Bombay Company Announces Fourth Quarter Revenue Decline

Furniture World Magazine

The Bombay Company, Inc. announced operating results for the fourth quarter and fiscal year ended January 28, 2006. For the fourth quarter ended January 28, 2006, the Company reported a loss of $25.1 million or $0.69 per share, inclusive of non-cash and other charges of $29.1 million or $0.80 per share described below, compared to income of $7.1 million or $0.20 per share for the same period of the prior fiscal year. Excluding non-cash and other charges, net income for the fourth quarter was $4.0 million or $0.11 per share which was just above management's most recent guidance of $0.04 to $0.10 per share before non-cash and other charges. For the fiscal year, the Company reported a loss of $46.7 million or $1.29 per share, inclusive of non-cash and other charges of $29.1 million or $0.80 per share, compared to a loss of $12.6 million or $0.35 per share for Fiscal 2004. For the fiscal year, net loss was $17.7 million or $0.49 per diluted share, excluding non-cash and other charges. These and all other amounts in the press release have been presented on a basis consistent with the adoption of the new lease accounting standard, as described below. OPERATING RESULTS Revenue for the quarter ended January 28, 2006 was $186.9 million compared to $203.4 million during the fourth quarter of Fiscal 2004. Same store sales for Bombay stores in existence for more than one year decreased 4.3% for the quarter. Revenue from non-store activity was 5.1% of total revenue for the fourth quarter of Fiscal 2005, compared to 7.1% in the corresponding period of the prior year, primarily due to the disposal of its Bailey Street Trading Company operations that accounted for approximately $3.5 million of revenue during the prior year's quarter. The fourth quarter sales reflect recording $2.5 million of sales returns and allowances previously discussed. Gross margins, after adjustment for the charges discussed above, declined to 28.6% of revenue during the fourth quarter of Fiscal 2005 from 28.9% of revenue during the corresponding period of the prior year. Buying and occupancy costs, included in gross margins, increased 140 basis points to $28.9 million or 15.3% of revenue from $28.2 million or 13.9% of revenue. Lower overall revenue resulted in a deleveraging of expenses. Higher occupancy costs were partially offset by improved product margins as the Company upgraded its assortment and had less clearance relative to last year. Selling, general and administrative costs increased $0.1 million due primarily to greater investments in marketing during the period. As a percentage of revenue, costs increased from 23.1% to 24.9% due principally to the lower sales base in Fiscal 2005. Interest expense increased to $0.6 million from $0.3 million primarily due to high levels of borrowings during the period as a result of higher losses and continued capital investments. The Company ended the year with $128.7 million of inventory compared to $144.7 million as of the end of Fiscal 2004. Bombay ended holiday 2005 with lower levels of clearance goods than the prior year and has planned product introductions throughout the Fiscal 2006 spring season compared to last year when the majority of new merchandise was introduced at the beginning of the spring. There were no outstanding borrowings under the credit facility as of year-end. 2006 OUTLOOK AND PLANS The Company has been engaged in a multi-phase turnaround since the third quarter of Fiscal 2002, and recently announced its intention to seek successor leadership to continue to capitalize on its existing initiatives and to develop and implement new plans to enhance performance. In connection with these steps, the Board of Directors has engaged William Blair & Company, to assist with its ongoing assessment and development of the Company's business, operating and capital allocation strategies with a focus on improving shareholder value. Until this process is further along, the Company does not plan to provide earnings guidance for Fiscal 2006. The Company continues to focus on maintaining adequate liquidity by managing its inventory levels, planned capital expenditures and operating results. The Company expects that planned cash flows from operations and funds available under the terms of its existing credit facility will be adequate to meet its operating requirements. The Bombay Company, Inc. designs, sources and markets a unique line of home accessories, wall decor and furniture through 498 retail outlets, specialty catalogs and the Internet in the U.S. and internationally.