Linens ’n Things sees light ahead in textiles
May 15, 2007,
Clifton, N.J. – Struggling big-box specialty retailer Linens ’n Things reported yet another “disappointing” loss in its first quarter results today –but its home textiles department is showing signs of a turnaround, chairman and ceo Robert DiNicola told financial analysts.
“We see continued improvement ahead on textiles side,” DiNicola emphasized, “as we round out the assortments.”
Sales at Linens Holding Co. (as the Apollo Management-owned entity is officially called) dropped 3.6% to $571.6 million and comps fell 5.2% in the period. The net loss was $58.2 million – an improvement over the loss of $65.5 million in the first quarter of 2006. However, the adjusted EBITDA was a loss of $33.0 million compared to the loss of $2.7 million in the prior-year period.
Margins were undercut by heavy promotions, with housewares being in the forefront of that activity, DiNicola said. Both customer visits and average ticket were down in the quarter as shoppers cherry-picked promotional items and avoided taking home more regularly priced goods.
Now that the 573-store chain is shorn of more than $100 million in “distressed inventory,” the leading LNT challenge is store traffic. DiNicola repeatedly referred to the 2007 back-to-school season as the first storewide test for full-assortment results for the company’s recently firmed-up merchandising team.
While top of bed saw positive comps in the first quarter, and some soft home skus exceeded plan, DiNicola said home textiles as a whole has still to recover from its “loss of momentum” in previous seasons.
On a somewhat positive note, inventory at the $2.8 billion chain is roughly flat for the quarter, while, store square footage grew 3.8%, yielding an inventory cut of 3.4% per square foot, almost on pace with the overall revenue drop.
During the second quarter, the company expects to effect an increase in its UBS credit facility to $700 million. No projection was offered for sales or earnings.
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