Design Within Reach, Inc. Reports First Quarter 2007 Results.SAN FRANCISCO San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden -- Design Within Reach, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DWRI DWRI Developmental Writing (college course) ) today announced financial results for the first quarter ended March 31, 2007. First Quarter Results: * Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight , which are comprised of product and shipping revenue, increased 25.1% to $43.8 million from $35.0 million in the same period last year, primarily driven by a 10%-off sales event Noun 1. sales event - an occasion (usually brief) for buying at specially reduced prices; "they held a sale to reduce their inventory"; "I got some great bargains at their annual sale" cut-rate sale, sale in March. Product sales for the first quarter of 2007 were $40.7 million, compared to $31.5 million recorded in the first quarter of 2006. * Gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. improved slightly, to 41.8% in the first quarter of 2007, compared to 41.1% in the same period last year due to more selective product and promotional initiatives in 2007 compared to the prior year period. * Product margin, which the Company defines as product gross profit divided by net product sales, was 45.6%, compared to 45.3% in the first quarter of 2006. For more information regarding the calculation of product margin, please see the discussion under the heading "Non-GAAP Financial Information" below. * Selling, general and administrative expenses increased to $22.2 million from $21.0 in the same period last year due to salary and occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal related to new studios and merchant fees related to increased sales volume. * Loss before income tax benefit decreased to $3.8 million, an improvement of 41.5% from a loss before income tax benefit of $6.5 million in the same period last year. Net loss for the first quarter of 2007 was $3.8 million, or $(0.26) per diluted share, compared to net loss of $4.2 million, or $(0.30) per diluted share, in the first quarter of 2006. No income tax benefit was recorded in quarter ended March 31, 2007, compared to an income tax benefit of approximately $2.3 million in the same period last year. "We are pleased with our 25% sales growth and ability to leverage expenses as we continue our efforts to drive our business toward profitability," said Ray Brunner, Chief Executive Officer. "Our improved first quarter results are primarily due to effective management of our 10%-off sale event in March, as well as utilizing select media advertising, our web channel, studios and catalogs to acquire new customers and inspire repeat purchases. In addition, we continue to manage our expenses and have made significant progress on improving our financial disciplines. We will now focus our efforts on improving product margin as we return to our core competency A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
Net sales by distribution channel were as follows: * Studio sales were $28.4 million in the first quarter of 2007, up approximately 36% from the same period last year, due to the 10%-off sales event held in March and the addition of eight net new studios opened from January 1, 2006 to March 31, 2007. Design Within Reach operated 64 studios and the DWR DWR Design Within Reach DWR Department of Water Resources DWR Direct Web Remoting (Easy Ajax for Java) DWR Durable Water Repellency DWR Delayed Word Recall (medical testing) DWR Driving While Revoked Annex an·nex tr.v. an·nexed, an·nex·ing, an·nex·es 1. To append or attach, especially to a larger or more significant thing. 2. , an outlet for returned and discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: merchandise in Secaucus, New Jersey
Secaucus is a town in Hudson County, New Jersey, USA. As of the United States 2000 Census, the town population was 15,931. , at the end of the first quarter of 2007, compared to 58 studios open at the end of the first quarter of 2006. The Company opened an additional studio in Charlotte, North Carolina “Charlotte” redirects here. For other uses, see Charlotte (disambiguation). Charlotte is the largest city in the state of North Carolina and the 20th largest city in the United States. in late April. * Direct sales (including phone sales and sales through the Design Within Reach website) were approximately $11.0 million in the first quarter of 2007, an increase of approximately 3% from $10.7 million in the first quarter of 2006 due to higher online sales. As of March 31, 2007, Design Within Reach had approximately $5.4 million in cash and cash equivalents and $16.2 million available for advances under its revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility. The Company believes that cash and cash equivalents as well as it credit facility will provide sufficient working capital to fund operations and anticipated capital expenditures in 2007. Guidance Design Within Reach is maintaining its 2007 guidance. The Company expects to achieve approximately $190 million in sales and breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations earnings. Conference Call Design Within Reach, Inc. will host a conference call today, May 16, 2007 at 1:30 p.m. Pacific (4:30 p.m. Eastern). The call, which will be hosted by Ray Brunner, President and Chief Executive Officer, and John Hellmann, Chief Financial Officer, will be broadcast live over the Internet and accessible through the Investor Relations Investor relations The process by which the corporation communicates with its investors. section of the Company's website at www.dwr.com. The webcast will also be archived online within one hour of the completion of the conference call and available at www.dwr.com. Non-GAAP Financial Information This press release presents Product Margin, which is a non-GAAP financial measure within the meaning of applicable SEC rules and regulations. The Company believes Product Margin is a useful financial measure as it removes the impact to gross margin from shipping revenues. Management believes shipping operations do not reflect the core operations of Design Within Reach's business and do not represent a profit center as shipping margins are expected to trend to zero. For a reconciliation of Product Margin to the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measure, see the following Reconciliation of GAAP Gross Margin to Product Margin.
Amount in thousands Thirteen >
Thirteen
Weeks Ended >
Weeks Ended
March 31, 2007 >
April 1, 2006
Product Sales $40,685 >
$31,529
Shipping Revenue 3,163 >
3,441
Net Sales $43,848 >
$34,970
>
Product Gross Profit $18,567 >
$14,283
Product Margin 45.6% >
45.3%
>
Shipping Gross Profit (222) >
99
Shipping Margin (7.0)% >
2.9%
>
Total Gross Profit $18,345 >
$14,382
Total Gross Margin 41.8% >
41.1%
About Design Within Reach, Inc. Design Within Reach, Inc., founded in 1998 and headquartered in San Francisco, is an integrated multi-channel provider of distinctive modern design furnishings and accessories. The Company markets and sells its products to both residential and commercial customers nationwide through the DWR catalog, studios, website and direct sales force, and a single common "in stock and ready to ship" inventory. "Design Within Reach" is a registered trademark of Design Within Reach, Inc. This press release includes forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including statements related to anticipated revenues, expenses, earnings, operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , the outlook for Design Within Reach's markets and the demand for its products. Factors that could cause Design Within Reach's actual results to differ materially from these forward-looking statements including the following: we recently revised our corporate strategy and the reduction in planned growth may adversely affect our gross margins, and our net sales may not increase as rapidly as planned or at all; if we fail to offer merchandise that our customers find attractive, the demand for our products may be limited; the expansion of our studio operations could result in increased expenses with no guarantee of increased revenues; we do not have long-term vendor contracts and as a result we may not have continued or exclusive access to products that we sell; our business depends, in part, on factors affecting consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. that are not within our control; our business will be harmed if we are unable to implement our growth strategy successfully; if we are unable to market, advertise and sell our products effectively through the Design Within Reach catalog and website, our operating results will be adversely affected; we have made and will continue to make certain systems changes that might disrupt our supply chain operations and delay financial results; if we do not manage our inventory levels successfully, our operating results will be adversely affected; we depend on domestic and foreign vendors, some of which are our competitors, for timely and effective sourcing of our merchandise; declines in the value of the U.S. dollar relative to foreign currencies could adversely affect our operating results; and we face intense competition and if we are unable to compete effectively, we may not be able to achieve and maintain profitability. Please refer to our reports and filings with the Securities and Exchange Commission, including our latest Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , for a further discussion of these risks and uncertainties. We also caution you not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events. [TABLE OMITTED] [TABLE OMITTED] |
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