dELiA*s, Inc. Announces Second Quarter 2013 Results

  dELiA*s, Inc. Announces Second Quarter 2013 Results

Business Wire

NEW YORK -- August 27, 2013

dELiA*s, Inc. (NASDAQ:DLIA), a multi-channel retail company primarily
marketing to teenage girls, today announced the results for its second quarter
of fiscal 2013.

dELiA*s, Inc. results for all periods presented reflect its former Alloy
business as a discontinued operation. All financial results in this press
release are for continuing operations only unless otherwise stated.

Second Quarter Fiscal 2013 Highlights:

  *Total revenue decreased 16.7% to $33.2 million from $39.8 million in the
    second quarter of fiscal 2012. Revenue from the retail segment decreased
    14.7% to $24.5 million, including a comparable store sales decrease of
    14.9%. Revenue from the direct segment decreased 21.8% to $8.7 million.
  *Consolidated gross margin was 20.9% compared to 31.6% in the prior year
    quarter, primarily due to increased inventory reserves, lower merchandise
    margins associated with higher markdowns on legacy product and the
    deleveraging of occupancy costs.
  *Loss from continuing operations was $11.1 million compared to a loss from
    continuing operations for the second quarter of fiscal 2012 of $5.4
    million. Overhead expenses previously allocated to the Alloy business have
    now been reallocated to continuing operations for both fiscal 2013 and
    2012. These costs were approximately $1.2 million for the second quarter
    of fiscal 2013.
  *The Company closed an underwritten follow-on public offering of its common
    stock with proceeds of approximately $14.8 million, net of underwriting
    discounts and commissions, as well as a private placement of convertible
    notes that, subject to approval of stockholders, will provide proceeds of
    approximately $20.3 million, net of placement agent fees.

Tracy Gardner, Chief Executive Officer, commented, “Our second quarter results
were indicative of challenging traffic trends, combined with the
underperformance of our legacy inventory. We expect these trends to continue
throughout the third quarter as we work to move through this inventory. The
team is currently focused on stabilizing the business, amplifying the dELiA*s
brand image and driving improved execution in the near term. During this
period, we are also focused on implementing our go forward strategy that we
believe will better position us for more consistent long term growth. While we
acknowledge that this turnaround will take time, we remain excited about our
future potential.”

Results by Segment

Retail Segment Results

Total revenue for the retail segment for the second quarter of fiscal 2013
decreased 14.7% to $24.5 million from $28.7 million in the second quarter of
fiscal 2012. This decrease was primarily due to a comparable store sales
decrease of 14.9%. Comparable store sales for the second quarter of fiscal
2012 increased by 14.0%.

Gross margin for the retail segment, which includes distribution, occupancy
and merchandising costs, was 15.6% for the second quarter of fiscal 2013
compared to 25.8% in the prior year period. The decrease in gross margin
includes a 400 basis point reduction related to increased markdown and other
inventory reserves and a 300 basis point reduction in merchandise margins in
connection with underperforming legacy inventory, as well as a 260 basis point
reduction due to the deleveraging of occupancy costs on lower revenues.

Selling, general and administrative (SG&A) expenses for the retail segment
were $11.2 million, or 45.6% of sales, in the second quarter of fiscal 2013
compared to $11.9 million, or 41.4% of sales, in the prior year period. The
reduction in SG&A expenses in dollars reflects reduced selling and
depreciation expenses on a lower store count. The increase in SG&A expenses as
a percent of revenues reflects the deleveraging of selling and overhead
expenses on lower revenues.

The operating loss for the second quarter of fiscal 2013 for the retail
segment was $7.3 million compared to $4.4 million in the prior year period.

The Company relocated one store location in the same mall during the second
quarter of fiscal 2013, ending the period with 103 stores.

Direct Segment Results

Total revenue for the direct segment for the second quarter of fiscal 2013
decreased 21.8% to $8.7 million from $11.1 million in the second quarter of
fiscal 2012.

Gross margin for the direct segment was 35.9% for the second quarter of fiscal
2013 compared to 46.7% in the second quarter of fiscal 2012. The decrease in
gross margin includes a 350 basis point reduction related to increased
markdown and other inventory reserves and a 500 basis point reduction in
merchandise margins in connection with underperforming legacy inventory, as
well as a 190 basis point reduction due to increased shipping and handling
costs as a percent of revenues.

SG&A expenses for the direct segment were $6.0 million, or 69.4% of sales, in
the second quarter of fiscal 2013 compared to $6.3 million, or 56.6% of sales,
in the prior year period. The reduction in SG&A expenses in dollars reflects
reduced selling and overhead expenses. The increase in SG&A expenses as a
percent of revenues reflects the deleveraging of selling, overhead and
depreciation expenses on lower revenues.

