margin at an accelerating pace to enhance our operations across the country, and remain focused on building the optimal footprint of centralized production facilities and local fulfilment centres to enable faster delivery times and greater product choice to Canadians everywhere and are excited by the opportunity ahead of us," concluded Mr. Ferrari.
RESULTS OF OPERATIONS -- FISCAL 2021 AND FISCAL 2020
The following table sets forth the components of the Company's consolidated statement of loss and comprehensive loss:
(In thousands of Canadian dollars, except per share and percentage information)
For the years ended
August 31, 2021 2020 ($) (%)
----------------------- -------- -------- -------- --------
Net sales $ 379,234 $285,372 $ 93,862 33%
Cost of goods sold 263,140 198,953 64,187 32%
---------------------- --------- -------- --------- --------
Gross profit $ 116,094 $ 86,419 $ 29,675 34%
Gross margin 30.6% 30.3% N/A 0.3 p.p.
Selling, general and
administrative
expenses $ 136,396 $ 84,987 $ 51,409 60%
Depreciation and
amortization 8,820 5,197 3,623 70%
Net finance costs 2,170 2,380 (210) (9)%
----------------------- -------- -------- --------- --------
Loss before income
taxes (31,292) (6,145) (25,147) N/A
Deferred income tax
expense (recovery) 500 (804) 1,304 N/A
---------------------- -------- ------- -------- --------
Net loss, being
comprehensive loss $(31,792) $(5,341) $(26,451) N/A
---------------------- -------- ------- -------- --------
Basic and diluted
loss per share $ (0.45) $ (0.09) $ (0.36) N/A
