|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected operating data:
|
|
Three months
ended
July 30, 2016
|
|
Three months
ended
August 1, 2015
|
|
Six months
ended
July 30, 2016
|
|
Six months
ended
August 1, 2015
|
|
|
|
(Dollars in thousands, except square foot data)
|
|
Comparable store sales increase (decrease)
|
|
|
0.3
|
%
|
|
3.8
|
%
|
|
(0.9
|
)%
|
|
2.9
|
%
|
Net sales per average selling square foot(1)(4)
|
|
$
|
93
|
|
$
|
91
|
|
|
180
|
|
$
|
177
|
|
Net sales per average store(2)(4)
|
|
$
|
477
|
|
$
|
468
|
|
$
|
920
|
|
$
|
913
|
|
Average selling square footage per store(3)
|
|
|
5,120
|
|
|
5,132
|
|
|
5,120
|
|
|
5,132
|
|
-
(1)
-
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.
-
(2)
-
Net
sales per average store is defined as net sales divided by the average of beginning and monthly end of period number of stores.
-
(3)
-
Average
selling square footage per store is defined as end of period selling square feet divided by end of period number of stores.
-
(4)
-
Effective
first quarter of fiscal year 2016, the Company transitioned to a monthly average calculation from a two-point average calculation. Prior period
metrics have been restated resulting in an immaterial impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
July 30, 2016
|
|
Three months
ended
August 1, 2015
|
|
Six months
ended
July 30, 2016
|
|
Six months
ended
August 1, 2015
|
|
Store count and selling square feet:
|
|
Store
Count
|
|
Selling
Square Feet
|
|
Store
Count
|
|
Selling
Square Feet
|
|
Store
Count
|
|
Selling
Square Feet
|
|
Store
Count
|
|
Selling
Square Feet
|
|
Stores open, beginning of period
|
|
|
488
|
|
|
2,494,787
|
|
|
504
|
|
|
2,597,912
|
|
|
490
|
|
|
2,511,429
|
|
|
504
|
|
|
2,596,988
|
|
New stores
|
|
|
1
|
|
|
5,517
|
|
|
2
|
|
|
8,051
|
|
|
1
|
|
|
5,517
|
|
|
7
|
|
|
30,400
|
|
Closed stores
|
|
|
(3
|
)
|
|
(12,359
|
)
|
|
(2
|
)
|
|
(8,587
|
)
|
|
(5
|
)
|
|
(28,791
|
)
|
|
(7
|
)
|
|
(26,671
|
)
|
Net impact of remodeled stores on selling square feet
|
|
|
|
|
|
362
|
|
|
|
|
|
(10,662
|
)
|
|
|
|
|
152
|
|
|
|
|
|
(14,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores open, end of period
|
|
|
486
|
|
|
2,488,307
|
|
|
504
|
|
|
2,586,714
|
|
|
486
|
|
|
2,488,307
|
|
|
504
|
|
|
2,586,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Table of Contents
Three Months Ended July 30, 2016 Compared to Three Months Ended August 1, 2015
Net Sales.
Net sales for the three months ended July 30, 2016 were $232.8 million, as compared to $235.7 million for the
three
months ended August 1, 2015. Comparable store sales increased 0.3% for the three months ended July 30, 2016, as compared to an increase of 3.8% for the three months ended
August 1, 2015. Included in comparable store sales for the three months ended July 30, 2016 are royalties and other revenue totaling $2.5 million recognized as a result of the ADS
Agreement. In the comparable store base, average dollar sales per transaction decreased by 0.1%, while the number of
transactions per average store increased 0.2%, as compared to the same period last year. For further information related to the ADS Agreement, please refer to Note 3, "Proprietary Credit Card"
in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Gross Profit.
