Q4 Sales Down 44%

Online jewelry retailer said Monday that net revenue for the fourth quarter of 2008 fell 44.4 percent, year-over-year, to $35.1 million, with domestic and international sales representing 72.1 percent and 27.9 percent of sales, respectively.

In the fourth quarter 2008, gross profit was approximately $12.1 million, compared with $19.8 million in the fourth quarter of 2007. Gross margins for the period, ended Dec. 31, 2008, were 34.4 period, compared with 31.2 period in the same period of 2007.

Net income for the quarter declined 64.4 percent, year-over-year, to $2.9 million.

“Given the unprecedented challenges that we and most companies faced over the holiday season, we are very pleased to report EPS in-line with our previously issued EPS guidance range,” said Leon Kuperman, president. “Importantly, we increased our fourth quarter gross margins by 320 basis points. We believe our ability to deliver these positive results in this environment reflect both the strength and flexibility of our business model and the tremendous value we offer to consumers. While the retail spending environment remains exceedingly difficult and we expect will continue to be so through 2009, we believe that our focus on profitability and gross margins combined with our ongoing cost cutting initiatives, will allow us to remain profitable and financially strong while increasing our market share in the global jewelry market.

“Looking ahead, we remain intensely focused on executing on our strategic initiatives that will continue to enhance the customer experience in all areas,” Kuperman added. “In times of rapid change, the right execution model is imperative and we are acting quickly to ensure we have the proper structure in place to manage and maximize our business in the current environment.”

Operating expenses in the fourth quarter 2008 were $7.6 million compared to $11.4 million in the prior year period. The company said the significant dollar decrease in expenses was primarily due to its aggressive cost cutting initiatives to downsize the number of employees to 165 from 240 in 2007, and other spending reductions in all areas of operations and administration.

The company’s pre-tax income for the fourth quarter of 2008 was $4.5 million, compared to $8.4 million in the prior year period. The company’s income tax expense increased to $1.6 million in the fourth quarter of 2008, compared to $32,000 in prior year period, and the effective tax rate increased to 35.1% from 0.4%. It is important to note that the Company became fully taxed in 2008 since all of its operating loss carry forwards were utilized in 2007.

For the year, net revenue for the Culver City, Calif.-based company increased 10.8 percent year-over-year to $207.4 million.

Gross profit for the fiscal year increased 7.8 percent, year-over-year, to $58.7 million. Gross margins in 2008 were 28.3 percent compared with 29.1 percent in the prior year.

Net income for 2008 declined 20.4 percent, year-over-year, to $14.4 million.

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