Eddie Bauer reports improvement in Full Year EBITDA
Eddie Bauer Holdings Inc reported preliminary comparable store sales and estimated adjusted EBITDA for the fourth quarter and full year. The Company is taking the step of releasing its estimated fourth quarter and full year adjusted EBITDA early because it is a key component of the Company's loan covenants. The Company also announced that SG&A expense for the year is expected to be down by $45 to $50 million, well ahead of its previously announced target.
For fiscal 2008, the Company estimates that adjusted EBITDA will be in the range of $50 to $55 million, an increase of $8 to $13 million from the prior year. Estimated fourth quarter adjusted EBITDA will be in the range of $53 to $58 million, a decrease of $2 to $7 million from fourth quarter 2007. The estimated EBITDA presented is adjusted for certain non-recurring and nonoperational items.
"The retail environment in the fourth quarter was brutal, the worst in decades," said Neil Fiske, President and Chief Executive Officer. "In spite of the recession in 2008, we managed to improve our year-over-year adjusted EBITDA and cash flow. Our sales were soft, but much of the market fared worse. Our turnaround program continues to show results, even in a tough environment."
Preliminary combined comparable store sales fell 5.7% for the quarter and 1.1% for the fiscal year when excluding the effect of foreign exchange rates resulting from the sharp fall in the Canadian dollar.
Comparable store sales for both the fourth quarter and fiscal 2007 have been calculated to include the addition of the first week of fiscal 2008, to make 2007 (a 52-week year) comparable to fiscal 2008, which is a 53-week fiscal year.
Preliminary net merchandise sales for the fourth quarter declined 5.7% and for the full-year net merchandise sales for 2008 declined 1.8%, driven by a small decline in comparable store sales and a smaller store base. Comparisons for net merchandise sales are between fiscal years and are not adjusted for a 52 or 53 week period. The Company ended the year with 16 fewer retail stores and one more outlet store than at year-end 2007. Merchandise margins for the fourth quarter and year were lower due to the high level of promotional activity in the market.
Inventories at quarter-end were down approximately 13.8% in total and approximately 8.2% on a per store basis. Inventory percentages have not been adjusted for Canadian currency fluctuations or the 53rd week.
At year-end, cash balances were $60.4 million. There were no short-term borrowings outstanding and the balance outstanding under the senior term loan was $192.8 million at the end of the year. As of the end of the fourth quarter of 2008, the Company was in compliance with all its loan covenants. The Company will be closely monitoring covenants in the first quarter of 2009. The Company will explore possible modifications to its current debt terms and has engaged the investment banking firm of Peter J. Solomon Company to assist in this process.
Selling, general, and administrative expenses (SG&A), excluding non- recurring costs and the impact of the 53rd week in 2008, are estimated to be down $45 to $50 million for the year. This exceeded the upper end of the Company's stated target of $25-30 million in SG&A reduction, and is primarily due to substantial savings from lower revenue-related expenses and better cost management. The Company benefited from substantial savings in revenue-related expenses.
The Company is taking further aggressive action to manage its cost structure and expenditures in 2009 in the face of the continuing economic downturn, including:
-- Setting a target for an additional $10-15 million reduction in year over year SG&A costs, excluding non-recurring items and the impact of the 53rd week in 2008;
-- Limiting net capital spending to approximately $15 million;
-- Freezing salaries;
-- Adjusting certain benefits programs;
-- Cutting the size of its Board of Directors and reducing total Board costs by 40-50%, including approximately $0.5 million per year in cash payments; and
-- Accelerating product innovation and new launches.