The Yankee Candle Company, Inc. ("Yankee" or the "Company")
(NYSE:YCC), the leading designer, manufacturer, wholesaler and
retailer of premium scented candles, today announced financial
results for the third quarter ended October 1, 2005. Total sales
for the third quarter were $136.5 million, a 7% increase over the
year ago quarter. Total company comparable sales for the third
quarter increased 1%. For the first nine months of 2005, total
sales were $364.3 million, a 9% increase over the first nine months
of 2004. Total company comparable sales for the first nine months
of 2005 increased 1%. Earnings per common share on a diluted basis
increased 6% to $0.35 from $0.33 for the prior year quarter. "In
this challenging environment, we grew total revenues, segment
profit, and earnings per share versus the prior year period,
although not at the rate we had anticipated," said Craig Rydin,
Chairman and Chief Executive Officer. "We experienced less than
anticipated revenue growth in the Wholesale segment and a heavier
than anticipated promotional environment in both the Retail and
Wholesale segments. With respect to Wholesale, the core gift
channel account base was the primary driver of revenue softness,
while the national accounts in the aggregate performed largely as
anticipated. In addition, consumer confidence continues to impact
not only our business but the consumer and the economy at large."
Revenue Highlights: -- Wholesale sales were $78.6 million, a 7%
increase over the year ago quarter; and Wholesale comparable sales
increased 1%. For the first nine months of 2005, Wholesale sales
were $204.7 million, a 10% increase over the first nine months of
2004; and Wholesale comparable sales increased 2% for the first
nine months of 2005. -- Retail sales were $57.9 million, a 6%
increase over the fiscal 2004 third quarter. Comparable sales in
the 325 retail stores that have been open more than one year and
mail-order hub decreased 1% and retail comparable store sales
(excluding mail-order hub) decreased 4% in the quarter. The Company
opened 14 new retail stores during the third quarter; and ended the
quarter with 372 stores in 42 states. For the first nine months of
2005, Retail sales were $159.6 million, a 7% increase over the
first nine months of 2004. Comparable sales in the 325 stores that
have been open more than one year and mail-order hub decreased 2%
for the first nine months of 2005. Retail comparable store sales
(excluding mail-order hub) decreased 3% for the first nine months
of 2005. Income Statement Highlights: -- Gross profit increased 4%
to $76.1 million for the third quarter ended October 1, 2005
compared to $73.0 million for the third quarter ended October 2,
2004; and increased 7% to $202.8 million for the thirty-nine weeks
ended October 1, 2005 compared to $189.2 million for the
thirty-nine weeks ended October 2, 2004. As a percentage of sales,
gross profit decreased to 55.8% for the third quarter ended October
1, 2005 compared to 57.1% for the third quarter ended October 2,
2004; and decreased to 55.7% for the thirty-nine weeks ended
October 1, 2005 compared to 56.4% for the thirty-nine weeks ended
October 2, 2004. -- Selling, general & administrative
("SG&A") expenses increased 8% to $49.5 million for the third
quarter ended October 1, 2005 compared to $45.7 million for the
third quarter ended October 2, 2004; and increased 10% to $141.3
million for the thirty-nine weeks ended October 1, 2005 compared to
$128.8 million for the thirty-nine weeks ended October 2, 2004. As
a percentage of sales, SG&A increased to 36.2% for the third
quarter ended October 1, 2005 compared to 35.7% for the third
quarter ended October 2, 2004; and increased to 38.8% for the
thirty-nine weeks ended October 1, 2005 compared to 38.4% for the
thirty-nine weeks ended October 2, 2004. -- Operating profit for
the fiscal 2005 third quarter decreased 2% to $26.7 million, from
$27.3 million for the prior year quarter. Pre-tax income for the
fiscal 2005 third quarter decreased 3% to $25.2 million from $26.1
million for the prior year quarter. Net income decreased 3% to
$15.4 million, or $0.35 per common share on a diluted basis, from
$15.8 million, or $0.33 per common share on a diluted basis for the
prior year quarter. -- Operating profit for the first nine months
of 2005 increased 2% to $61.5 million, from $60.3 million operating
profit for the prior year period. Net income for the nine months
ended October 1, 2005, was $34.7 million, or $0.76 per common share
on a diluted basis, compared to $34.7 million, or $0.70 per common
share on a diluted basis for the first nine months of 2004. Balance
Sheet Highlights: -- Accounts receivable at October 1, 2005 were
$56.0 million, an increase of 13% over the prior year level of
$49.4 million. Approximately 94% of our wholesale trade receivables
were due within 60 days of the end of the fiscal 2005 third quarter
compared to approximately 93% at the end of the fiscal 2004 third
quarter. -- Inventory at October 1, 2005 was $69.0 million, an
increase of 6% over the prior year level of $64.9 million and $3.0
million below the guidance provided in July. Existing store
inventory was well managed, decreasing 20% versus the third quarter
of fiscal 2004. -- The Company continues to return capital back to
its shareholders through its share repurchase program. In the third
quarter, the Company repurchased and retired 673,798 shares of its
Common Stock at a total cost of approximately $20.0 million. In the
first nine months it repurchased and retired 3,932,384 shares of
its Common Stock at a total cost of $120.0 million. Approximately
$130.0 million remains available for future purchases pursuant to
its stock repurchase program announced on July 27, 2005. -- At
October 1, 2005, cash and cash equivalents were $9.8 million
compared to $10.8 million at October 2, 2004. Total debt was $200.0
million compared to $146.4 million at October 2, 2004 and
stockholders' equity was $93.9 million at October 1, 2005 compared
to $143.9 million at October 2, 2004, the change in debt and equity
was primarily the result of share repurchase activity. Fourth
Quarter Strategic Initiatives Mr. Rydin continued, "We believe that
the continued weakness in consumer confidence, driven largely by
energy costs and related inflation, is impacting the overall retail
landscape and will continue to do so over at least the short term.
