New York & Company, Inc. (NYSE:NWY), a specialty apparel chain with 579 retail stores, today announced results for the third quarter ended October 30, 2010 were in-line with previous guidance issued by the Company.
For the third quarter of fiscal year 2010, net sales were $238.2 million, as compared to $227.9 million for the third quarter of fiscal year 2009. Comparable store sales for the third quarter of fiscal year 2010 increased 3.6% compared to an 8.4% decrease in the prior year third quarter. Net income from continuing operations for the third quarter of fiscal year 2010 was $1.9 million, or $0.03 per diluted share, which includes earnings of $0.06 per diluted share related to certain non-operating adjustments. This compares to a net loss of $0.11 per diluted share in the prior year, which includes a previously disclosed non-operating loss of $0.01 per diluted share related to restructuring charges.
The non-operating adjustments recorded in the third quarter of fiscal year 2010 include a $6.1 million tax benefit resulting primarily from a change in accounting methods for tax purposes, partially offset by $1.2 million of tax expense to record a valuation allowance against deferred tax assets generated during the third quarter, $1.0 million of separation expenses related to recent management changes and $0.1 million of restructuring charges.
On a non-GAAP basis, excluding the non-operating adjustments, the Company’s adjusted net loss from continuing operations for the third quarter of fiscal year 2010 was $1.9 million, or $0.03 per diluted share. This compares to a non-GAAP adjusted net loss from continuing operations for the third quarter last year of $6.0 million, or $0.10 per diluted share, which excludes a non-operating charge discussed above. Please refer to the “Reconciliation of GAAP to Non-GAAP Financial Measures” in Exhibit 5 of this press release.
Richard P. Crystal, New York & Company’s Chairman and CEO, stated: “We are encouraged by our third quarter results which were driven by an improved fall product assortment that resonated well with our core customer. During the quarter, we were more targeted and efficient with our customer relationship management efforts which allowed us to be more selective in our promotions and drive higher margins. As we enter the fourth quarter, we are pleased with the initial response to our holiday merchandise as well as our inventory position.”
During the quarter:
For the nine months ended October 30, 2010, net sales were $718.5 million, as compared to $708.6 million for the nine months ended October 31, 2009. Comparable store sales increased 1.5% for the nine months ended October 30, 2010, as compared to a 13.5% decrease in the prior year period. Net loss from continuing operations for the nine months ended October 30, 2010 was $91.5 million, or $1.54 per diluted share. Included in the results for the nine months ended October 30, 2010 was a loss of $0.93 per diluted share related to non-operating adjustments recorded during the second and third quarters. As previously disclosed, the non-cash items recorded during the second quarter included $2.1 million of restructuring charges related to the exiting of an underperforming test accessories concept, a $15.7 million charge related primarily to the impairment of store assets, and $48.5 million of tax-related charges including a $48.0 million valuation allowance against the Company’s deferred tax assets.
On a non-GAAP basis, excluding the non-operating adjustments, the Company’s adjusted net loss from continuing operations for the nine months ended October 30, 2010 was $36.1 million, or $0.61 per diluted share. This compares to prior year net loss from continuing operations of $16.0 million, or $0.27 per diluted share, which includes a loss of $0.01 per diluted share related to restructuring charges. Please refer to the “Reconciliation of GAAP to Non-GAAP Financial Measures” in Exhibit 5 of this press release.
Outlook
Regarding its expectations for the fourth quarter of fiscal year 2010, the Company provided the following:
Conference Call Information
A conference call to discuss the results for the third quarter of fiscal year 2010 is scheduled for today, Thursday, November 18, 2010 at 8:00 am Eastern Time. Investors and analysts interested in participating in the call are invited to dial 800-922-9655, referencing conference ID number 23330505, 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 until midnight on November 25, 2010 and can be accessed by dialing 800-642-1687 and entering conference ID number 23330505.
