dELiA*s, Inc. Announces Third Quarter 2013 Results

  dELiA*s, Inc. Announces Third Quarter 2013 Results

Business Wire

NEW YORK -- November 21, 2013

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

Third Quarter Fiscal 2013 Highlights:

  *Total revenue decreased 28.9% to $33.0 million from $46.4 million in the
    third quarter of fiscal 2012. Revenue from the retail segment decreased
    30.9% to $24.3 million, including a comparable store sales decrease of
    22.9%. Revenue from the direct segment decreased 22.6% to $8.7 million.
  *Consolidated gross margin was 12.9% compared to 32.8% in the prior year
    quarter, primarily due to increased inventory reserves and lower
    merchandise margins in connection with clearing legacy product, as well as
    the deleveraging of occupancy costs.
  *Stockholders ratified the issuance of $21.8 million of convertible notes
    and approved the issuance of 20.7 million shares of common stock upon
    conversion of the notes.
  *Loss from continuing operations was $19.3 million, including $3.3 million
    in non-cash store impairment charges and $2.9 million in non-cash charges
    related to the note conversion, compared to a loss from continuing
    operations for the third quarter of fiscal 2012 of $2.1 million.

Tracy Gardner, Chief Executive Officer, commented, "While we expected the
third quarter to be tough, our results were further pressured by a challenging
retail environment. We significantly reduced inventory levels by taking
aggressive markdowns in order to work through underperforming legacy
merchandise. However, we were encouraged by the strong customer response to
the newness we have been able to deliver thus far. We plan to continue to
bring in new product that is more differentiated to the dELiA*s customer in
December and more notably in the first quarter. Overall, our new merchandising
and marketing teams are working diligently to develop a stronger brand image
and merchandise assortment that resonates with our girl. We believe this
turnaround will take time, but remain confident in the long term potential of
the dELiA*s brand.”

Results by Segment

Retail Segment Results

Total revenue for the retail segment for the third quarter of fiscal 2013
decreased 30.9% to $24.3 million from $35.2 million in the third quarter of
fiscal 2012. This decrease was primarily due to a comparable store sales
decrease of 22.9%, as well as a 5% reduction in store count.

Gross margin for the retail segment, which includes distribution, occupancy
and merchandising costs, was 10.0% for the third quarter of fiscal 2013
compared to 29.5% in the prior year period. The decrease in gross margin
included a 500 basis point reduction related to increased markdown and other
inventory reserves and a 600 basis point reduction in merchandise margins in
connection with clearing underperforming legacy inventory, as well as an 800
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 $11.0 million, or 45.1% of sales, in the third quarter of fiscal 2013
compared to $12.2 million, or 34.8% of sales, in the prior year period. The
reduction in SG&A expenses in dollars reflects reduced selling, overhead and
depreciation expenses offset, in part, by an increase in stock-based
compensation. The increase in SG&A expenses as a percent of revenues reflects
the deleveraging of selling, overhead and depreciation expenses on lower
revenues.

The operating loss for the third quarter of fiscal 2013 for the retail segment
was $11.8 million compared to $1.7 million in the prior year period. The
operating loss for the third quarter of fiscal 2013 included $3.3 million of
non-cash impairment charges related to underperforming stores.

The Company closed one store location during the third quarter of fiscal 2013,
ending the period with 102 stores.

Direct Segment Results

Total revenue for the direct segment for the third quarter of fiscal 2013
decreased 22.6% to $8.7 million from $11.2 million in the third quarter of
fiscal 2012. Catalog circulation for the third quarter of fiscal 2013
decreased 16.3% compared to the prior year quarter predominantly due to a
reduction in unprofitable circulation.

Gross margin for the direct segment was 21.2% for the third quarter of fiscal
2013 compared to 43.0% in the third quarter of fiscal 2012. The decrease in
gross margin included a 400 basis point reduction related to increased
markdown and other inventory reserves and a 1,500 basis point reduction in
merchandise margins in connection with clearing underperforming legacy
inventory, as well as a 200 basis point reduction due to increased shipping
and handling costs as a percent of revenues.

SG&A expenses for the direct segment were $6.2 million, or 71.5% of sales, in
the third quarter of fiscal 2013 compared to $6.2 million, or 55.1% of sales,
in the prior year period. SG&A expenses in dollars for fiscal 2013 included
reduced selling, overhead and depreciation expenses compared to the prior year
period, offset by increased stock-based compensation expense. 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 third quarter of fiscal 2013 for the direct segment was
$4.2 million, compared to $0.2 million in the prior year period, which
included an incremental gift card breakage benefit of $1.0 million.

