Shoe Pavilion reported in a filing with the SEC that net sales for 2007 increased 18.2% to $152.6 million from $129.1 million. The growth reflected increased sales of $7.6 million generated from 15 new stores opened in fiscal year 2007 and a comparable store sales increase of 0.6%, offset by a sales reduction of $2.5 million from eight closed stores. The company opened four new stores in the first half of 2007 and 11 new stores in the second half.
As a percent of sales, gross profit decreased to 23.4% from 33.6% as a result of lower of cost or market inventory adjustment of 1.8%, an asset impairment charge of 2%, higher occupancy expenses of 3.6% primarily related to new stores, and a reduction in selling margin of 2.8% primarily related to increased discounts.
The shoe retailer reported a net loss of $16.3 million, or $1.71 a share, for the year compared with net income of $1.9 million, or 21 cents, for 2006. Approximately $9 million of the net loss in fiscal year 2007 reflects an asset impairment charge of $3.1 million, depreciation of $3 million, a lower of cost or market adjustment of $2.6 million, and $300,000 of stock-based compensation.
In the filing, Shoe Pavilion said that in its efforts to reduce operating expenses and improve liquidity, management along with retail consultants, are reviewing all store leases and are in discussions with landlords regarding rent reductions and lease modifications. Additionally, it has hired third-party consultants, on a contingent fee basis, to review operating expenses.
Shoe Pavilion said it expects to open three stores in 2008. The openings represent commitments made over one year ago, and the company has not signed any new leases over the last year because of the poor performance of new locations and the weakened retail environment. Shoe Pavilion said it plans to focus on reducing expenses and integrating its new stores into its operations.
At the year's close, it operated 115 stores in Washington, Oregon, California, Arizona, Nevada, Texas and New Mexico.