Forward Looking Statements: This press release contains certain forward looking statements. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “may,” “plan,” “project,” “predict”, and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These include, but are not limited to: (i) the impact of general economic conditions and their effect on consumer confidence and spending patterns, which have deteriorated significantly and may continue to do so for the foreseeable future; (ii) our ability to successfully maintain our restructuring and cost reduction program; (iii) the current economic conditions which could negatively impact the Company's merchandise vendors and their ability to deliver products; (iv) our ability to open and operate stores successfully; (v) seasonal fluctuations in our business; (vi) our ability to anticipate and respond to fashion trends; (vii) our dependence on mall traffic for our sales; (viii) competition in our market, including promotional and pricing competition; (ix) our ability to retain, recruit and train key personnel; (x) our reliance on third parties to manage some aspects of our business; (xi) our reliance on foreign sources of production; (xii) our ability to protect our trademarks and other intellectual property rights; (xiii) our ability to maintain, and our reliance on, our information technology infrastructure; (xiv) the effects of government regulation; (xv) the control of the company by our sponsors and any potential change of ownership of those sponsors; and (xvi) other risks and uncertainties as described in our documents filed with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to revise the forward looking statements included in this press release to reflect any future events or circumstances.
About New York & Company
New York & Company, Inc. is a leading specialty retailer of women’s fashion apparel and accessories offering “NY Style” at Great Deals. The Company’s proprietary branded New York & Company ® merchandise is sold exclusively through its national network of New York & Company retail stores and E-commerce store at www.nyandcompany.com. The Company currently operates 579 stores in 43 states. Additionally, certain product, press release and SEC filing information concerning the Company is available at the Company’s website: www.nyandcompany.com.
New York & Company, Inc. and Subsidiaries | |||||||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||||||
| (Amounts in thousands, except per share amounts) | October 30, | October 31, | October 30, | October 31, | |||||||||||||||
| Net sales | $ | 238,221 | $ | 227,949 | $ | 718,520 | $ | 708,629 | |||||||||||
| Cost of goods sold, buying and occupancy costs | 171,767 | 170,219 | 573,451 | (a) | 535,953 | ||||||||||||||
| Gross profit | 66,454 | 57,730 | 145,069 | 172,676 | |||||||||||||||
| Selling, general and administrative expenses | 70,354 | (b) | 68,198 | 222,466 | (b) | 199,566 | |||||||||||||
| Restructuring charges | 100 | 458 | (c) | 1,318 | (c) | 458 (c | ) | ||||||||||||
| Operating loss | (4,000 | ) | (10,926 | ) | (78,715 | ) | (27,348 | ) | |||||||||||
| Interest expense, net of interest income | 190 | 179 | 540 | 568 | |||||||||||||||
| Loss from continuing operations before income taxes | (4,190 | ) | (11,105 | ) | (79,255 | ) | (27,916 | ) | |||||||||||
| (Benefit) provision for income taxes | (6,044 | ) | (d) | (4,803 | ) | 12,223 | (d) | (11,897 | ) | ||||||||||
| Income (loss) from continuing operations | 1,854 | (6,302 | ) | (91,478 | ) | (16,019 | ) | ||||||||||||
| Income from discontinued operations, net of taxes | — | — | — | 3 | |||||||||||||||
| Net income (loss) | $ | 1,854 | $ | (6,302 | ) | $ | (91,478 | ) | $ | (16,016 | ) | ||||||||
| Basic income (loss) per share from continuing operations | $ | 0.03 | $ | (0.11 | ) | $ | (1.54 | ) | $ | (0.27 | ) | ||||||||
| Basic earnings per share from discontinued operations | — | — | — | — | |||||||||||||||
| Basic income (loss) per share | $ | 0.03 | $ | (0.11 | ) | $ | (1.54 | ) | $ | (0.27 | ) | ||||||||
| Diluted income (loss) per share from continuing operations | $ | 0.03 | $ | (0.11 | ) | $ | (1.54 | ) | $ | (0.27 | ) | ||||||||
| Diluted earnings per share from discontinued operations | — | — | — | — | |||||||||||||||
