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Home > Investors > News Releases > 2005 > Liquidation World Announces Q3 Results and Improving Performance from Q2
Calgary, August 16, 2005
Company continues to implement new merchandise management system and organizational structures along with other key initiatives.
Liquidation World Inc. (TSX:LQW) today announced results for the third quarter of fiscal 2005, representing 13 weeks of operations ending July 3, 2005.
The company recorded a total loss of $1,300,000 ($0.16 per share), compared to earnings of $221,000 ($0.03 per share) in the same period last year. On a cumulative basis, the loss for the first three quarters of the 2005 year totals $6.9 million compared to net earnings of $2.8 million in 2004.
Revenue totaled $46.3 million, a 2.9% increase from $45.0 million during the corresponding period in 2004. On a cumulative basis, revenue for the first three quarters of 2005 totaled $137.3 million, a 1.4% decrease from $139.2 million during the 39 weeks ending July 4, 2004. Further detail is provided in the financial statements below.
A conference call is scheduled to begin at 11:00 a.m. Calgary time (1:00 EST), on August 16, 2005. The dial-in numbers are 1-877-888-3855 or 416-695-6622. A replay of the call will be available within 24 hours at www.liquidationworld.com by selecting Company / Investor Info, News Archives and Q3 Conference Call.
"While we have seen a lot of progress in the past quarter, our financials are not consistent with the company’s historical performance," said Jonathan Hill, President and CEO. "These results reflect the following:
Gross margins
As we indicated would be the case following our second quarter, we continued to experience pressure on our gross margins. Gross margins for the quarter were 400 basis points less than the same period last year. At 34.7%, these were better than the 28.8% we experienced prior to the inventory write down in Q2 and we also achieved some improvement over the course of the quarter. These results are further evidence of the appropriateness of the company’s strategy to develop a more focused and accountable, merchandise procurement team. This will be supported by better current and historical information as well as better forecasting tools with the implementation of our new merchandise management system.
We expect to see more normalized gross margins early in 2006.
Store sales
Sales increased in certain key markets although overall average store sales declined slightly during the period. We are confident that the implementation of a new organizational structure that takes advantage of our history of strong local market leadership will deliver increasing sales in the future. This new structure includes three regional directors, two of whom are new to Liquidation World.
U.S. operations
We are pleased with the recent decision to relocate Darren Gillespie to the U.S. so as to dedicate his full time, talents and attention to the business. Darren has successfully developed and managed various areas of our business over the years including profitable results in the U.S. Although the U.S. business turned in a weak quarter, it continues to play an important role providing access to a wealth of inventory opportunities south of the border.
Expenses
We are reasonably happy with the management of the company’s day-to-day expenses. Additionally, the past quarter included a number of special expenses directly related to the long-term growth of the business. In particular, $300,000 was spent during the quarter on the implementation of our new merchandise management system that will support our objectives of improving sales and gross margins and inventory efficiency.
This quarter also saw $500,000 spent on an additional quarterly inventory count and store refurbishments. The refurbishing of our three Calgary stores has gone very well, and we will continue to test a more brand-focused marketing campaign in those locations. We also expect that costs associated with refurbishing other outlets will be lower in the future.
In addition to these items, we are also progressing with our Deal Hunter initiative, whereby customers are rewarded for calling our new 1-866-676-LEAD line with tips on local inventory opportunities that result in successful purchases. Our results in test markets have been very positive, and approximately a third of our stores have recently begun to promote the program.
While we are not satisfied with our financial results for this quarter, we have made very good progress in implementing changes that are necessary and important to the long-term success of the business. I am also very pleased with the progress a great many of our associates have made in these and other initiatives and above all, with how they continue the critical, day-to-day work of serving our customers."
Subsequent to the end of the quarter Mr. Rob Bakshi submitted his resignation from the board of directors in order to focus his time on his personal businesses. Therefore the board is now made up of four independent and two management directors.
This release includes forward-looking statements and potential future circumstances and developments. Forward-looking statements regarding future performance are subject to risks and uncertainties, and actual results may differ materially.
About Liquidation World
Liquidation World liquidates consumer merchandise through 105 outlets across North America, and also provides store-closure sales management. The company solves asset recovery problems in a professional manner for the financial services industry, insurance companies, manufacturers and other organizations. Liquidation World opened its first retail outlet in 1986 and is now the largest liquidator in Canada, with more than 1,800 employees in outlets and offices across Canada and the United States.
For more information, please contact:
Jonathan Hill, President and CEO
416-587-0688 phone
866-237-3778 fax
jonathanh@liquidationworld.com
Andrew Searby, C.A., Executive VP, and CFO
403-250-1222 phone
403-291-1306 fax
investorinfo@liquidationworld.com