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KITS Eyecare CEO channels Amazon, focuses on growth before profit

Revenue at the e-commerce eyewear seller jumped 21 per cent in the quarter, 32 per cent year-over-year
While the vast majority of KITS Eyecare's sales are online, the company also has an eyewear boutique within a coffee shop that it operates at the corner of Yew Street and Cornwall Avenue

Vancouver's KITS Eyecare Ltd. (TSX:KITS) generated strong sales to end 2023, but despite increasing its profit margins, the company continues to rack up overall net losses, according to its earnings report today.

The e-commerce eyewear seller generated record quarterly revenue in each subsequent quarter in 2023, ending with $31.663 million in sales in the quarter ended Dec. 31. That is up 20.7 per cent from $26.239 million in the same quarter a year ago. 

"We've been steadily decreasing the net-income loss, as well as growing the top line," CEO Roger Hardy told BIV this afternoon. 

Indeed, KITS lost $491,000 in its fourth quarter, down from a $1.385 million loss in the same quarter a year ago. 

Better profit margins combined with higher sales to help that bottom line. The company's gross margin increased by 110 basis points, to 35 per cent, up from 33.9 per cent in the fourth quarter of 2022. 

Some corporate expenses are being made now with an eye to the future. 

Marketing expenses as a percentage of revenue increased by 50 basis points to 14.2 per cent compared to 13.7 cent.

Hardy said that marketing spending has a long-term effect. Money spent now on marketing could lure a new customer who then returns in future years without having to be prompted by new marketing. 

"From purely a business standpoint, we're growing customers that return and recur over time, he said. 

Repeat customers generated about two-thirds of the company's fourth-quarter revenue. 

For the full year, KITS generated $120.510 million in revenue, up 31.5 per cent from $91.639 million in 2022. Its full-year loss dropped to $2.215 million, from $4.552 million in 2022. 

Hardy would not put a date on when he expects his company to break even but he said that "over time" this will happen.

"As return customers come back, our margins tend to go up," he said. "Over time, we will see not just adjusted EBITDA (earnings before interest taxes, depreciation and amortization) up positive, but EBITDA and net income positive."

He said that his focus is to grow his company's revenue as fast as possible and that profitability can come later on. 

"I take you back to (Nasdaq:AMZN)," he said. "I don't think they made money for 10 years. Facebook (Nasdaq:META): not 10 years. Google (Nasdaq:GOOGL): something like that, six years. So, you know, we're in Year 5 of a fast-growing consumer business that's gone to over $100 million [in revenue] in five years."

The company's shares initially popped but wound up having a muted reaction to the earnings news, which was released before markets opened. 

Shares immediately popped to $7, after closing yesterday at $6.42, but quickly settled and were down 0.62 per cent on the day, to close at $6.38.

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