Finlay narrows losses in second quarter

Finlay Enterprises, Inc. said sales from “continuing operations” (not including stores lost through the Federated and May merger) for the second quarter increased 8.1 percent to $162.9 million compared to $150.7 million in the second quarter of 2005. Recently acquired Carlyle contributed sales of $20 million in the current quarter versus $13.9 million last year. Comparable department sales for the second quarter (ended July 29) increased 3.4 percent.

The New York City based fine jewelry retailer and the largest operator of licensed fine jewelry departments in department stores in the United States reported a quarterly loss from continuing operations of $4.6 million, compared to a loss of $77.6 million, in the second quarter of fiscal 2005. The loss includes a pre-tax charge of $77.3 million, for the impairment of goodwill. Excluding this charge, the quarterly loss was $4.7 million. Income from operations before depreciation and amortization expenses (EBITDA) for the second quarter totaled $2.1 million, compared to $1 million in the prior year period, excluding the goodwill charge.

Comparable department sales for the second quarter, including discontinued stores, increased 7.4 percent. Total sales for the second quarter decreased 3.4 percent to $192.9 million compared to $199.7 million in the second quarter of fiscal 2005.

The company reported a net loss, on a consolidated basis, including discontinued operations, of $4 million, compared to a net loss of $74.8 million in the second quarter of fiscal 2005. Excluding the goodwill charge, net loss totaled $1.9 million. Included in discontinued operations for the second quarter of 2006 are pre-tax charges of $2 million as a result of the Federated and May merger, including $1.3 million associated with severance for field personnel and $0.7 million for accelerated depreciation.

Sales from continuing operations for the first half of the fiscal year increased 10.9 percent to $322.1 million, compared to $290.5 million in the same period a year ago. Comparable department sales for the six months increased 2.3 percent.

The company reported a loss from continuing operations for the half-year period of $10.2 million, compared to a loss of $82.8 million for the same period in 2005. The loss includes pre-tax charges of $1.5 million associated with central office severance and other closing related costs. The loss from continuing operations includes the aforementioned goodwill impairment charge. Excluding these charges, the loss from continuing operations for the half-year period was $9.3 million, compared to the prior year’s loss from continuing operations of $9.9 million. EBITDA for the period totaled $3.4 million, compared to $0.6 million in the prior year period, exclusive of the above charges.

Total sales for the half-year period increased 11.1 percent to $428.1 million compared to $385.5 million in the first six months of fiscal 2005. Comparable department sales for the period, including discontinued stores, increased 13.9 percent.

For the half-year period, the company reported a net loss, on a consolidated basis including discontinued operations, of $3.9 million, compared to a net loss of $77.6 million in the comparable period of fiscal 2005. Excluding the goodwill charge, net loss and net loss per share totaled $4.7 million. Included in discontinued operations are pre-tax charges of $4.4 million as a result of the Federated and May merger including $2.1 million associated with severance for field personnel and $2.3 million for accelerated depreciation.

“Our team did an excellent job of managing through a challenging transition period and successfully delivered top and bottom line gains in our results from continuing operations,” said Arthur E. Reiner, Finlay chairman and chief executive officer.