Bombay Announces Lower Net Loss For Quarter

Furniture World Magazine

The Bombay Company, Inc. announced operating results for the fourteen and fifty-three week periods ended February 3, 2007 compared to the thirteen and fifty-two week periods ended January 28, 2006. Net sales for the quarter and year included the additional week; however comparable store sales calculations are based upon the comparable fourteen and fifty-three week periods. FOURTH QUARTER RESULTS Revenue for the fourteen weeks ended February 3, 2007 increased 0.7% to $188.2 million compared to $186.9 million for the thirteen week period ended January 28, 2006. Same store sales for Bombay stores operating for more than one year decreased 3.1% for the quarter. Revenue from retail stores declined to $174.5 million from $177.7 million due to the decrease in same store sales and a lower store count. Bombay's direct-to-customer business, which includes Internet and Mail Order, grew to $13.4 million for the period compared to $8.8 million last year, driven primarily by the increase in Internet sales. Gross margin for the quarter, defined as revenue less cost of goods sold including buying and occupancy costs, increased $2.9 million to $55.1 million or 29.3% of revenue compared to $52.2 million or 27.9% of revenue for the prior year's quarter. Product margins increased 60 basis points due to improved leverage on logistics costs. Occupancy costs declined 60 basis points due to reduced rents and related expenses on a lower store base while buying costs declined 20 basis points due to cost reduction efforts during the year. Results for the fourth quarter of Fiscal 2006 include a $10.2 million charge for asset impairments comprised of $9.8 million associated with underperforming stores and $0.4 million associated with goodwill. During Fiscal 2005, the Company recorded a $5.9 million impairment charge relating to underperforming stores. Selling, general and administrative costs declined $4.7 million compared to the fourth quarter of Fiscal 2005 primarily due to lower advertising costs as the Company shifted its marketing focus to email marketing and reduced its reliance on other marketing vehicles. Income before income taxes for the quarter ended February 3, 2007 was $1.4 million compared to a loss of $1.5 million for the quarter ended January 28, 2006. Income tax expense for the quarter was an expense of $3.1 million relating to the Company's Canadian and state tax liabilities compared to the prior year expense of $23.6 million which related to the establishment of a valuation allowance against the Company's federal deferred tax assets. The net loss for the quarter ended February 3, 2007 was $1.7 million, or $0.05 per share, compared to a net loss of $25.1 million, or $0.69 per share, for the corresponding period of the prior year. FISCAL 2006 RESULTS For the 53-week period ended February 3, 2007, revenue decreased 5.1% to $536.3 million compared to $565.1 million for the corresponding period of the prior year. Revenue from retail stores declined to $498.6 million from $531.8 million as a result of a 5.4% decline in same store sales and the reduced store count. Revenue from Bombay's direct-to-customer business grew to $34.6 million for the 53-week period compared to $24.0 million in the year-ago 52-week period, primarily due to higher Internet sales. Results for the fiscal year ended January 28, 2006 include $6.9 million of revenue from Bailey Street operations, the assets of which were sold during the second quarter of Fiscal 2005. Gross margin for Fiscal 2006 declined $15.5 million due to lower sales and a 160 basis point decline in the gross margin rate to 22.4% of revenue from 24.0% of revenue. Product margins declined 120 basis points due to increased levels of promotional activity, particularly during the first half of the year, along with higher direct-to-customer shipping costs as Internet became a more significant part of the business. Buying and occupancy costs declined $3.8 million compared to last year but increased 40 basis points due to deleveraging of costs on the lower sales volumes. FY 2006 includes $10.2 million of asset impairment charges compared to $5.9 million in Fiscal 2005. Selling, general and administrative expenses were $8.6 million lower primarily due to lower advertising costs in the second half of the year as the Company focused on email marketing and reduced its reliance on other marketing vehicles. The loss before income taxes for the fiscal year ended February 3, 2007 was $50.7 million compared to $34.8 million for the fiscal year ended January 28, 2006 which included $4.7 million of gains on sales of the non- operating land and building and the Bailey Street assets. Income tax expense for the fiscal year was an expense of $2.0 million relating to the Company's Canadian and state tax liabilities compared to the prior year expense of $12.0 million, which related to the establishment of a valuation allowance against the Company's federal deferred tax assets. No benefit has been recorded during either period for federal income tax losses. The net loss for the fiscal year ended February 3, 2007 was $52.8 million, or $1.46 per share, compared to a net loss of $46.7 million, or $1.29 per share, for the prior fiscal year. Inventory levels were $138.1 million compared to $128.7 million because of an increased focus on ensuring that we are in stock on key SKUs and increasing levels to support higher unit sales for FY 2007. As a result of continuing losses and higher inventory levels, the Company ended the quarter with $39.3 million in borrowings outstanding under its credit facility compared to no borrowings as of year end Fiscal 2005. During the fourth quarter, Bombay opened 4 stores and closed 16 stores ending the year with 441 stores including 195 in malls, 199 off-mall and 47 outlet locations. During FY 2007, the Company expects to close 75 stores including 33 KIDS locations currently part of combination stores. The Company plans to continue to rationalize its store base, migrating stores to off-mall locations upon their lease expiration where the existing mall leases cannot be renewed at economic rental rates, and close unprofitable locations. The Company has recently engaged DJM Realty, LLC, a provider of strategic real estate solutions, to assist with landlords negotiations for early lease terminations and restructuring of existing lease terms. The Company announced that while it was encouraged with the results of its cost cutting and restructuring initiatives that were put in place during the first half of Fiscal 2006, the difficult retail environment has resulted in continuing losses and declining cash flow. The Company announced that it has engaged William Blair & Company to explore strategic alternatives that would provide additional liquidity to enable the Company to achieve its long term goals and return to positive cash flow. David B. Stewart, Chief Executive Officer, stated: "Although we are disappointed with our 2006 financial results, we are very pleased with our accomplishments during the year, which included renegotiating lending agreements, restructuring for cost reductions and efficiency, and continued strong growth in our Direct-to-Customer business. Our increased fourth quarter revenues are reflective of these efforts and encouraging in light of the continuing difficult conditions in the retail sector. It is particularly noteworthy that we were able to grow our fourth quarter sales with a reduced marketing spend. Our current focus is on continued execution of our stabilization plan to return the Company to positive cash flow and improved operations." The Bombay Company, Inc. designs, sources and markets a unique line of home accessories, wall decor and furniture through 441 retail outlets, specialty catalogs and the Internet in the U.S. and internationally.