Danier enters seasonally slower Q4 with improved inventory position

August 16, 2010 - Canada

Danier Leather Inc. announced its consolidated financial results for the fourth quarter and fiscal year ended June 26, 2010.

Fiscal 2010 Full Year Highlights

• EBITDA more than tripled to $15.2 million from $4.3 million last year
• Comparable store sales increased by 4%
• Gross profit dollars increased by 18% on a 740 basis point increase in gross margin
• Earnings per outstanding share of $1.58
• Repurchased 1,352,700 Subordinate Voting Shares or 28.9% of the prior year's outstanding Subordinate Voting Shares

Gross profit dollars increased by $1.6 million or 13% to $14.3 million compared with $12.7 million during the fourth quarter last year. Danier entered the seasonally slower fourth quarter with an improved inventory position compared with the prior year and, accordingly, management decided to reduce promotional activity and markdowns and focus on gross margin and gross profit dollar improvement.

Fourth quarter sales decreased by 1% while comparable store sales decreased by 2%. Net loss for the fourth quarter of fiscal 2010 decreased by approximately $2.1 million to $0.7 million, or $0.14 loss per outstanding share, compared with a net loss of $2.8 million, or $0.47 loss per outstanding share, during the fourth quarter last year. EBITDA loss for the fourth quarter of fiscal 2010 was $0.4 million which represents a $2.0 million decrease from last year's EBITDA loss of $2.4 million.

Selling, general and administrative expenses ("SG&A") during the fourth quarter of 2010 decreased by $1.1 million, mainly due to reduced head office and retail staff wages and administrative expenses and lower amortization.

Year-to-date sales increased 1% or $2.1 million to $164.2 million, while comparable store sales increased by 4%. Year-to-date net earnings were $7.2 million ($1.28 per diluted share) and represent a $9.5 million increase as compared with a net loss of $2.3 million (or $0.37 loss per diluted share) last year. Year-to-date earnings per share based on outstanding shares at year-end were $1.58 compared with a $0.39 loss per share last year. Year-to-date EBITDA more than tripled to $15.2 million compared with $4.3 million last year.

Year-to-date gross profit as a percentage of revenue increased by 740 basis points and was 52.8% compared with 45.4% during fiscal 2009. The year-to-date gross margin rate increase was mainly due to improved merchandise planning and purchasing, a stronger Canadian dollar and reduced markdowns as compared with last year. Year-to-date SG&A increased by 2% or $1.2 million to $75.9 million compared with $74.7 million last year.

This increase was due primarily to higher performance-based compensation for store and head office staff and increased stock-based compensation primarily resulting from an increase in the Company's share price. Excluding the increase in performance-based and stock-based compensation, SG&A decreased by $3.2 million.

Danier currently has a total of 4,568,169 shares outstanding comprised of 3,343,840 Subordinate Voting Shares and 1,224,329 Multiple Voting Shares. During fiscal 2010, Danier repurchased a total of 1,352,700 Subordinate Voting Shares of which 1,120,000 Subordinate Voting Shares were repurchased during the third quarter of fiscal 2010 under a modified "Dutch Auction" substantial issuer bid and 232,700 Subordinate Voting Shares were repurchased under Danier's subsequent normal course issuer bid on the facilities of the TSX during the fourth quarter of fiscal 2010. During the prior fiscal year, an aggregate of 367,160 Subordinate Voting Shares were repurchased under two consecutive normal course issuer bids outstanding during that period.

Danier maintained a strong financial position at the fiscal 2010 year-end with approximately $26.6 million in cash ($5.81 per outstanding share) compared with $24.6 million at the end of fiscal 2009. Inventory at the fiscal 2010 year-end was $26.5 million compared with $21.0 million last year. The increase in inventory is due mainly to early purchases of finished goods merchandise for the upcoming fall/winter season. Danier has no long-term debt and working capital of $36.9 million. Book value per outstanding share at the end of the fourth quarter of fiscal 2010 was $12.00 per outstanding share.

Danier Leather Inc. is a leading integrated designer, manufacturer, distributor and retailer of high-quality fashion-oriented leather and suede clothing and accessories. The Company's merchandise is marketed exclusively under the well-known Danier brand name and is available at its 90 shopping mall, street-front and power centre stores. Corporations and other organizations can obtain Danier products for use as incentives and premiums for employees, suppliers and customers through Canada Sportswear Corp.