BONT » Topics » 2008 Compared with 2007

These excerpts taken from the BONT 10-K filed Apr 15, 2009.
2008 Compared with 2007
 
Net sales:  Net sales in 2008 decreased 7.0% to $3,130.0 million from $3,365.9 million in 2007. Comparable store sales decreased 7.4% from the prior year. We believe the comparable store sales decline reflects a confluence of factors that created an adverse economic environment throughout the year, particularly the last quarter of 2008, which weakened consumer sentiment and pressured spending.
 
The best performing merchandise category in the period was Children’s Apparel. Sales increases in this category primarily reflect expanded and improved product selection in branded playwear and outerwear. The poorest performing categories in the period were Furniture (included in Home) and Moderate Sportswear and Dresses (both included in Women’s Apparel). Furniture sales were impacted by the difficult housing market in new construction and existing home sales, and continued deterioration in consumer spending for more expensive items. Moderate Sportswear and Dresses have been impacted by the challenging economic environment, which has resulted in reduced consumer spending on discretionary items. Sales in Moderate Sportswear were also affected by the decision made in 2007 by certain of our key vendors to exit the moderate sportswear business. It was not until the fall of 2008 that we began receiving merchandise from new, replacement vendors.
 
Other income:  Other income, which includes income from revenues received under our credit card program agreement with HSBC, leased departments and other customer revenues, was $95.5 million, or 3.0% of net sales, in 2008 as compared with $102.7 million, or 3.0% of net sales, in 2007. The decrease primarily reflects reduced sales volume in the current year.


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Costs and expenses:  Gross margin dollars in 2008 were $1,095.0 million as compared with $1,215.8 million in 2007, a decrease of $120.8 million. The decrease in gross margin dollars reflects the reduced sales volume and a decrease in the gross margin rate. Gross margin as a percentage of sales decreased 1.1 percentage points to 35.0% in the current year from 36.1% in the prior year. The decrease in the gross margin rate primarily reflects an increased net markdown rate in response to the challenging economic environment.
 
SG&A expense in 2008 was $1,033.5 million as compared with $1,066.7 million in 2007, a decrease of $33.1 million. The decrease primarily resulted from expense reductions in payroll, benefits and advertising in response to our sales trend. Other expense reductions were due to increased efficiencies in operations and prior year store closing expenses. Despite the expense savings, the expense rate in 2008 increased 1.3 percentage points to 33.0% of net sales, compared with 31.7% in 2007, due to the reduced sales volume.
 
In 2008, depreciation and amortization expense and amortization of lease-related interests increased $0.2 million, to $122.2 million, from $122.0 million in 2007.
 
We recorded a non-cash goodwill impairment charge of $17.8 million in the second quarter of 2008 in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Based upon our review, the fair value of our single reporting unit, estimated using a combination of our common stock trading value as of the end of the second quarter of 2008, a discounted cash flow analysis and other generally accepted valuation methodologies, was less than the carrying amount. There was no such charge in 2007. See Notes 1 and 3 in the Notes to Consolidated Financial Statements.
 
In the fourth quarter of 2008, in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), we recorded $17.9 million of non-cash asset impairment charges which resulted in a reduction in the carrying amount of certain store properties. We recorded charges of $2.7 million for asset impairments in 2007. See Notes 1 and 2 in the Notes to Consolidated Financial Statements.
 
In the fourth quarter of 2008, a review was completed of the carrying value of certain intangible assets in accordance with SFAS No. 142. As a result of our assessment, we recorded non-cash asset impairment charges of $8.1 million related to the reduction in the value of four indefinite-lived trade names and two indefinite-lived private label brand names. In 2007, we recorded impairment charges of $1.3 million related to the reduction in the value of two indefinite-lived private label brand names. See Notes 1 and 3 in the Notes to Consolidated Financial Statements.
 
(Loss) income from operations:  The loss from operations in 2008 was $(9.0) million, or (0.3)% of net sales, as compared with income from operations of $125.7 million, or 3.7% of net sales, in 2007.
 
Interest expense, net:  Net interest expense in 2008 was $97.8 million, or 3.1% of net sales, as compared with $108.2 million, or 3.2% of net sales, in 2007. The $10.3 million decrease primarily reflects decreased borrowing levels and reduced interest rates in the current year and $1.0 million of prior year expense incurred for the early extinguishment of debt.
 
Income tax provision:  The income tax provision reflects an effective tax rate of (59.1)% in 2008, compared with 34.0% in 2007. The 2008 income tax provision includes an unfavorable $108.5 million tax expense adjustment in the fourth quarter of 2008 pursuant to establishment of an additional valuation allowance against our deferred tax assets and a favorable $7.0 million tax benefit adjustment in the third quarter of 2008 related to expiration of certain exposures pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”).
 
Net (loss) income:  Net loss in 2008 was $(169.9) million, or (5.4)% of net sales, as compared with net income of $11.6 million, or 0.3% of net sales, in 2007.


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2008 Compared
with 2007



 



Net sales:  Net sales in 2008 decreased 7.0% to
$3,130.0 million from $3,365.9 million in 2007.
Comparable store sales decreased 7.4% from the prior year. We
believe the comparable store sales decline reflects a confluence
of factors that created an adverse economic environment
throughout the year, particularly the last quarter of 2008,
which weakened consumer sentiment and pressured spending.


