~ GAAP Operating Results Improved by $1.5
Million Compared to Last Year ~
~ Non-GAAP Operating Results Improved by
$3.1 Million Compared to Last Year ~
~ Gross Profit Margin Improves by 300 Basis
Points to Highest Level Since 2008 ~
~ Cash On-Hand of $75 Million, or $1.19 Per
Share ~
New York & Company, Inc. [NYSE:NWY], a specialty
women’s apparel chain with 463 retail stores, today announced
results for the first quarter ended April 29, 2017.
Gregory Scott, New York & Company’s CEO stated: “Our first
quarter top and bottom-line results were in line with our guidance,
and were highlighted by the continued success of our celebrity
collaborations, a double-digit percentage increase in eCommerce
sales and strong gross margin expansion to its highest level in the
first quarter since 2008. As we expand on our high-growth celebrity
collaborations, we are excited about our multi-year partnership
with Gabrielle Union, who will be the face of our 7th Avenue Design
Studio and will launch her own collection in the third quarter of
this year. While we saw a soft start to the quarter due to reduced
mall traffic, we saw comparable store sales significantly improve
for the combined March and April period. Moreover, for the quarter
we recorded our highest ever average unit retail, demonstrating the
increasing strength of the New York and Company brand.”
“While the apparel retail sector remains challenging with
traffic declines and a highly promotional environment, we remain
committed to accelerating even greater success in the proven
high-growth segments of celebrity partnerships, sub-brands and
eCommerce. We expect that the continued execution of our strategies
will drive increased sales productivity and profitability in this
fiscal year and enhance value for our shareholders.”
First Quarter Fiscal Year 2017 Results (13-weeks ended April
29, 2017 compared to the 13-weeks ended April 30, 2016):
- Net sales were $209.9 million,
decreasing 2.9% as compared to $216.0 million in the prior year,
reflecting growth in eCommerce, offset by decreases in
brick-and-mortar stores due to the combination of lower store count
(463 this year versus 488 last year) and decreased comparable store
sales.
- Comparable store sales
decreased 0.7%, reflecting double-digit percentage growth in
eCommerce offset by decreases in comparable store sales in
brick-and-mortar stores due to traffic declines.
- Gross profit as a percentage of net
sales increased 300 basis points to 30.7% versus the fiscal year
2016 first quarter gross profit percentage of 27.7%, reflecting the
highest gross margin rate achieved in the first quarter since 2008.
This increase during 2017 reflects benefits from our ongoing
business re-engineering program (Project Excellence), which
resulted in a 200 basis point increase in product margins,
comprised of $5.7 million of benefits from our new private label
credit card agreement and improved product markups, partially
offset by a 30 basis point increase in other cost of goods sold
related largely to a $1.2 million increase in shipping costs
associated with the significant growth in the Company’s eCommerce
sales. In addition, as reported in prior filings with the
Securities and Exchange Commission, the Company’s cost of sales
includes buying expenses and all store related occupancy costs.
During the quarter, the Company improved the leverage of its buying
and occupancy costs by 130 basis points, resulting in a $2.7
million contribution to gross profit, due primarily to the
continued success of our ongoing rent negotiation efforts.
- Selling, general and administrative
expenses were $68.3 million, as compared to $65.3 million in the
prior year period. Excluding non-operating charges of $1.0 million
resulting from certain consulting services and legal costs, the
non-GAAP selling, general and administrative expenses were $67.2
million. The main drivers in this non-GAAP increase of $2.0 million
were the following:
- Shift of $1.0 million in benefits from
the Company’s new private label credit card agreement to revenue,
as compared to the prior year which reflected benefits under the
previous private label credit card agreement as a reduction of
marketing expense;
- Investments of $1.2 million in
marketing to drive the double-digit percentage increase in
eCommerce sales, the expansion of our successful celebrity
collaborations and investments in private label credit card program
to drive continued growth in this important segment of our customer
base;
- Increase of $0.8 million in eCommerce
expenses largely due to increases in fulfillment costs to support
the significant increase in eCommerce sales; and
- Partially offset by a $1.3 million
decrease in compensation expense resulting from a reduction in
store payroll and a decrease in executive share-based compensation
expense.
- GAAP operating results narrowed to a
loss of $3.9 million, as compared to the prior year’s first quarter
GAAP operating loss of $5.4 million. Excluding $1.6 million of
non-operating charges, the non-GAAP adjusted operating loss in the
current year’s first quarter was $2.3 million. There were no
non-operating charges during the three months ended April 30,
2016.
- GAAP net loss for the first quarter of
fiscal year 2017 was $4.2 million, or a loss of $0.07 per diluted
share. This compares to the prior year’s GAAP net loss of $5.7
million, or a loss of $0.09 per diluted share. Excluding $1.6
million of non-operating charges, the current year’s first quarter
non-GAAP adjusted net loss was $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
April 29, 2017. There were no non-GAAP adjustments during the three
months ended April 30, 2016. GAAP is defined as Generally Accepted
Accounting Principles.
