Retailer Body Central responds to shareholder queries

03 Sep '14

3 min read

“Given the state of our business, the size and urgency of the capital need, and the costs associated with the investment, the Body Central BoD determined that issuing the $18 million aggregate principal amount of subordinated secured convertible notes and new series of preferred stock to investors in a private placement was the best alternative to provide shareholder value.”

This was a reply to one of the queries raised by shareholders of apparel retailer – Body Central with regards to recent issuance of convertible notes and on how the Board determined the necessity of issuing the notes, impact to existing shareholders, and to whom the notes would be offered?

While releasing the results of second fiscal quarter ending August 2, 2014, the garment retailer had encouraged shareholders to submit relevant questions to the company.

Excerpts from a few queries raised by Body Central shareholders.

To another query on whether, there are plans to generate non-operating cash flow through the disposal of non-core assets over the next twelve months, Body Central replied by saying, “While no assurances can be given that the Company will be able to arrive at a satisfactory solution for reducing, mitigating or terminating its obligations under the lease, the Company is currently exploring alternatives to monetize its investment in owned equipment and fixtures that it does not expect to install in either its current or vacant distribution center.

“These assets have a market value of approximately $1 million. The Company does not own any real estate, but continually evaluates store operations and lease renewals to optimize our returns on our working capital and fixed asset investments.”

Another query asked, “I understand the Company has a view of how gross profit rates may trend over in the near term, which includes a negative impact in the third quarter from increased markdowns. Should we view the negative impact on a year-over-year basis, a sequential basis, or something else?

Body Central replied, “The Company's inventory position needs to be clean, and capable of turning faster going into the fourth quarter. To accomplish that goal we have increased markdowns in the third quarter to move through aged inventory. While these increased markdowns will reduce gross profit margins in the third quarter, we believe such strategy will position us for improved fourth quarter gross profit margins on both a year-over-year and sequential basis.”

On a query to whether Body Central will provide future guidance on the timing of when it either expects to return to profitability or positive cash flows, it said, “The Company will not provide earnings guidance in the near-term. As the implementation of the Company's plans for cost-savings, inventory right-sizing and focus on "best at" categories continues, the Company intends to further hone its long-term business plans and to routinely engage with shareholders with regards to our strategic refinements and business developments.”

Fibre2fashion News Desk - India

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