Big Dog Holdings, Inc. saw net sales for the fourth quarter jump 22.2% to $72.6 million from $59.4 million in the same quarter of 2005. However, consolidated earnings were 31 cents per share for the fourth quarter 2006, as compared to 38 cents per share earned for the same period in 2005.
Consolidated earnings for the year ended December 31, 2006 were 10 cents per share, as compared to 49 cents per share in 2005. Consolidated net income was $3.0 million and $1.0 million for the fourth quarter and year 2006, respectively, as compared to $3.6 million and $4.7 million for the same periods in 2005.
The company attributed the consolidated net sales increase of $13.2 million primarily due to the additional new stores opened during the period, the Steve's Shoes, Inc. acquisition on January 31, 2006 and a comparative store sales increase of 5.8% (TWC had a comparative store sales increase of 14.5% while the Big Dogs chain had a comparative store sales decrease of 4.3%). The company had a total of 306 stores opened (151 TWC stores and 155 Big Dogs stores) at the end of the period, as compared with 268 stores (92 TWC stores and 176 Big Dogs stores) on December 31, 2005. Consolidated net sales for the year ended December 31, 2006 were $218.6 million, a 22.1% increase, as compared to $179.1 million in 2005. Comparable retail store sales increased 3.0% for the year (10.6% increase for the TWC chain and 4.8% decline for the Big Dogs chain.)
For the quarter ended December 31, 2006, the company's gross margin for the fourth quarter was 52.9% in 2006 as compared to 54.9% for the same period in 2005. Gross margins for the year ended 2006 were 53.5% compared to 55.2% for 2005. Consolidated operating expenses were 45.3% and 51.8% of sales for the fourth quarter and year ended 2006, respectively, as compared to 44.4% and 50.4%, respectively, for 2005.
The company's 2006 financial results reflect a core growth in the TWC business with TWC's sales increase of 56%. TWC's gross margin was stable from 2005; however, the company increased expenses relating to freight and distribution expenses which decreased TWC's margin in the 4th quarter. The company's Steve's Shoes' acquisition stores achieved stability in the 4th quarter and posted flat comparative sales (although not reported in the company's comparative sales for stores opened for 12 months). Big Dogs results declined as a result of the closure of 24 Big Dogs stores, lower traffic in our malls and increased pricing pressure which resulted in lower gross margins.
The company's first quarter 2007 financial results are expected to show an approximate comparative stores sales growth of 12% for the TWC chain and 27% for Steve Shoes' acquisition stores. (Note that the Steve's Shoes' acquisition stores will be included in TWC store comparative sales base as of February 1, 2007.) TWC's gross margin appears to be slightly higher from last year. The Big Dogs chain comparative store sales are approximately 5% down from last year, however gross margins are up compared to last year. Big Dogs store contribution level appears to be approximately the same as last year.
As previously announced, the company relocated its Los Angeles distribution center and set up a new distribution center in North Carolina. Resulting from this move, the company incurred one time operating expenses of approximately $1.4 million of which about half were incurred in the 4th quarter 2006 and the remaining were incurred in the 1st quarter 2007.
CEO Andrew Feshbach stated, “Overall, we are pleased with the progress we have made in 2006. Although our net income declined year over year, 2006 was a building year which required us to lay the foundation in our operating infrastructure to support our future TWC growth. We believe we were effective in growing the TWC business and have now stabilized the results of Big Dogs.”
BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Year Ended
December 31, December 31,
(Unaudited)
------------- ------------- ------------- -------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
NET SALES $ 72,628,000 $ 59,420,000 $ 218,604,000 $ 179,115,000
COST OF GOODS
SOLD 34,209,000 26,809,000 101,723,000 80,311,000
------------- ------------- ------------- -------------
GROSS PROFIT 38,419,000 32,611,000 116,881,000 98,804,000
------------- ------------- ------------- -------------
OPERATING
EXPENSES:
Selling,
marketing and
distribution 28,215,000 22,080,000 97,910,000 77,132,000
General and
administrative 2,653,000 3,041,000 8,817,000 8,950,000
Depreciation
and
amortization 1,998,000 1,249,000 6,524,000 4,173,000
------------- ------------- ------------- -------------
Total
operating
expenses 32,866,000 26,370,000 113,251,000 90,255,000
------------- ------------- ------------- -------------
INCOME FROM
OPERATIONS 5,553,000 6,241,000 3,630,000 8,549,000
INTEREST INCOME 2,000 2,000 8,000 44,000
INTEREST EXPENSE (726,000) (358,000) (2,084,000) (976,000)
------------- ------------- ------------- -------------
INCOME BEFORE
PROVISION FOR
INCOME TAXES 4,829,000 5,885,000 1,554,000 7,617,000
PROVISION FOR
INCOME TAXES 1,810,000 2,236,000 583,000 2,894,000
------------- ------------- ------------- -------------
NET INCOME $ 3,019,000 $ 3,649,000 $ 971,000 $ 4,723,000
============= ============= ============= =============
NET INCOME PER
SHARE
BASIC $ 0.33 $ 0.40 $ 0.11 $ 0.52
============= ============= ============= =============
DILUTED $ 0.31 $ 0.38 $ 0.10 $ 0.49
============= ============= ============= =============
WEIGHTED
AVERAGE SHARES
OUTSTANDING:
BASIC 9,236,000 9,075,000 9,180,000 9,145,000
============= ============= ============= =============
DILUTED 9,885,000 9,664,000 9,531,000 9,726,000
============= ============= ============= =============
