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Kaspien Holdings Inc. Reports Fiscal Third Quarter 2022 Results

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Kaspien Holdings Inc. (KSPN) reported a 9.4% decline in net revenue, totaling $29.1 million for Q3 2022, compared to $32.2 million the previous year. The decrease is attributed to reduced sales in the FBAUS segment. Despite this, the gross margin improved to 22.6%, up from 19.8% in Q2 2022. The company reported a net loss of $3.6 million or $0.92 per diluted share. Cash used in operations rose to $6.3 million. Management emphasized focusing on inventory and cash flow management as they prepare for fiscal 2023.

Positive
  • Gross margin improved to 22.6% from 19.8% in Q2 2022.
  • General and administrative expenses decreased by $0.4 million year-over-year.
Negative
  • Net revenue decreased 9.4% to $29.1 million from $32.2 million.
  • Gross profit fell 17.9% to $6.6 million, compared to $8.0 million in Q3 2021.
  • Loss from operations increased to $2.7 million from $2.0 million year-over-year.
  • Net loss increased to $3.6 million, compared to a $0.9 million loss in the same quarter last year.
  • Cash used in operations increased to $6.3 million from $5.1 million year-over-year.

SPOKANE, Wash., Dec. 13, 2022 /PRNewswire/ -- Kaspien Holdings Inc. (NASDAQ: KSPN) ("Kaspien" or the "Company"), a leading e-commerce marketplace growth platform, today reported financial results for the fiscal Third quarter ended October 29, 2022. 

Management Commentary

"During the third quarter, we began seeing the results of our vendor rationalization and remediation strategy.  Gross margin for the quarter improved to 22.6% from 19.8% in the second quarter and general and administrative expenses decreased $0.4 million from the prior year third quarter. Our focus for the fourth fiscal quarter is on prudent and strict inventory and cash flow management to set the foundation for fiscal 2023," said Kaspien interim CEO Brock Kowalchuk.

Fiscal Third Quarter 2022 Financial Results

Results compare 2022 fiscal Third quarter ended October 29, 2022 to 2021 fiscal Third quarter ended October 30, 2021 unless otherwise indicated.

  • Net revenue decreased 9.4% to $29.1 million from $32.2 million in the comparable year-ago period. The decrease in net revenue was primarily attributable to declines in Fulfillment by Amazon United States ("FBAUS"). Gross merchandise value ("GMV") for the three months ended October 29, 2022 was $63.9 million as compared to $63.5 million for the three months ended October 30, 2021. Retail GMV decreased 7.8% to $30.4 million compared to $33.0 million in the comparable year-ago period. Subscription GMV increased 9.8% to $33.5 million, or 52.4% of total GMV, compared to $30.5 million, or 47.6% of total GMV, in the comparable year-ago period.
  • Gross profit decreased 17.9% to $6.6 million or 22.6% of net revenue from $8.0 million or 24.9% of net revenue in the comparable year-ago period. The decrease in gross profit was primarily attributable to a reduction in net revenue for FBAUS, and a decrease in merchandise margin. The table below summarizes the year-over-year comparison of gross margin:


Thirteen Weeks Ended


Change



(amounts in thousands)


October 29, 2022


October 30, 2021



$

%














Merchandise margin


$

12,691


$

14,653


$

(1,962)

-13.4 %


% of net revenue



43.5 %



45.5 %



-2.1 %















Fulfillment fees 



(3,888)



(4,375)



487

-11.1 %


Warehousing and freight



(2,228)



(2,274)



46

-2.0 %


Gross profit


$

6,575


$

8,004


$

(1,429)

-17.9 %














% of net revenue



22.6 %



24.9 %






 

  • Selling, General & Administrative ("SG&A") expenses were $9.3 million or 31.8% of net revenue as compared to $10.0 million or 31.1% of net revenue in the comparable year-ago period. The decline in SG&A expenses was due to a reduction in Selling expenses related to the decline in Net revenue and a $0.4 million reduction in General and administrative expenses.
  • Loss from operations was $2.7 million, compared to a loss from operations of $2.0 million in the comparable year-ago period. The increase in operating loss resulted from the decline in net revenue and a reduction in merchandise margin.
  • Net loss was $3.6 million, or $0.92 per diluted share, compared to a net loss of $0.9 million, or $0.36 per diluted share, in the comparable year-ago period.
  • Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $2.3 million, compared to an adjusted EBITDA loss of $1.4 million in the comparable year-ago period.
  • As of October 29, 2022, the Company had $0.8 million in cash, compared to $1.2 million as of January 30, 2021 and $1.8 million as of October 30, 2021.
  • Cash used in operations during the thirteen weeks ended October 29, 2022 was $6.3 million, compared to $5.1 million in the comparable year-ago period.
  • Inventory at quarter end was $37.4 million, compared to $30.0 million as of October 30, 2021.
  • As of October 29, 2022, the Company had borrowings under its credit facility of $9.5 million and had $5.2 million available for borrowing.

