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
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