ABILENE, Kan., Dec. 11, 2008 (GLOBE NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which offers an exceptional selection of quality merchandise at value prices to small-town America, today announced operating results for its third quarter ending November 2, 2008.
Net loss for the third quarter was $1.7 million, or $0.44 per basic share, which is in line with the net loss of $1.6 million, or $0.43 per diluted share, in the third quarter of the prior fiscal year. Net sales from continuing operations for the third quarter increased 4.7% to $115.5 million, while same-store sales decreased 6.3%. The results were affected by a difficult retail environment, offset by progress in cost reductions and operational improvements by the Company.
Gross margin for the third quarter was 32.2%, down from 32.5% in the third quarter of the prior year. Contributing to the decline were increased markdowns, increased freight costs and lower rebates and new store allowances, offset by continued reduction in shrink and reduced LIFO expense.
Net loss for the thirty-nine week period year-to-date was $4.3 million, or $1.12 per basic share, compared with net loss of $1.3 million, or $0.33 per basic share, in the same period of the prior fiscal year. Net sales from continuing operations year-to-date increased 4.6% to $351.0 million, while same-store sales decreased 5.5%. The Company has experienced sequential improvement on a monthly basis with same-store sales of -11.1% in August, -5.1% in September, and -2.7% in October.
Gross margin year-to-date was 32.1% compared with 32.2% in the same period of the prior year. Contributing to the slight year-to-date decrease were expenses for an inventory review initiative and increased freight costs, offset by continued shrink improvement. Factoring out the effects of the first-quarter inventory review initiative expense, year-to-date gross margin was 32.4%.
Larry Zigerelli, President and CEO, commented: "Our turnaround continues to progress in the midst of the recession that all retailers are facing. We are doing the right things to attract consumers and provide essential merchandise at value prices, evidenced by our improvement in same-stores sales performance. At the same time, our operational improvements and cost reductions are moving ahead on-target, positioning us well for the long term."
Store Operations Update
Duckwall-ALCO operates 258 retail stores in 23 states. 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 three smaller ALCO stores with a new prototype ALCO. Fiscal year-to-date, the Company has opened fifteen new ALCO stores. No additional store openings are planned for the remainder of the fiscal year ending February 1, 2009.
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 Standard Time on December 12, 2008, to discuss operating results for the third quarter ended November 2, 2008. The dial-in number for the conference call is 800-776-0816 (international/local participants dial 913-312-0388), and the Confirmation Code is 4623634. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Standard Time. A replay of the call will be available from two hours after completion of the call on December 12 through December 26 by dialing 888-203-1112. International/local callers should dial 719-457-0820. The Replay Passcode is 4623634. A replay of the call will also be available four hours after completion of the call by visiting the Investors page on the Company's website, www.ALCOstores.com.
About Duckwall-ALCO Stores, Inc.
Duckwall-ALCO Stores, Inc. is a multi-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 258 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 For the
Thirteen Week Thirty-Nine Week
Periods Ended Periods Ended
------------------ ------------------
Nov. 2, Oct. 28, Nov. 2, Oct. 28,
2008 2007 2008 2007
-------- -------- -------- --------
Net sales $115,472 $110,258 $351,010 $335,537
Cost of sales 78,234 74,447 238,504 227,459
-------- -------- -------- --------
Gross margin 37,238 35,811 112,506 108,078
Selling, general
and administrative 38,217 35,487 110,315 100,785
Depreciation and amortization 2,119 1,820 5,799 5,359
-------- -------- -------- --------
Total operating expenses 40,336 37,307 116,114 106,144
Operating income (loss)
from continuing operations (3,098) (1,496) (3,608) 1,934
Interest expense 63 929 1,219 2,526
-------- -------- -------- --------
Loss from continuing
operations before
income taxes (3,161) (2,425) (4,827) (592)
Income tax benefit (1,647) (979) (2,354) (249)
-------- -------- -------- --------
Loss from continuing
operations (1,514) (1,446) (2,473) (343)
Loss from discontinued
operations, net of income
benefit (151) (189) (1,788) (930)
-------- -------- -------- --------
Net loss $ (1,665) $ (1,635) $ (4,261) $ (1,273)
======== ======== ======== ========
Loss per diluted share
Continuing operations $ (0.40) $ (0.38) $ (0.65) $ (0.09)
-------- -------- -------- --------
Net loss $ (0.44) $ (0.43) $ (1.12) $ (0.33)
-------- -------- -------- --------
Weighted-average
shares outstanding:
Basic 3,812 3,809 3,812 3,806
Diluted 3,812 3,809 3,812 3,806
Supplemental Data: Thirteen Weeks Thirty-Nine Weeks
Ended Ended
------------------ ------------------
Nov. 2, Oct. 28, Nov. 2, Oct. 28,
2008 2007 2008 2007
-------- -------- -------- --------
Same-store sales change -6.3% 4.9% -5.5% 4.2%
Same-store gross margin
dollar change -7.4% 9.0% -6.3% 10.1%
Same-store SG&A
dollar change -5.8% 7.3% -4.7% 9.2%
Same-store total customer
