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DWR to seek new suppliers in turnaround bid

San Francisco— Retailer Design Within Reach is trimming back its merchandise assortment and will begin seeking “resources outside ofEurope,” the company said in its fourth-quarter and year-end conference call yesterday.

Ray Brunner, who joined the company in 2002 and was named ceo in May 2006, outlined his plans, which he said include a return to profitability in 2007: “Initially we will restore our gross margins to the 2004 level of approximately 47%, and within three years we expect to bring our margins up to 50%.”

Brunner emphasized, “We will accomplish this by eliminating non-productive skus and categories in the short term, and developing resources outside of Europe in the longer term.”

He noted that costs have been held down and that “by the end of 2006 we cleared nearly all of our kids and bedding inventory -- and reduced our core range from 750 to 800 styles.”

The retailer, which operates 63 design studios and a website offering contemporary furniture and home décor, said it will report a net loss of 13 cents to 15 cents per share for the fourth quarter on a sales increase of approximately 20%. The preliminary figures include total sales of about $50 million for the quarter ended Dec. 30. In the 2005 fourth quarter, total sales were $41.4 million, and the company’s net loss came to 28 cents per share.

Preliminary figures for the year include net sales of about $178 million, compared with $158.2 million for 2005. The company would report a net loss of 57 cents to 59 cents per share for the year, compared with a loss of 15 cents per share for 2005.

The company issued only preliminary results because it has been delayed in completing its year-end financial statements due to problems in accounting for its accrued inventory. The company said in a filing with the Securities and Exchange Commission that it would be late in submitting its form 10-K (annual report).

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