Burlington Coat Factory Investments Holdings Inc. said second-quarter profits declined more than 20 percent but instituted a cost-cutting program that it expects will reduce costs by more than $45 million during the back half of the year.
In the three months ended Nov. 29, the Burlington, N.J.-based off-price chain’s net income fell 21.6 percent to $18.2 million from $23.2 million in the 2007 quarter, despite an almost $6 million reduction in interest expense against last year’s period and a $6.8 million impairment charge in the year-ago quarter.
However, the most recent quarter included $11.5 million in markdowns that in previous years had been taken in subsequent periods, and a $1.7 million write-off of Burlington’s investment in the troubled Reserve Primary [Mutual] Fund.
Sales moved up 5.9 percent to $1 billion from $946.6 million as a net increase of 33 stores helped overcome a 2.1 percent decline in same-store sales.
In December, sales increased 4 percent but declined 4.2 percent on a same-store basis.
Based on “weaker than expected second-quarter earnings and lower-than-expected December comparable-store sales,” Moody’s Investors Service last week downgraded the company’s corporate family rating to “B3” from “B2” and its speculative grade liquidity rating to “SGL-3” from “SGL-2.” About $1.2 billion in loans and notes were affected, and the outlook remained negative.
“The downgrades also reflect the risk that this lower earnings performance places Burlington Coat at risk for a potential financial covenant violation,” the ratings agency said, noting that further deterioration in sales and earnings was possible and that the firm might need to amend its covenants. “This could result in higher pricing under its term loan and revolving credit facilities, and may further weaken its interest coverage,” Moody’s said. Without providing specifics, the company said it had undertaken several initiatives “to enhance the organization’s productivity…including some that have resulted in the elimination of certain positions and the restructuring of certain other jobs and functions.”
Tom Kingsbury, who joined Burlington as chief executive officer in December from Kohl’s Corp., said, “We are pleased to report a total sales and market share increase in a difficult economic and retail sales environment. In addition, by remaining focused on receipt management and staying current on seasonal product, we are well positioned to take advantage of opportunistic buys, which we believe will help us sustain our planned gross margin rate for the fiscal year.”
For the six months to date, the company reduced its net loss by almost half, to $14.3 million from $27.2 million as sales expanded 5.2 percent to $1.71 billion, with a 1.1 percent comparable-store sales drop.
The firm, acquired by Bain Capital Partners for about $2.1 billion in early 2006, is privately held, but discloses its financial results because of public debt. It operates 427 off-price stores in 44 states and Puerto Rico.
Breaking: @cushnieetochs’ co-founders @carlycushnie and @ochsmichelle are parting ways. After a 10-year run, Ochs is leaving the brand. Get the full story on WWD.com – link in bio. #wwdnews #wwdfashion
@maybelline’s Kanako Takase had snow bunnies in mind when creating the beauty look for @philipppleininternational. Playing off of the bedazzled snowboards in the collection, Takase mixed two highlighters together for a luminous sheen. #wwdbeauty #nyfw (📷: @jilliansollazzo)
“There’s a huge gap between the old way of doing things and today. It takes the youth to help evolve that. You have to count on the kids today to help lead you into the future. A lot of these retailers are stuck in the past. Communication is the biggest thing,” said @ronniefieg of @kith on the youth’s role in retail. On Monday night, Jeff Staple moderated a keynote session with Fieg and @syresmith at Assembly - a series of workshops, talks and keynotes addressing topics or issues in the apparel industry. Head to WWD.com to read more advice from Fieg and what Smith thinks of his dad @willsmith’s Instagram account and sustainability (📷: @weston.wells)
@joansmalls closed the @michaelkors fall 2018 show in black sequined pants and a varsity T printed with 19 on the front and 81 on the back. 1981 – the year Kors went into business. #wwdfashion #nfyw (📷: @giovanni_giannoni_photo)
“You think your life is going to be a certain way, and nothing you thought would happen ends up happening. Never in my wildest dreams did I think I’d be designing clothes and working with Mickey Drexler, and building something I’m deeply proud of,” said Jenna Lyons. Nine months after leaving @jcrew, Lyons is exploring the meaning of happiness. Read the interview, where Lyons talks about reinvention and more on WWD.com – link in bio. #wwdfashion (📷: Farrell) #jennalyons #jcrew