Citing the “power” of its celebrity partnerships, New York & Co. moved into the black in the fourth quarter, posting a $4.75 million net profit for the period, versus a $9.9 million loss a year ago.
Sales in the quarter reached $278.7 million, up from $266.3 million in the year-ago period. Comparable sales rose 3 percent.
“Celebrity is probably our biggest game changer,” said Greg Scott, chief executive officer of New York & Co., during a conference call Thursday. “We are continuing to see customers respond to our celebrity collaborations.” The collaborations are “powerful traffic drivers.” They were a big factor in contributing to the company’s approximately 2.8 billion impressions last year, up more than 60 percent from the prior year.
He disclosed that another celebrity partnership for New York & Co.’s SoHo Jeans subbrand will be unveiled in the third or fourth quarter, complementing New York & Co.’s two existing celebrity partnerships, with Eva Mendes and Gabrielle Union.
The celebrity strategy for New York & Co.’s subbrands are approaching 10 percent of the overall New York & Co. business. Pants were cited as a “critical” component of subbrand success.
Scott said the fourth quarter was highlighted by the 3 percent increase in comparable sales, positive traffic in all channels, expansion in gross margin and leverage in expenses. “Combined, this led to GAAP operating profit of $5 million, representing growth of $14.2 million, as compared to the GAAP operating loss from the fourth quarter last year.”
Gross profit as a percentage of net sales increased 210 basis points to 29.5 percent versus the fiscal year 2016 fourth-quarter gross profit percentage of 27.4 percent, reflecting the company’s highest gross margin rate achieved in the fourth quarter since 2006. The increase during the quarter reflects a 160 basis point improvement in the leverage of buying and occupancy costs and a 50 basis point increase in merchandise margin.
Among other projects for this year, New York & Co. will begin to roll out Fashion to Figure stores this year, after purchasing the large-size retailer last February. Fashion to Figure has eight units and its Closet subscription service is still in beta phase.
Doorbusters, where the company “played hard” last quarter, and “the integrations between the outlet and core New York & Co. businesses in the third quarter,” added to profitability.
Scott also said that last quarter was the first time in the company’s history that all three channels — stores, outlets and e-commerce — delivered positive traffic comps. E-commerce, which represents more than 31 percent of sales, continues to grow at a double-digit pace, Scott said.
“Overall mall traffic continues to improve.…We are still better than mall traffic,” he said.
In addition, corporate office rationalization in early February will reduce annualized payroll related costs by about $7 million.
The company continues to streamline its brick-and-mortar, with more than 150 locations in the last five years closed. This year, 35 to 40 stores will close, though the plan is also to open five to 10 units in “premiere” locations.
The company operates 432 stores including 119 outlets.
For the first quarter, net sales are expected to increase in the low- to mid-single-digit percentage range, reflecting the combined effect of the shift of the calendar due to the 53rd week in 2017, and growth in e-commerce sales, partially offset by a reduced store count. Comparable store sales are expected to increase in the low single-digit percentage range.
For all of 2017, net sales reached $926.9 million, compared to $929.1 million for fiscal year 2016. Comparable store sales increased 1 percent. Net income was $5.7 million for 2017 versus a loss of $17.3 million in the prior year.