| Diluted income (loss) per share | $ | 0.03 | $ | (0.11 | ) | $ | (1.54 | ) | $ | (0.27 | ) | ||||||||
| Weighted average shares outstanding: | |||||||||||||||||||
| Basic shares of common stock | 59,502 | 59,161 | 59,412 | 59,508 | |||||||||||||||
| Diluted shares of common stock | 60,315 | 59,161 | 59,412 | 59,508 | |||||||||||||||
| Selected operating data for continuing operations: | |||||||||||||||||||
| (Dollars in thousands, except square foot data) | |||||||||||||||||||
| Comparable store sales increase (decrease) | 3.6 | % | (8.4 | )% | 1.5 | % | (13.5 | )% | |||||||||||
| Net sales per average selling square foot (e) | $ | 75 | $ | 69 | $ | 225 | $ | 215 | |||||||||||
| Net sales per average store (f) | $ | 411 | $ | 385 | $ | 1,243 | $ | 1,199 | |||||||||||
| Average selling square footage per store (g) | 5,505 | 5,568 | 5,505 | 5,568 | |||||||||||||||
| (a) | Includes the write-off of $0.8 million of inventory during the second quarter of fiscal year 2010 in connection with exiting an underperforming test accessories concept. | |
| (b) | During the third quarter of fiscal year 2010, the Company recorded $1.0 million of separation expenses related to recent management changes. During the second quarter of fiscal year 2010, the Company recorded $15.7 million of non-cash charges related to the impairment of New York & Company store assets and the disposal of certain information technology assets. | |
| (c) | During the second quarter of fiscal year 2010, the Company recorded $1.1 million of non-cash charges related to the impairment of store assets and $0.1 million of severance costs incurred in connection with exiting an underperforming test accessories concept. During the third quarter of fiscal year 2009, the Company recorded $0.5 million of separation expenses related to management changes. | |
| (d) | During the third quarter of fiscal year 2010, the Company recorded a $6.1 million tax benefit related primarily to a change in accounting methods for tax purposes, which will result in a reduction of the depreciable lives of certain assets, and a refund of amounts previously paid with a corresponding adjustment to the Company’s valuation allowance against its deferred tax assets. In addition, the Company recorded non-cash charges of $1.7 million to establish a valuation allowance against deferred tax assets generated during the third quarter of fiscal year 2010. During the second quarter of fiscal year 2010, the Company recorded non-cash charges of $48.5 million, including a $48.0 million valuation allowance against the Company’s deferred tax assets and a $0.5 million reserve for uncertain tax positions. | |
| (e) | Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet. | |
| (f) | Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores. | |
| (g) | Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores. |
New York & Company, Inc. and Subsidiaries | ||||||||||||
| Three months ended | Nine months ended | |||||||||||
| As a % of net sales | October 30, | October 31, | October 30, | October 31, | ||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
| Cost of goods sold, buying and occupancy costs | 72.1 | % | 74.7 | % | 79.8 | % | 75.6 | % | ||||
| Gross profit | 27.9 | % | 25.3 | % | 20.2 | % | 24.4 | % | ||||
| Selling, general and administrative expenses | 29.6 | % | 29.9 | % | 31.0 | % | 28.2 | % | ||||
| Restructuring charges | — | % | 0.2 | % | 0.2 | % | 0.1 | % | ||||
| Operating loss | (1.7 | )% | (4.8 | )% | (11.0 | )% | (3.9 | )% | ||||
| Interest expense, net of interest income | 0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | ||||
| Loss from continuing operations before income taxes | (1.8 | )% | (4.9 | )% | (11.1 | )% | (4.0 | )% | ||||
| (Benefit) provision for income taxes | (2.6 | )% | (2.1 | )% | 1.6 | % | (1.7 | )% | ||||
| Income (loss) from continuing operations | 0.8 | % | (2.8 | )% | (12.7 | )% | (2.3 | )% | ||||
| Income from discontinued operations, net of taxes | — | % | — | % | — | % | — | % | ||||
| Net income (loss) | 0.8 | % | (2.8 | )% | (12.7 | )% | (2.3 | )% | ||||
New York & Company, Inc. and Subsidiaries | |||||||||
| (Amounts in thousands) | October 30, | January 30, | October 31, | ||||||
| (Unaudited) | (Audited) | (Unaudited) | |||||||
