Danier Leather gross profit margin up by 1.8%

25 Apr '09

4 min read

Danier Leather Inc announced its unaudited interim consolidated financial results for the 13 week and 39 week periods ended March 28, 2009.

Q3 HIGHLIGHTS
• Comparable store sales increased 3%
• Gross profit margin increased by 1.8% (or 180 basis points) to 41.4%
• EBITDA increased by $1.2 million
• Cash increased by $6.3 million to $24.6 million
• Credit facility with CIBC renewed and committed to June 28, 2010

Sales for the third quarter of fiscal 2009 increased by 2% to $43.5 million from $42.4 million in the third quarter last year. Comparable store sales increased by 3%. Favourable customer response to the Company's promotions contributed to the sales increase. Year-to-date sales decreased by 1% to $135.1 million and comparable store sales decreased 1% representing an improvement from the first half comparable store sales decrease of 2%.

Net loss during the third quarter of fiscal 2009 was $2.3 million ($0.37 loss per diluted share) and includes staff reduction costs of $1.4 million ($1.0 million after tax, or $0.16 per diluted share) and a goodwill impairment charge of $0.3 million ($0.05 per diluted share). This compares to net earnings of $0.1 million ($0.02 per diluted share) during the third quarter of fiscal 2008. The third quarter of fiscal 2008 included recovery of legal and expert fees of $1.9 million ($1.3 million after tax or $0.20 per diluted share).

Adjusted net loss, which excludes staff reduction costs, the goodwill impairment charge and recovery of legal and expert fees, declined to $1.0 million ($0.16 loss per diluted share) during the third quarter of fiscal 2009 compared with an adjusted net loss of $1.2 million ($0.18 loss per diluted share) during the third quarter of fiscal 2008.

Year-to-date net earnings were $0.5 million ($0.07 per diluted share) and include staff reduction costs of $1.4 million ($1.0 million after tax or $0.16 per diluted share) and a goodwill impairment charge of $0.3 million ($0.05 per diluted share).

Year-to-date earnings for the first nine months of fiscal 2008 were $15.9 million ($2.50 per diluted share) and included $20.0 million ($14.7 million after tax or $2.32 per diluted share) for the reversal of the litigation provision and recovery of legal and expert fees as a result of the Supreme Court of Canada's decision to uphold the unanimous Ontario Court of Appeal ruling that dismissed the class action against the Company and two of its Senior Officers.

Adjusted net earnings(2), which exclude the items listed above, increased to $1.8 million ($0.28 per diluted share) for the 39 weeks ended March 28, 2009 compared with $1.2 million ($0.19 per diluted share) during the first nine months of fiscal 2008.

Gross profit as a percentage of revenue during the third quarter of fiscal 2009 was 41.4% compared with 39.6% during the third quarter of fiscal 2008. Both the third quarter of this year and the third quarter of last year were highly promotional. However, the third quarter of fiscal 2008 required higher than planned markdowns to clear excess inventory.

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