DELIA’S 2ND-QUARTER LOSS DEEPENS
NEW YORK — Second-quarter losses at Delia’s Inc. widened to $6.1 million from a $143,000 loss a year earlier, although sales gained 26.2 percent.
The loss, equal to 42 cents a diluted share, was 1 cent worse than Wall Street’s consensus estimate.
Sales for the quarter ended July 31 climbed to $33.4 million from $26.5 million. New catalog titles and new retail stores drove the increase, which was partially offset by lower circulation of the Delia’s summer catalogs and lower sales at Delia’s TSI Soccer subsidiary, the company said.
“As expected, the second quarter was one in which we focused on building infrastructure to support the growth of our retail, catalog and Internet operations,” Evan Gullemin, president, said in a statement. “While we expect to post lower-than-expected operating income for the remainder of 1999, we believe the investments we have made are critical to regaining our momentum in fiscal 2000 and beyond.”
Delia’s will also have additional operating expenses in 1999 and 2000 that are related to the purchase by its Internet subsidiary, ITurf, of OnTap.com, a college web site, Gullemin noted. ITurf, which went public in March, is 75 percent owned by Delia’s.
At its catalog business, Delia’s improved inventory positions and fill rates for the upcoming fall season and started to refine the merchandise mix at the core Delia’s catalog, the company said.
“While the initial response to the 1999 back-to-school book mailing was softer than expected, we believe our mailings for the remainder of the year better reflect our strategic initiatives,” said Gullemin.
During the quarter the company opened eight Delia’s stores and began the conversion of Screeem stores to the Delia’s format. Delia’s, which bought the Screeem chain along with another chain, Jeans Country, in July 1998, took a $13.7 million aftertax charge in its first quarter to close or convert the stores. At the end of the quarter Delia’s operated 50 retail stores.
The conversions will be costly over the short term, but will give the company a strong real estate base to expand the Delia’s retail concept, Gullemin said. In another move to support its retail and catalog expansion, Delia’s also recently bought for $6.2 million a 400,000-square-foot distribution center in Hanover, Pa., where it had earlier been leasing space.
For the half, Delia’s earnings leaped to $18.8 million, or $1.19 a share, from $1.9 million, or 14 cents, a year earlier. However, results for the current period were skewed by a $70.1 million pretax gain related to the ITurf IPO, and the store conversion charge, both recorded in the first quarter. Sales gained 30.4 percent to $75.2 million from $57.6 million.
Delia’s shares closed Wednesday at 7 3/4, off 3/8, in over-the-counter trading.