~ Reports Total Sales of $201.9 Million ~ ~
eCommerce Business Grew to 30% of Sales from 26% in the Prior Year
Quarter ~ ~ Reports $83.3 Million in Cash / $1.28 Per Diluted Share
with No Debt Outstanding ~
RTW Retailwinds, Inc. [NYSE:RTW], an omni-channel specialty
apparel retail platform for powerful celebrity and consumer brands,
today announced results for the second quarter of fiscal year 2019
ended August 3, 2019.
Gregory Scott, Chief Executive Officer of RTW Retailwinds, said:
“We continue to execute against our strategic initiatives, most
notably building the foundation of our multi-brand digital platform
to address customer opportunities. Fashion to Figure, our on-trend
plus-size brand, delivered positive comp results reflecting the
ongoing implementation of our strategic vision. Happy x Nature, our
ready-to-wear brand in partnership with Kate Hudson, continues to
build momentum driven by the strength of Kate’s active and engaged
social following. We also experienced positive comp results in our
celebrity brands, driven by a significant comp increase in the
Gabrielle Union sub-brand. In addition, we made key additions to
the RTW executive team representing industry leaders who bring the
expertise necessary to drive our near and long-term growth
objectives.
“That said, we were disappointed with second quarter results in
our core New York & Company brand. While our traffic and
eCommerce business improved sequentially from the prior quarter,
and we delivered positive increases in new customer acquisition, we
continued to experience decreases in brick-and-mortar traffic as
well as decreases in basket size and ongoing weakness from our SoHo
Jeans sub-brand. We responded swiftly to these challenges by
reducing receipts in the second quarter. As we move forward we are
also addressing these challenges with a sense of urgency, beginning
with our Customer First initiative launching this Fall. At the same
time, we experienced increases in variable eCommerce expenses
particularly in shipping, and this increase combined with reduced
vendor rebates and increased recruiting fees, negatively affected
our operating results in the quarter. We also incurred $2.3 million
of losses from our new businesses in the quarter, compared to
breakeven in the prior year.
“Looking ahead to the third quarter, as we continue to
experience challenging trends in our core New York & Company
brand, we will continue to focus on the growth of the New York
& Company eCommerce business which has shown stronger traffic
and sales trend, as reflected in our guidance for the third
quarter. We have repositioned our product investments for Fall
recognizing the ongoing weakness in our SoHo Jeans sub-brand, and
will lean into the celebrity brands, our dominant wear-to-work
pants category, and the lounge/athleisure category. Finally, our
Customer First initiative, led by Traci Inglis, President, Chief
Marketing and Customer Officer, is expected to transform the
customer journey across our portfolio of brands and position us for
long term growth. We remain committed to our strategic priorities
and are making the necessary adjustments reflecting the current
environment.”
Over the last year, the Company launched three new businesses,
Fashion to Figure, Happy x Nature and Uncommon Sense. Based on our
current performance, and the necessary decision to focus our
resources on improving the New York & Company business, the
Company has decided to concentrate on the Fashion to Figure and the
Happy x Nature businesses as the most compelling new opportunities
for growth. These businesses have shown early potential and the
Company has decided to focus on growing these brands, and as such,
has decided to exit the Uncommon Sense business. In connection with
this decision, the Company expects to pursue several divestiture
options and depending upon those efforts, could record a one-time
charge of up to $4.5 million in the third quarter to write down
inventory, impair certain assets, and record severance.
For the second quarter of fiscal year 2019, the Company reported
the following:
- Net sales were $201.9 million, as compared to $216.4 million in
the prior year, reflecting a 4.8% decrease in comparable store
sales, and a net reduction in store count by 13 stores from the
prior year second quarter, partially offset by an increase in sales
from new businesses.
- Gross profit as a percentage of net sales decreased 260 basis
points to 29.5% versus fiscal year 2018 second quarter gross profit
percentage of 32.1%. Product margin remains near peak levels
although it did decrease slightly due to increased promotional
activity. Margin was impacted by increases in shipping costs, as
well as a reduction of vendor rebates due to lower receipts,
partially offset by a slight improvement in buying and occupancy
costs as the Company continues to reduce occupancy expenses.
