NEW YORK--(BUSINESS WIRE)--Sept. 15, 2003--Candie's, Inc. (NASDAQ:
CAND) (the "Company") today announced that, as anticipated, the
operating results of the Company's footwear segment were significantly
negatively impacted by the Company's transition out of footwear
operations to its new licensing business. The Company licensed its
BONGO(R) footwear to Kenneth Cole Productions, Inc., and its
CANDIE'S(R) footwear to Steven Madden Ltd. in May 2003.
In connection with the wind-down of its footwear operations, the
Company reported a consolidated operating loss (before special charges
of $2.5 million) of $487,000 or $.02 per share for the quarter ending
July 31, 2003 of its fiscal year ending January 31, 2004 ("Second
Quarter"), and consolidated operating income (before special charges
of $2.9 million) of $1.5 million or $.06 per share for the six months
ended July 31, 2003. After the special charges noted above, resulting
primarily from the wind-down of its footwear operations, the Company
reported a consolidated net loss of $3.8 million, or $.15 per share
for the Second Quarter and a consolidated net loss of $3.1 million, or
$.12 per share for the six months ended July 31, 2003 as compared to
consolidated net income of $3.3 million, or $.12 per diluted share and
consolidated net income of $4.4 million, or $.17 per diluted share for
the prior year three and six month periods, respectively.
Consolidated net revenues for the Second Quarter were $42.1
million, a decrease of $7.5 million from $49.6 million in the
comparable prior year period. Of this decrease in the Second Quarter,
net sales for the footwear segment decreased to $16.6 million from
$28.4 million, down $11.8 million from the comparable prior year
period. For the six months ended July 30, 2003, net sales increased to
$84.1 million, up $8.9 million from $75.2 million in the comparable
prior year period. The $8.9 million net sales increase for the six
months period resulted primarily from the $21.0 million sales increase
in the BONGO jeans wear business operated through the Company's
wholly-owned subsidiary Unzipped Apparel LLC ("Unzipped"), of which
$17.2 million from the quarter ended April 30, 2003 was not comparable
to the prior year quarter when Unzipped's sales were not consolidated.
For the six months period, the sales in the footwear segment decreased
to $40.2 million, down $12.4 million from $52.6 million in the
comparable prior year period.
In connection with the ongoing licensing business, the Company
reported an increase in $496,000 in licensing income for the Second
Quarter to $1.8 million from $1.3 million in the comparable prior year
period. The six month results also reflected gains, with an increase
of $247,000 to $3.0 million from $2.8 million in the comparable period
for the prior year. Comparable licensing income increased $661,000, as
the prior year six month period included $414,000 of royalties the
Company received from Unzipped prior to its acquisition. The increase
was due primarily to revenue generated by new licenses.
The Company's BONGO jeans wear business also reported positive
results, with operating income increasing to $2.3 million versus $1.9
million for the comparable quarter in the prior year. Unzipped also
increased revenues to $23.6 million, up $3.8 million from $19.8 from
the comparable period in the prior year. Unzipped recorded gross
profit of $5.4 million compared to $4.0 million in the comparable
quarter for the prior year, an increase of $1.4 million. Unzipped's
gross profit margin increased, as a percentage of its net sales, by
270 basis points to 22.9% as compared to 20.2% in the second quarter
of the prior year. Unzipped's results have been consolidated with the
Company's since May 2002 when the Company acquired the division.
Included in special charges of $2.5 million relating to the
discontinuance of footwear operations for the Second Quarter were $1.5
million of asset impairment charges for leasehold improvements,
furniture and fixtures, computer hardware and software and other
capitalized costs resulting from the Company's cessation of its
operating footwear business. The Company is also closing its remaining
company-owned outlet stores, resulting in an impairment reserve for
unamortized fixed assets and leasehold improvements, plus additional
special charges for the Second Quarter for lease termination
liabilities relating to the closing of the Company's concept store
chain, which charges together totaled $600,000.
The Company will continue to operate its BONGO jeans wear division
and Bright Star Footwear, Inc., also a wholly-owned subsidiary, which
sells casual men's boots on a direct basis.
