New York & Company, Inc. Reports a 37.5% Increase in First Quarter 2008 Earnings, Exceeding Expectations

New York & Company, Inc. (NYSE:NWY), a specialty apparel chain with 586 retail stores, today announced results for the first quarter ended May 3, 2008. The results of operations discussed below are for the Company’s continuing operations only, the New York & Company brand. For the first quarter of fiscal year 2008, net sales were $270.1 million, as compared to $274.2 million for the first quarter of fiscal year 2007. Comparable store sales for the first quarter of fiscal year 2008 decreased 6.6%, compared to a 0.7% decrease in the prior year first quarter. Net income from continuing operations for the first quarter of fiscal year 2008 was $6.7 million, or $0.11 per diluted share, as compared to prior year net income from continuing operations of $5.2 million, or $0.08 per diluted share, representing a 37.5% increase in earnings per diluted share. Richard P. Crystal, New York & Company’s Chairman and CEO, stated: "We are pleased to report better than expected first quarter results. During the period, we maintained our inventory and expense management discipline while providing our customers with compelling fashions across our apparel and accessory categories. At the same time, we eliminated non-brand building promotions. These strategies, in a difficult consumer environment, proved highly successful for our Company and brand, as evidenced by our increase in gross profit margin and a 37.5% rise in earnings per share for the period. We expect the environment for consumer spending to remain difficult this year and as such will maintain our previously stated strategies. We expect fiscal 2008 to represent significant accomplishments toward achieving our goals of building brand loyalty, increasing earnings and enhancing value for our shareholders.” Significant highlights with respect to the first quarter include the following: Favorable response to spring assortments, particularly wear-to-work and accessories categories, along with the elimination of non-brand building promotions led to a significant improvement in merchandise margin and a net increase of 210 basis points in gross profit margin versus the same period a year ago; Reduced inventory by 10.5% on an average store basis driven by disciplined inventory management; Improvement in operating cash flows of $27.0 million as compared to the same period a year ago; Controlled costs with selling, general and administrative expenses declining by 4.3% on an average store basis; and Further strengthened the balance sheet with $61 million in cash versus $37 million at the end of last year’s first quarter while reducing debt by $6 million versus last year’s first quarter end. Outlook The Company expects to continue its successful strategy of improving margin through disciplined promotions and inventory control during what we anticipate to be a challenging business environment. The Company's outlook for the second quarter of fiscal year 2008 reflects comparable store sales in the negative mid single-digit range with margins improving versus the same period a year ago. The Company's current outlook for earnings per diluted share in the second quarter of fiscal year 2008 is in the range of $0.05 to $0.10. This compares to actual second quarter of fiscal year 2007 earnings per diluted share of $0.08. During the second quarter of fiscal year 2008, the Company plans to open approximately 13 stores, ending the quarter with approximately 599 stores. In fiscal year 2008, the Company expects comparable store sales to be in the low to mid negative single-digit range and earnings per diluted share to be in the range of $0.44 to $0.54. This compares to the Company’s previous guidance range of $0.42 to $0.52 and compares to actual fiscal year 2007 earnings per diluted share of $0.44. During fiscal year 2008, the Company plans to open 25 to 30 stores, close approximately 12 stores and remodel approximately 12 stores, ending the fiscal year with 591 to 596 stores and approximately 3.3 million selling square feet in operation, with new stores representing approximately 110,000 selling square feet. Capital expenditures are estimated in the range of $48.0 million to $52.0 million in fiscal year 2008 versus $75.5 million in fiscal year 2007. Depreciation expense for the year is estimated at $44.0 million. Quarterly Comparable Store Sales The Company also announced that beginning in the second quarter of fiscal year 2008, it will report comparable store sales results at the same time it reports quarterly earnings. Quarterly comparable store sales and earnings for the second quarter are expected to be released on or about August 21, 2008. Conference Call Information A conference call to discuss the first quarter of fiscal year 2008 results is scheduled for today Thursday, May 22, 2008 at 8:00 am Eastern Daylight Time. Investors and analysts interested in participating in the call are invited to dial (800) 922-9655, referencing conference ID number 47592579, approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.nyandcompany.com. A replay of