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Danier Leather reports fiscal 2008 Q4 & year end results

25
Aug '08
Danier Leather Inc announced its consolidated financial results for the fourth quarter and fiscal year ended June 28, 2008.

Sales for the fourth quarter of 2008 increased 24% or $5.2 million to $27.5 million from $22.3 million in the fourth quarter of 2007. Comparable store sales in the fourth quarter increased 25%. The fourth quarter of 2008 contained 13 weeks whereas the fourth quarter of 2007 contained 14 weeks.

On a comparable week basis, which compares the 13 week period ended June 28, 2008 to the comparable 13 week period ended June 30, 2007, sales increased 42% and comparable store sales increased 43%. Year-to-date sales increased 3% or $5.5 million to $163.6 million while comparable store sales increased 6%.

During the last half of the fiscal year, Danier adjusted its promotions, increased markdowns and offered attractive price points to customers. Although the average sale and gross margin decreased, the promotions generated a significant increase in sales and customer traffic and helped reduce inventory that had been built up during the first half of the fiscal year.

Danier finished its fiscal year with a $1.2 million reduction in inventory compared with the prior year and a strong cash balance of $19.9 million.

Gross profit dollars during the fourth quarter of 2008 increased by 2%. Gross profit as a percentage of revenue decreased to 45.1% compared with 54.5% during the fourth quarter of 2007. Year-to-date gross profit as a percentage of revenue decreased to 46.6% compared with 49.7% during fiscal 2007.

The gross margin rate decline was to a greater extent due to management's decision to increase markdowns during the last half of the year to stimulate sales and convert inventory to cash and to a lesser extent, higher overseas sourcing costs including higher leather prices, a reduction of an export rebate in China and appreciation of the Chinese Yuan.

Net loss for the fourth quarter of 2008 was $3.0 million, or $0.48 loss per share, compared with a net loss of $2.4 million, or $0.37 loss per share, during the fourth quarter last year. Year-to-date net earnings were $12.9 million, or $2.03 per diluted share, compared with net earnings of $1.7 million or $0.25 per share last year.

Excluding the reversal of the litigation provision of $18.0 million, recovery of legal and expert fees of $2.0 million and income taxes of $5.3 million, the year-to-date adjusted net loss was $1.8 million or $0.29 loss per share.

Adjusted EBITDA loss for the fourth quarter of 2008 was $2.5 million compared with an adjusted EBITDA loss of $2.2 million during the fourth quarter last year. Year-to-date adjusted EBITDA, which excludes the reversal of the litigation provision and recovery of legal and professional fees, was $3.8 million compared with $8.8 million last year.

Selling, general and administrative expenses ("SG&A") during the fourth quarter of 2008 increased by 3%or $0.5 million, on a $5.2 million sales increase. Year-to-date SG&A increased by 3% or $2.2 million to $78.6 million or 48.0% of sales compared with $76.4 million or 48.3% of sales last year.

Danier maintained a strong financial position at year-end with working capital $38.6 million compared with $26.1 million last year.

Danier Leather Inc


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