Neil Cole, President and CEO stated, "The transition to our new
licensing model is on plan and will be completed by the end of the
year. We have two powerful lifestyle brands, CANDIE'S and BONGO, both
of which are continuing to gain recognition in the marketplace. We are
confident that our strategic decision to transition to the new
licensing structure will result in increased profitability and
shareholder value in the future."
About Candie's, Inc.
Candie's, Inc. is in the business of licensing the CANDIE'S and
BONGO names on a variety of young women's footwear, apparel and
fashion products, and is a leading designer, distributor and marketer
of jeans wear under the BONGO brand through its wholly owned
subsidiary, Unzipped Apparel, LLC. Through its wholly owned subsidiary
Brightstar Footwear, Inc., the Company also arranges for the
manufacture of footwear products for mass market and discount
retailers under the private label brand of the retailer. The Company
operates Candie's retail stores across the United States. For investor
information please visit the corporate web site at
http://www.candiesinc.com.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995. The statements that are not historical facts
contained in this press release are forward looking statements that
involve a number of known and unknown risks, uncertainties and other
factors, all of which are difficult or impossible to predict and many
of which are beyond the control of the Company, which may cause the
actual results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward looking statements.
Such factors include, but are not limited to, uncertainty regarding
the results of the Company's decision to license its footwear
business, continued market acceptance of current products and the
ability to successfully develop and market new products particularly
in light of rapidly changing fashion trends, the impact of supply and
manufacturing constraints or difficulties relating to the Company's
dependence on foreign manufacturers and suppliers, uncertainties
relating to customer plans and commitments, the ability of licensees
to successfully market and sell branded products, competition,
uncertainties relating to economic conditions in the markets in which
the Company operates, the ability to hire and retain key personnel,
the ability to obtain capital if required, the risks of litigation and
regulatory proceedings, the risks of uncertainty of trademark
protection, the uncertainty of marketing and licensing acquired
trademarks and other risks detailed in the Company's SEC filings. The
words "confident", and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward looking statements, which speak only as of the date the
statement was made.
Candie's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
July 31, July 31,
----------------- -----------------
2003 2002 2003 2002
(000's omitted, except per share data)
Net sales $ 40,214 $ 48,218 $ 81,077 $ 72,408
Licensing income 1,841 1,345 3,019 2,772
-------- -------- -------- --------
Net revenues 42,055 49,563 84,096 75,180
Cost of goods sold 32,986 35,568 63,133 51,829
-------- -------- -------- --------
Gross profit 9,069 13,995 20,963 23,351
Operating expenses:
Selling, general and administrative
expenses 9,556 9,898 19,417 18,286
Special charges 2,450 78 2,884 93
-------- -------- -------- --------
12,006 9,976 22,301 18,379
-------- -------- -------- --------
Operating (loss) income (2,937) 4,019 (1,338) 4,972
Other expenses:
Interest expense 843 708 1,716 985
Equity income in joint venture - - - (250)
-------- -------- -------- --------
843 708 1,716 735
-------- -------- -------- --------
(Loss) income before income taxes (3,780) 3,311 (3,054) 4,237
Income tax benefit - - - (139)
-------- -------- -------- --------
Net (loss) income $ (3,780)$ 3,311 $ (3,054)$ 4,376
======== ======== ======== ========
(Loss) Earnings per common share:
Basic $ (0.15)$ 0.14 $ (0.12)$ 0.20
======== ======== ======== ========
Diluted $ (0.15)$ 0.12 $ (0.12)$ 0.17
======== ======== ======== ========
Weighted average number of common
shares outstanding:
Basic 25,068 24,176 25,042 22,438
======== ======== ======== ========
Diluted 25,068 27,835 25,042 25,499
======== ======== ======== ========
Selected Balance
Sheet Data: 7/31/2003 1/31/2003
Current Assets $ 47,357 $ 51,816
Current Liabilities $ 42,542 $ 45,921
Stockholders' Equity $ 26,175 $ 29,011
Working Capital $ 4,815 $ 5,895
Current Ratio 1.11:1 1.13:1
CONTACT: Candie's, Inc.
Richard Danderline, 212-730-0030
SOURCE: Candie's, Inc.