With a stalled turnaround effort and moves to recapitalize the company failing to reverse its fortunes, Delia’s Inc. is looking for a buyer.
Shares of the retailer, with stores, catalogues and a Web site targeted to teen girls, rose 3 cents, or 11.6 percent, to 27 cents Tuesday after the New York-based company said that it had retained Janney Montgomery Scott LLC to “explore and evaluate strategic alternatives to enhance shareholder value, including a possible sale, merger or other form of business combination.”
It also left the door open to new debt or equity financing arrangements. In June, the retailer received shareholder approval to increase the number of common shares, allowing it to use $24.1 million in proceeds for working capital and general corporate purposes from the sale of secured convertible notes that can be converted into Series B convertible stock.
Related Galleries
Without identifying them, Delia’s said it had received “several inquiries from third parties regarding a potential acquisition of the company,” prompting the firm’s board to explore a sale and other options.
“Management remains focused on executing its strategic plan and laying the groundwork to develop a more relevant, engaging and integrated customer experience across our multichannel platform,” said Tracy Gardner, who became chief executive officer in May 2013. “At the same time, we are focused on optimizing our working capital and continue to look for opportunities to leverage cost efficiencies.
“We maintain our belief that Delia’s can fulfill its potential as an authentic brand with a unique competitive position in the marketplace,” she concluded.
But options are limited. The company suffered a net loss of $13.6 million in the second quarter ended Aug. 2, up from a prior-year loss of $12.1 million and raising the year-to-date loss to $25.9 million. Efforts to invigorate its assortment haven’t struck a chord with consumers. Revenues fell 22.4 percent in the quarter, to $25.7 million, and comparable sales fell 17.5 percent, with same-store sales off 12.4 percent and traffic both online and in stores down.
On the positive side, the pace of comp erosion eased as the quarter unfolded, with July comps down a more manageable 7 percent.
Even with the proceeds raised earlier this year, cash and cash equivalents fell to $3.1 million from $4.2 million a year earlier. The firm warned at the end of the quarter, in its Form 10-Q filing with the Securities and Exchange Commission, that, if trends continued, “the company will not have sufficient liquidity to meet its anticipated cash requirements through the next 12 months. The speed of the company’s turnaround in a difficult retail environment, with reduced Web site and mall traffic, has been slower than expected.
“These factors raise substantial doubt about the company’s ability to continue as a going concern,” Delia’s said in the filing.
Shares of the company, trading in the neighborhood of $1 when Gardner took the reins as ceo, hit a 52-week low of 19 cents on Sept. 16. Even after the run-up in the stock Tuesday, the company’s market capitalization stood at $18.9 million.
It also faces a possible delisting by Nasdaq if its shares haven’t reclaimed the $1 level by early November.