ABILENE, Kan., Sept. 6, 2007 (PRIME NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which operates 251 retail stores in 21 states, today announced its operating results for the second quarter ending July 29, 2007. Dollar amounts are presented in thousands unless otherwise noted.
Net earnings for the second quarter were $2.6 million, or $0.67 per diluted share, compared with net earnings of $1.4 million, or $0.37 per diluted share, in the second quarter of the prior fiscal year. Net income year-to-date was $362, or $0.09 per diluted share, compared to net income of $2.0 million, or $0.51 per diluted share, in the prior fiscal year.
Net sales from continuing operations for the second quarter increased 4.0% to $124.4 million, while same-store sales increased 2.1%. Excluding fuel sales, merchandise only same store sales increased 2.6% for the second quarter ending July 29, 2007. Year-to-date sales from continuing operations increased 3.5% to $235.7 million, while same-store sales increased 1.7%.
Gross margin for the second quarter was 32.7% compared to 30.0% in the second quarter of the prior year. Contributing to this quarter's increase were primarily lower freight costs and significantly improved initial markon percentages along with increased vendor support. These improvements were partially offset by increased shrinkage. Gross margin year-to-date increased 190 basis points to 31.8% from 29.9% in the prior year. Lower freight costs, increased vendor support, lower markdowns and significantly improved initial markon percentages contributed to the year-to-date margin increase however, these improvements were partially offset by increased shrinkage.
Operating expenses for the second quarter increased to 28.3% of sales
from 27.4% in the prior-year quarter. Items that impacted the change
include:
* Increased non-comparable store expenses of $885.
* Increased IT expenses of $292 which will continue to trend
higher than fiscal year 2007.
* Additional planned maintenance expenses of $249 which will
continue to trend higher than fiscal year 2007.
* Increased inventory service fees of $295 due to the accelerated
store physical inventories. Inventory service fees for fiscal
2008 are expected to be consistent with fiscal 2007.
* Decreased vacation expense of $337. The vacation expense for
fiscal 2008 is expected to be consistent with fiscal 2007.
* Decreased accounting professional services of $354.
* Increased depreciation and amortization of $212.
Operating expenses increased on a year-to-date basis by 260 basis
points to 30.7% from 28.1%. Items that impacted the change include:
* Increased non-comparable store expenses of $1.7 million.
* The timing of the recognition of CO-OP offset resulted in $1.0
million less offset. Fiscal 2008 CO-OP offset is expected to be
consistent with fiscal 2007.
* Increased IT expenses of $1.1 million which will continue to
trend higher than fiscal year 2007. Fiscal 2008 will be the first
complete fiscal year of the Company's IT initiative.
* Additional planned maintenance expenses of $834 which will
continue to trend higher than fiscal year 2007.
* Increased inventory service fees of $558 due to accelerated
store physical inventories. Inventory service fees for fiscal
2008 are expected to be consistent with fiscal 2007.
* An additional $457 expense from planned overhead associated with
preparation of more aggressive store rollout plan and
strengthening our internal controls. These expenses are expected
to trend higher than fiscal year 2007.
* Increased professional accounting fees of $450 due to increased
audit fees for fiscal 2007.
* Increased share based compensation expense of $303 which will
continue to trend higher than fiscal year 2007.
* Increased depreciation and amortization of $470.
Commenting on the results of the second quarter of fiscal 2008, Bruce Dale, President and CEO stated: "While our second quarter results are somewhat encouraging, the most important part of the year is ahead of us. We are confident that the plans for the balance of the year are solid and we consider our sales performance for August a good start. We have work to do on operational expense reduction as well as the important task of opening 16 new ALCO stores by November 8th. Our team is excited and focused on the upcoming five months."
Updated Guidance
The Company also updates its Adjusted EBITDA guidance for the full fiscal year ended February 3, 2008, to the range of $25 million to $27 million. The update is due to increased projected operating expenses for fiscal year 2008.
Store Operations Update
Since January 28, 2007, the Company has opened two stores located in Illinois and Indiana and closed seven locations, one in Texas, two in Kansas, one in Arkansas, two in Oklahoma and one in Nebraska.
The average annualized new store sales performance on prototype stores is currently projected at $2.3 million.
Investor Conference Call
The Company will host an investor conference call at 10:00 a.m. central daylight time on September 7, 2007, to discuss operating results in greater detail for the quarter ended July 29, 2007. The dial-in number for the conference call is 800-811-0667 (international/local participants dial 913-981-4901), and the Confirmation Code is 4554929. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. central time. A replay of the call will be available two hours after completion from September 7 through September 21 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 4554929.
About Duckwall-ALCO Stores, Inc.
Duckwall-ALCO Stores, Inc. is a regional retailer that specializes in meeting the needs of smaller, underserved communities throughout the central United States. The Company offers an exceptional selection of fashionable merchandise, quality products and recognized brand names at reasonable prices. Our specialty is delivering those products with the friendly, personal service our customers have come to expect. With 251 stores across 21 states, we are proud to have continually provided excellent products at good value prices to our customers for 106 years. To learn more about Duckwall-ALCO Stores, Inc. visit our website at www.ALCOstores.com.
