SAN FRANCISCO, Calif., Sept. 14 /PRNewswire-FirstCall/ --
RedEnvelope, Inc. (NASDAQ:REDE) today reported financial results
for the fiscal quarter ended July 1, 2007, which is the first
quarter of its 2008 fiscal year. The Company previously announced
that the filing of its periodic report on Form 10-Q would be
delayed pending the completion of its analysis of certain state and
local tax issues. Having completed that analysis and finalized its
financial statements for the first fiscal quarter, the Company has
today filed its Form 10-Q for the fiscal quarter ended July 1,
2007. Net revenues for the first quarter of fiscal 2008 were $24.5
million, compared to $26.9 million in the first quarter of fiscal
2007. Net loss was $(3.6) million, or $(0.37) per diluted share,
compared to a net loss of $(0.9) million, or $(0.10) per diluted
share in the first quarter of fiscal 2007. First Quarter Fiscal
2008 Business Highlights -- Net revenues per order grew to
approximately $83, compared to approximately $81 in Q1 fiscal 2007
-- Gross profit per order decreased to approximately $42 compared
to $43 in Q1 fiscal 2007 -- Approximately 296,000 orders shipped, a
decrease of approximately 10% from the same period of the prior
year primarily due to a reduction in customer prospecting in the
second half of fiscal 2007 -- New customers grew by approximately
112,000 versus the end of fiscal 2007, bringing the total customer
file to over 3.5 million names Gross profit margin was
approximately 50.2% in the first quarter of fiscal 2008, compared
to 53.1% in the same period last fiscal year. The gross margin
decrease was primarily due to a shift in the product mix to include
more market product, partially offset by higher shipping margins.
Marketing expenses in the first quarter of fiscal 2008 were $6.2
million, or 25.3% of net revenues, compared to $6.3 million, or
23.4% of net revenues, in the same period last year. The decrease
in dollars is primarily due to a decrease in market research,
partially offset by higher catalog production costs. First quarter
fulfillment expenses were flat year-over-year at $3.4 million, but
increased 100 basis points to 13.7% of net revenues due to the
decrease in net revenues. General and administrative expenses
increased to $6.4 million in the first quarter of fiscal 2008, from
$5.5 million in the comparable period last year, primarily due to
increased personnel costs and corporate consulting projects, and
increased accruals for state and local tax liabilities. As of July
1, 2007, RedEnvelope had $9.7 million in cash and short-term
investments and no debt. The Company has a credit facility of up to
$12.5 million (of which $4.5 million was available as of July 1,
2007), the availability of which is subject to an inventory-based
formula, and a stand-by subordinated, unsecured credit arrangement
for up to $2.6 million, which it believes will be sufficient to
fund operations and anticipated capital expenditures for the next
twelve months. At the end of the first quarter, inventory was $12.9
million, compared to $19.2 million at the end of the corresponding
period of the prior year when RedEnvelope increased its investment
in core products. Capital expenditures for the first quarter of
fiscal 2008 were approximately $2.3 million as the Company invested
in its fulfillment center and technology, including its website.
The Company anticipates spending approximately an additional $3.8
million during the remainder of fiscal 2008. John Pound,
RedEnvelope's Executive Chairman, commented ... "Our first quarter
results are consistent with our expectations, and reflect the
factors that I outlined in my comments in our year-end release of
(July 3, 2007). We expected to be in a revenue downdraft this
quarter, with resulting bottom line losses. This was a result of
reduced prospecting late last year and early this year, which
resulted in a weakened customer file. Also, our creative and brand
statement were weak through Q1, as we had not yet been able to
change our message to our customer. That said, I am very pleased to
report that, as of September 1, we have kicked off our re-launch of
the RedEnvelope brand. Our new catalogue went in home on September
4th, and our new web site went live just prior to that time, on
August 28th. In both channels, we have a new, re-invigorated
branding statement, with a strong editorial voice around our core
mission: serving as a great, inspired creative resource to our
customer as she celebrates relationships and occasions through
giving. It is too early to offer any observations of the impact of
our re-branding on our financial results. However, the initial
qualitative feedback we have received on our new direction has been
positive. I want to commend and celebrate everyone in the
organization and particularly, Laurie Kanes and Suzanne Ellis, our
new heads of Creative and Merchandising, respectively, for such
progress in such a very short period of time. We have re-positioned
the brand in 5 months, and I think that the team deserves
tremendous credit for that effort." About RedEnvelope, Inc.
