Yankee Cdle (NYSE:YCC)
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The Yankee Candle Company, Inc. ("Yankee" or the
"Company"; NYSE:YCC) today announced financial results for the second
quarter ended July 1, 2006. Earnings per common share on a diluted
basis decreased 37% to $0.12 from $0.19 for the prior year quarter.
Total sales for the second quarter were $116.3 million, a 7% increase
over the year ago quarter.
"Second quarter 2006 results were in line with the expectations we
previewed in mid-July", commented Craig Rydin, Chairman and Chief
Executive Officer. "While total revenue was in line with our original
outlook for the quarter, Wholesale sales fell short of our
expectations and eclipsed a strong performance in our Retail segment.
While this was a difficult quarter, we recognize our team's hard work,
and appreciate their continued dedication as we enter the important
second half selling season."
Second Quarter Highlights:
-- Retail sales were $59.1 million, an 18% increase over the
fiscal 2005 second quarter. Comparable sales in the 337 retail
stores including the South Deerfield flagship store that have
been open for more than one year increased 8%. Comparable
sales in the 336 retail stores excluding the South Deerfield
flagship store increased 10%. Consumer Direct increased 35%
over the fiscal 2005 second quarter. Including Consumer
Direct, total retail comparable sales increased 10%.
-- Wholesale sales were $57.2 million in the second quarter, a
decrease of 3% over the year ago quarter.
-- Gross profit increased 2% to $63.1 million for the second
quarter versus the prior year quarter. As a percentage of
sales, gross profit decreased to 54.3% compared to 57.0% for
the prior year quarter, driven primarily by softer sales to
the core gift channel and certain national accounts along with
tighter inventory management at some national accounts. Gross
profit rates were also negatively impacted as a result of
increased promotional costs and higher wax, freight and
energy-related costs.
-- Income from operations for the second quarter decreased 28% to
$11.5 million, from $16.0 million for the second quarter of
2005.
Six Months Ended July 1, 2006 Highlights:
-- Retail sales were $120.7 million for the first six months of
2006, a 19% increase over the first six months of fiscal 2005.
Comparable sales in the 337 retail stores including the South
Deerfield flagship store that have been open for more than one
year increased 6%. Comparable sales in the 336 retail stores
excluding the South Deerfield flagship store increased 7%.
Consumer Direct increased 45% over the first six months of
fiscal 2005. Including Consumer Direct, total retail
comparable sales increased 9%.
-- Wholesale sales were $129.5 million for the first six months
of fiscal 2006, an increase of 3% over the first six months of
fiscal 2005.
-- Gross profit increased 7% to $135.1 million for the first six
months of fiscal 2006 versus the prior year comparable period.
As a percentage of sales, gross profit decreased to 54.0%
compared to 55.6% for the prior year, driven primarily by
softer sales to the core gift channel and certain national
accounts along with tighter inventory management at some
national accounts. Gross profit rates were also negatively
impacted as a result of increased promotional costs and higher
wax, freight, and energy-related costs.
-- Income from operations for the first six months of fiscal 2006
decreased 12% to $30.7 million, from $34.8 million for the
first six months of fiscal 2005.
Craig Rydin continued, "Our Retail division benefited from
continued strong execution and our emphasis on newness and excitement
in store displays and customer communications. Both our Mother's Day
and Summer Clearance events were successful, with higher average
ticket and traffic levels enabling us to exceed our comparable sales
growth outlook. We expect the very tight inventory constraints that
our Wholesale customers applied in the second quarter to loosen in
preparation for the fall and holiday selling seasons, and we are
experiencing strong early acceptance of our second half products.
Additionally, our performance with new customers and new brand
launches, particularly in the premium mass channel, was solid in the
second quarter and remains promising going into the third. We are on
track to implement a price increase for the beginning of September
designed to help offset the wax, freight and energy-related costs
impacting our business."
Share Repurchases
During the second quarter, the Company repurchased and retired
approximately 1.4 million shares of its Common Stock at a total cost
of approximately $42.0 million. Approximately $23.0 million remains
outstanding pursuant to its stock repurchase program announced on July
27, 2005.
Separate News Announcement
In a separate news release today, Yankee Candle announced it has
entered into a definitive agreement with Candle Acquisition Co.,
d/b/a/ Illuminations to acquire the Illuminations (R) brand, together
with certain related assets including 15 Illuminations retail stores
and the consumer direct business, for a purchase price of $22 million,
subject to adjustment in accordance with the terms of the agreement.
Pursuant to the agreement, those Illuminations stores not being
acquired by the Company will be phased out by the seller over time.
The transaction is currently expected to close by August 1, 2006,
subject to the satisfaction of customary closing conditions.
