New York—Shares of dELiA*s fell 2.66% in after-hours trading Wednesday after the teen apparel and accessories retailer reported a net revenue decrease in its second quarter earnings.
The company reported a net loss of $13.6 million compared to a loss operations for the of $11.1 million in the year ago period.
Total revenues decreased 22.4% to $25.7 million from $33.2 million last year. Comparable sales decreased 17.5% primarily due to reduced website and mall traffic. Comparable store sales decreased 12.4%. In addition, catalog circulation for the second quarter decreased 24.9% compared to the prior year quarter predominantly due to the reduction of a sale catalog and non-productive remails.
Gross profit, which includes distribution, occupancy and merchandising costs, was 17.1% compared to 20.9% in the prior year period. The gross profit decline was primarily due to 500 basis points of deleverage of occupancy, merchandising and distribution costs on lower revenues. This was partially offset by a 150 basis point improvement in merchandise margin.
“During the second quarter we continued to execute on our strategic plan. We also made progress in laying the groundwork to develop a more relevant, engaging and integrated customer experience across all our channels. Our stores, website, and catalog increasingly represent the product and experience we believe will differentiate the dELiA*s brand to our customers,” said CEO Tracy Gardner. “Our comparable store sales continued to improve each month of the quarter with higher gross margins. As we closed the second quarter, July comparable store sales were negative 7% and product margin dollars were flat, as our quality of sale has improved, yielding the better quality margin. We have key Fall categories that are positive to last year that continue to grow in importance in the second half. These include tops, sweaters, pants, skirts and key fits in jeggings. Although the speed of our turnaround has been slower than anticipated, we’ve continued to make meaningful progress across many areas of our operations.”
Gardner also said the company was examining a “number of stores that we have identified to improve both operations and execution that are not yet up to our standards and producing a drag on our results.”
Selling, general and administrative (SG&A) expenses were $17.6 million, or 68.2% of revenues, compared to $17.2 million, or 51.9% of revenues, in the prior year period. The SG&A expenses in dollars increased predominantly as a result of marketing initiatives related to our social media and e-commerce business as well as stock-based compensation expense. The increase in SG&A expenses as a percent of revenues reflects the deleveraging of selling, overhead, depreciation and stock-based compensation expenses on lower revenues.