Retail Ventures Back in Black

Columbus, Ohio — Retail Ventures Inc., the parent of Value City and Filene's Basement, broke back into the black — with a highly qualifying asterisk — reporting a first quarter profit of $54.2 million, compared with a year-before loss of $1.3 million.

But it wasn't really a cash profit generated by its diversified retail portfolio, rather the results stemmed entirely from a $64.8 million, non-cash paper gain reflecting an increase in the value of warrants. Pull that paper gain out of the equation, and the retailer recorded an operating loss of $6.7 million, compared with a prior-year operating profit of $6 million, as operating costs exceeded what the company took in after it paid for goods sold.

Putting operating results under heavy pressure, average gross margin weakened substantially, thinning 200 basis points, or 2 percentage points, to 38 percent from 40 percent a year ago. Operating costs improved slightly, 30 basis points, or three-tenths of a percentage point.

Sales at Retail Ventures climbed 6.6 percent, to $746.1 million from $699.7 million a year ago. Same-store sales rose 1 percent, a big gain over a 4.1 percent drop during the same period a year ago.

Same-store sales were mixed. Comps declined 1 percent at Value City Department Stores, but that marked a big improvement from a 7.8 percent decline the year before. Same-store sales rose 3.5 percent at the DSW shoe retailing operation, improving on a smaller 0.8 percent gain a year ago. Filene's Basement built its comps 2.1 percent, an improvement over last year's 1.1 percent gain.