Birks & Mayors Inc. second quarter of fiscal 2009 net sales increased 2.2 percent year-over-year to $61.2 million. Same-store sales for the period, ended Sept. 27, decreased 6 percent, as compared to a 5 percent increase in the prior-year period.
The company, which operates of luxury jewelry stores in the United States and Canada, reported a net loss of $2.1 million for the period, as compared to a net loss of $3.5 million during the second quarter of Fiscal 2008.
By region, same-store sales in the U.S. decreased 6 percent driven by traffic declines, which were partially offset by an increase in the average sale. Same-store sales in Canada fell 5 percent primarily due to traffic declines.
The Montreal-based company operates 37 Birks brand stores in most major metropolitan markets in Canada, 31 Mayors brand stores in Florida and Georgia, and two retail locations in Calgary and Vancouver under the Brinkhaus brand.
Gross profit was $27.4 million, or 44.8 percent of net sales, as compared to $28.9 million, or 48.3 percent of net sales in the second quarter of Fiscal 2008. The 350 basis point decline in the gross profit margin was driven by the company’s decision in November 2007 to lower the retail prices of certain products sold in Canada to reduce price disparity with the U.S. market and certain sales initiatives in the U.S. which resulted in lower margins on the sale of selected products.
“The ongoing execution of our key strategies to grow our average sale, reduce expenses, and control inventory while maintaining a superior level of client service enabled us to manage cash flow and debt successfully in a very challenging economic environment that intensified in severity during September,” said Tom Andruskevich, Birks & Mayors president and chief executive officer. “To this end, our focus on the sale of items over $20,000 drove a solid increase in the average sale in our U.S. market, which partially mitigated the decline in customer traffic to our overall results. In Canada, where the economy continued to be less volatile during this period, consumer spending was nonetheless affected by the financial crisis and weakness in economies globally. Our cost control disciplines led to a decline in expenses versus the prior year period despite the incremental costs for our Brinkhaus acquisition and two new Mayors stores. In addition, inventory was well controlled and below the prior year period. These strategies, while successful, were not sufficient to offset the negative impact to our results from a weakening U.S. and global economy, the financial crisis and unprecedented volatility in stock markets, commodities and currencies around the world.”
Selling, general and administrative expenses for the company were $27.3 million, or 44.6 percent of net sales, as compared to $28.5 million, or 47.7 percent of net sales in the prior year’s quarter. The $1.3 million decrease in SG&A expenses during the current fiscal year was driven by a $700,000 reduction in marketing expenses, a $1 million decrease in incentive compensation costs, and a $700,000 million reduction in general operating expenses as the result of our efforts to reduce general corporate overhead costs, offset by a $1.1 million increase in operating costs related to the opening of two new Mayors locations and the acquisition of two Brinkhaus locations.
The company in its fiscal 2009 guidance said that as a result of the “severity in the economic downturn, financial and stock market crises, and an all time low in consumer confidence and the related decrease in consumer spending,” it expects its net sales for the year to decrease and its gross margin rate to decrease. Capital expenditures are estimated at approximately $4 million for the full year.
The company also said the U.S. and global economic slowdown and the competitiveness of the luxury retail market could further negatively impact our results, along with rising interest rates, financing, a general lack of consumer confidence, exchange rate fluctuations, and real estate markets in Florida.
“As we look ahead, we are planning for an extremely challenging holiday season as we expect consumer confidence and spending to be quite weak, negatively impacting our upcoming third quarter performance,” Andruskevich said.Follow JCK on Instagram: @jckmagazine
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