Linens 'n Things Looks to Trim Costs
Home & Textiles Today Staff -- Home Textiles Today, March 24, 2008
Clifton, N.J. —Linens 'n Things will focus on cost-cutting this year, looking to shave $50 million off overhead as it seeks profitability and positive cash flow.
Last week company executives said LNT will reduce store-level staffing, pare back marketing, especially in the second and third quarters, tighten capital expenditures, slightly reduce inventory purchases and possibly close or sublease some of the retailer's 589 stores.
“None of this will be apparent to the customer when they arrive at the store. We've looked at some areas within our operation that are non-critical to the overall everyday activities that go on in the store,” said chairman and ceo Robert DiNicola, speaking during the company's quarterly conference call. He also noted there would be “no massive reduction in inventories.”
Linens 'n Things managed to hold the top line fairly flat during the fourth quarter, but its net loss nearly tripled as margins fell away in a promotional selling cycle and costs climbed.
“Even as we continue to move forward with the turnaround of the business, buffeted at the same time by a declining home category, exacerbated by the deterioration of the real estate market, coupled with the credit crunch only to be followed by a potential economic recession, we are still confident about our brand and about our business,” chairman and ceo Robert DiNicola said during the company's year-end conference call last week.
DiNicola added that while the business has stabilized operationally, “financially we still have a big hill to climb.”
For the quarter ended Dec. 29, LNT's net loss widened to $62 million from $22.5 million in the year-earlier period. Operating loss nearly doubled from $12.9 million in 4Q 2006 to $23.0 million in the recent quarter.
Sales held steady at $962.9 million, up 0.6%. Comps dipped 1.0%.
During the holiday sales period — Nov. 23 (Black Friday) to Dec. 29 — comps rose 0.9%.
“Once again we were able to demonstrate an ability to excite the consumer and recapture some of our lost market share,” said DiNicola. “The good news is that despite a continuing decline in the home sector in the retail marketplace, we were able to show positive comps between Thanksgiving and Christmas.”
For the fiscal year, LNT generated a net loss of $242.1 million vs. a net loss of $154.4 million during the previous fiscal year. The operating loss widened as well to $191.3 million from $94.4 million a year ago.
Sales fell 0.9% to $2.79 billion, with comps declining 3.4%.
Asked whether further investment might be made in the company (by majority stakeholder Apollo Management LP), DiNicola told analysts the company's liquidity is sound, describing cash flow as “sufficient.”
Linens ended the fourth quarter with an asset-based revolver balance of $205.9 million, cash on hand of $16.1 million and excess availability under its revolving credit facility of $302.9 million.
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