Finlay profits fall despite growth in sales

Finlay Enterprises, Inc., a leading retailer of fine jewelry and the largest operator of leased fine jewelry space in department stores throughout the United States, reported a net loss of $6.1 million for the second quarter, ended July 31, which includes a pre-tax charge of $9.1 million related to the refinancing of company debt. Without that charge, the New York-based company’s loss was $600,000 for the quarter.

Income from operations before depreciation and amortization expenses (EBITDA) totaled $8.2 million compared to $8.5 million in the prior year period, on a continuing operations basis.

Comparable department store sales increased 3.2% for the second quarter. Total sales increased 3.5% to $188.6 million, compared to $182.2 million a year earlier, the company said.

“The 3.2% increase in comparable department sales in the second quarter sustained our positive momentum and marked our fifth consecutive quarter of comp store gains,” said Arthur E. Reiner, chairman and CEO of Finlay Enterprises, Inc. “The consistency of our sales results are a reflection of the ongoing success of our merchandising and marketing initiatives. Although gross margin was impacted by sales mix trending more towards the diamond and designer categories, we were able to maintain EBITDA levels with the prior year.”

For the six months ended July 31, the company reported a net loss of $8 million, including the debt restructuring. EBITDA for the six-month period was $15.2 million, compared to $15 million in the prior year on a continuing operations basis.

Comparable department store sales increased 5% in the first half of fiscal 2004. Total sales increased 5.2% to $376.2 million compared to $357.7 million a year earlier.

The company estimates comparable store sales for the second half of the year in the range of 2% to 2.5%, which would result in comparable store sales for the fiscal year between 3% and 3.5%.

Finlay Enterprises, Inc., through its wholly owned subsidiary, Finlay Fine Jewelry Corp., operates 967 locations.