On 17th September, 2010 the gourmet food company for Moose Munch snacks, Harry and David cited a net loss of $39.2 million during the fourth quarter of fiscal budget 2010 following a $20.2 million loss in fiscal 2009. The fiscal year ended on June 26. The net sale of the company is lower by 12.8% this year. However, the cost-cutting and reduction in inventories put them in better position for the coming year.
So, one can assume that to facilitate more people with increased stocks of favorite treats and sending more gift baskets to the beloved ones, this holiday season there will be more new stores coming up in Manhattan. Do not worry. The CEO of Harry and David, Steven Heyer, stated: “Despite our sales decline we were able to return to positive operating cash flow by improving our management of working capital and reducing controllable operating expenses, both of which were effective in mitigating the cash effect of our lower sales.”
The company said fixed costs remained same while declining demand led to lower sales. The firm also suffered from higher delivery discounts. Chief Financial Officer Ed Dunlap said that a new hierarchy, reconfigured departments, reduced inventories and a four-year credit line have strengthened the cash position of company. Dunlap said, “Our cash position is much stronger now“. He also added, “We generated more cash in the past year. We are most definitely running the business on lower inventories and running the business on a lower cost basis.”
On June 26, Harry & David boosted its cash and short-term investments by $3.3 million to $18.7 million and benefited from the sale of land-use rights, which provided $1.3 million. Harry & David’s numbers were closer to the company’s 2009 performance excluding $9.8 million in stock-option compensation and severance payments, Dunlap said. Harry & David reported over $7 million in severance and reorganization and benefits costs. “Clearly, once you exclude those results, we would have exceeded last year’s performance, if you exclude the early debt retirement,” he said.
The closing of the company’s Eugene call center with $350,000 in associated costs will also work in the favor of the company. The annual management fee of $1 million is continued to pay by Harry & David to Wasserstein & Co. and Highfields, together with $686,000 in recruiting and relocation expenses. The chairman of the board and chief executive officer in a release, Steven Heyer said, “Throughout fiscal 2010, we continued to experience a challenging retail environment characterized by a slowly recovering economy and cautious discretionary consumer spending.”
During this year, Administrative expenses decreased from $33 million to $197.3 million. Primarily, the decrease was driven by lower advertising and payroll expenses and fewer write-offs. But, severance costs and stock-option expenses of $9.8 million bit into the bottom line. Harry & David’s had $35.5 million of inventory at the end of the fiscal year versus $44.7 million the previous year. Mainly, the 20.6 percent decrease in inventory was because of a mixture of improved inventory planning and lower overall production. In 2009, the net loss for the quarter was $21.2 million relative to a $17.3 million setback.