Liquidation World Inc.
TSX : LQW

Liquidation World Inc.

February 16, 2011 18:00 ET

Liquidation World Announces First Quarter 2011 Results

BRANTFORD, ONTARIO--(Marketwire - Feb. 16, 2011) - Liquidation World Inc. (TSX:LQW) (the "Company"), today announces results for the first quarter of fiscal 2011, representing the 13 week period ending January 2, 2011.

As was announced on February 10, 2011, revenue in the first quarter was $43.4 million, compared with $44.1 million in the first quarter 2010, a decline of approximately 1.6% from the first quarter of 2010.

As was announced on February 10, 2011, during the quarter, the Company recorded a net loss of $6.0 million, ($0.20 per share), compared with a profit of $ 0.7 million ($0.05 per share) in the first quarter of fiscal 2010.

Gross margin was $12.7 million or 29.3% of sales for the first quarter of fiscal 2011 versus $17.3 million, or 39.2% of sales in the first quarter of fiscal 2010.

Throughout the first quarter of fiscal 2011, the Company continued implementing its strategy to improve its supply chain and merchandising process and evolve from a liquidator of close out goods to Canada's premier destination for extreme value. This strategy involves converting and/or opening new stores under the "LW - Everybody's Outlet Store" banner.

During the period, the Company closed two legacy "Liquidation World" stores and opened seven new "LW - Everybody's Outlet Store" locations. Four of these new stores replaced stores that the Company had closed in the same geographic area. Four additional stores were converted from the legacy format into the "LW - Everybody's Outlet Store" banner during the first quarter. At the close of the first quarter fiscal 2011, a total of 92 stores are operating in Canada, 44 as "LW - Everybody's Outlet Store" locations and 48 continue as "Liquidation World" legacy stores.

During the period, same store sales increased approximately 12%, or approximately $1.9 million in the weeks following the conversions for store locations that were renovated and re-opened under the "LW - Everybody's Outlet Store" banner. During the same period, those stores not yet converted, experienced a decline of 4.5% in sales, or approximately $1.0 million.

Gross margin was 10 percentage points lower compared to the same quarter in 2010, principally due to an increase in landed and distribution centre costs. Gross margin was also impacted as a result of further markdowns taken during the quarter relating to slow moving and seasonal inventory items which are being purged as the Company continues to transform its business model towards a more compelling product offering in line with its strategy.

Selling, general and administrative expenses increased by approximately 11.5% during the quarter, to $17.4 million, compared with $15.6 million in the first quarter of 2010. In addition to significant expenses relating to management's strategy to convert or open new stores under the "LW - Everybody's Outlet Store" banner, a portion of these increased expenses are attributable to the Company's strategy to increase consumer awareness, including those associated with store rebranding and product promotion.

Inventory at the end of the first quarter, 2011 increased by $1.1 million to $38.5 million. compared with $37.4 million in the same period in 2010.

As reported at the Company's Annual General Meeting February 10, 2011, in addition to supporting the realignment strategy and ensuring that the Company's selects the most compelling product offering for customers, Liquidation World's Board of Directors is also exploring various strategies that could lead to acceleration towards profitability including financing activities, strategic partnerships, and, M&A opportunities, including acquisition and divestiture transactions.

Forward-Looking Statements

This release includes forward-looking statements and potential future circumstances and developments. Forward-looking statements regarding future performance are subject to risks and uncertainties, and actual results may differ materially. Due to fluctuations in gross margins and expenses, an increase in revenue does not directly correlate to an increase in net earnings.

About Liquidation World

Liquidation World operates 92 stores in Canada and 1 in the United States. Liquidation World is based in Brantford, Ontario. The Company opened its first store in Calgary, Alberta in 1986 and today, with more than 1,500 employees, is Canada's largest operator of closeout retail stores.



Consolidated Financial Statements

Consolidated Balance Sheets
As at January 2, 2011 and October 3, 2010
Unaudited
(in thousands of Canadian dollars)

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2011 2010
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Assets


Current assets
Accounts receivable $ 1,285 $ 533
Deposits 104 120
Inventory 38,511 39,619
Prepaid expenses 1,669 1,679
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41,569 41,951

Lease deposits 379 376
Property and equipment 9,550 9,074
Intangibles - -
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$ 51,498 $ 51,401
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Liabilities and Shareholders' Equity

Current liabilities
Bank indebtedness $ 10,084 $ 15,797
Accounts payable and accrued liabilities 26,600 15,623
Current portion of obligations under capital
leases 46 127
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36,730 31,547

Subordinated notes 1,597 1,557
Deferred lease inducements 3,032 2,272

Shareholders' equity
Share capital 32,278 32,224
Warrants 1,008 1,020
Contributed surplus 1,666 1,595
Deficit (24,813) (18,814)
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10,139 16,025

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$ 51,498 $ 51,401
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Consolidated Statements Of Income (Loss) And Comprehensive Income (Loss)
And Deficit
For the thirteen weeks ended January 2, 2011 and January 3, 2010
Unaudited
(in thousands of Canadian dollars, except per share amounts)
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2011 2010
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Revenue $ 43,421 $ 44,130
Cost of sales 30,682 26,852
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Gross margin 12,739 17,278

Expenses
Selling, general and administrative 17,384 15,558
Depreciation and amortization 936 746
Interest
Short term 376 281
Long term 98 8
Foreign exchange gain (56) (34)
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18,738 16,559
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Net comprehensive income (loss) (5,999) 719
Deficit, beginning of period (18,814) (6,483)
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Deficit, end of period $ (24,813) $ (5,764)
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Basic and diluted earnings (loss) per share $ (0.20) $ 0.05
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Consolidated Statements Of Cash Flows
For the thirteen weeks ended January 2, 2011 and January 3, 2010
Unaudited
(in thousands of Canadian dollars)

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2011 2010
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Cash provided by (used in):

Operating activities
Net income (loss) $ (5,999) $ 719
Add (deduct) non-cash items:
Depreciation and amortization 936 746
Leasehold inducements 32 5
Loss on disposal of capital assets 6 8
Stock based compensation 71 36
Accretion on long term debt 40 -
Changes in non-cash working capital items 12,086 (5,556)
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7,172 (4,042)

Investment activities
Purchase of capital assets (1,430) (999)
Proceeds on disposal of capital assets 12 -
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(1,418) (999)

Financing activities
Increase (decrease) in bank indebtedness (5,713) 5,001
Repayment of capital leases (81) (291)
Deposits (3) 112
Lease inducements - 219
Proceeds on exercise of warrants 43 0
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(5,754) 5,041
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Increase (decrease) in cash - -
Cash, beginning of period - -
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Cash, end of period $ - $ -
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Supplemental disclosure of cash paid for:
Income taxes $ - $ -
Interest paid 259 184
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$ 259 $ 184
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