Losses at Harry & David Holdings doubled during fiscal year 2010, but cost-cutting and reduced inventories have put it in better position for the coming year.
The Medford-based gourmet food and gift company Thursday reported a net loss of $39.2 million in fiscal 2010 following a $20.2 million loss in fiscal 2009. The fiscal year ended June 26.
Harry & David reported net sales of $426.8 million during fiscal 2010, a 12.8 percent decline from 2009's $489.6 million sales. The company said declining demand led to lower sales, while fixed costs remained. The firm also suffered from higher delivery discounts.
A new hierarchy, reconfigured departments, reduced inventories and a four-year credit line have strengthened the company's cash position, Chief Financial Officer Ed Dunlap said.
"Our cash position is much stronger now," Dunlap said. "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."
Harry & David boosted its cash and short-term investments by $3.3 million to $18.7 million on June 26 and benefited from the sale of land-use rights, which provided $1.3 million.
Dunlap said excluding $9.8 million in stock-option compensation and severance payments, Harry & David's numbers were closer to the company's 2009 performance. Harry & David reported more than $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 company's favor.
Harry & David also continued to pay an annual management fee of $1 million to Wasserstein & Co. and Highfields, along with $686,000 in recruiting and relocation expenses.
"Throughout fiscal 2010, we continued to experience a challenging retail environment characterized by a slowly recovering economy and cautious discretionary consumer spending," said Steven Heyer, chairman of the board and chief executive officer in a release.
Administrative expenses decreased $33 million to $197.3 million during the year. The decrease was driven primarily by lower advertising and payroll expenses and fewer write-offs. However, 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. The 20.6 percent decrease in inventory was primarily due to a combination of improved inventory planning and lower overall production.
During the fourth quarter, sales decreased 13 percent to $47.3 million. Harry & David operated 13 fewer stores during the period than a year earlier, as well.
The net loss for the quarter was $21.2 million compared with a $17.3 million setback in 2009.
Reach reporter Greg Stiles at 541-776-4463 or e-mail email@example.com.