CLIFTON, N.J.–Linens ’n Things posted a steep net decline in the fourth quarter, as its housewares business continued to outpace soft home.
For the quarter ended Dec. 29., the retailer generated adjusted earnings before interest, income taxes, depreciation and amortization of $15.3 million, compared with adjusted earnings before income tax of $58.1 million in the fourth quarter of 2006. The drop largely reflects a decrease in gross margin due to the highly promotional retail environment, coupled with an increase in selling, general and administrative expenses due to increased marketing spend.
As previously announced, the retailer reported total net sales inched up 0.6 percent, to $962.9 million for the quarter from the opening of new stores. That was offset by a comparable-store sales decline of 1.0 percent.
For the quarter, performance among product categories was more balanced than in previous quarters, the retailer said in a statement. However, “consistent with prior trends, the housewares category outperformed textiles and home decor during the period.”
Linens ’n Things is evaluating cost-reduction initiatives to bring its cost structure in line with its sales productivity. These include reducing store staffing costs; corporate overhead expense; and other “non-selling or non-essential” expenses that don’t impact store and guest service levels, the retailer said.
It’s also looking to fine-tune marketing expenditures and reduce inventory purchases.
“We recognize the challenges that the current macroeconomic environment presents, especially while we are engaged in turning around a complex operation in a highly leveraged situation,” said Robert DiNicola, chairman and chief executive officer, in a statement. “Consequently, we are taking what we consider to be prudent steps to ensure that we realize the benefits of all of our efforts over the past two years to rebuild this business.”
