Yankee Cdle (NYSE:YCC)
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The Yankee Candle Company, Inc. (NYSE:YCC) today
announced preliminary financial results for the second quarter ended
July 1, 2006. Based upon currently available information, second
quarter 2006 earnings per share are expected to be in the range of
$0.11 to $0.12 per common share. These anticipated results are below
the Company's previous guidance for second quarter 2006 earnings per
share of $0.18 to $0.20.
This outlook results primarily from weaker than expected Wholesale
performance, increased promotional spending and greater than
anticipated wax and freight costs:
-- Sales in the Wholesale division trended down approximately 3%
compared to the prior year quarter, below prior expectations
of an increase of 6% to 8%, primarily because of softer sales
to the core gift channel and certain national accounts as well
as tighter inventory management among some national accounts.
In addition, this softness in core gift sales continued to
unfavorably affect the customer and product profitability mix,
therefore pressuring Wholesale segment profit. Wholesale
segment profit was also negatively impacted by above-plan
promotional spending in the quarter due to a more competitive
marketplace environment. Sales to the premium mass channel
were on plan.
-- Wax prices and freight costs, each influenced by oil prices,
increased at a rate greater than that anticipated by the
Company and further pressured the Company's second quarter
gross profit rate. The Company's packaging and other materials
costs were also negatively impacted.
-- Sales in the Retail division were above expectations, with
sales increasing approximately 18% over the prior year
quarter. For the quarter, Retail comparable store sales
increased approximately 8% over the prior year quarter and
traffic levels in the Retail division increased by
approximately 3% over prior year. The consumer direct business
also performed above plan. Retail segment profit was on plan.
As a result, while total consolidated second quarter sales growth
over prior year is anticipated to be approximately 7% compared to
guidance of 6% to 8% growth, the overall shift in total sales versus
plan from Wholesale to Retail negatively impacted the Company's
earnings during a quarter when the Retail division's segment profit
rate is historically significantly lower than that of Wholesale. This
shift, together with the above-mentioned customer and product mix
issues in Wholesale, higher than planned promotional spending and
greater than anticipated wax and freight costs, all contributed to
lower than anticipated gross profit and operating income in the
quarter.
Craig Rydin, Chairman and Chief Executive Officer, commented,
"Clearly, we are disappointed in our second quarter performance. While
our previous second quarter guidance already contemplated a more
challenging Wholesale environment, and a Wholesale revenue growth
profile similar to our first quarter FY 2006 performance, actual
Wholesale performance was considerably weaker than we expected. The
core gift channel marketplace is being fundamentally challenged by
both macro-economic conditions and competitive pressures, and the
continued weakness in this channel clearly impacted our mix and
margins. We are taking a hard look at this business to calibrate our
efforts and expectations going forward. In addition, Wholesale
national accounts took advantage of the opportunity of the second
quarter's normally light seasonal traffic pattern to constrict
inventory ahead of the second half selling season, despite what we
believe to be generally good sell through of Yankee Candle product."
"On a positive note, our continued strong performance in Retail,
in conjunction with generally positive Wholesale consumption trends
from those customers who provide point of sale data, appear to us to
indicate that consumer buying behavior with respect to the Yankee
Candle brand remains healthy."
In addition to announcing the above preliminary second quarter
results, Yankee Candle today revised its full-year 2006 outlook in
view of its second quarter performance and the Company's current
assessment of its second-half 2006 plan. The Company now anticipates
2006 diluted EPS to be in a range of $1.93 per share to $2.03 per
share, including the one-time tax benefit of $0.05 per share in the
first quarter of 2006. Excluding this one time tax benefit, the
Company now projects 2006 diluted EPS of $1.88 to $1.98, which
compares to the Company's previous guidance of $2.01 to $2.07. This
guidance does not include the impact of any additional share
repurchase activity by the Company. Total sales growth for the full
year 2006 is now expected to be in a range of approximately 8% to 10%
over prior year.
"In light of our second quarter performance and current
marketplace and macro-economic conditions, we have re-examined our
second-half plan and are adjusting our prior guidance," said Mr.
Rydin. "We have been working closely with our Wholesale national
account customers to assess the factors which impacted our second
quarter performance and based on these discussions we believe that
inventory replenishment should strengthen in advance of the busy
second half selling season and that there is reason to be confident
about our fall/holiday programs. In Retail, we are focused on
sustaining our recent positive momentum. Further, in order to help
offset the rising wax, freight and other costs impacting our business
we are in the process of instituting a price increase, at a level
consistent with previous increases, targeted for approximately
September 1st. All that said, we expect that some of the softness in
the core gift channel, and the related margin pressures, may persist
in the second half and we have therefore adjusted our guidance
accordingly. We will be prepared to comment further on our 2006
outlook, including the third quarter, when we report final second
quarter results on our upcoming earnings call."
Yankee Candle will report its final second quarter 2006 results,
and comment further on the full year, on Wednesday, July 26, 2006.
The second quarter financial results and revised 2006 full-year
guidance reported in this press release, together with the Company's
analysis thereof, are preliminary in nature and may be subject to
change in connection with the completion of the Company's second
quarter financial statements and their review by the Company's
independent accountants.
Earnings Conference Call:
The Company will host its second quarter 2006 conference call to
be broadcast via the Internet at 1:00 p.m. on Wednesday, July 26,
2006. 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 ten minutes prior to the start of
the conference.
About The Yankee Candle Company, Inc.
The Yankee Candle Company, Inc. is the leading designer,
manufacturer, wholesaler and retailer of premium scented candles,
based on sales, in the giftware industry. Yankee has a 36-year history
of offering distinctive products and marketing them as affordable
luxuries and consumable gifts. The Company sells its products through
a North American customer network of approximately 17,000 store
locations, a growing base of Company owned and operated retail stores
(385 located in 42 states as of July 1, 2006), direct mail catalogs,
its Internet website (www.yankeecandle.com), international
distributors and to a European customer network of approximately 2,300
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
2006, and the second 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.