RedEnvelope, Inc. is a retailer dedicated to inspiring people to
celebrate their relationships through giving. RedEnvelope offers an
extensive collection of imaginative gifts through its webstore,
http://www.redenvelope.com/. "RedEnvelope" is a registered
trademark of RedEnvelope, Inc. This press release contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934 that involve risks, uncertainties and assumptions, such
as statements regarding our plans, objectives and future operations
and estimates of our financial results and capital expenditures for
future periods. Our actual results and the timing of events could
differ materially from those anticipated in these forward-looking
statements as a result of several factors. Factors that could
affect future performance include, but are not limited to: any
failure to obtain short-term or other financing if necessary,
including any inability to obtain money under existing credit
facilities due to non-compliance with borrowing requirements;
marketing, advertising and customer acquisition programs and
related expenditures may not achieve desired results; cost-control
measures may fail to yield satisfactory results; changes in key
management positions and personnel; the inability to attract and
retain qualified managerial, creative and technical personnel;
integration of recently hired key personnel, and other managerial,
technical, finance, accounting and operations personnel, and
potential disruption occasioned thereby; failure of the market to
accept our new or existing products and competition relating to
such products; planned and ongoing fulfillment center and system
upgrades and enhancements could fail to achieve desired results or
cost savings or could take longer or incur greater costs than
anticipated to implement; difficulties encountered in, or increased
costs of, fulfillment; economic conditions and changes in consumer
spending levels; any significant disruption of our operations due
to network or systems failures or disruptions, power outages,
regulatory actions, natural disasters or attacks; difficulties
encountered in predicting consumer preferences, managing inventory
levels or gaining access to popular products; increased or more
effective competition from other retailers; difficulties
encountered in managing our growth; increased costs for, or delays
or difficulties in the receipt of, merchandise ordered by us;
seasonality of the retail business; increases in shipping,
advertising or marketing costs; intellectual property or other
claims that may have an adverse effect on our financial results
product offerings or technology; difficulties encountered in
properly staffing our operations or providing satisfactory customer
service; changes in government or regulatory requirements affecting
e-commerce that may restrict, or increase the cost of, our
operations, and other risk factors described in detail in our
Report on Form 10-K for the fiscal year ended April 1, 2007 and
Quarterly Report on Form 10-Q for the period ended July 1, 2007,
including, without limitation, those discussed under the captions,
"Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Risk Factors," which
document is on file with the Securities and Exchange Commission
(the "SEC") and available at the SEC's website at
http://www.sec.gov/. These forward-looking statements are made only
as of the date of this press release, and RedEnvelope undertakes no
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
The lack of any update or revision is not intended to imply
continued affirmation of forward-looking statements contained
herein. Investor Contact: Andrew Greenebaum/Christine Lumpkins ICR,
Inc. ; (310) 954-1100 REDENVELOPE, INC. STATEMENTS OF OPERATIONS
(Unaudited) Thirteen Weeks Ended Thirteen Weeks Ended July 1, July
2, 2007 % 2006 % (In thousands, except for per share data) Net
revenues $24,529 100.0% $26,858 100.0% Cost of sales 12,222 49.8%
12,608 46.9% Gross profit 12,307 50.2% 14,250 53.1% Operating
expenses: Fulfillment 3,366 13.7% 3,419 12.7% Marketing 6,198 25.3%
6,285 23.4% General and administrative 6,443 26.3% 5,489 20.4%
Total operating expenses 16,007 65.3% 15,193 56.6% Loss from
operations (3,700) (15.1%) (943) (3.5%) Interest income, net 145
0.6% 43 0.1% Net loss $(3,555) (14.5%) $(900) (3.4%) Net loss per
share - basic and diluted $(0.37) $(0.10) Weighted average shares
outstanding - basic and diluted 9,519 9,377 RedEnvelope, Inc.
BALANCE SHEETS (Unaudited) July 1, April 1, July 2, 2007 2007 2006
ASSETS (In thousands) Current assets: Cash and cash equivalents
$9,727 $13,245 $2,311 Short-term investments - - 5,058 Accounts
receivable, net 2,089 1,050 1,611 Inventory 12,929 14,288 19,209
Prepaid catalog costs and other current assets 2,056 2,423 2,430
Total current assets 26,801 31,006 30,619 Property and equipment,
net 9,255 8,221 7,576 Other assets 374 184 258 Total assets $36,430
$39,411 $38,453 LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued expenses $12,563 $12,463
$10,926 Capital lease obligations, current 184 207 284 Total
current liabilities 12,747 12,670 11,210 Capital lease obligations,
long-term 323 350 507 Deferred rent 454 502 644 Total liabilities
13,524 13,522 12,361 Stockholders' equity: Common stock 96 96 96
Additional paid-in capital 119,371 118,800 116,367 Deferred
compensation - (1) - Notes receivable from stockholders (44) (44)
(44) Accumulated deficit (96,517) (92,962) (90,327) Total
stockholders' equity 22,906 25,889 26,092 Total liabilities and
stockholders' equity $36,430 $39,411 $38,453 RedEnvelope, Inc.
STATEMENTS OF CASH FLOWS (Unaudited) Thirteen Weeks Ended July 1,
July 2, 2007 2006 (In thousands) Cash Flows From Operating
Activities: Net loss $(3,555) $(900) Adjustments to reconcile net
loss to net cash used in operating activities: Depreciation and
amortization 673 837 Stock-based compensation 528 593 Other
non-cash charges (39) (34) Changes in current assets and
liabilities: Accounts receivable, net (1,039) (557) Inventory 1,359
481 Prepaid catalog costs and other current assets 167 363 Accounts
payable (340) (3,192) Accrued expenses and other current
liabilities 1,059 571 Net cash used in operating activities (1,187)
(1,838) Cash Flows From Investing Activities: Maturities of
short-term investments - 6,561 Purchases of short-term investments
- (4,857) Purchases of property and equipment (2,325) (945) Net
cash (used in) provided by investing activities (2,325) 759 Cash
Flows From Financing Activities: Proceeds from issuance of common
stock 44 409 Principal payments on capital lease obligations (50)
(155) Payment of debt issuance costs - (141) Net cash (used in)
provided by financing activities (6) 113 Net decrease in cash and
cash equivalents (3,518) (966) Cash and cash equivalents at
beginning of period 13,245 3,277 Cash and cash equivalents at end
of period $9,727 $2,311 DATASOURCE: RedEnvelope, Inc. CONTACT:
Andrew Greenebaum, , or Christine Lumpkins, , both of ICR, Inc.,
for RedEnvelope, Inc., +1-310-954-1100 Web site:
http://www.redenvelope.com/
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