Gross profit for the three months ended July 30, 2016 was $67.1 million, or 28.8% of net sales, as compared to
$67.1 million, or 28.5% of net sales, for the three months ended August 1, 2015. The increase in gross profit as a percentage of net sales for the three months ended July 30,
2016, as compared to the three months ended August 1, 2015, was due to a 90 basis point improvement in buying and occupancy costs, partially offset by a 60 basis point decrease in merchandise
margin. The decrease in merchandise margin during the three months ended July 30, 2016, as compared to the three months ended August 1, 2015, is primarily due to an increase in markdowns
and a $2.2 million increase in shipping costs associated with the growth in the Company's eCommerce business, partially offset by a $2.5 million reduction in product costs resulting from
Project Excellence, and a $2.5 million benefit from the revenue recognized as a result of the ADS Agreement.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses were $65.7 million, or 28.2% of net
sales, for the
three months ended July 30, 2016, as compared to $66.7 million, or 28.3% of net sales, for the three months ended August 1, 2015. The decrease in selling, general, and
administrative expenses during the three months ended July 30, 2016, as compared to the three months ended August 1, 2015, reflects a decrease in marketing expense and performance-based
compensation expense, partially offset by increases in variable expenses associated with the growth in eCommerce sales. In addition, selling, general and administrative expenses for the three months
ended August 1, 2015 included $2.0 million of non-operating charges consisting of $0.6 million in consulting fees incurred in connection with Project Excellence,
$0.9 million of certain severance expenses, and $0.6 million of certain legal expenses and moving expenses related to the Company's corporate headquarters.
Operating Income.
For the reasons discussed above, operating income for the three months ended July 30, 2016 was $1.3 million,
as
compared to operating income of $0.4 million for the three months ended August 1, 2015.
Interest Expense, Net.
Net interest expense was $0.3 million for both the three months ended July 30, 2016 and August 1,
2015,
primarily related to interest on a $15.0 million, 5-year term loan (the "Term Loan"), described further in the "Long-Term Debt and Credit Facilities" section below.
Provision for Income Taxes.
As previously disclosed, the Company continues to provide for adjustments to the deferred tax valuation
allowance
initially recorded during the three months ended July 31, 2010. The provision for income taxes for the three months ended July 30, 2016 was $0.1 million as compared to
$0.3 million for the three months ended August 1, 2015.
Net Income (Loss).
For the reasons discussed above, net income for the three months ended July 30, 2016 was $0.9 million, or
earnings
of $0.01 per diluted share, as compared to a net loss of $0.1 million, or essentially breakeven per diluted share, for the three months ended August 1, 2015.
16
Table of Contents
Six Months Ended July 30, 2016 Compared to Six Months Ended August 1, 2015
Net Sales.
Net sales for the six months ended July 30, 2016 decreased 2.2% to $448.9 million, as compared to
$459.1 million for
the six months ended August 1, 2015. Comparable store sales for the six months ended July 30, 2016 decreased 0.9%, as compared to an increase of 2.9% for the six months ended
August 1, 2015. Included in comparable store sales for the six months ended July 30, 2016 are royalties and other revenue totaling $2.5 million recognized as a result of the ADS
Agreement. In the comparable store base, average dollar sales per transaction decreased by 1.7%, while the number of transactions per average store increased by 0.3%, as compared to the same period
last year. For further information related to the ADS Agreement, please refer to Note 3, "Proprietary Credit Card" in the Notes to Condensed Consolidated Financial Statements appearing
elsewhere in this Quarterly Report on Form 10-Q.
Gross Profit.
Gross profit for the six months ended July 30, 2016 was $126.9 million, or 28.3% of net sales, as compared to
$131.4 million, or 28.6% of net sales, for the six months ended August 1, 2015. The decrease in gross profit as a percentage of net sales during the six months ended July 30,
2016, as
compared to the six months ended August 1, 2015, was due to an 80 basis point decrease in merchandise margin, partially offset by a 50 basis point improvement in buying and occupancy costs
primarily reflecting a decrease in occupancy expenses. The decrease in merchandise margin during the six months ended July 30, 2016, as compared to the six months ended August 1, 2015,
is primarily due to an increase in markdowns and a $4.5 million increase in shipping costs associated with the growth in the Company's eCommerce business, partially offset by a
$4.1 million reduction in product costs resulting from Project Excellence, and a $2.5 million benefit from the revenue recognized as a result of the ADS Agreement.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses decreased to $131.0 million, or 29.2% of
net sales,
for the six months ended July 30, 2016, as compared to $135.2 million, or 29.4% of net sales, for the six months ended August 1, 2015. The decrease in selling, general, and
administrative expenses during the six months ended July 30, 2016, as compared to the six months ended August 1, 2015, reflects a decrease in marketing expense and performance-based
compensation expense, partially offset by increases in variable expenses associated with the growth in eCommerce sales. In addition, selling, general and administrative expenses for the six months
ended August 1, 2015 included $4.9 million of non-operating charges consisting of $3.0 million in consulting fees incurred in connection with Project Excellence,
$1.6 million of certain severance expenses and $0.4 million of certain legal expenses, partially offset by a $0.1 million net reduction in moving expenses related to the Company's
corporate headquarters.
Operating Loss.
