eResearch | Last week, Organic Garage Ltd. (TSXV: OG), released its F2020 annual results, for the year ending January 31. Organic Garage is a leading organic grocer that offers a wide selection of healthy and natural products at affordable prices. Founded in 2005, Organic Garage is headquartered in Toronto, operates four stores in the GTA with a fifth store opening in early 2021, and also operates a supply chain through its centralized distribution centre.
F2020 Financial Results
Organic Garage announced revenues of $24.1 million in F2020 versus $23.6 million in F2019, representing a 2.3% increase. Gross margins grew slightly to 27.8% in F2020 when compared with 27.4% from the previous fiscal year.
The Company’s year-end net loss increased to $5.1 million, up from $2.0 million in F2019. The net loss was primarily due to non-cash charges, including $2.2 million of goodwill impairment and depreciation charges of $1.7 million. Depreciation increased to $1.7 million from $0.69 million after the implementation of the IFRS 16, which had an impact on long-term leases for retail locations.
CHART 1: Organic Garage Fiscal Quarterly Revenue
Cash Flow & Debt Financing
Cash Flows from Operating Activities was a loss of $0.78 million in F2020 versus a loss of $0.59 million in F2019. However, Organic Garage continues to focus on improving cash flows from operating activities, including optimizing accounts receivable and accounts payable balances, and further cost containment measures.
To reduce interest payments, last October, the Company completed a $3.0 million convertible debt offering at an interest of 9.5% and used the proceeds to repay a $3.0 million loan, bearing an annual interest rate of 14%, held by the Business Development Bank of Canada. In addition, to conserve cash, Organic Garage recently converted $71,250 of accrued interest into shares at $0.105 per share.
At the end of the fiscal year, the Company’s cash position decreased to $0.2 million from $2 million held in F2019 but still has the financial reinforcement of an undrawn operating credit facility of $0.15 million.
F2021 Management Guidance and COVID-19 Impact
Organic Garage has been designated an “essential service” by the Ontario government and ensures that its stores remain operational while providing a safe environment for its customers and staff.
After the fiscal year end, the Company experienced high demand volumes because of the COVID-19 pandemic and this demand should positively affect revenue and cash flows in FH1/2021. Organic Garage also implemented a “Curbside Pickup” option at its Oakville and Thornhill stores.
Due to the previously announced agreement with Cornershop (see January 29, 2020 news release), Organic Garage was in a position to provide its customers with an online shopping and delivery option.
On April 8, the Company released an operational update disclosing that a significant increase in in-store and online sales has occurred due to new purchasing trends.
“The entire company did an excellent job during those difficult times in managing the increased in-store and online sales and I believe that the positive impact will be reflected in future quarterly financial results”, commented Matt Lurie, CEO of Organic Garage.
In early 2021, the Company expects to open its 5th store, with this store in the Leaside neighborhood of Toronto. The new store was previously scheduled to open in 2019 but was delayed due to redevelopment issues with the property owner. Because of the delays, Organic Garage has negotiated substantial benefits in favour of the Company, which should help with the store’s profitability.
Organic Garage believes that Ontario can support 25-30 Organic Garage stores and continues to evaluate possible expansion locations.
FIGURE 1: Artist Representation of Organic Garage’s Proposed Leaside Location
