Design Within Reach Posts 1st Quarter Loss

May 16, 2006  by in UnCategorized   

By Home Furnishings Business in Furniture Retailing on May 2006 San Francisco-based Design Within Reach reported net sales of $35 million for the first quarter ended April 1, a 1.4 percent decrease from the $35.5 million recorded in the same quarter last year.

Net loss for the quarter was $4.2 million, compared to net earnings of $900,000 posted in the first quarter of 2005. Included in the first quarter 2006 results are approximately $895,000 of professional consulting fees relating to Sarbanes-Oxley compliance and additional audit fees compared to the first quarter of 2005.

In addition, the retailer reduced its 2006 sales guidance to about $175 million, the low end of its previously released guidance of $175 million to $185 million. With its plans to re-evaluate strategy and prioritize cost-cutting measures, Design Within Reach is not providing annual earnings guidance and said that any previously issued earnings guidance should not be relied on.

Last week, the company replaced Tara Poseley as its chief executive officer. Ray Brunner, who has been with the company since 2002, succeeded Poseley in the position.

The contemporary retailer sells products through its stores, online and a catalog.

The company said in-person sales were about $20.9 million in the quarter. Design Within Reach has opened seven stores year-to-date and has two under construction, but it doesn’t plan to open new stores in fiscal 2006.

Online and phone sales dropped 18 percent to $10.7 million for the quarter. The company attributed the 16 percent online sales drop to a reduction in marketing price promotions from the same period last year. Phone sales were down 22 percent.

Moving forward, Design Within Reach said it will examine costs associated with online and phone sales to determine catalog profitability.

“I’m excited about the opportunity to lead a turnaround at Design Within Reach and am committed to instituting some major, but necessary, changes in the coming months,” Brunner said. “I have a strong understanding of our core competencies and firmly believe that our problem is not at the top-line, but an expense and control issue. Over the past several years, we have veered away from some of the basic tenets that made our business so successful by introducing products with lower unit costs and lower inventory turnover, and we have invested heavily in overhead. We are currently examining every line item to return to the fundamentals of cost control and bring DWR back to profitability.”