Conversion of Private Placement Notes

During the third quarter of fiscal 2013, the Company obtained stockholder
ratification of the issuance of $21.8 million in principal amount of its
secured 7.25% convertible notes and approval for the conversion of those
convertible notes into equity. As a result of the market price of the stock on
the date of conversion being in excess of the issue price, the Company
recorded $2.9 million in non-cash charges. A $0.5 million charge related to
the participation of certain insiders in the convertible note offering was
included in stock-based compensation expense, while the remaining $2.4 million
was included in interest expense. The Company used the net proceeds it
received from the note offering for the repayment of outstanding amounts under
its revolving credit facility with Salus Capital.

Balance Sheet Highlights

At the end of the third quarter of fiscal 2013, cash and cash equivalents were
$1.9 million compared with $5.9 million at the end of the third quarter of
fiscal 2012. At the end of the third quarter of fiscal 2013, the Company had
restricted cash of $10.8 million to support outstanding letters of credit.
Availability under the Company's credit facility with Salus Capital was $20.1
million as of the end of the third quarter of fiscal 2013, net of borrowings
of $1.2 million.

Total net inventories at the end of the third quarter of fiscal 2013 were
$25.9 million compared with $32.3 million at the end of the third quarter of
fiscal 2012. Inventory per average retail store was down 16.1% compared to the
prior year period, and inventory for the direct segment was down 19.3%
compared to the prior year, primarily due to clearance of legacy inventory.

First Nine Month Results

For the nine-month period ended November 2, 2013, total revenue decreased
20.5% to $101.3 million from $127.4 million for the prior year period. Total
gross margin was 19.3% compared to 32.0% for the prior year period. SG&A
expenses were $51.9 million, or 51.2% of sales, for the first nine months of
fiscal 2013, compared to $54.3 million, or 42.6% of sales, for the prior year
period.

The operating loss for the first nine months of fiscal 2013 increased to $35.1
million, compared to $11.7 million for the first nine months of fiscal 2012.
The operating loss for the first nine months of fiscal 2013 included $3.3
million of non-cash impairment charges related to underperforming stores.

Loss from continuing operations for the first nine months of fiscal 2013
increased to $39.6 million, compared to $11.8 million for the first nine
months of fiscal 2012. Included in the first nine months of fiscal 2013 is a
gift card breakage benefit of $0.5 million compared to $1.7 million in the
first nine months of fiscal 2012. The loss from continuing operations for the
first nine months of fiscal 2013 included $3.3 million of non-cash impairment
charges related to underperforming stores, and $2.9 million in non-cash
charges related to the conversion of the notes payable to equity.

Interest expense for the first nine months of fiscal 2013 was $4.4 million,
including $2.4 million in non-cash charges related to the conversion of the
notes payable to equity, compared to $0.5 million for the first nine months of
fiscal 2012.

The provision for income taxes for the first nine 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 third quarter 2013 results is scheduled for
Thursday, November 21, 2013 at 4:30 P.M. Eastern Time. The conference call
will be webcast live at www.deliasinc.com. A replay of the call will be
available through December 21, 2013 and can be accessed by dialing (877)
870-5176 and providing the pass code number 6207507.

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 but not limited to our Annual Report on Form 10-K, as
amended; Quarterly Reports on Form 10-Q; and Registration Statement on Form
S-3 (SEC File No. 333-1991143). 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)
                                                              
                                         November 2, 2013     October 27, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                $   1,866            $   5,919
Inventories, net                             25,893               32,271
Prepaid catalog costs                        2,271                2,300
Restricted cash                              9,608                -
Other current assets                         6,169                3,146
Assets held for sale                        -                  8,308     
                                                              
TOTAL CURRENT ASSETS                         45,807               51,944
                                                              
PROPERTY AND EQUIPMENT, NET                  28,411               38,340
GOODWILL                                     -                    4,462
INTANGIBLE ASSETS, NET                       2,419                2,419
RESTRICTED CASH                              1,203                -
OTHER ASSETS                                935                938       
TOTAL ASSETS                             $   78,775          $   98,103    
                                                              
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                         $   19,772           $   20,461
Bank loan payable                            1,233                -
Accrued expenses and other current           9,897                10,481
liabilities
Income taxes payable                         704                  916
Liabilities held for sale                   -                  4,651     
TOTAL CURRENT LIABILITIES                    31,606               36,509
                                                              
DEFERRED CREDITS AND OTHER LONG-TERM       8,724              9,825     
LIABILITIES
TOTAL LIABILITIES                           40,330             46,334    
                                                              
