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Design Within Reach Inc declares Q2 preliminary results

06
Aug '05
Gross profit margin was 44.7 percent in the second quarter of 2005, compared to 46.5 percent in the same period last year. This decrease is due primarily to the strength of the Euro versus the U.S. dollar and the rising costs of shipping. Shipping and handling expenses have increased significantly as the new Studios influence the merchandise mix toward "white glove delivery" items, which require special assistance due to their weight or fragility.

For the second quarter of 2005, selling, general and administrative expenses increased to $15.2 million, from $10.9 million in the same period last year, primarily due to costs associated with the opening of new Studios, Sarbanes-Oxley compliance, and the Company's Employee Stock Purchase Plan.

Selling, general and administrative expenses as a percentage of sales decreased to 36.2 percent, from 38.6 percent in the same period last year, as the Company leveraged fixed fulfillment center costs and corporate overhead spread over increased sales.

Guidance

Design Within Reach remains comfortable with its previously issued revenue guidance of $160 to $165 million for 2005. The Company is, however, lowering diluted earnings per share to a range of $0.40-$0.42, which suggests an approximately 38 percent-45 percent EPS growth rate from 2004.

This reduction reflects the Company's decision to minimize the use of promotional activity to offset product and shipping margin pressures and additional Sarbanes-Oxley compliance expenses. Design Within Reach expects the vast majority of earnings for the second half of 2005 to come in the fourth quarter as the benefits from the product and shipping initiatives begin to take hold.


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