BELLEVUE, Wash., Jan. 21 /PRNewswire-FirstCall/ -- Eddie Bauer Holdings,
Inc. (Nasdaq: EBHI) today reported preliminary comparable store sales and
estimated adjusted EBITDA for the fourth quarter and full year. The Company is
taking the step of releasing its estimated fourth quarter and full year
adjusted EBITDA early because it is a key component of the Company's loan
covenants. The Company also announced that SG&A expense for the year is
expected to be down by $45 to $50 million, well ahead of its previously
announced target.
For fiscal 2008, the Company estimates that adjusted EBITDA will be in the
range of $50 to $55 million, an increase of $8 to $13 million from the prior
year. Estimated fourth quarter adjusted EBITDA will be in the range of $53 to
$58 million, a decrease of $2 to $7 million from fourth quarter 2007. The
estimated EBITDA presented is adjusted for certain non-recurring and
nonoperational items.
"The retail environment in the fourth quarter was brutal, the worst in
decades," said Neil Fiske, President and Chief Executive Officer. "In spite of
the recession in 2008, we managed to improve our year-over-year adjusted
EBITDA and cash flow. Our sales were soft, but much of the market fared worse.
Our turnaround program continues to show results, even in a tough
environment."
SALES RESULTS
Preliminary combined comparable store sales fell 5.7% for the quarter and
1.1% for the fiscal year when excluding the effect of foreign exchange rates
resulting from the sharp fall in the Canadian dollar. Preliminary comparable
store sales were as follows:
Q4 2008(%) FY 2008(%)
(Excl. (Excl.
Comp store sales Q4 2008(%) CDN Impact) FY 2008(%) CDN Impact)
Combined(retail & outlet) (8.8) (5.7) (1.8) (1.1)
Retail (10.5) (5.9) (2.0) (0.9)
Outlet (5.4) (5.4) (1.5) (1.5)
Comparable store sales for both the fourth quarter and fiscal 2007 have
been calculated to include the addition of the first week of fiscal 2008, to
make 2007 (a 52-week year) comparable to fiscal 2008, which is a 53-week
fiscal year.
Preliminary net merchandise sales by channel were as follows:
Q4 2008 Q4 2007 FY 2008 FY 2007
($'s in ($'s in ($'s in ($'s in
Net merchandise sales millions) millions) millions) millions)
Combined 356.0 377.6 971.3 989.4
Retail & outlet 255.9 274.2 697.1 711.4
Direct 100.1 103.4 274.2 277.9
Preliminary net merchandise sales for the fourth quarter declined 5.7% and
for the full-year net merchandise sales for 2008 declined 1.8%, driven by a
small decline in comparable store sales and a smaller store base. Comparisons
for net merchandise sales are between fiscal years and are not adjusted for a
52 or 53 week period. The Company ended the year with 16 fewer retail stores
and one more outlet store than at year-end 2007. Merchandise margins for the
fourth quarter and year were lower due to the high level of promotional
activity in the market.
Inventories at quarter-end were down approximately 13.8% in total and
approximately 8.2% on a per store basis. Inventory percentages have not been
adjusted for Canadian currency fluctuations or the 53rd week.
At year-end, cash balances were $60.4 million. There were no short-term
borrowings outstanding and the balance outstanding under the senior term loan
was $192.8 million at the end of the year. As of the end of the fourth quarter
of 2008, the Company was in compliance with all its loan covenants. The
Company will be closely monitoring covenants in the first quarter of 2009. The
Company will explore possible modifications to its current debt terms and has
engaged the investment banking firm of Peter J. Solomon Company to assist in
this process.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses (SG&A), excluding non-
recurring costs and the impact of the 53rd week in 2008, are estimated to be
down $45 to $50 million for the year. This exceeded the upper end of the
Company's stated target of $25-30 million in SG&A reduction, and is primarily
due to substantial savings from lower revenue-related expenses and better cost
management. The Company benefited from substantial savings in revenue-related
expenses.
The Company is taking further aggressive action to manage its cost
structure and expenditures in 2009 in the face of the continuing economic
downturn, including:
-- Setting a target for an additional $10-15 million reduction in year
over year SG&A costs, excluding non-recurring items and the impact of
the 53rd week in 2008;
-- Limiting net capital spending to approximately $15 million;
-- Freezing salaries;
-- Adjusting certain benefits programs;
-- Cutting the size of its Board of Directors and reducing total Board
costs by 40-50%, including approximately $0.5 million per year in cash
payments; and
-- Accelerating product innovation and new launches.
