dELiA*s, Inc. Announces Fourth Quarter and Year End Fiscal 2012 Results

dELiA*s, Inc. Announces Fourth Quarter and Year End Fiscal 2012 Results

Retention of a Strategic Advisor with an Initial Focus on Alloy

Update to Senior Leadership Transitions


NEW YORK--(BUSINESS WIRE)-- dELiA*s, Inc. (NASDAQ:DLIA), a multi-channel retail company comprised of two lifestyle brands primarily marketing to teenage girls and young women, today announced the results for its fourth quarter of fiscal 2012 (the fourth quarter of fiscal 2012 consisted of fourteen weeks compared to the fourth quarter of 2011, which consisted of thirteen weeks) and fiscal year 2012 (fiscal year 2012 consisted of fifty-three weeks compared to fiscal year 2011, which consisted of fifty-two weeks).

Fourth Quarter Fiscal 2012 Highlights:

  • Total revenue increased 1.0% to $66.2 million from $65.6 million in the prior year quarter. Revenue from the retail segment decreased 2.4% to $32.8 million, due to a reduction in store count and a comparable store sales decrease of 0.3%. Revenue from the direct segment increased 4.4% to $33.4 million on a catalog circulation increase of 1.0%.

  • Consolidated gross margin decreased to 31.4% compared to 32.3% in the prior year quarter.

  • Net loss was $10.7 million, or $0.34 per diluted share, compared to $4.2 million, or $0.13 per diluted share, in the prior year quarter. Included in the fourth quarter of fiscal 2012 were CEO transition costs of $0.6 million, or $0.02 per diluted share, and a goodwill impairment charge of $4.5 million, or $0.14 per diluted share.

Walter Killough, Chief Executive Officer, commented, "For the year, the dELiA*s brand had improved performance, driven primarily by the retail segment which recorded a comparable sales increase of over 5% and reduced its operating loss by almost $8 million. However, the fourth quarter proved disappointing, as a slowdown in mall and web traffic during January caused a negative change in trends in both segments. As we move through a senior management transition, I am focusing on improving the business, including implementing plans to reduce expenses by approximately $7 million and limit capital expenditures, managing inventory levels to improve turns, and partnering with our strategic advisor on a potential sale of the Alloy business."

Results by Segment

Retail Segment Results

Total revenue for the retail segment for the fourth quarter of fiscal 2012 decreased 2.4% to $32.8 million from $33.6 million for the fourth quarter of fiscal 2011 due primarily to a reduction in store count. Fiscal 2012 includes a fifty-third week and therefore the fourth quarter comparable sales are compared to the fourteen-week period ended February 4, 2012 for the prior year. Comparable store sales decreased 0.3% compared to the comparable period of the prior year.

Gross margin for the retail segment, which includes distribution, occupancy and merchandising costs, was 20.9% for the fourth quarter of fiscal 2012 compared to 20.5% in the prior year period. The increase in gross margin resulted primarily from the leveraging of reduced occupancy costs partially offset by increased inventory reserves.

Selling, general and administrative (SG&A) expenses for the retail segment were $12.4 million, or 37.7% of sales, in the fourth quarter of fiscal 2012 compared to $12.8 million, or 38.0% of sales, in the prior year period. The decrease in SG&A expenses, in dollars and as a percent of revenues, resulted from reduced selling and depreciation expenses. Included in SG&A expenses for the fourth quarter of fiscal 2012 were approximately $0.3 million of costs related to the Company's CEO transition.

In the fourth quarter of fiscal 2012, the Company recorded a pre-tax non-cash store impairment charge of $0.2 million related to an underperforming store location. In the fourth quarter of fiscal 2011, the Company recorded a pre-tax non-cash store impairment charge of $0.5 million related to certain underperforming store locations.

The operating loss for the fourth quarter of fiscal 2012 for the retail segment decreased to $5.6 million compared to $6.2 million in the prior year period.

The Company closed three stores during the fourth quarter of fiscal 2012, ending the period with 104 stores.

