Shoe Pavilion, Inc. reported Q3 sales jumped 18.2% to $37.3 million from $31.6 million, with comparable store sales up 2.3%. The retailer reported a net loss of $10.2 million, or $1.07 per share, against a loss of $318,000, or 3 cents, a year ago.
Shoe Pavilion also announced that it is adding consignment merchandise to its product offerings in order to improve store productivity. Offerings will include branded denim, sportswear, accessories and fragrances. A pilot program for the new initiative began in September 2007, and has been well received by customers. All stores are expected to have consignment merchandise within the next fiscal year. The branded consignment merchandise is expected to grow to represent between 10% to 20% of net sales on an annual basis.
Gross margins in the third quarter eroded to 12.8% from 31.6% primarily due to liquidations of $2.3 million to clear floor space for the introduction of consignment merchandise, as well as a non-cash impairment expense of $1.7 million related to seven underperforming stores. The net loss also reflected a $4.8 million charge to income tax expense related to establishing a partial valuation allowance against its deferred tax assets.
