Hamilton Beach 2013 Annual Report Download - page 19

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Overall, revenues decreased from $224.7 million
in 2012 to $196.0 million in 2013. Operating results
were also very disappointing as a result of reduced
revenues, lower margins due to the liquidation of a
significant amount of inventory as stores were closed
and charges totaling $2.0 million, or $1.3 million after
tax of $0.7 million, for the impairment of fixed assets
($1.1 million), employee severance costs ($0.6 million)
as part of a program to close more underperforming
stores in 2014 and inventory valuation reductions ($0.3
million). As a result, Kitchen Collection reported a net
loss of $6.9 million in 2013 compared with a net loss
of $3.1 million in 2012 and had negative cash flow
before financing activities of $12.2 million in 2013
compared with negative cash flow before financing
activities of $0.1 million in 2012.
Outlook for 2014
Consumer traffic to all mall locations, and
particularly outlet malls, continued to decline in 2013,
especially in the fourth quarter. Prospects for 2014 are
uncertain. Fewer households were established in 2013,
and this trend is expected to continue in 2014 because
the middle-market consumer remains under pressure
as a result of financial and economic concerns. These
concerns are expected to continue to dampen consumer
sentiment and limit consumer spending levels for
Kitchen Collection’s target customer in 2014. In this
context, Kitchen Collection expects to close over 50
stores in 2014, with the majority closing in the first
quarter, as part of a program to close underperforming
stores and realign the business around core stores
which perform with acceptable profitability. Kitchen
Collection plans to maintain a lower number of stores
in 2014 and, as a result, expects 2014 revenues to
decrease compared with 2013.
The net effect of closing stores early in 2014 and
the anticipated opening of a small number of new stores
during the second half of 2014 is expected to contribute
to significantly improved operating results, with the
objective of approaching break-even operating profit in
2014 compared with a significant loss in 2013. As part
of Kitchen Collection’s program to realign its business,
the company plans not only to close unprofitable stores,