Direct Segment Results

Total revenue for the direct segment for the fourth quarter of fiscal 2012 increased 4.4% to $33.4 million from $32.0 million in the fourth quarter of fiscal 2011. Catalog circulation increased by 1.0% compared to the fourth quarter of fiscal 2011. Fiscal 2012 includes a fifty-third week and therefore fourth quarter revenues consisted of a fourteen week period. The extra week in the fourth quarter of fiscal 2012 added $1.7 million in revenues.

Gross margin for the direct segment was 41.4% for the fourth quarter of fiscal 2012 compared to 44.6% in the fourth quarter of fiscal 2011. The decrease in gross margin resulted primarily from higher shipping and handling costs.

SG&A expenses for the direct segment were $15.4 million, or 46.2% of sales, in the fourth quarter of fiscal 2012 compared to $13.5 million, or 42.4% of sales, in the prior year period. The increase in SG&A expenses, in dollars and as a percent of sales, reflects increased selling, overhead and depreciation expenses. Included in SG&A expenses for the fourth quarter of fiscal 2012 were approximately $0.3 million of costs related to the Company's CEO transition.

In the fourth quarter of fiscal 2012, the Company recorded a pre-tax non-cash goodwill impairment charge of $4.5 million primarily as a result of the performance of the Alloy business. The Company also recognized $1.2 million of gift card breakage income in the fourth quarter of fiscal 2012 compared to $1.6 million in the prior year period.

Operating loss for the fourth quarter of fiscal 2012 for the direct segment was $4.8 million compared to an operating income of $2.3 million in the prior year period. Included in the fourth quarter of fiscal 2012 was the aforementioned goodwill impairment charge of $4.5 million, $0.3 million of costs related to the Company's CEO transition and the gift card breakage benefit of $1.2 million. Included in the fourth quarter of fiscal 2011 was a $1.6 million gift card breakage benefit.

Balance Sheet Highlights

At the end of the fourth quarter of fiscal 2012, cash and cash equivalents were $16.8 million compared with $28.4 million at the end of the fourth quarter of fiscal 2011.

Total net inventories at the end of the fourth quarter of fiscal 2012 were $30.5 million compared with $30.9 million at the end of the fourth quarter of fiscal 2011. Inventory per average retail store was up 7.7% compared to the prior year period, and inventory for the direct segment was up 0.8% compared to the prior year.

Fiscal Year 2012 Results

For the fiscal year ended February 2, 2013, total revenue increased 2.6% to $222.7 million from $217.2 million for the prior year period. Fiscal 2012 includes a fifty-third week and therefore the fiscal 2012 comparable sales are compared to the fifty-three week period ended February 4, 2012 for the prior year. Comparable store sales increased 5.2% compared to the comparable fifty-three week period of the prior year. Revenues in the direct segment increased 3.4% over the prior year.

Total gross margin was 32.8% compared to 31.5% for the prior year period. SG&A expenses were $93.4 million, or 42.0% of sales, for fiscal 2012, compared to $92.7 million, or 42.7% of sales, for the prior year period.

The operating loss for fiscal 2012 decreased to $20.8 million, compared to $22.9 million for fiscal 2011. Included in fiscal 2012 were the pre-tax non-cash store impairment charge of $0.2 million, $0.6 million of costs related to the Company's CEO transition, $4.5 million of a pre-tax non-cash goodwill impairment charge, store and customer contact center closing costs of $1.1 million, and a gift card breakage benefit of $4.2 million. Included in fiscal 2011 were pre-tax non-cash store impairment charges of $0.5 million and a gift card breakage benefit of $2.0 million.

