(Filed Under wholesale Lingerie News). First quarter sales at Peekay Boutiques, the chain that sells adult products and lingerie, dropped by $436,000, while its losses for the period rose from $486,000 last year to $889,000 for the first three months of this year.
The 47-store chain reported sales of $11.269 million for the period ended March 31, 2016 compared to $11.705 million in the same period last year. The decline in sales and expanded losses came in what is supposed to be one of the best times of year for the stores. “Significant portions of the company’s net revenue and operating income are realized during the first and fourth quarters of the fiscal year, corresponding to the Valentine Day and holiday shopping seasons, respectively,” Peekay admitted in its most recent SEC filing.
The firm reported the drop in sales was related, in part, to its exit from a line of unsuccessful private label adult products as well as DVDs. “Sales of our private label products declined $0.3 million for the three months ended March 31, 2016, as compared to the comparable period in 2015, as we finish selling through the remaining products imported in 2013 and early 2014, while DVD sales were $0.2 million lower than 2015, as we discontinued distribution of DVDs in the third quarter of 2015. Total revenue, as adjusted for these assortment changes, would have increased by 0.8% over Q1 2015, which was the highest quarterly revenue in the company’s history.”
Peekay said in the quarterly filing that its “auditor has raised substantial doubt about our ability to continue as a going concern, relating that “During 2014 and 2015, we incurred net losses of $4.2 million and $46.7 million (including a $40.6 million goodwill impairment charge), respectively. Our net losses are largely a result of interest expense on the approximately $51 million of debt, which exceeds the operating profits generated through the operations of our business. Approximately $38.2 million in senior secured debt matured on February 15, 2016, and we do not have the resources necessary to pay this debt and we have been unable to find replacement financing.”
The chain added that it is “currently operating under a Ninth Amendment [to its financing agreements] providing for certain forbearance treatment” with its lenders, and admitted, “we may be forced to file for bankruptcy and/or liquidate our assets if we are unable to meet the terms of the agreement. Our ability to continue our operations and execute our business plan is dependent on our ability to refinance this debt and/or to raise sufficient capital to pay this debt and other obligations as they come due (or are extended through a refinancing) and to provide sufficient capital to operate our business as contemplated. If we are unable to refinance our existing senior debt or raise equity capital we may have to cease operations and liquidate our assets and the holders of our equity may lose all or a significant portion of the value of their equity.”
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