Danier Leather Reports Fiscal 2012 Fourth Quarter and Year End Results




Aug 16, 2012 - 06:00

TORONTO, ONTARIO--(Marketwire - Aug. 16, 2012) - Danier Leather Inc. (TSX:DL) ("Danier" or the "Company") today announced its consolidated financial results for the fourth quarter and fiscal year ended June 30, 2012.

FINANCIAL HIGHLIGHTS ($000s, except earnings per share (EPS), square footage and number of stores):

Quarter Ended* Year Ended*
Jun 30, 2012 Jun 25, 2011 Jun 30, 2012 Jun 25, 2011
(14 weeks) (13 weeks) (53 weeks) (52 weeks)
Sales $ 27,510 $ 26,713 $ 148,219 $ 157,621
EBITDA(1) (2,120 ) 286 9,095 14,662
Net Earnings (Loss) (2,090 ) (212 ) 4,003 7,568
EPS - Basic $ (0.45 ) $ (0.04 ) $ 0.86 $ 1.62
EPS - Diluted $ (0.45 ) $ (0.04 ) $ 0.83 $ 1.55
Number of Stores 89 89 89 89
Retail Square Footage 294,343 306,050 294,343 306,050
* The Company's fiscal year ends on the last Saturday in June of each year. Consequently, fiscal 2012 consists of a 53-week year that ended on June 30, 2012, while the fiscal 2011 year consists of a 52-week year that ended on June 25, 2011. For the full impact on sales and comparable store sales excluding the additional week in fiscal 2012, please see footnote 3.

Total company sales during the fourth quarter, which consisted of a 14-week period compared with a 13-week period last year, increased by 3% to $27.5 million, compared with $26.7 million during the fourth quarter last year. Comparable store sales(2) during the fourth quarter of fiscal 2012 increased by 6%, compared to the fourth quarter last year.

Total company sales for the year were impacted by one of the warmest winters on record, which significantly affected sales of winter-related merchandise such as outerwear. Total sales for fiscal 2012 decreased by 6% to $148.2 million compared with $157.6 million last year. Comparable store sales for fiscal 2012 decreased by 6%, as compared to the corresponding quarter last year.

Danier's accessory sales increased by 38% during the fourth quarter of fiscal 2012 and represented 35% of total fourth quarter sales compared with 27% of total fourth quarter sales the previous year. For fiscal 2012, accessory sales increased by 11% and represented 32% of total company sales compared with 27% of total company sales during fiscal 2011.

While unseasonably warmer weather continued throughout the fourth quarter this year, impacting outerwear sales particularly during April and May, a successful accessories-focused brochure was distributed at the beginning of June, helping to drive significant increases in customer traffic and accessory sales during that month. During fiscal 2012, Danier placed more emphasis on growing the higher margin accessory category by expanding the offering of handbags, wallets, briefcases, business accessories and other accessory categories, as well as featuring more accessories in its windows and marketing programs.

Gross profit as a percentage of revenue during the fourth quarter of this year was 47.6% compared with 55.6% during the fourth quarter last year. Gross profit margin for the fiscal 2012 year was 51.8% compared with 54.7% during fiscal 2011. The decrease in the gross margin rate was mainly due to higher than anticipated markdowns for outerwear as a result of the unseasonably warm weather as well as increased leather prices.

Selling, general and administrative expenses during the fourth quarter of fiscal 2012 increased by $0.8 million, or 5%, to $16.2 million, compared with $15.4 million during the fourth quarter last year. Selling, general and administrative expenses for the fiscal 2012 year decreased by $4.2 million, or 6%, to $71.4 million, compared with $75.6 million last year.

Net loss during the fourth quarter of fiscal 2012 was $2.1 million ($0.45 per diluted share) compared with a net loss of $0.2 million ($0.04 per diluted share) during the fourth quarter last year. For the fiscal year ended June 30, 2012, net earnings were $4.0 million ($0.83 per diluted share) compared with net earnings of $7.6 million ($1.55 per diluted share) for the fiscal year ended June 25, 2011.

Danier continues to maintain a strong balance sheet with cash and cash equivalents of $34.3 million compared with $28.7 million at the end of fiscal 2011. In addition, at the fiscal 2012 year-end, Danier had working capital of $49.2 million and no long-term debt.