Fiscal First Nine Months Financial Results

Results compare nine months ended October 29, 2022 to nine months ended October 30, 2021 unless otherwise indicated.

  • Net revenue decreased 11.9% to $94.8 million from $107.7 million in the comparable year-ago period. This decrease in net revenue was driven by declines in the Company's FBAUS segment.
  • Gross profit was $20.2 million or 21.3% of net revenue, compared to $26.6 million or 24.7% of net revenue over the comparable year-ago period. The decrease in gross profit was primarily attributable to a reduction in net revenue on the Amazon US platform, a decrease in merchandise margin and increased warehousing and freight expenses. The table below summarizes the year-over-year comparison of gross margin:



Thirty-nine Weeks


Change



October 29,



October 30,

$

%


(amounts in thousands)



2022


2021














Merchandise margin


$

40,858


$

49,309


$

(8,451)

-17.1 %


% of net revenue



43.1 %



45.8 %



-2.8 %















Fulfillment fees 



(13,110)



(16,218)



3,108

-19.2 %


Warehousing and freight



(7,593)



(6,455)



(1,138)

17.6 %


Gross profit


$

20,155


$

26,636


$

(6,481)

-24.3 %














% of net revenue



21.3 %



24.7 %

















 

  • SG&A expenses decreased 2.9% to $30.0 million or 31.6% of net revenue from $30.9 million or 28.7% of net revenue in the comparable year-ago period. The decrease in SG&A expenses was primarily attributable to a $1.9 million decline in selling expenses partially offset by a $1.0 million increase in general and administrative expenses.
  • Loss from operations totaled $9.8 million compared to a loss from operations of $4.3 million in the comparable year-ago period. The increased loss was due to lower Net revenue and gross margin.
  • Net loss was $12.4 million, compared to a net loss of $2.2 million in the comparable year-ago period.
  • Adjusted EBITDA loss (a non-GAAP metric reconciled below) was $8.9 million, compared to a loss of $3.2 million in the comparable year-ago period.
  • Cash used in operations was $12.2 million, compared to $10.0 million in the comparable year-ago period.

About Kaspien

Kaspien Holdings Inc. (f/k/a Trans World Entertainment Corporation) (NASDAQ: KSPN) is a leading e-commerce marketplace growth platform, offering an expanding suite of software and services to help brands grow on Amazon, Walmart, Target, eBay, and other online marketplaces. Founded in 1972 as a brick-and-mortar retailer and rebranded as Kaspien in 2020, the Company has spent the last decade building and utilizing proprietary technologies for brand protection, marketing optimization, and fulfillment efficiency to generate rapid revenue growth for its partners. Through innovative strategies and best-in-class technologies, Kaspien has earned the trust of many leading brands, including 3M, Strider Bikes, and ZippyPaws. For more information, visit kaspien.com.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net loss, adjusted to exclude: (i) income tax expense; (ii) Other income; (iii) interest expense; and (iv) depreciation expense. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. We use adjusted EBITDA to evaluate our own operating performance and as an integral part of our planning process. We present adjusted EBITDA as a supplemental measure because we believe such a measure is useful to investors as a reasonable indicator of operating performance. We believe this measure is a financial metric used by many investors to compare companies. This measure is not a recognized measure of financial performance under GAAP in the United States and should not be considered as a substitute for operating earnings (losses), net earnings (loss) from continuing operations or cash flows from operating activities, as determined in accordance with GAAP.


Thirteen Weeks Ended


Thirty-Nine Weeks Ended


October 29,

October 30,


October 29,

October 30,

(amounts in thousands)

2022

2021


2022

2021







Net loss

$          (3,561)

$             (886)


$         (12,407)

$        (2,221)

Income tax expense (benefit)

-

-


43

46

Other (income) loss

-

(1,567)


-

(3,530)

Interest expense

881

439


2,544

1,455

Loss from operations

(2,680)

(2,014)


(9,820)

(4,250)

Depreciation expense

367

572


961

1,064

Adjusted EBITDA

$          (2,313)

$          (1,442)


$            (8,859)

$        (3,186)







About Key Performance Indicators
Gross Merchandise Value ("GMV") is the total value of merchandise sold over a given time period through a customer-to-customer exchange site. For Kaspien, it is the measurement of merchandise value sold across all channels and partners within the Kaspien platform.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements in this communication are forward-looking statements. The statements contained herein that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties.

We have used the words "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", and similar terms and phrases, including references to assumptions, in this document to identify forward-looking statements. These forward-looking statements are made based on management's expectations and beliefs concerning future events and are subject to uncertainties and factors that could cause actual results to differ materially from the results expressed in the statements. The following factors are among those that may cause actual results to differ materially from the Company's forward-looking statements:  risk of disruption of current plans and operations of Kaspien and the potential difficulties in customer, supplier and employee retention; the outcome of any legal proceedings that may be instituted against the Company; the Company's level of debt and related restrictions and limitations, unexpected costs, charges, expenses, or liabilities; the Company's ability to operate as a going-concern; deteriorating economic conditions and macroeconomic factors; the impact of the COVID-19 pandemic; and other risks described in the Company's filings with the SEC, such as its Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.

