~ Reports a Comparable Store Sales Increase
of 2.7% ~
~ 1st Quarter GAAP Operating
Income of $3.5 Million Increasing $7.3 Million to Last Year
~
~ 1st Quarter Non-GAAP
Operating Income of $4.3 Million, Exceeds High End of Guidance
Range ~
~ Increases Spring Operating Income Guidance
to $5 Million to $6 Million ~
~ Reports Cash of $78.0 Million or $1.19 Per
Share ~
New York & Company, Inc. (NYSE:NWY), a specialty
apparel chain with 432 retail stores, today announced results for
the first quarter ended May 5, 2018.
Gregory Scott, New York & Company’s CEO stated: “We were
pleased to have a strong start to the year reporting first quarter
operating income that significantly exceeded guidance driven by
strength across all key financial metrics, including positive
comparable store sales in both our store and eCommerce channels,
expansion in gross margin and disciplined expense
management. GAAP operating income rose $7.3 million from the
first quarter last year, continuing the favorable momentum we have
seen in our business for the past 5 quarters. We attribute our
consistent performance to the successful execution of our strategy,
focused on expanding our exclusive celebrity brand offerings that
differentiates New York & Company from peers and resonates well
with our demographic, increasing digital marketing, growing our
loyalty base, leveraging our omni-channel capabilities, gaining
efficiencies from Project Excellence, and adding new growth
opportunities in support of our long-term growth. Our
partnerships with Eva Mendes and Gabrielle Union continue to be a
cornerstone of our future strategy, and their strong support of the
partnership was integral to our strong results in the quarter. Our
positive outlook is reflected in the decision to increase Spring
season operating income guidance.
As we look ahead, we remain excited about our business
prospects. Our strong balance sheet and positive cash flow
positions us well to continue to execute our strategy and invest in
growth initiatives. We expect to add a third celebrity brand
this year to support our Soho jeans sub-brand and also to continue
to integrate and expand our recently acquired brand, Fashion to
Figure. We reintroduced Fashion to Figure in February, opening 8
locations and launching the brand on our eCommerce platform. We
continue to look forward to the success of these initiatives and we
are optimistic that they will lead to sustainable growth in sales
and profits while also increasing long-term value for our
shareholders.”
First Quarter Fiscal Year 2018 Results (13-weeks ended May 5,
2018 compared to the 13-weeks ended April 29, 2017):
- Net sales were $218.8 million, as
compared to $209.9 million in the prior year. The increase in net
sales reflects the combined effect of the shift of the calendar due
to the 53rd week in fiscal year 2017, increased sales from Fashion
to Figure and growth in eCommerce sales, partially offset by a
reduced store count.
- Comparable store sales
increased 2.7%, as compared to the same period last year,
driven by increases in both brick-and-mortar store sales and sales
from the Company’s eCommerce business.
- Gross profit as a percentage of net
sales increased 130 basis points to 32.0% versus the fiscal year
2017 first quarter gross profit percentage of 30.7%, reflecting the
highest gross margin rate achieved in the first quarter since 2005.
The increase during the quarter reflects a 260 basis point
improvement in the leverage of buying and occupancy costs due to a
$3.4 million reduction in expenses, partially offset by a 130 basis
point decrease in merchandise margin, largely driven by increased
shipping expense, severance expense and a slight increase in
promotional activity. Cost of goods sold, buying and occupancy
costs included $0.3 million and $0.5 million of non-operating
charges during the first quarter of fiscal year 2018 and fiscal
year 2017, respectively, related to certain severance expense.
- On a GAAP basis, selling, general and
administrative expenses were well below our guidance at $66.5
million, or 30.4% of net sales, as compared to $68.3 million, or
32.5% of net sales in the prior year period. The current year
period includes $0.5 million of non-operating charges primarily
related to employee termination costs from our recent
organizational changes. On a non-GAAP basis, selling, general and
administrative expenses were $66.0 million, or 30.1% of net sales,
as compared to non-GAAP selling, general and administrative
expenses of $67.2 million, or 32.0% of net sales in the prior
year.
- GAAP operating income improved
significantly to income of $3.5 million, which included
non-operating charges of $0.8 million. Excluding the $0.8 million
of non-operating charges, adjusted non-GAAP operating income was
well above the Company’s prior guidance at $4.3 million, and the
prior year’s GAAP operating loss of $3.9 million and the non-GAAP
operating loss of $2.3 million, which excluded $1.6 million of
non-operating charges.
