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Perfumania Holdings Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 13, 2011 11:51PM
Perfumania Holdings Inc. (PERF) filed Quarterly Report for the period ended 2011-10-29. Perfumania Holdings Inc. has a market cap of $172.2 million; its shares were traded at around $18.83 with and P/S ratio of 0.4.
Highlight of Business Operations:As previously discussed, members of senior management and a principal shareholder of the Company are engaging in discussions with Parlux Fragrances, Inc. (“Parlux”) regarding the possible terms of a business combination between the Company and Parlux, although they are under no obligation to do so. There can be no assurance that any agreement between the Company and Parlux regarding a potential business combination will ever be reached, or if such an agreement is reached, that such a transaction will be consummated. Parlux is one of the Company's largest trading partners. Information about the Company's purchases from, and amounts owed to, Parlux is provided in Note 10 to the financial statements included in Item 1 of this Form 10-Q. At September 30, 2011, Parlux had assets of $124.4 million, and its sales and net income for the six months ended September 30, 2011 were $68.9 million and $0.4 million, respectively. Its current market capitalization is approximately $66.7 million. Further information about Parlux may be found in its filings with the Securities and Exchange Commission at www.sec.gov/edgar/searchedgar/companysearch.html. The Company expects that, if any such transaction were to occur, the consideration provided to the Parlux shareholders would consist of both cash and Company common stock, and that it expects to finance the cash portion, as well as costs of acquisition, through further borrowing and, possibly, the issuance of equity. Unless and until the terms of any such transaction are determined, the Company's management will not be in a position to definitively quantify the impact on the Company's capital needs or results of operations.
Perfumania's retail sales increased from $56.4 million in the thirteen weeks ended October 30, 2010 to $59.6 million in the thirteen weeks ended October 29, 2011. The average number of stores operated was 344 in the thirteen weeks ended October 29, 2011 compared with 368 in the comparable period last year. Perfumania's comparable store sales increased by 8.4% during the thirteen weeks ended October 29, 2011 from the same period in 2010. Comparable store sales measure sales from stores that have been open for one year or more. We exclude stores that are closed for renovation from comparable store sales from the month during which renovation commences until the first full month after reopening. The average retail price per unit sold during the thirteen weeks ended October 29, 2011 was unchanged from the prior year's comparable period while the total number of units sold increased by 5.9%. We attribute the increase in the number of units sold to an increase in mall traffic and various store level pricing promotions.
Perfumania's retail gross profit dollars for the thirteen weeks ended October 29, 2011 increased by 0.5% to $27.3 million compared with the comparable period in 2010. For these same periods, Perfumania's retail gross margins were 45.8% and 48.1%, respectively. The decrease in Perfumania's retail gross profit percentage was due to increased promotional activity during the thirteen weeks ended October 29, 2011.
Selling, general and administrative expenses include payroll and related benefits for our distribution center, sales, store operations, field management, purchasing and other corporate office and administrative personnel; rent, common area maintenance, real estate taxes and utilities for our stores, distribution center and corporate office; advertising, consignment fees, sales promotion, insurance, supplies, freight out, and other administrative expenses. Selling, general and administrative expenses were $39.9 million in the thirteen weeks ended October 29, 2011, compared to $39.4 million in the thirteen weeks ended October 30, 2010. Included in selling, general and administrative expenses are expenses in connection with the Services Agreement with Quality King, which were $0.1 million for both thirteen week periods ended October 29, 2011 and October 30, 2010, and expenses related to the potential business combination with Parlux discussed above which were $0.3 million for the thirteen weeks ended October 29, 2011.
Perfumania's retail gross profit for the thirty-nine weeks ended October 29, 2011 increased by 12.6% to $84.8 million compared with the comparable period in 2010. For these same periods, Perfumania's retail gross margins were 47.0% and 45.7%, respectively.
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