News Releases
Brookstone Announces Second Quarter 2002 Earnings, Improves Over 2001
NASHUA, N.H., August 21, 2002 -- Specialty retailer Brookstone, Inc. (Nasdaq:BKST) today announced earnings for the second quarter ending August 3, 2002, which marked an improvement over the second quarter of 2001.
Total Company sales for the 13-week period ending August 3, 2002 increased 2.3 percent to $71.2 million, compared to $69.6 million for the second quarter of last year. Same store sales for the comparable 13-week period decreased 3.7 percent. Direct marketing sales for the second quarter increased 9.3 percent to $12.6 million.
The Company reported a net loss of $2.2 million, or $0.26 per diluted share for the quarter. This loss includes a one-time gain of $642,000, or $0.05 per diluted share, related to the curtailment of the Company's retiree medical plan. Excluding this one-time gain, Brookstone's operating loss for the second quarter 2002 would have been $0.31 per diluted share, compared to a net loss in the second quarter of Fiscal 2001 of $2.8 million, or $0.33 per diluted share.
Year to date, total Company sales increased approximately 2.6 percent, to $127.9 million for the 26-week period ending August 3, 2002, compared to $124.6 million for the same 26-week period in 2001. Same-store sales for the comparable 26-week period decreased 3.5 percent. Direct marketing sales increased 3.2 percent, to $23.0 million, for the same period. Net loss to date is $8.8 million or $1.04 per diluted share as compared to last year's loss of $8.0 million or $0.95 per diluted share for the same 26-week period.
Brookstone Chairman, President and Chief Executive Officer Michael Anthony said the Company was able to post an improvement in earnings over the second quarter of 2001 -- despite a decrease in same store sales -- because of better material margins, controlled expenses and improved performance in the direct marketing segment.
"During the second quarter we experienced strong consumer response to our new product offerings, as sales penetration of these products were at or above our target levels," Mr. Anthony said. "Furthermore, our Father's Day sales were encouraging during this traditional gift-giving period."
Mr. Anthony said the Company's successes in the second quarter were offset by continuing challenges in the travel business, which significantly affected same-store sales.
"We experienced particular weakness in travel-related products, and locations dependent on travel, such as airport and tourist locations, which saw same-store sales decreases approximately twice that of our other stores," Mr. Anthony said. "While we continue to believe that airports are an excellent long-term investment, in the short term they suffered from the decline in airport traffic."
As Brookstone enters the second half of 2002, Mr. Anthony said the Company is in a favorable position in regard to new product introductions, inventory and cash on hand.
"We completed the second quarter in strong financial condition, with inventories 9 percent below what they were for the second quarter of 2001," Mr. Anthony said. "Additionally, we had approximately $16 million of cash on hand at the end of the second quarter 2002, compared to having $2 million in borrowings under our credit facility at the same time last year. Moreover, we remain optimistic for our important Holiday selling season because of our Father's Day performance and our new product introductions."
Mr. Anthony said that the Company projects same-store sales in the second half of the year to grow in the mid-single digit range. This should result in earnings for the year to increase to between $1.00 and $1.05 per diluted share, compared to $0.63 per diluted share last year.
For the third quarter 2002, Brookstone is projecting a net loss per diluted share of $0.80 to $0.85, versus last year's third-quarter net loss of $1.07 per diluted share, with same-store sales increases in the mid-single digits. Mr. Anthony attributed the projected decrease in losses as compared to last year to the projected same-store sales increase, an increase in direct marketing profitability, and gross margin increases.
Brookstone, Inc. is a nationwide specialty retailer that operates 246 Brookstone Brand stores nationwide and in Puerto Rico. Typically located in high-traffic regional shopping malls and airports, the stores feature unique and innovative consumer products. The Company also operates two stores under the Gardeners Eden Brand, and the Company also operates a direct marketing business that consists of three catalogs: The Brookstone Catalog, Hard-to-Find Tools and Gardeners Eden catalog; as well as a Web site at www.brookstone.com.
Statements in this release which are not historical facts, including statements about the Company's confidence or expectations, earnings, anticipated operations of its e-commerce sites and those of third-party service providers, and other statements about the Company's operational outlook, are forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those set forth in such forward-looking statements. Such risks and uncertainties include, without limitation, risks of changing market conditions in the overall economy and the retail industry, consumer demand, the effectiveness of e-commerce technology and marketing efforts, availability of products, availability of adequate transportation of such products, and other factors detailed from time to time in the Company's annual and other reports filed with the Securities and Exchange Commission. Words such as "estimate", "project", "plan", "believe", "feel", "anticipate", "assume", "may", "will", "should" and similar words and phrases may identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligations to publicly release any revisions to these forward-looking statements or reflect events or circumstances after the date hereof.
Brookstone, Inc.
Consolidated Statement of Operations
($ in thousands)
(Unaudited)
Thirteen Thirteen Twenty-six Twenty-six
Weeks weeks weeks weeks
ended ended ended ended
August 3, August 4, August 3, August 4,
2002 2001 2002 2001
Net sales $71,231 $69,612 $127,864 $124,609
Cost of
sales 49,813 48,840 93,555 89,681
Gross profit 21,418 20,772 34,309 34,928
Selling,
general and
administrative
expenses 25,367 25,044 48,465 47,692
Gain on
curtailment
of retiree
medical plan (642) --- (642) ---
Loss from
operations (3,307) (4,272) (13,514) (12,764)
Interest
expense, net 318 210 625 149
Loss before
taxes (3,625) (4,482) (14,139) (12,913)
Income tax
benefit (1,378) (1,721) (5,373) (4,959)
Net Loss $(2,247) $(2,761) $(8,766) $(7,954)
Basic/diluted
loss per
share:
Net Loss $(0.26) $(0.33) $(1.04) $(0.95)
Weighted
average shares
outstanding
- basic/diluted 8,500 8,357 8,454 8,346
Brookstone, Inc.
Consolidated Balance Sheet
($ in thousands)
Unaudited
August 3, 2002 August 4, 2001 February 2, 2002
Current Assets:
Cash and cash equivalents $16,096 $ 2,391 $ 28,928
Receivables, net 4,722 4,421 8,170
Merchandise inventories 56,547 61,969 55,629
Deferred income taxes 9,290 8,775 3,447
Other current assets 5,417 6,044 4,933
Total current assets 92,072 83,600 101,107
Deferred income taxes 4,536 3,662 4,536
Property and equipment, net 40,985 44,592 45,058
Intangible assets, net 4,588 5,086 4,812
Other assets 1,884 1,866 1,592
Total assets $144,065 $138,806 $157,105
Liabilities and Shareholders'
Equity
Current Liabilities:
Accounts payable $9,795 $13,199 $11,232
Short term borrowings --- 2,050 ---
Other current liabilities 18,907 14,309 22,569
Total current liabilities 28,702 29,558 33,801
Other long term liabilities 12,656 11,954 13,246
Long term obligation under
capital lease 2,203 2,360 2,273
Commitments and
Contingencies
Total shareholders' equity 100,504 94,934 107,785
Total liabilities and
shareholders' equity $144,065 $138,806 $157,105
Contacts: Philip Roizin, Executive Vice President of Finance and Administration (603) 880-9500 Robert Fusco, Investor Relations (603) 880-9500