- Total quarter-end inventory decreased
6.4%, as compared to the end of last year’s first quarter, due to
the lower store count combined with decreased levels of in-store
inventory, partially offset by higher levels of inventory
in-transit and increased levels of eCommerce inventory.
- Capital spending for the first quarter
of fiscal year 2017 was $2.1 million, as compared to $1.9 million
in last year’s first quarter, primarily reflecting investments to
remodel and refresh existing real estate, investments for five new
stores with short-term leases under attractive terms and
investments in the Company’s information technology infrastructure
to support its growing omni-channel business.
- The Company opened 5 New York &
Company stores and 1 new Outlet store, remodeled/refreshed 3 New
York & Company stores, and closed 8 New York & Company
stores and 1 Outlet store during the first quarter, ending the
first quarter with 463 stores, including 123 Outlet stores and 2.3
million selling square feet in operation.
- The Company ended the quarter with
$75.3 million of cash on-hand, representing approximately $1.19 in
cash per share and approximately $1.00 in cash per share, net of
debt. The Company had no outstanding borrowings under its revolving
credit facility.
Share Repurchase Activity:
- During the first quarter, the Company
repurchased 218,524 shares of its common stock and has repurchased
a total of 695,169 shares under its existing share repurchase
program. As of the end of the first quarter, the Company had
approximately $3.5 million of total availability remaining under
the Company’s share repurchase program. Any future share
repurchases are expected to be funded using the Company’s available
cash.
Outlook:
Regarding expectations for the second quarter of fiscal year
2017, the Company is providing the following guidance:
- Net sales and comparable store sales
are expected to be flat to down in the low single-digit percentage
range.
- Gross margin is expected to be up 250
to 300 basis points from the prior year’s second quarter rate
reflecting continued benefits from Project Excellence through
increased royalties, reductions in product costs, agent expenses
and occupancy costs, partially offset by increased shipping costs
associated with the significant growth in the omni-channel
business.
- Selling, general and administrative
expenses are expected to increase $3 million to $4 million as
compared to the prior year’s second quarter, reflecting the
elimination of marketing credits earned under the old private label
credit card agreement which have been replaced by royalty payments
under the new agreement and reported as revenue, increased
eCommerce fulfillment costs due to the expected increase in sales,
and investment in marketing, including the recent private label
credit card relaunch, increases in digital marketing and increases
in celebrity collaborations, all of which are in an effort to drive
top line sales.
- For the second quarter of fiscal year
2017 we are expecting approximately $1 million to $3 million in
operating income, as compared to operating income of $1.3 million
in the prior year, resulting in anticipated diluted earnings per
share in the range of $0.01 to $0.04.
Additional Outlook:
- Total inventory at the end of the
second quarter is expected to decrease slightly over the prior year
second quarter.
- The Company continues to be very
aggressive in its rationalization of its real estate portfolio in
an effort to reduce occupancy costs and maximize profitability per
selling square foot. These efforts include maintaining a highly
flexible real estate portfolio with approximately 227 stores, or
50% of its leases expiring in less than 12 months, and 293 stores,
or more than 60% in less than 2 years.
- Capital expenditures for the second
quarter of fiscal year 2017 are projected to be between $6 million
and $8 million, as compared to $7.4 million of capital expenditures
in the second quarter of last year.
- Depreciation expense for the second
quarter of fiscal year 2017 is estimated to be approximately $6
million.
- During the second quarter, the Company
expects to open 1 New York & Company store and 2 Outlet stores,
remodel/refresh 3 New York & Company stores, and close 5 New
York & Company stores, ending the second quarter of fiscal year
2017 with 461 stores, including 125 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 store and private label credit card
royalties and related revenue are included in comparable store
sales.
Conference Call Information
A conference call to discuss first quarter of fiscal year
2017 results is scheduled for today, Thursday, May 18, 2017 at
4:30 p.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to dial (888) 397-5338 and
reference conference ID number 8632153 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 18, 2017 until 11:59
p.m. Eastern Time on May 25, 2017 and can be accessed by dialing
(844) 512-2921 and entering conference ID number 8632153.
About New York & Company
New York & Company, Inc. is a specialty retailer of women's
fashion apparel and accessories, and the modern wear-to-work
destination for women, providing fashion that is feminine,
polished, on-trend and versatile. New York & Company, Inc.
helps its customers feel confident, put-together, attractive and
stylish by providing affordable fashion. The Company's proprietary
branded New York & Company® merchandise is sold through its
national network of retail stores and online at
www.nyandcompany.com. The Company operates 463 stores in 39 states.
