Linens 'N Things gets boost from new stores
February 5, 2001,
CLIFTON, NJ — Getting a big lift from 17 new stores, and a further assist from moderate growth in same-store sales during the all-important Christmas quarter, superstore retailer Linens'n Things drove fourth-quarter profits up by 20.3 percent, to $34.5 million from $28.7 million the prior year.
But impressive as that performance is, it still marks something of a slowdown from an even faster rate of earnings growth for the first nine months of the year, when profits raced ahead by more than 30 percent.
Sales at Linens 'n Things raced ahead by 19.6 percent, to $495.6 million form $414.3 million, lifted by 16 net new stores (17 were opened and another closed in the quarter) as well a moderate 2.4 percent increase in same-store sales. In a troubled retail environment, set against a background of eroding consumer confidence, the rate of same-store sales growth slowed sharply during the holiday period, to 2.4 percent, compared with a robust gain of 5.3 percent rung up in the first nine months of the year.
Average gross margin gained strength in the quarter, rising by 40 basis points, to 42.2 percent from 41.8 percent the prior year. Gross margin dollars increased by 20.7 percent, to $209.2 million from $173.4 million. Somewhat offsetting improved margins, costs climbed slightly higher in the period, rising by 20 basis points, to 30.8 percent from 30.6 percent a year ago.
Lifted by rising sales and stronger margins, operating profits grew by 26.7 percent, to $56.6 million from $46.6 million a year ago during the highly profitable Christmas season. The operating margin — operating profits measured as a percentage of sales — grew by 20 basis points, to 11.4 percent from 11.2 percent a year ago. But evening things out over the entire 12 months, the full-year operating margin came in at 6.8 percent, up 30 basis points from 6.5 percent last year.
Taking a bite out of the bottom line, interest costs climbed sharply higher as short-term borrowings rose. Interest expense totaled $718,000, up from just $54,000 in the year-ago period. Short-term borrowings increased to $3.9 million this year from a level of zero in last year's fourth quarter.
Looking ahead to the new year, the retailer said it expects sales to increase about 20 percent in 2001, climbing to $1.9 billion. Same-store sales are expected to grow in the range of two to four percent. Operating profits and earnings are expected to rise by about 23 percent. About 60 to 65 new stores are planned, with capital spending totaling about $90 million.