- Selling, general and administrative expenses were $67.2
million, or 33.3% of net sales, as compared to $66.3 million, or
30.7% of net sales, in the second quarter of fiscal year 2018.
Included in selling, general and administrative expenses in the
second quarter of fiscal year 2019 is $2.0 million of incremental
spending compared to prior year period incurred in connection with
the incubation of three new businesses (Fashion to Figure, Happy x
Nature, and Uncommon Sense) and increased recruiting expenses,
which were partially offset by a reduction in variable
compensation.
- Operating loss for the second quarter of fiscal year 2019 was
$7.6 million, inclusive of $2.3 million of losses from the
Company’s new businesses. This compares to operating income of $3.1
million for the second quarter of fiscal year 2018.
- Net loss for the second quarter of fiscal year 2019 was $7.5
million, or a loss of $0.12 per diluted share, as compared to net
income of $3.1 million, or earnings of $0.05 per diluted share, in
the second quarter of fiscal year 2018.
Other Financial and Operational Highlights for the Second
Quarter of Fiscal Year 2019:
- On hand inventory in-store is down slightly. Total quarter end
inventory increased 8.8%, as compared to the end of the prior year
period, primarily reflecting an increase in merchandise in-transit
due to shifts in the timing of receipts in an effort to receive
goods in advance of projected tariff increases, and an increase in
inventory to support the new businesses.
- Capital expenditures were $1.8 million, as compared to $1.4
million in the prior year period, reflecting continued spending to
support new stores, the remodel/refresh of existing stores, and
investments in the IT infrastructure to support new
businesses.
- The Company opened 3 New York & Company stores and 2
Fashion to Figure stores, closed 1 New York & Company store and
1 Outlet store, as well as converted 2 New York & Company
stores to Outlet stores, ending the second quarter with 413 stores,
including 120 Outlet stores (of which 57 are clearance stores),
with approximately 2.0 million selling square feet in operation.
The Company continues to maintain a highly flexible lease portfolio
with approximately 70% of its leases expiring in 2 years or
less.
- The Company ended the second quarter with $83.3 million of cash
on-hand versus $94.8 million at the end of the second quarter of
fiscal year 2018, with no outstanding borrowings under its
revolving credit facility and no long-term debt.
Outlook:
For the third quarter of fiscal year 2019:
- Net sales are expected to be down in the low single-digit to
mid single-digit percentage range, reflecting the combination of
reduced store count and comparable store sales which are expected
to be down in the low to mid single-digit percentage range.
- Gross margin is expected to be down slightly, primarily
reflecting increased shipping costs and decreased vendor rebates,
partially offset by an increase in product margins.
- Selling, general and administrative expenses are expected to
increase by approximately $2 million versus the prior year’s third
quarter. This increase reflects investments in marketing to support
the Company’s new businesses and drive new customer acquisition and
an increase in variable eCommerce selling expenses, driven by
growth in the eCommerce business and the costs to support new
businesses, partially offset by reductions in variable compensation
and reduced payroll.
- Operating results for the third quarter are expected to reflect
a modest loss, excluding one-time charges to exit the Uncommon
Sense business.
Additional Outlook:
- On-hand inventory at the end of the third quarter of fiscal
year 2019 in the core New York & Company business is expected
to be down slightly, offset by increased in-transit levels due to
the timing of receipts and inventory to support the new businesses,
with total inventory expected to be up in the low to mid
single-digits percentage.
- Capital expenditures for the third quarter of fiscal year 2019
are projected to be approximately $4.5 million to $6.0 million to
support new stores and the remodel/refresh of existing stores, as
well as investments in IT infrastructure, as compared to $2.1
million of capital expenditures in the third quarter of fiscal year
2018. For fiscal year 2019, total capital expenditures are
projected to be $12 million to $13 million, as compared to $8.5
million in capital expenditures in fiscal year 2018, with the
increase primarily due to investments in IT infrastructure.
- Depreciation and amortization expense for the third quarter of
fiscal year 2019 is estimated to be approximately $5 million.
- During the third quarter of fiscal year 2019, the Company
expects to open 3 New York & Company stores, remodel/refresh 1
New York & Company store, and close 1 New York & Company
store and 1 Outlet store.
