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ALCO Stores, Inc. Reports Operating Results for Fourth Quarter and Fiscal Year Ended February 2, 2014

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COPPELL, Texas, May 5, 2014 (GLOBE NEWSWIRE) -- ALCO Stores, Inc. (Nasdaq:ALCS), which specializes in providing a superior selection of essential products for everyday life in small-town America, today announced operating results for its fourth quarter and fiscal year ended February 2, 2014.

Net sales from continuing operations during the fourth quarter of fiscal 2014 (13 weeks) decreased 8.9% to $130.9 million, compared to $143.6 million in the fourth quarter of fiscal 2013 (14 weeks). Excluding the 14th week of the fiscal 2013 quarter, net sales from continuing operations decreased 4.7%. Same-store sales, excluding fuel centers, decreased 11.7% to $124.8 million during the fourth quarter of fiscal 2014. Excluding the 14th week of the fiscal 2013 quarter, same-store sales, excluding fuel centers, decreased 7.6%.

Net loss for the fourth quarter of fiscal 2014 was $8.6 million, or $2.65 per diluted share, compared to a net income of $2.0 million, or $0.61 per diluted share, for the fourth quarter of fiscal 2013. Results in the fourth quarter of fiscal 2014 included impairment charges of $1.4 million associated with the planned closing of 14 stores during fiscal 2015, $0.5 million for costs associated with the relocation of the headquarters to Coppell, Texas, and, $0.1 million in expenses attributable to the failed merger.

Net sales from continuing operations during the 52 weeks of fiscal year 2014 decreased 1.6% to $474.1 million, compared to net sales during the 53 weeks of fiscal year 2013 of $481.8 million. Excluding the 53rd week of fiscal year 2013, net sales from continuing operations decreased 0.3%. Same-store sales, excluding fuel centers, during the 52 weeks of fiscal year 2014 decreased 4.5% to $452.5 million. Excluding the 53rd week of fiscal year 2013, same-store sales, excluding fuel centers, decreased 3.2%.

Net loss for fiscal 2014 was $26.4 million, or $8.11 per diluted share, compared to net income of $1.3 million, or $0.36 per diluted share. Results for fiscal 2014 included a previously disclosed non-cash charge of $9.8 million related to a valuation allowance on the Company's cumulative deferred tax assets, $1.9 million for discontinued operations and a total of $3.5 million of non-recurring expenses attributable to the relocation of the corporate office and the proposed merger that was rejected in a shareholder vote in October 2013.

Richard Wilson, President and CEO, commented, "Fiscal year 2014 operating results reflect the impact of significant change and disruption to our business. Most importantly we took steps to fix long-term problems that have hurt ALCO's profitability while dealing with the events associated with the proposed merger that was rejected. We recorded approximately $2.4 million in merger-related costs and approximately $1.1 million of headquarters relocation costs. During the year, ALCO decided to close 22 underperforming stores, and the last of those stores will be closed by the end of the first quarter of fiscal year 2015. We also experienced a net reduction in gross margin dollars of approximately $10 million, primarily due to increased promotional activity in an attempt to reduce inventory and to comparison with the 53-week year in fiscal 2013. Finally, we recognized a large non-cash charge relating to the accounting for deferred tax assets on the Company's balance sheet."

Mr. Wilson added, "Moving forward, ALCO is focused on executing five major initiatives to improve profitability and deliver value for shareholders. These actions include:

  • Maximizing the benefit of our headquarters relocation to the Dallas area, which is enabling ALCO to recruit experienced managers, buyers and marketers from some of the nation's top retail organizations. Our new team is largely in place.
  • Expanding gross margins by completing the price optimization initiative with Revionics, which benefits top-line sales and gross margin by adjusting prices store-by-store and item-by-item based on detailed demand data.
  • Improving our real estate portfolio by closing unprofitable stores and opening more productive ones. At the end of fiscal year 2014, we had closed or were in the process of closing 22 underperforming stores, and we opened three high-performing locations in regions with growing energy-based economies.
  • Upgrading our information technology (IT) with a new Enterprise Resource Planning system and a new supply chain service provider. These systems will increase efficiency, reduce costs and improve inventory management.
  • Reducing inventory and associated debt levels by, in addition to the store rationalization and IT upgrades mentioned, making a number of targeted changes in store layout and merchandise mix to appeal to ALCO shoppers."

