News Releases - 2007


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May 11, 2007

Liquidation World Inc. (LQW – TSX) today announced results for the second quarter of fiscal 2007, representing 13 weeks of operations ending April 1, 2007. Revenue for the quarter decreased 2.7% to $47.6 million from $48.9 million. The Company recorded a net loss of $3.0 million ($0.37 per share) for the quarter compared to net income of $0.7 million ($0.08 per share) during the same period last year.

Fiscal year-to-date revenue increased 5.8% to $112.2 million from $106.1 million. Cumulative losses for the year total $1.2 million ($0.15 per share) compared to net income of $2.6 million ($0.31 per share) during the same period last year.

Further detail is provided in the financial statements in the PDF version of this release.

Liquidation World’s President and Chief Executive Officer, Jonathan Hill, said:

Clearly, the results of this quarter are disappointing. For some time we have been working to execute a successful turnaround strategy in our business. While not without setbacks, we have made meaningful progress. We have reached many of the milestones of our plan, adding vendors, building key product categories, expanding the store base and reducing aged and non-performing inventory. Through the first quarter of this year, we reported 5 consecutive quarters of record sales. It is very important that these achievements are not overshadowed by our second quarter results.

Our stores offer two types of merchandise: traditional closeouts from goingconcern businesses and unique event deals acquired from bankruptcies, insurance claims and business closures. The closeouts generate a baseline sales volume that is reasonably large, stable and predictable, while revenue from the event deals tends to be more volatile. The availability of great event merchandise is a key differentiator for our business and can have a significant impact on quarterly performance. This is especially true during the second quarter when sales are lowest and earnings are most sensitive to fluctuations in revenue.

During the second quarter of last year, we benefited from a number of excellent event deals that came to us as a result of insurance claims associated with Hurricane Katrina. During Q2 2006, these event deals helped to drive an 18.4% increase in same store sales. In the second quarter of this year, we were unable to offer similarly compelling event merchandise, which negatively impacted our same store sales.

The availability of better information in our business enabled us to identify these issues very early in the quarter and take appropriate action to mitigate their impact. As a result, we adjusted our purchasing plans twice and increased our promotional activity to stimulate sales. In addition to the impact of our sales promotions, gross margin was affected during the quarter by higher than anticipated freight and handling costs.

We continue to review and refine our turnaround plans. The results for this quarter confirm the need to reduce our expenses to a level that can withstand a higher degree of sales volatility. As previously announced, in March we acted to make certain changes that will improve the effectiveness of our organization and concurrently reduce expenses. These improvements included the elimination of certain middle management positions in the Buying and Operations teams and the consolidation of several functions at the executive level.

We are pleased that many of the changes that we have implemented in our organization are having the desired effect; however, our second quarter results reflect the fact that we have more work to do. Looking forward, we will be focused on ensuring that our buying structure and spending plans are more flexible, so that we have the organizational agility to source the great deals that excite our customers and drive sales. And, we will continue to review expenses in order to ensure our business can better withstand any fluctuations in sales.

When we commenced our turnaround efforts we were entirely committed to improving our business and creating value for our shareholders. That commitment has not changed. Today we have better information with which to make decisions and a team with the drive, experience and enthusiasm to achieve our objectives.

In the quarter, Liquidation World opened 1 new location in Truro, NS and closed 3 locations in Belleville, ON, Smiths Falls, ON and Burien, WA. At quarter end, the Company had 114 locations in operation. Since the end of Q2, the Company has opened one additional new store in Mississauga, ON and expects to open 3 more new stores during the third quarter.

For more information, please contact:

Jonathan Hill
President and CEO
416-587-0688 phone
866-237-3778 fax
jonathanh@liquidationworld.com

Andrew Searby,
CA, Executive VP, and CFO
403-250-1222 phone
866-484-4504 fax
investorinfo@liquidationworld.com