RTW Retailwinds (RTW) Reports Q3 Loss of $0.18, Revenues Miss

RTW Retailwinds (NYSE: RTW) reported Q3 EPS of ($0.18), versus $0.03 reported last year. Revenue for the quarter came in at $200.1 million versus the consensus estimate of $208.7 million.

Gregory Scott, Chief Executive Office of RTW Retailwinds, said: “Overall, we were disappointed with our third quarter results as softness in our store channel contributed to our sales decrease and operating loss below our expectations. That said, we continue to make progress against our strategic initiatives, which include growing our multi-brand platform, driving digital growth across all brands, and implementing our Customer First initiative. We are encouraged to report that in the third quarter our Fashion to Figure brand delivered a +55% comp, our total digital businesses across all brands delivered positive comp results and represented 36% of total volume, and we were able to accelerate further our new customer growth. Unfortunately, traffic in our store channel combined with challenges in our denim-based SoHo Jeans sub-brand drove the quarter’s operating loss. The team navigated these headwinds through disciplined inventory management and expense controls and we ended the quarter with lower inventory and with $65.6 million in cash on-hand with no debt. We acknowledge these challenges and are addressing with a sense of urgency.”

Commenting on the fourth quarter, Mr. Scott added, “While our reads in October and early November were above our expectations, our Black Friday performance was disappointing due to traffic in our store channel. We were pleased that our Cyber Monday results delivered record-breaking traffic and sales, which reflects the continued bifurcation of our positive digital growth and our traffic headwinds in stores. In addition, we anticipate improving margin rate over the prior year period reflecting our merchandise strategies. Finally, we expect to drive positive growth across our digital businesses and Fashion to Figure brand in the fourth quarter.”

Outlook:

For the fourth quarter of fiscal year 2019 the Company continues to expect to move forward with its strategic initiatives driving digital growth across all brands with its Customer First strategy. The Company also continues to expect pressure on brick-and-mortar sales given traffic headwinds and a highly promotional retail environment. In light of these ongoing investments in the future and retail industry trends, we expect the following for the fourth quarter of fiscal year 2019:

• Net sales are expected to be down in the mid to upper single-digit percentage range, reflecting the combination of reduced store count, and a comparable store sales decrease in the mid-single-digit range.
• Gross margin as a percentage of net sales is expected to decrease up to 150 basis points, primarily reflecting increased shipping costs with product margins flat to up slightly.
• Selling, general and administrative expenses are expected to be up slightly versus the prior year’s fourth quarter. This increase reflects investments in marketing to support the Company’s new businesses and drive new customer acquisition and an increase in variable eCommerce selling expenses, driven by growth in the eCommerce business and the costs to support new businesses, increase in variable compensation due to the elimination of accrual reversals which occurred in the prior year, partially offset by reduced payroll.
• Operating results for the fourth quarter are expected to reflect a loss in the range of $4 million to $8 million.

Additional Outlook:

• On-hand inventory at the end of the fourth quarter of fiscal year 2019 is expected to be down in the mid-single-digit percentage range.
• Capital expenditures for the fourth quarter of fiscal year 2019 are projected to be approximately $5.5 million to $6.5 million, primarily reflecting continued investments in the Company’s information technology and omni-channel infrastructure, as compared to $4.8 million of capital expenditures in the fourth quarter of fiscal year 2018. For fiscal year 2019, total capital expenditures are projected to be $11 million to $12 million, as compared to $8.5 million in capital expenditures in fiscal year 2018, with the increase primarily due to investments in IT infrastructure.
• Depreciation and amortization expense for the fourth quarter of fiscal year 2019 is estimated to be approximately $5 million.
• During the fourth quarter of fiscal year 2019, the Company expects to open 1 New York & Company store and close 19 New York & Company stores, 4 Fashion to Figure stores, and 4 Outlet stores. The Company plans to end fiscal year 2019 with roughly 390 stores, and approximately 1.9 million selling square feet. For the full year 2019, the Company expects to have opened a total of 7 New York & Company stores and 2 Fashion to Figure stores, and closed 22 New York & Company stores, 4 Fashion to Figure stores and 5 Outlet stores.

For earnings history and earnings-related data on RTW Retailwinds (RTW) click here.

You May Also Be Interested In

• Citi agrees to acquire rewards platform Kard Financial
• KULR Technology Group (KULR) Misses Q2 EPS by 39c
• Lument Finance Trust (LFT) Misses Q2 EPS by 17c