New York & Company, Inc. (NYSE:NWY), a specialty
apparel chain with 483 retail stores, today announced results for
the third quarter ended October 29, 2016.
Gregory Scott, New York & Company’s CEO stated: “In the
third quarter we delivered sales slightly below our expectations
reflecting the difficult mall traffic environment, yet operating
results met our guidance as we benefited from our focus on our five
key strategic initiatives. To this end, we were especially pleased
to see strength across our key initiatives, which are best
demonstrated in the ongoing growth of our Eva Mendes collection,
increased participation in our private label credit card and
loyalty programs, continued growth in our eCommerce channel, and
continued progress toward our sourcing, product cost and expense
savings goals. Combined, this led to operating results, which
improved versus the prior year on a GAAP basis and in line with the
prior year on a non-GAAP basis.
Mr. Scott, continued, “As we entered the early part of the
fourth quarter we experienced softness in sales, however we were
encouraged to see a significant improvement in the trends last week
particularly in our eCommerce business, with a strong Black Friday
and Cyber Monday. We remain confident in our strategy and believe
the continued implementation of our initiatives along with our
solid inventory position has us poised to achieve profit growth in
the final quarter of the year.”
Third Quarter Fiscal Year 2016 Results (13-weeks ended
October 29, 2016 compared to the 13-weeks ended October 31,
2015):
- Net sales were $213.9 million, which
included $3.1 million of royalty revenue from the new private label
credit card agreement, as compared to $219.8 million in the prior
year.
- Comparable store sales
decreased 0.7% as an increase in the Company’s eCommerce
business, combined with royalty and related revenue from its new
private label credit card agreement were more than offset by sales
declines in store locations.
- Gross profit as a percentage of net
sales increased 90 basis points to 29.9% versus the fiscal year
2016 third quarter gross profit percentage of 29.0%. This increase
reflects benefits from the new private label credit card agreement,
product cost reductions and efficiencies from vendor negotiations
related to the implementation of Project Excellence, partially
offset by a 20 basis point decline in the leverage of buying and
occupancy costs and increased shipping costs from the Company’s
growing eCommerce business.
- Selling, general and administrative
expenses were $66.1 million, as compared to $68.6 million in the
prior year period. The decrease in selling, general, and
administrative expenses on a GAAP basis reflects a significant
reduction in performance-based compensation expense and the
elimination of the non-operating charges incurred in the prior
year’s third quarter, partially offset by an increase in marketing
expense due to the shift in classification of private label credit
card credits to revenue, and increased variable expenses associated
with the growth in eCommerce sales. On a non-GAAP basis, selling,
general and administrative expenses excluding non-operating legal
accrual reductions of $0.5 million were $66.6 million. This
compares to non-GAAP selling, general and administrative expenses
of $66.3 million in the prior year adjusted for the exclusion of
$2.3 million of non-operating charges due primarily to the
settlement of a class action lawsuit.
- GAAP operating loss was $2.1 million,
as compared to the prior year’s third quarter GAAP operating loss
of $4.9 million. On a non-GAAP basis, excluding a $0.5 million
non-operating benefit, adjusted operating loss was $2.6 million,
compared to the prior year’s non-GAAP operating loss of $2.6
million, which excluded $2.3 million of non-operating charges.
- GAAP net loss for the third quarter of
fiscal year 2016 was $2.5 million, or a loss of $0.04 per diluted
share. This compares to the prior year’s GAAP net loss of $5.3
million, or a loss per diluted share of $0.08. On a non-GAAP basis,
the Company’s third quarter 2016 adjusted net loss was $3.0
million, or a loss of $0.05 per diluted share. This compares to
prior year’s third quarter, non-GAAP adjusted net loss of $3.0
million, or a loss of $0.05 per diluted share.Please refer to the
“Reconciliation of GAAP to Non-GAAP Financial Measures” in Exhibits
5 and 6 of this press release, which delineates the non-operating
charges for the three and nine months ended October 29, 2016 and
October 31, 2015, respectively. GAAP is defined as Generally
Accepted Accounting Principles.
- Total quarter-end inventory decreased
4.0%, as compared to the end of last year’s third quarter,
reflecting lower levels of on-hand inventory, partially offset by
higher levels of inventory in transit.
- Capital spending for the third quarter
of fiscal year 2016 was $4.1 million, as compared to $6.8 million
in last year’s third quarter, primarily reflecting continued spend
on real estate and the Company’s information technology
infrastructure.
- The Company opened 1 New York &
Company store and closed 3 New York & Company stores and 1
Outlet store during the third quarter, ending the third quarter
with 483 stores, including 130 Outlet stores and 2.5 million
selling square feet in operation.
