MONTREAL — DavidsTea Inc. said Monday it faces the possibility of being delisted from the Nasdaq due to its low stock price as it provided an operational update amid the COVID-19 pandemic.
The Montreal-based company said in a statement that the Nasdaq Stock Market LLC notified the company on April 21 that it "is not in compliance with the minimum bid price requirement" under the index's listing rules.
Shares traded on the exchange must meet a US$1 minimum bid price. If a company trades below that threshold for 30 straight business days, Nasdaq will send them a deficiency notice, according to the Nasdaq Listing Center. The company is given 180 days to regain compliance.
DavidsTea shares were trading at 74 cents U.S. early afternoon Monday, up slightly from their close Friday.
The company's shares fell below the US$1 mark in early March. On March 8, they closed at 85 US cents, down from $1.08 Friday, March 6.
The Nasdaq notice "has no immediate effect" on the company's listing, DavidsTea said, adding it has until Dec. 28, 2020 "to regain compliance."
If it fails to do so before that date, it "may result in the company's common stock being delisted from Nasdaq."
The listing news came as the company announced its sales in its fourth quarter totalled $73.5 million, down 11.6 per cent compared with the same period a year earlier. The released financial metrics are unaudited.
DavidsTea temporarily closed all its 231 stores in Canada and the U.S. on March 17 as the coronavirus continued to spread.
The stores remain closed, but the company continued to sell its products online, as well as in more than 2,500 supermarkets and drugstores in Canada.
E-commerce and wholesale revenue totalled $17.8 million in its fourth quarter which ended Feb. 1, up 18.5 per cent over the same quarter last year.
For its full financial year, sales totalled $196.5 million, down 7.7 per cent compared with the prior year, while e-commerce and wholesale revenue amounted to $42.2 million.
In the first 11 weeks of its 2020 financial year, which ended April 18, sales totalled $28.9 million. That's down 23 per cent compared with the same period last year due to the closure of its stores.
The company saw e-commerce sales jump by 127 per cent in the same period, while wholesale sales rose 86 per cent.
DavidsTea anticipates the impact of COVID-19 on the company's business "will be significant."
It notes "there is no assurance that customers will purchase our products at previous volumes through these alternative channels or that the increase in our e-commerce sales will continue."
It does not know what the ultimate impact will be, as that depends on factors the company can not control, it said, such as how long the pandemic lasts and how much it spreads.
The company has taken some action to reduce costs.
All store-related employees have been temporarily furloughed, it said, and moved "substantially all" non-essential employees to a four-day work week.
Management and board members agreed to reduce their compensation at this time, it said.
This report by The Canadian Press was first published April 27, 2020.
The Canadian Press