<< MONROVIA, Calif.--(BUSINESS WIRE)--April 21, 1997--Barry's
Jewelers Inc. (NASDAQ/NM:BARY) Monday reported operating results
for its fiscal 1997 third quarter and nine months ended Feb. 28,
1997.
For the quarter ended Feb. 28, 1997, net sales decreased
$1,632,000, or 3.2 percent to $49,236,000, vs. net sales of
$50,868,000 for the fiscal 1996 third quarter, due to a 7.3 percent
fall in comparable store sales from the comparable period a year ago.
According to the company, the net sales decrease in comparable
stores was due, in part, to a more restrictive credit policy
implemented in November 1995, which has reduced sales in the short
term, but is expected to result in higher quality receivables.
Additionally, net sales were adversely impacted by late receipt
of merchandise in the stores for the Christmas selling season which
resulted in excessive stock outs, as well as the sales mix of
promotionally priced merchandise, and a competitive discounting
environment.
Costs of goods sold, buying and occupancy expenses were
65.0 percent and 54.8 percent of net sales for the third quarter of
fiscal years 1997 and 1996, respectively. Included in cost of goods
sold, buying and occupancy expenses for the quarter ended Feb. 28,
1997, was a $1,095,000 non-cash charge in connection with the
company's cost savings initiatives to hasten the liquidation of aged
inventory in an effort to improve cash flow.
The remaining increase was primarily due to a combination of the
company's continued value-pricing strategy, rent and a higher
shrinkage reserve in fiscal 1997 than in fiscal 1996. Cost of goods
sold was also impacted by the sales mix of promotionally priced
merchandise and a competitive discounting environment.
Selling, general and administrative expenses were 38.8 percent and
28.9 percent of net sales for the three months ended Feb. 28, 1997,
and Feb. 29, 1996, respectively. In the current quarter, $1,970,000
of expense was included in selling, general and administrative
expense related principally to the impairment of leasehold
improvements, property and equipment related to 26 under-performing
stores.
Excluding such charge, selling, general and administrative expense
as a percentage of net sales for the current quarter would have been
34.8 percent. The increase as a percentage of net sales was
attributable to a combination of the decline in net sales and the
increase in total expenses. The dollar increase was primarily the
result of increases in the cost of advertising and display,
professional services and shipping.
The company's new management team announced that it is carefully
reviewing restructuring initiatives that the former management began
earlier this year. As previously announced, those initiatives were
expected to require various charges to third quarter operations of
between $10 million to $14 million. The company's new management has
not yet determined if all initiatives will be adopted, or whether
certain initiatives may be added due to new operating strategies
being developed.
As a result, the composition of the charges will change and such
charges will occur in both the third and fourth quarters as the
initiatives are finalized. Although management does not anticipate
that the magnitude of the various charges will significantly increase
as compared to what was previously announced, due to uncertainties
regarding the components of the various initiatives, an estimate of
these charges cannot be reasonably determined until management's
reevaluation is completed.
During the current quarter, $1,336,000 was charged to restructuring
expense. This charge consisted of $949,000 for severance items;
$93,000 and $241,000 for costs associated with terminating leases and
abandoning, or selling the leasehold improvements, fixtures and
equipment, respectively for 11 closed stores; and $53,000 for
other items related to the restructuring.
In addition, the company changed its customer receivable write-off
policy. Previously, the company would fully reserve for accounts
that fell within certain aged parameters but would continue internal
collection efforts until such time as a determination was made that
the accounts should be written off against the allowance for doubtful
accounts.
With this change in policy, the internal collection efforts for
these fully reserved accounts will be discontinued and the accounts
will be sent to outside collection agencies, at which time the
account balances will be written off against the allowance for
doubtful accounts. As a result, the company accelerated the
write-off of approximately $6,780,000 of customer receivables against
the allowance for doubtful accounts. Such charge was fully reserved
for and had no material impact on current operations.
In the quarter ended Feb. 28, 1997, net interest expense
increased $696,000 vs. the comparable quarter last year. Such
increase was primarily due to a combination of an increase in the
amortization of deferred financing fees associated with the Amended
Revolving Credit Agreement, an amendment fee in connection with an
amendment to the Amended Revolving Credit Agreement and an increase
in average revolving debt.
The average total revolving debt for the third quarter of fiscal
1997 was approximately $4.9 million higher than the comparable period
of the prior year.
As a result of the foregoing, the net loss for the quarter was
$6,818,000, or $1.70 per share, vs. net income of $3,159,000, or
79 cents per share, in the comparable period of fiscal 1996.
For the first nine months of fiscal 1997, net sales decreased
5.5 percent to $104,685,000 from $110,732,000 in the same period a
year ago. Comparable store sales for such nine month period declined
9.6 percent from the comparable period for fiscal 1996. The net loss
for the first nine months of fiscal 1997 was a loss of $19,220,000,
or $4.81 per share, vs. net income of $1,706,000, or 43 cents per
share, for the nine month period a year ago.
Commenting on the company's results, recently appointed Barry's
Jewelers President and CEO Sam Merksamer said: "This is a new
management team and restructuring Barry's operations has been our
goal since day one. We're still in mid-stream at this point. We are
in the process of carefully and quickly reviewing all areas of our
business, looking at ways of achieving greater efficiencies -- both
long and short term.
"It's a difficult task, but we are making progress. We have an
experienced, hands on management team in place, we've reduced
corporate staff size, closed certain unprofitable stores and made
substantial improvements to our credit policies."
The company failed to meet certain financial covenants contained
in the Amended Revolving Credit Agreement as of the Feb. 28, 1997,
testing date. The failure to meet such covenants constitutes an
Event of Default under the Amended Revolving Credit Agreement.
While the company is continuing negotiations with the bank group
to obtain a forbearance or waiver of the Event of Default, or a
modification of the covenants, there can be no assurance that the
company will be able to obtain such forbearance or waiver, or that
such forbearance or waiver can be obtained on acceptable terms.
Under the terms of the Amended Revolving Credit Agreement, the
company may not make the interest payment due April 30, 1997, or any
subsequent payment due under its 11 percent Senior Secured Notes due
Dec. 22, 2000, after an Event of Default under the Amended Revolving
Credit Agreement has occurred and is continuing unless such Event of
Default has been waived. >> |
