BIRKS GROUP INC.

Birks Group Inc. operates as a leading designer of fine jewelry and operator of luxury jewelry, timepieces and gifts retail stores in Canada. The North American retail jewelry industry is highly competitive and fragmented, with a few very large national and international competitors and many medium and small regional and local competitors. Competition is based primarily on the total brand experience including trust, quality craftsmanship, product design and exclusivity, product selection, marketing and branding elements, service excellence, and to a certain extent, price. The Company generates substantially all of its net sales in Canada and sources inventory from suppliers within and outside North America.

The Company competes with nationally-recognized jewelry chains as well as a large number of independent regional and local jewelry and timepiece retailers, department stores, mass merchandisers, and e-commerce sellers. Many of these competitors have greater financial resources than the Company. The Company believes it is differentiated by its long-standing reputation and heritage, its ability to offer distinctively designed exclusive products, and a strong emphasis on providing a superior shopping experience. As of May 31, 2026, The Grande Rousse Trust beneficially owns or controls approximately 69.3% ¹ of all classes of outstanding voting shares, with Montel and Mangrove owning 44.9% ² and 24.4% ³ respectively.

The Company generates revenue through the sale of fine jewelry, timepieces, and gifts across three distribution channels: retail stores, e-commerce, and gold exchange. The retail division accounts for approximately 94% ⁴ of net sales during fiscal 2026, fiscal 2025 and fiscal 2024. E-commerce and gold exchange combined accounted for approximately 6% ⁵ of net sales during fiscal 2026. The Company also operates a private label credit card administered by a third-party financial institution and a Birks proprietary credit card. Sales under the Birks private label credit card and the Birks in-house credit card accounted for approximately 15.2% ⁶ of net sales during fiscal 2026.

Net sales are divided into two principal product categories: jewelry and other, and timepieces. For fiscal 2026, jewelry and other sales were $78,126 ⁷ thousand, representing 38.0% ⁸ of total net sales, and timepieces sales were $127,298 ⁹ thousand, representing 62.0% ¹⁰ of total net sales. For fiscal 2025, jewelry and other sales were $68,927 ¹¹ thousand, representing 38.8% ¹² of total net sales, and timepieces sales were $108,880 ¹³ thousand, representing 61.2% ¹⁴ of total net sales. For fiscal 2024, jewelry and other sales were $86,256 ¹⁵ thousand, representing 46.6% ¹⁶ of total net sales, and timepieces sales were $99,019 ¹⁷ thousand, representing 53.4% ¹⁸ of total net sales.

The Company offers Birks branded designed jewelry, designer jewelry including diamonds, gemstones, and precious metals, and a large selection of prestigious brand name timepieces including Rolex, Tudor, Baume & Mercier, Breitling, Cartier, Chaumet, Frédérique Constant, Grand Seiko, IWC, Jaeger Lecoultre, Longines, Montblanc, Omega, Panerai, Patek Philippe, Roger Dubuis and Tag Heuer. Other designer jewelry brands include Chaumet, Dinh Van Paris, Fope, Fred, Marco Bicego, Messika, Roberto Coin, and Yoko London. The Company also offers giftware including Montblanc writing instruments. During fiscal 2026, approximately 46% ¹⁹ of jewelry products acquired for sale were internally designed and sourced.

On July 8, 2025, the Company completed the European Acquisition for a total consideration of $10.8 million ²⁰ (or $8.1 million ²¹ net of cash acquired), acquiring four retail locations in Toronto, Ontario under the European Boutique brand. The purchase price was paid with $9.7 million ²² of cash consideration at closing and a note payable of $1.1 million ²³. On June 26, 2025, Mangrove Holding S.A. entered into a loan agreement to advance $3.75 million ²⁴ of additional indebtedness at an annual interest rate of 15% ²⁵, repayable on December 24, 2026. On July 8, 2025, the Company entered into an amendment to the Amended Term Loan with SLR, providing an additional term loan of $13.5 million ²⁶ to fund the European Acquisition and working capital. On June 5, 2026, the Company entered into a five-year $32.5 million ²⁷ senior secured term loan facility with Gordon Brothers, which matures in June 2031 and refinances the $26 million ²⁸ SLR Term Loan. Contemporaneously, the Company amended and extended its Amended Credit Facility with Wells Fargo, extending the maturity date until June 2031 and providing total commitments of $93 million ²⁹, an increase of $3 million ³⁰. The GB Term Loan decreases to $30.0 million ³¹ in December 2027. The Company also signed an amendment to the Mangrove Loan extending the maturity date until June 2031, with interest at 12.2% ³² effective August 1, 2026, and annual principal payments of $250,000 ³³ over three years commencing in June 2028, with a final repayment of $3.0 million ³⁴.

For fiscal 2026, total net sales were $205,424 ³⁵ thousand, compared to $177,807 ³⁶ thousand in fiscal 2025 and $185,275 ³⁷ thousand in fiscal 2024. The Company reported a net loss of $3.4 million ³⁸ for fiscal 2026, compared to a net loss of $12.8 million ³⁹ in fiscal 2025 and a net loss of $4.6 million ⁴⁰ in fiscal 2024. Net cash provided by operations was $0.2 million ⁴¹ in fiscal 2026, compared to net cash used in operations of $1.9 million ⁴² in fiscal 2025 and $0.2 million ⁴³ in fiscal 2024. The Company had an accumulated deficit of $141.7 million ⁴⁴ as of March 28, 2026, and a stockholders' deficit of $21.4 million ⁴⁵.