 



The best performing merchandise category in the period was
Children’s Apparel. Sales increases in this category
primarily reflect expanded and improved product selection in
branded playwear and outerwear. The poorest performing
categories in the period were Furniture (included in Home) and
Moderate Sportswear and Dresses (both included in Women’s
Apparel). Furniture sales were impacted by the difficult housing
market in new construction and existing home sales, and
continued deterioration in consumer spending for more expensive
items. Moderate Sportswear and Dresses have been impacted by the
challenging economic environment, which has resulted in reduced
consumer spending on discretionary items. Sales in Moderate
Sportswear were also affected by the decision made in 2007 by
certain of our key vendors to exit the moderate sportswear
business. It was not until the fall of 2008 that we began
receiving merchandise from new, replacement vendors.


 



Other income:  Other income, which includes
income from revenues received under our credit card program
agreement with HSBC, leased departments and other customer
revenues, was $95.5 million, or 3.0% of net sales, in 2008
as compared with $102.7 million, or 3.0% of net sales, in
2007. The decrease primarily reflects reduced sales volume in
the current year.





21





 





 



Costs and expenses:  Gross margin dollars in
2008 were $1,095.0 million as compared with
$1,215.8 million in 2007, a decrease of
$120.8 million. The decrease in gross margin dollars
reflects the reduced sales volume and a decrease in the gross
margin rate. Gross margin as a percentage of sales decreased
1.1 percentage points to 35.0% in the current year from
36.1% in the prior year. The decrease in the gross margin rate
primarily reflects an increased net markdown rate in response to
the challenging economic environment.


 



SG&A expense in 2008 was $1,033.5 million as compared
with $1,066.7 million in 2007, a decrease of
$33.1 million. The decrease primarily resulted from expense
reductions in payroll, benefits and advertising in response to
our sales trend. Other expense reductions were due to increased
efficiencies in operations and prior year store closing
expenses. Despite the expense savings, the expense rate in 2008
increased 1.3 percentage points to 33.0% of net sales,
compared with 31.7% in 2007, due to the reduced sales volume.


 



In 2008, depreciation and amortization expense and amortization
of lease-related interests increased $0.2 million, to
$122.2 million, from $122.0 million in 2007.


 



We recorded a non-cash goodwill impairment charge of
$17.8 million in the second quarter of 2008 in accordance
with Statement of Financial Accounting Standards
(“SFAS”) No. 142, “Goodwill and Other
Intangible Assets” (“SFAS No. 142”).
Based upon our review, the fair value of our single reporting
unit, estimated using a combination of our common stock trading
value as of the end of the second quarter of 2008, a discounted
cash flow analysis and other generally accepted valuation
methodologies, was less than the carrying amount. There was no
such charge in 2007. See Notes 1 and 3 in the Notes to
Consolidated Financial Statements.


 



In the fourth quarter of 2008, in accordance with the provisions
of SFAS No. 144, “Accounting for the Impairment
or Disposal of Long-Lived Assets”
(“SFAS No. 144”), we recorded
$17.9 million of non-cash asset impairment charges which
resulted in a reduction in the carrying amount of certain store
properties. We recorded charges of $2.7 million for asset
impairments in 2007. See Notes 1 and 2 in the Notes to
Consolidated Financial Statements.


 



In the fourth quarter of 2008, a review was completed of the
carrying value of certain intangible assets in accordance with
SFAS No. 142. As a result of our assessment, we
recorded non-cash asset impairment charges of $8.1 million
related to the reduction in the value of four indefinite-lived
trade names and two indefinite-lived private label brand names.
In 2007, we recorded impairment charges of $1.3 million
related to the reduction in the value of two indefinite-lived
private label brand names. See Notes 1 and 3 in the Notes
to Consolidated Financial Statements.


 



(Loss) income from operations:  The loss from
operations in 2008 was $(9.0) million, or (0.3)% of net
sales, as compared with income from operations of
$125.7 million, or 3.7% of net sales, in 2007.


 



Interest expense, net:  Net interest expense in
2008 was $97.8 million, or 3.1% of net sales, as compared
with $108.2 million, or 3.2% of net sales, in 2007. The
$10.3 million decrease primarily reflects decreased
borrowing levels and reduced interest rates in the current year
and $1.0 million of prior year expense incurred for the
early extinguishment of debt.


 



Income tax provision:  The income tax provision
reflects an effective tax rate of (59.1)% in 2008, compared with
34.0% in 2007. The 2008 income tax provision includes an
unfavorable $108.5 million tax expense adjustment in the
fourth quarter of 2008 pursuant to establishment of an
additional valuation allowance against our deferred tax assets
and a favorable $7.0 million tax benefit adjustment in the
third quarter of 2008 related to expiration of certain exposures
pursuant to the provisions of Financial Accounting Standards
Board (“FASB”) Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes”
(“FIN No. 48”).


 



Net (loss) income:  Net loss in 2008 was
$(169.9) million, or (5.4)% of net sales, as compared with
net income of $11.6 million, or 0.3% of net sales, in 2007.





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EXCERPTS ON THIS PAGE:

10-K (2 sections)
Apr 15, 2009

RELATED TOPICS for BONT:

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