The Wilmington, N.C.-based specialty retailer said that, including a $4.9 million restructuring charge, its losses mounted to $9.1 million, or $1.07 a share, in the third quarter ended Nov. 30. That compares with a loss of $767,000, or 9 cents, in the year-ago period. Sales decreased 9.6 percent in the quarter, to $24.7 million versus $27.3 million last year, and were down 10.6 percent on a comparable-store basis.
Gross margins were 47.1 percent, which were down from the 48.1 percent recorded in last year’s third quarter. The company attributed the decrease to a higher level of promotional activity necessitated by the weak economy and the decrease in discretionary spending by consumers.
Last March, when the company reported last year’s results for the fourth quarter and full year, Alan M. Zimmer, president and chief executive officer, predicted that the 55-year-old firm would return to growth in the third or fourth quarter.
Nevertheless, investors sent Reeds’s stock price up 17 cents, or 17.9 percent, to close at $1.12 in American Stock Exchange trading.
During the quarter, Reeds closed four underperforming stores and said it would be closing at least 15 additional locations through sales, lease terminations and lease expirations during the remainder of the year. Reeds currently operates 109 stores primarily in enclosed regional shopping malls in 21 states in the Southeast and the Midwest,
The restructuring charge included associated lease termination fees, write-down of fixed assets, costs of closing 19 stores, including severance costs, as well as a 20 percent reduction in headquarters personnel.
Reeds announced on Dec. 10 the signing of a seven-year agreement for Alliance Data to provide a full-service private label credit card program for the chain. Under the terms of the agreement, Alliance Data will provide account acquisition and activation, receivables funding, card authorization and data capture, private label credit card issuance, payment processing, statement generation and customer service.
For the nine months, the company’s losses widened to $13.2 million, or $1.56 a share, compared with a loss of $2.7 million, or 31 cents, in the year-ago period. Sales decreased 9.9 percent, to 68.3 million from $75.7 million, and dropped 11.9 percent on a comp basis.