SOURCE: Gordmans Stores, Inc.

November 20, 2015 07:00 ET

Gordmans Stores, Inc. Announces Third Quarter 2015 Results

Reports Positive Third Quarter Comparable Sales Growth

OMAHA, NE--(Marketwired - Nov 20, 2015) - Gordmans Stores, Inc. (NASDAQ: GMAN), an Omaha-based apparel and home décor retailer, announced results for its third quarter and nine months ended October 31, 2015. 

Third Quarter Highlights

  • Net sales increased 4.9% to $153.9 million compared to $146.7 million. 
  • Comparable store sales increased 0.8%.
  • Gross profit increased 50 bps to 44.4%.
  • Opened two new stores in Bismarck, North Dakota and in Cincinnati, Ohio.

Andy Hall, President and Chief Executive Officer, commented, "We are pleased that the business has returned to positive comparable store sales growth while at the same time fueling a 50 basis point increase in gross profit. The merchandise and marketing initiatives that we've implemented over the past year are resonating with our customers, driving improvements in both units per transaction and transaction value. With the successful launch of our e-commerce platform in August, we are now able to bring our unique everyday value priced concept to a much broader audience. We are optimistic that we can maintain our positive momentum in the fourth quarter despite the warm start to November and a tougher sales comparison with a year ago. Looking further ahead, we believe our current growth strategies have us on track towards delivering enhanced profitability and greater shareholder value over the long-term."

Hall continued, "Our inventories are in good shape to start the fourth quarter. This year we are flowing goods through our distribution centers and into our stores on a more timely basis which will allow us to better maximize sales."

Third Quarter Financial Results
Net sales for the third quarter ended October 31, 2015 increased 4.9% to $153.9 million from $146.7 million for the third quarter last year. Comparable store sales on an owned plus licensed basis increased 0.3%. On an owned basis, comparable store sales increased 0.8%.

Gross profit increased by 6.1% to $68.4 million, or 44.4% of sales, from $64.4 million, or 43.9% of sales, in the third quarter of fiscal 2014. The 50 basis point increase in gross profit was primarily due to lower markdowns compared to last year.

Selling, general and administrative expenses were $71.9 million, or 46.7% of sales, compared to $66.5 million, or 45.3% of sales, in the third quarter last year. The increase in expenses was primarily due to an increased store count, the addition of e-commerce, increased investment in advertising, higher depreciation expense and the cost to close one Chicago market store.

The net loss for the 2015 third quarter was $2.8 million, or ($0.14) per diluted share, compared to a net loss of $1.9 million, or ($0.10) per diluted share, in the third quarter of fiscal 2014.

Nine Month Financial Results
Net sales for the first nine months of fiscal 2015 increased by $12.5 million, or 2.9%, to $443.2 million. Comparable store sales decreased 0.8% on both an owned and owned plus licensed basis. Gross profit increased 4.6%, to $196.1 million and represented 44.3% of sales, compared to $187.5 million and 43.5% of sales last year, which represents an 80 basis point increase. The 2015 net loss on an adjusted basis, excluding charges related to debt extinguishment, for the first nine months was $4.2 million, or ($0.22) per diluted share, a 27% improvement over last year's unadjusted net loss of $5.8 million, or ($0.30) per diluted share. The net loss for the first nine months on a GAAP basis was ($0.28) per diluted share.

New Stores
The Company opened two new stores in Bismarck, North Dakota and in Cincinnati, Ohio and closed one existing store in Algonquin, Illinois (Chicago market) during the third quarter of 2015. The Company has opened five net new stores year-to-date and has no store openings or closings planned for the fourth quarter of 2015. The Company expects to operate 102 stores at year end.

E-Commerce
In August, the Company expanded its presence from 22 states to a national footprint with the addition of online shopping. Now guests from across the country may access savings of up to 60% off department store prices every day. Gordmans.com provides shoppers with a wide array of merchandise found in Gordmans stores including apparel and footwear for men, women and children in addition to home décor, designer fragrances, fashion jewelry, bedding and bath and toys. 

