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Embattled Tandy Brands Accessories Inc. saw its net loss nearly triple as it endured sharply lower sales and a series of charges in its effort to reorganize its finances and operations.
The company reiterated that it expected to have a new credit facility in place by the end of the month and had signed nonbinding term sheets with lenders for financing at rates expected to range from 9.3 to 12 percent. A poor holiday season nudged Tandy out of the profitability requirements of its $35 million credit facility with Wells Fargo, which last month granted the Dallas-based firm a waiver on those covenants.
In the third quarter ended March 31, Tandy suffered a net loss of $8.5 million, or $1.19 a diluted share, versus a loss of $3.1 million, or 43 cents, in the 2012 period. Included in the loss were pretax charges of $3 million for intangibles and held-for-sale impairments and $2.6 million for restructuring.
Sales descended 17.9 percent to $19.6 million from $23.9 million a year ago as gross margin fell to 26.7 percent of sales from 31.7 percent of sales in the year-ago period. Cost of goods sold fell 11.9 percent to $14.3 million and selling, general and administrative expenses dropped 22.7 percent to $7.6 million.
“Our third-quarter net sales were impacted by abnormally low levels of replenishment sales to the largest customer in our accessories segment,” said Rod McGeachy, president and chief executive officer of Tandy. “This decline was driven by [the customer’s] decision to delay new spring roll-outs early in the quarter and does not represent any material change in our market share.”
Wal-Mart is the company’s largest accessories customer, according to the firm’s annual report.
Tandy’s difficulties intensified after a poor holiday season in which sales in its gift segment were weak, causing higher-than-expected sales allowances and returns. After finding itself in violation of its profit covenants with Wells Fargo, its stock price declined by nearly two-thirds. In March, it retained Deloitte Financial Advisory Services LLP and named Deloitte’s John Little its chief restructuring officer to help it navigate a turnaround. Its stock price has since picked up from the 52-week low of 38 cents hit on April 17 to 74 cents on Wednesday, when shares rose 7 cents or 10.5 percent.
In the nine months, the net loss expanded to $15.4 million, or $2.16 a diluted share, from a loss of $1.4 million, or 20 cents, in the first three quarters of 2012. In addition to the third-quarter charges, this year’s loss included a pretax inventory writedown of $6.7 million. Sales declined 2.8 percent to $93.4 million.