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Gross profit as a percentage of net sales increased to 32.1 per cent versus fiscal year 2017 second quarter gross profit percentage of 30.6 per cent, reflecting the highest gross margin rate achieved in the second quarter since 2005. The increase during the quarter reflects a 160 basis point increase in merchandise margin, reflecting reduced product costs, decreased promotional activity and shipping efficiencies, partially offset by a 10 basis point decrease in the leverage of buying and occupancy costs due to lower gross sales.
"We were very pleased with our strong operating results in the second quarter with positive comparable store sales, expansion in gross margin and operating profit which significantly exceeded our guidance. This strong performance contributed to the success of our spring season, completing a successful first half of the year with operating income surpassing guidance and notable accomplishments toward our stated goals. Our results continue to demonstrate the successful execution of our strategy to evolve our operating platform to meet the needs of how consumers are shopping today while increasing efficiency across the enterprise. We believe the company is becoming a key omni-channel shopping destination with sought after celebrity brands, great style and great value," Gregory Scott, New York & Company’s CEO, said.
In the third quarter, the net sales are expected to increase in the low single-digit percentage range, reflecting benefits from the shift of the retail calendar, combined with growth in e-commerce sales, partially offset by a reduced store count. The comparable store sales, which are shifted to compare like calendar weeks, are likely to increase in the low single-digit percentage range, driven by celebrity collaborations, the introduction of Kate Hudson for Soho Jeans Collection and growth in the digital business.
"Moving into the second half of the year, earlier this week, we announced a multi-year partnership with Kate Hudson which follows our already successful collaborations with Eva Mendes and Gabrielle Union – which provides us with another catalyst for growth and further differentiates and defines our Company from peers," added Scott. "I am excited about the opportunities that lie ahead and believe we remain well-positioned to continue our positive performance in the Fall season, which is further supported by our guidance that includes growth in operating income versus the comparable Fall season last year despite more difficult comparisons due to the prior year’s 53rd week calendar." (RR)
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