BARRY’S JEWELERS POSTS $6.8M QUARTER LOSS
MONROVIA, Calif. — Barry’s Jewelers Inc. lost $6.8 million in the third quarter ended Feb. 28, causing a default in its bank agreements.
The retailer said that it is continuing negotiations with the bank group to waive the default or modify the covenants.
The loss included a charge of $1.3 million to cover severance costs and the closing of 11 stores, and a $1.1 million charge to liquidate aged inventories.
It also reflects a competitive discount climate and expenses related to impairment of leasehold improvements, property and equipment, the firm said.
In the 1996 quarter, Barry’s earned $3.2 million, or 79 cents a share.
Sales fell 3.2 percent to $49.2 million from $50.9 million, while same-store sales slumped 7.3 percent.
Barry’s said sales were hurt by a more restrictive credit policy implemented in November 1995 that is expected to result in higher-quality receivables.
Also, late merchandise during Christmas caused stock shortages.
In a statement, Sam Merksamer, president and chief executive officer, said, “We’re still in mid-stream at this point.
“We are in the process of carefully and quickly reviewing all areas of our business, looking at ways of achieving greater efficiencies — both long and short term,” he continued.
For the nine months, the company lost $19.2 million against earnings of $1.7 million, or 43 cents a share. Sales declined 5.5 percent to $104.7 million from $110.7 million, and same-store sales fell 9.6 percent.
Barry’s operates 163 stores in 17 states.
In another development, Moody’s Investors Service downgraded Barry’s senior secured notes to Caa from B3, while rating the outlook “stable.”
Ratings reflect the company’s high leverage; previous control problems, which “cast doubts” on its financial statements; potential near-term liquidity constraints, poor quality of customer receivables, and the effective subordination of the senior secured notes to the bank debt, which has a first priority lien on all assets, Moody’s said.
However, ratings are supported by a new management team and its plan to close underperforming stores, reduce trade names and change marketing strategies to encourage repeat purchases.