Whitehall Jewellers Q1 Results Highlight Growing Problems

Whitehall Jewellers released today its first quarter results, posting a net loss of $3.7 million compared to a net loss of $2.8 million for the same period a year ago, partially due to increased litigation expenses.

The jeweler recorded growing litigation costs of $8.6 million for the consolidated Capital Factors actions and the US Attorney and SEC investigations.

The company said its actively seeking additional settlement negotiations relating to these matters. In light of this it has recorded an additional accrual to the tune of $350,000. In addition, professional fees increased by $1.7 million over the first quarter last year. This increase came primarily in connection with the Capital Factors actions and the related investigations.

Not all is bleak though, as net sales for the quarter ended April 30, increased 5.6 percent to $73 million compared to $69.1 million in the first quarter last year. Comparable store sales increased 3.3 percent in the first quarter compared to a decrease of 8.7 percent last year.

Hugh M. Patinkin, Chairman and CEO, commented, “At the beginning of the year we began to introduce a number of programs which are designed to improve merchandise gross margin. We are pleased with the progress we made in implementing these programs”.

“We are in the process of evaluating our future store expansion plans. We currently anticipate increasing our rate of new store growth in 2005 and 2006.”

Regarding the investigations Patinkin said, “We continue to cooperate with the United States Attorney and the Securities and Exchange Commission in their investigations related to the Capital Factors actions. We are also actively recruiting for the newly created position of Chief Operating Officer as well as for a new Executive Vice President of Merchandise”.