- GAAP net income for the first quarter
of fiscal year 2018 improved by $7.3 million to $3.1 million, or
earnings of $0.05 per diluted share, as compared to the prior
year’s GAAP net loss of $4.2 million, or a loss of $0.07 per
diluted share. On a non-GAAP basis, the Company’s first quarter
2018 adjusted net income was $3.9 million, or earnings of $0.06 per
diluted share. This compares to prior year’s first quarter,
non-GAAP adjusted net loss of $2.7 million, or a loss of $0.04 per
diluted share.
Please refer to the “Reconciliation of GAAP to Non-GAAP
Financial Measures” in Exhibit 4 of this press release, which
delineates the non-operating charges for the three months ended May
5, 2018 and April 29, 2017. GAAP is defined as Generally Accepted
Accounting Principles in the United States.
Other Financial and Operational Highlights:
- Total quarter-end inventory decreased
5.4%, reflecting planned reductions in unit inventories.
- Capital spending for the first quarter
of 2018 was $0.3 million, as compared to $2.1 million in the prior
year period.
- The Company opened 1 New York &
Company store, 8 Fashion to Figure stores, converted 1 existing New
York & Company store to an Outlet store, closed 8 New York
& Company stores and 1 Outlet store during the first quarter,
as well as remodeled/refreshed 2 existing locations ending the
quarter with 432 stores, including 119 Outlet stores and 2.2
million selling square feet in operation.
- The Company prepaid the remaining
outstanding balance on its Term Loan in the amount of $11.5
million, which was scheduled to mature in October 2019. The
prepayment will save the Company approximately $0.5 million of
interest expense for the remainder of fiscal year 2018 and save $1
million of interest expense over the remaining term. While there
were no prepayment costs, the Company did write-off $0.2 million of
unamortized deferred financing costs, which are reflected as a loss
on extinguishment of debt in the condensed consolidated statement
of operations. The prepayment was funded with the Company’s
existing cash balances.
- The Company ended the quarter with
$78.0 million of cash on-hand, no outstanding borrowings under its
revolving credit facility and no long-term debt.
Outlook:
Regarding expectations for fiscal year 2018, the Company
continues to focus on improving its operating results to drive
increases in both annual operating income and EBITDA. As previously
disclosed in March, the individual quarters within the Spring
season are expected to be impacted by the combined effects of the
calendar shift from the 53rd week in fiscal year 2017 and the new
revenue recognition accounting standard, and as such, the Company
will provide commentary on the overall Spring season, which
combines the first and second quarters of fiscal year 2018.
For the Spring season, the Company has increased its
expectations and now expects non-GAAP operating income to be in the
range of $5 million to $6 million, excluding the impact of
non-operating charges of $1.0 million primarily related to
severance, resulting from the Company’s recently completed
streamlining of its corporate office support functions, as compared
to the prior year non-GAAP operating income of $1.2 million.
Adjusted EBITDA for the Spring season, excluding the aforementioned
charge for severance, is expected to be in the range of $17 million
to $18 million, as compared to adjusted EBITDA of $12.3 million for
the prior Spring season after excluding non-operating charges and
benefits.
- Net sales for the full Spring season
are expected to be up slightly, reflecting growth in eCommerce and
the addition of Fashion to Figure, partially offset by a reduced
store count.
- Comparable store sales, which are
shifted to compare like calendar weeks, are expected to increase in
the low single-digit percentage range for the full Spring
Season.
- Gross margin for the full Spring Season
is expected to increase by approximately 50 basis points, as
compared to last year’s historic high, reflecting reductions in
home office payroll costs driven by the ongoing benefits of Project
Excellence and reductions in occupancy costs due to the Company’s
real estate negotiations, partially offset by increased shipping
costs associated with the growing omni-channel business, and
increases in variable-based compensation accruals.
- Selling, general and administrative
expenses for the Spring season are expected to decrease by
approximately 50 basis points after excluding the impact of
non-operating charges and benefits in both periods. This reflects
the Company’s continued efforts to increase efficiency and reduce
home office payroll costs through a recently completed
rationalization of the Company’s corporate support functions in
connection with Project Excellence, partially offset by an increase
in selling expenses driven by increases in eCommerce variable costs
and performance-based compensation accruals, which are anticipated
this year based upon the Company’s improved operating results.
- Non-GAAP operating income for the
Spring season is now expected to be in the range of $5 million to
$6 million, as compared to non-GAAP operating income of $1.2
million in the prior year period.