Forecast Highlights:
The Company also provided its sales and EPS guidance for the
fiscal 2006 third quarter and full year. As is customary for Yankee
Candle Company, this guidance excludes any impact of any future share
repurchases.
-- For the third quarter of 2006, the Company expects
approximately 7%-9% total sales growth and earnings per
diluted common share of $0.28 to $0.30 versus $0.35 in the
third quarter of 2005.
-- The Company anticipates the 2006 diluted EPS to be in a range
of $1.93 per share to $2.03 per share, including the tax
benefit of $0.05 per share in the first quarter of 2006.
Excluding this tax benefit, the Company projects 2006 diluted
EPS of $1.88 to $1.98, which compares to the Company's
previous guidance of $2.01 to $2.07 and to fiscal 2005 diluted
EPS of $1.73. This guidance does not include the impact of any
future share repurchase activity by the Company. Total sales
growth for the full year 2006 is expected to be in a range of
approximately 8% to 10% over prior year.
-- This guidance does not yet include any effect from the pending
Illuminations acquisition, though the Company expects this
acquisition to be mid-single digit dilutive this year. The
Company will provide updated guidance including Illuminations
at its Third Quarter conference call at which point the
transaction is expected to have closed.
Mr. Rydin concluded, "Yankee Candle is well prepared for the
second half selling season with strongly positioned merchandising and
marketing plans. We continue to feel positive about our retail
performance, and as you know the conversion rate in the fourth quarter
is quite strong compared to earlier quarters. Additionally, we should
benefit from our September price increase, particularly on top of the
increase last November. We remain cautious on gross profit rates in
Wholesale due to our belief that softness in the core gift channel may
persist in the second half. However, given an improving open to buy
environment in advance of the holiday selling season, incremental
space in certain national accounts and the strength of our
fall/holiday programs, we believe that overall wholesale performance
in the second half will improve."
Considering Strategic Alternatives
The Company also announced today that its Board of Directors has
authorized the Company to retain the services of Lehman Brothers to
assist the Company in an analysis and consideration of potential
strategic alternatives to enhance shareholder value, including a
potential sale of the Company. Mr. Rydin stated "We are confident in
our business strategy and optimistic about our future financial
performance. We and our Board of Directors also believe that we owe it
to our shareholders to explore whether there are strategic
alternatives available to us that would optimize shareholder value.
During this process, it will be business as usual for all facets of
the Yankee Candle operations and we remain focused on executing our
second half plan."
The Company cautions that there can be no assurance that the
exploration of strategic alternatives will result in a transaction.
The Company does not intend to disclose developments with respect to
the exploration of strategic alternatives unless and until its Board
of Directors has made a decision regarding a specific transaction.
Earnings Conference Call:
The Company will host a conference call to be broadcast via the
Internet at 1:00 p.m. (EST) this afternoon to more fully discuss
fiscal 2006 second quarter results and outlook. 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 Yankee Candle
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 wholesale customer network of approximately 17,250
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 wholesale customer network of
approximately 2,340 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 third quarter thereof, management's current expectations
regarding the pending Illuminations acquisition, its plan to operate
the acquired business and any impact thereof on the Company's
financial and operating results, 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
July 1, 2006 July 2, 2005
---------------- ----------------
Sales:
Retail $59,068 50.81% $49,889 45.96%
Wholesale 57,183 49.19% 58,659 54.04%
---------------- ----------------
Total sales 116,251 100.00% 108,548 100.00%
Cost of sales 53,115 45.69% 46,694 43.02%
---------------- ----------------
Gross profit 63,136 54.31% 61,854 56.98%
Retail 31,234 52.88%(A) 27,891 55.91%(A)
Wholesale 5,348 9.35%(B) 4,231 7.21%(B)
---------------- ----------------
Total selling expenses 36,582 31.47% 32,122 29.59%
General & administrative
expenses 15,056 12.95% 13,742 12.66%
---------------- ----------------
Income from operations 11,498 9.89% 15,990 14.73%
