Comp store sales rose 4.8% in the fourth quarter at Eddie Bauer Holdings, Inc. and would have risen more if not for weak outlet store sales, the company said. Total revenues, meanwhile, rose 2.7% at the company. CEO Neil Fiske said EBHI made good progress cleaning up its marketing message, but has work to do on cutting costs.
Total revenues for the fourth quarter of 2007 included:
- net merchandise sales of $377.6 million, as compared to $365.2 million in the fourth quarter of 2006;
- shipping revenues of $9.3 million as compared to $10.0 million in the same period of 2006;
- licensing royalty revenues of $3.4 million as compared to $4.7 million in the same period of 2006;
- royalty revenues from foreign joint ventures of $2.0 million and other revenues of $0.1 million, both of which were flat over the same period in 2006.
Net merchandise sales for the fourth quarter of 2007 included $274.2 million of sales, an increase of 1.2%, from the company's retail and outlet stores, and $103.4 million, an increase of 9.7%, of sales from its direct channel, which includes sales from its catalogs and websites.
Gross margin for the fourth quarter of 2007 totalled $165.2 million, representing an increase of $0.8 million from $164.4 million for the fourth quarter of 2006. Gross margin percentage for the fourth quarter of 2007 decreased to 43.8%, compared to 45.0% for the year-ago period, due to markdowns on higher inventory and costs associated with the Company's customer loyalty program in 2007 compared to 2006.
Operating income declined to $47.5 million during the fourth quarter of 2007 from $52.1 million for the fourth quarter of the prior year. The decline in operating income was primarily driven by an increase in selling, general and administrative (SG&A) expenses during the fourth quarter and a decline in licensing revenues.
“From a sales perspective, this was a solid fourth quarter,” said Neil Fiske, Chief Executive Officer. “I was pleased with our holiday campaign and execution. Our catalogs improved in merchandising, photography and layout. Retail had a clear point of view and better presentation. And across all our channels and our advertising, we had a tight, focused message. Still, we must do better on our costs and inventory management in order to flow through more of the sales gain to the bottom line. We have taken aggressive action to get our costs in line and manage inventory more tightly — while rebuilding the fundamentals of the Eddie Bauer brand.”
Higher tax expenses on AR sale create net quarterly loss
FISCAL 2007 Results
For the fiscal year ended Dec. 29, 2007, total revenues were $1.04 billion, compared to $1.01 billion in fiscal 2006. Total revenues for 2007 included:
- net merchandise sales of $989.4 million, an increase of 3.4% over $956.7 million in 2006;
- shipping revenues of $34.2 million, an increase of $0.2 million over 2006;
- licensing royalty revenues of $13.8 million, a decrease of 11.8% from $15.7 million in 2006;
- royalty revenues from foreign joint ventures of $6.3 million, a decrease of $0.3 million over 2006 and other revenues of $0.6 million, a slight increase over 2006.
Net merchandise sales for 2007 included $711.4 million of sales from the company's retail and outlet stores and $277.9 million of sales from its direct channel. This compares to $700.1 million of sales from the company's retail and outlet stores and $256.5 million of sales from its direct channel in 2006. Comparable store sales for fiscal year 2007 increased by 4.4%, and sales in the direct channel increased by 8.4%.
Gross margin for fiscal 2007 was $358.5 million, representing an increase of $5.0 million from the gross margin for the same period last year. Gross margin percentage for the year declined to 36.2%, compared to a gross margin percentage of 37.0% for 2006. The decline in the gross margin percentage versus the prior year was due primarily to a 0.8 percentage point decrease related to the Company's customer loyalty program and a 0.7 percentage point decrease in merchandise margins, driven in part by higher levels of inventory markdowns in the current year. These decreases were partially offset by a 0.7 percentage point improvement to gross margin resulting from a decrease in the Company's occupancy costs as a percentage of net merchandise sales.
Operating loss declined to $28.4 million during fiscal 2007, from $118.6 million for fiscal 2006. The fiscal 2006 loss included a $117.6 million impairment charge related to the company's goodwill. Excluding the impact of the 2006 impairment charge, the Company's operating loss increased by $27.4 million in 2007, primarily resulting from a $30.6 million increase in the company's SG&A expenses during fiscal 2007 as compared to the prior year. SG&A expenses during fiscal 2007 reflected $16.4 million of non-recurring expenses associated with the Company's terminated merger, resignation of the company's former CEO and an estimated settlement of litigation.
The company's net loss for the year was $101.7 million, or a loss of $3.33 per diluted share, compared to a net loss of $212.0 million, or a loss of $7.06 per diluted share in 2006. The 2007 net loss included several non-recurring expenses totaling $19.7 million including a loss on extinguishment of debt of $3.3 million recorded during the second quarter and $16.4 million of expenses related to the company's terminated merger, resignation of the company's former CEO and an estimated legal settlement.
Income from continuing operations before income taxes, interest expense and depreciation and amortization expense, or EBITDA, for 2007 was $41.9 million when excluding the above-mentioned non-recurring and non-operational items, compared to $56.4 million in the prior year. The decline in EBITDA was caused primarily by higher SG&A costs. EBITDA for 2007 included $9.9 million in non-cash, stock-based compensation expense, as compared to $10.2 million in 2006.
Eddie Bauer ended the year with 391 stores, a decrease of three stores from 2006. The Company opened 11 retail stores and one outlet store during the fourth quarter and closed two outlet stores. At year end, the Company operated 271 retail stores and 120 outlet stores.
EDDIE BAUER HOLDINGS, INC.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
Three Months Three Months
December 29, December 30,
2007 2006 Fiscal 2007 Fiscal 2006
($ in thousands, except per share data)
Net sales and
other revenues 392,430 381,919 1,044,353 1,013,447
Costs of sales,
and occupancy 212,394 200,745 630,853 603,171
intangible assets – – – 117,584
Selling, general and
administrative expenses 132,517 129,098 441,875 411,300
expenses 344,911 329,843 1,072,728 1,132,055
Operating income (loss) 47,519 52,076 (28,375) (118,608)
Interest expense 6,987 7,480 26,698 26,928
Other income 16,376 941 23,695 3,031
Equity in earnings
joint ventures (20) (1,083) (1,147) (3,413)
Income (loss) from
before income tax
expense (benefit) 56,888 44,454 (32,525) (145,918)
expense (benefit) 75,137 (18,699) 69,193 65,531
Income (loss) from
continuing operations (18,249) 63,153 (101,718) (211,449)
Income (loss) from
discontinued operations – – – (534)
Net income (loss) $(18,249) $63,153 $(101,718) $(211,983)
Income (loss) per basic
and diluted share:
Loss from continuing
operations per share $(0.59) $2.11 $(3.33) $(7.04)
Loss from discontinued
operations per share – – – (0.02)
Net loss per share $(0.59) $2.11 $(3.33) $(7.06)
Weighted average shares
used to compute income
(loss) per share:
Basic 30,677,625 30,058,311 30,524,191 30,012,896
Diluted 30,677,625 30,058,311 30,524,191 30,012,896