dELiA*s, Inc. Announces First Quarter 2014 Results

  dELiA*s, Inc. Announces First Quarter 2014 Results

Business Wire

NEW YORK -- May 29, 2014

dELiA*s, Inc. (NASDAQ:DLIA), an omni-channel retail company primarily
marketing to teenage girls, today announced the results for its first quarter
of fiscal 2014.

First Quarter Results

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.

The Company identifies its operating segments according to how business
activities are managed and evaluated. Prior to fiscal 2014, dELiA*s, Inc. had
two reportable segments: retail stores and direct marketing. Beginning in
fiscal 2014, the Company combined all channels under one management team which
oversees the retail stores and online operations. The Company has determined
that the two operating segments share similar economic and other qualitative
characteristics and has therefore aggregated the results of the two operating
segments into one reportable segment.

First Quarter Fiscal 2014 Highlights:

  *Total revenues decreased 26.3% to $25.9 million from $35.2 million in the
    first quarter of fiscal 2013. Comparable sales, including comparable store
    sales and direct-to-consumer sales, decreased 24.7%.
  *Consolidated gross profit was 21.3% compared to 23.8% in the prior year
    quarter primarily due to the deleveraging of occupancy costs.
  *Loss from continuing operations was $11.6 million compared to a loss from
    continuing operations for the first quarter of fiscal 2013 of $9.2
    million.

Tracy Gardner commented, “At this early stage of our turnaround, we are
encouraged by our first quarter progress in what continues to be a challenging
macro retail environment. While our total revenues decreased 26% in the first
quarter, our comparable store performance was down 21% and sequentially
improved each month of the quarter. Our merchandise margin rates, inclusive of
obsolescence, were rebuilt to the highest level we have seen in the last six
quarters as we delivered merchandise margin dollars that were only down 13% on
a comparable store basis. This improvement in merchandise margin levels is an
important first step that we would expect to see at this point in our
turnaround. Also important was that we achieved our targeted first quarter
reductions in inventory levels and operating expenses. Our team has made
tremendous progress in developing a product assortment that appeals to our
girl's fashion sense and her desire for great value. We are seeing our girl
respond to the customer engagement strategies and enhanced store shopping
experience that were rolled out in the first quarter. We are optimistic that
the sequential improvements we have seen in the first quarter will continue
forward while we remain focused on transforming dELiA*s into a
customer-centric teen brand that enables her to express her individual style.
I want to thank our entire headquarters, distribution center and store teams
for their hard work, passion and dedication to helping dELiA*s reach its
potential."

Total revenues for the first quarter of fiscal 2014 decreased 26.3% to $25.9
million from $35.2 million in the first quarter of fiscal 2013. Comparable
sales decreased 24.7% primarily due to reduced website and mall traffic. In
addition, catalog circulation for the first quarter of fiscal 2014 decreased
15.2% compared to the prior year quarter predominantly due to a reduction in
unprofitable circulation.

Gross profit, which includes distribution, occupancy and merchandising costs,
was 21.3% for the first quarter of fiscal 2014 compared to 23.8% in the prior
year period. Gross profit benefitted from a 260 basis point improvement in
reduced obsolescence and other inventory reserves. Merchandise margin rate was
down 100 basis points versus the prior year period; however, the rate improved
1,440 basis points over fourth quarter of fiscal 2013. Gross profit included a
450 basis point reduction due to the deleveraging of occupancy costs on lower
revenues.

Selling, general and administrative (SG&A) expenses were $16.5 million, or
63.6% of revenues, in the first quarter of fiscal 2014 compared to $17.5
million, or 49.7% of revenues, in the prior year period. The reduction in SG&A
expenses in dollars reflects reduced overhead and depreciation expenses
offset, in part, by an increase in selling and stock-based compensation
expenses. The increase in SG&A expenses as a percent of revenues reflects the
deleveraging of selling, overhead and stock-based compensation expenses on
lower revenues.

The operating loss for the first quarter of fiscal 2014 was $10.7 million
compared to a loss of $8.9 million in the prior year period.

The Company relocated one store location and closed two store locations during
the first quarter of fiscal 2014, ending the period with 99 stores.

Balance Sheet Highlights

At the end of the first quarter of fiscal 2014, cash and cash equivalents were
$2.5 million compared with $3.6 million at the end of the first quarter of
fiscal 2013. At the end of the first quarter of fiscal 2014, the Company had
restricted cash of $9.3 million to support outstanding letters of credit.
Availability under the Company's credit facility with Salus Capital was $5.5
million as of the end of the first quarter of fiscal 2014, net of borrowings
of $11.2 million.

Total net inventories at the end of the first quarter of fiscal 2014 were
$24.1 million compared with $26.1 million at the end of the first quarter of
fiscal 2013.

During the first quarter of fiscal 2014, the Company closed on a $44.1 million
private placement transaction. Approximately $20.0 million of proceeds were
immediately available to the Company, with the remaining $24.1 million to
become available subsequent to stockholder approval of an amendment of the
Company’s certificate of incorporation at the annual stockholder meeting
scheduled for June 17. 2014. This transaction included the sale of 199,834
shares of preferred stock for an aggregate purchase price of approximately
$20.0 million, and the sale of approximately $24.1 million in principal amount
of 7.25% secured convertible notes. Each share of preferred stock is
convertible into 125 shares of common stock at a conversion price of $0.80 per
share. The notes will automatically convert into 241,166 shares of preferred
stock upon stockholder approval of an amendment to the Company’s certificate
of incorporation that would increase authorized common stock to allow
conversion into common stock of the preferred stock issuable under the notes.
If the Company does not obtain stockholder approval, the funds will be used to
repay the notes.

Conference Call and Webcast Information

A conference call to discuss first quarter 2014 results is scheduled for
Thursday, May 29, 2014 at 9:30 A.M. Eastern Time. The conference call will be
webcast live at www.deliasinc.com. A replay of the call will be available
through June 29, 2014 and can be accessed by dialing (877) 870-5176 and
providing the pass code number 8593263.

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 an omni-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, Quarterly Reports on
Form 10-Q and Registration Statements on Form S-3. 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)
                                                                 
                                                    May 3, 2014    May 4, 2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                           $ 2,548        $ 3,643
Inventories, net                                      24,076         26,119
Prepaid catalog costs                                 1,194          1,565
Restricted cash                                       32,360         -
Other current assets                                  6,520          5,596
Assets held for sale                                 -            6,094   
                                                                   
TOTAL CURRENT ASSETS                                  66,698         43,017
                                                                   
PROPERTY AND EQUIPMENT, NET                           26,795         34,988
INTANGIBLE ASSETS, NET                                2,419          2,419
RESTRICTED CASH                                       1,100          -
OTHER ASSETS                                          792            968
ASSETS HELD FOR SALE                                 -            657     
TOTAL ASSETS                                        $ 97,804      $ 82,049  
                                                                   
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable                                    $ 15,910       $ 21,927
Bank loan payable                                     11,240         1,550
Accrued expenses and other current liabilities        9,336          11,703
Convertible notes payable                             24,117         -
Accrued dividends payable                             243            -
Income taxes payable                                  635            666
Liabilities held for sale                            -            4,552   
TOTAL CURRENT LIABILITIES                             61,481         40,398
                                                                   
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES     7,977        9,455   
TOTAL LIABILITIES                                    69,458       49,853  
                                                                   
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.001 par value; 25,000,000 shares
authorized: Series B Convertible Preferred stock,
(liquidation preference of $20,226) stated value      0              -
$100 per share, $.001 par value: 441,000 shares
designated and 199,834 and 
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