the Wholesale segment, had increased revenues, as a percentage of
total net revenues, to 42.1% for the year ended December 31, 2010
compared to 41.3% for the year ended December 31, 2009. The Wholesale
segment revenues, as a percentage of total net revenues, decreased to
47.9% for the year ended December 31, 2010 from 49.1% for the year
ended December 31, 2009. The revenues in the Licensing segment, which
carries nominal cost of goods sold, increased, as a percentage of
total net revenues, to 10.0% for the year ended December 31, 2010
compared to 9.6% for the year ended December 31, 2009.
Selling, general and administrative ("SG&A") expenses, including
warehousing and handling expenses, as a percentage of net revenues,
improved 200 basis points to 42.4% for the year ended December 31,
2010 compared to 44.4% for the year ended December 31, 2009. Total
SG&A increased $11.9 million to $194.1 million for the year ended
December 31, 2010 from $182.2 million for the year ended December 31,
2009. The increase in SG&A expenses versus the prior period was
primarily attributable to variable shipping costs, compensation for
the Company's pay-for-performance bonus incentive and $6.9 million
for store closing costs and professional fees for exploring strategic
alternatives.
Impairments of intangible and long-lived assets were $0.3 million for
the year ended December 31, 2010 and $19.3 million for the year ended
December 31, 2009. Management reviewed its retail stores' fair value
based upon estimated undiscounted future cash flows. Based upon this
review, the Company recorded a charge of $0.3 million and $6.5
million for underperforming retail stores whose fair value was below
carrying value for the years ended December 31, 2010 and 2009,
respectively. In addition, impairments in 2009 included a $12.8
million charge to reduce the
Le Tigre
trademark to its adjusted fair value.
Interest and other income, net increased $1.5 million to $2.0 million
for the year ended December 31, 2010 compared to $0.5 million for the
year ended December 31, 2009. The increase is primarily due to the
gain on the sale of the Company's equity investments of approximately
$1.7 million partially offset by lower interest rates on money market
funds.
Impairment of investments, which were other-than-temporary
impairments of auction-rate securities, was $0.5 million for the year
ended December 31, 2010 and $1.0 million for the year ended December
31, 2009. The fair value of the Company's auction-rate securities was
determined utilizing an independent appraiser. The primary variables
used in determining fair value include collateral, rating, insurance,
credit risk and downgrade risk of the security.
The Company's
effective tax rate was a 30.1% provision for the year ended December 31, 2010 compared to a 103.8%
provision for the year ended December 31, 2009. The change in the Company's effective tax rate is
primarily the result of the additional $43.6 million valuation allowance recorded by the Company during
2009. The Company also recorded a small increase in the valuation allowance of $0.4 million for the year ended December 31,
2010. The income tax expense for 2010 is primarily taxes from state, local and foreign jurisdictions. The
Company remains in a three-year cumulative loss position and continues to have a valuation allowance for
primarily all of the Company's deferred tax assets. If the Company generates taxable
income on a sustained basis, the need for a deferred tax asset valuation allowance could change resulting
in the reversal of all or a portion of this deferred tax asset valuation allowance.
As a result of the foregoing, the Company recorded net income of $2.1
million or 0.5% of net revenues for the year ended December 31, 2010
compared to a $63.2 million loss or (15.4%) of net revenues for the
year ended December 31, 2009.
Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
Net revenues decreased $81.9 million, or 16.6%, to $410.4 million in
2009 from $492.3 million in 2008. The decrease was due to decreases
in each of the Company's business segments.
Wholesale net sales (excluding sales to the Company's Consumer Direct
business segment) decreased $65.7 million, or 24.6%, to $201.5
million in 2009 from $267.2 million in 2008. The decrease was
primarily a result of the Company's decision to streamline its
portfolio of brands and eliminate unprofitable businesses. Over 70%
of the decline was attributable to the Company's planned exit of the
Tribeca
and
Bongo
footwear lines, as well as reductions in associated private label
programs and sales to the Company's off-priced customers. The
remaining decline was attributable to a decrease in sales across the
majority of the Company's wholesale businesses as a result of factors
including retailer destocking, a challenging retail environment and
continued stress in the macro-economic marketplace.
Net sales in the Company's Consumer Direct segment decreased $11.9
million, or 6.6%, to $169.5 million for the year ended December 31,
2009 from $181.4 million for the year ended December 31, 2008. Sales
associated with fourteen net new stores opened since the prior year
was offset by a comparable store sales decrease of 12.8%, or $19.2
million. The Company chose to be less promotional in the back half of
the year and therefore while its sales were down the lack of
clearance activity resulted in higher percentage of full price sales
and improved gross margin. Comparable stores are defined as new
stores that are open for longer than thirteen months. A store that
stops operations is included in the comparable sales calculation
through the date of closing. During 2009, the Company opened nineteen
outlets and closed five full-priced retail stores as compared to
opening eleven outlets, opening two full-priced retail stores and
closing eight full-priced retail stores during 2008.