We will continue to evaluate the impact of this changing
environment on our business outlook. As we approach our peak
selling season, we are taking a number of actions to help mitigate
the current economic challenges we and the rest of the industry
face." -- The Company announced plans today to close approximately
10 to 20 underperforming stores. The Company expects to have a
majority of these stores closed by the end of the fourth quarter
ended December 31, 2005. It expects to incur costs related to the
store closings of between $4.0 and $8.0 million, most of which will
likely occur during the fourth quarter ended December 31, 2005. Of
the total, approximately 50% is anticipated to be non-cash charges
in the form of fixed asset write-offs, with the balance coming from
estimated lease terminations, severance and other related closing
costs. In conjunction with the store closings, the Company also
announced other planned general and administrative expense
initiatives. The Company expects to reduce its administrative
workforce, excluding supply chain, as a result of attrition,
limited downsizing and other actions. These efforts are designed to
allow the Company to upgrade its organization and other initiatives
to drive profitable sales growth. -- The Company announced plans to
increase retail and wholesale prices on selected candle products.
This action will take effect in the fiscal fourth quarter and is in
response to recent increases in commodity prices, primarily wax
costs, and energy-related costs. Additionally, due to the effects
of the recent hurricanes along the Gulf Coast, the Company has been
notified of wax allocations from one of its primary suppliers. The
Company is actively addressing the impact of allocation issues
through effective inventory, vendor, and production management
activities. While the Company is not currently anticipating any
significant impact on its product assortment or ability to fulfill
customer orders as a result of this issue, and believes that it has
appropriate measures in place to mitigate such impacts, the current
lack of visibility regarding future wax supply is cause for caution
in terms of the Company's fourth quarter outlook. -- The Company
noted it will begin controlled testing of increased investments in
marketing that it believes could offer opportunities for profitable
revenue growth, including increased levels of direct marketing to
drive store traffic and expanded consumer marketing to support the
brand. -- Finally, the Board of Directors has endorsed the
Company's updated strategic growth plan. The Company intends to
focus its efforts on its core candle category. The Company intends
to outline its updated growth strategy during its upcoming
conference call. Mr. Rydin commented, "The Yankee Candle brand
remains the clear brand of choice in the premium scented candle
category. We remain confident that the strength of our brand and
the differentiation of our business model will enable our business
to continue to profitably grow during these more challenging times,
and I am confident our new strategy together with these actions
will create long-term value for our shareholders." Forecast
Highlights: The Company also updated its sales and EPS guidance for
2005, excluding any impact of additional share repurchases and
excluding the impact of any store closures. -- For the full year
the Company expects approximately 7%-8% total sales growth,
including 6%-8% in the fourth quarter. For the full year the
Company expects 5%-8% growth in diluted earnings per share, or
$1.77 - $1.81, including 4%-7% in the fourth quarter, or $1.04 -
$1.07. The diluted earnings per share guidance incorporates the net
benefit (higher interest expense on revolver borrowings and fewer
shares outstanding) of share repurchase activity in the first nine
months of fiscal 2005. Mr. Rydin concluded, "Due to the current
macro-economic environment, we believe it is prudent to be more
cautious about consumer spending and are therefore anticipating
that sales may remain softer in the short run. Given the
uncertainty, we feel we have put together a forecast we are
confident we can achieve." Earnings Conference Call: The Company
will host a conference call to be broadcast via the Internet at
11:00 a.m. (EST) this morning to more fully discuss fiscal 2005
third quarter results. This call is being webcast by CCBN and can
