DAVIDsTEA (DTEA) Solid Start to the Year - BMO Capital

BMO Analyst, Kelly Bania, maintained her Market Perform rating and $13 PT after DAVIDsTEA (NASDAQ: DTEA) reported F1Q17 EPS of C$0.06, which was ahead of consensus EPS of C$0.05. Top-line sales of +24.1% was slightly ahead of the 22% (comps +4.9% in line with MSD% guidance). Operating margin of 4.6% was ahead of expectations with weaker GM% more than offset by better SG&A. Full-year F17 guidance was reiterated.

Key positives this quarter include:

1) Solid FX-neutral GM% expansion of +90 bps supported by supply chain efficiencies and improved product costs

2) higher-margin online penetration continues to increase

3) the company remains on track to open ~40 new stores this year and new store productivity continues to remain robust (particularly in Canada)

4) initial tests with customized online marketing (tested in California w/ iced tea) have been successful and remain a great opportunity

5) expense management (including wages) is running better than expected.

The PT of $13 is unchanged and based on 32x F17E EPS of C$0.52 (or $0.41 in US$).

For an analyst ratings summary and ratings history on DAVIDsTEA click here. For more ratings news on DAVIDsTEA click here.

Shares of DAVIDsTEA closed at $11.90 yesterday.

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