| Assets | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 22,461 | $ | 87,296 | $ | 39,297 | |||
| Accounts receivable | 17,708 | 9,447 | 14,194 | ||||||
| Income taxes receivable | 8,943 | 3,000 | 4,947 | ||||||
| Inventories, net | 112,556 | 87,059 | 117,438 | ||||||
| Prepaid expenses | 20,868 | 22,608 | 23,229 | ||||||
| Other current assets | 1,195 | 1,417 | 2,506 | ||||||
| Current assets of discontinued operations | 108 | 108 | 108 | ||||||
| Total current assets | 183,839 | 210,935 | 201,719 | ||||||
| Property and equipment, net | 151,756 | 187,079 | 194,868 | ||||||
| Intangible assets | 14,879 | 14,879 | 14,879 | ||||||
| Deferred income taxes | 3,647 | 22,637 | 21,926 | ||||||
| Other assets | 741 | 997 | 1,086 | ||||||
| Total assets | $ | 354,862 | $ | 436,527 | $ | 434,478 | |||
| Liabilities and stockholders’ equity | |||||||||
| Current liabilities: | |||||||||
| Current portion – long-term debt | $ | 6,000 | $ | 6,000 | $ | 6,000 | |||
| Short-term borrowings | 9,000 | — | — | ||||||
| Accounts payable | 84,091 | 72,019 | 79,989 | ||||||
| Accrued expenses | 53,860 | 58,932 | 51,443 | ||||||
| Income taxes payable | 2,073 | 991 | — | ||||||
| Deferred income taxes | 3,647 | 4,774 | 2,774 | ||||||
| Current liabilities of discontinued operations | 265 | 265 | 265 | ||||||
| Total current liabilities | 158,936 | 142,981 | 140,471 | ||||||
| Long-term debt, net of current portion | 3,000 | 7,500 | 9,000 | ||||||
| Deferred rent | 68,738 | 72,020 | 73,203 | ||||||
| Other liabilities | 5,582 | 5,862 | 7,101 | ||||||
| Total liabilities | 236,256 | 228,363 | 229,775 | ||||||
| Total stockholders’ equity | 118,606 | 208,164 | 204,703 | ||||||
| Total liabilities and stockholders’ equity | $ | 354,862 | $ | 436,527 | $ | 434,478 | |||
New York & Company, Inc. and Subsidiaries | ||||||||
| Nine months ended | ||||||||
(Amounts in thousands) | October 30, | October 31, | ||||||
| Operating activities | ||||||||
| Net loss | $ | (91,478 | ) | $ | (16,016 | ) | ||
| Less: Income from discontinued operations, net of taxes | — | 3 | ||||||
| Loss from continuing operations | (91,478 | ) | (16,019 | ) | ||||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities of continuing operations: | ||||||||
| Depreciation and amortization | 31,165 | 31,383 | ||||||
| Loss from impairment charges | 16,283 | — | ||||||
| Amortization of deferred financing costs | 162 | 162 | ||||||
| Share-based compensation expense | 1,829 | 1,387 | ||||||
| Deferred income taxes | 17,863 | (6,275 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (8,261 | ) | (2,201 | ) | ||||
| Income taxes receivable | (5,943 | ) | 5,255 | |||||
| Inventories, net | (25,497 | ) | (12,577 | ) | ||||
| Prepaid expenses | 1,740 | 1,381 | ||||||
| Accounts payable | 12,072 | 11,558 | ||||||
| Accrued expenses | (5,072 | ) | (9,678 | ) | ||||
| Income taxes payable | 1,082 | — | ||||||
| Deferred rent | (3,282 | ) | (2,645 | ) | ||||
| Other assets and liabilities | (36 | ) | (142 | ) | ||||
| Net cash (used in) provided by operating activities of continuing operations | (57,373 | ) | 1,589 | |||||
| Investing activities | ||||||||
| Capital expenditures | (12,989 | ) | (8,903 | ) | ||||
| Proceeds from the sale of fixed assets | 936 | — | ||||||
| Net cash used in investing activities of continuing operations | (12,053 | ) | (8,903 | ) | ||||
| Financing activities | ||||||||
| Proceeds from short-term borrowings under revolving credit facility | 9,000 | — | ||||||
| Repayment of debt | (4,500 | ) | (4,500 | ) | ||||
| Purchase of treasury stock | — | (3,417 | ) | |||||
| Proceeds from exercise of stock options | 91 | 74 | ||||||
| Excess tax benefit from exercise of stock options | — | 179 | ||||||
| Net cash provided by (used in) financing activities of continuing operations | 4,591 | (7,664 | ) | |||||
| Cash flows from discontinued operations | ||||||||
| Operating cash flows | — | (6 | ) | |||||
| Investing cash flows | — | — | ||||||
| Financing cash flows | — | — | ||||||
| Net cash used in discontinued operations | — | (6 | ) | |||||
| Net decrease in cash and cash equivalents | (64,835 | ) | (14,984 | ) | ||||
| Cash and cash equivalents at beginning of period (including cash at discontinued operations of $0 and $1, respectively) | 87,296 | 54,281 | ||||||