Net loss for fiscal 2012 decreased to $21.6 million, or $0.69 per diluted share, compared to a net loss of $22.7 million, or $0.73 per diluted share, for fiscal 2011. Included in fiscal 2012 were the aforementioned store impairment charge of $0.2 million, or $0.01 per diluted share, CEO transition costs of $0.6 million, or $0.02 per diluted share, goodwill impairment charge of $4.5 million, or $0.14 per diluted share, store and customer contact center closing costs of $1.1 million, or $0.04 per diluted share, and gift card breakage benefit of $4.2 million, or $0.13 per diluted share. Included in fiscal 2011 were the aforementioned store impairment charge of $0.5 million, or $0.02 per diluted share, and a gift card breakage benefit of $2.0 million, or $0.06 per diluted share.

The provision for income taxes for fiscal 2012 was $0.1 million, or $0.00 per diluted share, compared to an income tax benefit of $0.8 million, or $0.03 per diluted share, for fiscal 2011.

Retention of a Strategic Advisor

The Company has retained Janney Montgomery Scott LLC as strategic advisor to the Board of Directors. The initial focus will be on the potential disposition of the Company's Alloy brand. The Board of Directors has not set a definitive timetable for any transaction, and there can be no assurance that Janney's retention will result in any specific action or transaction. The Company does not intend to disclose or comment on developments until such time as the Board takes action, if any, or otherwise deems disclosure appropriate or required.

Update to Senior Leadership Transitions

Walter Killough has agreed to continue to serve as CEO of dELiA*s on a month-to-month basis as the search for a permanent CEO continues.

Dyan Jozwick, President, dELiA*s Brand, has resigned from the Company effective March 27, 2013. The Company has retained a senior merchandise consultant with relevant experience to oversee the merchandising functions on an interim basis.

Carter Evans, Chairman of the Board, stated, "After much consideration, the board and Company management have decided to make a series of strategic moves, including engaging Janney, in order to focus our efforts to strengthen the balance sheet and better position the dELiA*s brand for long-term success. As we enter the final stages of our CEO search, we are pleased to have Walter's continuing support in executing initiatives that we believe will drive improved performance in the business and lead to a smooth transition process. The Board would also like to thank Dyan for her dedicated service."

Conference Call and Webcast Information

A conference call to discuss fourth quarter and year end fiscal 2012 results is scheduled for Thursday, March 28, 2013 at 10:00 A.M. Eastern Time. The conference call will be webcast live at www.deliasinc.com. A replay of the call will be available until April 28, 2013 and can be accessed by dialing (877) 870-5176 and providing the pass code number 1253048.

During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends. The Company's responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.

About dELiA*s, Inc.

dELiA*s, Inc. is a multi-channel retail company comprised of two lifestyle brands primarily marketing to teenage girls and young women. Its brands - dELiA*s and Alloy - generate revenue by selling apparel, accessories and footwear to consumers through direct mail catalogs, websites, and dELiA*s mall-based retail stores.

Forward-Looking Statements

This press release may contain forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations and beliefs regarding our future results or performance. Because these statements apply to future events, they are subject to risks and uncertainties. When used in this announcement, the words "anticipate", "believe", "estimate", "expect", "expectation", "should", "would", "project", "plan", "predict", "intend" and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements. Additionally, you should not consider past results to be an indication of our future performance. For a discussion of risk factors that may affect our results, see the "Risk Factors That May Affect Future Results" section of our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. We do not intend to update any of the forward-looking statements after the date of this announcement to conform these statements to actual results, to changes in management's expectations or otherwise, except as may be required by law.

dELiA*s, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
(unaudited)

February 2, 2013

January 28, 2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

16,812

$

28,426

Inventories, net

30,544

30,937

Prepaid catalog costs

1,702

2,111

Other current assets

5,297

3,556

TOTAL CURRENT ASSETS

54,355

65,030

PROPERTY AND EQUIPMENT, NET

36,797

42,588

GOODWILL

-

4,462

INTANGIBLE ASSETS, NET

2,419

2,419

OTHER ASSETS

921

837

TOTAL ASSETS

$

94,492

$

115,336

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

31,018

$

24,199

Accrued expenses and other current liabilities

12,098

16,747

Income taxes payable

623

736

TOTAL CURRENT LIABILITIES

43,739

41,682

DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES

9,500

11,545

TOTAL LIABILITIES

53,239

53,227

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:

