Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which specializes in
providing a superior selection of essential products for everyday
life in small-town America, today announced operating results for
its second quarter ended August 1, 2010.
Net sales from continuing operations for the second quarter of
fiscal 2011 decreased 5.5% to $118.2 million, and same-store sales
decreased 7.2%. Net sales from continuing operations for the first
half of fiscal 2011 decreased 3.8% to $231.2 million, and
same-store sales decreased 5.1%.
Net loss for the second quarter was $1.3 million, or $0.34 per
diluted share, compared to net earnings of $3.0 million, or $0.78
per diluted share, for the second quarter of the fiscal 2010. Net
loss for the first half of fiscal 2011 was $3.2 million, or $0.85
per diluted share, compared to net earnings of $3.0 million, or
$0.77 per diluted share, for the same period of the prior fiscal
year.
Richard Wilson, President and CEO, commented, "Second-quarter
results were negatively impacted by a same-store sales decline of
7.2%, which resulted from inadequate inventory levels in key
seasonal departments. Due to lower sales, gross margin contribution
was lower by approximately $2.9 million. SG&A expense increased
approximately $1.7 million as a result of higher than anticipated
insurance costs, severance and legal fees. We achieved savings in
advertising of $132,000, store maintenance expense of $318,000, and
accounting fees of $131,000.
"Clearly, we must deliver improved results. The management team
and I are working quickly to improve top-line sales and
profitability. Business is stabilizing as inventory levels are now
sufficient to achieve our sales objectives. We are also encouraged
by our previously announced August same-store sales trend,
reflecting a significant improvement over our second-quarter
same-store sales result."
Mr. Wilson added, "Our core strategy is to improve our value
proposition, provide an improved shopping experience with our new
store layouts, and build upon key 'trip driving' businesses to
improve our comp store sales and improve shareholder value. As a
major step in this strategy, we are progressing with our store
resets and expect to be fully complete by the end of
September."
One important initiative is a new partnership with Associated
Wholesale Grocers (AWG), a major food distributor headquartered in
Kansas City. The alliance with AWG will provide our customers with
exciting new products under the "Best Choice" and "Always Save"
brands. Both brands offer national brand quality at more
competitive prices. We are excited to launch this new merchandise
initiative and will be delivering more than 400 new items into our
stores by the end of September.
Investor Conference Call
The Company will host an investor
conference call at 10:00 a.m. Central Daylight Time on September
10, 2010, to discuss operating results for the second quarter ended
August 1, 2010. The dial-in number for the
conference call is 888-204-4368 (international/local participants
dial 913-312-1389), and the Confirmation Code is 7742660. Parties
interested in participating in the conference call should dial in
approximately five minutes prior to 10:00 a.m. Central Daylight
Time. A replay of the call will be available after 1:30 p.m.
Central Daylight Time September 10, 2010 through September 15, 2010
by dialing 888-203-1112 or for international/local callers by
dialing 719-457-0820. The Replay Passcode is 7742660. A
replay of the call will also be available four hours after
completion of the call by visiting the Investors page on the
Company's website, www.ALCOstores.com.
Supplemental Data
The Company has included certain tables in this press release
that are set forth fully in the Company's 10-Q.
Certain Non-GAAP Financial Measures
The Company has included Adjusted Gross Margin and Adjusted
EBITDA, non-GAAP performance measures, as part of its
disclosure as a means to enhance its communications with
stockholders. Certain stockholders have specifically requested this
information to assist them in comparing the Company to other
retailers that disclose similar non-GAAP performance measures.
Further, management utilizes these measures in internal evaluation,
review of performance and in comparing the Company's financial
measures to those of its peers. Adjusted EBITDA differs from the
most comparable GAAP financial measure (earnings [loss] from
continuing operations) in that it does not include
certain items, as does Adjusted Gross Margin. These items are
excluded by management to better evaluate normalized operational
cash flow and expenses excluding unusual, inconsistent and non-cash
charges. To compensate for the limitations of evaluating the
Company's performance using Adjusted Gross Margin and Adjusted
EBITDA, management also utilizes GAAP performance measures
such as gross margin return on investment, return on equity and
cash flow from operating activities. As a result, Adjusted
Gross Margin and Adjusted EBITDA may not reflect important
aspects of the results of the Company's operations.
About Duckwall-ALCO Stores,
Inc.
Duckwall-ALCO Stores, Inc. is a regional broad line retailer
that specializes in meeting the needs of smaller, underserved
communities across 23 states, primarily in the central United
States. The Company offers an exceptional selection of quality
products and recognized brand names at reasonable prices. Its
specialty is delivering those products with the friendly, personal
service its customers have come to expect. With 257 stores,
Duckwall-ALCO Stores is proud to have continually provided
excellent products at good value prices to its customers for 109
years. To learn more about Duckwall-ALCO Stores, Inc. visit
www.ALCOstores.com.
