Delia’s On The Selling Block

Teen apparel cataloger/retailer Delia’s has put itself up for sale. According to published reports, the company, which has a market value of about $60 million, has been soliciting interest from buyers.

Why is Delia’s looking to sell? “Essentially, they have no choice,” says Stuart Rose, managing director for investment bank Tully & Holland. “Delia’s has $14 million cash on hand, and last year lost $11 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) and is trading below book value.”

Delia’s, which has been struggling to keep pace in a depressed economy, hasn’t been profitable in recent years and “was just about breakeven” in 2006, Rose says. The merchant also hasn’t made any improvements in operating efficiency to costs under control, he adds.

It doesn’t help that the teen market is crowded with competitors such as Aeropostale, Forever 21, Hot Topic, Tween Brands, Abercrombie & Fitch, American eagle, Hollister, Nordstrom, Pacific Sunwear, and Target. And it’s a tough target audience: Teenagers travel in packs, they’re fickle and demanding, Rose says.

Bottom line, “Delia’s isn’t the fashion leader,” Rose says. “Something has to be done to right the ship and monetize the remaining value of Delia’s, because continuing on this path leads nowhere.”

Delia’s had been acquired by teen apparel and sporting gear cataloger Alloy in 2003. It still operates the Alloy brand, but in 2008 it sold its extreme-sports gear merchant CCS to retail chain Foot Locker.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.

Delia’s Down in Q4, Up Slightly for 2009

Fourth-quarter sales at Delia’s decreased 1.4%, to $66.3 million for the three months ended Jan. 30. The cataloger/retailer’s net loss was $800,000, compared to a net loss of $900,000 for the fourth quarter last year.

Sales for the direct segment—the catalogs and Websites of teen girls’ apparel brands Delia’s and Alloy—fell 3.9%, to $32.0 million from $33.2 million. The company’s total retail sales increased 1.1%, to $34.3 million.

For the fiscal year, total sales at Delia’s increased 3.8%, to $223.9 million from $215.6 million. Net loss for fiscal 2009 was $10.4 million, compared to a net loss of $12.6 million in fiscal 2008.

Delia’s direct sales for the year rose 2.7%, to $105.3 million from $102.5 million. Sales for the retail segment grew 4.7%, to $118.4 million from $113.0 million.

CEO Robert Bernard said in a statement that fourth-quarter sales were in line with the New York-based company’s expectations. But he added that increased promotional activity failed to drive direct revenue for Delia’s.

“We expect lower direct segment sales, with higher margins, in the first half of the year due to significantly lower clearance inventory levels as compared to spring 2009,” Bernard said. “With the focus on improving sales productivity, we anticipate scaling back our store expansion plans for 2010 compared to 2009, limiting our capital expenditures and prudently reducing costs.”

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.

Delia’s Trims Net Loss

First-quarter sales at cataloger/retailer Delia’s increased 11.3%, to $52.1 million, compared with $46.8 million for the same period last year. For the 13-week period ended May 2, net loss was $3.6 million, compared to a net loss of $5.9 million after the first quarter in 2008.

Total retail sales increased 10%, to $25.2 million, from $22.9 million. Sales for the direct segment, which includes the Delia’s and Alloy teen girls’ apparel catalogs, increased 12.5%, to $26.9 million, from $23.9 million. Direct sales were driven by higher clearance activity following the fourth quarter holiday sales period, according to a company release.

CEO Robert Bernard added: “We are pleased with the improvement in sales trends and traffic that we experienced in April with the Easter and spring break shift. That said, as we enter the second quarter, we are finding that traffic has slowed, and we expect sales trends to be challenging until the beginning of the back-to-school selling season. However, we are confident in our merchandise assortment and comfortable with our retail inventory and believe we will be able to drive increased margins.”

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.

Delia’s Sells CCS to Foot Locker

Cataloger/retailer Delia’s announced Monday it sold its extreme-sports gear merchant CCS to Foot Locker for $102 million in cash.

Besides CCS, the direct segment of Delia’s includes the catalogs and Websites of teen girls apparel brands Delia’s and Alloy. The brands target consumers between the ages of 12 and 19.

Founded in California in 1985, CCS sells skateboard footwear, apparel and accessories through catalogs and the Internet. Its revenue is projected to exceed $80 million in 2009; more than 80% of CCS’ sales are made online.

CCS is currently managed by a team based in New York led by Susan Van Arsdale, who will remain with CCS as managing director. Delia’s CEO Robert Bernard said in a release: “We are pleased with the opportunity to significantly strengthen our balance sheet and achieve the valuation afforded to the CCS brand, particularly in this uncertain economic environment.”

Foot Locker chairman/CEO Matthew D. Serra said in a release that “The impending purchase of CCS is in line with one of our strategic priorities–pursuing the acquisition of athletic footwear and apparel retailers that are compatible with our existing portfolio of businesses.”

Why would Delia’s sell CCS? “The sale was prompted by the strong performance at Delia’s 2008 vintage new stores, and the real estate opportunities at hand for the core Delia’s brand,” says Lee Helman, managing director with investment firm Financo, which acted as the exclusive financial adviser to Delia’s for the sale of the CCS business.

“Management was spread thin across four different concepts, and it has been the consistent mantra of management to focus on the core Delia’s concept,” Helman says. CCS was “an exceptional performer, and the sale enables management to find a home for the brand to continue to thrive.”

The use of the sale proceeds has not been fully determined, “but given the success of recent Delia’s store openings, and its back-to-school merchandise, it would not be unexpected to see Delia’s take advantage of retail opportunities within its core Delia’s brand over the next three or so years,” Helman says

For Foot Locker, “skate is a category that very much has a lot of momentum in the marketplace,” Helman says, and the CCS deal will make Foot Locker the dominant skate and surf cataloger/e-tailer. Foot Locker has the platform and resources to accelerate the growth of CCS beyond what Delia’s has done historically, “which was a very consistent and measured growth plan,” he notes.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.

Delia’s Loss Widens Despite Sales Growth

Second-quarter sales at cataloger/retailer Delia’s increased 7.3%, to $52.4 million for the 13 weeks ended Aug. 4. But net loss for the quarter increased 65%, to $5.1 million, from a loss of $3.1 million in the second quarter in 2006. Same-store sales increased 4.6%, with total retail sales rising 29.4%, to $19.4 million. Sales for the direct segment, which includes the Delia’s and Alloy teen girls’ apparel catalogs and extreme-sports gear catalog CCS, fell 2.4%, to $33.1 million from $33.9 million for the comparable quarter last year.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.

Delia’s Extends Credit Facility, Files for 10-K Extension

Cataloger/retailer Delia’s (Nasdaq: DLIA) has completed an amendment of its loan with Wells Fargo Retail Finance II. The amendment provides for a three-year $20 million secured credit facility. Despite the Wells Fargo amendment, however, the marketer of teen girls’ apparel says it must continue to pursue other financing alternatives, such as with with third-party investors, to raise additional equity capital and refinance a $2.9 million mortgage for its Hanover, PA, distribution facility.

Because it is still seeking financing, the New York-based company is filing for an extension of its 10-K filing with the Securities and Exchange Commission. Its deadline for filing its annual report is May 2.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.