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;               69                   32
69,108,614 and 31,684,387 issued,
respectively
Additional paid-in capital                   137,839              99,788
Accumulated deficit                          (99,391   )          (48,051   )
Treasury stock at cost; 49,807 and          (72       )         -         
TOTAL STOCKHOLDERS' EQUITY                  38,445             51,769    
                                                              
TOTAL LIABILITIES AND STOCKHOLDERS'      $   78,775          $   98,103    
EQUITY
                                                                            

                                                              
dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
                                                                       
                     For the Thirteen Weeks Ended
                     November 2,                    October 27,
                     2013                           2012
                                                                       
                                                                       
NET REVENUES         $ 32,998           100.0 %     $ 46,399           100.0 %
Cost of goods         28,740          87.1  %      31,200          67.2  %
sold
                                                                       
GROSS PROFIT          4,258           12.9  %      15,199          32.8  %
Selling, general
and                    17,187           52.1  %       18,420           39.7  %
administrative
expenses
Impairment of
long-lived             3,251            9.9   %       -                0.0   %
assets
Other
operating             (152       )     -0.5  %      (1,284     )     -2.8  %
income
TOTAL OPERATING       20,286          61.5  %      17,136          36.9  %
EXPENSES
OPERATING LOSS         (16,028    )     -48.6 %       (1,937     )     -4.2  %
Interest              3,240           9.8   %      159             0.3   %
expense
LOSS FROM
CONTINUING
OPERATIONS             (19,268    )     -58.4 %       (2,096     )     -4.5  %
BEFORE INCOME
TAXES
Provision
(benefit) for         21              0.1   %      (34        )     -0.1  %
income taxes
LOSS FROM
CONTINUING             (19,289    )     -58.5 %       (2,062     )     -4.4  %
OPERATIONS
(LOSS) INCOME
FROM
DISCONTINUED          (62        )     -0.2  %      65              0.1   %
OPERATIONS, NET
OF TAX
NET LOSS             $ (19,351    )     -58.6 %     $ (1,997     )     -4.3  %
                                                                       
BASIC AND DILUTED LOSS PER SHARE:
LOSS FROM
CONTINUING           $ (0.40      )                 $ (0.06      )
OPERATIONS
                                                                       
(LOSS) INCOME
FROM                 $ (0.00      )                 $ 0.00       
DISCONTINUED
OPERATIONS
                                                                       
NET LOSS PER         $ (0.40      )                 $ (0.06      )
SHARE
                                                                       
WEIGHTED AVERAGE
BASIC AND
DILUTED COMMON        48,799,333                   31,355,085 
SHARES
OUTSTANDING
                                                                       

                                                                
dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
                                                                       
                     For the Thirty-Nine Weeks Ended
                     November 2, 2013             October 27, 2012
                                                                       
                                                                       
NET REVENUES         $  101,342           100.0 % $  127,421           100.0 %
Cost of goods          81,784           80.7  %   86,620           68.0  %
sold
                                                                       
GROSS PROFIT           19,558           19.3  %   40,801           32.0  %
Selling, general
and                     51,880            51.2  %    54,287            42.6  %
administrative
expenses
Impairment of
long-lived              3,251             3.2   %    -                 0.0   %
assets
Other operating        (467        )     -0.5  %   (1,740      )     -1.4  %
income
TOTAL OPERATING        54,664           53.9  %   52,547           41.2  %
EXPENSES
OPERATING LOSS          (35,106     )     -34.6 %    (11,746     )     -9.2  %
Interest expense       4,412            4.4   %   477              0.4   %
LOSS FROM
CONTINUING
OPERATIONS              (39,518     )     -39.0 %    (12,223     )     -9.6  %
BEFORE INCOME
TAXES
Provision
(benefit) for          74               0.1   %   (402        )     -0.3  %
income taxes
LOSS FROM
CONTINUING              (39,592     )     -39.1 %    (11,821     )     -9.3  %
OPERATIONS
(LOSS) INCOME
FROM
DISCONTINUED           (1,078      )     -1.1  %   937              0.7   %
OPERATIONS, NET
OF TAX
NET LOSS             $  (40,670     )     -40.1 % $  (10,884     )     -8.5  %
                                                                       
BASIC AND
DILUTED LOSS PER
SHARE:
LOSS FROM
CONTINUING           $  (1.06       )             $  (0.38       )
OPERATIONS
                                                                       
