Delia's records 1Q losses of $8.3M

New York — With sales falling off after the sale of some of its businesses, and margins thinning out as well, Delia's Corp., a retailer of apparel and home fashions to teenage girls and young women, posted a modestly narrowed loss of $8.3 million, compared with a prior-year deficit of $8.7 million.

Sales dropped off by 26.1 percent, to $36.2 million from $49.1 million after the earlier sale of non-core businesses.

Skewing the earnings picture substantially, in the year-ago first quarter Delia's recorded a $3.9 million profit from its share of a joint venture, earned $667,000 in interest income and recorded an income-tax benefit of $2.4 million. Pulling out all the one-time items to create a more level playing field, the retailer actually slashed its operating losses in the period virtually in half, by 49.7 percent, to $7.9 million from $15.7 million last year. And approximately $2.6 million of the operating loss, roughly a third, was generated by businesses during the period or since the quarter's end.

Contributing to this year's quarterly loss, in addition to the lower level of sales, average gross margin thinned by 170 basis points, to 45.7 percent from 47.4 percent a year ago. But more than offsetting the margin erosion, Delia's hacked away at costs, reducing its expense ratio - costs as a percentage of sales - to 67.5 percent from 79.5 percent a year ago in the wake of the asset sales. Measured in absolute dollars, costs were cut by 37.3 percent, to $334.5 million from $349.0 million, a cash savings of $14.5 million.

Stephen Kahn, ceo, said, "In the first quarter, we posted positive comparable store sales in the mid-single-digits despite a weak retail environment. On the Direct side [catalog and website], we were pleased by the continued shift in sales to our Internet channel; however, business was affected by some merchandising miscues. We moved quickly to address these issues, and believe we are now well positioned for the key Back-to-School season."

Thomas RussellThomas Russell | Associate Editor, FurnitureToday

I'm Tom Russell and have worked at Furniture/Today since August 2003. Since then, I have covered the international side of the business from a logistics and sourcing standpoint. Since then, I also have visited several furniture trade shows and manufacturing plants in Asia, which has helped me gain perspective about the industry in that part of the world. As I continue covering the import side of the business, I look forward to building on that knowledge base through conversations with industry officials and future overseas plant tours. From time to time, I will file news and other industry perspectives online and, as always, welcome your response to these Web postings.

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