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However, the company's net sales for the reported period went down 6.1 per cent to $54.5 million compared to $58.0 million in the first quarter of fiscal 2017. Wholesale segment sales decreased 19.5 per cent to $28.5 million, in line with expectations, as compared to the same period last year primarily due to the planned reduction in full-price wholesale partners.
Gross profit was $25.5 million, or 46.8 per cent of net sales, compared to gross profit of $25.6 million, or 44.1 per cent of net sales, in the first quarter of fiscal 2017. The increase in gross margin rate was largely due to lower sales allowances in the wholesale channel and a favourable shift in channel mix, partially offset by the unfavorable impact of adjustments to inventory reserves.
Selling, general, and administrative (SG&A) expenses were $29.9 million, or 54.8 per cent of sales, compared to $33.8 million, or 58.2 per cent of sales, in the first quarter of fiscal 2017. The decline in SG&A dollars was primarily the result of lower product development costs and the non-recurrence of investments made last year related to the remediation and optimisation of the systems implemented during fiscal 2016.
The company ended the first quarter of fiscal 2018 with $5.2 million in cash and cash equivalents and $50.6 million of borrowings under its debt agreements. The company decreased borrowings under its debt agreements since the same period last year by $15.5 million, primarily due to $14.0 million of payments to the term loan facility.
Net inventory at the end of the first quarter of fiscal 2018 was $49.4 million compared to $32.2 million at the end of the first quarter of fiscal 2017. The increase in net inventory was primarily due to a change in the timing of shipments to the off-price wholesale channel, growth of the replenishment programme, and the reinstatement of the company’s summer collection.
"We were pleased with the strong response to our women’s and men’s product assortments in the first quarter which drove a double digit comparable sales increase in our full price stores, and more than 25 per cent growth in our e-commerce business. In addition, we are highly encouraged by our three recent store openings, all of which are exceeding our sales expectations. In the wholesale channel, we saw better than expected performance at both Nordstrom and Neiman Marcus as well as strong sell-through across all accounts, indicating a favourable response to our product offering. Sales in our wholesale segment declined, consistent with our expectations, primarily as the result of our planned reduction in partners in this channel. Given our increased confidence and visibility in the business, we have reinstituted annual guidance. With the building enthusiasm for our brand, we are more confident than ever that we are on the right path to delivering consistent profitable growth over the long term," Brendan Hoffman, chief executive officer, said.
For fiscal 2018, net sales is expected between $273 and $280 million. This is compared to net sales of $272.6 million in fiscal 2017. The operating income is likely to be between $3 and $6 million. This compared to reported operating loss of $18.3 million in fiscal 2017 which includes a $5.1 million non-cash asset impairment charge related to property and equipment of certain retail stores. (RR)
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