Jennifer Convertibles Reports First Quarter Results

Furniture World Magazine

Jennifer Convertibles, Inc. announced its unaudited financial results for the first fiscal quarter ended November 27, 2004. These results were impacted by the deflationary pressure in the furniture industry caused by a change in the source of supply to China, which reduced unit prices to customers. For the first quarter, revenue decreased by 6.1% to $31.7 million from the $33.7 million reported for the same period last year. For the first quarter, the Company incurred a net loss of $2,465,000 or ($0.43) per basic and diluted share compared to net loss of $1,691,000 or ($0.30) per basic and diluted share for the same period last year. Operating margins from continuing operations decreased in the first quarter to 28.0% from 29.6% in the same period last year. The decrease of 1.6% as a percentage of revenue from continuing operations is primarily attributable to an increase in store occupancy costs, including rent, combined with the decrease in revenues. For the first quarter, selling, general, and administrative expenses from continuing operations increased to 33.9% as a percentage of revenue from continuing operations compared to 33.5% for the same period last year. During the first quarter, the Company closed two stores in Missouri, one store in Kansas and one store in Hartford. Revenues from these stores amounted to $261,000 and $274,000 in the first quarter of fiscal years 2005 and 2004, respectively. The losses from operations of these stores were $177,000, including loss on store closings of $134,000, for the first quarter, compared to income from operations of these stores in the amount of $84,000, for the same period last year. During the quarter, the Company opened one new store and closed four stores as described above. Commenting on the results for the quarter, Harley J. Greenfield Chief Executive of Jennifer said, "Although we are not pleased with the results achieved during this quarter we believe, as I had indicated when we reported our results for the fiscal year, that our new supply chain is now in place. We expect to begin to see its' benefits in written sales towards the end of our second fiscal quarter. The furniture industry has experienced a significant change in source of supply, from Europe and the United States to China, which has resulted in a reduction in unit prices for customers, which impacts revenues. We believe that we have several merchandising and marketing initiatives now in place which will provide incredible values for customers yet increase unit sales per customer at acceptable margins." Mr. Greenfield added, "Also as of January 1, 2005 we modified the Interim Operating Agreement with the Private Company, which will save in excess of $100,000 per month until the end of Fiscal 2007. We will begin to see this benefit during second fiscal quarter. We are also evaluating the profitability of each of our stores, particularly in secondary markets closing 4 during our first quarter. When this process is completed we expect to achieve increased profitability." Jennifer Convertibles is the owner and licensor of the largest group of sofabed specialty retail stores in the United States, with 199 Jennifer Convertibles(R) stores and 16 Jennifer Leather stores. As of November 27, 2004, the Company owned 138 stores and licensed 77 (including 24 owned and operating stores by a private company on a royalty free basis.)