Bombay Announces Fourth Quarter and Fiscal 2004 Operating Results

Furniture World Magazine

The Bombay Company, Inc., announced that earnings for the fourth quarter ended January 29, 2005 were $7.1 million or $0.20 per diluted share compared to earnings of $12.3 million or $0.34 per diluted share for the corresponding period of the prior fiscal year. For the fiscal year ended January 29, 2005 the Company reported a loss of $12.8 million or $0.36 per share compared to earnings of $9.3 million or $0.27 per share for the fiscal year ended January 31, 2004. These and all other amounts in the press release have been presented on a basis consistent with a restatement as described below. Revenue for the quarter ended January 29, 2005 was $203.4 million compared to $211.6 million for the prior year. Same store sales for Bombay stores in existence for more than one year decreased 7% for the quarter. For the year ended January 29, 2005, revenue declined 3% to $576.1 million compared to $596.4 million for the prior fiscal year. Same store sales decreased 12% for the year, which was partially offset by revenue from new stores. For the year, Internet and mail order revenue grew 6% to $31.7 million from $29.8 million last year as a result of growth in Internet sales that offset a decline in mail order sales. Annual revenue for Bailey Street Trading Company declined to $15.1 million compared to $15.8 million last year. For the quarter, gross margins declined to 28.7% of revenue from 31.8% of revenue during the corresponding period of the prior year as a result of the loss of leverage on fixed costs as well as lower product margins due to increased promotional activity. Buying and occupancy costs, included in gross margins, increased to $28.7 million or 14.1% of revenue from $27.1 million or 12.8% of revenue in the prior year due to the combination of a store count increase and a decline in average sales per store as the Company experienced an overall softness in sales during the period. Selling, general and administrative costs declined $0.1 million, but increased from 22.3% of revenue to 23.1% of revenue due to the lower sales base in Fiscal 2004. The Company ended the year with no debt and $9.2 million in cash. The level of inventory increased to $144.7 million, an increase of $5.8 million over the prior year as a result of higher levels of in-transit merchandise. Average inventory per store at January 29, 2005 declined to $288,000 from $295,000 at January 31, 2004. James D. Carreker, Chairman of the Board and Chief Executive Officer, stated, "Our earnings were in line with expectations for the quarter. While we are disappointed with the financial results for the year, we made good progress towards many of our long-term goals. We've spent the last two years investing in our infrastructure, including upgrading our stores, improving our systems and enhancing our distribution network. We have managed over 200 lease expirations during this period. We have successfully moved to a much higher percentage of off-mall locations, which have significantly lower fixed operating costs per square foot. Currently, almost 40% of our stores are in off-mall locations compared to only 12% two years ago. All of these investments position us well for future profit flow-through on sales. We began 2005 with a fresh and much improved inventory mix, including an upgraded assortment in terms of design, quality and price. We plan to continue this trend throughout the year. "We remain concerned about the softness in consumer demand. We have taken steps to reduce our expenses during 2004 and will continue to manage spending levels aggressively for 2005. At the same time, we plan to increase our spending on consumer and market research, Internet, marketing and visual presentation in our stores. We remain committed to our long-term strategy and believe that it will allow us to deliver increased shareholder value," noted Mr. Carreker. LEASE ACCOUNTING AND IMPACT OF CHANGE ON PRIOR PERIODS The Company announced today that it had finalized the review of its lease accounting practices. Like many other companies in the retail and restaurant businesses, the Company previously announced that it was reviewing its lease accounting practices in light of the communication issued by the office of the Chief Accountant of the Securities and Exchange Commission on February 7, 2005. Historically, the Company has recognized store lease expense on a straight-line basis beginning on the commencement date of the lease. This generally had the effect of excluding the store build out and fixturing period (generally one to three months) during which the Company typically had no rent payments. The Company has now concluded that the appropriate accounting treatment is to include the rent-free, build out and fixturing period in the period over which the straight-line expense should be recognized. The change has no effect on historical or future cash flows or the timing of payments under leases. The lease related accounting adjustments are reflected in the reported financial results included in this release. The impact of these adjustments to Fiscal 2003 results was to reduce annual net income by $0.7 million or $0.02 per diluted share. Similarly, the impact of the modification of lease accounting practices on Fiscal 2004 was to increase the loss by $0.7 million or $0.02 per diluted share. The Company plans to restate the historical financial information related to Fiscal 2002, Fiscal 2003 and the first three quarters of Fiscal 2004 in its Annual Report on Form 10-K for the year ended January 29, 2005. FISCAL 2005 OUTLOOK For Fiscal 2005, the Company expects to report earnings in the range of $0.02 to $0.08 per share. Comparable store sales are expected to be in the low to mid-single digit range with the improvement to be heavily weighted toward the second half of the year. The Company plans to open approximately 45 to 50 new stores during the year and close approximately 42 stores, or a net increase of 3 to 8 stores in Fiscal 2005. The Bombay Company, Inc. designs, sources and markets a unique line of home accessories, wall decor and furniture through retail outlets, specialty catalogs and the internet in the U.S. and internationally.