- For fiscal year 2019, the Company expects to open approximately
8 New York & Company stores and 2 Fashion to Figure stores,
convert 2 New York & Company stores to Outlet stores, and
remodel/refresh 4 New York & Company stores and 2 Outlet
stores, and close 11 to 13 New York & Company stores and up to
5 Outlet stores. The Company plans to end fiscal year 2019 with
roughly 402 to 404 stores, and approximately 2.0 million selling
square feet.
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 stores, and private label credit card
royalties and related revenue are included in comparable store
sales. In addition, in a year with 53 weeks, sales in the last week
of the year are not included in determining comparable store
sales.
Conference Call Information
A conference call to discuss second quarter results is scheduled
for today, Thursday, August 22, 2019 at 4:30 p.m. Eastern Time.
Investors and analysts interested in participating in the call are
invited to dial (877) 407-0784 and reference conference ID number
13693408 approximately ten minutes prior to the start of the call.
The conference call will also be webcast live at
www.nyandcompany.com. A replay of this call will be available at
7:30 p.m. Eastern Time on August 22, 2019 until 11:59 p.m. Eastern
Time on August 29, 2019 and can be accessed by dialing (844)
512-2921 and entering conference ID number 13693408.
As a supplement to this press release, slides with information
regarding the second quarter results and outlook for third quarter
2019 will also be available at: www.nyandcompany.com at
approximately 4:20 p.m. Eastern Time on Thursday, August 22,
2019.
About RTW Retailwinds
RTW Retailwinds, Inc. (together with its subsidiaries, the
"Company") is a specialty women's omni-channel and digitally
enabled retailer with a powerful multi-brand lifestyle platform
providing curated fashion solutions that are versatile, on-trend,
and stylish at a great value. The specialty retailer, first
incorporated in 1918, has grown to now operate 413 retail and
outlet locations in 35 states while also growing a substantial
eCommerce business. The Company's portfolio includes branded
merchandise from New York & Company, Fashion to Figure, and
Happy x Nature, and collaborations with Eva Mendes, Gabrielle Union
and Kate Hudson. The Company's branded merchandise is sold
exclusively at its retail locations and online at
www.nyandcompany.com, www.fashiontofigure.com,
www.happyxnature.com, and through its rental subscription
businesses at www.nyandcompanycloset.com and
www.fashiontofigurecloset.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; (xvi)
the impact of tariff increases or new tariffs; and (xvii) 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)
RTW Retailwinds, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(Unaudited)
(Amounts in thousands, except per share
amounts)
13 weeks ended August 3,
2019
% of net sales
13 weeks ended August 4,
2018
% of net sales
Net sales
$
201,894
100.0
%
$
216,370
100.0
%
Cost of goods sold, buying and occupancy
costs
142,259
70.5
%
146,996
67.9
%
Gross profit
59,635
29.5
%
69,374
32.1
%
Selling, general and administrative
expenses
67,208
33.3
%
66,317
30.7
%
Operating (loss) income
(7,573)
(3.8)
%
3,057
1.4
%
Net interest income
(261)
(0.1)
%
(217)
(0.1)
%
(Loss) income before income taxes
(7,312)
(3.7)
%
3,274
1.5
%
Provision for income taxes
178
—
%
207
0.1
%
Net (loss) income
$
(7,490)
(3.7)
%
$
3,067
1.4
%
Basic (loss) earnings per share
$
(0.12)
$
0.05
Diluted (loss) earnings per share
$
(0.12)
$
0.05
Weighted average shares outstanding:
Basic shares of common stock
64,337
63,749
Diluted shares of common stock
64,337
66,244
Selected operating data:
(Dollars in thousands, except square
foot data)
Comparable store sales (decrease)
increase
(4.8)
%
0.6
%
Net sales per average selling square foot
(a)
$
99
$
101
Net sales per average store (b)
$
491
$
503
Average selling square footage per store
(c)
4,959
4,974
Ending store count
413
426
(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)
RTW Retailwinds, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Operations
(Unaudited)
(Amounts in thousands, except per share
amounts)
