Improvement not imminent at Gordmans

Gordmans Stores new CEO Andy Hall is looking to execute a turnaround at the off price department store chain where weak sales trends and losses indicate he is in for a big challenge.



Hall was just eight days into his new job when Gordman’s reported weak second quarter results on August 27 for a quarterly period that had ended two weeks prior to his arrival. There wasn’t much good to say about the company’s performance aside from the fact that it had planned to lose 16 cents a share. The company reported a net loss of $3.2 million, or 16 cents a share, compared to a prior year profit of $900,000, or five cents a share.



"While we are disappointed with our second quarter sales performance, our earnings per share met the low end of our guidance," said Andy Hall, Gordman’s president and CEO. "As we projected at the beginning of the quarter, our second quarter gross profit was negatively impacted by additional markdowns taken to clear aged merchandise. In addition, we reduced our average store inventory by 11% at the end of the second quarter compared to the second quarter last year. Our quarter end inventory level and content positions us to improve our sales and gross margin performance trends in the second half of fiscal 2014."



Sales during the quarter increased 3.1% to $141 million compared to the second quarter the prior year, but the gain was driven entirely by new stores. Gordmans open 10 new stores last year and five new stores during the first half of this year to give it a total of 97 locations in 20 states. The square footage expansion and entry into new markets has helped the top line, but same store sales in the second quarter declined 6.8% and that was on top of prior year decline of 2.6%. The company said its best performing category in the second quarter was apparel followed by home and accessories.



Those are categories Hall knows well so there is hope for Gordman’s on the merchandise front as the company addresses the perennial retail challenges of driving store traffic and growing transactions. Hall is a former Stage Stores CEO and department store executive Gordmans brought in on August 19 to replace board member Scott King who had served as interim CEO for the past five months. Hall also spent considerable time in senior roles at leading department store retailers prior to joining Stage Stores in 2006.



Hall will have his hands full at Gordmans and while some immediate margin improvement is expected sales are forecast to again decline in the third quarter. A 40 to 50 basis point improvement in gross margins is forecast for the third quarter, however increased expenses related to the opening of the company’s second distribution center are expected to negatively affect profits. Gordmans forecast an earnings per share loss in the range of seven cents to 11 cents in the third quarter and also said same store sales are likely to decline in the mid-single digits.