Deb Shops' Margins Widen

Deb Shops' net sales in 4Q were $82.6 million versus $80.7 million in the same quarter a year ago. Gross profit for the quarter was $35.1 million, which resulted in a gross margin of 42.5%, compared with gross profits of $31.9 million and a $39.6% gross margin in 4Q fiscal 2004.

Calling the company's 4Q performance "a great way to end a productive year," Marvin Rounick, president and CEO, said, "throughout fiscal 2005, continued improvements in our operating platform allowed us to better leverage our fixed costs and report meaningful gains in net income and earnings per share in each quarter." He also credited "enhancements to our product offerings (that) enabled us to better meet the demands of our core customer."

For the full fiscal year, net sales rose just 1.7% to $303.8 million, compared with $298.6 million the year before. Full-year gross profit was $99.7 million resulting in a gross margin of 32.8%, versus gross profit of $92 million and a 30.8% gross margin at the end of the previous fiscal year.

Based on this report, Deb Shops' 2006 guidance forecasts fiscal 2006 sales of between $305 million and $315 million. The forecast anticipates low, single-digit comp store sales increases and projected net new store growth of between five and 10 units. During 4Q fiscal 2005, it closed eight stores, opened three new stores, remodeled one existing unit, and converted one junior store to a junior/plus combination.

Meanwhile, heading into the new year, comp store sales for this March are positively impacted by an earlier Easter this year versus last, and are expected to be in excess of the low, single digit increase projected for the year. Conversely, however, this year's early Easter is expected to have a negative impact on sales for this April.

Deb Shops sells shoes and accessories in addition to junior apparel in both regular and plus sizes. It currently operates 323 stores in 41 states under the names DEB and Tops 'n Bottoms. It trades on the Nasdaq under the call letters DEBS. Shares closed at $28.22 a share on Thursday, March 31. The 52-week high is $30.25 a share; the 52-week low, $22 a share.