Operating loss for the second quarter of fiscal 2013 for the direct segment
was $2.8 million as compared to $0.9 million in the prior year period.

Balance Sheet Highlights

During the second quarter of fiscal 2013, the Company completed an
underwritten follow-on public offering of 15,025,270 shares of its common
stock, with proceeds of approximately $14.8 million, net of underwriting
discounts and commissions, which were used to repay a portion of the
outstanding amounts under its revolving credit facility with Salus Capital.
Concurrently with the closing of the public offering, the Company also sold
and issued in a private placement an aggregate of $21.8 million in principal
amount of its secured 7.25% convertible notes. Upon approval by stockholders,
the notes will automatically convert into approximately 20.7 million shares of
common stock. If stockholders do not approve the note offering and issuance,
the notes will be repaid, with interest. The Company intends to use the net
proceeds it receives from the note offering for working capital and general
corporate purposes, including the repayment of additional outstanding amounts
under the Salus Capital revolving credit facility.

At the end of the second quarter of fiscal 2013, cash and cash equivalents
were $4.2 million compared with $11.7 million at the end of the second quarter
of fiscal 2012. At the end of the second quarter of fiscal 2013, the Company
had restricted cash of $21.8 million related to the convertible notes, and
restricted cash of $11.3 million to support outstanding letters of credit. The
Company also had $9.8 million in borrowings under its credit facility with
Salus Capital at the end of the second quarter of fiscal 2013.

Total net inventories at the end of the second quarter of fiscal 2013 were
$26.8 million compared with $31.8 million at the end of the second quarter of
fiscal 2012. Inventory per average retail store was down 15.0% compared to the
prior year period, and inventory for the direct segment was up 3.3% compared
to the prior year.

First Six Month Results

For the six-month period ended August 3, 2013, total revenue decreased 15.6%
to $68.3 million from $81.0 million for the prior year period. Total gross
margin was 22.4% compared to 31.6% for the prior year period. SG&A expenses
were $34.7 million, or 50.8% of sales, for the first six months of fiscal
2013, compared to $35.9 million, or 44.3% of sales, for the prior year period.

The operating loss for the first six months of fiscal 2013 increased to $19.1
million, compared to $9.8 million for the first six months of fiscal 2012.

Loss from continuing operations for the first six months of fiscal 2013
increased to $20.3 million, compared to $9.8 million for the first six months
of fiscal 2012. Included in the first six months of fiscal 2013 is gift card
breakage of $0.3 million compared to $0.5 million in first six months of
fiscal 2012.

The provision for income taxes for the first six months of fiscal 2013 was
$0.1 million, compared to an income tax benefit of $0.4 million for fiscal
2012.

Conference Call and Webcast Information

A conference call to discuss second quarter 2013 results is scheduled for
Tuesday, August 27, 2013 at 10:00 A.M. Eastern Time. The conference call will
be webcast live at www.deliasinc.com. A replay of the call will be available
through September 27, 2013 and can be accessed by dialing (877) 870-5176 and
providing the pass code number 2225667.

During the conference call, the Company may discuss and answer questions
concerning business and financial developments and trends. The Company’s
responses to questions, as well as other matters discussed during the
conference call, may contain or constitute information that has not been
disclosed previously.

About dELiA*s, Inc.

dELiA*s, Inc. is a multi-channel retail company primarily marketing to teenage
girls. It generates revenue by selling apparel, accessories and footwear to
consumers through its website, direct mail catalogs and mall-based retail
stores.

Forward-Looking Statements

This announcement may contain forward-looking statements made in reliance upon
the safe harbor provisions of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including statements regarding our expectations and beliefs regarding our
future results or performance. Because these statements apply to future
events, they are subject to risks and uncertainties. When used in this
announcement, the words “anticipate”, “believe”, “estimate”, “expect”,
“expectation”, “should”, “would”, “project”, “plan”, “predict”, “intend” and
similar expressions are intended to identify such forward-looking statements.
Our actual results could differ materially from those projected in the
forward-looking statements. Additionally, you should not consider past results
to be an indication of our future performance. For a discussion of risk
factors that may affect our results, see the “Risk Factors That May Affect
Future Results” section of our filings with the Securities and Exchange
Commission, including our annual report on Form 10-K and quarterly reports on
Form 10-Q. We do not intend to update any of the forward-looking statements
after the date of this announcement to conform these statements to actual
results, to changes in management's expectations or otherwise, except as may
be required by law.

dELiA*s, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
(unaudited)
                                                              
                                                August 3, 2013   July 28, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                       $  4,204         $  11,732
Inventories, net                                   26,776           31,767
Prepaid catalog costs                              1,553            1,286
Restricted cash                                    31,838           -
Other current assets                               6,385            3,242
Assets held for sale                              -              7,546    
                                                                 