The Company completed the European Acquisition in July 2025, acquiring four retail locations in Toronto under the European Boutique brand for total consideration of $10.8 million ⁴⁶ (or $8.1 million ⁴⁷ net of cash acquired). The Company may continue to make acquisitions in the future based on available opportunities. The Company also continues to evaluate other ERP alternatives to update its retail systems including point of sale, supply chain, warehouse management, wholesale, and finance, after recording a non-cash impairment charge of $4.6 million ⁴⁸ in fiscal 2025 associated with a change in plans to implement a new ERP system with the Microsoft Dynamics D365 for Retail platform.

The Company plans to continue to review opportunities to open new stores in new prime retail locations when the right opportunities exist. During fiscal 2026, the Company launched the construction of a new store in Vancouver which opened in June 2026. The Company also continues to evaluate the productivity of existing stores and close unproductive stores. The capital expenditures related to remodeling some retail stores are estimated to be approximately $4.0 million ⁴⁹ during fiscal 2027, though these are at the discretion of the Company and not yet fully committed.

The Company expects to finance capital expenditures from operating cash flows and existing financing arrangements including tenant allowances and capital lease financing. The Company currently expects to continue to invest in capital expenditures in fiscal 2027 and fiscal 2028 to make on-going strategic improvements to its retail network, focusing on operations and delivering a return on strategic investment spending during the last fiscal year.

In the last three fiscal years, the Company invested a total of approximately $17.6 million ⁵⁰ in capital expenditures, primarily associated with remodeling of the existing store network and digital transformation including the continued evolution of the e-commerce platform. During fiscal 2026, the Company invested a total of $2.8 million ⁵¹ in capital expenditures, including $1.9 million ⁵² on store leasehold improvements, store equipment and assets, $0.5 million ⁵³ for digital transformation initiatives, and $0.4 million ⁵⁴ towards computer hardware and other equipment. During fiscal 2025, the Company invested a total of $7.5 million ⁵⁵ in capital expenditures.

The Company's ability to meet cash flow requirements depends on attaining profitable operations, adhering to the terms of committed financings, obtaining favorable payment terms from suppliers, and maintaining positive excess availability levels under the Wells Credit Facility and GB Term Loan. The Company is required to maintain minimum excess availability at all times as defined in these facilities. The Company expects to be above the minimum excess availability for at least the next twelve months from the date of issuance of the financial statements.

The Company believes recent general economic conditions, business and retail climates, and geopolitical instability, including heightened inflation, stock market volatility, high interest rates and tariffs and retaliatory tariffs, could lead to a slow-down in certain segments of the global economy and affect customer behavior and discretionary income spent on the Company's products. The risk of recession is growing, notably in light of the significant increase in interest and inflation rates. The current inflationary environment, higher interest rates, and the increase in cost of sales could negatively affect consumer spending. The Company has seen decreases in consumer spending that could negatively impact sales when general economic conditions deteriorate.

The Company is subject to periodic review by NYSE American during the Plan Period ending August 25, 2026. If the Company does not regain compliance with Sections 1003(a)(i) and 1003(a)(ii) of the NYSE American Company Guide by that date, or if the Company does not make progress consistent with the plan, NYSE American may initiate delisting procedures. As of March 28, 2026, the Company reported a stockholders' deficit of U.S. $15.4 million ⁵⁶ (CAD $(21.4) million ⁵⁷) and net losses for each of its three most recent fiscal years. The Company is currently not meeting the continued listing standards with respect to minimum stockholders' equity and reported losses.

The Company has an accumulated deficit of $141.7 million ⁵⁸ as of March 28, 2026, a net loss of $3.4 million ⁵⁹ for fiscal 2026, and negative cash flows from operations, raising substantial doubt about its ability to continue as a going concern. Total indebtedness was $110,160 ⁶⁰ thousand as of March 28, 2026, with a ratio of total indebtedness to total capitalization of 124.1% ⁶¹, which has worsened progressively from 101.8% ⁶² as of March 27, 2021. The Company is required to maintain minimum excess availability under its Wells Credit Facility and GB Term Loan, and failure to do so would trigger an event of default causing all debt balances to become immediately due. The Company is not in compliance with NYSE American continued listing standards regarding minimum stockholders' equity, reporting a stockholders' deficit of U.S. $15.4 million ⁶³ (CAD $(21.4) million ⁶⁴) as of March 28, 2026, and faces potential delisting if it does not regain compliance by August 25, 2026. In fiscal 2026, merchandise supplied by the largest luxury timepiece supplier accounted for approximately 22% ⁶⁵ of total net sales, and the abrupt loss of this supplier would have a material adverse effect on the business.

Management's message emphasizes the Company's strategic focus on executing its business plan, improving liquidity, and extending debt maturities through significant financing transactions completed in fiscal 2026 and subsequent periods. The key themes include the completion of the European Acquisition to expand the retail footprint in the Greater Toronto Area, the refinancing of the SLR Term Loan with a new five-year $32.5 million ⁶⁶ senior secured term loan facility with Gordon Brothers maturing in June 2031, and the amendment and extension of the Wells Fargo credit facility to $93 million ⁶⁷ with maturity extended to June 2031. Management also highlights the appointment of new interim leadership following the departure of the President and CEO, with the Executive Chairman appointed as Interim CEO and a Board member appointed as Interim President and Chief Operating Officer. The strategic priorities emphasized are investing in store renovations, omni-channel capabilities, digital commerce initiatives, and working capital requirements, while continuing to evaluate the productivity of existing stores and close unproductive stores.