For the reasons discussed above, operating loss for the six months ended July 30, 2016 was $4.1 million, as
compared to
an operating loss of $3.8 million for the six months ended August 1, 2015.
Interest Expense, Net.
Net interest expense was $0.6 million for both the six months ended July 30, 2016 and August 1,
2015,
primarily related to interest on the Term Loan, described further in the "Long-Term Debt and Credit Facilities" section below.
Provision for Income Taxes.
As previously disclosed, the Company continues to provide for adjustments to the deferred tax valuation
allowance
initially recorded during the three months ended July 31, 2010. The provision for income taxes for the six months ended July 30, 2016 was $0.1 million, as compared to
$0.4 million for the six months ended August 1, 2015.
Net Loss.
For the reasons discussed above, net loss for both the six months ended July 30, 2016 and August 1, 2015 was
$4.8 million, or a loss of $0.08 per diluted share.
17
Table of Contents
Reconciliation of GAAP to Non-GAAP Financial Measures
A reconciliation of the Company's GAAP to non-GAAP selling, general, and administrative expenses, operating income (loss), net income
(loss) and earnings (loss) per diluted share for the three and six months ended August 1, 2015 is indicated below. There were no non-GAAP adjustments affecting comparability during the three
and six months ended July 30, 2016. This information reflects, on a non-GAAP basis, the Company's adjusted operating results after excluding certain non-operating charges, as described below.
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 August 1, 2015
|
|
(Amounts in thousands, except per share amounts)
|
|
Selling,
general and
administrative
expenses
|
|
Operating
income
|
|
Net (loss)
income
|
|
(Loss) earnings
per diluted
share
|
|
GAAP as reported
|
|
$
|
66,698
|
|
$
|
435
|
|
$
|
(146
|
)
|
$
|
(0.00
|
)
|
Adjustments affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting expenseProject Excellence
|
|
|
572
|
|
|
572
|
|
|
572
|
|
|
|
|
Certain severance expenses
|
|
|
860
|
|
|
860
|
|
|
860
|
|
|
|
|
Moving expenses for new headquarters
|
|
|
197
|
|
|
197
|
|
|
197
|
|
|
|
|
Certain legal expenses
|
|
|
386
|
|
|
386
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments(1)
|
|
|
2,015
|
|
|
2,015
|
|
|
2,015
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP as adjusted
|
|
$
|
64,683
|
|
$
|
2,450
|
|
$
|
1,869
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended August 1, 2015
|
|
(Amounts in thousands, except per share amounts)
|
|
Selling,
general and
administrative
expenses
|
|
Operating
(loss)
income
|
|
Net (loss)
income
|
|
(Loss) earnings
per diluted
share
|
|
GAAP as reported
|
|
$
|
135,190
|
|
$
|
(3,810
|
)
|
$
|
(4,817
|
)
|
$
|
(0.08
|
)
|
Adjustments affecting comparability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting expenseProject Excellence
|
|
|
3,028
|
|
|
3,028
|
|
|
3,028
|
|
|
|
|
Certain severance expenses
|
|
|
1,584
|
|
|
1,584
|
|
|
1,584
|
|
|
|
|
Net reduction of moving expenses for new headquarters
|
|
|
(116
|
)
|
|
(116
|
)
|
|
(116
|
)
|
|
|
|
Certain legal expenses
|
|
|
386
|
|
|
386
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments(1)
|
|
|
4,882
|
|
|
4,882
|
|
|
4,882
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP as adjusted
|
|
$
|
130,308
|
|
$
|
1,072
|
|
$
|
65
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
tax effect of $2.0 million and $4.9 million of expenses, during the three and six months ended August 1, 2015, respectively, is
offset by a full valuation allowance against deferred tax assets.
Liquidity and Capital Resources
The Company's primary uses of cash are to fund working capital, operating expenses, debt service and capital expenditures related
primarily to the construction of new stores, remodeling of existing
18
Table of Contents
stores
and development of the Company's information technology infrastructure and omni-channel strategy. Historically, the Company has financed these requirements from internally generated cash flow.
The Company intends to fund its ongoing capital and working capital requirements, as well as debt service obligations, primarily through cash flows from operations, supplemented by borrowings under
its credit facility, if needed. As of the date of this Quarterly Report on Form 10-Q, the Company is in compliance with all debt covenants.
