Jennifer Convertibles, Inc.announced its financial results for the fourth quarter and fiscal year ended August 29, 2009.
For the fourth quarter, revenue from continuing operations decreased by 25.6% to $22,818,000 from the $30,670,000 reported for the same period last year. For the fiscal year 2009, revenue from continuing operations decreased 21.6% to $94,177,000 from the $120,131,000 reported in the same period last year.
For the fourth quarter, the net loss was $5,263,000 or ($0.74) per basic and diluted share, compared to net loss of $867,000 or ($0.12) per basic and diluted share, for the same period last year. For the fiscal year 2009, the net loss was $11,008,000 or ($1.55) per basic and diluted share, compared to net loss of $3,329,000 or ($0.47) per basic and diluted share, for the same period last year. The net losses for fiscal 2009 include charges incurred during the fourth quarter totaling $3,414,000 related to impairment of goodwill, provisions for a potential legal settlement and provisions for losses in connection with amounts due from the related company.
For the fourth quarter, operating margins from continuing operations decreased to 29.8% compared to 31.0% the same period last year. For the twelve-month period operating margins from continuing operations decreased to 28.9% compared to 29.4% for the same period last year.
For the fourth quarter, selling, general, and administrative expenses from continuing operations increased to 37.0% as a percentage of revenue from continuing operations compared to 32.9% for the same period last year. For the twelve-month period, selling, general and administrative expenses from continuing operations increased to 35.5% compared to 31.4% for the same period last year.
During the fourth quarter, the Company did not close any stores. During fiscal 2009, the Company closed seven stores of which the operating results of three stores were reported in discontinued operations. Loss from discontinued operations was $1,000 and $90,000 in the fourth quarter of fiscal 2009 and 2008, respectively. For the twelve-month periods for fiscal 2009 and 2008, loss from discontinued operations amounted to $243,000 and $335,000, respectively.
Commenting on the results of the year, Harley J Greenfield, Chief Executive Officer of Jennifer said, "Fiscal 2009 was a challenging year for the Company as the difficulties in the economy impacted the home furniture industry particularly hard. As a result during the fourth fiscal quarter we incurred several events, which significantly impacted our results.
Due to the decline in the operating performance of stores in the Chicago and Florida markets we recognized an impairment of goodwill of $1,167,000 during the period. Although this impacts our balance sheet and income statement it has no operational or cash flow implications. Of more significance long term is the termination of the Purchasing Agreement with the related company due to their failure to make payments to us. We have established a reserve of $947,000 as of August 29, 2009 against potential losses on amounts due from the related company as of August 29, 2009. We also expect to establish substantial reserves for the first quarter of fiscal 2010 relating to amounts, which become due from the related company subsequent to August 29, 2009 and prior to the termination of the purchasing agreement in late November.
We have taken steps as of November 27, 2009, which we believe will ensure that we will incur minimal further losses on any additional products shipped to customers of the related company. We are in negotiations with the related company to resolve these issues. I believe the results of these negotiations should have a positive long-term benefit to Jennifer and should create an opportunity to generate additional revenue.
Additionally during the fourth quarter we established a reserve of $1,300,000 for a class action lawsuit for alleged violations of California Labor Law. We are vigorously defending this matter."
Mr. Greenfield added, "We are very pleased with the progress of our Ashley Furniture Homestores division. During the year it generated $12.8 million or more than 13% of our revenue and generated income before income taxes of about $1.3 million, a 42.6% increase from the prior fiscal year. Since year-end we have opened two additional Ashley Furniture Homestores, have announced the opening of a fifth location in January and our currently negotiating for additional stores to be opened before the end of the fiscal year. Recently we have seen an increase in revenues in our existing Ashley Furniture Homestores locations and our new stores have opened and are performing as projected. We are also beginning to see some stabilization in our Jennifer stores. Capitalizing on our new line of extreme value merchandise, we expect to see improvement in our Jennifer division as well in 2010."
Jennifer Convertibles is the owner and licensor of the largest group of sofabed specialty retail stores in the United States, with 148 Jennifer Convertibles stores and is the largest specialty retailer of leather furniture with 14 Jennifer Leather stores. As of December 14, 2009, the Company owned 141 stores and licensed 21 stores (including 19 owned and operated by a related company on a royalty free basis) and operates four licensed Ashley Furniture HomeStores.