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Alco Posts Q4 Sales, Income Declines

For the fourth quarter ended February 2, Alco Stores, Inc. posted a net loss of $8.6 million, or $2.65 per diluted share, versus net income of $2 million, or 61 cents per diluted share, for the 2013 period. Comparable store sales, excluding fuel centers, decreased 11.7% to $124.8 million during the fourth quarter, or 7.6% excluding the 14th week of the fiscal 2013 period, the company reported.

Fourth quarter net sales from continuing operations decreased 8.9% to $130.9 million. Excluding the 14th week of the fiscal 2013 quarter, net sales from continuing operations decreased 4.7%, the company asserted.

Fourth quarter results included impairment charges of $1.4 million associated with the planned closing of 14 stores during fiscal 2015, the company pointed out, as well as $500,000 for costs associated with the relocation of the company headquarters to Coppell, TX, and, $100,000 in expenses attributable to a merger that was rejected in an October 2013 shareholder vote.

For the fiscal year, net sales from continuing operations slid 1.6% to $474.1 million, according to the company. Excluding the fiscal 2013 53rd week, net sales from continuing operations slipped 0.3%, it added. Comps, excluding fuel centers, decreased 4.5% to $452.5 million versus the year earlier or 3.2% excluding the extra week in fiscal 2013.

Fiscal 2014 net loss was $26.4 million, or $8.11 per diluted share, versus net income of $1.3 million, or 36 cents per diluted share, in the year earlier, the company maintained.

Results for fiscal 2014 included a previously disclosed non-cash charge of $9.8 million related to a valuation allowance on the company’s cumulative deferred tax assets, $1.9 million for discontinued operations and a total of $3.5 million of non-recurring expenses attributable to the relocation of the corporate office and the failed merger proposal, the company pointed out.

Richard Wilson, ALCO resident and CEO, said, in discussing the financial results, “Fiscal year 2014 operating results reflect the impact of significant change and disruption to our business. Most importantly, we took steps to fix long-term problems that have hurt Alco’s profitability while dealing with the events associated with the proposed merger that was rejected. We recorded approximately $2.4 million in merger-related costs and approximately $1.1 million of headquarters relocation costs. During the year, Alco decided to close 22 underperforming stores, and the last of those stores will be closed by the end of the first quarter of fiscal year 2015. We also experienced a net reduction in gross margin dollars of approximately $10 million, primarily due to increased promotional activity in an attempt to reduce inventory and to comparison with the 53-week year in fiscal 2013. Finally, we recognized a large non-cash charge relating to the accounting for deferred tax assets on the company’s balance sheet.”

Wilson added, “Moving forward, Alco is focused on executing five major initiatives to improve profitability and deliver value for shareholders. These actions include maximizing the benefit of our headquarters relocation to the Dallas area, which is enabling Alco to recruit experienced managers, buyers and marketers from some of the nation’s top retail organizations; expanding gross margins by completing the price optimization initiative with Revionics, which benefits top-line sales and gross margin by adjusting prices store-by-store and item-by-item based on detailed demand data; improving our real estate portfolio by closing unprofitable stores and opening more productive ones; upgrading our information technology with a new Enterprise Resource Planning system and a new supply chain service provider; reducing inventory and associated debt levels by, in addition to the store rationalization and IT upgrades mentioned, making a number of targeted changes in store layout and merchandise mix to appeal to Alco shoppers.”