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LXRandCo Reports Continued Improvement in Financial Results for First Quarter 2019

a?? First Quarter Highlighted by 13% Increase in Average Store Sales, Continued Year-over-Year Gross Margin Improvement and Continued Progress on Cost Management a??MONTREAL, May 13, 2019 /CNW/ -A LXRandCo, Inc. ("LXRandCo" or the "Company") (TSX: LXR, LXR.WT), a North American omni-channel retailer of branded vintage luxury handbags and accessories, today reported its financial results for the first quarter ended March 31, 2019."The first quarter was an excellent start to 2019," said Steven Goldsmith, President and Chief Executive Officer, LXRandCo.A  "With a smaller but much healthier retail network, average store sales were up 13% year-over-year as our focus on the quality of sales by being in the right locations with the right partners is clearly yielding the intended results.A  This fundamental principle will continue to guide our decision-making as we expand our presence in the top designated market areas in the United States and Canada. Importantly, our continued focus gross margin expansion and cost management resulted in solid improvements on both fronts.A  Gross margin expanded 200 basis points year-over-year, with the opportunity for continued improvement going forward.A  And we saw both year-over-year and sequential decreases in our selling, general and administrative expenses, even before the impact of non-recurring costs.A  All of this contributed to significantly improved cash used in operations, which was just $1.0 million a?? a year-over-year improvement of $7.1 million.""We are optimistic for the balance of the year and I look forward to building on this success throughout the remainder of 2019 as we continue to pursue our strategic priorities of prudent revenue growth, margin expansion and sustainable cash flow generation," added Mr. Goldsmith.A  "With the only national shop-in-shop network in the U.S. and Canada, LXRandCo occupies a truly unique position in the rapidly growing vintage luxury handbag and accessories space.A  Alongside its own growth potential, it provides a significant opportunity to expand our e-commerce business, especially through the platforms of our outstanding group of retail partners, as well as through opportunities with new online retail partners."Highlights for the First Quarter Ended March 31, 2019(All comparable figures are to the first quarter ended March 31, 2018 unless otherwise stated1)

The retail network at March 31, 2019 had 20% fewer stores and consisted of 85 stores compared with 106 at March 31, 2018 (which excludes the 27 European stores closed in 2018 and subsequently re-classified as discontinued operations). This decrease of 21 stores, which was an integral part of the Company's strategic plan, is primarily composed of the closure of four stores and the transition of 12 stores to a wholesale arrangement during the fourth quarter of 2018, as well as the closure of one store with an existing retail partner in the first quarter of 2019.



Despite 20% fewer stores, net revenue was unchanged at $8.8 million;



Gross profit increased to $2.2 million from $2.0 million;



Gross profit margin increased to 25% of revenue from 23%;



Selling, general and administrative expenses decreased 5% to $5.0 million from $5.2 million, representing 57% of net revenue, down from 59%. Excluding non-recurring legal and professional fees related to the Strategic Review, selling, general and administration expenses were $4.5 million, or 51% of net revenue;



Due primarily to a non-cash, foreign exchange related loss attributable to the European operations, net loss increased to $3.9 million from $3.6 million;



Adjusted EBITDA (a non-IFRS measure) was $(2.2) million compared with $(3.1) million;



Adjusted Net Loss (a non-IFRS measure) was $2.6 million compared with $3.7 million;



Cash used in operations improved to $1.0 million from $8.1 million; and,



On March 4, 2019, pursuant to the strategic review process launched in August 2018, the Company completed a non-brokered private placement of 12,500,000 Class B Shares in the capital of the Company at a price of $0.40 per Share for gross proceeds of $5,000,000. The net proceeds will be used to fund the execution of the Company's strategic plan. As previously reported, completion of the private placement concluded the mandate of the Company's special committee of independent directors to identify and evaluate a broad range of strategic and financing alternatives for the Company and which unanimously recommended the Private Placement; and,



The Company's cash balance at March 31, 2019 was $5.1 million.

