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Value City loss widens in second qtr.

COLUMBUS, OH — Hobbled by thinning margins and rising costs, Value City Department Stores recorded a widening second-quarter loss of $3.6 million, weakening further from a year-ago deficit of $726,000.

Sales at the parent of Value City, Filene's Basement and DSW Shoe Warehouse rose by 6.2 percent, to $604.6 million from $569.1 million last year, helped by a strong rebound in same-store sales and the roll-out of new shoe stores.

Same-stores grew by 1.6 percent, recovering from a year-before drop of 4.3 percent. The biggest improvement in same-store sales was reported at Value City units, where comps increased by 0.6 percent vs. a prior-year loss of 6.1 percent. Filene's Basement sales rose by 0.3 percent vs. a stronger year-ago gain of 1.2 percent. Same-stores at DSW were up by 4.5 percent, improving after a last-year decline of 2.1 percent.

Helping to fuel the quarterly loss, costs climbed higher by 50 basis points, or half a percentage point, to 39.0 percent of sales from 38.5 percent a year ago. Measured in absolute dollars, costs increased by 7.5 percent, to $235.9 million from $219.3 million last year, pulling more than $16 million away from the bottom line.

Margins thinned out modestly, by 20 basis points, or two-tenths of a percentage point, to 39.1 percent from 39.3 percent a year ago.

But with stronger sales offsetting margin erosion, gross margin dollars still improved by 5.7 percent, to $236.4 million from $223.6 million the year before.

The retailer took in $1.3 million in licensing fees and other revenue, but even then that figure was down by 46.9 percent from $2.4 million the preceding year.

Value City recorded an income-tax benefit, stemming from earlier losses, of $2.6 million, up from a prior-year tax benefit of $451,000.

Value City Department Stores Inc.

Qtr. 8/2 (x000) 2003 2002 % change
(loss)
a-Second-quarter results include $1.3 million in licensing fees and other revenues, compared with $2.4 million in the year-ago period; and a $2.6 million income-tax benefit vs. a prior-year tax benefit of $451,000.
b-Six-month results include $2.8 million in licensing fees and other revenue, compared with $4.6 million the preceding year; and an income-tax benefit of $11.9 million vs. $2.0 million during the first six months of 2002. Six-month 2002 results included a $2.1 million charge stemming from a change in accounting.
Sales $604,594 $569,062 6.2
Oper. income (EBIT) 491 4,255 -88.5
Net income (3,648)a (726)a
Per share (diluted) (0.11) (0.02)
Average gross margin 39.1% 39.3%
SG&A expenses 39.0% 38.5%
Six months
Sales 1,193,126 1,154,974 3.3
Oper. income (EBIT) (18,830) 4,172
Net income (16,821)b (5,501)b
Per share (diluted) (0.50) (0.16)
Average gross margin 38.0% 38.7%
SG&A expenses 39.1% 38.3%


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