be accessed at The Yankee Candle Company's web site at
www.yankeecandle.com. Click on the "About Us" link, and then select
the "Investor Information" link. Enter your registration
information, 10 minutes prior to the start of the conference. The
Yankee Candle Company, Inc. is the leading designer, manufacturer,
wholesaler and retailer of premium scented candles in the giftware
industry. Yankee has a 35 year history of offering distinctive
products and marketing them as affordable luxuries and consumable
gifts. The Company sells its products through a North American
wholesale customer network of approximately 16,284 store locations,
a growing base of Company owned and operated retail stores (372
located in 42 states as of October 1, 2005), direct mail catalogs,
its Internet website (www.yankeecandle.com), international
distributors and to a European wholesale customer network of
approximately 2,110 store locations (through its distribution
center located in Bristol, England). This press release contains
certain information constituting "forward-looking statements" for
purposes of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. Forward-looking statements include
but are not limited to the statements contained herein with respect
to management's current estimates of the Company's financial and
operating results for Fiscal 2005, and the fourth quarter thereof,
the growth initiatives and specific actions discussed above and
their impact on the Company's future operating results, and any
other statements concerning the Company's or management's plans,
objectives, goals, strategies, expectations, estimates, beliefs or
projections, or any other statements concerning future performance
or events. Actual results could differ materially from those
indicated by these forward-looking statements as a result of
various risks and uncertainties, including but not limited to the
following: the current economic conditions in the United States as
a whole and the continuing weakness in the retail environment; the
risk that we will be unable to maintain our historical growth rate;
the effects of competition from others in the highly competitive
giftware industry; our ability to anticipate and react to industry
trends and changes in consumer demand; our dependence upon our
senior executive officers; the risk of loss of our manufacturing
and distribution facilities; the impact on our stock price of
seasonal, quarterly and other fluctuations in our business; the
risk of any disruption in wax supplies; and other factors described
or contained in the Company's most recent Quarterly Report on Form
10-Q or Annual Report on Form 10-K on file with the Securities and
Exchange Commission. Any forward-looking statements represent our
views only as of today and should not be relied upon as
representing our views as of any subsequent date. While we may
elect to update certain forward-looking statements at some point in
the future, we specifically disclaim any obligation to do so even
if experience or future events may cause the views contained in any
forward-looking statements to change. -0- *T The Yankee Candle
Company, Inc. and Subsidiaries Consolidated Statements of
Operations (in thousands, except per share data) (Unaudited)
Thirteen Weeks Thirteen Weeks Ended Ended October 1, 2005 October
2, 2004 ----------------- ----------------- Sales: Retail $ 57,878
42.40% $ 54,597 42.68% Wholesale 78,622 57.60% 73,316 57.32%
---------------- ---------------- Total sales 136,500 100.00%
127,913 100.00% Cost of sales 60,368 44.23% 54,906 42.92%
---------------- ---------------- Gross profit 76,132 55.77% 73,007
57.08% Selling expenses: Retail 30,268 52.30%(A) 27,459 50.29%(A)
Wholesale 4,499 5.72%(B) 4,355 5.94%(B) ----------------
---------------- Total selling expenses 34,767 25.47% 31,814 24.87%
General & administrative expenses 14,689 10.76% 13,862 10.84%
---------------- ---------------- Income from operations 26,676
19.54% 27,331 21.37% Interest (income) (5) 0.00% 0 0.00% Interest
expense 2,347 1.72% 1,093 0.85% Other (income) expense (897) -0.66%
118 0.09% ---------------- ---------------- Income before provision
for income taxes 25,231 18.48% 26,120 20.42% Provision for income
taxes 9,840 7.21% 10,317 8.07% ---------------- ----------------
Net income $ 15,391 11.28% $ 15,803 12.35% ================
