Eddie Bauer Holdings Inc. reported a third-quarter loss of $18.6 million, or 61 cents a share, primarily driven by a $19.2 million non-cash change in the fair value adjustment of the company's embedded derivative liability associated with its convertible notes. The loss compares with a loss of $16.4 million, or a loss of 54 cents per share a year earlier.
Total revenues for the third quarter decreased 1.8% to $207.3 million from $211.0 million a year ago. Comparable store sales declined slightly for the quarter on lower promotional activity and catalog circulation. Catalog circulation pages were down approximately 22% for the quarter, while catalog productivity was up approximately 24% on a more targeted mailing strategy.
The retailer cut its operating loss improved from $17.1 million to $9.4 million in the third quarter, primarily due to lower selling, general and administrative (SG&A) expenses.
Earnings before interest expense, income taxes, depreciation and amortization (EBITDA), excluding the fair value adjustments on the Company's convertible debt, increased by $15.3 million to $0.1 million for the third quarter of 2008, and year-to-date adjusted EBITDA loss was narrowed to a $1.3 million loss for the first nine months of 2008 from an $18.0 million loss in the year-ago period, when excluding the fair value adjustments and certain non-recurring expenses.
“This was a transitional quarter for us as we scaled back substantially on unprofitable marketing, catalog and promotional expenses,” said Neil Fiske, president and CEO. “While our sales were negatively impacted by the reduced promotional activity and by the economic downturn, our profitability improved substantially. Costs and inventories were down, while cash flow and profits were up. This translated into a substantial improvement of $15.3 million in EBITDA, excluding the fair value adjustments on our convertible debt, and the cash flow gain was even greater. We are executing against our plan and demonstrating meaningful improvement.”
