Harry & David reports 1st-quarter loss

However, the company says it's poised for a successful Christmas

The fiscal first quarter has never been a big winner for Harry & David Holdings — in good times or bad — as it harvests pears, ramps up production and sets up logistics for the coming holiday surge.

The Medford-based gourmet food and gift company Tuesday reported an $11.5 million loss for the fiscal first quarter of 2013. Harry & David said it had sales of $33.2 million for the 13 weeks ending Sept. 29.

"Viewed from the perspective of other specialty retailers, we're all in a similar position, with the magnitude differing depending on the size of company," said Chief Financial Officer Mike Schwindle. "Those retailers know they will lose money that time of the year. We know that and expect it and plan for it."

The good news for Harry & David is that it's set up for solid back-to-back Christmas runs after exiting bankruptcy in September 2011.

"We're pleased with what we saw on the sales side," Schwindle said. "From a profitability perspective, it's the best first quarter we've seen in quite a few years. It reflects the growth and restoration of growth on our customer file and improvements in our Web traffic ... and we see it as a positive result. Seasonality in our business is very steep, and we are working on things to mitigate that."

Comparable sales increased 9.7 percent over the prior year after adjusting for the additional week in the fiscal 2012 period and taking into account 13 stores closed since last year.

"We're exploring several avenues on the retail side," Schwindle said. "We're testing a temporary store concept in several markets and have high expectations. We'll see if the results validate it and then we'll go forward."

Harry & David's direct marketing produced $18.2 million in sales, an increase of $1.1 million or 6.6 percent. Adjusting for the additional week in the fiscal year, 2012 direct marketing sales were up $2 million, or 12.2 percent. The sales increase was because of a 15.2 percent increase in orders driven by greater Web traffic. Same-store sales were up 1.5 percent between the two periods, even though total store sales decreased $2.3 million, or 16.8 percent, because of store closures.

The company said wholesale revenue was up $800,000 from the previous year because of earlier holiday shipments.

"We believe that we are well positioned for the holiday selling period with a strong assortment and inventory position, as well as marketing and operational plans built to both retain existing customers and attract new customers," said Chief Executive Officer Craig Johnson.


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