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Danier Leather reports fiscal 2010 Q3 results

04
May '10
Danier Leather Inc. announced its unaudited interim consolidated financial results for the 13 week and 39 week periods ended March 27, 2010.

Q3 Highlights

• Comparable store sales increased by 11%
• Gross profit dollars increased by 36%
• EBITDA increased by $5.0 million
• Cash increased by $7.7 million to $32.3 million from $24.6 million in the third quarter last year
• 1,120,000 Subordinate Voting Shares repurchased under a Substantial Issuer Bid

Net earnings during the third quarter of fiscal 2010 were $2.8 million ($0.48 per diluted share) compared with a net loss of $2.3 million ($0.37 loss per diluted share) during the third quarter last year. The third quarter of last year included staff reduction costs of $1.4 million ($1.0 million after tax, or $0.16 per diluted share) and a goodwill impairment charge of $0.3 million ($0.05 per diluted share). Therefore, adjusted net earnings, which excludes staff reduction costs and the goodwill impairment charge (and income taxes related to the restructuring costs and goodwill impairment charge), was $2.8 million for the third quarter of fiscal 2010 compared with an adjusted net loss of $1.0 million during the third quarter of fiscal 2009.

Sales for the third quarter of fiscal 2010 increased by 8% to $46.9 million from $43.5 million in the third quarter last year. Comparable store sales increased by 11%. Gross profit margin increased by 1,070 basis points to 52.1% from 41.4% resulting in a gross profit dollar increase of 36% or $6.4 million to $24.4 million from $18.0 million during the third quarter last year. The increase in gross profit margin was mainly due to improved merchandise planning and purchasing, a stronger Canadian dollar and reduced markdowns as compared with the third quarter last year.

Selling, general and administrative expenses ("SG&A") during the third quarter of fiscal 2010 increased by $1.1 million. The increase was due 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.

For the year-to-date period, net earnings increased by $7.4 million to $7.9 million ($1.33 per diluted share) compared with net earnings of $0.5 million ($0.07 per diluted share) for the corresponding period last year. As mentioned above, the third quarter of last year included staff reduction costs and a goodwill impairment charge. Therefore, adjusted net earnings for the year-to-date period were $7.8 million ($1.32 per diluted share) compared with $1.8 million ($0.28 per diluted share) during the same period last year.

Year-to-date sales increased by 2% to $137.4 million compared with $135.1 million for the corresponding period last year. Year-to-date comparable store sales increased by 5%. Gross profit as a percentage of revenue for the 39 week period ended March 27, 2010 increased by 770 basis points to 52.7% compared with 45.0% during the same period last year and year-to-date SG&A was $60.5 million compared with $58.3 million last year.


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