Design Within Reach, Inc. (NASDAQ:DWRI) today announced financial
results for the first quarter ended March 29, 2008. First Quarter
Results: Product sales for the first quarter of 2008 increased 6.4%
to $43.3 million, compared to $40.7 million recorded in the first
quarter of 2007, primarily driven by increased studio sales. Net
sales, which are comprised of product sales and shipping revenue,
increased 7.0% to $46.9 million in the first quarter of 2008 from
$43.8 million in the same period last year. Gross profit margin
improved to 47.3% in the first quarter of 2008, compared to 41.8%
in the same period last year. Product margin, which the Company
defines as product gross profit divided by net product sales, was
50.5% for the first quarter of 2008, compared to 45.6% in the first
quarter of 2007. For more information regarding the calculation of
product margin, please see the discussion under the heading
�Non-GAAP Financial Information� below. Selling, general and
administrative expenses were $23.4 million for the first quarter of
2008, compared to $22.2 million in the same period last year. As a
percentage of net sales, these expenses decreased to 49.8% in the
first quarter of 2008, from 50.7% in the same period last year,
primarily resulting from leveraging of expenses and higher sales.
Loss before income tax benefit for the first quarter of 2008 was
$1.3 million, compared to a loss before income tax benefit of $3.8
million in the same period last year. Net loss for the first
quarter of 2008 was $0.6 million, or $(0.04) per diluted share,
compared to a net loss of $3.8 million, or $(0.26) per diluted
share, in the first quarter of 2007. An income tax benefit of $0.7
million was recorded in the quarter ended March 29, 2008, compared
to no income tax benefit in the first quarter of 2007. �Our first
quarter results demonstrate our skilled management team�s and
employees� abilities to drive sales and leverage expenses in a
challenging economic environment,� said Ray Brunner, Chief
Executive Officer. �We continue to build brand awareness through
our innovative catalog, mass media and online marketing programs,
as well as our recently redesigned DWR website. Tools for Living
remains on track with an expanded range of products and two stores
scheduled to open in New York and Los Angeles in the fall. As we
continue to build a strong financial and operational foundation for
long-term sustainable growth, we remain committed to not only
providing well designed modern luxury goods, but also ensuring that
our growth initiatives warrant the effort and return on invested
capital.� Net sales by sales channel were as follows: Studio sales
were $31.3 million in the first quarter of 2008, up 9.9% from the
same period last year, resulting primarily from increased sales at
existing studios. Design Within Reach operated 68 studios and the
DWR Annex, an outlet for returned and discontinued merchandise, at
the end of the first quarter of 2008, compared to 64 studios and
one outlet open at the end of the first quarter of 2007.
Incremental sales from the four additional studios amounted to $0.7
million. Direct sales (including phone sales and sales through the
Design Within Reach website) were $10.6 million in the first
quarter of 2008, a decrease of approximately 3.6% from $11.0
million in the first quarter of 2007. As of March 29, 2008, Design
Within Reach had approximately $6.5 million in cash and cash
equivalents, outstanding borrowings of $2.5 million under its
revolving credit facility and $1.1 million in outstanding letters
of credit. The Company had approximately $16.4 million available
for advances under its revolving credit facility as of March 29,
2008. The Company believes that its cash and cash equivalents,
anticipated cash flow from operations and availability under its
credit facility will provide sufficient working capital to fund
operations and anticipated capital expenditures for the next 12
months. Guidance Design Within Reach is maintaining its 2008 sales
guidance of approximately $200 million and diluted earnings per
share guidance of $0.03-$0.05. Conference Call Design Within Reach,
Inc. will host a conference call today, May 8, 2008 at 1:30 p.m.
Pacific (4:30 p.m. Eastern) with Ray Brunner, President and Chief
Executive Officer, and John Hellmann, Chief Financial Officer. To
access the conference call, participants in North America should
dial (888) 259-8387 and international participants should dial
(913) 312-1487. Participants are encouraged to dial in to the
conference call five to ten minutes prior to the scheduled start
time. The call will also be broadcast live over the Internet and
accessible through the Investor Relations section of the Company�s
website at www.dwr.com. The webcast will also be archived online
within one hour of the completion of the conference call and
available at www.dwr.com. A telephone replay will be available
through May 22, 2008. To access the replay, please dial
888-203-1112 (domestic) or 719-457-0820 (international), passcode
5269046. Non-GAAP Financial Information This press release presents
product margin, which is a non-GAAP financial measure within the
meaning of applicable SEC rules and regulations. The Company
believes product margin is a useful financial measure as it removes
the impact of shipping revenues and expenses from gross margin.
Management believes shipping operations do not reflect the core
operations of Design Within Reach�s business and do not represent a
profit center as shipping margins are expected to trend to zero.
