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Gadzooks Sinks to Loss on Soft Sales

NEW YORK — Gadzooks, Inc., a specialty retailer of casual apparel and accessories for young adults, swung to a third-quarter loss as it failed to ignite sales.<br><br>The Dallas-based firm reported a loss of $856,000, or 9 cents a diluted share,...

NEW YORK — Gadzooks, Inc., a specialty retailer of casual apparel and accessories for young adults, swung to a third-quarter loss as it failed to ignite sales.

The Dallas-based firm reported a loss of $856,000, or 9 cents a diluted share, for the three months ended Nov. 2. That reverses income in the year-ago period of $1 million, or 11 cents. Net sales for the quarter increased 0.7 percent to $73.7 million from $73.2 million a year ago and same-store sales dropped 5.1 percent compared with a 3.2 percent decrease for the third quarter of last year.

Gross profits were down 278 basis points and selling, general and administrative (SG&A) expenses rose 124 points. Inventory was down 4 percent.

“Although our top line and bottom line were ahead of plan, we have yet to achieve the level of sales and profits we expect,” Gerald?Szczepanski, chairman and chief executive, said on a conference call. “Sales trends over the past month are slightly above our expectations and we continue to have a guarded optimism for the upcoming holiday season.”

While he indicated he didn’t expect “a breakout season,” he was hoping for “a profitable season that concluded with inventory in good shape.”

Paula Masters, president and chief merchandising officer, said that the young men’s and women’s divisions reported negative comps of 8 percent and 2 percent, respectively. Woven outerwear and activewear were strong, offset by T-shirts and sweaters.

The company said it expects fourth-quarter earnings to range between 38 to 42 cents a share, sales to land between $97 million to $99 million and comps to fall in the low-single digits.

For the nine months, income fell 50.8 percent to $1 million, or 11 cents a share, versus income of $2.1 million, or 22 cents, for the same period last year. Net sales rose 5.6 percent to $228.7 million from $216.6 million but fell 3.6 percent on a comp basis.