ABILENE, Kan., Sept. 11, 2008 (GLOBE NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which operates 259 retail stores in 23 states, today announced operating results for its second quarter ending August 3, 2008.
Net earnings for the second quarter were $3.3 million, or $0.85 per diluted share, an improvement from net earnings of $2.6 million, or $0.68 per diluted share, in the second quarter of the prior fiscal year.
Net loss year-to-date was $2.6 million, or $0.68 per basic share, compared with net earnings of $362,000, or $0.09 per diluted share, in the same period of the prior fiscal year.
Net sales from continuing operations for the second quarter increased 8.9% to $129.6 million, while same-store sales decreased 2.1%.
Net sales from continuing operations year-to-date increased 4.6% to $235.5 million, while same-store sales decreased 5.0%.
Gross margin for the second quarter was 33.5%, up from 33.2% in the second quarter of the prior year. Contributing to the quarter's improvement were increased vendor support and reduced corporate shrink reserve somewhat offset by increased freight costs.
Gross margin year-to-date was 32.0% compared with 32.1% in the same period of the prior year. Contributing to the slight year-to-date decrease were increased freight costs, effects of inventory review initiative expense and LIFO expense offset by increased vendor support and reduced corporate shrink reserve. Factoring out the effects of the first quarter inventory review initiative expense year-to-date gross margin was 32.5%.
A major contributor to the improved second quarter performance was the Company-wide cost reduction program implemented during the first quarter. This program is expected to generate annual savings of approximately $6.0 million, including the previously announced $2.5 million. Separately, the Company has announced a new $3.5 million consulting agreement expected to generate an incremental annualized benefit of at least $8.0 million once fully implemented by July 2009.
Larry Zigerelli, President and CEO commented: "The improved second quarter profitability reflects the initial impact of our efforts to transform the Company to deliver better returns. We have taken further action to position the Company for improved top and bottom-line results as part of our new strategic plan."
Store Operations Update
Since February 3, 2008, the Company has closed ten ALCO stores and four Duckwall stores. The increase in loss from discontinued operations is due to the expenses associated with the 14 stores closed where the Company exited the markets. Four Duckwall stores have been closed where an ALCO store was opened in the same market. The Company has replaced one smaller ALCO store with a new prototype ALCO. Fiscal year-to-date, the Company has opened fifteen new ALCO stores.
Supplemental Data
The Company has included certain tables in this press release that are set forth fully in the Company's 10-Q.
Certain Non-GAAP Financial Measures
The Company has included Adjusted EBITDA, a non-GAAP performance measure, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information as a means of comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes this measure in internal evaluation; review of performance and comparison with the Company's financial measure to that of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings from continuing operations before discontinued operations) in that it does not include certain items. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the Company's performance using Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and free cash flow. As a result, Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.
Investor Conference Call
The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on September 12, 2008, to discuss operating results for the second quarter ended August 3, 2008. The dial-in number for the conference call is 800-388-8975 (international/local participants dial 913-312-0408), and the Confirmation Code is 5345297. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Daylight Time. A replay of the call will be available from two hours after completion on September 12 through September 26 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 5345297.
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. Its specialty is delivering those products with the friendly, personal service its customers have come to expect. With 259 stores across 23 states, Duckwall-ALCO Stores is proud to have continually provided excellent products at good value prices to its customers for 107 years. To learn more about Duckwall-ALCO Stores, Inc. visit 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 10-Q filings and other public documents, copies of which are available from the Company on request and are available from the United States Securities and Exchange Commission.