For the 2012 fiscal year, Danier began reporting its financial results in accordance with International Financial Reporting Standards ("IFRS"), including comparative information. Previously reported financial results prepared in accordance with Canadian generally accepted accounting principles have been restated to conform to the new standards adopted. See note 23 accompanying Danier's fourth quarter 2012 unaudited interim condensed consolidated financial statements for further information on the transition to IFRS and its impact on Danier's financial position, financial performance and cash flows.

Non-IFRS Financial Measures and Impact of Additional Week during Fiscal 2012

The Company prepares its consolidated financial statements in accordance with IFRS. In order to provide additional insight into the business, the Company has also provided non-IFRS data, including EBITDA and comparable store sales, each as defined below. Non-IFRS measures such as EBITDA and comparable store sales are not recognized measures for financial presentation under IFRS. These non-IFRS measures do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similarly titled measures presented by other publicly traded companies, nor should they be construed as an alternative to other financial measures determined in accordance with IFRS.

  1. EBITDA is defined as net earnings (loss) before interest expense, interest income, income taxes, impairment loss on property and equipment and amortization. EBITDA is a financial metric used by management and some investors to compare companies on the basis of ongoing operating results before taxes, interest expense, interest income, impairment loss on property and equipment and amortization and its ability to incur and service debt. EBITDA is also used by management to measure performance against internal targets and prior period results. EBITDA is calculated as outlined in the following table:
Fourth Quarter Ended Year Ended
Jun 30, 2012 Jun 25, 2011 Jun 30, 2012 Jun 25, 2011
(14 weeks) (13 weeks) (53 weeks) (52 weeks)
($000) ($000) ($000) ($000)
Net earnings (loss) $ (2,090 ) $ (212 ) $ 4,003 $ 7,568
Add (deduct) impact of the following:
Income tax (916 ) (299 ) 1,524 3,140
Interest expense 10 9 51 103
Interest income (89 ) (62 ) (229 ) (160 )
Impairment loss on property and equipment - - 66 98
Amortization 965 850 3,680 3,913
EBITDA $ (2,120 ) $ 286 $ 9,095 $ 14,662
  1. Comparable store sales are defined as sales generated by stores that have been open during the full current fiscal year as well as the full prior fiscal year. Comparable store sales is a key indicator used by the Company to measure performance against internal targets and prior period results and excludes sales fluctuations due to new stores, store closings and certain permanent store relocations. This measure is also commonly used by financial analysts and investors to compare Danier to other retailers.
  1. Total company sales during the fourth quarter of fiscal 2012, which contained 14 weeks compared with 13 weeks last year, increased by 3% and comparable store sales increased by 6%. Excluding the additional week during the fourth quarter of fiscal 2012, total company sales decreased 2% and comparable store sales increased 1%. For the year-to-date period, which contained 53 weeks compared with 52 weeks last year, sales and comparable store sales decreased by 6%. Excluding the additional week during fiscal 2012, total company sales decreased by 7% and comparable store sales decreased by 6%.

Forward-Looking Statements

This press release may contain forward-looking information and forward-looking statements which reflect the current view of Danier with respect to the Company's objectives, plans, goals, strategies, future growth, results of operations, financial and operating performance and business prospects and opportunities. Wherever used, the words "may", "will", "anticipate", "intend", "estimate", "expect", "plan", "believe" and similar expressions identify forward-looking statements and forward-looking information. Forward-looking statements and forward-looking information should not be read as guarantees of future events, performance or results, and will not necessarily be accurate indications of whether, or the times at which, such events, performance or results will be achieved. All of the statements in this press release containing forward-looking statements or forward-looking information, if any, are qualified by these cautionary statements.

Forward-looking statements and forward-looking information are based on information available at the time they are made, underlying estimates, opinions and assumptions made by management and management's good faith belief with respect to future events, performance and results, and are subject to inherent risks and uncertainties surrounding future expectations generally. For additional information with respect to Danier's inherent risks and uncertainties, reference should be made to Danier's continuous disclosure materials filed from time to time with the Canadian Securities Regulatory Authorities, including the Company's most recent annual information form, quarterly and annual reports and financial statements and not