The Bombay Company, Inc. Reports Third Quarter Results

Furniture World Magazine

The Bombay Company, Inc. reported that consolidated revenue for the three-month period ended November 3, 2001 increased 7% to $96.9 million compared to $90.9 million for the three months ended October 28, 2000. Same store sales for Bombay stores decreased 3% for the thirteen-week period compared to the corresponding period of the prior year. The net loss for the period was $2.2 million or $.07 per diluted share compared to last year's net loss of $1.6 million or $.05 per diluted share. Gross margin for the three-month period ended November 3, 2001 was $25.2 million or 25.9% of sales compared to $25.8 million or 28.4% of sales the corresponding prior year period. Selling, general and administrative expenses were $28.3 million or 29.2% of sales this year compared to $28.3 million or 31.1% of sales last year. Strong operational controls over selling, general and administrative expenses resulted in leveraging costs during the current year. Carmie Mehrlander, Chief Executive Officer, stated, "While sales in August and early September were off to a good start, we quickly felt the results from the terrorist attacks on both our sales and margin performance for the quarter. Customers remain very selective in their purchases with promotionally priced product becoming the driver for their selections. Big- ticket purchases declined in favor of smaller accessories purchases. Double- digit growth in the accessories area drove the overall increase in sales for the quarter. Furniture sales, which were 50% of the business last year, were only 46% of the business this year and declined in real dollars compared to last year. Wall decor sales declined slightly and were 15% of the mix this year compared to 16% last year. We expect non furniture categories to play an even bigger role in the fourth quarter where they have historically represented 65% of the total business." Ms. Mehrlander further noted, "Our new initiatives continue to progress. We launched our Bombay KIDS business on August 27 over the internet at http://www.bombaykids.com and the first mail order catalog arrived in homes on September 17. The second catalog which features more holiday related accessories arrived in homes in late October. We achieved our sales and margin expectations on the first book in spite of the poor timing and are optimistic about the future. On the wholesale side, we are encouraged by responses to the Bailey Street Trading Company lines at the High Point Furniture Market. Based upon the successes to date, we expect Bailey Street revenue to reach approximately $1.5 to $2 million for the year. We are pleased with the progress in the international licensing arena with one store opening during the quarter and two additional stores planned to open in November. We are also pleased with our internet growth year over year and its positive contribution to the bottom line." For the nine months ended November 3, 2001, revenues increased 7% to $285.0 million compared to $266.2 million the prior year. Same store sales for Bombay were flat for the thirty-nine week period compared to the corresponding period of the prior year. The net loss for the nine-month period was $7.9 million or $.24 per diluted share compared to last year's net loss of $4.3 million or $.13 per diluted share. The Company continues to have a solid balance sheet with $223.9 million in assets, $87.3 million in working capital and $146.6 million in stockholders' equity. Quarter end inventory was $129.9 million or $10.6 million higher than the prior year. The higher inventory levels are primarily in the accessories areas and are intended to support the fourth quarter accessories business, which represents approximately 52% of the business during the period. Investment in KIDS inventory of approximately $2 million also contributed to the increase. The Company expects to finish the year with inventory levels in line with its plan. For the fourth quarter, there is a great deal of uncertainty with respect to predicting sales performance. However, we are focused on executing our holiday season plan and will continue to manage the business conservatively from an expense standpoint. Assuming same store sales decreases in the low to mid-single digit range, we would expect revenue to be approximately $150 to $155 million during the period compared to $157 million last year. For the fiscal year, total sales would be $435 to $440 million compared to $431 million last year. We expect the competitive retail environment to put pressure on margins. In light of these factors, we expect that income for the fourth quarter will be in the $.33 to $.38 per share range. On an annual basis, this would result in earnings ranging from $.09 to $.14 per share. During the fourth quarter, the Company expects to open four stores, convert three stores to the large format and close seven stores. For Fiscal 2002, at the current time, the Company plans to open 17 new stores, convert four regular stores and will close approximately 6 stores.