Birks & Mayors U.S. Same-Store Sales Down 11%

-- JCK-Jewelers Circular Keystone, 8/12/2008 10:07:00 AM

Birks & Mayors said first quarter 2009 net sales increased 6.4 percent to $72.4 million, year-over-year. Contributing factors included $5.1 million in sales from the two acquired Brinkhaus stores and two new Mayors stores, and the appreciation of the Canadian dollar.

Same-store sales for the period, ended June 28, decreased 5 percent, and included a 2-percent increase in Canada and an 11-percent decline in the U.S., said the Montreal-based retailer, which operates 70 luxury jewelry stores across Canada, Florida and Georgia. Same-store sales results were affected by lower store traffic in both regions, which was offset by a higher average sale in Canada. Same-store sales are measured on a constant exchange rate basis, which excludes the impact of changes in foreign exchange rates.

First quarter net loss for the retailer was $1.9 million, as compared to a net loss of $2 million during the first quarter of fiscal 2008.

“As we anticipated, the economic challenges we experienced in fiscal 2008 continued through the first quarter of Fiscal 2009,” said Tom Andruskevich, Birks & Mayors president and chief executive officer. “In Canada, the pricing strategy implemented in November of last year combined with our ability to increase the sale of higher price point offerings enabled us to generate a modest increase in comparable store sales in our Canadian market despite continued declines in store traffic. However, our Mayors stores, which have been affected by the extremely soft consumer spending environment in Florida, generated disappointing comparable store sales. We are nevertheless satisfied to be delivering improved bottom line results and higher net sales for the period driven by our intense focus on disciplined expense control and inventory management, while realizing the benefit of the Brinkhaus acquisition and the opening of two new stores since the same time last year. ”

Gross profit for the company was $32.9 million, or 45.4 percent of net sales, as compared to $31.6 million, or 46.5 percent of net sales in the first quarter of Fiscal 2008, the company said. The 110 basis point decline in the gross profit margin was primarily driven by the company’s decision in November 2007 to reduce the retail prices of certain products sold in Canada to reduce price disparity with the U.S. market.

Selling, general and administrative (“SG&A”) expenses were $31.2 million, or 43.1 percent of net sales, as compared to $30.1 million, or 44.2 percent of net sales in the first quarter of Fiscal 2008, the company said. The $1.1 million increase in SG&A expenses during the first quarter of Fiscal 2009 was primarily driven by a $1.3 million increase resulting from the impact of foreign exchange rates and a $1.3 million increase related to additional expenses associated with operating the two acquired Brinkhaus stores and the two new Mayors stores opened since the first quarter last year. These increases were partially offset by lower marketing and incentive compensation expenses recorded during the period.

“Although we continue to explore new tactical and strategic programs that are expected to build stronger relationships with existing clients and reach new clients, we expect business conditions to remain difficult,” Andruskevich said. “We will be more targeted in our marketing and provide an even greater level of unique and compelling assortments utilizing fewer resources and we will continue to be disciplined in the management of expenses and inventory.”

The company said it continues to expect net sales to increase in the low single digit percentage range for the year—while the gross margin rate continues to be projected to increase for the year, albeit very modestly. Capital expenditures are currently projected between $5 and $6 million.