For a reconciliation of product margin to the most comparable GAAP
measure, see the following reconciliation of GAAP gross margin to
product margin. Amounts in thousands � Thirteen � Thirteen Weeks
Ended Weeks Ended March 29, 2008 March 31, 2007 Product Sales $
43,349 $ 40,685 Commissions, License and Royalty Fees 10 - Shipping
Revenue � 3,555 � � 3,163 � Net Sales $ 46,914 $ 43,848 � Product
Gross Profit $ 21,911 $ 18,567 Product Margin % 50.5 % 45.6 % �
Commissions, License and Royalty Fees Gross Profit 8 - Commissions,
License and Royalty Fees Margin % 80.0 % - � Shipping Gross Profit
257 (222 ) Shipping Margin % 7.2 % (7.0 )% � Total Gross Profit $
22,176 $ 18,345 Total Gross Margin % 47.3 % 41.8 % About Design
Within Reach, Inc. Design Within Reach, Inc., founded in 1998 and
headquartered in San Francisco, California, is an integrated
multi-channel provider of distinctive modern design furnishings and
accessories. The Company markets and sells its products to both
residential and contract customers through www.dwr.com, its San
Francisco-based phone sales team at (800) 944-2233 and over 68
retail Studios in the United States and Canada. �Design Within
Reach� is a registered trademark of Design Within Reach, Inc. This
press release includes forward-looking statements, including
statements related to anticipated revenues, expenses, earnings,
operating cash flows, the outlook for Design Within Reach�s markets
and the demand for its products. Factors that could cause Design
Within Reach's actual results to differ materially from these
forward-looking statements including the following: we have
recently revised our corporate strategy and our new strategy may
not be successful; if we fail to offer merchandise that our
customers find attractive, the demand for our products may be
limited; the expansion of our studio operations could result in
increased expenses with no guarantee of increased revenues; we do
not have long-term vendor contracts and as a result we may not have
continued or exclusive access to products that we sell; our
business depends, in part, on factors affecting consumer spending
that are not within our control; we rely on catalog-based
marketing, which could have significant cost increases and could
have unpredictable results; we must manage our online business
successfully or our business will be adversely affected; we have
made and will continue to make certain systems changes that might
disrupt our supply chain operations and delay financial results;
management has identified material weaknesses in internal controls
over financial reporting; our failure to implement and maintain
effective internal controls in our business could have a material
adverse effect on our business, financial condition, results of
operations and stock price; we may need additional financing and
may not be able to obtain additional financing on favorable terms
or at all, which could increase our costs, limit our ability to
grow and dilute the ownership interests of existing stockholders;
we may not manage our inventory levels successfully; changes in the
value of the U.S. dollar relative to foreign currencies and any
failure by us to adopt and implement an effective hedging strategy
could adversely affect our operating results; we rely on foreign
sources of production, which subjects us to various risks; we may
fail to timely and effectively obtain shipments of product from our
vendors and deliver merchandise to our customers; we face intense
competition and if we are unable to compete effectively, we may not
be able to achieve and maintain profitability; and our operating
and financial performance in any given period might not meet the
guidance that we have provided to the public and other risks
detailed in our reports and filings with the Securities and
Exchange Commission, including our latest Annual Report on Form
10-K and Quarterly Report on Form 10-Q, which is available at the
SEC�s website at www.sec.gov. You are urged to consider these
factors carefully in evaluating the forward-looking statements
herein, and we caution you not to place undue reliance on
forward-looking statements, which speak only as of the date they
are made. We undertake no obligation to update publicly any
forward-looking statements to reflect new information, events or
circumstances after the date they were made or to reflect the
occurrence of unanticipated events. Design Within Reach, Inc.
Condensed Statements of Operations (Unaudited) (amounts in
thousands, except per share data) � � � � Thirteen Weeks Ended
March 29, 2008 March 31, 2007 � Net sales $ 46,914 $ 43,848 Cost of
sales � 24,738 � � 25,503 � Gross margin 22,176 18,345 Selling,
general and administrative expenses � 23,359 � � 22,244 � Loss from
operations (1,183 ) (3,899 ) Other income (expenses), net � (135 )
� 94 � Loss before income tax benefit (1,318 ) (3,805 ) Income tax
benefit � (696 ) � � � Net loss $ (622 ) $ (3,805 ) � Net loss per
share: Basic $ (0.04 ) $ (0.26 ) Diluted $ (0.04 ) $ (0.26 ) �
Weighted average shares used in calculation of net loss per share:
Basic 14,455 14,418 Diluted 14,455 14,418 Design Within Reach, Inc.
Condensed Balance Sheets (Unaudited) (amounts in thousands) � � � �
March 29, 2008 � March 31, 2007 ASSETS Current assets Cash and cash
equivalents $ 6,496 $ 5,423 Inventory 41,217 40,889 Accounts
receivable 2,194 2,635 Prepaid catalog costs 1,423 1,382 Deferred
income taxes 1,251 2,078 Other current assets � 2,992 � 2,587 �
Total current assets 55,573 54,994 � Property and equipment, net
22,929 23,875 Deferred income taxes, net 8,182 8,083 Other
non-current assets � 965 � 974 � Total assets $ 87,649 $ 87,926 �
LIABILITIES AND STOCKHOLDERS� EQUITY Current liabilities Accounts
payable $ 15,305 $ 20,079 Accrued expenses 5,271 5,821 Accrued
compensation 2,079 1,696 Deferred revenue 1,980 4,246 Customer
deposits and other liabilities 3,310 2,441 Borrowings under loan
agreement 2,534 2,587 Long-term debt, current portion � 351 � 341 �
Total current liabilities 30,830 37,211 � Deferred rent and lease
incentives 6,139 5,762 Long-term debt, net of current portion � 224
� 498 � Total liabilities 37,193 43,471 � Stockholders� equity �
50,456 � 44,455 � Total liabilities and stockholders� equity $
87,649 $ 87,926
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