dELiA*s, Inc. (DLIA) Announces Second Quarter 2012 Results

dELiA*s, Inc. (NASDAQ: DLIA), a multi-channel retail company comprised of two lifestyle brands primarily targeting teenage girls and young women, today announced the results for its second quarter of fiscal 2012.

Second Quarter Fiscal 2012 Highlights:

• Total revenue increased 8.9% to $48.3 million from $44.3 million in the second quarter of fiscal 2011. Revenue from the retail segment increased 8.8% to $28.7 million, including a comparable store sales increase of 14.0%. Revenue from the direct segment increased 9.1% to $19.6 million.
• Consolidated gross margin was 33.4% compared to 27.0% in the prior year quarter, primarily due to increased merchandise margins and leveraging of occupancy costs.
• Net loss was $5.2 million, or $0.17 per diluted share, compared to net loss for the second quarter of fiscal 2011 of $9.6 million, or $0.31 per diluted share.

Walter Killough, Chief Executive Officer, commented, “We are extremely pleased with our second quarter performance in both our retail and direct segments. Our results were driven by favorable customer reaction to the changes in our merchandise assortments and visual presentation for our dELiA*s brand, which led to double digit increases in both comparable store sales and in our dELiA*s direct business, as well as higher merchandise margins.”

Mr. Killough continued, “In our retail segment, based on current trends we expect mid-single digit positive comparable store sales for the month of August, with improved merchandise margins. In the dELiA*s direct business, we have released our July and August catalogs which have generated double-digit sales increases to date compared to last year. We believe our performance demonstrates that our strategic initiatives have been effective and should continue to deliver improved results.”

Results by Segment

Retail Segment Results

Total revenue for the retail segment for the second quarter of fiscal 2012 increased 8.8% to $28.7 million from $26.4 million in the second quarter of fiscal 2011. Retail comparable store sales increased 14.0% for the second quarter of fiscal 2012 compared to an increase of 7.2% for the second quarter of fiscal 2011.

Gross margin for the retail segment, which includes distribution, occupancy and merchandising costs, was 26.2% for the second quarter of fiscal 2012 compared to 16.0% in the prior year period. The increase in gross margin resulted primarily from higher merchandise margins, driven by increased full price selling and fewer markdowns, and the leveraging of reduced occupancy costs.

Selling, general and administrative (SG&A) expenses for the retail segment were $11.3 million, or 39.3% of sales, in the second quarter of fiscal 2012 compared to $11.8 million, or 44.7% of sales, in the prior year period. The decrease in SG&A expenses in dollars and as a percent of sales reflects the leveraging of reduced selling, overhead and depreciation expenses.

The operating loss for the second quarter of fiscal 2012 for the retail segment was $3.7 million compared to $7.5 million in the prior year period. Included in the second quarter of fiscal 2012 were store closing costs of $0.3 million.

The Company closed three stores during the second quarter of fiscal 2012, ending the period with 109 stores.

Direct Segment Results

Total revenue for the direct segment for the second quarter of fiscal 2012 increased 9.1% to $19.6 million from $18.0 million in the second quarter of fiscal 2011.

Gross margin for the direct segment was 44.0% for the second quarter of fiscal 2012 compared to 43.1% in the second quarter of fiscal 2011. The increase in gross margin resulted primarily from higher merchandise margins partially offset by higher shipping and handling costs.

SG&A expenses for the direct segment were $10.2 million, or 52.3% of sales, in the second quarter of fiscal 2012 compared to $9.6 million, or 53.6% of sales, in the prior year period. The increase in SG&A expenses in dollars resulted primarily from costs related to the closing of our customer contact center and additional investments in web-based marketing. The decrease in SG&A expenses as a percent of sales reflects the leveraging of selling and depreciation expenses on higher sales.

Operating loss for the second quarter of fiscal 2012 for the direct segment was $1.3 million as compared to $1.9 million in the prior year period. Included in the second quarter of fiscal 2012 was incremental gift card breakage income of $0.3 million, and the aforementioned costs related to the closing of our customer contact center of $0.3 million.

Balance Sheet Highlights

At the end of the second quarter of fiscal 2012, cash and cash equivalents were $11.7 million compared with $22.2 million at the end of the second quarter of fiscal 2011.

Total net inventories at the end of the second quarter of fiscal 2012 were $38.0 million compared with $39.9 million at the end of the second quarter of fiscal 2011. Inventory per average retail store was down 2.1% compared to the prior year period, and inventory for the direct segment was down 1.1% compared to the prior year.