Discussion of First Quarter 2019 ResultsUnless otherwise indicated, all amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures. See "Non-IFRS Measures" further below. For a reconciliation of non-IFRS measures to their most directly comparable measure calculated in accordance with IFRS, see "Select Consolidated Financial Information" further below.The following provides an overview of LXRandCo's financial results for the three-month period ended March 31, 2019 compared with the three-month period ended March 31, 2018.Net RevenueNet revenue remained stable at $8.8 million in the three-month period ended March 31, 2019. LXRandCo's retail network consisted of 85 stores as at March 31, 2019 compared to 106 stores as at March 31, 2018 (excluding from the 2018 comparative are 27 European stores closed in 2018 and subsequently classified as discontinued operations). The opening and closings were within the context of the Company's strategic plan, including its intention to prudently expand its retail network in the largest market areas in the United States and Canada and implement a more profitable retail partner model across its network. Gross ProfitGross profit was $2.2 million compared to $2.0 million, a $0.2 million increase. Gross profit margin was 24.9% compared to 22.9%.A  SG&A ExpensesSG&A expenses were $5.0 million in the three-month period ended March 31, 2019, compared to $5.2 million in the three-month period ended March 31, 2018. Excluding non-recurring legal fees and professional fees related to the strategic review, SG&A expenses were $4.5 million, or 51.4% of net revenue;A Net LossNet loss was $3.9 million in the three-month period ended March 31, 2019, compared to a net loss of $3.6 million in the three-month period ended March 31, 2018. Adjusted Net LossAdjusted Net Loss was $2.6 million in the three-month period ended March 31, 2019, compared to adjusted net loss of $3.7 million in the three-month period ended March 31, 2018.Adjusted EBITDAAdjusted EBITDA was $(2.2) million in the three-month period ended March 31, 2019, compared to $(3.1) million in the three-month period ended March 31, 2018. Adjusted EBITDA Margin was (25.3) % of net revenue in the three-month period ended March 31, 2019, compared to (35.5) % of net revenue in the three- month period ended March 31, 2018.Consolidated Financial Statements and Management's Discussion and AnalysisThe Company's unaudited interim condensed consolidated financial statements for the three-month period ended March 31, 2019 and Management's Discussion and Analysis ("MD&A") thereon are available on the Company's web site at https://investors.lxrco.com/financials-reports-information and under the Company's profile on SEDAR at www.sedar.com.Selected Consolidated Financial InformationThe following table summarizes LXRandCo's recent results for the periods indicated:

Consolidated statements of loss and comprehensive loss



(in Canadian dollars, except per share amounts, unaudited)




























For the 3-month period ended March 31,




























2019



2018






































Net revenue























8,756,063



8,791,998



Cost of sales























6,578,400



6,778,350



Gross profit























2,177,663



2,013,648









































































Operating expenses

































Selling, general and administrative expenses























4,974,901



5,222,967



Amortization and depreciation expenses























218,444



246,970



Results from operating activities























(3,015,682)



(3,456,289)






































Other income and expenses

































Finance costs























113,341



277,415



Foreign exchange loss (gain)























690,668



(176,919)



Loss before income taxes























(3,819,691)



(3,556,785)






































Income tax expense (recovery)

































Current























39,865



a??



Deferred























a??



44,000




























39,865



44,000



Net loss from continuing operations























(3,859,556)



(3,600,785)



Net loss from discontinued operations























(7,621)



(725,618)



Net loss for the period























(3,867,177)



(4,326,403)

A The following table provides a reconciliation of net loss to EBITDA and Adjusted EBITDA in addition to Net Loss to Adjusted Net Loss for the periods indicated:
















For the 3-month period ended March 31,


















2019



2018




























Reconciliation of net loss to Adjusted EBITDA























Net Loss













(3,867,177)



(4,326,403)



Add: Amortization and depreciation expense













218,444



246,970



Add: Finance Costs













113,341



277,415



Add: Income Tax Expense













39,865



44,000



EBITDA













(3,495,527)



(3,758,018)




























Adjustments to EBITDA:























Foreign exchange loss (gain)













690,668



(176,919)



Stock-Based Compensation Expense













79,373



88,507



Professional fees related to strategic review and private placement













474,853



a??



Store closing costs













30,318



a??



