~ Reports Total Sales of $200.1 Million
~
~ eCommerce Business Grew to 36% of Sales
from 32% in the Prior Year Quarter ~
~ Reports $65.6 Million in Cash / $1.02 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 third quarter of fiscal year 2019
ended November 2, 2019.
Gregory Scott, Chief Executive Office of RTW Retailwinds, said:
“Overall, we were disappointed with our third quarter results as
softness in our store channel contributed to our sales decrease and
operating loss below our expectations. That said, we continue to
make progress against our strategic initiatives, which include
growing our multi-brand platform, driving digital growth across all
brands, and implementing our Customer First initiative. We are
encouraged to report that in the third quarter our Fashion to
Figure brand delivered a +55% comp, our total digital businesses
across all brands delivered positive comp results and represented
36% of total volume, and we were able to accelerate further our new
customer growth. Unfortunately, traffic in our store channel
combined with challenges in our denim-based SoHo Jeans sub-brand
drove the quarter’s operating loss. The team navigated these
headwinds through disciplined inventory management and expense
controls and we ended the quarter with lower inventory and with
$65.6 million in cash on-hand with no debt. We acknowledge these
challenges and are addressing with a sense of urgency.”
Commenting on the fourth quarter, Mr. Scott added, “While our
reads in October and early November were above our expectations,
our Black Friday performance was disappointing due to traffic in
our store channel. We were pleased that our Cyber Monday results
delivered record-breaking traffic and sales, which reflects the
continued bifurcation of our positive digital growth and our
traffic headwinds in stores. In addition, we anticipate improving
margin rate over the prior year period reflecting our merchandise
strategies. Finally, we expect to drive positive growth across our
digital businesses and Fashion to Figure brand in the fourth
quarter.”
For the third quarter of fiscal year 2019, the Company reported
the following:
- Net sales were $200.1 million, as compared to $210.8 million in
the prior year, reflecting a 4.0% decrease in comparable store
sales, and a net reduction in store count by 14 stores from the
prior year third quarter, partially offset by an increase in sales
from new businesses.
- Gross profit as a percentage of net sales decreased 460 basis
points to 27.8% versus fiscal year 2018 third quarter gross profit
percentage of 32.4%. Product margins for the three months ended
November 2, 2019 were relatively strong, despite increased
promotional activity and excluding the impact of $3.6 million of
charges to exit Uncommon Sense. Gross margin was also impacted by
increases in shipping costs, and the deleveraging of buying and
occupancy costs based on lower sales, and $0.2 million of expense
related to reorganizations in New York & Company.
- Selling, general and administrative expenses were $67.7
million, or 33.8% of net sales, which was below our prior guidance,
as compared to $66.8 million, or 31.7% of net sales, in the third
quarter of fiscal year 2018. Included in selling, general and
administrative expenses in the third quarter of fiscal year 2019 is
$1.5 million of incremental spending compared to prior year period
incurred in connection with the incubation of new businesses, as
well as $0.6 million of expense associated with the exit of
Uncommon Sense and $0.4 million of expense incurred in connection
with reorganizations in the core New York & Company business,
partially offset by the reversal of a legal accrual.
- Operating loss for the third quarter of fiscal year 2019 was
$12.1 million, inclusive of $5.8 million of losses from the
Company’s new businesses, including a charge of $4.2 million to
exit Uncommon Sense. This compares to operating income of $1.6
million for the third quarter of fiscal year 2018. On a non-GAAP
basis, adjusted operating loss for the third quarter of fiscal year
2019 was $7.5 million as compared to non-GAAP adjusted operating
income of $2.4 million for the third quarter of fiscal year 2018.
Please refer to Exhibit 5 “Reconciliation of GAAP to non-GAAP
Financial Measures” for a reconciliation of GAAP to non-GAAP
adjusted operating income (loss).
- Net loss for the third quarter of fiscal year 2019 was $11.6
million, or a loss of $0.18 per diluted share, as compared to net
income of $1.7 million, or earnings of $0.03 per diluted share, in
the third quarter of fiscal year 2018.
Other Financial and Operational Highlights for the Third
Quarter of Fiscal Year 2019:
- Total quarter end inventory decreased 5.2%, as compared to the
end of the prior year period, primarily reflecting a planned
decrease in merchandise in-transit and a planned decrease in
inventory on-hand.
- Capital expenditures were $2.0 million, as compared to $2.1
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 2 New York & Company stores, closed 1
New York & Company store, and remodeled 1 New York &
Company store, ending the third quarter with 414 stores, including
120 Outlet stores (of which 57 are clearance stores), and 2.1
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 third quarter with $65.6 million of cash
on-hand versus $83.7 million at the end of the third quarter of
fiscal year 2018, with no outstanding borrowings under its
revolving credit facility and no long-term debt.
Outlook:
For the fourth quarter of fiscal year 2019 the Company continues
to expect to move forward with its strategic initiatives driving
digital growth across all brands with its Customer First strategy.
