The clothing retailing market is shrinking. The shares of Lands’ End, Inc. ($LE), and Liberty Interactive Corporation (LINTA) both declined. And dELiA*s, Inc. (DLIA) is no exception. The stock on Wednesday declined 6.85 percent to $0.61 per share which was the lowest point in the past 6 months.
The misfortune is not without precedent. The stock has been getting hammered since November in 2013, despite a short resuscitation between March and April in 2014. On May 7, 2014, the company received a notification letter from the NASDAQ OMX Group, indicating that the bid price of its common stock was below the minimum $1.00 per share threshold. The company had been provided a period of 360 calendar days in total to regain compliance. Otherwise, Nasdaq would provide notice that the company’s securities will be subject to delisting.
Sell-Off Started May 29
New York-based dELiA*s released its Q1 of fiscal 2014 earnings report on May 29. The company’s total revenues decreased 26.3 percent to $25.9 million from $35.2 million in the Q1 of fiscal 2013. Comparable sales, including comparable store sales and direct-to-consumer sales, decreased 24.7 percent. Consolidated gross profit was 21.3 percent, comparing to 23.8 percent in the prior year quarter primarily due to the deleveraging of occupancy costs. The operating loss had a 16.82 percent year-over-year advance from $8.9 million to $10.7 million in 2014.
Various reasons led dELiA*s into such a predicament, including reduced website and mall traffic, a worrying trend which is affecting mall retailers nationwide. In addition, catalog circulation for Q1 of fiscal 2014 had a 15.2 percent year-over-year decrease due to a reduction in unprofitable circulation.
Selling, general and administrative (SG&A) expenses were $16.5 million, or 63.6 percent of revenues, in Q1 of fiscal year versus $17.5 million, or 49.7 percent of revenues, in the prior year period. The reduction in SG&A expenses in dollars reflects reduced overhead and depreciation expenses offset, in part, by an increase in selling and stock-based compensation expenses. The increase in SG&A expenses as a percent of revenues reflects the deleveraging of selling, overhead and stock-based compensation expenses on lower revenues.
Given the serious circumstances, dELiA*s has made several actions to save itself. Prior to fiscal 2014, the company had two reportable segments: retail stores and direct marketing. Beginning in fiscal 2014, dELiA*s combined all channels under one management team which supervises the retail stores and online operations.
“While we are not pleased with our financial results, we believe that we have made tangible progress in executing on key initiatives that will set the stage for improved and more consistent financial performance,” said CEO Tracy Gardner in a statement.
New CFO Has Hands Full
These key initiatives included transitioning products to reflect an on-trend assortment appealing to teenage girls aging from 12 to 18. The company also relocated one store and closed two stores during Q1 of fiscal 2014, ending the period with 99 stores.
And here’s another big move. On May 29, the company announced the resignation of its CFO, David Dick, effective after August 1, 2014. Meanwhile, dELiA*s commenced a search for a new successor. But there is still a question mark over what changes the new CFO will make.
There appeared to be no reasoning behind the stock drop on June 4, aside from a continuing sell-off as a result of earnings and the CFO departure causing the company to dwindle to its all-time low.
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