26 weeks ended August 3,
2019
% of net sales
26 weeks ended August 4,
2018
% of net sales
Net sales
$
402,857
100.0
%
$
435,199
100.0
%
Cost of goods sold, buying and occupancy
costs
280,580
69.6
%
295,864
68.0
%
Gross profit
122,277
30.4
%
139,335
32.0
%
Selling, general and administrative
expenses
132,300
32.9
%
132,803
30.5
%
Operating (loss) income
(10,023)
(2.5)
%
6,532
1.5
%
Net interest income
(576)
(0.1)
%
(195)
—
%
Loss on extinguishment of debt
—
—
%
239
—
%
(Loss) income before income taxes
(9,447)
(2.4)
%
6,488
1.5
%
Provision for income taxes
292
—
%
335
0.1
%
Net (loss) income
$
(9,739)
(2.4)
%
$
6,153
1.4
%
Basic (loss) earnings per share
$
(0.15)
$
0.10
Diluted (loss) earnings per share
$
(0.15)
$
0.09
Weighted average shares outstanding:
Basic shares of common stock
64,265
63,638
Diluted shares of common stock
64,265
65,824
Selected operating data:
(Dollars in thousands, except square
foot data)
Comparable store sales (decrease)
increase
(5.0)
%
1.7
%
Net sales per average selling square foot
(a)
$
197
$
202
Net sales per average store (b)
$
980
$
1,007
Average selling square footage per store
(c)
4,959
4,974
(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 (3)
RTW Retailwinds, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Amounts in thousands)
August 3, 2019
February 2, 2019*
August 4, 2018
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$ 83,320
$
95,542
$
94,758
Accounts receivable
9,526
9,879
11,831
Inventories, net
89,349
82,803
82,124
Prepaid expenses
12,361
16,921
17,233
Other current assets
1,897
1,818
2,018
Total current assets
196,453
206,963
207,964
Property and equipment, net
56,669
63,791
68,331
Operating lease assets
218,230
—
—
Intangible assets
16,719
16,813
16,969
Other assets
817
1,311
1,618
Total assets
$ 488,888
$
288,878
$
294,882
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$ 78,617
$
77,050
$
73,310
Accrued expenses
66,840
68,585
73,641
Current operating lease liabilities
40,383
—
—
Income taxes payable
—
375
—
Total current liabilities
185,840
146,010
146,951
Deferred rent
—
25,090
26,066
Non-current operating lease
liabilities
207,168
—
—
Other liabilities
28,097
31,165
33,649
Total liabilities
421,105
202,265
206,666
Total stockholders’ equity
67,783
86,613
88,216
Total liabilities and stockholders’
equity
$ 488,888
$
288,878
$
294,882
*
Derived from the audited consolidated
financial statements included in the Company’s Annual Report on
Form 10-K for the fiscal year ended February 2, 2019.
Exhibit (4)
RTW Retailwinds, Inc. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
26 weeks ended August 3,
2019
26 weeks ended August 4,
2018
Operating activities
Net (loss) income
$
(9,739)
$
6,153
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:
Depreciation and amortization
9,520
10,715
Non-cash lease expense
22,313
—
Loss from impairment charges
407
486
Amortization of intangible assets
94
156
Amortization of deferred financing
costs
15
41
Write-off of unamortized deferred
financing costs
—
239
Share-based compensation expense
1,352
1,186
Changes in operating assets and
liabilities:
Accounts receivable
685
513
Inventories, net
(6,546)
2,374
Prepaid expenses
(603)
(786)
Accounts payable
1,567
3,221
Accrued expenses
(2,020)
(2,835)
Income taxes payable
(375)
(28)
Deferred rent
—
(1,151)
Operating lease liabilities
(23,478)
—
Other assets and liabilities
(2,070)
(2,025)
Net cash (used in) provided by operating
activities
(8,878)
18,259
Investing activities
Capital expenditures
(2,708)
(1,626)
Insurance recoveries
267
184
Net cash used in investing activities
(2,441)
(1,442)
Financing activities
Repayment of long-term debt
—
(11,750)
Principal payments on capital lease
obligations
(844)
(1,046)
Shares withheld for payment of employee
payroll taxes
(59)
(171)
Net cash used in financing activities
(903)
(12,967)
Net (decrease) increase in cash and cash
equivalents
(12,222)
3,850
Cash and cash equivalents at beginning of
period
95,542
90,908
Cash and cash equivalents at end of
period
$
83,320
$
94,758
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Investor Relations: ICR, Inc. (203) 682-8200 Allison
Malkin
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