New York & Company announced results for the first quarter ended May 2, 2015. Net sales were $223.4 million, as compared to $219.6 million in the prior year.
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Comparable store sales increased 1.8%, following a decrease of 2.2% for the same period last year. Gross profit as a percentage of net sales increased 50 basis points versus the fiscal 2014 first quarter.
Selling, general and administrative expenses were $68.5 million, as compared to $62.1 million in the prior year period. Included in fiscal 2015 first quarter are $2.9 million of non-operating charges related primarily to the company’s business process re-engineering project, and $2.1 million of increased marketing expenses, which are unique to the quarter and relate to a testing agenda to drive traffic, increase brand awareness and improve sales.
In addition, on an ongoing basis, rent and depreciation expense has increased by $1.3 million related to the company’s new corporate headquarters, and the company has also experienced increases in variable distribution expenses associated with its growing eCommerce business, which were offset by the savings recognized as a result of the company’s organizational realignment initiated in the third quarter of fiscal year 2014.
GAAP operating loss was $4.2 million, as compared to the prior year’s first quarter GAAP breakeven operating income. On a non-GAAP basis, excluding $2.9 million of non-operating charges, adjusted operating loss was $1.4 million.
GAAP net loss for the first quarter of fiscal year 2015 was $4.7 million, or a loss of $0.07 per diluted share. This compares to the prior year’s GAAP net loss of $0.3 million, or breakeven per diluted share. On a non-GAAP basis, the company’s adjusted net loss was $1.8 million, or a loss of $0.03 per diluted share.
Please refer to the “Reconciliation of GAAP to Non-GAAP Financial Measures†in Exhibit 4 of this press release, which delineates the non-operating charges for the first quarter of fiscal year 2015.
There were no non-operating charges recorded during the first quarter of fiscal year 2014.
Total quarter-end inventory increased 8.0%, as compared to the end of last year’s first quarter, which was slightly below the company’s previously issued guidance on March 19, 2015.
Capital spending for the first quarter of fiscal year 2015 was $6.7 million, as compared to $4.6 million in last year’s first quarter, primarily reflecting continued investments in the company’s information technology infrastructure, including its omni-channel retail strategy, and the opening of new stores.
The decrease in capital spending during the first quarter of fiscal year 2015, compared to the company’s previously issued guidance, is primarily due to cost savings and modifications to the timing of the build-out of the company’s new corporate headquarters and information technology projects.
The company opened 2 New York & company stores, 3 Outlet stores, closed 5 stores, converted 9 New York & company locations to Outlet stores, and remodeled 2 New York & company stores during the first quarter, ending the fiscal quarter with 504 stores, including 74 Outlet stores, and 2.6 million selling square feet in operation.
The company ended the quarter with $48.4 million of cash-on-hand and no outstanding borrowings under its revolving credit facility, as compared to $47.5 million of cash-on-hand at the end of last year’s first quarter.
Regarding expectations for the second quarter of fiscal year 2015, the company is providing the following guidance:
Net sales and comparable store sales are expected to increase by a low single-digit percentage versus last year.
Gross margin is expected to increase by 100-200 basis points from the prior year’s second quarter rate reflecting improved product costs and improved leverage of buying and occupancy costs, partially offset by increased shipping costs associated with the growing omni-channel business.
Selling, general and administrative expenses are expected to be up approximately $5 million from last year reflecting non-operating charges of approximately $1 million, which are primarily comprised of consulting related expenses due to the continuation of the business process re-engineering project.
The increase in selling, general and administrative expenses reflects investments in marketing, anticipated increases in performance-based compensation accruals as compared to last year, increased rent expense for the company’s new corporate headquarters and higher depreciation resulting from the increase in information technology investments, partially offset by savings recognized as a result of the company’s organizational realignment.
Selling, general and administrative expenses are expected to normalize during the second half of the year.
On a non-GAAP basis, excluding the non-operating charges of $1 million, adjusted operating income is expected to be between $1 million and $2 million, reflecting an improvement from the prior year’s breakeven operating income. ■