Additional Outlook:
- Total inventory at the end of the
second quarter is expected to be down by a low to mid-single-digit
percentage as compared to the prior year second quarter, reflecting
lower on-hand inventory, partially offset by higher in-transit
inventory.
- Capital expenditures for the second
quarter of fiscal year 2018 are projected to be approximately $3
million to $5 million, as compared to $2.6 million of capital
expenditures in the second quarter of last year, reflecting
continued investments in the Company’s information technology and
omni-channel infrastructure, and real estate remodel/refresh
activity. For the full year, capital expenditures are expected to
be in the range of $10 million to $12 million.
- Depreciation expense for the second
quarter of fiscal year 2018 is estimated to be approximately $5
million.
- During the second quarter of fiscal
year 2018, the Company expects to open 1 Fashion to Figure store,
open 1 new Outlet store, convert 1 existing New York & Company
store to an Outlet store, remodel/refresh 4 existing stores, and
close 5 New York & Company stores and 1 Outlet store.
Comparable Store Sales:
A store is included in the comparable store sales calculation
after it has completed 13 full fiscal months of operations from the
store's opening date or once it has been reopened after remodeling
if the gross square footage did not change by more than 20%. Sales
from the Company's eCommerce store, including Fashion to Figure
eCommerce sales, and private label credit card royalties and
related revenue are included in comparable store sales. Fashion to
Figure retail locations are not included in comparable store sales
calculations until they complete 13 full fiscal months of
operation. In addition, in a year with 53 weeks, sales in the last
week of the year are not included in determining comparable store
sales.
Project Excellence
Project Excellence is the Company’s ongoing business
re-engineering program which consists of a continuous analysis of
business processes and organizational structure in an effort to
improve sales productivity and operating efficiencies, as well as
to reduce the Company’s overall cost structure. For further
information related to Project Excellence, please refer to Note 14,
“Quarterly Results” in the Notes to Consolidated Financial
Statements appearing in the Company’s Annual Report on Form 10-K
for the fiscal year ended February 3, 2018.
Conference Call Information
A conference call to discuss first quarter 2018 results is
scheduled for today, Thursday, May 24, 2018 at 4:30 p.m. Eastern
Time. Investors and analysts interested in participating in the
call are invited to dial (800) 263-0877 and reference conference ID
number 1730955 approximately ten minutes prior to the start of the
call. The conference call will also be web-cast live at
www.nyandcompany.com. A replay of this call will be available at
7:30 p.m. Eastern Time on May 24, 2018 until 11:59 p.m. Eastern
Time on May 31, 2018 and can be accessed by dialing (844) 512-2921
and entering conference ID number 1730955.
As a supplement to this press release, slides with information
regarding the first quarter 2018 results and outlook for second
quarter and Spring 2018 will also be available at:
www.nyandcompany.com at approximately 4:20 p.m. Eastern Time on
Thursday, May 24, 2018.
About New York & Company
New York & Company, Inc. is an omni-channel women’s fashion
retailer providing curated lifestyle solutions that are versatile,
on-trend, and stylish at a great value. The specialty retailer,
first incorporated in 1918, has grown to now operate 432 retail and
outlet locations in 36 states while also growing a substantial
eCommerce business. Its branded merchandise, including
collaborations with Eva Mendes and Gabrielle Union, is sold
exclusively at these locations and online at www.nyandcompany.com.
Additionally, certain product, press releases and SEC filing
information concerning the Company are available at the Company's
website: www.nyandcompany.com.