- The Company ended the quarter with
$54.0 million of cash on-hand and no outstanding borrowings under
its revolving credit facility. As previously disclosed, on January
10, 2017 the Company expects to receive $22.5 million of cash
proceeds representing the second installment of the signing bonuses
related to its new private label credit card agreement further
increasing the Company’s cash balances.
Share Repurchase Activity:
- During the third quarter, the Company
invested approximately $1.0 million of cash to repurchase 422,720
shares of its common stock. As of the end of the third quarter, the
Company had approximately $4.0 million of total availability under
the Company’s share repurchase program. Any future share
repurchases will be funded using the Company’s available cash.
Outlook:
Regarding expectations for the fourth quarter of fiscal year
2016, the Company is providing the following guidance:
- Net sales are expected to decline in
the low single-digit percentage range, reflecting decreased store
count, partially offset by royalty and other revenue from the new
private label credit card agreement and growth in the eCommerce
business.
- Comparable store sales are expected to
be flat to down slightly on a percentage basis.
- Gross margin is expected to be up by
approximately 150 basis points to 250 basis points reflecting
benefits from the Company’s new private label credit card
agreement, reductions in product costs and agent expenses resulting
from Project Excellence, and reductions in occupancy costs,
partially offset by increased shipping costs associated with the
growing omni-channel business.
- Selling, general and administrative
expenses on a GAAP basis are expected to increase by 150 basis
points to 250 basis points versus the prior year’s fourth quarter.
This increase is primarily due to the following factors which were
partially offset by the elimination of non-operating charges which
occurred in the prior year:
- The shift in benefits from the
Company’s new private label credit card agreement to revenue, as
compared to the prior year which reflected these benefits as a
reduction of marketing expense;
- The elimination of insurance credits
and performance-based compensation accrual reversals which
benefited the prior year by reducing the prior year’s
expenses;
- Increases in selling expenses largely
driven by increases in eCommerce variable costs; and
- Investments in digital marketing to
drive incremental sales.
- Operating results on a GAAP basis for
the fourth quarter of fiscal year 2016 are expected to be
approximately breakeven.
Additional Outlook:
- Total inventory at the end of the
fourth quarter is expected to be approximately flat to the prior
year fourth quarter.
- Capital expenditures for the fourth
quarter of fiscal year 2016 are projected to be between $7 million
and $8 million, as compared to $5.8 million of capital expenditures
in the fourth quarter of last year.
- Depreciation expense for the fourth
quarter of fiscal year 2016 is estimated to be approximately $6
million.
- The Company plans to end the full
fiscal year 2016 having opened 2 New York & Company stores,
converted 50 New York & Company stores to Outlet stores,
remodeled/refreshed 22 existing stores and closed 21 New York &
Company stores and 7 Outlet stores, ending the fiscal year with
roughly 464 stores, including 124 Outlet stores, and approximately
2.4 million selling square feet.
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 third quarter of fiscal year
2016 results is scheduled for today, Wednesday, November 30,
2016 at 4:30 p.m. Eastern Time. Investors and analysts interested
in participating in the call are invited to dial (877) 723-9522 and
reference conference ID number 9344646 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 November 30, 2016 until
11:59 p.m. Eastern Time on December 7, 2016 and can be accessed by
dialing (877) 870-5176 and entering conference ID number
9344646.
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 483 stores in 41 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) market conditions impacting the Company’s
stock; (ii) the impact of general economic conditions and their
effect on consumer confidence and spending patterns; (iii) changes
in the cost of raw materials, distribution services or labor; (iv)
the potential for current economic conditions to negatively impact
the Company's merchandise vendors and their ability to deliver
products; (v) the Company’s ability to open and operate stores
successfully; (vi) the Company’s ability to fully recognize the
potential savings identified through Project Excellence; (vii)
seasonal fluctuations in the Company’s business; (viii) the
Company’s ability to anticipate and respond to fashion trends; (ix)
the Company’s dependence on mall traffic for its sales; (x)
competition in the Company’s market, including promotional and
pricing competition; (xi) the Company’s ability to retain, recruit
and train key personnel; (xii) the Company’s reliance on third
parties to manage some aspects of its business; (xiii) the
Company’s reliance on foreign sources of production; (xiv) the
Company’s ability to protect its trademarks and other intellectual
property rights; (xv) the Company’s ability to maintain, and its
reliance on, its information technology infrastructure; (xvi) the
effects of government regulation; (xvii) the control of the Company
by its sponsors and any potential change of ownership of those
sponsors; and (xviii) 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 October
29, 2016
% ofnet sales
Three monthsended October
31, 2015
% ofnet sales
Net sales $ 213,901 100.0 % $ 219,750 100.0 % Cost of goods
sold, buying and occupancy costs 149,917 70.1 % 156,055 71.0 %
Gross profit 63,984 29.9 % 63,695 29.0 % Selling,
general and administrative expenses 66,087 30.9 % 68,612 31.2 %
Operating loss (2,103) (1.0) % (4,917) (2.2) %
Interest expense, net of interest income 320 0.1 % 325 0.1 %
Loss before income taxes (2,423) (1.1) % (5,242) (2.3) %
Provision for income taxes 109 0.1 % 94 0.1 % Net loss $
(2,532) (1.2) % $ (5,336) (2.4) % Basic loss per
share $ (0.04) $ (0.08) Diluted loss per share $ (0.04) $
(0.08) Weighted average shares outstanding: Basic shares of
common stock 63,459 63,224 Diluted shares of common stock 63,459
63,224
Selected operating data: (Dollars in
thousands, except square foot data) Comparable store sales
(decrease) increase (0.7) % 4.9 % Net sales per average selling
square foot (a)(d) $ 86 $ 85 Net sales per average store (b)(d) $
442 $ 434 Average selling square footage per store (c) 5,113 5,117
Ending store count 483 508
___________________________________________________________________________________________
(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. (d) 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.