(LOSS) INCOME
FROM                 $  (0.03       )             $  0.03        
DISCONTINUED
OPERATIONS
                                                                       
NET LOSS PER         $  (1.09       )             $  (0.35       )
SHARE
                                                                       
WEIGHTED AVERAGE
BASIC AND
DILUTED COMMON         37,417,287                 31,334,288  
SHARES
OUTSTANDING
                                                                       
DILUTED (LOSS)
INCOME PER
SHARE:
NET (LOSS)           $  (1.09       )             $  (0.35       )
INCOME PER SHARE
                                                                       
WEIGHTED AVERAGE
DILUTED COMMON
SHARES
OUTSTANDING            37,417,287                 31,265,800  
                                                                       

                                                         
dELiA*s Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                              
                                         For the Thirty-Nine Weeks Ended
                                         November 2, 2013     October 27, 2012
                                                              
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss                                 $   (40,670   )      $   (10,884   )
(Loss) income from discontinued             (1,078    )         937       
operations
Loss from continuing operations              (39,592   )          (11,821   )
Adjustments to reconcile net loss to
net cash used in operating
activities of continuing operations:
Depreciation and amortization                6,669                7,372
Deferred financing fees                      745                  163
Stock-based compensation                     1,617                516
Interest on conversion of notes              2,370                -
payable to equity
Impairment of long-lived assets              3,251                -
Changes in operating assets and
liabilities:
Inventories                                  (1,053    )          (7,546    )
Prepaid catalog costs and other              (2,299    )          (1,455    )
assets
Restricted cash                              (10,811   )         -
Income taxes payable                         81                   180
Accounts payable, accrued expenses          (8,830    )         (5,897    )
and other liabilities
                                                              
Total adjustments                           (8,260    )         (6,667    )
Net cash used in operating                   (47,852   )          (18,488   )
activities of continuing operations
Net cash used in operating
activities of discontinued                  (1,328    )         (262      )
operations
NET CASH USED IN OPERATING                  (49,180   )         (18,750   )
ACTIVITIES
                                                              
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures                        (2,450    )         (3,757    )
Net cash used in investing                   (2,450    )          (3,757    )
activities of continuing operations
Net cash provided by investing
activities of discontinued                  2,591              -         
operations
NET CASH PROVIDED BY (USED IN)              141                (3,757    )
INVESTING ACTIVITIES
                                                              
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common             13,926               -
stock, net of issuance costs
Purchase of treasury stock                   (72       )          -
Proceeds from the exercise of stock          33                   -
options
Proceeds from bank borrowings                1,233                -
Payment of deferred financing fees           (1,007    )          -
Sale of notes payable and conversion        19,980             -         
to equity, net of issuance costs
NET CASH PROVIDED BY FINANCING              34,093             -         
ACTIVITIES
                                                              
NET DECREASE IN CASH AND CASH                (14,946   )          (22,507   )
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning        16,812             28,426    
of period
CASH AND CASH EQUIVALENTS, end of        $   1,866           $   5,919     
period
                                                                            

                                                         
dELiA*s, Inc.
SELECTED OPERATING DATA
(in thousands, except number of stores)
(unaudited)
               
               For The Thirteen Weeks Ended     For The Thirty-Nine Weeks Ended
               November 2,       October        November 2,        October 27,
               2013              27, 2012       2013               2012
                                                                   
Channel
net
revenues:
Retail           $ 24,304        $ 35,172         $ 73,499         $ 92,753
Direct (1)       8,694         11,227         27,843         34,668  
Total net       $ 32,998       $ 46,399        $ 101,342       $ 127,421 
revenues
                                                                   
Comparable
store            (22.9  %)      2.4    %        (15.4   %)      7.3     %
sales
                                                                   
Catalogs         3,533         4,221          12,727         12,612  
mailed (1)
                                                                   
Inventory       $ 16,994       $ 21,250        $ 16,994        $ 21,250  
- retail
Inventory
- direct        $ 8,899        $ 11,021        $ 8,899         $ 11,021  
(1)
                                                                   
                                                                   
Number of
stores:
Beginning          103             109              104              113
of period
Opened             -               -                2       *       1       **
Closed           1             2              4       *      7       **
End of           102           107            102            107     
period
                                                                   
Total
gross sq.        393.4         410.8          393.4          410.8   
ft @ end
of period
                                                                             

* Totals include two stores that were closed and relocated to alternative
sites in the same malls during the first nine months of fiscal 2013.

** Totals include one store that was closed and relocated to an alternative
site in the same mall during the first nine months of fiscal 2012.

(1) Restated to exclude the Alloy business

Contact:

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

-0- Nov/21/2013 21:05 GMT
 
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