In summary, Mr. Wilson stated, "We look forward to delivering greater shareholder value by executing on these initiatives to substantially increase profitability for the ALCO enterprise. Across ALCO's 198 stores, our team is committed to providing personal, friendly service and great values to our ALCO shoppers during this holiday season – and beyond."

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Time on Tuesday, May 6, 2014 to discuss operating results for the fourth quarter and fiscal year ended February 2, 2014. The dial-in number for the conference call is 888-455-2263 (international/local participants dial 719-325-2361), and the Conference Code is 9631280. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Time. A replay of the call will be available after 1:00 p.m. Central Time May 6, 2014 through May 9, 2014, by dialing 888-203-1112 (international/local participants dial 719-457-0820), and the Replay Code is 963128. A replay of the call will also be available four hours after completion of the call by visiting the Investors page on the Company's website, www.ALCOstores.com.

Supplemental Data

The Company has included certain tables in this press release that are set forth fully in the Company's 10-K.

Certain Non-GAAP Financial Measures

The Company has included Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information to assist them in comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes these measures in internal evaluation; review of performance and in comparing the Company's financial measures to those of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings [loss] from continuing operations) in that it does not include certain items. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the Company's performance using Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and cash flow from operating activities. As a result, Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.

ALCO Stores, Inc.

ALCO Stores, Inc. is a broad-line retailer, primarily located in small underserved communities across 23 states. The Company has 198 stores that offer both name brand and private label products of exceptional quality at reasonable prices. We are proud to have continually provided friendly, personal service to our customers for the past 113 years. To learn more about the Company visit www.ALCOstores.com.

Forward-looking statements

All of the statements in this release, other than historical facts, are forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the inclusion of "will," "believe," "intend," "expect," "plan," "project" and similar future-looking terms. You should not rely unduly on these forward-looking statements. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments, and Company performance. Forward-looking statements inherently involve risks and uncertainties, and, accordingly, actual results may vary materially. Factors which could significantly change results include but are not limited to: sales performance, expense levels, competitive activity, interest rates, changes in the Company's financial condition, and factors affecting the retail category in general. Further risks that could cause actual results to differ materially from those matters expressed in or implied by such forward-looking statements are set forth under "Risk Factors" in the Company's Form 10-K for the fiscal year ended February 2, 2014, and its subsequent quarterly reports on Form 10-Q. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, although its situation and circumstances may change in the future.

