DAVIDsTEA Brews Expansion Despite Retail Headwinds

NEW YORK, NY – November 19, 2025

A Counter-Trend Strategy

DAVIDsTEA, the North American tea merchant, is taking a decidedly contrarian approach to retail growth. While many companies are scaling back physical footprints, DAVIDsTEA recently closed a $3.0 million private placement of units, signaling an aggressive push to expand its store network across Canada. The move, detailed in a recent press release, suggests a strong belief in the enduring appeal of the in-store experience and a calculated bet that it can successfully navigate the challenges of a shifting retail landscape.

For a company that underwent significant restructuring in 2020 – closing nearly all of its U.S. locations and a substantial number of Canadian stores – this renewed focus on brick-and-mortar is noteworthy. “The company realized that the stores were a best billboard for the brand,” says one industry analyst, “and are critical to converting casual tea drinkers into loyal customers. This isn’t just about transactions, it’s about creating a sensory experience.” The company believes that the ability to smell, sample, and interact with tea experts remains a powerful draw for consumers.

Financial Turnaround and Expansion Plans

The private placement provides DAVIDsTEA with the capital to open new stores and bolster working capital. The company’s recent financial performance indicates a positive trajectory, with fiscal year 2024 demonstrating a narrowing net loss and a rise in adjusted EBITDA. “We've seen a very clear improvement in profitability over the last few years,” a source close to the company explains. “The company’s strategy to focus on its most profitable channels and improve its gross margins is working.”

Specifically, DAVIDsTEA plans to double its Canadian store count. Several locations are already slated for opening, including a renovated flagship store on Montreal’s South Shore, a new store in Quebec City, and a location in Square One Mall in Mississauga. The latter will feature a new, more open concept and a ‘Tea Bar’ for sampling and curated drinks. These Tea Bars, a recent addition to the DAVIDsTEA experience, are designed to provide a quick and convenient way to enjoy specialty tea beverages, addressing a gap in the market.

Navigating a Competitive Landscape

While DAVIDsTEA's financial turnaround is encouraging, the company operates in a competitive market. The Canadian tea market is experiencing growth, but also increasing complexity, with a growing demand for ready-to-consume beverages and functional teas. “The competitive landscape is shifting,” notes one retail observer. “Consumers are looking for convenience and health benefits, and companies need to adapt.”

DAVIDsTEA is responding by expanding its product offerings and focusing on innovation. The company is also leveraging its online channel to reach a wider audience and complement its brick-and-mortar stores. However, the success of its expansion strategy will depend on its ability to differentiate itself from competitors and deliver a compelling customer experience. Maintaining a balance between the online and in-store channels will also be critical.

The company’s growth hinges on a mix of factors. A source familiar with the expansion states, “They’re aiming for stores in high-traffic locations with favorable lease terms, and they are being cautious about over-expanding. They are also focused on ensuring that each store is profitable.” The company has also implemented strict cost control measures to protect its margins.

Warrant Structure and Potential Dilution

The $3.0 million private placement involved the issuance of units consisting of common shares and warrants. This introduces a potential for future dilution as warrant holders may exercise their rights to purchase additional shares. The warrants have a two-tiered exercise price, starting at $1.25 for one year and then increasing to $1.50. Furthermore, the company has the option to accelerate the expiry of the warrants if the share price reaches $2.00 for a sustained period. “The warrant structure provides a nice incentive for shareholders,” says one financial analyst. “If the stock price rises, warrant holders will be motivated to exercise their rights, bringing in additional capital to the company.”

The company will likely closely monitor its share price and the performance of its stores. If the expansion is successful and the share price rises, it may choose to accelerate the expiry of the warrants to clear the potential dilution. Conversely, if the expansion is slower than expected, it may allow the warrants to expire unexercised. The warrant structure gives the company flexibility and control over its capital structure. The current share price and future performance of DAVIDsTEA will determine whether warrant holders exercise their options, bringing in capital, or allow them to expire, potentially leaving capital on the table.