Bluestem Group Inc. Announces Unaudited Consolidated Second Quarter Fiscal 2019 Earnings Results
Bluestem Group Inc. ("Bluestem Group" or the "Company") (OTCMKTS: BGRP) today reported unaudited consolidated financial results that include its wholly-owned subsidiary, Bluestem Brands, Inc. and its subsidiaries (“Bluestem Brands”), for the 13- and 26-weeks ended August 2, 2019 and August 3, 2018. We refer to the 13-week periods in this release as the "second quarter." Bluestem is a multi-brand, direct-to-consumer online retailer of a broad selection of name-brand and private label general merchandise serving the boomer and senior demographic, generally considered age 50 and over, and low- to middle-income consumers across all age demographics.
Second Quarter Fiscal 2019 Bluestem Brands Highlights
- The previously announced strategic exit from six of our eleven Orchard brands is on track, with inventory liquidation completed in August 2019.
- Net sales were $365.4 million, a 13.5% decrease compared to the second quarter of fiscal 2018. Net sales decreased 9.7% when adjusted for exited brand sales in 2019 and 2018.
- Gross margin was 46.4% compared to 47.8% in the second quarter of fiscal 2018. Excluding the impact of inventory liquidation of the exited brands, gross margin was 46.6%.
- Selling and marketing expenses as a percent of net sales was 21.8% compared to 23.3% in the second quarter of fiscal 2018.
- Net credit expense excluding servicing rights valuation was $23.2 million, an improvement of $6.2 million compared to Q2 2018 from a lower merchant discount rate charged on sales to SCUSA due to an improving credit portfolio.
- Contribution margin, excluding the impact of the servicing rights valuations and the inventory liquidation of exited brands, was 18.3% of net sales an improvement of 80 bps compared to Q2 2018.
- Adjusted EBITDA was $25.1 million compared to $31.6 million in the second quarter of fiscal 2018, excluding the impact of inventory liquidation of the exited brands, decreased 50 basis points as a percent of net sales.
- Compliant with lender covenants as of the end of the second quarter, net liquidity was $50.2 million compared to a covenant requirement of $40.0 million and lender leverage ratio was 3.02x compared to a covenant requirement of 4.50x.
Bruce Cazenave, CEO, stated, “During second quarter, we continued to benefit from initiatives employed to stabilize the credit portfolio and delivered increased contribution margin rates once again at both the Northstar and Orchard portfolios. At Northstar, we remain focused on implementing our customer segmentation and personalization strategies to drive increased overall customer engagement while also continuing to deliver improvements in the credit portfolio. At Orchard, there are encouraging signs that our continued focus on circulation productivity as well as refinements to our merchandising and marketing strategies will yield positive results for our go-forward brands. At this time, we continue to develop a new three year strategic plan which will add focus to driving improved performance in core business processes as well as capitalizing on our growth opportunities. We have a differentiated business model that enables us to offer a compelling value proposition to our value-minded customers and believe that the execution of this plan will lead to long term profitable growth and enhanced value to our stakeholders.”