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DLIA > SEC Filings for DLIA > Form 10-Q on 17-Sep-2013All Recent SEC Filings

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Form 10-Q for DELIAS, INC.


17-Sep-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and in conjunction with our audited financial statements and related notes contained in our most recent Annual Report on Form 10-K and in our Current Report on Form 8-K filed with the Securities & Exchange Commission ("SEC") on September 13, 2013. Descriptions of all documents incorporated by reference herein or included as exhibits hereto are qualified in their entirety by reference to the full text of such documents so incorporated or included. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those set forth below in this Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Forward Looking Statements."

On June 4, 2013, A. Merchandise, LLC (formerly Alloy Merchandise, LLC), a wholly-owned subsidiary of the Company ("Alloy Merchandising"), and the Company entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with HRSH Acquisitions LLC d/b/a Alloy Apparel and Accessories ("Buyer") and concurrently closed the transaction under the Asset Purchase Agreement. Subject to the terms and conditions of the Asset Purchase Agreement, Alloy Merchandising sold certain assets and transferred certain related liabilities related to its Alloy business to Buyer, and Buyer purchased such assets and assumed certain related liabilities. Upon closing of the transaction, the Company received $3.7 million in cash proceeds, subject to adjustment as provided in the Asset Purchase Agreement, and the Buyer assumed $3.3 million in liabilities. The final purchase price was approximately $3.4 million. The loss on sale from this transaction was immaterial. The Company also agreed to provide certain transition services to Buyer at specified rates following the consummation of the transaction.

Results of Operations and Financial Condition

Executive Summary

dELiA*s, Inc. is a multi-channel retailer of apparel, accessories and footwear, primarily marketing to teenage girls. Our merchandise assortment (which includes our own proprietary brand products and some name brand products), our e-commerce webpages, our catalogs, and our mall-based retail stores are designed to appeal directly to consumers. We reach our customers through our direct marketing segment, which consists of our e-commerce and catalog business, and our retail stores.

Our strategy is to improve upon our position as a direct marketing company, to increase productivity in our retail stores, and to carry out such strategy while controlling costs. In addition, our strategy includes strengthening the dELiA*s brand through alignment across all channels of our business while continuing extended offerings online and in our catalogs.

We expect that improved productivity in each segment of our business will be the key element of our overall growth strategy. Our focus is to improve productivity in our current retail store base, to invest in web-based marketing programs to drive additional traffic to our website and improve the productivity of catalogs distributed. As productivity improves and market conditions allow, we plan to continue to expand the retail store base over the long term. In addition, as store performance and market conditions allow, we may plan on accelerating our growth in gross square footage. Should we accelerate our growth, we may need additional equity or debt financing.

Goals

We believe that focusing on our dELiA*s brand and implementing the following initiatives should lead to profitable growth and improved results from operations:

leveraging our omni-channel platform in order to drive top line growth;

implementing web, mobile and social media initiatives, while optimizing our catalog circulation;

developing merchandise assortments that emphasize key categories more effectively and drive improved gross profit margins;



employing focused inventory management strategies and creating inventory turn improvement;

improving productivity of the existing store base through heightened focus on the selling culture, with emphasis on increased customer conversion;

leveraging our current expense infrastructure and taking additional operating costs out of the business, including monitoring and opportunistically closing underperforming stores; and

expanding the dELiA's retail store base over the long-term.

Key Performance Indicators

The following measurements are among the key business indicators that management reviews regularly to gauge the Company's results:

store metrics such as comparable store sales, sales per gross square foot, average retail price per unit sold, average transaction values, average units per transaction, traffic conversion rates and store contribution margin (defined as store gross profit less direct costs of operating the store);

direct marketing metrics such as average order value and demand generated by book, with demand defined as the amount customers seek to purchase without regard to merchandise availability;

web metrics such as unique site visits, carts opened and carts converted, and site conversion;

fill rate, which is the percentage of any particular order we are able to ship for our direct marketing business, from available on-hand inventory or future inventory orders;

gross profit;

operating income;

inventory turnover and average inventory per store; and

cash flow and liquidity determined by the Company's cash provided by operations.

The discussion below includes references to "comparable stores." We consider a store comparable after it has been open for 15 full months without closure for more than seven consecutive days and whose square footage has not been expanded or reduced by more than 25% within that period. If a store is closed during a fiscal period, it is removed from the computation of comparable store sales for that fiscal period.

Our fiscal year is on a 52-53 week basis and ends on the Saturday nearest to January 31st. The fiscal year ended February 2, 2013 was a 53-week fiscal year, and the fiscal year ending February 1, 2014 will be a 52-week fiscal year.


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