Bombay posts loss, to close stores
By Clint Engel -- Furniture Today, April 10, 2006
Fort Worth, Texas — Specialty retailer The Bombay Company posted a $25.1 million loss in its fourth quarter, and said it plans to close a net 33 to 38 stores this year.
The chain said special charges and declining sales contributed to the loss.
In addition to the store closings, Bombay will continue migrating stores to off-mall locations. It also will test new merchandise and merchandising techniques, including a bath category, and try smaller but more frequent product introductions.
The company, which is seeking a successor to Chairman and CEO James Carreker, set to step down in June, said it is interviewing quality candidates, although the search committee hasn't yet made a recommendation.
The $25.1 million net loss in the quarter ended Jan. 28 compares to a $7.1 million profit in the comparable quarter last year, and included non-cash and other charges of $29.1 million, mainly related to an accounting change involving valuation of deferred taxes.
Without the charges, Bombay would have had net income in the quarter of $4 million, or 11 cents per share, just above its guidance. Revenue dropped 8.1% to $186.9 million from $203.4 million in the fourth quarter a year ago, and same-store sales decreased 4.3%.
For the year, the 498-store retailer reported a loss of $46.7 million, including the charges, compared to a $12.6 million loss a year ago. Revenue dipped 1.9% to $565.1 million.
In a conference call with the investment community, Carreker reviewed many of the steps the retailer has taken in the past three years to return to profitability, including its investments in infrastructure, its gradual move out of shopping malls and the changes in its marketing and merchandising programs.
"Unfortunately, we've not yet delivered on the financial potential of our company," he said. Bombay expected to do better this past year than the year before, Carreker said, believing it was positioned for a much better holiday season, but that didn't materialize.
Bombay has hired William Blair & Co. "to help with its ongoing assessment and development of the company's business, operating and capital allocation strategies, with a focus on improving shareholder value." It said that until the process is further along, it doesn't plan to provide earnings guidance.
The recent downturn in results prompted Bombay to conduct a thorough review of stores, and it identified about 25 unprofitable units that will close this year. An additional 35 to 40 stores are expected to close as leases expire, although some will be relocated. The net result should be a drop in store count at the end of the year to 460 to 465 stores from the current 498 units, Bombay said.
The company also said it is testing variations of its assortment in some stores and remerchandising older mall units. Carreker said some of the altered assortments will feature lower prices and less fashion risk. He also said a 74-store test is under way with bath furnishings and accessories.
Executive Vice President and General Merchandise Manager Steve Woodward said that bath accent furniture and related items are off to a stronger start than the lotions.
He added the overall emphasis continues to be on upgrading Bombay's assortment to appeal to a more upscale consumer as a point of differentiation with competitors.
This year, Bombay plans five smaller product launches vs. the typical two major introductions in February and August/September, keeping a regular flow of fresh goods coming in to stores and giving customers a reason to shop more often.
Bombay also said it will reduce its clearance-related promotions this year, continue to control costs, improve its supply chain and invest in marketing to drive retail and Internet sales.
| The Bombay Company | |||
|---|---|---|---|
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 1/28 | 2006 | (a) 2005 | Change |
| a) Restated. b) Based on average shares outstanding of 36.4 million in the 2006 quarter, 36.5 million in the 2005 quarter, 36.2 million in the 2006 year and 35.7 million in the 2005 year. c) Includes a $560,000 pretax gain on the sale of assets and a $4.1 million pretax gain on the sale of non-operating assets. d) Includes a $6.7 million income tax benefit. | |||
| Revenues | $186,854,000 | $203,358,000 | (8.1%) |
| Operating income | (908,000) | 11,305,000 | — |
| Net income | (25,055,000) | 7,117,000 | — |
| Earnings per share (b) | (0.69) | 0.20 | — |
| Year ended 1/28 | 2006 | (a) 2005 | Change |
| Revenues | $565,074,000 | $576,087,000 | (1.9%) |
| Operating income | (37,082,000) | (18,812,000) | — |
| Net income | (c) (46,731,000) | (d) (12,641,000) | — |
| Earnings per share (b) | (1.29) | (0.35) | — |
