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Third quarter revenue declines - dELiA*s

24 Nov '11
6 min read

Gross margin for the retail segment, which includes distribution, occupancy and merchandising costs, was 26.0% compared to 29.3% in the prior year period. The decrease in gross margin resulted from lower merchandise margins and the deleveraging of occupancy costs.

SG&A expenses for the retail segment were $12.1 million, or 33.5% of sales, in the third quarter of fiscal 2011 compared to $12.9 million, or 34.6% of sales, in the prior year period. The decrease in SG&A expenses in dollars and as a percent of sales was driven by selling and overhead expense reductions.

The operating loss for the third quarter of fiscal 2011 for the retail segment was $2.7 million compared to $1.9 million in the prior year period.

The Company remodeled one store location and closed one store location during the third quarter of fiscal 2011, ending the period with 114 stores.

Direct Segment Results
Total revenue for the direct segment for the third quarter of fiscal 2011 decreased 6.5% to $21.9 million from $23.4 million in the prior year period.

Gross margin for the direct segment was 42.7% compared to 42.2% in the third quarter of the prior year, primarily resulting from increased merchandise margins.

SG&A expenses for the direct segment were $10.9 million, or 50.0% of sales, compared to $11.6 million, or 49.5% of sales, in the prior year period. The decrease in SG&A expenses in dollars reflects reduced selling and overhead expenses.

The operating loss for the third quarter of fiscal 2011 for the direct segment was $1.5 million as compared to $9.3 million in the prior year period. The prior year period included the aforementioned goodwill impairment charge of $7.6 million.

Balance Sheet Highlights
At the end of the third fiscal quarter of 2011, cash and cash equivalents were $15.8 million compared with $21.6 million, including restricted amounts, at the end of the third quarter of fiscal 2010.

Total net inventories at October 29, 2011 were $41.7 million compared with $41.8 million at October 30, 2010. While inventory per average retail store was up 8%, due to the timing of certain holiday receipts, inventory for the direct segment was down 6% compared to the end of the third quarter of fiscal 2010.

First Nine Month Results
For the first nine months of fiscal 2011, total revenue decreased 1.4% to $151.6 million from $153.8 million for the prior year period. Total gross margin was 31.1% compared to 31.7% for the prior year period. SG&A expenses were $66.4 million, or 43.8% of sales, for the first nine months of fiscal 2011, compared to $69.6 million, or 45.2% of sales, for the prior year period.

The operating loss for the first nine months of fiscal 2011 decreased to $19.0 million, compared to $28.1 million for the first nine months of fiscal 2010. Included in the first nine months of fiscal 2010 was the aforementioned goodwill impairment charge of $7.6 million.

Net loss for the first nine months of fiscal 2011 decreased to $18.5 million, or $0.59 per diluted share, compared to a net loss of $22.3 million, or $0.72 per diluted share, for the first nine months of fiscal 2010. Included in the first nine months of fiscal 2010 was the aforementioned goodwill impairment charge of $7.6 million, or $0.24 per diluted share. The net loss for the first nine months of fiscal 2011 includes a benefit for income taxes of $0.9 million, or $0.03 per diluted share, compared to a benefit of $6.0 million, or $0.19 per diluted share, recorded in the first nine months of fiscal 2010.

dELiA's Inc

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