The reader should keep in mind that any forward-looking statement made by us in this document, or elsewhere, pertains only as of the date on which we make it. New risks and uncertainties come up from time-to-time and it's impossible for us to predict these events or how they may affect us. In light of these risks and uncertainties, you should keep in mind that any forward-looking statements made in this document or elsewhere might not occur.

Company Contact
Ed Sapienza
Chief Financial Officer
509-202-4261
esapienza@kaspien.com

-Financial Tables to Follow-

 

KASPIEN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)



Thirteen Weeks Ended


Thirty-nine Weeks Ended


October 29,

October 30,


October 29,

October 30,


2022

2021


2022

2021







Net revenue

$      29,145

$         32,172


$     94,843

$   107,680







Cost of sales

22,570

24,168


74,688

81,044

Gross profit

6,575

8,004


20,155

26,636

Selling, general and administrative expenses

9,255

10,018


29,975

30,886

Loss from operations

(2,680)

(2,014)


(9,820)

(4,250)

Interest expense

881

439


2,544

1,455

Other income

-

(1,567)


-

(3,530)

Loss before income tax expense

(3,561)

(886)


(12,364)

(2,175)

Income tax expense

-

-


43

46

Net loss

$      (3,561)

$            (886)


$    (12,407)

$     (2,221)







BASIC AND DILUTED LOSS PER SHARE:






Basic and diluted loss per common share

$        (0.92)

$           (0.36)


$        (4.15)

$       (0.92)







Weighted average number of common shares outstanding –
basic and diluted

3,865

2,491


2,990

2,404







 

KASPIEN HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share and share amounts)



October 29, 2022

January 29, 2022

October 30, 2021

ASSETS

Unaudited


Unaudited

CURRENT ASSETS




  Cash and cash equivalents

$              769

$            1,218

$          1,754

  Restricted cash 

1,158

1,158

1,158

  Accounts receivable

2,796

2,335

2,566

  Merchandise inventory

37,353

29,277

30,248

  Prepaid expenses and other current assets

706

649

760

          Total current assets

42,782

34,637

36,486





  Restricted cash 

1,601

2,447

2,732

  Fixed assets, net

2,140

2,335

2,251

  Operating lease right-of-use assets

1,678

2,144

2,284

  Intangible assets, net

-

-

-

  Cash Surrender Value

3,563

4,154

4,413

  Other assets

682

965

1,074

          TOTAL ASSETS

$         52,446

$          46,682

$        49,240





LIABILITIES




CURRENT LIABILITIES




  Accounts payable

$         12,648

$            6,271

$          6,743

  Short-term borrowings

9,494

9,966

5,858

  Accrued expenses and other current liabilities

1,962

2,362

2,685

  Current portion of operating lease liabilities

634

649

636

          Total current liabilities

24,738

19,248

15,922





  Operating lease liabilities

1,253

1,608

1,764

  Long-term debt

9,163

4,356

4,161

  Other long-term liabilities

13,590

14,185

15,515

          TOTAL LIABILITIES

48,744

39,397

37,362





SHAREHOLDERS' EQUITY




Preferred stock  ($0.01 par value; 5,000,000  shares authorized; none issued)

-

-

-

    Common stock ($0.01 par value; 200,000,000  shares  authorized; 5,321,985,




        3,902,985 and 3,902,985  shares issued,  respectively)

53

39

39

Additional paid-in capital

263,766

359,220

359,100

    Treasury stock at cost 467,069, 1,410,378 and 1,410,378 shares, respectively)

(125,906)

(230,170)

(230,170)

Accumulated other comprehensive loss

(910)

(910)

(2,007)

Accumulated deficit

(133,301)

(120,894)

(115,084)

          TOTAL SHAREHOLDERS' EQUITY

3,702

7,285

11,878

          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$         52,446

$          46,682

$        49,240













 

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SOURCE Kaspien Holdings Inc.

FAQ

What were Kaspien Holdings Inc.'s Q3 2022 financial results?

Kaspien reported a net revenue of $29.1 million for Q3 2022, a 9.4% decline from the previous year.

How did Kaspien's gross margin perform in Q3 2022?

Kaspien's gross margin improved to 22.6% in Q3 2022, up from 19.8% in Q2 2022.

What was Kaspien's net loss for Q3 2022?

Kaspien reported a net loss of $3.6 million or $0.92 per diluted share in Q3 2022.

How much cash did Kaspien use in operations during Q3 2022?

Kaspien used $6.3 million in cash for operations during Q3 2022.

What is the outlook for Kaspien Holdings Inc. after Q3 2022?

Management aims to focus on inventory and cash flow management to prepare for fiscal 2023.

KASPIEN HOLDINGS INC

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