NEW YORK — Hurt by a lack of merchandise in its stores, Merry-Go-Round Enterprises reported a loss of $10.8 million before interest, income taxes, depreciation, amortization and reorganization costs in the first quarter ended April 30.
The loss, compared to earnings before interest, taxes, depreciation and amortization of $11.4 million last year, was not unexpected, as the retailer continues to move to restock its stores with fresh merchandise.
MGR, which filed a Chapter 11 petition to reorganize on Jan. 11, had told trade credit executives that it expected the red ink to flow until the back-to-school season, when its stores become fully restocked after being depleted of inventory last winter as resources refused to ship goods during the company’s financial squeeze.
“From a credit point of view, MGR is solid with a $125 million line of debtor-in-possession financing practically untouched and about $50 million cash on hand,” one industry credit watcher said Thursday.
MGR said its net loss in the quarter, reflecting $4.9 million in costs associated with terminating 39 store leases and the write-off of related store assets, as well as $2.1 million in professional fees, reached $24.1 million. Also included in the net loss was a $3 million income tax benefit.
In the year-earlier quarter, the company had a net profit of $2 million, or 4 cents a share.
Sales in the 13-week period dropped 9 percent, to $169 million from $186 million the previous year. MGR, which now operates 1,361 stores, including the Merry-Go-Round, Dejaiz and Cignal chains, said same store sales were off 26 percent in the quarter.
MGR, which has announced plans to close up to 80 stores, said it continues to review its units on a store-for-store basis. Under the most recent bankruptcy court order, it has until July 31 to decide which stores it wants to shutter, although the company has hinted its decision on store closing would probably take longer.