Forward-looking Statements
This press release contains certain forward-looking statements,
including statements made within the meaning of the safe harbor
provisions of the United States Private Securities Litigation
Reform Act of 1995. Some of these statements can be identified by
terms and phrases such as “expect,” “anticipate,” “believe,”
“intend,” “estimate,” “continue,” “could,” “may,” “plan,”
“project,” “predict,” and similar expressions and references to
assumptions that the Company believes are reasonable and relate to
its future prospects, developments and business strategies. Such
statements, including information under “Outlook” and “Additional
Outlook” above, are subject to various risks and uncertainties that
could cause actual results to differ materially. These include, but
are not limited to: (i) the Company’s dependence on mall traffic
for its sales and the continued reduction in the volume of mall
traffic; (ii) the Company’s ability to anticipate and respond to
fashion trends; (iii) the impact of general economic conditions and
their effect on consumer confidence and spending patterns; (iv)
changes in the cost of raw materials, distribution services or
labor; (v) the potential for economic conditions to negatively
impact the Company's merchandise vendors and their ability to
deliver products; (vi) the Company’s ability to open and operate
stores successfully; (vii) seasonal fluctuations in the Company’s
business; (viii) competition in the Company’s market, including
promotional and pricing competition; (ix) the Company’s ability to
retain, recruit and train key personnel; (x) the Company’s reliance
on third parties to manage some aspects of its business; (xi) the
Company’s reliance on foreign sources of production; (xii) the
Company’s ability to protect its trademarks and other intellectual
property rights; (xiii) the Company’s ability to maintain, and its
reliance on, its information technology infrastructure; (xiv) the
effects of government regulation; (xv) the control of the Company
by its largest shareholder and any potential change of ownership of
the Company including the shares held by its largest shareholder;
and (xvi) other risks and uncertainties as described in the
Company’s documents filed with the SEC, including its most recent
Annual Report on Form 10-K and subsequent Quarterly Reports on Form
10-Q. The Company undertakes no obligation to revise the
forward-looking statements included in this press release to
reflect any future events or circumstances.
Exhibit (1)
New York & Company, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share
amounts)
Three monthsended
May 5, 2018
% ofnet sales Three monthsended
April 29, 2017
% ofnet sales Net sales $ 218,829 100.0 % $ 209,857
100.0 % Cost of goods sold, buying and occupancy costs
148,868 68.0 % 145,435 69.3 % Gross profit 69,961
32.0
% 64,422 30.7 % Selling, general and administrative expenses
66,486 30.4 % 68,274 32.5 % Operating income (loss)
3,475 1.6 % (3,852 )
(1.8
)%
Interest expense, net of interest income 22 — % 279 0.1 %
Loss on extinguishment of debt 239 0.1 % — — %
Income (loss) before income taxes 3,214 1.5 % (4,131 )
(1.9
)%
Provision for income taxes 128 0.1 % 116 0.1 %
Net income (loss) $ 3,086 1.4 % $ (4,247 )
(2.0
)%
Basic earnings (loss) per share $ 0.05 $ (0.07 )
Diluted earnings (loss) per share $ 0.05 $ (0.07 )
Weighted average shares outstanding: Basic shares of common stock
63,527 63,181 Diluted shares of common stock 65,404 63,181
Selected operating data: (Dollars in
thousands, except square foot data) Comparable store sales
increase (decrease) 2.7 %
(0.7
)%
Net sales per average selling square foot (a) $ 101 $ 89 Net sales
per average store (b) $ 504 $ 452 Average selling square footage
per store (c) 4,985 5,033 Ending store count 432 463
(a) Net sales per average selling square foot is defined as
net sales divided by the average of beginning and monthly end of
period selling square feet. (b) Net sales per average store is
defined as net sales divided by the average of beginning and
monthly end of period number of stores. (c) Average selling square
footage per store is defined as end of period selling square feet
divided by end of period number of stores.
Exhibit (2) New York &
Company, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets (Amounts in thousands) May 5,
2018 February 3, 2018* April 29, 2017
(Unaudited) (Unaudited) Assets Current assets:
Cash and cash equivalents $ 78,019 $ 90,908 $ 75,292 Accounts
receivable 14,850 12,528 16,873 Income taxes receivable 115 115 115
Inventories, net 90,984 84,498 96,194 Prepaid expenses 16,557
16,447 17,777 Other current assets 1,944 1,924 1,516 Total current
assets 202,469 206,420 207,767 Property and equipment, net
72,701 77,906 83,146 Intangible assets 17,047 17,125 14,879 Other
assets 1,469 1,505 1,563 Total assets $ 293,686 $ 302,956 $ 307,355
Liabilities and stockholders’ equity Current liabilities:
Current portion—long-term debt $ — $
841
$ 841 Accounts payable 73,937 70,089 83,496 Accrued expenses 73,535
70,677 66,070 Income taxes payable 716 28 66 Total current
liabilities 147,543 141,635 150,473 Long-term debt, net of
current portion — 10,644 11,275 Deferred rent 26,353 27,217 29,554
Other liabilities 35,142 36,599 40,977 Total liabilities 209,038
216,095 232,279 Total stockholders’ equity 84,648 86,861
75,076 Total liabilities and stockholders’ equity $ 293,686 $
302,956 $ 307,355
* Derived from the audited consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the fiscal
year ended February 3, 2018.