Duckwall-ALCO Stores, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
For the Thirteen For the Twenty-Six
Week Periods Ended Week Periods Ended
--------- --------- --------- ---------
August 3, July 29, August 3, July 29,
2008 2007 2008 2007
--------- --------- --------- ---------
Net sales $ 129,555 $ 119,013 $ 235,537 $ 225,279
Cost of sales 86,123 79,555 160,269 153,012
--------- --------- --------- ---------
Gross margin 43,432 39,458 75,268 72,267
Selling, general and
administrative 35,187 31,947 72,097 65,297
Depreciation and
amortization 1,905 1,786 3,680 3,540
--------- --------- --------- ---------
Total operating
expenses 37,092 33,733 75,777 68,837
Operating earnings
(loss) from
continuing operations 6,340 5,725 (509) 3,430
Interest expense 551 839 1,156 1,597
--------- --------- --------- ---------
Earnings (loss) from
continuing operations
before income taxes 5,789 4,886 (1,665) 1,833
Income tax expense
(benefit) 2,356 1,936 (707) 726
--------- --------- --------- ---------
Earnings (loss) from
continuing operations 3,433 2,950 (958) 1,107
Loss from discontinued
operations, net of
income benefit (177) (356) (1,637) (745)
--------- --------- --------- ---------
Net earnings (loss) $ 3,256 $ 2,594 $ (2,595) $ 362
========= ========= ========= =========
Earnings (loss) per
diluted share
Continuing operations $ 0.90 $ 0.77 $ (0.25) $ 0.29
--------- --------- --------- ---------
Net earnings (loss) $ 0.85 $ 0.68 $ (0.68) $ 0.09
--------- --------- --------- ---------
Weighted-average shares
outstanding:
Basic 3,814 3,808 3,812 3,804
Diluted 3,825 3,846 3,812 3,848
Supplemental Data: Thirteen Weeks Twenty-Six Weeks
Ended Ended
-------- -------- -------- --------
August 3 July 29, August 3, July 29,
2008 2007 2008 2007
-------- -------- -------- --------
Same-store sales change -2.1% 4.2% -5.0% 3.9%
Same-store gross margin
dollar change -3.6% 12.1% -5.2% 12.1%
Same-store SG&A dollar
change -2.9% 4.8% -4.5% 7.9%
Same-store total customer
count change -7.6% -4.8% -8.5% -4.8%
Same-store average sale
per ticket change 6.0% 9.5% 3.8% 9.2%
Net earnings (loss) from
continuing operations 3,433 2,950 (958) 1,107
Plus interest 551 839 1,156 1,597
Plus taxes 2,356 1,936 (707) 726
Plus depreciation and
amortization 1,905 1,786 3,680 3,540
Plus share-based compensation
expense 194 294 (135) 576
Plus preopening store costs 773 252 1,495 351
Plus inventory review
initiative -- -- 1,345 --
Plus executive and staff
severance -- -- 1,942 --
-------- -------- -----------------
=Adjusted EBITDA $ 9,212 8,057 7,818 7,897
======== ======== =================
Adjusted EBITDA from net earnings (loss) from continuing
operations:
Trailing
For the Twelve
Thirteen Week Periods
Periods Ended Ended
----------------------------
Fiscal May 4, April 29, May 4,
2008 2008 2007 2008
--------------------------------------
Net earnings (loss) from
continuing operations (1) $ 522 (4,392) (1,847) (2,023)
Plus:
Interest 3,382 605 758 3,229
Taxes (1) 538 (3,063) (1,206) (1,319)
Depreciation and
amortization (1) 9,475 1,774 1,753 9,496
Share-based compensation
expense 1,130 (329) 282 519
Preopening store costs (2) 2,783 722 100 3,405
Inventory review initiative -- 1,345 -- 1,345
Executive and staff
severance -- 1,942 -- 1,942
--------------------------------------
=Adjusted EBITDA (1)(3)(4) 17,830 (1,396) (160) 16,594
======================================
Adjusted EBITDA
---------------
Same-stores 47,623 7,243 8,199 46,667
Non same-stores (3) 1,650 (6) (42) 1,686
Corporate (22,116) (6,297) (6,027) (22,386)
Warehouse (9,327) (2,336) (2,290) (9,373)
--------------------------------------
Reconciled adjusted EBITDA
(1)(3)(4) 17,830 (1,396) (160) 16,594
======================================
Cash 5,501 4,977 4,986 4,977
Debt 33,013 41,080 42,440 41,080
--------------------------------------
Debt, net of cash $ 27,512 36,103 37,454 36,103
======================================
Trailing
Twelve
For the Thirteen Week Periods
Periods Ended Ended
-----------------------------------
August 3, July 29, August 3,