TOTAL CURRENT ASSETS                               70,756           55,573
                                                                 
PROPERTY AND EQUIPMENT, NET                        33,606           39,969
GOODWILL                                           -                4,462
INTANGIBLE ASSETS, NET                             2,419            2,419
RESTRICTED CASH                                    1,203            -
OTHER ASSETS                                      1,006          820      
TOTAL ASSETS                                    $  108,990      $  103,243  
                                                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                                $  21,483        $  20,332
Bank loan payable                                  9,799            -
Convertible notes payable                          21,775           -
Accrued expenses and other current                 11,618           13,424
liabilities
Income taxes payable                               666              848
Liabilities held for sale                         -              4,570    
TOTAL CURRENT LIABILITIES                          65,341           39,174
                                                                 
DEFERRED CREDITS AND OTHER LONG-TERM              9,229          10,461   
LIABILITIES
TOTAL LIABILITIES                                 74,570         49,635   
                                                                 
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.001 par value; 25,000,000       -                -
shares authorized, none issued
Common Stock, $.001 par value; 100,000,000
shares authorized; 47,822,776 and 31,684,387       48               32
shares issued and outstanding, respectively
Additional paid-in capital                         114,449          99,630
Accumulated deficit                                (80,040  )       (46,054  )
Treasury stock                                    (37      )      -        
TOTAL STOCKHOLDERS' EQUITY                        34,420         53,608   
                                                                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $  108,990      $  103,243  

dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
                                                      
                               For the Thirteen Weeks Ended
                               August 3, 2013           July 28, 2012
                                                                       
                                                                       
NET REVENUES                   $ 33,167       100.0 %   $ 39,808       100.0 %
Cost of goods sold              26,233      79.1  %    27,226      68.4  %
                                                                       
GROSS PROFIT                    6,934       20.9  %    12,582      31.6  %
Selling, general and             17,201       51.9  %     18,179       45.7  %
administrative expenses
Other operating income          (169       ) -0.5  %    (248       ) -0.6  %
TOTAL OPERATING EXPENSES        17,032      51.4  %    17,931      45.0  %
OPERATING LOSS                   (10,098    ) -30.4 %     (5,349     ) -13.4 %
Interest expense                987         3.0   %    165         0.4   %
LOSS FROM CONTINUING             (11,085    ) -33.4 %     (5,514     ) -13.9 %
OPERATIONS BEFORE INCOME TAXES
Provision (benefit) for income  25          0.1   %    (74        ) -0.2  %
taxes
LOSS FROM CONTINUING             (11,110    ) -33.5 %     (5,440     ) -13.7 %
OPERATIONS
(LOSS) INCOME FROM
DISCONTINUED OPERATIONS, NET    (994       ) -3.0  %    227         0.6   %
OF TAX
NET LOSS                       $ (12,104    ) -36.5 %   $ (5,213     ) -13.1 %
                                                                       
BASIC AND DILUTED LOSS PER
SHARE:
LOSS FROM CONTINUING           $ (0.35      )           $ (0.18      )
OPERATIONS
(LOSS) INCOME FROM             $ (0.03      )           $ 0.01       
DISCONTINUED OPERATIONS
NET LOSS PER SHARE             $ (0.38      )           $ (0.17      )
                                                                       
WEIGHTED AVERAGE BASIC AND
DILUTED COMMON SHARES           32,035,171             31,327,526 
OUTSTANDING

dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
                                                      
                               For the Twenty-Six Weeks Ended
                               August 3, 2013           July 28, 2012
                                                                       
                                                                       
NET REVENUES                   $ 68,344       100.0 %   $ 81,022       100.0 %
Cost of goods sold              53,044      77.6  %    55,420      68.4  %
                                                                       
GROSS PROFIT                    15,300      22.4  %    25,602      31.6  %
Selling, general and             34,693       50.8  %     35,867       44.3  %
administrative expenses
Other operating income          (315       ) -0.5  %    (456       ) -0.6  %
TOTAL OPERATING EXPENSES        34,378      50.3  %    35,411      43.7  %
OPERATING LOSS                   (19,078    ) -27.9 %     (9,809     ) -12.1 %
Interest expense                1,172       1.7   %    318         0.4   %
LOSS FROM CONTINUING             (20,250    ) -29.6 %     (10,127    ) -12.5 %
OPERATIONS BEFORE INCOME TAXES
Provision (benefit) for income  53          0.1   %    (368       ) -0.5  %
taxes
LOSS FROM CONTINUING             (20,303    ) -29.7 %     (9,759     ) -12.0 %
OPERATIONS
(LOSS) INCOME FROM
DISCONTINUED OPERATIONS, NET    (1,016     ) -1.5  %    872         1.1   %
OF TAX
NET LOSS                       $ (21,319    ) -31.2 %   $ (8,887     ) -11.0 %
                                                                       
