NEW YORK — Specialty retailer New York & Co. posted a loss Tuesday as fees relating to its initial public offering cut into the bottom line.
But top executives said they weren’t worried over the results and have their sights set on making the retailer a top destination for accessories. Wall Street also saw through the loss, and sent shares soaring.
“We’re going to become the accessories store for America to shop at. This will be, implicitly, our second line of business,” said John Howard, chief executive officer of Bear Stearns Merchant Banking and a director of the retailer.
In 2002, Bear Stearns bought New York & Co. from Limited Brands Inc. for $78.5 million cash and subsequently advised the retailer on its $170 million initial public offering in October.
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For the quarter ended Oct. 30, New York & Co. lost $4.6 million, or 10 cents a diluted share, compared with a profit of $5.8 million, or 10 cents, in the year-earlier period. Results included $4.7 million in advisory fees, of which $4 million was a termination payment to Bear Stearns Merchant Banking.
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Carving out the fees, earnings increased 46 percent to $11.8 million, or 23 cents, which compared with $8.1 million, or 15 cents, last year. On this basis, analysts were expecting a profit of 20 cents.
Total revenues in the third quarter came in at $242.3 million, up 8.5 percent. Same-store sales increased 7 percent, driven by sales of sweaters and accessories.
In an interview with WWD, Howard described the retailer as “the biggest billion-dollar secret in retail” that could eventually reach up to 800 stores or more, a fact that Richard Crystal, president and ceo of the retailer, confirmed on a post-earnings conference call with analysts on Tuesday.
While New York & Co. grew out of the more than 80-year-old apparel chain Lerner New York in 2000, accessories could very well be the key to its future, Howard and Crystal said. That isn’t surprising, given that accessories same-store sales — sales at stores open at least a year — spiked 27 percent in the third quarter and made up 13.7 percent of total business, according to Crystal.
Accessories are important to New York & Co., said Crystal, because they attract customers. “Lots of [retailers] are trying; we’re already ahead of the game,” he told WWD. “We offer apparel and accessories that work together and therein lies our competitive advantage.”
Accessories — as with all of New York & Co.’s merchandise — are proprietary, which helps the company maintain cost controls as well as certain price levels, effectively allowing it to pass along value to customers. That value, plus fashionable, trend-right merchandise, make New York & Co. stand out in the industry, said Howard.
“The people who shop here don’t have that much disposable income, so we want to give them a good deal,” Howard said. New York & Co. targets women ages 25 to 45 with annual household incomes ranging from $40,000 to $75,000, a demographic targeted by retailers such as Limited Brands Inc. or Claires Stores.
Meanwhile, expansion, especially in its accessories business, is a staple for New York & Co., which currently has 486 stores. Crystal said on the conference call that the company will have 26 new stores and 40 remodels by fiscal yearend. The firm, which now has just one stand-alone accessories store, said it expects to open more, as well as 20 to 30 side-by-side or dual-entrance stores.
The dual-entrance stores have one door entering the accessories store and one going into the apparel store.
Shares of the company surged on the earnings news, closing Tuesday’s session on the New York Stock Exchange up 9.2 percent at $22, well above the $17 a share IPO price from October.