Additionally, certain product, press release 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 sponsors and any potential change of ownership of those
sponsors; 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
April 29, 2017
%ofnetsales Three
monthsended
April 30, 2016
%ofnetsales Net sales $ 209,857 100.0 %
$ 216,038 100.0 % Cost of goods sold, buying and occupancy
costs 145,435 69.3 % 156,151 72.3 % Gross profit 64,422 30.7
% 59,887 27.7 % Selling, general and administrative expenses
68,274 32.5 % 65,285 30.2 % Operating loss (3,852) (1.8) %
(5,398) (2.5) % Interest expense, net of interest income 279
0.1 % 297 0.1 % Loss before income taxes (4,131) (1.9) %
(5,695) (2.6) % Provision for income taxes 116 0.1 % 21 — %
Net loss $ (4,247) (2.0) % $ (5,716) (2.6) %
Basic loss per share $ (0.07) $ (0.09) Diluted loss per
share $ (0.07) $ (0.09) Weighted average shares outstanding:
Basic shares of common stock 63,181 63,277 Diluted shares of common
stock 63,181 63,277
Selected operating data:
(Dollars in thousands, except square foot data) Comparable
store sales decrease (0.7) % (2.3)
%
Net sales per average selling square foot (a) $ 89 $ 86 Net sales
per average store (b) $ 452 $ 442 Average selling square footage
per store (c) 5,033 5,112 Ending store count 463 488
(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) April 29, 2017
January 28, 2017* April 30, 2016 (Unaudited)
(Unaudited) Assets Current assets: Cash and cash
equivalents $ 75,292 $ 88,369 $ 47,628 Accounts receivable 16,873
11,837 17,011 Income taxes receivable 115 144 47 Inventories, net
96,194 78,044 102,764 Prepaid expenses 17,777 18,746 18,998 Other
current assets 1,516 824 831 Total current assets 207,767 197,964
187,279 Property and equipment, net 83,146 87,070 86,136
Intangible assets 14,879 14,879 14,879 Other assets 1,563 1,675
1,966 Total assets $ 307,355 $ 301,588 $ 290,260
Liabilities and
stockholders’ equity Current liabilities: Current
portion—long-term debt $ 841 $ 841 $ 841 Accounts payable 83,496
68,068 91,158 Accrued expenses 66,070 69,294 55,388 Income taxes
payable 66 174 63 Total current liabilities 150,473 138,377 147,450
Long-term debt, net of current portion 11,275 11,485 12,115
Deferred rent 29,554 30,039 33,131 Other liabilities 40,977 42,518
8,246 Total liabilities 232,279 222,419 200,942 Total
stockholders’ equity 75,076 79,169 89,318 Total liabilities and
stockholders’ equity $ 307,355 $ 301,588 $ 290,260
*
Derived from the audited consolidated
financial statements included in the Company’s Annual Report on
Form 10-K for the fiscal year ended January 28, 2017.
Exhibit (3)
New York & Company, Inc.
and Subsidiaries
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(Amounts in thousands)
Three months
ended
April 29, 2017
Three months
ended
April 30, 2016
Operating activities Net loss $ (4,247) $ (5,716)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization 5,732 5,863 Loss from
impairment charges 288 — Amortization of deferred financing costs
48 47 Share-based compensation expense 501 1,107 Changes in
operating assets and liabilities: Accounts receivable (5,036)
(8,803) Income taxes receivable 29 — Inventories, net (18,150)
(14,987) Prepaid expenses 969 444 Accounts payable 15,428 8,933
Accrued expenses (3,239) 2,664 Income taxes payable (108) (176)
Deferred rent (485) (1,220) Other assets and liabilities
(1,613) 270 Net cash used in operating activities
(9,883) (11,574)
Investing activities Capital
expenditures (2,096) (1,869) Net cash
used in investing activities (2,096)
(1,869)
Financing activities Repayment of long-term
debt (250) (250) Repurchase of treasury stock (416) — Proceeds from
exercise of stock options — 120 Shares withheld for payment of
employee payroll taxes (23) (73) Principal payments on capital
lease obligations (409) (158) Net cash used in
financing activities (1,098) (361) Net
decrease in cash and cash equivalents (13,077) (13,804) Cash and
cash equivalents at beginning of period 88,369 61,432
Cash and cash equivalents at end of period $ 75,292 $ 47,628
Non-cash capital lease transactions $ — $ 1,299
Exhibit (4)
New York & Company, Inc. and
SubsidiariesReconciliation 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 April 29, 2017 is
indicated below. There were no non-GAAP adjustments for the three
months ended April 30, 2016. This information reflects, on a
non-GAAP basis, the Company’s adjusted operating results after
excluding certain non-operating charges. 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 April 29,
2017
Cost of goods Selling,
general sold,
buying and Loss per
and occupancy administrative Operating
diluted
(Amounts in thousands, except per share
amounts)
costs Gross profit expenses loss Net
loss 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 $1.6 million of
expenses is offset by a full valuation allowance against deferred
tax assets.
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Investors:ICR, Inc.Allison Malkin, 203-682-8200
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