Inventories
Inventories at October 31, 2015 were $165.1 million, an increase of 9.8% compared with inventories of $150.4 million at November 1, 2014. This increase results from four additional stores, our e-commerce inventory investment and earlier flow of holiday receipts through our distribution centers.

Fourth Quarter Outlook
For the 2015 fourth quarter, the Company expects net sales to be between $211.4 million and $215.8 million, which reflects comparable store sales growth in the range of flat to 2% on an owned plus licensed basis. The Company expects gross profit as a percent of sales to improve versus last year. Selling, general and administrative expenses are expected to deleverage in the fourth quarter primarily due to additional advertising, e-commerce and depreciation expense. The Company projects diluted earnings per share in the range of $0.12 to $0.16 for the fourth quarter. The weighted average diluted share count is expected to be approximately 19.5 million. 

Conference Call Information
A conference call to discuss third quarter financial results is scheduled for today, November 20, 2015 at 11:00 a.m. Eastern Time. The conference call will be webcast live at http://investor.gordmans.com/events.cfm. A replay of this call will be available within two hours of the conclusion of the call and will remain on the website for one year.

About Gordmans Stores, Inc.
Gordmans (NASDAQ: GMAN) is an everyday value priced department store featuring a large selection of name brands and the latest fashions and styles at up to 60 percent off department and specialty store prices. The wide range of merchandise includes apparel and footwear for men, women and children, as well as accessories, home décor, gifts, designer fragrances, fashion jewelry, bedding and bath, accent furniture and toys. Founded in 1915, Gordmans guests can shop in any of our 102 stores in 22 states or at gordmans.com. For more information about Gordmans, please visit www.gordmans.com

Safe Harbor Statement
Certain statements in this release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "guidance," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding expected net sales, net income < loss >, comparable store sales, diluted earnings < loss > per share, and store expansion, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, guest preferences and other related factors; (3) fluctuations in our sales and profitability on a seasonal basis; (4) intense competition from other retailers; (5) our ability to maintain or improve levels of comparable store sales; (6) our ability to attract and retain talent and (7) our successful implementation of advertising, marketing and promotional strategies.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including other risks, relevant factors and uncertainties identified in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2015, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 
GORDMANS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
                   
    October 31,
2015

(Unaudited)
    January 31,
2015
(Unaudited)
    November 1,
2014

(Unaudited)
 
ASSETS                        
CURRENT ASSETS:                        
  Cash and cash equivalents   $ 8,860     $ 7,634     $ 12,417  
  Accounts receivable     3,814       3,930       3,400  
  Landlord receivable     2,290       1,559       2,585  
  Income taxes receivable     4,140       8,525       4,312  
  Merchandise inventories     165,082       94,470       150,403  
  Deferred income taxes     2,896       2,895       2,732  
  Prepaid expenses and other current assets     9,301       8,535       8,742  
                         
    Total current assets     196,383       127,548       184,591  
PROPERTY AND EQUIPMENT, net     86,443       91,601       89,832  
INTANGIBLE ASSETS, net     1,820       1,820       1,841  
OTHER ASSETS, net     4,762       5,908       5,975  
                         
TOTAL ASSETS   $ 289,408     $ 226,877     $ 282,239  
                         
LIABILITIES AND STOCKHOLDERS' EQUITY                        
CURRENT LIABILITIES:                        
  Accounts payable   $ 111,215     $ 64,349     $ 119,549  
  Accrued expenses     30,256       31,353       32,092  
  Current portion of long-term debt     37,739       12,463       7,133  
                         
    Total current liabilities     179,210       108,165       158,774  
                         
NONCURRENT LIABILITIES:                        
  Long-term debt, less current portion     28,428       28,827       44,291  
  Deferred rent     31,147       35,381       33,043  
  Deferred income taxes     16,344       15,636       9,831  
  Other liabilities     188       381       327  
                         
