Sterling Shoes Income Fund reported its financial results for the fourth quarter and year ended December 31, 2009.
Fourth Quarter Highlights:
• Net bank debt improved to $0.9 million at December 31, 2009 from $11.8 million at September 30, 2009 • Sales were $41.2 million in fourth quarter 2009 compared to $42.5 million in 2008 • Gross margin increased to 56.3% of sales in fourth quarter 2009, compared to 56.0% last year • Store and selling expenses and G&A expenses both decreased in fourth quarter 2009 as a percentage of sales compared to 2008 • Adjusted EBITDA rose to $8.1 million or 19.8% of sales in fourth quarter 2009 compared to $7.8 million or 18.3% of sales in 2008
"We are pleased with our fourth quarter performance", said Jeremy Horwitz, President and Chief Executive Officer. "Despite challenging economic conditions and lower sales, Sterling improved gross margins, lowered operating and administrative costs and increased profitability compared to the same period last year. We also reduced inventory levels, changed our product mix, restricted maintenance and capital expenditures, and suspended distributions to Unitholders."
"These actions have improved our cost competitiveness and reduced our net debt, thereby providing us with greater business flexibility. We believe that our business is currently in a much better position to weather future economic volatility than it was twelve months ago. We are also positioning Sterling for sustainable long-term earnings and growth once economic conditions stabilize."
Financial Results for the three months ended December 31, 2009
During the three months ended December 31, 2009, sales declined 3% to $41.2 million from $42.5 million a year earlier. Same store sales declined by 5.6% compared to the same period during 2008.
Cost of sales as a percentage of sales for the three months ended December 31, 2009 was 43.7% compared to 44.0% for the same period during 2008. Efforts to reduce inventory levels during the first three quarters of 2009 allowed Sterling to make room for higher margin inventory, which contributed to higher margins during the three month period ended December 31, 2009. These efforts were offset in part by the cost of heavy promotional activity required to generate sales, clear inventory and respond to competitive forces.
Store and selling expenses for the three months ended December 31, 2009 were 30.7% of sales, compared to 31.5% for the same period during 2008. Store and selling expenses have a fixed underlying core with a large variable component, primarily consisting of expenses relating to occupancy and employee costs. The Fund undertook a comprehensive review of business processes during earlier months which resulted in greater operating flexibility and a reduction of store and selling expenses in the last quarter of 2009. The Fund did not open any new stores during the three months ended December 31, 2009.
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