Danier Leather announced its unaudited interim consolidated financial results for the first quarter of fiscal 2016 ended September 26, 2015. Sales decreased by 12% to $18.2 million compared with $20.6 million during Q1 last year.
Article continues below
Comparable store sales decreased by 10% compared to the same period last year.
On August 27, 2015, the company converted its existing operating and revolving credit facilities of $29 million into an asset based loan facility of $35 million with its existing lender.
The asset based loan facility has a term of three years with an initial commitment of $35 million that will reduce to $28.5 million upon the sale of the company's head office building and property on October 1, 2015.
The head office location was sold for net proceeds of $11.4 million with an expected gain on sale of $6.9 million. The Company is leasing back the building from the purchaser for the next seven years at fixed rental rates.
Gross profit margin during the first quarter of fiscal 2016 was 44.1% compared with 46.7% during the same period last year. The decrease in gross profit margin was mainly due to increased promotional activity undertaken by the company in order to reduce past-season built-up inventory, increased inventory provisions and the effect of the weakened Canadian dollar relative to the U.S. dollar.
Selling, general and administrative expenses of $14.9 million incurred during the first quarter of fiscal 2016 decreased by approximately $2.6 million compared with the same period last year due to cost reduction initiatives including lowered salary expense of $1.2 million and reduced advertising spend of $0.9 million.
Foreign exchange gains of $1.9 million were recorded on derivative financial instruments during the first quarter of 2016 ($1.0 million in the same period last year) due to the decline in the Canadian dollar in relation to the U.S. dollar.
The net loss of approximately $6.0 million during the first quarter of fiscal 2016 increased by approximately $0.1 million compared with the net loss of $5.9 million during the first quarter last year.
At the end of first quarter of fiscal 2016, Danier had working capital(3) of $15.0 million ($24 million as at September 27, 2014). On-going operating losses are being financed by increased bank indebtedness.
The company's net bank indebtedness increased from $2.2 million as at September 27, 2014 to net bank indebtedness of $17.5 million as at September 26, 2015.
Total inventory of $33.5 million as at September 26, 2015 was approximately $3.2 million higher than inventory of $30.3 million at the end of the first quarter last year. ■