Comparable store sales rise 3.6% at New York & Co
New York & Company, Inc., a specialty apparel chain with 579 retail stores, today announced that based on preliminary unaudited results for the third quarter ended October 30, 2010, it expects net income per diluted share in the range of $0.01 to $0.03, which includes earnings of approximately $0.06 per diluted share related to certain non-operating adjustments which are detailed below.
This compares to a net loss of $0.11 per diluted share in the prior year, which included a previously disclosed non-operating loss of approximately $0.01 per diluted share. Additionally, the Company introduced its preliminary outlook for the fourth quarter of fiscal year 2010.
Comparable store sales increased 3.6%. Merchandise margins are projected to increase from last year reflecting lower levels of promotional activity. Gross margin is expected to exceed prior year levels. Selling, general and administrative expenses are expected to increase slightly from last year to support the higher than anticipated level of sales and due to the inclusion of separation costs associated with recent management changes.
Excluding these separation costs, selling, general and administrative expenses as a percentage of net sales is expected to decrease year-over-year. As previously anticipated, the Company expects to record adjustments to its deferred tax valuation allowance resulting in an effective tax rate of 0% for the third quarter and the foreseeable future. As described below, third quarter also included unusual tax benefits of $6.1 million related to a change in accounting methods for tax purposes.
Cash-on-hand at quarter-end is expected to be approximately $22 million. As previously anticipated, the Company expects to end the third quarter with less than $10 million of borrowings outstanding under its $90 million revolving credit facility.
Inventory is expected to be down approximately 4% versus the prior year's level.
As referenced above, the Company expects to record earnings of $3.9 million, or $0.06 per diluted share, resulting from certain non-operating adjustments recorded during the third quarter of fiscal year 2010, as described below:
A tax benefit of $6.1 million related to a change in accounting methods for tax purposes, which will result in a reduction of the depreciable life of certain assets, and a refund of amounts previously paid with a corresponding adjustment to the Company's valuation allowance against its deferred tax assets.
Expenses of $1.2 million to record a valuation allowance against deferred tax assets generated during the third quarter. Approximately $1.0 million of separation expenses related to recent management changes.
While the Company is pleased with the positive customer response to its fall product offerings, it believes the economic environment will remain challenging. The retail environment is highly promotional and the Company remains cautious with its outlook and has planned its inventory accordingly.
As a result, for the fourth quarter of fiscal year 2010 the Company expects operating profit to approximate year-ago levels. Cash-on-hand at year-end is expected to build significantly versus cash-on-hand at third quarter-end and the Company expects to have no borrowings outstanding under its revolving credit facility.
New York & Company, Inc.