Bombay Announces 38% Increase in Fiscal 2003 Earnings

Furniture World Magazine

For the fourth quarter, earnings were $12.1 million or $0.33 per diluted share compared to $13.8 million or $0.41 per diluted share for the quarter ended February 1, 2003. For the year ended January 31, 2004, revenue increased 21% to $596.4 million compared to $494.0 million for the prior fiscal year. Same store sales increased 13% for the year while revenue from non-store activity increased to 8% of total revenue this year compared to 7% last year. Revenue for the quarter ended January 31, 2004 grew to $211.6 million compared to $189.3 million for the prior year. Same store sales for Bombay stores in existence for more than one year increased 1% for the quarter. Revenue from non-store activity was 8% of total revenue for the fourth quarter compared to 6% for the corresponding period of the prior year. For the year, Internet and Mail Order annual revenues grew 44% to $29.8 million from $20.6 million last year as a result of strong Internet sales that offset an 11% decline in mail order. Bailey Street had strong revenue growth with annual revenue of $15.8 million compared to $8.4 million last year. All non-store operations contributed incrementally to bottom line profitability. In general, new stores have performed well, and the Company is particularly pleased with the early results from its combination Bombay and BombayKIDS format which it plans to continue rolling out during 2004. For the quarter, gross margins declined to 31.7% of revenue from 34.5% of revenue as a result of more promotional selling during the holiday season. Buying and occupancy costs, included in gross margins, declined slightly to 12.9% of revenue from 13.0% of revenue last year due to the higher revenue base. Selling, general and administrative costs were flat as a percentage of revenue. The Company ended the year with no debt and $25.6 million in cash. The level of inventory increased to $138.9 million, which was slightly higher than expected. Soft sales during the fourth quarter resulted in higher than anticipated levels of merchandise, primarily relating to core product. The Company does not expect the higher levels to have a significant adverse impact on margins going forward. James D. Carreker, Chairman of the Board and Chief Executive Officer, stated, "The Company is in a multi-phase turnaround. Phase I of the turnaround, which was characterized by double-digit same store sales increases, was completed during the third quarter of Fiscal 2003. During this period, the Company focused on validating our position in the market place, reinvigorating same store sales growth, reclaiming market share and investing in the future. During the fourth quarter and especially during the Christmas season, our same store sale growth was in line with sector growth; however, we were more promotional than planned. Decisions made earlier in the year with respect to inventory purchases resulted in a higher level of promotional activity and lower realized margins. The 1% same store sales increase also made it difficult to leverage fixed costs throughout the organization. "As we enter the second phase of the turnaround, we expect our focus to be on driving profitable sales and improving profit flow-through," noted Mr. Carreker. "We have identified six success factors that are critical to achieving our goal of being a profitable, billion dollar company. Long-term, our goal is to grow same store sales in the mid-single digit range. Initially, we expect lower same store sales as we anniversary difficult comparisons and opt not to repeat promotions that drove top line sales but did not deliver profits at acceptable rates. We expect to continue the migration of our store base from mall to off-mall, thereby reducing fixed costs and improving profitability. Bombay store count is expected to increase by approximately 5% annually. We plan to continue our growth through other channels, such as BombayKIDS. We seek to expand our margins through improved supply chain opportunities, better systems and leveraging fixed costs. Finally, we expect to continue to make key investments in infrastructure to enable us to meet the challenges that accompany growth."