Off-price department store operator Gordmans reported another quarter of weak sales under the control of private equity ownership as its searches for a full-time CEO and eyes e-commerce expansion in 2015.
Omaha-based Gordmans Stores, which operates 94 stores with an assortment focused on apparel and home décor, said its sales during the 13-week first quarter ended May 4 increased 8.8% to $143 million as the result of new store expansion. Same store sales declined 2.7% on top of a prior year decline of 10.5%. A loss of $700,000, or four cents a share, was well below a prior year profit of $3.2 million, or 17 cents a share. First quarter results were negatively affected by expenses of two cents a share related to the departure of former CEO Jeff Gordman and a three cents a share impact due to increased interest expense related to a $45 million loan that was taken out last fall to pay shareholders of the company controlled by Sun Capital Partners a special dividend of $3.60 a share.
"Our first quarter sales performance was driven by the 10 new stores that we opened in fiscal 2013 and the three new stores that we opened in the first quarter of fiscal 2014, partially offset by a comparable store sales decline of 2.7%," said Scott King, Gordman’s chairman and interim CEO who joined the retailer’s board a little more than a year ago. King assumed the interim CEO role in late March when former CEO Jeff Gordman stepped down the day fourth quarter results were released. King has been with Sun Capital since 2003. "While we are disappointed with our first quarter results, we are encouraged that comparable store sales improved as the quarter progressed. We believe that the initiatives that we have put in place to realign our merchandise mix, modify our store presentation and adjust our marketing to focus on merchandise, value and urgency and utilize information obtained from our loyalty program will produce improved comparable store sales results as the year progresses."
The company also touted the fact that its loyalty program launched in 2013 now boasts 2 million customers, an increase from 1.5 million at the end of the fourth quarter. More than 60% of the company's sales represent loyalty transactions and the average loyalty transaction has equated to a double digit percentage increase over the average non-loyalty transaction, according to the company.
The company plans to open four additional new stores in the second and third quarters of 2014 and is belatedly looking to enter the modern retail industry by selling merchandise online. The company said it is, “developing a strategy and an assessment of utilizing e-commerce as an additional channel in which to service guests and is evaluating potential omnichannel expansion by fiscal 2015.
In the meantime, the four new stores yet to open this year will give the company a total of 97 units by year end. That represents a 43% increase from the 68 stores the company had in operation at the end of 2010, the same year the company went public, and also highlights the anemic same store sales performance given the youthful nature of its store base.
The company has also said it doesn’t expect trends to improve anytime soon. Same store sales during the second quarter are expected to decline in the low single digits due to aggressive plans to clear merchandise in advance of the fall season. As a result, the company forecasts a loss of between 16 cents a share and 13 cents a share during the second quarter.
"We ended the quarter with inventory per average store below last year's level, however, our aged inventory position as a percentage of total inventory is higher than historical levels due to our sales performance,” King said. “As a result, we are planning to aggressively address this issue in the second quarter with additional markdowns to clear aged clearance goods. These actions will have a negative impact on second quarter gross margins, but should lead to an improved inventory position and improved gross margin in the back half of the year.”