"We are making good progress in our turnaround," Fiske said. "But these
are extraordinary times and we know we must do more to weather the storm. We
are looking carefully and methodically at all areas of the Company and
focusing our resources on the highest priority areas that are consistent with
our direction. While cutting costs and preserving cash, we are also pushing
forward with our new product lines and marketing programs. We will emerge from
this recession leaner and poised for growth."
The financial information contained in this release is preliminary in
nature, based on information as of January 21, 2009, has not been audited, and
may be subject to further adjustment. Investors should be aware that the
Company has not yet finalized its results and that the Company's preliminary
numbers reflect management's estimates, which could differ materially from
actual results, if the information on which the estimates were based
ultimately proves to be incomplete or incorrect. EBITDA is an important non-
GAAP financial measure of operating performance. Loss before Income Tax
Benefit is considered the comparable GAAP measure to EBITDA. As of the date of
this press release, the Company has not completed its annual valuation of
goodwill, trademarks and tax net operating loss carryforwards, and therefore
cannot provide an estimate of Loss before Income Tax Benefit for comparison to
the projected EBITDA information provided in this release. Adjustments to
EBITDA include fees and costs associated with the merger termination in 2007,
severance, asset impairments, fair value changes on convertible notes, and
gains from modifications of benefit plans. EBITDA is used, with additional
adjustments, to determine compliance with certain loan covenants. Net
merchandise sales include sales from the Company's retail and outlet stores
and its direct channel, which includes its catalogs and websites, but does not
include licensing revenue, shipping revenues or revenue generated by the
Company's joint venture. Comparable store sales include net merchandise sales
from retail and outlet stores that have been open for one complete fiscal
year. New store locations are excluded from our comparable store sales until
they have been in operation for one complete fiscal year. Similarly, stores
that are expanded or down-sized by more than 30% are also excluded from our
comparable store base until they have been in operation in their new
configuration for one complete fiscal year. Stores that are closed for more
than 10 consecutive days are also excluded from the comparable store base.
Comparable store sales do not include net sales from our catalogs and
websites.
ABOUT EDDIE BAUER
Established in 1920 in Seattle, Eddie Bauer is a specialty retailer that
sells outerwear, apparel and accessories for the active outdoor lifestyle. The
Eddie Bauer brand is a nationally recognized brand that stands for high
quality, innovation, style and customer service. Eddie Bauer products are
available at 376 stores throughout the United States and Canada, through
catalog sales and online at http://www.eddiebauer.com. Eddie Bauer
participates in a joint venture in Japan and has licensing agreements across a
variety of product categories.
SAFE HARBOR STATEMENTS
All financial information related to fiscal 2008 in this press release is
preliminary projected data as of January 21, 2009. This press release contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. In some cases, you can identify these
statements by forward-looking words such as "may," "might," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential", qualifiers such as "preliminary", and similar
expressions. Forward-looking statements are not guarantees of future events,
and the Company can provide no assurance that such statements will be
realized. Forward-looking statements contained in this press release are based
on estimates and assumptions, which assumptions and estimates may prove to be
inaccurate, and involve risks and uncertainties. Actual results may differ
from those contemplated by such forward-looking statements as a result of a
variety of factors, including a continued downturn in the national and global
economies; the ability to meet the covenants contained in our various credit
facilities or obtain relief therefrom; changes in consumer confidence and
consumer spending patterns; our inability to effectuate our proposed
turnaround of Eddie Bauer as a premium quality brand and improve profitability
of our retail and outlet stores, catalogs and website operations; our
inability to hire, retain and train key personnel; risks associated with legal
and regulatory matters; risks associated with rising energy costs; the
volatility of foreign exchange rates as they impact our results of operations;
risks associated with reliance on information technology; increased levels of
merchandise returns not estimated by management; our inability to source our
requirements from our current sourcing agents; disruption in our back-end
operations; the inability of our joint venture partner to operate our joint
venture effectively; our inability to protect our trademarks and other
proprietary intellectual property rights; unseasonable or severe weather
conditions; the Company's inability to use its federal net operating loss
carryforwards, whether as a result of lack of future income from tax purposes
or otherwise; and the other risks identified in our periodic reports filed
pursuant to the Securities Exchange Act of 1934, as amended, including the
Company's Annual Report on Form 10-K for the period December 29, 2007 and
Quarterly Reports on Form 10-Q for the periods ended March 29, 2008, June 28,
2008 and September 27, 2008. The information contained in this release is as
of January 21, 2009, and except as required by law, we undertake no obligation
to update any of these forward-looking statements.
Contact:
Eddie Bauer Holdings, Inc.
Marv Toland, Chief Financial Officer - 1 425 755 6225
SOURCE Eddie Bauer Holdings, Inc.