– Tables to follow –

ALCO Stores, Inc.
Statements of Operations
Fiscal Years Ended February 2, 2014 and February 3, 2013
(dollars in thousands, except share and per share amounts)
(unaudited)
Thirteen Week
Period Ended
Fourteen Week
Period Ended
(unaudited)
Fifty-Two Week
Period Ended
Fifty-Three Week
Period Ended
February 2, 2014 February 3, 2013 February 2, 2014 February 3, 2013
Net sales $ 130,880 143,600 474,052 481,788
Cost of sales 95,446 102,877 338,271 335,721
Gross margin 35,434 40,723 135,781 146,067
Selling, general and administrative 38,346 34,504 141,029 131,279
Depreciation and amortization 3,982 2,383 10,421 8,739
Total operating expenses 42,328 36,887 151,450 140,018
Operating income (loss) from continuing operations (6,894) 3,836 (15,669) 6,049
Interest expense 972 1,083 3,834 3,477
Earnings (loss) from continuing operations before income taxes (7,866) 2,753 (19,503) 2,572
Income tax expense (benefit) (363) 756 5,033 667
Net earnings (loss) from continuing operations (7,503) 1,997 (24,536) 1,905
Loss from discontinued operations, net of income tax benefit (1,117) (17) (1,889) (598)
Net earnings (loss) $ (8,620) 1,980 (26,425) 1,307
Earnings (loss) per share
Basic
Continuing operations $ (2.30) 0.61 (7.53) 0.52
Discontinued operations $ (0.35) (0.01) (0.58) (0.16)
Net earnings per share $ (2.65) 0.61 (8.11) 0.36
Earnings (loss) per share
Diluted
Continuing operations $ (2.30) 0.61 (7.53) 0.52
Discontinued operations $ (0.35) (0.01) (0.58) (0.16)
Net earnings per share $ (2.65) 0.61 (8.11) 0.36
Weighted-average shares outstanding:
Basic 3,258,162 3,258,152 3,258,162 3,634,235
Diluted 3,258,162 3,258,152 3,258,162 3,634,235
ALCO Stores, Inc.
Schedule of Adjusted EBITDA
(dollars in thousands)
(unaudited)
53 Weeks For the Thirty-Nine Week
Periods Ended
Trailing Twelve
Period Ended
Thirteen Week
Period Ended
Fourteen Week
Period Ended
52 Weeks
Fiscal 2013 November 3,
2013
October 28,
2012
November 3,
2013
February 2,
2014
February 3,
2013
Fiscal 2014
Net earnings (loss) $ 1,307 (17,806) (673) (15,826) (8,619) 1,980 (26,425)
Plus:
Interest 3,477 2,862 2,394 3,945 972 1,083 3,834
Taxes 311 4,924 (443) 5,678 108 754 5,032
Depreciation and amortization 8,902 6,539 6,479 8,962 4,006 2,423 10,545
EBITDA 13,997 (3,481) 7,757 2,759 (3,533) 6,240 (7,014)
Plus:
Share-based compensation 381 335 327 389 69 54 404
(Gain) loss asset disposals 141 -- (4) 145 337 145 337
Adjusted EBITDA (1) $ 14,519 (3,146) 8,080 3,293 (3,127) 6,439 (6,273)
Cash $ 3,160 2,972 1,179 2,972 2,230 3,160 2,230
Debt 79,962 94,029 74,745 94,029 108,407 79,962 108,407
Debt, net of cash $ 76,802 91,057 73,566 91,057 106,177 76,802 106,177
(1) These amounts may not agree with 10-Qs of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations.
ALCO Stores, Inc.
Balance Sheets
(dollars in thousands, except share and per share amounts)
(unaudited)
February 2, 2014
February 3, 2013
Assets
Current assets:
Cash and cash equivalents $ 2,230 $ 3,160
Receivables 12,305 13,187
Prepaid income taxes -- --
Inventories 162,670 166,671
Prepaid expenses 3,824 3,767
Deferred income taxes -- 3,081
Property held for sale 568 568
Total current assets 181,597 190,434
Property and equipment, at cost:
Land and land improvements 5,543 5,648
Buildings and building improvements 15,245 10,499
Furniture, fixtures and equipment 78,776 74,066
Transportation equipment 1,009 988
Leasehold improvements 19,715 21,138
Construction work in progress 1,445 5,083
Total property and equipment 121,733 117,422
Less accumulated depreciation and amortization 84,805 81,794
Net property and equipment 36,928 35,628
Property under capital leases 24,957 26,972
Less accumulated amortization 10,424 11,476
Net property under capital leases 14,533 15,496
Deferred income tax - non current 41 1,693
Other non-current assets 1,994 624
Total assets $ 235,093 $ 243,875
ALCO Stores, Inc.
Balance Sheets
(dollars in thousands, except share and per share amounts)
(unaudited)
February 2, 2014
February 3, 2013
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations $ 523 $ 580
Accounts payable 28,817 39,220
Accrued income tax 108 --
Accrued salaries and commissions 3,361 3,111
Accrued taxes other than income 4,741 5,046
Self-insurance claim reserves 4,493 4,429
Deferred income tax 41 --
Other current liabilities 3,935 4,429
Total current liabilities 46,019 56,815
Notes payable under revolving loan 92,540 63,446
Capital lease obligations - less current maturities 15,345 15,936
Deferred gain on leases 2,666 3,053
Deferred income taxes -- --
Other noncurrent liabilities 2,381 2,462
Total liabilities 158,951 141,712
Stockholders' equity:
Common stock, $.0001 par value, authorized 20,000,000 shares; 3,258,162 shares issued and outstanding, both fiscal years 1 1
Additional paid-in capital 36,937 36,533
Retained earnings 39,204 65,629
Total stockholders' equity 76,142 102,163
Total liabilities and stockholders' equity $ 235,093 $ 243,875

CONTACT: For more information, contact: Wayne S. Peterson Senior Vice President - Chief Financial Officer 469-322-2900 X1071 email: wpeterson@alcostores.com or Debbie Hagen Hagen and Partners 913-642-6363 email: dhagen@hagenandpartners.com

Source:ALCO Stores, Inc.