    Total noncurrent liabilities     76,107       80,225       87,492  
                         
COMMITMENTS AND CONTINGENCIES                        
STOCKHOLDERS' EQUITY:                        
  Preferred stock     --       --       --  
  Common stock     20       20       20  
  Additional paid-in capital     54,887       53,870       53,652  
  Accumulated deficit     (20,816 )     (15,403 )     (17,699 )
                         
    Total stockholders' equity     34,091       38,487       35,973  
                         
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 289,408     $ 226,877     $ 282,239  
                         
                         
   
GORDMANS STORES, INC. AND SUBSIDIARIES  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Dollars in Thousands Except Per Share Data)  
                         
    13 Weeks
Ended
October 31,
2015

(Unaudited)
    13 Weeks
Ended
November 1,
2014
(Unaudited)
    39 Weeks
Ended
October 31,
2015

(Unaudited)
    39 Weeks
Ended
November 1,
2014

(Unaudited)
 
Net sales   $ 153,856     $ 146,653     $ 443,230     $ 430,714  
License fees from leased departments     2,196       2,284       6,615       6,445  
  Cost of sales     (87,700 )     (84,525 )     (253,698 )     (249,643 )
                                 
Gross profit     68,352       64,412       196,147       187,516  
Selling, general and administrative expenses     (71,915 )     (66,468 )     (200,052 )     (193,320 )
                                 
  Loss from operations     (3,563 )     (2,056 )     (3,905 )     (5,804 )
Interest expense, net     (892 )     (1,350 )     (2,966 )     (3,888 )
Loss on extinguishment of debt     --       --       (2,014 )     --  
                                 
  Loss before taxes     (4,455 )     (3,406 )     (8,885 )     (9,692 )
Income tax benefit     1,692       1,555       3,465       3,920  
                                 
  Net loss   $ (2,763 )   $ (1,851 )   $ (5,420 )   $ (5,772 )
                                 
                                 
Basic loss per share   $ (0.14 )   $ (0.10 )   $ (0.28 )   $ (0.30 )
Diluted loss per share   $ (0.14 )   $ (0.10 )   $ (0.28 )   $ (0.30 )
                                 
Basic weighted average shares outstanding     19,424       19,363       19,397       19,358  
Diluted weighted average shares outstanding     19,424       19,363       19,397       19,358  
                                 
                                 
Ratios as a percent of sales:                                
Gross profit     44.4 %     43.9 %     44.3 %     43.5 %
Selling, general and administrative expenses     46.7 %     45.3 %     45.1 %     44.9 %
Loss from operations     (2.3 %)     (1.4 %)     (0.9 %)     (1.3 %)
Effective tax rate     38.0 %     45.7 %     39.0 %     40.4 %
Net loss     (1.8 %)     (1.3 %)     (1.2 %)     (1.3 %)
                                 
                                 
Excluding loss on extinguishment of debt:                                
Net loss   $ (2,763 )   $ (1,851 )   $ (4,215 )   $ (5,772 )
Diluted loss per share   $ (0.14 )   $ (0.10 )   $ (0.22 )   $ (0.30 )
Net loss as a percent of sales     (1.8 %)     (1.3 %)     (1.0 %)     (1.3 %)
                                 
                                 
 
GORDMANS STORES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
 
             
    39 Weeks
Ended
October 31,
2015
(Unaudited)
    39 Weeks
Ended
November 1,
2014
(Unaudited)
 
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (5,420 )   $ (5,772 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
  Depreciation and amortization expense     12,368       9,633  
  Write-off of deferred financing fees related to extinguishment of debt     1,722       --  
  Amortization of deferred financing fees     414       444  
  Loss on retirement / sale of property and equipment     708       346  
  Deferred income taxes     707       361  
  Deferred tax asset shortfall related to share-based compensation expense     (26 )     (235 )
  Share-based compensation expense, net of forfeitures     1,011       107  
  Net changes in operating assets and liabilities:                
    Accounts, landlord and income taxes receivable     3,770       983  
    Merchandise inventories     (70,612 )     (55,692 )
    Prepaid expenses and other current assets     (766 )     (124 )
    Other assets     166       (181 )
    Accounts payable     46,866       76,988  
    Deferred rent     (4,234 )     1,452  
    Accrued expenses and other liabilities     1,539       6,694  
                 
