Delia’s Direct Biz Sees Margin Boost Despite Sales Drop

By Jun 01, 2010

Forgive the management at Delia’s for not breaking out the champagne at the end of its most recent quarter. The company’s total sales amounted to $50 million, down from $52.1 million in first-quarter 2009. And its net loss widened from $3.6 million a year ago to $5.8 million.

Delia’s, which offers apparel and accessories targeted at teenage girls and young women, did see its retail sales rise 3% from first-quarter 2009’s level, to $26 million, while its direct revenue slipped by 10.7% to $24 million.

But there is room for hope. The direct channel led the way in terms of segment margin. Gross margin for the direct segment was 44.1% compared to 41.8% in the first quarter of the prior year, as the company cut back on clearance sale activity, compared with first quarter 2009. Its retail gross margin was 19.6% compared to 22.3% a year ago.

Delia’s also cut back on catalog expenses, dropping its first-quarter circulation from just over 9.3 million copies a year ago to 9.1 million copies.

So why the widening net loss for the company as a whole? Much of the increase can be attributed to a pre-tax severance charge of $1.4 million. And selling, general and administrative expenses were $23.6 million, or 47.2% of sales, for the quarter compared to $22.2 million, or 42.5% of sales, in the first quarter of fiscal 2009.

“We are taking steps to improve the business and our performance as we continue to limit our capital expenditures and prudently reduce costs,” said Walter Killough, Delia’s new CEO, in a statement. “We continue to focus on improving productivity in our existing operations. We expect the initiatives we are implementing across both our retail and direct segments will result in improved performance in the back half of the year and provide for a stronger business model long-term.”

Killough, who had previously served as the company’s COO, was named CEO in mid-May.