Exhibit (3) New York & Company, Inc. and
Subsidiaries Condensed Consolidated Statements of Cash
Flows
(Amounts in thousands)
Three months
ended
May 5, 2018
Three months
ended
April 29, 2017
Operating activities Net income (loss) $ 3,086 $
(4,247 ) Adjustments to reconcile net income (loss) to net cash
used in operating activities: Depreciation and amortization 5,479
5,732 Loss from impairment charges — 288 Amortization of intangible
assets 78 — Amortization of deferred financing costs 34 48
Write-off of unamortized deferred financing costs 239 — Share-based
compensation expense 642 501 Changes in operating assets and
liabilities: Accounts receivable (2,506 ) (5,036 ) Income taxes
receivable — 29 Inventories, net (6,486 ) (18,150 ) Prepaid
expenses (110 ) 969 Accounts payable 3,848 15,428 Accrued expenses
(3,022 ) (3,239 ) Income taxes payable 43 (108 ) Deferred rent (864
) (485 ) Other assets and liabilities (935 ) (1,613 )
Net cash used in operating activities (474 ) (9,883 )
Investing activities Capital expenditures (274 )
(2,096 ) Insurance recoveries 184 — Net
cash used in investing activities (90 ) (2,096 )
Financing activities Repayment of long-term debt
(11,750 ) (250 ) Repurchase of treasury stock — (416 ) Shares
withheld for payment of employee payroll taxes (93 ) (23 )
Principal payments on capital lease obligations (482 )
(409 ) Net cash used in financing activities (12,325
) (1,098 ) Net decrease in cash and cash equivalents
(12,889 ) (13,077 ) Cash and cash equivalents at beginning of
period 90,908 88,369 Cash and cash equivalents
at end of period $ 78,019 $ 75,292
Exhibit (4)
New York & Company, Inc. and
Subsidiaries Reconciliation of GAAP to Non-GAAP Financial
Measures (Unaudited)
A reconciliation of the Company’s GAAP to non-GAAP financial
statement information for the three months ended May 5, 2018 and
the three months ended April 29, 2017 is indicated below. This
information reflects, on a non-GAAP basis, the Company’s adjusted
operating results after excluding certain non-operating
adjustments. This non-GAAP financial information is provided to
enhance the user’s overall understanding of the Company’s current
financial performance. Specifically, the Company believes the
non-GAAP adjusted results provide useful information to both
management and investors by excluding expenses that the Company
believes are not indicative of the Company’s continuing operating
results. The non-GAAP financial information should be considered in
addition to, not as a substitute for or as being superior to,
measures of financial performance prepared in accordance with
GAAP.
Three months ended May 5, 2018
(Amounts in thousands, except per share
amounts)
Cost of goods sold, buying
and occupancy costs
Gross profit
Selling, general and
administrative expenses
Operating income
Net income
Earnings per diluted
share
GAAP as reported $ 148,868 $ 69,961 $ 66,486 $ 3,475 $ 3,086 $ 0.05
Adjustments
affecting comparability
Certain severance expense 319 319 352 671 671 Consulting expense —
— 27 27 27 Legal settlement fees — — 140
140 140 Total adjustments (1)
319 319 519 838 838
0.01
Non-GAAP as adjusted
$ 148,549 $ 70,280 $ 65,967 $ 4,313 $ 3,924 $ 0.06
Three months ended April 29,
2017
(Amounts in thousands, except per share
amounts)
Cost of goods sold, buying
and occupancy costs
Gross profit
Selling, general and
administrative expenses
Operating loss
Net loss
Loss per diluted
share
GAAP as reported $ 145,435 $ 64,422 $ 68,274 $ (3,852 ) $ (4,247 )
$ (0.07 )
Adjustments
affecting comparability
Certain severance expenses 548 548 — 548 548 Consulting expense — —
562 562 562
Legal settlement fees (trademark
infringement case)
—
—
470 470 470 Total
adjustments (1) 548 548 1,032 1,580
1,580 0.03
Non-GAAP as adjusted
$ 144,887 $ 64,970 $ 67,242 $ (2,272 ) $ (2,667 ) $ (0.04 )
(1) The tax effect of $0.8 million and
$1.6 million of non-operating adjustments during the three months
ended May 5, 2018 and April 29, 2017, respectively, is offset by a
full valuation allowance against deferred tax assets.
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version on businesswire.com: https://www.businesswire.com/news/home/20180524006290/en/
Investor:ICR, Inc.Allison Malkin, (203) 682-8200
New York & Company (NYSE:NWY)
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