Eddie Bauer Holdings, Inc. said said its first quarter loss was reduced to $19.3 million from $44.8 million a year ago
Total revenues were $213.2 million, compared to $214.0 million in the first quarter of 2007. Total revenues included:
— net merchandise sales of $198.3 million as compared to $200.0 million
in the first quarter of 2007;
— shipping revenues of $9.1 million as compared to $8.7 million in the
first quarter of 2007;
— licensing royalty revenues of $4.1 million as compared to $3.5 million
in the first quarter of 2007; and
— royalty revenues from foreign joint ventures of $1.6 million as
compared to $1.5 million in the first quarter of 2007.
Net merchandise sales for the first quarter of 2008 included $134.5 million of net sales from the Company's retail and outlet stores, a decrease of 1.4%, and $63.7 million of net sales from the direct channel, which includes catalogs and website sales, an increase of 0.3% from the prior year quarter. This compares to $136.4 million of net sales from the Company's retail and outlet stores and $63.6 million of net sales from its direct channel in the same period last year.
Gross margin for the first quarter of 2008 totaled $54.8 million, representing a decrease of $3.8 million from $58.6 million for the first quarter of 2007. Gross margin percentage for the first quarter of 2008 decreased to 27.6%, compared to 29.3% for the year-ago period, due primarily to markdowns on higher levels of clearance inventory.
The Company cut its operating loss by $13.8 million, a reduction of 35.2%, to $25.4 million during the first quarter of 2008 from $39.2 million for the first quarter of the prior year. The reduced operating loss was primarily driven by a $16.7 million decrease in selling, general and administrative (SG&A) expenses during the first quarter of 2008 as compared to the prior year quarter. Included in first quarter 2008 SG&A expenses are $2.5 million of non-recurring severance costs for the January 2008 corporate reduction in workforce. The first quarter of 2007 included non-recurring expenses of $16.4 million associated with the Company's terminated merger agreement, resignation of the Company's former Chief Executive Officer; and an estimated legal settlement.
“We made good progress on our turnaround agenda this quarter, despite some significant challenges,” said Neil Fiske, President and Chief Executive Officer. “Against a backdrop that included high comparable store sales comparisons from a year ago, an overall downturn in retail, a higher starting inventory position, and the restructuring costs we took in the quarter, we posted a slightly positive comparable store sales gain and met all of our loan covenants. We made important strides in reducing our cost structure, working down inventory levels, better focusing our stores and catalogs, and repositioning our brand. Overall, we are a stronger brand and company this year as we head into the second quarter.”
Net loss for first quarter 2008 decreased by $25.5 million, or 56.9%, to $19.3 million, or $0.63 per diluted share, compared to a net loss of $44.8 million, or $1.47 per diluted share, in the first quarter of 2007. The improvement in the first quarter net loss was driven by a decline in SG&A expenses and a higher tax benefit recognized during the first quarter of 2008. The higher tax benefit recognized in the current year quarter resulted from higher non-deductible expenses during the first quarter of 2007, primarily related to the Company's net financing receivables sold in December 2007. (See the Company's Form 8-K filing dated December 10, 2007 for a more complete description of the receivables sale.) The Company's current year first quarter results included non-operational income of $3.9 million related to a non-cash fair value adjustment on the Company's convertible notes' embedded derivative liability and an impairment charge of $3.9 million to write-off the Company's equity investment in its joint venture in Germany.
Loss before income tax benefit, interest expense and depreciation and amortization expense, or EBITDA, for the first quarter of 2008 was $15.1 million compared to a loss of $25.8 million for the year-ago first quarter. EBITDA is a non-GAAP financial measure that management believes is an important metric because it is a key factor in how the Company measures operating performance. See Reconciliation of Non-GAAP Financial Measures attached to this press release for a reconciliation of EBITDA to its most comparable GAAP measure – “Loss before income tax benefit.” When excluding certain non-recurring and non-operational items, EBITDA was a loss of $12.5 million in the first quarter of 2008 compared to a loss of $9.4 million in the prior year quarter.
As of March 29, 2008, the Company operated 365 total stores, consisting of 247 retail stores and 118 outlet stores. During the first quarter, the Company opened one outlet store and closed 24 retail stores and three outlet stores.
