Rest of Year Looks Strong as Bombay Begins Turnaround

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The Bombay Company continued an upward climb as its stock shot up 40 percent from April 29 to May 29, during which time the share price moved from $3.55 to $4.97.

The increase built on the 21.5 percent improvement during April.

Among the believers in the multi-channel retailer is Alex Rotonen, an analyst with SWS Securities, Dallas. His firm upgraded the stock from market outperform to strong buy last month.

"The core business trend started to improve, and their new initiatives bring upside to earnings and sales for the rest of this year and going forward," he said. "They cut back on orders and after 9/11 mall traffic was down significantly."

Rotonen estimated that out of the company's 420 retail outlets, 80 percent are in malls.

"In January, February and March they had weak comps, due in part to consumer spending overall," he said. " They had two catalogs last year in March vs. one this year, so they were still behind the 8-ball in March. In the second half of April, sales strength started to improve and they were positive in terms of same-store sales compared to the previous year. Once they started getting new product in and the catalog back into circulation, the trend started improving in the last part of April."

The company reported that revenue for the quarter ended May 4 totaled $90.9 million compared to $91 million during the corresponding period of the previous year. Same-store sales for stores in existence for more than one year fell 10 percent during the quarter. Revenue from non-store activity -- including Bailey Street Trading Company, Internet, mail-order and international --amounted to 7 percent of total revenue during the quarter compared to 3 percent for the first quarter of the previous year.

The net loss for the quarter ended May 4 was $3.4 million compared to a loss of $3 million for the same period last year.

"Before, products were displayed not by categories, it was more by the look," Rotonen said. "It was not well organized and now they are presenting them more by categories. Resetting should be done by the beginning of June. And Bailey Street Trading Company, a wholesale division selling to 2,000 mom and pop furniture specialty stores, is doing well and they are in discussions with Home Depot."

Chairman/CEO Carmie Mehrlander said the attempt to increase sales and grow the customer database by reducing catalog distribution, testing newspaper ads and other direct mail pieces during the quarter proved unsuccessful.

"We have reinstated our catalog program. For the balance of the year, we plan to mail 13 percent more catalogs than last year while we continue to test alternative methods to increase our marketing reach," Mehrlander said. "Last fall's decision to cancel and delay purchases in light of the weakness in the retail environment post-Sept. 11 resulted in a lack of freshness in the product mix during the first quarter."


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