Hanover: from loss to small profit
Don Hogsett -- Home Textiles Today, April 19, 2004
Building margins, hacking away at costs and shucking off some of the one-time charges that dogged the bottom line a year ago, Hanover Direct Inc. edged toward a turn-around with a modest fourth-quarter profit of $364,000, recovering from a year-before loss of $9.9 million.
But as the direct-to-consumer retailer — the parent of Domestications and The Company Store — coped with a soft economy and lopped off unprofitable circulation from its catalogs, sales in the quarter declined 14.2 percent, to $110 million from $128.3 million the prior year.
Steadily improving its operations throughout the year, Hanover widened margins by 180 percent, or 1.8 percentage points during the closing quarter to 39.3 percent from 37.5 percent a year ago. But given the drop-off in sales, gross margin dollars declined 10.1 percent, to $43.2 million from $48.1 million.
In another lift to the bottom line, Hanover whittled down its costs — when measured as a percentage of sales — by 110 basis points, or 1.1 percentage points, to 33.3 percent from 34.4 percent the preceding year. Measured in absolute dollars, costs were slashed by 16.9 percent, to $36.7 million from $44.1 million, generating a cash savings of $7.5 million.
Building on the stronger margins and lower costs, operating profits shot up by two-thirds, increasing 66 percent, to $6.6 million from $3.7 million a year ago.
In another assist, the retailer shed many of the special items that helped to throttle earnings a year ago. Special charges were reduced by 76.8 percent, to $627,000 from $2.7 million last year. The company eliminated preferred stock dividends and accretion, which cost it $5 million during the same period a year ago.
The company incurred no federal taxes after paying $3.7 million in deferred taxes last year.
For all of last year, Hanover recorded a loss of $23.3 million, marking a modest improvement over a $24.7 million loss the preceding year.
Sales for the entire year declined 9.3 percent, to $414.9 million from $457.6 million.
Hanover Direct Inc.
|Qtr. 12/27 (x000)||2003||2002||% chg|
|Oper. income (EBIT)||6,578||3,962||66.0|
|Per share (diluted)||0.00||(0.07)||—|
|Average gross margin||39.3%||37.5%||—|
|12 months||2003||2002||% chg|
|Oper. income (EBIT)||12,133||9,616||26.2|
|Per share (diluted)||(0.16)||(0.18)||—|
|Average gross margin||37.1%||36.5%||—|
|a-Fourth-quarter results include special charges of $627,000, compared with $2.7 million last year; year-before fourth-quarter results include a $252,000 gain on the sale of its Improvement operation; a $3.7 million provision for deferred federal income taxes; and a $4.9 million preferred stock dividend.|
|b-12-month results include $1.3 million in special charges, compared with $4.4 million a year ago; a $1.9 million gain on the sale of the Improvement business, compared with $570,000 the year before; an $11.3 million provision for deferred income taxes, compared with $3.7 million the preceding year; and preferred stock dividends of $7.9 million, compared with $15.6 million in 2002.|
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