| Cash and cash equivalents at end of period (represents cash at continuing operations) | $ | 22,461 | $ | 39,297 | ||||
| Exhibit 5 | ||||||||||||||||
| New York & Company, Inc. and Subsidiaries | ||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
A reconciliation of the Company’s GAAP to non-GAAP loss from continuing operations before income taxes, net loss from continuing operations and loss per diluted share for the three and nine months ended October 30, 2010 and October 31, 2009 are indicated below. This information reflects, on a non-GAAP adjusted basis, the Company’s operating results after excluding the effects of charges incurred in connection with the Company’s restructuring and cost reduction program in addition to certain non-operating adjustments recorded during the second and third quarters of fiscal year 2010. 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 and earnings 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 October 30, 2010 | ||||||||||||||||
| (Amounts in thousands, except per share amounts) | Loss from | Benefit for income | Net income (loss) | Net earnings (loss) per | ||||||||||||
| GAAP as reported | $ | (4,190 | ) | $ | (6,044 | ) | $ | 1,854 | $ | 0.03 | ||||||
Adjustments affecting comparability: | ||||||||||||||||
| Restructuring charges (a) | 100 | (40 | ) | 60 | - | |||||||||||
| Separation expenses (a) | 953 | (383 | ) | 570 | 0.01 | |||||||||||
| Tax benefit from a change in accounting methods for tax purposes | - | (6,082 | ) | (6,082 | ) | (0.10 | ) | |||||||||
| Deferred tax valuation allowance and reserve for uncertain tax positions (b) | - | 1,695 | 1,695 | 0.03 | ||||||||||||
| Non-GAAP as adjusted | $ | (3,137 | ) | $ | (1,234 | ) | $ | (1,903 | ) | $ | (0.03 | ) | ||||
| Three months ended October 31, 2009 | ||||||||||||||||
| (Amounts in thousands, except per share amounts) | Loss from | Benefit for income | Net loss from | Net loss per diluted | ||||||||||||
| GAAP as reported | $ | (11,105 | ) | $ | (4,803 | ) | $ | (6,302 | ) | $ | (0.11 | ) | ||||
Adjustments affecting comparability: | ||||||||||||||||
| Restructuring charges (a) | 458 | (184 | ) | 274 | 0.01 | |||||||||||
| Non-GAAP as adjusted | $ | (10,647 | ) | $ | (4,619 | ) | $ | (6,028 | ) | $ | (0.10 | ) | ||||
| (a) The tax effect is calculated using a 40.2% effective tax rate. | ||||||||||||||||
| (b) Includes a $1.2 million valuation allowance against deferred tax assets generated by the third quarter operating loss and a $0.4 million valuation allowance against deferred tax assets generated by the restructuring and separation costs incurred during the third quarter. | ||||||||||||||||
Exhibit 5 | ||||||||||||||||
| New York & Company, Inc. and Subsidiaries | ||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Nine months ended October 30, 2010 | ||||||||||||||||
| (Amounts in thousands, except per share amounts) | Loss from | Provision (benefit) | Net loss from | Net loss per diluted | ||||||||||||
| GAAP as reported | $ | (79,255 | ) | $ | 12,223 | $ | (91,478 | ) | $ | (1.54 | ) | |||||
Adjustments affecting comparability: | ||||||||||||||||
| Restructuring charges (a) | 2,163 | (870 | ) | 1,293 | 0.02 | |||||||||||
| Separation expenses (a) | 953 | (383 | ) | 570 | 0.01 | |||||||||||
| New York & Company asset impairments and disposals (a) | 15,725 | (6,321 | ) | 9,404 | 0.16 | |||||||||||
| Tax benefit from a change in accounting methods for tax purposes | - | (6,082 | ) | (6,082 | ) | (0.10 | ) | |||||||||
| Deferred tax valuation allowance and reserve for uncertain tax positions | - | 50,189 | 50,189 | 0.84 | ||||||||||||
| Non-GAAP as adjusted | $ | (60,414 | ) | $ | (24,310 | ) | $ | (36,104 | ) | $ | (0.61 | ) | ||||
| Nine months ended October 31, 2009 | ||||||||||||||||
| (Amounts in thousands, except per share amounts) | Loss from | Benefit for income | Net loss from | Net loss per diluted | ||||||||||||
| GAAP as reported | $ | (27,916 | ) | $ | (11,897 | ) | $ | (16,019 | ) | $ | (0.27 | ) | ||||
Adjustments affecting comparability: | ||||||||||||||||
| Restructuring charges (a) | 458 | (184 | ) | 274 | 0.01 | |||||||||||
| Non-GAAP as adjusted | $ | (27,458 | ) | $ | (11,713 | ) | $ | (15,745 | ) | $ | (0.26 | ) | ||||
| (a) The tax effect is calculated using a 40.2% effective tax rate. | ||||||||||||||||
