For the reported period, luxury brand's gross profit was $25.6 million, or 42.0 per cent of net sales. This compares to gross profit of $27.4 million, or 45.1 per cent of net sales, in the second quarter of fiscal 2016. The prior year results reflected a $1.9 million benefit from favourable adjustments to inventory reserves. In addition, gross margin in the second quarter of fiscal 2017 was negatively impacted by a higher mix of markdowns in the direct-to-consumer segment, as well as an unfavourable impact from higher product and supply chain costs, partially offset by decreased discounts and allowances in the wholesale segment.
"We were pleased to see the stabilisation in net sales during the second quarter, which showed significant sequential improvement versus our first quarter results. In our wholesale business, sales decreased slightly, due to a reduction in international sales. We also saw disruption in receipt flows for pre-Fall and Fall deliveries. In our direct-to-consumer segment, we saw sequential improvement in sales, with strong sales growth in our e-commerce business. In addition, we were very pleased with the positive sell through that we have seen for our Fall product thus far in our retail channel," said Brendan Hoffman, chief executive officer.
The company's selling, general, and administrative expenses were $34.4 million, or 56.6 per cent of sales compared to $31.6 million, or 52.1 per cent of sales, in the second quarter of fiscal 2016. The growth in SG&A expense for the second quarter of fiscal 2017 was primarily due to a net increase of $2.3 million reflecting investments related to the remediation and optimisation of IT systems, severance, and other one-time investments as well as savings related to the Company’s previous consulting arrangement with its founders.
"As we look ahead, we have taken steps to rationalise our department store distribution and made the strategic decision to enter into limited distribution arrangements for non-licensed products with two department store partners, Nordstrom and Neiman Marcus, beginning in fiscal 2018. We expect that these partnerships will bring a number of benefits to our business, including driving improved profitability over the long-term," said Hoffman.
"Overall, we believe that we have the right initiatives and team in place for our brand, and expect to stabilize and ultimately drive growth in the business as we refine our wholesale distribution strategy, and enhance our direct-to-consumer segment. In addition, we believe that our efforts to deliver product that is better aligned with customers’ needs and enhanced, targeted marketing initiatives, combined with our focus on reducing costs across the business while making investments in our infrastructure will support our long term growth objectives," concluded Hoffman. (RR)
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