================ Basic earnings per share $ 0.35 $ 0.33 ========
======== Diluted earnings per share $ 0.35 $ 0.33 ======== ========
Weighted average basic shares outstanding 43,787 47,959 Weighted
average diluted shares outstanding 44,223 48,316 Thirty Nine Weeks
Thirty Nine Weeks Ended Ended October 1, 2005 October 2, 2004
----------------- ----------------- Sales: Retail $159,586 43.81%
$148,615 44.32% Wholesale 204,717 56.19% 186,725 55.68%
---------------- ---------------- Total sales 364,303 100.00%
335,340 100.00% Cost of sales 161,485 44.33% 146,172 43.59%
---------------- ---------------- Gross profit 202,818 55.67%
189,168 56.41% Selling expenses: Retail 86,499 54.20%(A) 78,506
52.83%(A) Wholesale 12,883 6.29%(B) 10,922 5.85%(B)
---------------- ---------------- Total selling expenses 99,382
27.28% 89,428 26.67% General & administrative expenses 41,964
11.52% 39,414 11.75% ---------------- ---------------- Income from
operations 61,472 16.87% 60,326 17.99% Interest (income) (17) 0.00%
(7) 0.00% Interest expense 4,809 1.32% 3,062 0.91% Other (income)
expense (200) -0.05% (109) -0.03% ---------------- ----------------
Income before provision for income taxes 56,880 15.61% 57,380
17.11% Provision for income taxes 22,183 6.09% 22,665 6.76%
---------------- ---------------- Net income $ 34,697 9.52% $
34,715 10.35% ================ ================ Basic earnings per
share $ 0.77 $ 0.71 ======== ======== Diluted earnings per share $
0.76 $ 0.70 ======== ======== Weighted average basic shares
outstanding 45,237 49,179 Weighted average diluted shares
outstanding 45,709 49,560 (A) Retail selling expenses as a
percentage of retail sales. (B) Wholesale selling expenses as a
percentage of wholesale sales. The Yankee Candle Company, Inc. And
Subsidiaries Condensed Consolidated Balance Sheets (in thousands)
ASSETS October 1, January 1, 2005 2005 ----------- ----------
(unaudited) Current Assets: Cash and cash equivalents $ 9,748 $
36,424 Accounts receivable, net 56,056 28,231 Inventory 69,012
46,901 Prepaid expenses and other current assets 10,554 8,112
Deferred tax assets 3,611 3,876 ---------- --------- Total Current
Assets 148,981 123,544 Property, Plant And Equipment, net 131,331
126,365 Marketable Securities 2,049 1,499 Deferred Financing Costs
627 451 Deferred Tax Assets 77,957 84,697 Other Assets 9,509 9,803
---------- --------- Total Assets $ 370,454 $ 346,359 ==========
========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Accounts payable $ 29,539 $ 20,246 Accrued payroll 12,174 14,492
Accrued income taxes 3,281 26,264 Other accrued liabilities 16,568
18,435 ---------- --------- Total Current Liabilities 61,562 79,437
Deferred Compensation Obligation 2,187 1,659 Long-Term Debt 200,000
75,000 Deferred Rent 12,792 10,600 Stockholders' Equity 93,913
179,663 ---------- --------- Total Liabilities And Stockholders'
Equity $ 370,454 $ 346,359 ========== ========= The Yankee Candle
Company, Inc. October 26, 2005 Earnings Release Supplemental Data
Year to Quarter Date Total -------- --------- -------- Retail
Stores 14 30 372 Wholesale Customer Locations - North America 139
684 16,284 Wholesale Customer Locations - Europe (119) (90) 2,110
Square Footage - Gross 25,600 46,979 700,776 Square Footage -
Selling 20,576 37,380 555,754 Retail Comp Store Count 325 N/A 325
Retail Comp Store Sales Change %, excl. S. Deerfield -3% -3% Retail
Comp Store & Hub Sales Change % -1% -2% Retail Comp Store Sales
Change % -4% -3% Wholesale Comp Sales Change % 1% 2% Total Company
Comp Sales Change % 1% 1% Sales per Square Foot (2) N/A $570 Store
Count N/A 330 Average store square footage, gross (3) N/A 1,660
Average store square footage, selling (3) N/A 1,281 Gross Profit
(1) Retail $ $39,313 $104,946 Retail % 67.9% 65.8% Wholesale $
$36,819 $97,872 Wholesale % 46.8% 47.8% Segment Profit (1) Retail $
$9,045 $18,447 Retail % 15.6% 11.6% Wholesale $ $32,320 $84,988
Wholesale % 41.1% 41.5% Depreciation & Amortization (1) $6,260
$18,355 Inventory per Store $39,000 N/A Inventory Turns 3.8 4.3 (4)
Capital Expenditures (1) $12,313 $22,344 Shares Outstanding N/A
43,551 (1) Dollars in thousands (2) Trailing 12 months, stores open
for full 12 months, excluding S. Deerfield Flagship Store. (3)
Excludes S. Deerfield Flagship Store. Includes two Old Farmer's
Almanac test stores. (4) Rolling four quarters. *T
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