Organic Garage (TSX-V:OG, FRA:9CW1) Ltd said its shift to a decentralized distribution model and the phasing out of its warehouse has resulted in incremental savings and improved financial results.
The organic grocer has reported an increase in gross profit for its fiscal second-quarter despite reduced sales as the impact of coronavirus (COVID-19) overstocking subsided.
READ: Organic Garage says it has started seeing significant incremental savings as a result of moving to a decentralized distribution model as it posts first-quarter results
In April, the company completed the move to a decentralized distribution model and successfully agreed to sub-lease its warehouse facility for the remainder of the lease term. It said this resulted in incremental savings of about $238,000 for the quarter, consisting primarily of savings related to wages and benefits, transportation, and rent.
For the three months ended July 31, 2021, Organic Garage (TSX-V:OG, FRA:9CW1) reported a 16% decline in sales to $6.8 million, down from $8.1 million a year earlier. Gross profit increased by 2.5% to $2.25 million from $2.19 million, and its net loss widened to $383,130 from $201,724 in fiscal 2Q 2021.
The company said the decrease was primarily related to non-cash stock-based compensation offset by improved gross margins, lower in store wages and benefits, administrative wages and benefits and transportation costs related to the company’s phase-out of warehouse operations.
It ended the quarter with working capital of $1.9 million from a working capital deficit of $0.3 million a year earlier. Its cash balance improved to $2.5 million from $0.9 million.
It said customers have reacted positively to a new partnership for online deliveries that was announced in the summer as they can now complete online orders from a significantly larger geographic footprint. The company's Future of Cheese operations continue to swiftly develop, and it said it is focused on the upcoming launch of the first products in the near term.
“We are very pleased with our strong 2Q results which built on our 1Q performance and have put the company on a promising trajectory for the remainder of the year,” Organic Garage CEO Matt Lurie said in a statement.
“Our gross profit improvement is a testament to the focus that management has put into our strategic purchasing process. We have received great feedback on the expansion of our Hand-Picked Partners roster, which now includes Cheese Boutique and Tori’s Bakeshop.”
The company said it will be engaging Octagon Media Corp. to provide corporate communication and strategy services for an initial period of three months. The engagement is anticipated to commence in October 2021 and will provide for the grant of 800,000 stock options at an exercise price that will be the greater of $0.40 and the market price prior to the date of grant, as well as a fee of US$47,500.
It has also hired North Equities to provide consulting and investor engagement services for an initial period of three months starting October 2021 and will provide for a grant of 200,000 stock options at an exercise price that will be the greater of $0.40 and the market price prior to the date of grant, as well as a monthly fee of $12,500.
Contact the author at stephen.gunnion@proactiveinvestors.com