Exhibit (2)
New York & Company, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except per share
amounts)
Nine monthsended October
29, 2016
% ofnet sales
Nine monthsended October
31, 2015
% ofnet sales
Net sales $ 662,758 100.0 % $ 678,836 100.0 % Cost of goods
sold, buying and occupancy costs 471,837 71.2 % 483,761 71.3 %
Gross profit 190,921 28.8 % 195,075 28.7 % Selling,
general and administrative expenses 197,082 29.7 % 203,802 30.0 %
Operating loss (6,161) (0.9) % (8,727) (1.3) %
Interest expense, net of interest income 925 0.1 % 923 0.1 %
Loss before income taxes (7,086) (1.0) % (9,650) (1.4) %
Provision for income taxes 217 0.1 % 503 0.1 % Net loss $
(7,303) (1.1) % $ (10,153) (1.5) % Basic loss per
share $ (0.12) $ (0.16) Diluted loss per share $ (0.12) $
(0.16) Weighted average shares outstanding: Basic shares of
common stock 63,399 63,127 Diluted shares of common stock 63,399
63,127
Selected operating data: (Dollars in
thousands, except square foot data) Comparable store sales
(decrease) increase (0.9) % 3.5 % Net sales per average selling
square foot (a)(d) $ 266 $ 262 Net sales per average store (b)(d) $
1,361 $ 1,347 Average selling square footage per store (c) 5,113
5,117
___________________________________________________________________________________________
(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. (d) 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.
Exhibit (3)
New York & Company, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Amounts in
thousands) October 29, 2016 January 30, 2016*
October 31, 2015 (Unaudited) (Unaudited)
Assets Current assets: Cash and cash equivalents $ 54,012 $
61,432 $ 44,980 Restricted cash — — 1,509 Accounts receivable
37,076 8,208 12,630 Income taxes receivable 47 47 73 Inventories,
net 123,819 87,777 129,006 Prepaid expenses 18,790 19,442 19,669
Other current assets 1,226 858 1,335 Total current assets 234,970
177,764 209,202 Property and equipment, net 88,703 88,831
87,412 Intangible assets 14,879 14,879 14,879 Deferred income taxes
(a) — — 6,316 Other assets 2,026 1,986 1,505 Total assets $ 340,578
$ 283,460 $ 319,314
Liabilities and stockholders’ equity
Current liabilities: Current portion—long-term debt $ 841 $ 841 $
840 Accounts payable 109,586 82,225 107,139 Accrued expenses 54,584
52,424 54,871 Income taxes payable 149 239 599 Deferred income
taxes (a) — — 6,316 Total current liabilities 165,160 135,729
169,765 Long-term debt, net of current portion 11,695 12,326
12,537 Deferred rent 31,211 34,351 37,791 Other liabilities 44,145
7,283 6,996 Total liabilities 252,211 189,689 227,089 Total
stockholders’ equity 88,367 93,771 92,225 Total liabilities and
stockholders’ equity $ 340,578 $ 283,460 $ 319,314
___________________________________________________________________________________________
* Derived from the audited consolidated financial statements
included in the Company’s Annual Report on Form 10-K for the fiscal
year ended January 30, 2016. (a) In November 2015, the
Financial Accounting Standards Board issued Accounting Standards
Update 2015-17, “Balance Sheet Classification of Deferred Taxes”
(“ASU 2015-17”), which requires an entity to classify deferred tax
liabilities and assets, and any related valuation allowance, as
non-current within a classified statement of financial position. On
January 30, 2016, the Company adopted ASU 2015-17 prospectively.
The Company’s net deferred tax assets are netted against a full
valuation allowance. Prior periods were not retrospectively
adjusted. The Company continues to maintain a valuation allowance
against its deferred tax assets until the Company believes it is
more likely than not that these assets will be realized in the
future.