Loss from discontinued operations













7,621



725,618



Adjusted EBITDA













(2,212,694)



(3,120,812)



Adjusted EBITDA as a percentage of net revenue













(25.3%)



(35.5%)





















































Reconciliation of Net Loss to Adjusted Net Loss























Net Loss













(3,867,177)



(4,326,403)



Adjustments to Net Income:























Foreign exchange loss (gain)













690,668



(176,919)



Stock-Based Compensation Expense













79,373



88,507



Professional fees related to strategic review and private placement













474,853



a??



Store closing cost













30,318



a??



Loss from discontinued operations













7,621



725,618



Adjusted Net Loss













(2,584,344)



(3,689,197)



Adjusted Net Loss as a percentage of net revenue













(29.5%)



(42.0%)

Notes

As at September 30, 2018, the Company ceased the operations of its European based subsidiaries, LXR&Co Germany GmbH, LXR&Co UK Limited, and LXRandCo Netherlands B.V. As the cash flows related to the operations of the European based subsidiaries are clearly distinguished, both operationally, geographically and for financial reporting purposes from the rest of the entity, the financial performance within these entities for the comparative periods has been reclassified and presented separately as discontinued operations in the consolidated statements of comprehensive loss and cash flows.

Conference CallA conference call to discuss the Company's first quarter 2019 results is scheduled for tomorrow,A Tuesday, May 14, 2019 at 8:30 a.m. (ET).A  Participants can access the conference call by telephone by dialing 647-427-7450 or 1-888-231-8191, or via the Internet at https://investors.lxrco.com/events-and-webcasts.The conference call will be archived for replay both by telephone and via the Internet beginning approximately one hour following completion of the call. To access the archived conference call by telephone, dial 1-855-859-2056 or 416-849-0833 and enter the pass code 3287833 followed by the pound key.A  The telephone replay will be available until Tuesday, May 21, 2019 at midnight. To access the archived conference call via the Internet, go to https://investors.lxrco.com/events-and-webcasts.About LXRandCoLXRandCo is a North American omni-channel retailer of branded vintage luxury handbags and other personal luxury products. LXRandCo sources and authenticates high-quality, pre-owned products from iconic brands such as HermA?s, Louis Vuitton, Gucci and Chanel, among others, and sells them at attractive prices through a retail network of stores located primarily in major department stores in the United States and Canada, wholesale operations primarily in the United States, and its own e-commerce website, www.lxrco.com. Caution Regarding Forward-Looking StatementsCertain statements in this press release are prospective in nature and constitute forward-looking information and/or forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "could", "would", "will", "expect", "intend", "estimate", "forecasts", "project", "seek", "anticipate", "believes", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events and the negative of any of these terms. Forward-looking statements in this news release include, but are not limited to, statements concerning future objectives and strategies to achieve those objectives, including, without limitation, store openings, as well as other statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, outlook, circumstances, performance or expectations that are not historical facts.A  Forward-looking statements reflect management's current beliefs, expectations and assumptions and are based on information currently available to management, which includes assumptions about continued revenues based on historical past performance, management's historical experience, perception of trends and current business conditions, expected future developments and other factors which management considers appropriate. With respect to the forward-looking statements included in this press release, management has made certain assumptions with respect to, among other things, the Company's ability to meet its future objectives and strategies, the Company's ability to achieve its future projects and plans and that such projects and plans will proceed as anticipated, the expected growth of the Company's e-Commerce revenue, the expected number and timing of store openings in North America and internationally, entering into new and/or expanded retail partnerships in North America and internationally, the Company's ability to source products, the Company's competitive position in the vintage luxury industry, and beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the marketing, distribution and sale of the Company's products as well as assumptions concerning general economic and market growth rates, currency exchange and interest rates and competitive intensity.Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur. All forward-looking statements included in and incorporated into this press release are qualified by these cautionary statements. Unless otherwise indicated, the forward-looking statements contained herein are made as of the date of this press release, and except as required by applicable law, the Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned that the actual results achieved will vary from the information provided herein and that such variations may be material. Consequently, there are no representations by LXRandCo that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements.SOURCE LXRandCo, Inc.
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