The
Company may also use cash to repurchase shares of its common stock. In July 2016, the Company announced that its board of directors had authorized the use of up to $5 million
to repurchase the Company's common stock over a 12-month period. Repurchases will be made from time to time in the manner the Company believes appropriate, through open market or private transactions
including through pre-established trading plans. The Company is not obligated to acquire any particular amount of common stock. Repurchases are dependent on a number of factors including market
conditions for the Company's common stock.
The
following tables contain information regarding the Company's liquidity and capital resources:
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30,
2016
|
|
January 30,
2016
|
|
August 1,
2015
|
|
|
|
(Amounts in thousands)
|
|
Cash and cash equivalents
|
|
$
|
63,798
|
|
$
|
61,432
|
|
$
|
60,122
|
|
Working capital
|
|
$
|
73,190
|
|
$
|
42,035
|
|
$
|
43,134
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
July 30, 2016
|
|
Six months
ended
August 1, 2015
|
|
|
|
(Amounts in thousands)
|
|
Net cash provided by operating activities
|
|
$
|
12,495
|
|
$
|
5,831
|
|
Net cash used in investing activities
|
|
$
|
(9,235
|
)
|
$
|
(13,993
|
)
|
Net cash used in financing activities
|
|
$
|
(894
|
)
|
$
|
(1,009
|
)
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
2,366
|
|
$
|
(9,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
Net cash provided by operating activities was $12.5 million for the six months ended July 30, 2016, as compared to
$5.8 million for the six months ended August 1, 2015. The increase in net cash provided by operating activities during the six months ended July 30, 2016, as compared to the six
months ended August 1, 2015, is primarily the result of a $17.5 million payment received in July 2016 in connection with the ADS Agreement, partially offset by fluctuations in other
operating assets and liabilities. For further information related to the ADS Agreement, please refer to Note 3, "Proprietary Credit Card" in the Notes to Condensed Consolidated Financial
Statements appearing elsewhere in this Quarterly Report on Form 10-Q. Included in the net loss for the six months ended August 1, 2015 is $4.9 million of non-operating charges, as
described in the "Results of Operations" section above. There were no non-operating charges recorded during the six months ended July 30, 2016.
Investing Activities
Net cash used in investing activities was $9.2 million for the six months ended July 30, 2016, as compared to
$14.0 million for the six months ended August 1, 2015. The decrease in capital spending during the six months ended July 30, 2016, as compared to the six months ended
August 1, 2015, primarily reflects a shift in certain planned expenditures for real estate and information technology projects to later in fiscal year 2016. Net cash used in investing
activities during the six months ended July 30, 2016 represents capital expenditures of $6.1 million for store-related projects and $3.1 million
19
Table of Contents
related
to the Company's information technology infrastructure. During the six months ended July 30, 2016, the Company converted 50 New York & Company stores to Outlet stores, opened 1
New York & Company store, remodeled 2 New York & Company stores, and closed 5 stores, ending the second quarter with 486 stores, including 131 Outlet stores, and 2.5 million
selling square feet in operation. Included in the New York & Company store count at July 30, 2016, are 16 "Side-by-Side" and 24 "Shop-in-Shop" New York & Company stores,
which feature an adjoining or shop-in-shop Eva Mendes store, and 2 free-standing Eva Mendes boutiques.
Net
cash used in investing activities during the six months ended August 1, 2015 represents capital expenditures of $9.5 million related to the opening of two New
York & Company stores and five Outlet stores, the conversion of nine New York & Company stores to Outlet stores, and the remodeling of six existing stores, as well as approximately
$4.5 million related to the Company's continued investment in its information technology infrastructure, primarily relating to its omni-channel strategy.
For
fiscal year 2016, capital expenditures are expected to range between $20 million and $22 million. In total, fiscal year 2016 capital expenditures reflect continued
investments in the Company's information technology infrastructure, including its eCommerce store and mobile applications, and real estate spending to support opening a select number of new stores and
remodeling and refreshing existing locations. During the remainder of fiscal year 2016, the Company expects to open 1 new New York & Company store, and close between 23 and 28 stores, ending
the fiscal year with between 459 and 464 stores, including approximately 125 Outlet stores.
As
of July 30, 2016, approximately 27% of the Company's store leases could be terminated by the Company within one year or less.
Financing Activities
Net cash used in financing activities for the six months ended July 30, 2016 was $0.9 million consisting of
$0.5 million in quarterly amortization payments of the Term Loan, $0.4 million of principal payments on capital lease obligations, and $0.1 million of employee payroll taxes for
which shares were withheld, partially offset by $0.1 million of proceeds from the exercise of stock options. Net cash used in financing activities for the six months ended August 1, 2015
consisted primarily of $0.5 million in quarterly amortization payments of the Term Loan, $0.2 million of employee payroll taxes for which shares were withheld, and $0.3 million of
principal payments on capital lease obligations.