Exhibit (4) New York
& Company, Inc. and Subsidiaries Condensed Consolidated
Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Nine months
ended
October 29, 2016
Nine months
ended
October 31, 2015
Operating activities Net loss $ (7,303) $
(10,153) Adjustments to reconcile net loss to net cash provided by
(used in) operating activities: Depreciation and amortization
17,291 18,590 Loss from impairment charges 271 287 Amortization of
deferred financing costs 142 154 Share-based compensation expense
2,720 2,948 Changes in operating assets and liabilities: Accounts
receivable (28,868) (5,224) Income taxes receivable — 26
Inventories, net (36,042) (35,215) Prepaid expenses 652 912
Accounts payable 27,361 20,658 Accrued expenses 1,330 2,256 Income
taxes payable (90) (111) Deferred rent (3,140) 2,622 Other assets
and liabilities 34,199 198 Net cash provided by (used
in) operating activities 8,523 (2,052)
Investing activities Capital expenditures (13,332) (20,835)
Insurance recoveries — 146 Net cash
used in investing activities (13,332)
(20,689)
Financing activities Repayment of long-term
debt (750) (750) Payment of financing costs — (161) Purchase of
treasury stock (909) — Proceeds from exercise of stock options 120
16 Shares withheld for payment of employee payroll taxes (312)
(267) Principal payments on capital lease obligations (760)
(410) Net cash used in financing activities (2,611)
(1,572) Net decrease in cash and cash equivalents
(7,420) (24,313) Cash and cash equivalents at beginning of period
61,432 69,293 Cash and cash equivalents at end of
period $ 54,012 $ 44,980
Supplementary non-cash investing
activities Non-cash capital lease transactions $ 4,102 $ 1,080
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 selling,
general, and administrative expenses, operating loss, net loss and
loss per diluted share for the three months ended October 29, 2016
and October 31, 2015 is indicated below. 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 October 29,
2016
(Amounts in thousands, except per share amounts)
Selling, general and
administrative expenses
Operating loss Net loss
Loss per diluted share
GAAP as reported $ 66,087 $ (2,103) $ (2,532) $ (0.04)
Adjustments
affecting comparability
Legal accrual reversal (473) (473) (473) Total adjustments
(1) (473) (473) (473) (0.01)
Non-GAAP as adjusted
$ 66,560 $ (2,576) $ (3,005) $ (0.05)
Three months ended October 31,
2015
(Amounts in thousands, except per share amounts)
Selling, general and
administrative expenses
Operating loss Net loss
Loss per diluted share
GAAP as reported $ 68,612 $ (4,917) $ (5,336) $ (0.08)
Adjustments
affecting comparability
Consulting expense – Project Excellence 77 77 77 Net reduction of
certain severance expenses (7) (7) (7) Moving expenses for new
headquarters 12 12 12 Legal expense 2,211 2,211 2,211 Total
adjustments (1) 2,293 2,293 2,293 0.03
Non-GAAP as adjusted
$ 66,319 $ (2,624) $ (3,043) $ (0.05)
___________________________________________________________________________________________
(1) The tax effect of $0.5 million expense reduction and
$2.3 million of expenses, during the three months ended October 29,
2016 and October 31, 2015, respectively, is offset by a full
valuation allowance against deferred tax assets.
Exhibit (6)
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 selling,
general, and administrative expenses, operating loss, net loss and
loss per diluted share for the nine months ended October 29, 2016
and October 31, 2015 is indicated below. 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.
Nine months ended October 29,
2016
(Amounts in thousands, except per share amounts)
Selling, general and
administrative expenses
Operating loss Net loss
Loss per diluted share
GAAP as reported $ 197,082 $ (6,161) $ (7,303) $ (0.12)
Adjustments
affecting comparability
Legal accrual reversal (473) (473) (473) Total adjustments
(1) (473) (473) (473) — Non-GAAP as adjusted . $ 197,555 $ (6,634)
$ (7,776) $ (0.12)
Nine months ended October 31,
2015
(Amounts in thousands, except per share amounts)
Selling, general and
administrative expenses
Operating loss Net loss
Loss per diluted share
GAAP as reported $ 203,802 $ (8,727) $ (10,153) $ (0.16)
Adjustments
affecting comparability
Consulting expense – Project Excellence 3,105 3,105 3,105 Certain
severance expenses 1,577 1,577 1,577 Net reduction of moving
expenses for new headquarters (104) (104) (104) Legal expense 2,597
2,597 2,597 Total adjustments (1) 7,175 7,175 7,175 0.11
Non-GAAP as adjusted
$ 196,627 $ (1,552) $ (2,978) $ (0.05)
___________________________________________________________________________________________
(1) The tax effect of $0.5 million expense reduction and
$7.2 million of expenses, during the nine months ended October 29,
2016 and October 31, 2015, respectively, 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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