The Duckwall-ALCO Stores, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=5865
Forward-looking statements
This press release contains forward-looking statements, as
referenced in the Private Securities Litigation Reform Act of 1995
("the Act"). Any forward-looking statements are made by the Company
in good faith, pursuant to the safe-harbor provisions of the Act.
These forward-looking statements reflect management's current views
and projections regarding economic conditions, retail industry
environments, and Company performance. Factors which could
significantly change results include but are not limited to: sales
performance, expense levels, competitive activity, interest rates,
changes in the Company's financial condition, the company's high
operating leverage in an environment of flat or declining consumer
spending, the economic viability of small rural towns the company
serves and macro-economic factors affecting, and potentially
affecting, the retail industry in general such as a decline in the
value of the US dollar against the currencies of countries from
which US retailers import product, the introduction of a national
sales tax or Value Added Tax, continued high levels of
unemployment, rising fuel prices and the high level of consumer
indebtedness. Additional information regarding these and other
factors may be included in the Company's 10-Q filings and other
public documents, copies of which are available from the Company on
request and are available from the United States Securities and
Exchange Commission.
|
Duckwall-ALCO Stores,
Inc. |
Consolidated Statements
of Operations |
(dollars in thousands, except
share and per share amounts) |
(Unaudited) |
|
|
|
|
|
|
For the Thirteen Week
Periods Ended |
For the Twenty-Six Week
Periods Ended |
|
August 1, 2010 |
August 2, 2009 |
August 1, 2010 |
August 2, 2009 |
Net sales |
$ 118,158 |
125,029 |
$ 231,181 |
240,189 |
Cost of sales |
80,572 |
82,706 |
158,424 |
159,418 |
Gross margin |
37,586 |
42,323 |
72,757 |
80,771 |
|
|
|
|
|
Selling, general and administrative |
36,210 |
34,505 |
71,025 |
70,107 |
Depreciation and amortization |
2,501 |
2,268 |
4,983 |
4,645 |
Total operating expenses |
38,711 |
36,773 |
76,008 |
74,752 |
|
|
|
|
|
Operating income (loss) from continuing
operations |
(1,125) |
5,550 |
(3,251) |
6,019 |
Interest expense, net |
721 |
521 |
1,395 |
1,057 |
|
|
|
|
|
Earnings (loss) from
continuing operations before income taxes |
(1,846) |
5,029 |
(4,646) |
4,962 |
Income tax expense (benefit) |
(545) |
1,985 |
(1,555) |
1,952 |
|
|
|
|
|
Earnings (loss) from continuing
operations |
(1,301) |
3,044 |
(3,091) |
3,010 |
|
|
|
|
|
Earnings (loss) from discontinued operations,
net of income tax expense (benefit) |
4 |
(14) |
(137) |
(29) |
|
|
|
|
|
Net earnings (loss) |
$ (1,297) |
3,030 |
$ (3,228) |
2,981 |
|
|
|
|
|
Earnings (loss) per diluted share |
|
|
|
|
Continuing operations |
$ (0.34) |
0.78 |
$ (0.81) |
0.78 |
Net earnings (loss) |
$ (0.34) |
0.78 |
$ (0.85) |
0.77 |
|
|
|
|
|
Weighted-average shares outstanding: |
|
|
|
|
Basic |
3,836 |
3,798 |
3,823 |
3,798 |
Diluted |
3,836 |
3,902 |
3,823 |
3,857 |
|
|
|
|
|
Supplemental Data: |
|
|
|
|
|
For the Thirteen Week
Periods Ended |
For the Twenty-Six Week
Periods Ended |
|
August 1, 2010 |
August 2, 2009 |
August 1, 2010 |
August 2, 2009 |
|
|
|
|
|
Same-store gross margin dollar change |
(1.5)% |
1.1% |
(1.8)% |
1.3% |
Same-store SG&A dollar change |
2.5% |
(3.8)% |
0.8% |
(3.4)% |
Same-store total customer count change |
(4.7)% |
(0.6)% |
(3.9)% |
2.4% |
Same-store average sale per ticket
change |
(2.3)% |
(2.3)% |
(0.9)% |
0.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Thirteen Week
Periods Ended |
Trailing Twelve Periods Ended |
For the Thirteen Week
Periods Ended |
Trailing Twelve Periods Ended |
|
Fiscal 2010 |
May 2, 2010 |
May 3, 2009 |
May 2, 2010 |
August 1, 2010 |
August 2, 2009 |
August 1, 2010 |
Net earnings (loss) from continuing
operations (1) |
$ 3,100 |
(1,788) |
(36) |
1,348 |
(1,301) |
3,044 |
(2,997) |
Plus: |
|
|
|
|
|
|
|
Interest |
2,149 |
674 |
537 |
2,286 |
721 |
521 |
2,486 |
Taxes (1) |
2,174 |
(1,011) |
(33) |
1,196 |
(545) |
1,985 |
(1,334) |
Depreciation and amortization (1) |
9,982 |
2,482 |
2,377 |
10,087 |
2,501 |
2,268 |
10,320 |
Share-based compensation |
757 |
81 |