BASIC AND DILUTED LOSS PER
SHARE:
LOSS FROM CONTINUING           $ (0.64      )           $ (0.31      )
OPERATIONS
(LOSS) INCOME FROM             $ (0.03      )           $ 0.03       
DISCONTINUED OPERATIONS
NET LOSS PER SHARE             $ (0.67      )           $ (0.28      )
                                                                       
WEIGHTED AVERAGE BASIC AND
DILUTED COMMON SHARES           31,763,122             31,323,890 
OUTSTANDING

dELiA*s Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                              
                                                For the Twenty-Six Weeks Ended
                                                August 3, 2013   July 28, 2012
                                                                 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                        $  (21,319  )    $  (8,887   )
Loss (income) from discontinued operations        (1,016   )      872      
Loss from continuing operations                    (20,303  )       (9,759   )
Adjustments to reconcile net loss to net cash used in
operating activities of continuing operations:
Depreciation and amortization                      4,609            4,958
Deferred financing fees                            674              90
Stock-based compensation                           588              374
Changes in operating assets and liabilities:
        Inventories                                (1,936   )       (7,042   )
        Prepaid catalog costs and other assets     (1,797   )       (346     )
        Restricted cash                            (11,266  )      -
        Income taxes payable                       43               112
        Accounts payable, accrued expenses and    (5,568   )      (2,737   )
        other liabilities
                                                                 
        Total adjustments                         (14,653  )      (4,591   )
Net cash used in operating activities of           (34,956  )       (14,350  )
continuing operations
Net cash (used in) provided by operating          (1,266   )      338      
activities of discontinued operations
NET CASH USED IN OPERATING ACTIVITIES             (36,222  )      (14,012  )
                                                                 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures                              (1,658   )      (2,682   )
Net cash used in investing activities of           (1,658   )       (2,682   )
continuing operations
Net cash provided by investing activities of      2,591          -        
discontinued operations
NET CASH USED IN INVESTING ACTIVITIES             933            (2,682   )
                                                                 
CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from issuance of common           13,926           -
        stock, net of issuance costs
        Purchase of treasury stock                 (37      )       -
        Proceeds from bank borrowings              9,799            -
        Payment of deferred financing fees         (1,007   )       -
        Proceeds from sale of convertible          21,775           -
        notes
       Restricted cash                           (21,775  )     -        
NET CASH PROVIDED BY FINANCING ACTIVITIES         22,681         -        
                                                                 
NET DECREASE IN CASH AND CASH EQUIVALENTS          (12,608  )       (16,694  )
CASH AND CASH EQUIVALENTS, beginning of period    16,812         28,426   
CASH AND CASH EQUIVALENTS, end of period        $  4,204        $  11,732   

dELiA*s, Inc.
SELECTED OPERATING DATA
(in thousands, except number of stores)
(unaudited)
                                              
            For The Thirteen Weeks Ended         For The Twenty-Six Weeks
                                                 Ended
            August 3, 2013       July 28, 2012   August 3,      July 28,
                                                 2013           2012
                                                                           
Channel net
revenues:
Retail      $  24,483            $  28,707       $ 49,196       $ 57,580
Direct (1)    8,684              11,101       19,148       23,442 
Total net   $  33,167           $  39,808      $ 68,344      $ 81,022 
revenues
                                                                           
Comparable    (14.9   %)          14.0    %     (11.2  %)     10.5   %
store sales
                                                                           
Catalogs      4,282              4,527        9,194        8,391  
mailed (1)
                                                                           
Inventory - $  17,016           $  22,323      $ 17,016      $ 22,323 
retail
Inventory - $  9,760            $  9,444       $ 9,760       $ 9,444  
direct (1)
                                                                           
                                                                           
Number of
stores:
Beginning      103                  112            104            113
of period
Opened         1           *        -              2         **   1        ***
Closed        1          *       3            3        **  5       ***
End of        103                109          103          109    
period
                                                                           
Total gross
sq. ft @
end
of period     397.5              418.4        397.5        418.4  
* Totals include one store that was closed and relocated to an alternative
site in the same mall during the second quarter of fiscal 2013.
** Totals include two stores that were closed and relocated to alternative
sites in the same malls during the first half of fiscal 2013.
*** Totals include one store that was closed and relocated to an alternative
site in the same mall during the first quarter of fiscal 2012.
(1) Restated to exclude the Alloy business

Contact:

dELiA*s, Inc.
David Dick, Chief Financial Officer, 212-590-6200
or
ICR
Jean Fontana, 646-277-1214