ABILENE, Kan., Sept. 9, 2010 (GLOBE NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which specializes in providing a superior selection of essential products for everyday life in small-town America, today announced operating results for its second quarter ended August 1, 2010.
Net sales from continuing operations for the second quarter of fiscal 2011 decreased 5.5% to $118.2 million, and same-store sales decreased 7.2%. Net sales from continuing operations for the first half of fiscal 2011 decreased 3.8% to $231.2 million, and same-store sales decreased 5.1%.
Net loss for the second quarter was $1.3 million, or $0.34 per diluted share, compared to net earnings of $3.0 million, or $0.78 per diluted share, for the second quarter of the fiscal 2010. Net loss for the first half of fiscal 2011 was $3.2 million, or $0.85 per diluted share, compared to net earnings of $3.0 million, or $0.77 per diluted share, for the same period of the prior fiscal year.
Richard Wilson, President and CEO, commented, "Second-quarter results were negatively impacted by a same-store sales decline of 7.2%, which resulted from inadequate inventory levels in key seasonal departments. Due to lower sales, gross margin contribution was lower by approximately $2.9 million. SG&A expense increased approximately $1.7 million as a result of higher than anticipated insurance costs, severance and legal fees. We achieved savings in advertising of $132,000, store maintenance expense of $318,000, and accounting fees of $131,000.
"Clearly, we must deliver improved results. The management team and I are working quickly to improve top-line sales and profitability. Business is stabilizing as inventory levels are now sufficient to achieve our sales objectives. We are also encouraged by our previously announced August same-store sales trend, reflecting a significant improvement over our second-quarter same-store sales result."
Mr. Wilson added, "Our core strategy is to improve our value proposition, provide an improved shopping experience with our new store layouts, and build upon key 'trip driving' businesses to improve our comp store sales and improve shareholder value. As a major step in this strategy, we are progressing with our store resets and expect to be fully complete by the end of September."
One important initiative is a new partnership with Associated Wholesale Grocers (AWG), a major food distributor headquartered in Kansas City. The alliance with AWG will provide our customers with exciting new products under the "Best Choice" and "Always Save" brands. Both brands offer national brand quality at more competitive prices. We are excited to launch this new merchandise initiative and will be delivering more than 400 new items into our stores by the end of September.
Investor Conference Call
The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on September 10, 2010, to discuss operating results for the second quarter ended August 1, 2010. The dial-in number for the conference call is 888-204-4368 (international/local participants dial 913-312-1389), and the Confirmation Code is 7742660. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Daylight Time. A replay of the call will be available after 1:30 p.m. Central Daylight Time September 10, 2010 through September 15, 2010 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 7742660. A replay of the call will also be available four hours after completion of the call by visiting the Investors page on the Company's website, http://www.alcostores.com/">www.ALCOstores.com.
Supplemental Data
The Company has included certain tables in this press release that are set forth fully in the Company's 10-Q.
Certain Non-GAAP Financial Measures
The Company has included Adjusted Gross Margin and Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information to assist them in comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes these measures in internal evaluation, review of performance and in comparing the Company's financial measures to those of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings [loss] from continuing operations) in that it does not include certain items, as does Adjusted Gross Margin. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the Company's performance using Adjusted Gross Margin and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and cash flow from operating activities. As a result, Adjusted Gross Margin and Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.
About Duckwall-ALCO Stores, Inc.
Duckwall-ALCO Stores, Inc. is a regional broad line retailer that specializes in meeting the needs of smaller, underserved communities across 23 states, primarily in the central United States. The Company offers an exceptional selection of quality products and recognized brand names at reasonable prices. Its specialty is delivering those products with the friendly, personal service its customers have come to expect. With 257 stores, Duckwall-ALCO Stores is proud to have continually provided excellent products at good value prices to its customers for 109 years. To learn more about Duckwall-ALCO Stores, Inc. visit www.ALCOstores.com.
