Finlay Continues to Lose Despite Sales Gains

Fine jewelry retailer Finlay Enterprises reported an 8.1 percent rise in second quarter sales to $162.9 million. Comparable department sales (departments open for the same months during the comparable period) increased 3.4 percent. Despite this, the company is reporting a quarterly loss of $4.6 million compared to a loss of $77.6 million in the same period of 2005.

The loss during the second quarter of 2005 included a pre-tax charge of $77.3 million for the impairment of goodwill. Excluding this charge, the loss was $4.7 million.

Finlay, the largest operator of licensed fine jewelry departments in department stores in the United States, reported that the Carlyle chain, which the company bought in May 2005, contributed sales of $20 million versus $13.9 million last year.

Income from operations before depreciation and amortization expenses for the quarter totaled $2.1 million, compared to $1 million in the prior year period, excluding the goodwill charge.

According to Arthur E. Reiner, Finlay’s chairman and CEO, the company reduced short-term borrowings by $38 million, or 43 percent, from last year and decreased total inventory levels, including consignment, by approximately $100 million, exclusive of Carlyle.

“With continued solid execution, we believe we are positioned to grow and enhance our business over the long-term,'' Reiner says.

The company anticipates per share loss for the third quarter to be between $0.85 and $0.90 on both a continuing operations and consolidated basis, as most of the store marked for closure closed in the first half of the year. These estimates are based on comparable store sales in the range of 3.5 percent to 4 percent.

For fiscal year 2006, the Company now projects EBITDA in the range of $40 to $42 million and earnings per diluted share, on a continuing operations basis, in the range of $0.20 to $0.30, excluding central office severance and other closing related costs.