BKRS Bakers Footwear Grp. (MM)

Bakers Footwear Group, Inc. (Nasdaq:BKRS), a leading specialty retailer of moderately priced fashion footwear for young women, with 241 stores, today announced results for the thirteen and thirty nine-weeks ended October 31, 2009.

For the third quarter, the thirteen weeks ended October 31, 2009:

• Net sales were $39.0 million, a decrease of 4.9% from $41.1 million for the thirteen-week period ended November 1, 2008, reflecting weak demand for our transitional fall product;
• Comparable store sales decreased 5.1%, compared to an increase of 4.5% in the prior-year period;
• Gross profit was $6.8 million, or 17.3% of net sales, compared to $9.0 million, or 21.9% of net sales, in the prior-year period, reflecting increased promotional activity and lower leverage on occupancy and buying costs;
• Selling, general and administrative expenses were $13.5 million, or 34.6% of net sales, compared to $13.9 million, or 34.0% of net sales, in the prior-year period;
• Impairment expense was $2.8 million, reflecting non-cash charges in connection with specific underperforming stores, compared to impairment expense of $2.6 million in the third quarter last year;
• Operating loss was $9.5 million, compared to $7.6 million in the third quarter last year; and
• Net loss was $10.2 million or ($1.38) per share, compared to $8.3 million, or ($1.18) per share in the third quarter last year.

Peter Edison, Chairman and Chief Executive Officer of Bakers Footwear Group commented, “In a period that typically represents a seasonal loss for our Company, and despite tougher sales comparisons from last year, we continued to successfully manage our inventory levels, control our operating expenses and maintain compliance with our debt covenants. Our quarter end balance sheet included a 14% decline in inventory. Although comparable store sales declined for the quarter and were below our expectations, consumer response to our boot offerings across key categories was strong. This led to a strengthening in sales as the quarter progressed with positive comp sales recorded in October.

“As we look ahead, we are well positioned to deliver sales growth and improved operating performance in the fourth quarter. While our comparable stores sales are down 2.2% in the fourth quarter through December 6, 2009, holiday sales are encouraging with comparable store sales up 4.0% from Black Friday, November 27, 2009, through December 6, 2009, reflecting continued momentum in boots. We remain confident that our compelling footwear assortments and continued financial discipline will enable us to generate improved operating results and adjusted EBITDA during the fourth quarter. We are also excited by a favorable response to our early spring product that was delivered to warm weather stores.”

Based on the Company’s business plan, the Company believes it has adequate liquidity to fund anticipated working capital requirements and expects to be in compliance with its financial covenants throughout the remainder of 2009. The Company’s Quarterly Report on Form 10-Q, issued today and the Company’s Annual Report on Form 10-K disclose additional information regarding its debt agreements and provide additional disclosure regarding the risks of the Company’s current liquidity situation and its ability to comply with its financial covenants.

For the first nine months of fiscal 2009, the thirty-nine weeks ended October 31, 2009:

• Net sales were $127.7 million, a slight decrease from $128.2 million for the thirty-nine week period ended November 1, 2008;
• Comparable store sales increased 0.2%, compared to a decrease of 0.8% in the first nine months of 2008;
• Gross profit was $32.4 million, or 25.4% of net sales, compared to $33.1 million, or 25.8% of net sales, in the first nine months of 2008;
• Selling, general and administrative expenses were $41.9 million, or 32.8% of net sales, compared to $43.2 million, or 33.7% of net sales in the first nine months of 2008;
• Impairment expense was $2.8 million, reflecting non-cash charges in connection with specific underperforming stores, compared to impairment expense of $2.6 million in the first nine months of 2008;
• Operating loss was $12.6 million, compared to $13.1 million in the first nine months of 2008; and
• Net loss was $14.7 million or ($2.01) per share, compared to $15.5 million, or ($2.20) per share in the first nine months of 2008.

Conference Call

The Company announced that it will conduct a conference call to discuss its third quarter fiscal 2009 results today, Wednesday, December 9, 2009 at 9:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784, approximately five minutes prior to the start of the call. The conference call will also be webcast live at http://viavid.net/dce.aspx?sid=00006E49. A replay of this call will be available until December 16, 2009 and can be accessed by dialing (877) 660-6853, referencing account number 3055 and entering confirmation number 338777. The webcast will remain available until March 8, 2010 at the same web address.

About Bakers Footwear Group, Inc.

Bakers Footwear Group, Inc. is a national, mall-based, specialty retailer of distinctive footwear and accessories for young women. The Company’s merchandise includes private label and national brand dress, casual and sport shoes, boots, sandals and accessories. The Company currently operates over 240 stores nationwide. Bakers’ stores focus on women between the ages of 16 and 35. Wild Pair stores offer fashion-forward footwear to both women and men between the ages of 17 and 29.

THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS (WITHIN THE MEANING OF SECTION 27(A) OF THE SECURITIES ACT OF 1933 AND SECTION 21(E) OF THE SECURITIES EXCHANGE ACT OF 1934). BAKERS FOOTWEAR HAS NO DUTY TO UPDATE SUCH STATEMENTS. ACTUAL FUTURE EVENTS AND CIRCUMSTANCES COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THIS STATEMENT DUE TO VARIOUS FACTORS. FACTORS THAT COULD CAUSE THESE CONDITIONS NOT TO BE SATISFIED INCLUDE INABILITY TO SATISFY DEBT COVENANTS, MATERIAL DECLINES IN SALES TRENDS AND LIQUIDITY, MATERIAL CHANGES IN CAPITAL MARKET CONDITIONS OR IN BAKERS FOOTWEAR’S BUSINESS, PROSPECTS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION, INABILITY TO COMPLY WITH NASDAQ LISTING REQUIREMENTS AND OTHER RISKS AND UNCERTAINTIES, INCLUDING THOSE DETAILED IN BAKERS FOOTWEAR’S MOST RECENT ANNUAL REPORT ON FORM 10-K AND OUR MOST RECENT QUARTERLY REPORTS ON FORM 10-Q, INCLUDING THOSE DISCUSSED IN “RISK FACTORS,” IN “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS” AND IN NOTE 2 TO THE FINANCIAL STATEMENTS IN THESE REPORTS, AND IN BAKERS FOOTWEAR’S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

       

Bakers Footwear Group, Inc.Income Statement Data

 

ThirteenWeeks EndedOctober 31,2009

 

ThirteenWeeks EndedNovember 1,2008

 

Thirty-nineWeeks EndedOctober 31,2009

 

Thirty-nineWeeks EndedNovember 1,2008

(in thousands, except per share data) Unaudited Unaudited Unaudited Unaudited   Net sales $ 39,042 $ 41,075 $ 127,739 $ 128,181 Cost of merchandise sold, occupancy, and buying expenses  

32,276

     

32,078

     

95,354

     

95,055

  Gross profit 6,766 8,997 32,385 33,126   Operating expenses Selling 9,656 9,931 29,641 30,838 General and administrative 3,872 4,016 12,270 12,411 Loss on disposal of property and equipment 3 67 298 321 Impairment of long-lived assets   2,762       2,610       2,762       2,610   Operating loss (9,527 ) (7,627 ) (12,586 ) (13,054 )   Interest expense (681 ) (768 ) (2,179 ) (2,297 ) Other income, net   41       52       93       95   Loss before income taxes (10,167 ) (8,343 ) (14,672 ) (15,256 )   Income tax expense ―     ―     ―       223     Net loss $ (10,167 )   $ (8,343 )   $ (14,672 )   $ (15,479 )   Basic loss per share $ (1.38 )   $ (1.18 )   $ (2.01 )   $ (2.20 ) Diluted loss per share $ (1.38 )   $ (1.18 )   $ (2.01 )   $ (2.20 )     Weighted average shares outstanding Basic 7,383 7,056 7,309 7,036 Diluted 7,383 7,056 7,309 7,036     Cash Flow Data Cash used in operating activities $ (3,016 ) $ (13,699 ) Cash used in investing activities (332 ) (713 ) Cash provided by financing activities 3,378 14,394 Net increase (decrease) in cash 30 (18 )   Supplemental Data Comparable store sales increase (decrease) (5.1 %) 4.5 % 0.2 % (0.8 %) Gross profit percentage 17.3 % 21.9 % 25.4 % 25.8 % Number of stores at end of period 241 241            

Bakers Footwear Group, Inc.Balance Sheet Data

             

October 31,2009

 

November 1,2008

(in thousands) Unaudited Unaudited Cash $ 165 $ 142 Accounts receivable 1,581 1,413 Inventories 23,335 27,184 Other current assets   978       1,235   Current assets   26,059       29,974     Property and equipment, net 26,184 35,655 Other assets   934       1,044   $ 53,177     $ 66,673     Accounts payable $ 12,558 $ 7,329 Revolving credit facility 16,694 20,249 Subordinated secured term loan 3,375 5,346 Subordinated convertible debentures 4,000 4,000 Other current liabilities   10,731       10,001   Current liabilities   47,358       46,925     Other noncurrent liabilities 9,364 9,931 Shareholders’ equity (deficit)   (3,545 )     9,817   $ 53,177     $ 66,673     Table I: Reconciliation of Net Loss to Adjusted EBITDA  

ThirteenWeeks EndedOctober 31,2009

 

ThirteenWeeks EndedNovember 1,2008

 

Thirty-nineWeeks EndedOctober 31,2009

 

Thirty-nineWeeks EndedNovember 1,2008

Net loss $ (10,167 ) $ (8,343 ) $ (14,672 ) $ (15,479 ) Interest expense 681 768 2,179 2,297 Depreciation expense 1,621 1,944 5,021 5,974 Provision for income taxes ― ― ― 223 Loss on disposal of property and equipment 3 67 298 321 Impairment of long-lived assets 2,762 2,610 2,762 2,610 Stock based compensation expense   85       154       491       455   Adjusted EBITDA $ (5,015 )   $ (2,800 )   $ (3,921 )   $ (3,599 )    

Adjusted EBITDA is calculated in accordance with the terms of our Subordinated Secured Term Loan. Adjusted EBITDA is defined as net income (loss) before deducting interest expense, income taxes, depreciation, gains or losses on disposal of property and equipment, impairment expense, and stock based compensation expense. Adjusted EBITDA should not be considered as an alternative to operating income or net income (as determined in accordance with generally accepted accounting principles (GAAP)) as a measure of our operating performance or to net cash provided by operating, investing and financing activities (as determined in accordance with GAAP) as a measure of our ability to meet cash needs. The Company believes that adjusted EBITDA is a measure commonly reported and widely used by investors and other interested parties as a measure of a company’s operating performance because it assists in comparing performance on a consistent basis without regard to capital structure, depreciation and amortization or non-operating factors (such as historical cost) and is also used to determine compliance with a financial covenant in our Subordinated Secured Term Loan. This information has been disclosed here to permit a more complete comparative analysis of our operating performance relative to other companies. Adjusted EBITDA may not, however, be comparable in all instances to other similar types of measures.