The Duckwall-ALCO Stores, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5865
Forward-looking statements
This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995 ("the Act"). Any forward-looking statements are made by the Company in good faith, pursuant to the safe-harbor provisions of the Act. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments, and Company performance. Factors which could significantly change results include but are not limited to: sales performance, expense levels, competitive activity, interest rates, changes in the Company's financial condition, the company's high operating leverage in an environment of flat or declining consumer spending, the economic viability of small rural towns the company serves and macro-economic factors affecting, and potentially affecting, the retail industry in general such as a decline in the value of the US dollar against the currencies of countries from which US retailers import product, the introduction of a national sales tax or Value Added Tax, continued high levels of unemployment, rising fuel prices and the high level of consumer indebtedness. Additional information regarding these and other factors may be included in the Company's 10-Q filings and other public documents, copies of which are available from the Company on request and are available from the United States Securities and Exchange Commission.
| Duckwall-ALCO Stores, Inc. | ||||
| Consolidated Statements of Operations | ||||
| (dollars in thousands, except share and per share amounts) | ||||
| (Unaudited) | ||||
| For the Thirteen Week Periods Ended | For the Twenty-Six Week Periods Ended | |||
| August 1, 2010 | August 2, 2009 | August 1, 2010 | August 2, 2009 | |
| Net sales | $ 118,158 | 125,029 | $ 231,181 | 240,189 |
| Cost of sales | 80,572 | 82,706 | 158,424 | 159,418 |
| Gross margin | 37,586 | 42,323 | 72,757 | 80,771 |
| Selling, general and administrative | 36,210 | 34,505 | 71,025 | 70,107 |
| Depreciation and amortization | 2,501 | 2,268 | 4,983 | 4,645 |
| Total operating expenses | 38,711 | 36,773 | 76,008 | 74,752 |
| Operating income (loss) from continuing operations | (1,125) | 5,550 | (3,251) | 6,019 |
| Interest expense, net | 721 | 521 | 1,395 | 1,057 |
| Earnings (loss) from continuing operations before income taxes | (1,846) | 5,029 | (4,646) | 4,962 |
| Income tax expense (benefit) | (545) | 1,985 | (1,555) | 1,952 |
| Earnings (loss) from continuing operations | (1,301) | 3,044 | (3,091) | 3,010 |
| Earnings (loss) from discontinued operations, net of income tax expense (benefit) | 4 | (14) | (137) | (29) |
| Net earnings (loss) | $ (1,297) | 3,030 | $ (3,228) | 2,981 |
| Earnings (loss) per diluted share | ||||
| Continuing operations | $ (0.34) | 0.78 | $ (0.81) | 0.78 |
| Net earnings (loss) | $ (0.34) | 0.78 | $ (0.85) | 0.77 |
| Weighted-average shares outstanding: | ||||
| Basic | 3,836 | 3,798 | 3,823 | 3,798 |
| Diluted | 3,836 | 3,902 | 3,823 | 3,857 |
| Supplemental Data: | ||||
| For the Thirteen Week Periods Ended | For the Twenty-Six Week Periods Ended | |||
| August 1, 2010 | August 2, 2009 | August 1, 2010 | August 2, 2009 | |
| Same-store gross margin dollar change | (1.5)% | 1.1% | (1.8)% | 1.3% |
| Same-store SG&A dollar change | 2.5% | (3.8)% | 0.8% | (3.4)% |
| Same-store total customer count change | (4.7)% | (0.6)% | (3.9)% | 2.4% |
| Same-store average sale per ticket change | (2.3)% | (2.3)% | (0.9)% | 0.3% |
|
For the Thirteen Week Periods Ended |
Trailing Twelve Periods Ended |
For the Thirteen Week Periods Ended |
Trailing Twelve Periods Ended |
||||
|
Fiscal 2010 |
May 2, 2010 |
May 3, 2009 |
May 2, 2010 |
August 1, 2010 |
August 2, 2009 |
August 1, 2010 |
|
| Net earnings (loss) from continuing operations (1) | $ 3,100 | (1,788) | (36) | 1,348 | (1,301) | 3,044 | (2,997) |
| Plus: | |||||||
| Interest | 2,149 | 674 | 537 | 2,286 | 721 | 521 | 2,486 |
| Taxes (1) | 2,174 | (1,011) | (33) | 1,196 | (545) | 1,985 | (1,334) |
| Depreciation and amortization (1) | 9,982 | 2,482 | 2,377 | 10,087 | 2,501 | 2,268 | 10,320 |
| Share-based compensation | 757 | 81 | 185 | 653 | 119 | 262 | 510 |
