DAVIDs Tea Outlines Growth Strategy

DAVIDs Tea’s second-quarter earnings call on Sept. 7 revealed a multitiered strategy for growth in Canada and the United States. At the top of the call, CEO Joel Silver said, “We’re putting the right team in place and many of the measures we’re initiating will help our team achieve improved performance.” Second-quarter results were consistent with expectations, as total sales increased 11 percent. The rate of same-store sales decline improved 4.8 percentage points to -0.9 percent from -5.7 percent in the first quarter of 2017, according to Silver. However, there was a decline in the year-over-year growth margin as a result of clearance of seasonal products and the deleveraging of fixed costs. This quarter, the company made progress on: improving short-term goals, product assortment and in-store experience. Additionally, the company surveyed 4,500 customers in Canada and the U.S. with three goals in mind:

• To clearly identify DAVIDs Tea’s target market.
• To identify the key differences between the U.S. and Canadian consumers.
• To measure brand awareness of DAVIDs Tea.

The survey gleaned data on customer preferences with regard to demographics, drink choices, taste preferences, location preferences and how they drink tea. “We believe these insights will be key to further developing our strategy to better tailor our DAVIDs Tea concept to customers,” said Silver. Starbucks’ recent announcement regarding closing its Teavana stores also plays into DAVIDs Tea’s strategy. “We are currently assessing the potential opportunity,” Silver said. DAVIDs Tea has 38 stores in Canada that are positioned in the same malls as Teavana stores and 19 in the U.S. Some of DAVIDs Tea’s plans include:

• Reducing SKUs for the purpose of creating a more streamlined in-store experience, thereby connecting customers with DAVIDs Tea’s best products.
• A new marketing strategy of creating a more cohesive message about DAVIDs Tea to strengthen its position in specialty teas.
• A new, more robust website with improved capabilities, which will allow the company to increase its e-commerce. The website is slated to launch in early 2018.

Two new people were recently hired in key roles in the company. Sarah Segal will lead the group that focuses on tea, product development and innovation. Natalie Pelchat will oversee direct merchandising, with assortment planning and inventory management. Silver said the overall fiscal second-quarter results for DAVIDs Tea were disappointing, but he is optimistic about the second half. This year, DAVIDs Tea will open 12-15 stores in Canada and as many as five in the U.S. Executives will consider closing the low-performing U.S. stores. They intend to improve the profitability of Canadian stores, which account for 80 percent of total sales.