The Company also continues to expect pressure on brick-and-mortar
sales given traffic headwinds and a highly promotional retail
environment. In light of these ongoing investments in the future
and retail industry trends, we expect the following for the fourth
quarter of fiscal year 2019:
- Net sales are expected to be down in the mid to upper
single-digit percentage range, reflecting the combination of
reduced store count, and a comparable store sales decrease in the
mid-single-digit range.
- Gross margin as a percentage of net sales is expected to
decrease up to 150 basis points, primarily reflecting increased
shipping costs with product margins flat to up slightly.
- Selling, general and administrative expenses are expected to be
up slightly versus the prior year’s fourth 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,
increase in variable compensation due to the elimination of accrual
reversals which occurred in the prior year, partially offset by
reduced payroll.
- Operating results for the fourth quarter are expected to
reflect a loss in the range of $4 million to $8 million.
Additional Outlook:
- On-hand inventory at the end of the fourth quarter of fiscal
year 2019 is expected to be down in the mid-single-digit percentage
range.
- Capital expenditures for the fourth quarter of fiscal year 2019
are projected to be approximately $5.5 million to $6.5 million,
primarily reflecting continued investments in the Company’s
information technology and omni-channel infrastructure, as compared
to $4.8 million of capital expenditures in the fourth quarter of
fiscal year 2018. For fiscal year 2019, total capital expenditures
are projected to be $11 million to $12 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 fourth quarter of
fiscal year 2019 is estimated to be approximately $5 million.
- During the fourth quarter of fiscal year 2019, the Company
expects to open 1 New York & Company store and close 19 New
York & Company stores, 4 Fashion to Figure stores, and 4 Outlet
stores. The Company plans to end fiscal year 2019 with roughly 390
stores, and approximately 1.9 million selling square feet. For the
full year 2019, the Company expects to have opened a total of 7 New
York & Company stores and 2 Fashion to Figure stores, and
closed 22 New York & Company stores, 4 Fashion to Figure stores
and 5 Outlet stores.
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 third quarter results is scheduled
for today, Thursday, December 5, 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
13695903 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 December 5, 2019 until 11:59 p.m. Eastern
Time on December 12, 2019 and can be accessed by dialing (844)
512-2921 and entering conference ID number 13695903.
As a supplement to this press release, slides with information
regarding the third quarter results and outlook for fourth quarter
2019 will also be available at: www.nyandcompany.com at
approximately 4:20 p.m. Eastern Time on Thursday, December 5,
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 414 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 November 2,
2019
% of net sales
13 weeks ended November 3,
2018
% of net sales
Net sales
$
200,117
100.0
%
$
210,758
100.0
%
Cost of goods sold, buying and occupancy
costs
144,519
72.2
%
142,383
67.6
%
Gross profit
55,598
27.8
%
68,375
32.4
%
Selling, general and administrative
expenses
67,664
33.8
%
66,802
31.7
%
Operating (loss) income
(12,066)
(6.0)
%
1,573
0.7
%
Net interest income
(158)
(0.1)
%
(258)
(0.1)
%
(Loss) income before income taxes
(11,908)
(5.9)
%
1,831
0.8
%
(Benefit) provision for income taxes
(259)
(0.1)
%
106
—
%
Net (loss) income
$
(11,649)
(5.8)
%
$
1,725
0.8
%
Basic (loss) earnings per share
$
(0.18)
$
0.03
Diluted (loss) earnings per share
$
(0.18)
$
0.03
Weighted average shares outstanding:
Basic shares of common stock
64,420
63,940
Diluted shares of common stock
64,420
66,289
Selected operating data:
(Dollars in thousands, except square
foot data)
Comparable store sales (decrease)
increase
(4.0)
%
0.2
%
Net sales per average selling square foot
(a)
$
98
$
99
Net sales per average store (b)
$
484
$
495
Average selling square footage per store
(c)
4,956
4,987
Ending store count
414
428
(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)
39 weeks ended November
2, 2019
% of net sales
39 weeks ended November
3, 2018
% of net sales
Net sales
$
602,974
100.0
%
$
645,957
100.0
%
Cost of goods sold, buying and occupancy
costs
425,099
70.5
%
438,247
67.8
%
Gross profit
177,875
29.5
%
207,710
32.2
%
Selling, general and administrative
expenses
199,964
33.2
%
199,605
30.9
%
Operating (loss) income
(22,089)
(3.7)
%
8,105
1.3
%
Net interest income
(734)
(0.2)
%
(453)
(0.1)
%
Loss on extinguishment of debt
—
—
%
239
—
%
(Loss) income before income taxes
(21,355)
(3.5)
%
8,319
1.4
%
Provision for income taxes
33
—
%
441
0.2
%
Net (loss) income
$
(21,388)
(3.5)
%
$
7,878
1.2
%
Basic (loss) earnings per share
$
(0.33)
$
0.12
Diluted (loss) earnings per share
$
(0.33)
$
0.12
Weighted average shares outstanding:
Basic shares of common stock
64,317
63,738
Diluted shares of common stock
64,317
65,979
Selected operating data:
(Dollars in thousands, except square
foot data)
Comparable store sales (decrease)
increase
(4.7)
%
1.2
%
Net sales per average selling square foot
(a)
$
294
$
301
Net sales per average store (b)
$
1,464
$
1,502
Average selling square footage per store
(c)
4,956
4,987
(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)
November 2, 2019
February 2, 2019*
November 3, 2018
(Unaudited)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$ 65,565
$
95,542
$
83,662
Accounts receivable
11,762
9,879
14,134
Inventories, net
115,230
82,803
121,586
Prepaid expenses
11,162
16,921
16,894
Other current assets
2,399
1,818
2,363
Total current assets
206,118
206,963
238,639
Property and equipment, net
53,129
63,791
65,292
Operating lease assets
209,336
—
—
Intangible assets
16,672
16,813
16,891
Other assets
1,176
1,311
1,411
Total assets
$ 486,431
$
288,878
$
322,233
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$ 102,800
$
77,050
$
107,231
Accrued expenses
62,973
68,585
66,487
Current operating lease liabilities
39,233
—
—
Income taxes payable
—
375
16
Total current liabilities
205,006
146,010
173,734
Non-current operating lease
liabilities
198,761
—
—
Deferred rent
—
25,090
25,623
Other liabilities
26,247
31,165
32,226
Total liabilities
430,014
202,265
231,583
Total stockholders’ equity
56,417
86,613
90,650
Total liabilities and stockholders’
equity
$ 486,431
$
288,878
$
322,233
*
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)
39 weeks
ended
November 2, 2019
39 weeks
ended
November 3, 2018
Operating activities
Net (loss) income
$
(21,388)
$
7,878
Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:
Depreciation and amortization
14,778
15,833
Non-cash lease expense
33,861
—
Loss from impairment charges
782
486
Amortization of intangible assets
141
234
Amortization of deferred financing
costs
27
49
Write-off of unamortized deferred
financing costs
—
239
Share-based compensation expense
1,609
1,997
Changes in operating assets and
liabilities:
Accounts receivable
(1,551)
(1,981)
Inventories, net
(32,427)
(37,088)
Prepaid expenses
596
(447)
Accounts payable
25,750
37,142
Accrued expenses
(5,887)
(10,202)
Income taxes payable
(375)
(12)
Deferred rent
—
(1,594)
Operating lease liabilities
(35,735)
—
Other assets and liabilities
(4,128)
(3,071)
Net cash (used in) provided by operating
activities
(23,947)
9,463
Investing activities
Capital expenditures
(4,755)
(3,705)
Insurance recoveries
267
375
Net cash used in investing activities
(4,488)
(3,330)
Financing activities
Repayment of long-term debt
—
(11,750)
Principal payments on capital lease
obligations
(1,318)
(1,320)
Payment of financing fees
(139)
—
Shares withheld for payment of employee
payroll taxes
(85)
(309)
Net cash used in financing activities
(1,542)
(13,379)
Net decrease in cash and cash
equivalents
(29,977)
(7,246)
Cash and cash equivalents at beginning of
period
95,542
90,908
Cash and cash equivalents at end of
period
$
65,565
$
83,662
Exhibit (5)
RTW Retailwinds, Inc. and Subsidiaries
Reconciliation of GAAP to non-GAAP Financial Measures
(Unaudited)
A reconciliation of the Company’s GAAP operating income (loss)
to non‑GAAP adjusted operating income (loss) is indicated below.
Adjusted operating income (loss) is being presented because it is a
key measure used by the Company’s management and board of directors
to understand and evaluate the Company’s core operating performance
and trends, to prepare the financial budget and to develop short
and long‑term operational plans. In particular, the exclusion of
certain expenses in calculating adjusted operating income (loss)
can provide a useful measure for period‑to‑period comparisons of
the Company’s core business. Accordingly, the Company believes that
adjusted operating income (loss) provides useful information to
investors and others in understanding and evaluating the Company’s
operating results in the same manner as the Company’s management
and its board of directors. This 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.
(Amounts in thousands)
13 weeks ended November 2,
2019
13 weeks ended November 3,
2018
GAAP operating (loss) income as
reported
$(12,066)
$1,573
Adjustments affecting comparability
Company name change and Registration
Statement
—
341
Certain severance expense (reversal)
578
(67)
Consulting expense‑Project Excellence
—
418
Legal expense (reversal)
(209)
103
Uncommon Sense closeout
4,225
—
Total adjustments
4,594
795
Non‑GAAP adjusted operating (loss)
income
$(7,472)
$2,368
(Amounts in thousands)
39 weeks ended November 2,
2019
39 weeks ended November 3,
2018
GAAP operating (loss) income as
reported
$(22,089)
$8,105
Adjustments affecting comparability
Company name change and Registration
Statement
—
341
Certain severance expense (reversal)
578
571
Reversal of certain employee relocation
accruals
—
(135)
Consulting expense‑Project Excellence
—
610
Legal expense (reversal)
(209)
655
Uncommon Sense closeout
4,225
—
Total adjustments
4,594
2,042
Non‑GAAP adjusted operating (loss)
income
$(17,495)
$10,147
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Investor Relations: ICR, Inc. (203) 682-8200 Allison
Malkin
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