| Preopening store costs (2) | 128 | 199 | -- | 327 | 183 | -- | 510 |
| Store transformation project costs | 2,096 | -- | 1,378 | 718 | -- | 718 | -- |
| =Adjusted EBITDA (1)(3)(4)(5) | 20,386 | 637 | 4,408 | 16,615 | 1,678 | 8,798 | 9,495 |
| Cash | 5,164 | 5,186 | 8,208 | 5,186 | 3,690 | 5,446 | 3,690 |
| Debt | 40,992 | 35,606 | 60,946 | 35,606 | 34,018 | 48,802 | 34,018 |
| Debt, net of cash | $ 35,828 | 30,420 | 52,738 | 30,420 | 30,328 | 43,356 | 30,328 |
| (1) These amounts will not agree with the fiscal year end 2010 or fiscal 2010 first quarter 10-Q filing due to the five stores the Company closed since the second quarter of fiscal 2010. These stores are now shown in discontinued operations. | |||||||
| (2) These costs are not consistent quarter to quarter as the Company does not open the same number of stores in each quarter of each fiscal year. These costs are directly associated with the number of stores that have been or will be opened and are incurred prior to the grand opening of each store. | |||||||
| (3) For the trailing twelve periods ended August 1, 2010 the average open weeks for the Company's two non same-stores was 14 weeks. | |||||||
| (4) The Company implemented new initiatives for fiscal year 2010. The fiscal 2010 initiatives include, but are not limited to, reduced point-of-sale hardware lease expense, energy expense and accident reduction programs. These initiatives achieved approximately $1.4 million in SG&A savings for the twenty-six weeks of fiscal 2010 when compared to the prior year same period. | |||||||
| (5) The store transformation project completed in fiscal 2010 continues to provide SG&A savings in fiscal 2011. This initiative achieved approximately $458 in SG&A savings for the twenty-six weeks of fiscal 2011 when compared to the prior year same period. | |||||||
| Duckwall-ALCO Stores, Inc. | ||
| Consolidated Balance Sheets | ||
| (dollars in thousands, except share and per share amounts) | ||
| (Unaudited) | ||
| August 1, 2010 | August 2, 2009 | |
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 3,690 | $ 5,446 |
| Receivables | 5,395 | 5,656 |
| Prepaid income taxes | 2,051 | 423 |
| Inventories | 140,274 | 148,499 |
| Prepaid expenses | 4,022 | 4,067 |
| Deferred income taxes | 4,307 | 5,345 |
| Assets held for sale | 1,181 | 1,539 |
| Total current assets | 160,920 | 170,975 |
| Property and equipment, at cost | 101,295 | 100,761 |
| Less accumulated depreciation | 71,819 | 69,230 |
| Net property and equipment | 29,476 | 31,531 |
| Property under capital leases, net of accumulated amortization | 7,753 | 2,231 |
| Other non-current assets | 1,203 | 164 |
| Total assets | $ 199,352 | $ 204,901 |
| Duckwall-ALCO Stores, Inc. | ||
| Consolidated Balance Sheets | ||
| (dollars in thousands, except share and per share amounts) | ||
| (Unaudited) | ||
| August 1, 2010 | August 2, 2009 | |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Current maturities of long-term debt | $ 1,498 | $ 1,406 |
| Current maturities of capital lease obligations | 1,084 | 1,903 |
| Accounts payable | 29,979 | 25,682 |
| Accrued salaries and commissions | 4,415 | 4,632 |
| Accrued taxes other than income | 5,160 | 4,792 |
| Self-insurance claim reserves | 4,180 | 4,841 |
| Other current liabilities | 4,821 | 4,548 |
| Total current liabilities | 51,137 | 47,804 |
| Long-term debt, less current maturities | 653 | 2,151 |
| Notes payable under revolving loan agreement | 29,912 | 41,308 |
| Capital lease obligations - less current maturities | 7,596 | 2,034 |
| Deferred gain on leases | 4,019 | 4,405 |
| Deferred income taxes | 1,078 | 129 |
| Other noncurrent liabilities | 1,835 | 1,662 |
| Total liabilities | 96,230 | 99,493 |
| Stockholders' equity: | ||
|
Common stock, $.0001 par value, authorized 20,000,000 shares; issued and outstanding 3,839,395 shares and 3,797,947 shares, respectively |
1 | 1 |
| Additional paid-in capital | 39,930 | 39,002 |
| Retained earnings | 63,191 | 66,405 |
| Total stockholders' equity | 103,122 | 105,408 |
| Total liabilities and stockholders' equity | $ 199,352 | $ 204,901 |