Interest income (6) 0.00% (6) -0.01%
Interest expense 3,740 3.22% 1,526 1.41%
Other (income) expense (148) -0.13% 479 0.44%
---------------- ----------------
Income before provision for
income taxes 7,912 6.81% 13,991 12.89%
Provision for income taxes 3,086 2.65% 5,457 5.03%
---------------- ----------------
Net income $4,826 4.15% $8,534 7.86%
================ ================
Basic earnings per share $0.12 $0.19
======== ========
Diluted earnings per share $0.12 $0.19
======== ========
Weighted avg. basic shares
outstanding 40,412 45,048
Weighted avg. diluted shares
outstanding 40,791 45,594
-------------------------------
(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
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Twenty-Six Twenty-Six
Weeks Weeks
Ended Ended
July 1, 2006 July 2, 2005
----------------- -----------------
Sales:
Retail $120,704 48.25% $101,709 44.65%
Wholesale 129,460 51.75% 126,094 55.35%
----------------- -----------------
Total sales 250,164 100.00% 227,803 100.00%
Cost of sales 115,051 45.99% 101,118 44.39%
----------------- -----------------
Gross profit 135,113 54.01% 126,685 55.61%
Retail 63,210 52.37%(A) 56,231 55.29%(A)
Wholesale 10,638 8.22%(B) 8,384 6.65%(B)
----------------- -----------------
Total selling expenses 73,848 29.52% 64,615 28.36%
General & administrative
expenses 30,520 12.20% 27,274 11.97%
----------------- -----------------
Income from operations 30,745 12.29% 34,796 15.27%
Interest income (13) -0.01% (12) -0.01%
Interest expense 6,529 2.61% 2,462 1.08%
Other (income) expense (294) -0.12% 697 0.31%
----------------- -----------------
Income before provision for
income taxes 24,523 9.80% 31,649 13.89%
Provision for income taxes 7,226 2.89% 12,343 5.42%
----------------- -----------------
Net income $17,297 6.91% $19,306 8.47%
================= =================
Basic earnings per share $0.42 $0.42
========= =========
Diluted earnings per share $0.42 $0.42
========= =========
Weighted avg. basic shares
outstanding 40,714 45,963
Weighted avg. diluted shares
outstanding 41,066 46,453
Basic EPS before Q1 Tax
Adjustment 0.37
Diluted EPS before Q1 Tax
Adjustment 0.36
------------------------------
(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 July December
1, 31,
2006 2005
----------- -----------
(unaudited)
Current Assets:
Cash and cash equivalents $9,604 $12,655
Accounts receivable, net 32,447 42,546
Inventory 71,504 55,528
Prepaid expenses and other current assets 11,891 9,060
Deferred tax assets 5,462 6,734
----------- -----------
Total Current Assets 130,908 126,523
Property, Plant And Equipment, net 134,009 139,089
Marketable Securities 2,274 2,223
Deferred Financing Costs 743 593
Deferred Tax Assets 71,807 73,975
Other Assets 13,368 12,731
----------- -----------
Total Assets $353,109 $355,134
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $11,488 $21,068
Accrued payroll 10,329 14,319
Accrued income taxes - 20,828
Other accrued liabilities 14,698 34,326
Short-term debt 10,000 -
----------- -----------
Total Current Liabilities 46,515 90,541
Deferred Compensation Obligation 2,364 2,418
Long-Term Debt 241,000 178,000
Deferred Rent 16,186 16,031
Stockholders' Equity 47,044 68,144
----------- -----------
Total Liabilities And Stockholders'
Equity $353,109 $355,134
=========== ===========
The Yankee Candle Company, Inc.
July 26, 2006 Earnings Release
Supplemental Data
Year to
Quarter Date Total
----------- ----------- --------
Retail Stores 5 9 385
Wholesale Customer Locations -
North America 203 866 17,250
Wholesale Customer Locations -
Europe 40 140 2,340
Square Footage - Gross 5,302 11,089 784,521
Square Footage - Selling 4,391 9,116 613,645
Total Company Comp Sales Change % -10% -4%
Wholesale Comp Sales Change % -18% -10%
Retail Comp Store Sales Change % 8% 6%
Retail Comp Store Count 337 - 337
Retail Comp Store Sales Change %,
excl. S.Deerfield 10% 7%
Retail Comp Store & Hub Sales
Change % 10% 9%
Sales per Square Foot (1) - $577
Store Count - 337
Average store square footage, gross
(2) - 1,657
Average store square footage,
selling (2) - 1,282
Gross Profit (3)
Retail $ $38,879 $77,637
Retail % 65.8% 64.3%
Wholesale $ $24,257 $57,476
Wholesale % 42.4% 44.4%
Segment Profit (3)
Retail $ $7,645 $14,424
Retail % 12.9% 12.0%
Wholesale $ $18,910 $46,838
Wholesale % 33.1% 36.2%
Depreciation & Amortization (3) $6,495 $12,980
Inventory per Store $38,000 -
Inventory Turns 3.2 4.3 (4)
Capital Expenditures (3) $10,148 $12,427
Shares Outstanding 39,738,361 -
Weighted avg diluted shares in EPS
calculation 40,791,000 41,066,000
(1) Trailing 12 months, stores open for full 12 months, excluding S.
Deerfield Flagship Store.
(2) Excludes S. Deerfield and Williamsburg, VA Flagship stores.
(3) Dollars in thousands.
(4) Rolling four quarters.
*T