First Six Month Results

For the six-month period ended July 28, 2012, total revenue increased 7.8% to $100.8 million from $93.5 million for the prior year period. Total gross margin was 33.3% compared to 30.4% for the prior year period. SG&A expenses were $43.1 million, or 42.7% of sales, for the first six months of fiscal 2012, compared to $43.3 million, or 46.3% of sales, for the prior year period.

The operating loss for the first six months of fiscal 2012 decreased to $8.5 million, compared to $14.8 million for the first six months of fiscal 2011.

Net loss for the first six months of fiscal 2012 decreased to $8.9 million, or $0.28 per diluted share, compared to a net loss of $14.1 million, or $0.45 per diluted share, for the first six months of fiscal 2011. Included in the first six months of fiscal 2012 is gift card breakage of $1.0 million, or $0.03 per diluted share, compared to $0.1 million, or $0.00 per diluted share, in first six months of fiscal 2011.

The provision for income taxes for fiscal 2012 was $0.1 million, or $0.00 per diluted share, compared to an income tax benefit of $0.9 million, or $0.03 per diluted share, for fiscal 2011.

Conference Call and Webcast Information

A conference call to discuss second quarter 2012 results is scheduled for Monday, August 20, 2012 at 10:00 A.M. Eastern Time. The conference call will be webcast live at www.deliasinc.com. A replay of the call will be available until September 20, 2012 and can be accessed by dialing (877) 870-5176 and providing the pass code number 8727634.

During the conference call, the Company may discuss and answer questions concerning business and financial developments and trends. The Company’s responses to questions, as well as other matters discussed during the conference call, may contain or constitute information that has not been disclosed previously.

About dELiA*s, Inc.

dELiA*s, Inc. is a multi-channel retail company comprised of two lifestyle brands primarily targeting teenage girls and young women. Its brands – dELiA*s and Alloy – generate revenue by selling apparel, accessories and footwear to consumers through direct mail catalogs, websites, and dELiA*s mall-based retail stores.

Forward-Looking Statements

This announcement may contain forward-looking statements made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations and beliefs regarding our future results or performance. Because these statements apply to future events, they are subject to risks and uncertainties. When used in this announcement, the words “anticipate”, “believe”, “estimate”, “expect”, “expectation”, “should”, “would”, “project”, “plan”, “predict”, “intend” and similar expressions are intended to identify such forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements. Additionally, you should not consider past results to be an indication of our future performance. For a discussion of risk factors that may affect our results, see the “Risk Factors That May Affect Future Results” section of our filings with the Securities and Exchange Commission, including our annual report on Form 10-K and quarterly reports on Form 10-Q. We do not intend to update any of the forward-looking statements after the date of this announcement to conform these statements to actual results, to changes in management’s expectations or otherwise, except as may be required by law.

dELiA*s, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share data)
(unaudited)
		July 28, 2012				July 30, 2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	11,732			$	22,216
Inventories, net			37,957				39,862
Prepaid catalog costs			2,387				2,955
Other current assets			3,497				4,373
TOTAL CURRENT ASSETS			55,573				69,406
PROPERTY AND EQUIPMENT, NET			39,969				46,612
GOODWILL			4,462				4,462
INTANGIBLE ASSETS, NET			2,419				2,419
OTHER ASSETS			820				855
TOTAL ASSETS		$	103,243			$	123,754
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	23,668			$	21,027
Accrued expenses and other current liabilities			14,658				19,697
Income taxes payable			848				833
TOTAL CURRENT LIABILITIES			39,174				41,557
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES			10,461				11,826
TOTAL LIABILITIES			49,635				53,383
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred Stock, $.001 par value; 25,000,000 shares authorized, none issued			–				–
Common Stock, $.001 par value; 100,000,000 shares authorized; 31,684,387 and 31,432,531 shares issued and outstanding, respectively			32				31
Additional paid-in capital			99,630				98,918
Accumulated deficit			(46,054	)			(28,578	)
TOTAL STOCKHOLDERS’ EQUITY			53,608				70,371
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	103,243			$	123,754

dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
		For the Thirteen Weeks Ended
		July 28, 2012							July 30, 2011
NET REVENUES		$	48,303			100.0	%		$	44,347			100.0	%
Cost of goods sold			32,169			66.6	%			32,381			73.0	%
GROSS PROFIT			16,134			33.4	%			11,966			27.0	%
Selling, general and administrative expenses			21,522			44.6	%			21,426			48.3	%
Other operating income			(383	)		-0.8	%			(34	)		-0.1	%
TOTAL OPERATING EXPENSES			21,139			43.8	%			21,392			48.2	%
OPERATING LOSS			(5,005	)		-10.4	%			(9,426	)		-21.3	%
Interest expense, net			166			0.3	%			136			0.3	%
LOSS BEFORE INCOME TAXES			(5,171	)		-10.7	%			(9,562	)		-21.6	%
Provision for income taxes			42			0.1	%			50			0.1	%
NET LOSS		$	(5,213	)		-10.8	%		$	(9,612	)		-21.7	%
BASIC AND DILUTED LOSS PER SHARE:
NET LOSS PER SHARE		$	(0.17	)					$	(0.31	)
WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES OUTSTANDING			31,327,526							31,209,737

dELiA*s, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
		For the Twenty-Six Weeks Ended
		July 28, 2012							July 30, 2011
NET REVENUES		$	100,754			100.0	%		$	93,493			100.0	%
Cost of goods sold			67,184			66.7	%			65,046			69.6	%
GROSS PROFIT			33,570			33.3	%			28,447			30.4	%
Selling, general and administrative expenses			43,068			42.7	%			43,324			46.3	%
Other operating income			(1,015	)		-1.0	%			(72	)		-0.1	%
TOTAL OPERATING EXPENSES			42,053			41.7	%			43,252			46.3	%
OPERATING LOSS			(8,483	)		-8.4	%			(14,805	)		-15.8	%
Interest expense, net			319			0.3	%			223			0.2	%
LOSS BEFORE INCOME TAXES			(8,802	)		-8.7	%			(15,028	)		-16.1	%
Provision (benefit) for income taxes			85			0.1	%			(947	)		-1.0	%
NET LOSS		$	(8,887	)		-8.8	%		$	(14,081	)		-15.1	%
BASIC AND DILUTED LOSS PER SHARE:
NET LOSS PER SHARE		$	(0.28	)					$	(0.45	)
WEIGHTED AVERAGE BASIC AND DILUTED COMMON SHARES OUTSTANDING			31,323,890							31,209,737

dELiA*s Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
		For the Twenty-Six Weeks Ended
		July 28,2012				July 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(8,887	)		$	(14,081	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			4,958				5,722
Stock-based compensation			386				408
Changes in operating assets and liabilities:
Inventories			(7,020	)			(7,837	)
Prepaid catalog costs and other assets			(200	)			6,409
Restricted cash			–				8,268
Income taxes payable			112				91
Accounts payable, accrued expenses and other liabilities			(3,361	)			(2,870	)
Total adjustments			(5,125	)			10,191
NET CASH USED IN OPERATING ACTIVITIES			(14,012	)			(3,890	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures			(2,682	)			(1,968	)
NET CASH USED IN INVESTING ACTIVITIES			(2,682	)			(1,968	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(16,694	)			(5,858	)
CASH AND CASH EQUIVALENTS, beginning of period			28,426				28,074
CASH AND CASH EQUIVALENTS, end of period		$	11,732			$	22,216

dELiA*s, Inc.
SELECTED OPERATING DATA
(in thousands, except number of stores)
(unaudited)
		For The Thirteen Weeks Ended									For The Twenty-Six Weeks Ended
		July 28, 2012				July 30, 2011					July 28, 2012				July 30, 2011
Channel net revenues:
Retail		$	28,717			$	26,388				$	57,580			$	53,402
Direct			19,586				17,959					43,174				40,091
Total net revenues		$	48,303			$	44,347				$	100,754			$	93,493
Comparable store sales			14.0	%			7.2	%				10.5	%			3.9	%
Catalogs mailed			8,038				7,843					15,580				16,584
Inventory – retail		$	22,323			$	24,047				$	22,323			$	24,047
Inventory – direct		$	15,634			$	15,815				$	15,634			$	15,815
Number of stores:
Beginning of period			112				115					113				114
Opened			–				1		**			1		*		2		**
Closed			3				1		**			5		*		1		**
End of period			109				115					109				115
Total gross sq. ft @ end
of period			418.4				440.0					418.4				440.0
* Totals include one store that was closed and relocated to an alternative site in the same mall during the first quarter of fiscal 2012.
** Totals include one store that was closed, remodeled and reopened during the second quarter of fiscal 2011.