Long-Term Debt and Credit Facilities
On October 24, 2014, Lerner New York, Inc., Lernco, Inc. and Lerner New York Outlet, LLC (f.k.a. Lerner New
York Outlet, Inc.), wholly-owned indirect subsidiaries of New York & Company, Inc., entered into a Fourth Amended and Restated Loan and Security Agreement (the "Loan Agreement")
with Wells Fargo Bank, National Association, as Agent and Term Loan Agent and
the lender party thereto. The obligations under the Loan Agreement are guaranteed by New York & Company, Inc. and its other subsidiaries.
The
Loan Agreement consists of: (i) a revolving credit facility that provides the Company with up to $100 million of credit, consisting of a $75 million revolving
credit facility (which includes a sub-facility for issuance of letters of credit up to $45 million) with a fully committed accordion option that allows the Company to increase the revolving
credit facility up to $100 million or decrease it to a minimum of $60 million, subject to certain restrictions, and (ii) a $15 million, 5-year term loan, bearing interest
at the Adjusted Eurodollar Rate plus 4.50%. The Company used a portion of the proceeds from the Term Loan to pay for costs associated with the relocation and build-out of its new corporate
headquarters at 330 West 34
th
Street, New York, New York and for general corporate purposes.
20
Table of Contents
Under
the terms of the Loan Agreement, the interest rates applicable to Revolving Loans are, at the Company's option, either at a floating rate equal to the Adjusted Eurodollar Rate plus
a margin of between 1.50% and 1.75% per year for Eurodollar Rate Loans or a floating rate equal to the Prime Rate plus a margin of between 0.50% and 0.75% per year for Prime Rate Loans, depending upon
the Company's Average Compliance Excess Availability. The Company pays to the lender under the revolving credit facility a monthly fee on outstanding commercial letters of credit at a rate of between
0.75% and 0.875% per year and on standby letters of credit at a rate of between 1.50% and 1.75% per year, depending upon the Company's Average Compliance Excess Availability, plus a monthly fee on a
proportion of the unused commitments under the revolving credit facility at a rate of 0.25% per year.
The
maximum borrowing availability under the Company's revolving credit facility is determined by a monthly borrowing base calculation based on applying specified advance rates against
eligible inventory and certain other eligible assets. As of July 30, 2016, the Company had availability under its revolving credit facility of $46.3 million, net of letters of credit
outstanding of $15.6 million, as compared to availability of $36.6 million, net of letters of credit outstanding of $15.6 million, as of January 30, 2016, and availability
of $35.7 million, net of letters of credit outstanding of $20.5 million, as of August 1, 2015. The $15.6 million in letters of credit outstanding at July 30, 2016
represents $1.4 million of trade letters of credit and $14.2 million of standby letters of credit primarily related to the Company's new corporate headquarters and certain insurance
contracts.
Under
the terms of the Loan Agreement, the Company is subject to a Minimum Excess Availability covenant of $7.5 million. The Loan Agreement contains other covenants and
conditions, including restrictions on the Company's ability to pay dividends on its common stock, prepay the Term Loan, incur additional indebtedness and to prepay, redeem, defease or purchase other
indebtedness. Subject to such restrictions, the Company may incur more indebtedness for working capital, capital expenditures, stock repurchases, acquisitions and for other purposes.
The
lender has been granted a pledge of the common stock of Lerner New York Holding, Inc. and certain of its subsidiaries, and a first priority security interest in substantially
all other tangible and intangible assets of New York & Company, Inc. and its subsidiaries, as collateral for the Company's obligations under the Loan Agreement. In addition, New
York & Company, Inc. and certain of its subsidiaries have fully and unconditionally guaranteed the obligations under the Loan Agreement, and such guarantees are joint and several.
Critical Accounting Policies
Management has determined the Company's most critical accounting policies are those related to inventories, long-lived assets,
intangible assets and income taxes. Management continues to monitor these accounting policies to ensure proper application of current rules and regulations. There have been no significant changes to
these policies as discussed in the Company's Annual Report on Form 10-K filed with the SEC on April 14, 2016.
Adoption of New Accounting Standards
Please refer to Note 2, "New Accounting Pronouncements" in the Notes to Condensed Consolidated Financial Statements appearing
elsewhere in this Quarterly Report on Form 10-Q.
21
Table of Contents