LNT Soft Home Slide Yields Red Ink

Weighed down by debt and interest expense following its buyout by a private investment group, then squeezed by severely eroding margins and sharply higher costs — compounded by a falloff in higher-margin textiles sales — Linens Holding Co., the parent of Linens 'n Things, recorded a fourth-quarter loss of $22.5 million, a sharp reversal of fortune from a year-before profit of $45.0 million. For all of last year, the struggling specialty retailer rang up a daunting loss of $154.4 million, compared with a year-before profit of $36.0 million.

Sales in the quarter edged up 3.9%, to $956.8 million from $921.2 million a year ago, helped by new store openings. The same-store sales dipped slightly, by 0.2%, an improvement over a 2.3% decline during the year-before holiday season.

The sales picture was mixed during the Christmas season (Nov. 24-Dec. 30), the retailer said, as sales shifted hard toward the 'things' side of the business. Tabletop and housewares put up an impressive same-store gain of 15.3% during the holiday period — suggesting a double-digit slide in soft home comps. The 571-store chain said hardlines gains were "offset by weaker sell-through in the higher-margin textiles category, where the assortments require longer lead times and are still in the process of being repositioned."

For all of 2006, sales rose by 4.6%, to $2.8 billion from $2.7 billion, while same-store sales slipped by 0.7%.

Tilting the retailer into the loss column during the closing quarter, interest expense jumped up more than 15-fold, to $24.4 million from $1.6 million. At the same time, margins eroded as textiles sales shrank, narrowing by 320 basis points, or 3.2 percentage points, to 36.7% from 39.9% a year ago. Gross margin dollars thinned by 4.6%, or $16.9 million, to $350.8 million.

Costs also raced up by 340 basis points, or 3.4 percentage points, when measured as a percentage of sales, to 34.9% from 31.5%. In absolute dollars, the damage done by rising costs is even more obvious, with operating expenses jumping up 15.3%, to $334.3 million from $290.1 million last year, an increase of $44.2 million.

Linens Holding Co. (Linens 'n Things)

Qtr. 12/30 (x000) 2006 2005 % change
a. Fourth-quarter results include $28.0 million in fixed asset impairment charges vs. $4.1 million during the same period a year ago; $3.1 million in identifiable intangible asset impairment charges; $53,000 in interest income, down 75.5% from $216,000 last year; and an income tax benefit of $16.5 million vs. a year-ago tax provision of $27.2 million.
b. 12-month results include $28.0 million in fixed asset impairment charges vs. $4.1 million last year; $3.1 million in identifiable intangible asset impairment charges; $858,000 in interest income, -4.0% from last year; and a $66.9 million income tax benefit vs. a year-before tax provision of $21.9 million.
c. Earnings per share are not applicable since Linens Holding Co. is not a publicly held company. But because of its level of publicly held debt, it is still required to report financial results to the federal Securities and Exchange Commission.
Sales $956,782 $921,211 3.9
Oper. income (EBIT) 16,460 77,599 -78.8
Net income (22,450)a 44,964a
Per share (diluted) b b
Average gross margin 36.7% 39.9%
SG&A expenses 34.9% 31.5%
12 months
Sales $2,819,336 $2,694,742 4.6
Oper. income (EBIT) (132,511) 65,886
Net income (106,533)c 35,982c
Per share (diluted) b b
Average gross margin 38.4% 40.8%
SG&A expenses 43.1% 38.4%


Home & Textiles Today Staff | News & Commentary

 Home Textiles Today is the market-leading brand covering the home and textiles markets, offering a comprehensive package of print and online products. Home & Textiles Today provides industry news, product trends and introductions, exclusive industry research, consumer data, store operations solutions, trade show news and much more.

Featured Video

  • 1200 Suppliers are Ready for You at Intertextile Shanghai

    Camera Icon More Videos

Subscribe to
Home & Textiles Today eDaily
Receive the news you need to know about the trends in the industry delivered right to your inbox.

CURRENT ISSUE

HTT August 2017

See the August 2017 issue of Home & Textiles Today. In this issue, we look at the Top 50 Retailing Giants Report, plus Manufacturing: Made in the USA gaining ground; International: Portugal ramping up exports; New products: NY Now home textiles introductions; Outlook: Commentary from H&TT's editors; and Planning: Trade show calendar.

See details!