2008 2007 2008
-----------------------------------
Net earnings (loss) from
continuing operations (1) $ 3,433 2,950 (1,540)
Plus:
Interest 551 839 2,941
Taxes (1) 2,356 1,936 (899)
Depreciation and
amortization (1) 1,905 1,786 9,615
Share-based compensation
expense 194 294 419
Preopening store costs (2) 773 252 3,926
Inventory review initiative -- -- 1,345
Executive and staff severance -- -- 1,942
-----------------------------------
=Adjusted EBITDA (1)(3)(4) 9,212 8,057 17,749
===================================
Adjusted EBITDA
--------------
Same-stores 15,342 15,046 46,963
Non same-stores (3) 1,281 487 2,480
Corporate (4,982) (5,325) (22,043)
Warehouse (2,429) (2,151) (9,651)
-----------------------------------
Reconciled adjusted EBITDA
(1)(3)(4) 9,212 8,057 17,749
===================================
Cash 4,653 4,217 4,653
Debt 36,964 37,698 36,964
-----------------------------------
Debt, net of cash $ 32,311 33,481 32,311
===================================
(1) These amounts will not agree with the 2008 fiscal 2008 10-K
filing due to the 14 stores the Company closed in the first
quarter of fiscal 2009. These stores are now shown in
discontinued operations.
(2) These costs are not consistent quarter to quarter as the
Company does not open the same number of stores in each quarter
of each fiscal year. These costs are directly associated with
the number of stores that have or will be opened and are
incurred prior to the grand opening of each store.
(3) For the trailing twelve periods ended August 3, 2008 the
average open weeks for the Company's 30 non same-stores is 32
weeks.
(4) During fiscal year 2009, the Company made a change in its
Executive Management team and Board of Directors resulting in
several initiatives to reduce SG&A expense. For the twenty-six
weeks ended August 3, 2008, the Company has reduced SG&A
approximately $2.9 million when compared to the same period for
the previous fiscal year. The initiatives include, but are not
limited to, executive and staff reduction, reduced floor care
services, professional service providers' expense and travel
expense.
Duckwall-ALCO Stores, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
(Unaudited)
August 3, July 29,
2008 2007
---------- ----------
Assets
Current assets:
Cash and cash equivalents $ 4,653 $ 4,217
Receivables 3,743 4,151
Prepaid income taxes 2,423 46
Prepaid expenses 4,106 3,528
Inventories 145,658 156,019
Deferred income taxes 6,835 3,037
---------- ----------
Total current assets 167,418 170,998
---------- ----------
Property and equipment, at cost 91,907 90,806
Less accumulated
depreciation 62,682 66,662
---------- ----------
Net property and equipment 29,225 24,144
---------- ----------
Property under capital leases, net of
accumulated amortization 3,972 5,941
Other non-current assets 249 97
Deferred income taxes 3,078 5,653
---------- ----------
Total assets $ 203,942 $ 206,833
========== ==========
Liabilities and
Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 1,319 $ --
Current maturities of capital lease
obligations 1,828 1,982
Accounts payable 35,879 36,290
Accrued salaries and commissions 5,092 4,311
Accrued taxes other than income 4,338 5,130
Self-insurance claim reserves 4,205 4,936
Other current liabilities 6,815 3,659
---------- ----------
Total current liabilities 59,476 56,308
Long-term debt, less current
maturities 3,557 --
Notes payable under revolving loan 26,257 29,876
Capital lease obligations - less
current maturities 4,002 5,839
Deferred gain on leases 4,792 5,179
Other noncurrent liabilities 1,457 2,465
---------- ----------
Total liabilities 99,541 99,667
---------- ----------
Stockholders' equity:
Common stock, $.0001 par value,
authorized 20,000,000 shares; issued
and outstanding 3,820,591 shares and
3,809,341 shares, respectively 1 1
Additional paid-in capital 38,590 38,174
Retained earnings 65,810 68,991
---------- ----------
Total stockholders' equity 104,401 107,166
---------- ----------
Total liabilities and stockholders'
equity $ 203,942 $ 206,833
========== ==========