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OAKLAND, Calif.–(BUSINESS WIRE)–Cost Plus, Inc. (NASDAQ: CPWM – News) today announced financial results for its fourth quarter and fiscal year ended January 30, 2010 and provided financial guidance for the first quarter of fiscal 2010.
Fourth Quarter Highlights:
$21 million in net income, a $39 million improvement over the prior year
$11 million in income from continuing operations before interest and taxes, a $22 million improvement, compared with an $11 million operating loss last year
Same store sales increased 0.3% for the combined fis! cal November-December holiday period
Same store sales decreased 2.5% for the quarter due to significantly less clearance activity in January than a year ago
Gross profit rate for the quarter increased 340 basis points versus last year
Customer count increased 2.7% for the quarter
$13 million tax benefit for the net operating loss (NOL) refund was received in February 2010
Fourth Quarter and Fiscal 2009
Barry Feld, President and Chief Executive Officer commented, “We are pleased with the return to profitability in our most important quarter. The Company’s core competency in unique and affordable seasonal gift-giving and entertaining products, augmented with a new customer acquisition campaign, reversed the negative trend in customer count and drove significantly more profitable sales in the quarter than a year ago.â€
Mr. Feld continued, “Despite a 7% decline in same store sales for the fiscal year, we reduced our loss from continuing operations for the year (EBIT) by 32% from fiscal 2008 during one of the toughest retail periods on record. Fourth quarter EBITDA of $17 million compared to an EBITDA loss of $2.7 million last year clearly demonstrates that the recent changes to our merchandising and marketing strategies are the right ones to deliver po! sitive cash flow in fiscal 2010.â€
Gross profit rate for the fourth quarter of fiscal 2009 increased to 27.4% from 24.0% for the fourth quarter last year. Last year, the fourth quarter gross profit rate included a $9.0 million charge to write-down slow moving inventory which, as a result of improved inventory management, was not repeated in the fourth quarter of fiscal 2009. Excluding the $9.0 million inventory write-down last year, gross profit rate increased 80 basis points.
The gross profit rate for fiscal 2009 was 26.4% compared to 26.0% for fiscal 2008. Reductions in the cost of merchandise were offset by promotional activity required to compete with aggressive discounting among other specialty retailers, particularly in the furniture category. Additionally, sales in consumables which have a lower margin rate continued to outperform home furnishings putting pressure on the overall margin rate. Occupancy costs for fiscal 2009 increased 90 basis points ove! r last year primarily due to decreased leverage on lower same store sa les. To date, the Company has executed or obtained agreements in principle of $15 million in rent concessions under its rent abatement program, of which $4 million was realized in fiscal 2009. Negotiations with landlords will continue for the foreseeable future.
Fourth quarter selling, general and administrative (“SG&Aâ€) expenses include charges for the following:
$0.3 million non-cash impairment charge to write-down property and equipment net of deferred rent and tenant improvement allowances for five stores that closed during the first quarter of fiscal 2010 compared to a $0.8 million write-down last year related to the eight continuing operations stores that closed in the first quarter of fiscal 2009.
$0.4 million severance charge in the fourth quarter of fiscal 2009 compared to a $1.2 million severance charge for the work force reduction in the fourth quarter of fiscal 2008.
$0.4 million non-cash impairment charge to write-down property and equipm! ent net of deferred rent and tenant improvement allowances for two underperforming stores that we do not plan to close compared to a $0.9 million write-down last year for seven underperforming stores that we do not plan to close.
Excluding the items listed above, SG&A expenses as a percentage of net sales were 23.9% for the fourth quarter of fiscal 2009 versus 26.4% for the fourth quarter of fiscal 2008. The decrease in SG&A expenses as a percentage of net sales for the fourth quarter and fiscal year were due to the Company’s cost-cutting initiatives, including store closures, which resulted in lower payroll, advertising and other controllable expenses. Excluding the items listed above, SG&A expenses as a percentage of net sales were 31.1% for fiscal 2009 compared to 32.7% for fiscal 2008.
Store closure costs related to closing the eight stores classified within continuing operations were a gain of $0.5 million for the fourth quarter of fiscal 2009 and an expens! e of $5.8 million for the year. The $0.5 million gain in the fourth qu arter is the result of favorable lease buy-out settlements. There were no store closure costs in fiscal 2008 relating to closed stores that were classified within continuing operations.
For the fourth quarter of fiscal 2009, the Company reported earnings from continuing operations before interest and taxes (or “EBITâ€) of $10.7 million. The following table provides comparable EBIT and EBITDA results on a GAAP and non-GAAP basis:
Fourth Quarter Full Year
(Dollars in thousands) FY09 FY081 FY09 FY081
Income/(loss) from continuing operations before interest and taxes (EBIT) $10,677 ($10,867) ($48,046) ($70,659)
Excluding impact of:
Property & equipment impairments, net 680 1,670 1,142 1,902
Store closure costs (518)
_
5,799 _
Corporate workforce severance 383 1,160 383 1,160
Permanent write-down of inventory _ 9,005 _ 9,005
Rev! iew unsolicited offer from Pier 1 _ _ _ 2,800
Non-GAAP EBIT $11,222 $968 ($40,722) ($55,792)
Less impact of depreciation and amortization 6,414 8,187 28,549 32,847
Non-GAAP EBITDA $17,636 $9,155 ($12,173) ($22,945)
1. Amounts for fiscal 2008 have been restated to remove the impact of the discontinued operations related to the 18 stores classified within discontinued operations that were closed in fiscal 2009.
Net income on a GAAP basis for the fourth quarter of fiscal 2009 was $21.1 million or $0.95 per diluted share versus a loss of $18.3 million or $0.83 per diluted share for the fourth quarter of fiscal 2008. Net loss for fiscal 2009 was $63.3 million or $2.87 per diluted share compared to a net loss of $102.7 million or $4.65 per diluted share last year. In the fourth quarter of fiscal 2009, the Company had an income tax benefit of $13.1 million primarily as a result of a rec! eivable that was recorded for a tax refund that was received in Februa ry 2010. The tax refund was related to the Worker, Homeownership, and Business Assistance Act of 2009, which was signed into law on November 6, 2009, that allows taxpayers to elect to carry back net operating losses for additional periods.
The Company ended the year with $48.5 million in borrowings and $12.9 million in letters of credit outstanding under its asset-based credit facility compared to $38.5 million in borrowings and $13.5 million in letters of credit last year. The revolving credit facility is asset-based and expires in June 2012. At the end of fiscal 2009, inventory levels had declined 18.8% year-over-year. The reduction in inventory is the result of store closures, planned decreases in SKU (stock keeping unit) count and lower weeks of supply.