      Net cash provided by (used in) operating activities     (11,787 )     35,004  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
    Purchase of property and equipment     (14,283 )     (42,048 )
    Proceeds from sale-leaseback transactions     3,556       15,849  
    Cash received on sale of property and equipment     --       57  
    Proceeds from insurance settlement     21       39  
                 
      Net cash used in investing activities     (10,706 )     (26,103 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
    Borrowings on revolving line of credit     169,350       146,600  
    Repayments on revolving line of credit     (144,493 )     (148,004 )
    Proceeds from secured term loan     30,000       --  
    Payment of long-term debt     (29,980 )     (281 )
    Payment of debt issuance costs     (863 )     (476 )
    Payment penalty on early extinguishment of debt     (292 )     --  
    Dividends paid     (34 )     (67 )
    Repurchase of common stock     --       (15 )
    Proceeds from the exercise of stock options     31       --  
                 
      Net cash provided by (used in) financing activities     23,719       (2,243 )
                 
NET INCREASE IN CASH AND CASH EQUIVALENTS     1,226       6,658  
CASH AND CASH EQUIVALENTS, Beginning of period     7,634       5,759  
                 
CASH AND CASH EQUIVALENTS, End of period   $ 8,860     $ 12,417  
                 
                 
 
GORDMANS STORES, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO NON-GAAP ADJUSTED FINANCIAL MEASURES
(Unaudited)
 
To supplement our condensed consolidated statements of operations presented in accordance with generally accepted accounting principles ("GAAP"), we are providing non-GAAP adjusted financial measures of operating results that exclude certain items. Loss on extinguishment of debt, loss before taxes, income tax benefit, net loss, and both basic and diluted loss per share are presented below both as reported on a GAAP and non-GAAP adjusted basis related to the loss on extinguishment of debt associated with refinancing our term debt during the second quarter of fiscal 2015. We believe these items should be presented separately to enhance a reader's overall understanding of the Company's ongoing operations. These non-GAAP adjusted financial measures should be considered in conjunction with the GAAP financial measures. We believe these non-GAAP adjusted financial measures provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. In addition, we evaluate results using GAAP and non-GAAP adjusted financial measures. These non-GAAP adjusted financial measures should not be considered in isolation or as a substitute for GAAP financial measures. The following table reconciles the GAAP to Non-GAAP adjusted financial measures for the period presented.
                         
    39 Weeks Ended
October 31, 2015 GAAP Basis as Reported
(Unaudited)
    Non-GAAP Adjustments
(Unaudited)
    39 Weeks Ended
October 31, 2015 Non-GAAP as Adjusted
(Unaudited)
    39 Weeks Ended
November 1, 2014 GAAP Basis as Reported
(Unaudited)
 
Loss from operations   $ (3,905 )   $ --     $ (3,905 )   $ (5,804 )
Interest expense, net     (2,966 )     --       (2,966 )     (3,888 )
Loss on extinguishment of debt     (2,014 )     2,014       --       --  
                                 
Loss before taxes     (8,885 )     2,014       (6,871 )     (9,692 )
Income tax benefit     3,465       (809 )     2,656       3,920  
                                 
Net loss   $ (5,420 )   $ 1,205     $ (4,215 )   $ (5,772 )
                                 
                                 
Basic loss per share   $ (0.28 )   $ 0.06     $ (0.22 )   $ (0.30 )
Diluted loss per share   $ (0.28 )   $ 0.06     $ (0.22 )   $ (0.30 )
                                 
                                 

Contact Information

  • Company Contact:
    James Brown
    Chief Financial Officer
    (402) 691-4126

    Investor Relations:
    ICR, Inc.
    Brendon Frey
    (203) 682-8200