count change -10.5% -3.8% -9.2% -4.5%
Same-store average sale
per ticket change 4.7% 9.0% 4.1% 9.1%
Net loss from continuing
operations $ (1,514) (1,446) (2,473) (343)
Plus interest 63 929 1,219 2,526
Plus taxes (1,647) (979) (2,354) (249)
Plus depreciation
and amortization 2,119 1,820 5,799 5,359
Plus share-based
compensation expense 169 317 34 893
Plus preopening store costs 342 1,169 1,837 1,520
Plus inventory
review initiative -- -- 1,345 --
Plus executive and
staff severance -- -- 1,942 --
Plus Accenture store
transformation project 937 -- 937 --
-------- -------- -------- --------
Adjusted EBITDA $ 469 1,810 8,286 9,706
======== ======== ======== ========
Adjusted EBITDA from net income (loss) from continuing operations:
Trailing
Twelve
For the Twenty-Six Periods
Week Periods Ended Ended
----------------------------- --------
Fiscal Aug. 3, July 29, Aug. 3,
2008 2008 2007 2008
-------- -------- -------- --------
Net income (loss) from
continuing operations (1) $522 (959) 1,103 (1,540)
Plus:
Interest 3,382 1,156 1,597 2,941
Taxes (1) 538 (707) 730 (899)
Depreciation and
amortization (1) 9,475 3,679 3,539 9,615
Share-based compensation
expense 1,130 (135) 576 419
Preopening store costs (2) 2,783 1,495 352 3,926
Inventory review initiative -- 1,345 -- 1,345
Executive and staff severance -- 1,942 -- 1,942
Accenture store
transformation project -- -- -- --
-------- -------- -------- --------
Adjusted EBITDA (1)(3)(4) 17,830 7,816 7,897 17,749
======== ======== ======== ========
Adjusted EBITDA
Same-stores (5) 47,623 22,585 22,988 47,220
Non same-stores (3)(5) 1,650 1,275 381 2,544
Store support center (5) (22,116) (11,279) (11,031) (22,364)
Warehouse (9,327) (4,765) (4,441) (9,651)
-------- -------- -------- --------
Reconciled Adjusted
EBITDA (1)(3)(4) 17,830 7,816 7,897 17,749
======== ======== ======== ========
Cash 5,501 4,653 4,217 4,653
Debt 33,013 36,964 37,698 36,964
-------- -------- -------- --------
Debt, net of cash $ 27,512 32,311 33,481 32,311
======== ======== ======== ========
Trailing
Twelve
For the Thirteen Periods
Week Periods Ended Ended
-------------------- --------
Nov. 2 Oct. 28 Nov. 2
2008 2007 2008
-------- -------- --------
Net income (loss) from
continuing operations (1) (1,514) (1,446) (1,608)
Plus:
Interest 63 929 2,075
Taxes (1) (1,647) (979) (1,567)
Depreciation and
amortization (1) 2,119 1,820 9,914
Share-based compensation
expense 169 317 271
Preopening store costs (2) 342 1,169 3,099
Inventory review initiative -- -- 1,345
Executive and staff severance -- -- 1,942
Accenture store
transformation project 937 -- 937
-------- -------- --------
Adjusted EBITDA (1)(3)(4) 469 1,810 16,408
======== ======== ========
Adjusted EBITDA
Same-stores (5) 8,524 9,786 45,957
Non same-stores (3)(5) 340 260 2,624
Store support center (5) (5,787) (5,730) (22,421)
Warehouse (2,608) (2,506) (9,753)
-------- -------- --------
Reconciled Adjusted
EBITDA (1)(3)(4) 469 1,810 16,408
======== ======== ========
Cash 5,320 4,525 5,320
Debt 58,303 55,759 58,303
-------- -------- --------
Debt, net of cash 52,983 51,234 52,983
======== ======== ========
(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 November 2, 2008 the average open weeks for the Company's 33 non same-stores is 41 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 thirty-nine weeks ended November 2, 2008, the Company has reduced SG&A approximately $4.6 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. (5) Adjusted EBITDA amount of $321 was reclassified for an internal allocation for the thirteen week period ended October 28, 2007 and the twenty-six week period ended July 29, 2007.
Duckwall-ALCO Stores, Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share amounts)
(Unaudited)
Nov. 2, Oct. 28,
2008 2007
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 5,320 $ 4,525
Receivables 3,520 4,530
Prepaid income taxes 4,731 2,590
Prepaid expenses 3,871 3,353
Inventories 166,404 178,311
Deferred income taxes 5,430 3,037
-------- --------
Total current assets 189,276 196,346
-------- --------
Property and equipment, at cost 93,607 95,933
Less accumulated depreciation 63,605 67,699
-------- --------
Net property and equipment 30,002 28,234
-------- --------
Property under capital leases, net of
accumulated amortization 3,513 5,435
Other non-current assets 227 150
Deferred income taxes 1,181 5,736
-------- --------
Total assets $224,199 $235,901
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 1,340 $ --
Current maturities of capital lease obligations 1,833 1,922
Accounts payable 37,513 47,646
Accrued salaries and commissions 5,589 4,007
Accrued taxes other than income 4,844 5,889
Self-insurance claim reserves 4,318 5,319
Other current liabilities 4,618 3,683
-------- --------
Total current liabilities 60,055 68,466
Long-term debt, less current maturities 3,214 --
Notes payable under revolving loan 48,388 48,461
Capital lease obligations - less current maturities 3,528 5,376
Deferred gain on leases 4,695 5,082
Other noncurrent liabilities 1,617 2,653
-------- --------
Total liabilities 121,497 130,038
-------- --------
Stockholders' equity:
Common stock, $.0001 par value, authorized
20,000,000 shares; issued and outstanding
3,806,113 shares and 3,809,841 shares,
respectively 1 1
Additional paid-in capital 38,557 38,506
Retained earnings 64,144 67,356
-------- --------
Total stockholders' equity 102,702 105,863
-------- --------
Total liabilities and stockholders' equity $224,199 $235,901
======== ========