Preferred Stock, $.001 par value; 25,000,000 shares authorized, none issued

-

-

Common Stock, $.001 par value; 100,000,000 shares authorized; 31,919,615 and 31,726,645 shares issued and outstanding, respectively

32

32

Additional paid-in capital

99,942

99,244

Accumulated deficit

(58,721)

(37,167)

TOTAL STOCKHOLDERS' EQUITY

41,253

62,109

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

94,492

$

115,336

dELiA*s, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

For the Fiscal Quarters Ended

February 2, 2013

January 28, 2012

NET REVENUES

$

66,222

100.0%

$

65,592

100.0%

Cost of goods sold

45,554

68.8%

44,436

67.7%

GROSS PROFIT

20,668

31.2%

21,156

32.3%

Selling, general and administrative expenses

27,793

42.0%

26,333

40.1%

Impairment of goodwill

4,462

6.7%

-

0.0%

Impairment of long-lived assets

181

0.3%

495

0.8%

Other operating income

(1,332)

-2.0%

(1,763)

-2.7%

TOTAL OPERATING EXPENSES

31,104

47.0%

25,065

38.2%

OPERATING LOSS

(10,436)

-15.8%

(3,909)

-6.0%

Interest expense

248

0.4%

183

0.3%

LOSS BEFORE INCOME TAXES

(10,684)

-16.1%

(4,092)

-6.2%

(Benefit) provision for income taxes

(14)

0.0%

72

0.1%

NET LOSS

$

(10,670)

-16.1%

$

(4,164)

-6.3%

BASIC AND DILUTED LOSS PER SHARE:

NET LOSS PER SHARE

$

(0.34)

$

(0.13)

WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES OUTSTANDING

31,397,294

31,239,527

dELiA*s, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

For the Fiscal Years Ended

February 2, 2013

January 28, 2012

NET REVENUES

$

222,699

100.0%

$

217,152

100.0%

Cost of goods sold

149,546

67.2%

148,816

68.5%

GROSS PROFIT

73,153

32.8%

68,336

31.5%

Selling, general and administrative expenses

93,433

42.0%

92,740

42.7%

Impairment of goodwill

4,462

2.0%

-

0.0%

Impairment of long-lived assets

181

0.1%

495

0.2%

Other operating income

(4,169)

-1.9%

(1,957)

-0.9%

TOTAL OPERATING EXPENSES

93,907

42.2%

91,278

42.0%

OPERATING LOSS

(20,754)

-9.3%

(22,942)

-10.6%

Interest expense, net

726

0.3%

577

0.3%

LOSS BEFORE INCOME TAXES

(21,480)

-9.6%

(23,519)

-10.8%

Provision (benefit) for income taxes

74

0.0%

(849)

-0.4%

NET LOSS

$

(21,554)

-9.7%

$

(22,670)

-10.4%

BASIC AND DILUTED LOSS PER SHARE:

NET LOSS PER SHARE

$

(0.69)

$

(0.73)

WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES OUTSTANDING

31,350,931

31,217,185

dELiA*s Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

For the Fiscal Years Ended

February 2, 2013

January 28, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(21,554)

$

(22,670)

Adjustments to reconcile net loss to net cash (used in) provided by

operating activities:

Depreciation and amortization

8,908

11,446

Amortization of deferred financing fees

180

140

Accelerated depreciation on early lease terminations

694

-

Impairment of goodwill

4,462

-

Impairment of long-lived assets

181

495

Stock-based compensation

698

734

Changes in operating assets and liabilities:

Inventories

393

1,088

Prepaid catalog costs and other assets

(1,597)

8,742

Restricted cash

-

8,268

Income taxes payable

(113)

(6)

Accounts payable, accrued expenses and other liabilities

675

(2,951)

Total adjustments

14,481

27,956

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(7,073)

5,286

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures

(4,541)

(4,015)