LNT Plunges Into the Red

Don Hogsett, July 25, 2005

Clifton, N.J. — Hobbled by sliding same-store sales, a big jump in costs and swelling stockpiles, Linens 'n Things, as it had forecast, recorded a second quarter loss of $5.9 million compared with a small year-before profit of $97,000.

It was the second straight quarterly loss for the retailer, bringing its six-month total loss to $10 million. The retailer would have lost even more but for a $3.6 million income tax benefit during the quarter, and a $6 million benefit for the six months. Without the boost provided by the tax gain, the quarterly loss totaled $9.5 million, with a six-month loss of $16 million.

Sales at the big-box home fashions specialist slipped 0.9 percent, to $573.3 million from $578.7 million, and would have fallen further but for new store openings. Same-store sales dropped off 6.8 percent. For the first six months of the year, sales edged up 1.1 percent, to $1.1 billion, but same-store sales declined 6.1 percent.

Putting the bite on profits, in addition to sliding same-store sales, costs climbed 6.1 percent during the period, to $245.7 million from $231.5 million last year, a jump of $14.2 million. Measured as a percentage of sales, costs rose 290 basis points, or 2.9 percentage points.

Climbing costs more than offset some relief provided by wider margins, which improved 110 basis points, or 1.1 percentage points.

Focusing on the turn-around promised for the back half, Wall Street shrugged off the second quarter loss, pushing the retailer's stock up 12 cents a share, or 0.5 percent, to $25.71 in mid-day trading.

Linens 'n Things

Qtr. 7/2 (x000) 2005 2004 % chg
a-Second quarter results include an income tax benefit of $3.6 million, compared with a prior-year tax provision of $59,000. Excluding the income tax benefit, the retailer reported a loss of $9.5 million.
b-Six month results include an income tax benefit of $6 million, compared with a prior-year tax benefit of $630,000. Excluding the tax benefit, the company posted a six-month loss of $16 million versus a $630,000 loss the year before.
Sales $573,317 $578,749 -0.9
Oper. income (EBIT) (8,759) 1,201 --
Net income (5,932)a 97a --
Per share (diluted) (0.13) 0.00 --
Average gross margin 41.3% 40.2% --
SG&A expenses 42.9% 40.0% --
Six months
Sales 1,144,263 1,131,549 1.1
Oper. income (EBIT) (14,520) 159 --
Net income (10,006)b (1,015)b --
Per share (diluted) (0.22) (0.02) --
Average gross margin 41.4% 40.1% --
SG&A expenses 42.6% 40.1% --

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