Forward-looking statements
This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995 ("the Act"). Any forward-looking statements are made by the Company in good faith, pursuant to the safe-harbor provisions of the Act. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments and Company performance. Factors, which could significantly change results, include but are not limited to: sales performance, expense levels, competitive activity, interest rates, changes in the Company's financial condition and factors affecting the retail category in general. Additional information regarding these and other factors may be included in the Company's quarterly 10-Q filings and other public documents, copies of which are available from the Company on request.
Duckwall-ALCO Stores, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(Unaudited)
For the For the
Thirteen Week Twenty-Six Week
Periods Ended Periods End
--------------------- ---------------------
July 29, July 30, July 29, July 30,
2007 2006 2007 2006
--------- --------- --------- ---------
Net sales $ 124,366 $ 119,637 $ 235,688 $ 227,817
Cost of sales 83,744 83,715 160,718 159,603
--------- --------- --------- ---------
Gross margin 40,622 35,922 74,970 68,214
Selling, general
and administrative 33,291 31,155 68,595 60,744
Depreciation and
amortization 1,876 1,664 3,738 3,268
--------- --------- --------- ---------
Total operating
expenses 35,167 32,819 72,333 64,012
Operating income
from continuing
operations 5,455 3,103 2,637 4,202
Interest expense 840 631 1,597 1,202
--------- --------- --------- ---------
Earnings from
continuing
operations before
income taxes 4,615 2,472 1,040 3,000
Income tax expense 1,829 1,016 412 1,233
--------- --------- --------- ---------
Earnings from
continuing
operations 2,786 1,456 628 1,767
Earnings (loss)
from continuing
operations, net
of income taxes (192) (39) (266) 191
--------- --------- --------- ---------
Net earnings $ 2,594 $ 1,417 $ 362 $ 1,958
========= ========= ========= =========
Earnings per
diluted share
Continuing
operations $ 0.72 $ 0.38 $ 0.16 $ 0.46
--------- --------- --------- ---------
Net earnings $ 0.67 $ 0.37 $ 0.09 $ 0.51
--------- --------- --------- ---------
Weighted-average
shares outstanding:
Basic 3,808 3,793 3,804 3,791
Diluted 3,846 3,829 3,848 3,821
Supplemental Data: Thirteen Weeks Twenty-Six Weeks
Ended Ended
July 29, July 30, July 29, July 30,
2007 2006 2007 2006
------ ------ ------ ------
Same store sales change 2.1% 6.2% 1.7% 6.6%
Total customer count change -1.7% 5.1% -1.9% 4.9%
Average sale per ticket change 4.0% 6.3% 3.6% 6.2%
Earnings from continuing
operations $2,786 $1,456 $ 628 $1,767
Plus interest 840 631 1,597 1,202
Plus taxes 1,829 1,016 412 1,233
Plus depreciation and
amortization 1,876 1,664 3,738 3,268
Plus share based compensation
expense 294 226 576 272
------ ------ ------ ------
EBITDA from continuing
operations $7,625 $4,993 $6,951 $7,742
====== ====== ====== ======
Incremental expenses related
to IT initiative* $ 292 $ 248 $1,097 $ 420
* (excludes incremental depreciation and additional costs related
to performing SKU level inventories)
Duckwall-ALCO Stores, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
(Unaudited)
July 29, 2007 July 30, 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 4,217 $ 1,686
Receivables 4,151 4,062
Prepaid expenses 3,528 2,712
Prepaid income taxes 46 --
Inventories 156,019 135,477
Deferred income taxes 3,037 --
-------- --------
Total current assets 170,998 143,937
-------- --------
Property and equipment, at cost 90,806 88,780
Less accumulated depreciation 66,662 65,222
-------- --------
Net property and equipment 24,144 23,558
-------- --------
Property under capital leases,
net of accumulated amortization 5,941 7,078
Other non-current assets 97 62
Deferred income taxes 5,653 2,961
-------- --------
Total assets $206,833 $177,596
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital
lease obligations $ 1,982 $ 2,089
Accounts payable 36,290 26,701
Income taxes payable -- 432
Accrued salaries and commissions 4,311 4,980
Accrued taxes other than income 5,130 4,639
Self-insurance claim reserves 4,936 4,281
Other current liabilities 3,659 2,418
-------- --------
Total current liabilities 56,308 45,540
Notes payable under revolving loan 29,876 18,136
Capital lease obligations - less
current maturities 5,839 7,140
Deferred gain on leases 5,179 4,883
Other noncurrent liabilities 2,465 265
-------- --------
Total liabilities 99,667 75,964
-------- --------
Stockholders' equity:
Common stock, $.0001 par value,
authorized 20,000,000 shares;
issued and outstanding
3,809,341 shares and 3,792,515
shares, respectively 1 1
Additional paid-in capital 38,174 36,735
Retained earnings 68,991 64,896
-------- --------
Total stockholders' equity 107,166 101,632
-------- --------
Total liabilities and
stockholders' equity $206,833 $177,596
======== ========