185 |
653 |
119 |
262 |
510 |
Preopening store costs (2) |
128 |
199 |
-- |
327 |
183 |
-- |
510 |
Store transformation project costs |
2,096 |
-- |
1,378 |
718 |
-- |
718 |
-- |
=Adjusted EBITDA (1)(3)(4)(5) |
20,386 |
637 |
4,408 |
16,615 |
1,678 |
8,798 |
9,495 |
|
|
|
|
|
|
|
|
Cash |
5,164 |
5,186 |
8,208 |
5,186 |
3,690 |
5,446 |
3,690 |
Debt |
40,992 |
35,606 |
60,946 |
35,606 |
34,018 |
48,802 |
34,018 |
Debt, net of cash |
$ 35,828 |
30,420 |
52,738 |
30,420 |
30,328 |
43,356 |
30,328 |
|
|
|
|
|
|
|
|
(1) These amounts will not agree
with the fiscal year end 2010 or fiscal 2010 first quarter 10-Q
filing due to the five stores the Company closed since the second
quarter of fiscal 2010. These stores are now shown in
discontinued operations. |
(2) These costs are not
consistent quarter to quarter as the Company does not open the same
number of stores in each quarter of each fiscal year. These
costs are directly associated with the number of stores that have
been or will be opened and are incurred prior to the grand
opening of each store. |
(3) For the trailing twelve
periods ended August 1, 2010 the average open weeks for the
Company's two non same-stores was 14 weeks. |
(4) The Company implemented
new initiatives for fiscal year 2010. The fiscal 2010 initiatives
include, but are not limited to, reduced point-of-sale hardware
lease expense, energy expense and accident reduction
programs. These initiatives achieved approximately $1.4
million in SG&A savings for the twenty-six weeks of fiscal 2010
when compared to the prior year same period. |
(5) The store transformation
project completed in fiscal 2010 continues to provide SG&A
savings in fiscal 2011. This initiative achieved approximately
$458 in SG&A savings for the twenty-six weeks of fiscal 2011
when compared to the prior year same period. |
|
Duckwall-ALCO Stores,
Inc. |
Consolidated Balance
Sheets |
(dollars in thousands, except
share and per share amounts) |
(Unaudited) |
|
August 1, 2010 |
August 2, 2009 |
Assets |
|
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 3,690 |
$ 5,446 |
Receivables |
5,395 |
5,656 |
Prepaid income taxes |
2,051 |
423 |
Inventories |
140,274 |
148,499 |
Prepaid expenses |
4,022 |
4,067 |
Deferred income taxes |
4,307 |
5,345 |
Assets held for sale |
1,181 |
1,539 |
Total current assets |
160,920 |
170,975 |
|
|
|
Property and equipment, at cost |
101,295 |
100,761 |
Less accumulated depreciation |
71,819 |
69,230 |
Net property and equipment |
29,476 |
31,531 |
|
|
|
Property under capital leases, net of
accumulated amortization |
7,753 |
2,231 |
Other non-current assets |
1,203 |
164 |
|
|
|
Total assets |
$ 199,352 |
$ 204,901 |
|
|
Duckwall-ALCO Stores,
Inc. |
Consolidated Balance
Sheets |
(dollars in thousands, except
share and per share amounts) |
(Unaudited) |
|
August 1, 2010 |
August 2, 2009 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
|
|
|
Current liabilities: |
|
|
Current maturities of long-term debt |
$ 1,498 |
$ 1,406 |
Current maturities of capital lease
obligations |
1,084 |
1,903 |
Accounts payable |
29,979 |
25,682 |
Accrued salaries and commissions |
4,415 |
4,632 |
Accrued taxes other than income |
5,160 |
4,792 |
Self-insurance claim reserves |
4,180 |
4,841 |
Other current liabilities |
4,821 |
4,548 |
Total current liabilities |
51,137 |
47,804 |
|
|
|
Long-term debt, less current maturities |
653 |
2,151 |
Notes payable under revolving loan
agreement |
29,912 |
41,308 |
Capital lease obligations - less current
maturities |
7,596 |
2,034 |
Deferred gain on leases |
4,019 |
4,405 |
Deferred income taxes |
1,078 |
129 |
Other noncurrent liabilities |
1,835 |
1,662 |
Total liabilities |
96,230 |
99,493 |
Stockholders' equity: |
|
|
Common stock, $.0001 par value,
authorized 20,000,000 shares; issued and outstanding 3,839,395
shares and 3,797,947 shares, respectively |
1 |
1 |
Additional paid-in capital |
39,930 |
39,002 |
Retained earnings |
63,191 |
66,405 |
Total stockholders' equity |
103,122 |
105,408 |
|
|
|
Total liabilities and stockholders'
equity |
$ 199,352 |
$ 204,901 |
CONTACT: Duckwall-ALCO Stores, Inc.
Jon A. Ramsey, Vice President - Controller
785-263-3350 X221
jramsey@alcostores.com
Hagen and Partners
Debbie Hagen
913-652-6547
dhagen@hagenandpartners.com
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