this call will be available until midnight on May 29, 2008 and can be accessed by dialing (800) 642-1687 and enter conference ID number 47592579 and pin: 1079. Forward Looking Statements: This press release contains certain forward looking statements. Some of these statements can be identified by terms and phrases such as "anticipate,” "believe,” "intend,” "estimate,” "expect,” "continue,” "could,” "may,” "plan,” "project,” "predict”, and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies. Such statements are subject to various risks and uncertainties that could cause actual results to differ materially. These include, but are not limited to: (i) our ability to open and operate stores successfully and the potential lack of availability of suitable store locations on acceptable terms; (ii) seasonal fluctuations in our business; (iii) our ability to anticipate and respond to fashion trends, develop new merchandise and launch new product lines successfully; (iv) general economic conditions, consumer confidence and spending patterns; (v) our dependence on mall traffic for our sales; (vi) our dependence on the success of our brand; (vii) competition in our market, including promotional and pricing competition; (viii) our reliance on the effective use of customer information; (ix) our ability to service any debt we incur from time to time as well as our ability to maintain the requirements that the agreements related to such debt impose upon us; (x) the susceptibility of our business to extreme and/or unseasonable weather conditions; (xi) our ability to retain, recruit and train key personnel; (xii) our reliance on third parties to manage some aspects of our business; (xiii) changes in the cost of raw materials, distribution services or labor, including federal and state minimum wage rates; (xiv) the potential impact of national and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities; (xv) our reliance on foreign sources of production, including the disruption of imports by labor disputes, political instability, legal and regulatory matters, duties, taxes, other charges and quotas on imports, local business practices, potential delays in shipping and related pricing impacts and political issues and fluctuation in currency and exchange rates; (xvi) the potential impact of natural disasters and health concerns relating to outbreaks of widespread diseases, particularly on manufacturing operations of our vendors; (xvii) the ability of our manufacturers to manufacture and deliver products in a timely manner while meeting our quality standards; (xviii) our ability to successfully integrate new or acquired businesses into our existing business; (xix) our reliance on manufacturers to maintain ethical business practices; (xx) our ability to protect our trademarks and other intellectual property rights; (xxi) our ability to maintain, and our reliance on, our information technology infrastructure; (xxii) the effects of government regulation; and (xxiii) the control of the company by our sponsors and any potential change of ownership of those sponsors; and (xxiv) other risks and uncertainties as described in our documents filed with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to revise the forward looking statements included in this press release to reflect any future events or circumstances. About New York & Company, Inc. New York & Company, Inc., founded in 1918, is a leading specialty retailer of fashion-oriented, moderately-priced women’s apparel. The Company’s proprietary branded New York & Company ™ merchandise is sold exclusively through its national network of New York & Company retail stores and E-commerce store at www.nyandcompany.com. The Company currently operates 586 stores in 44 states. Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company’s website: www.nyandcompany.com. Exhibit (1) New York & Company, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)         (Amounts in thousands, except per share amounts) Three monthsended May 3,2008 %ofnetsales Three monthsendedMay 5,2007 %ofnetsales Net sales $ 270,069 100.0 % $ 274,186 100.0 %   Cost of goods sold, buying and occupancy costs 186,128 68.9 % 194,743 71.0 %   Gross profit 83,941 31.1 % 79,443 29.0 %   Selling, general and administrative expenses 72,575 26.9 % 70,525 25.7 %   Operating income 11,366 4.2 % 8,918 3.3 %   Interest expense, net of interest income 124 — % 261 0.1 %   Income from continuing operations before income taxes 11,242 4.2 % 8,657 3.2 %   Provision for income taxes 4,519 1.7 % 3,480 1.3 %   Income from continuing operations 6,723 2.5 % 5,177 1.9 %   Loss from discontinued operations, net of taxes — — % (4,375 ) (1.6 )%   Net income $ 6,723 2.5 % $ 802 0.3 %     Basic earnings per share from continuing operations $ 0.11 $ 0.09 Basic loss per share from discontinued operations   —   (0.08 ) Basic earnings per share $ 0.11 $ 0.01   Diluted earnings per share from continuing operations $ 0.11 $ 0.08 Diluted loss per share from discontinued operations   —   (0.07 ) Diluted earnings per share $ 0.11 $ 0.01   Weighted average shares outstanding: Basic shares of common stock 59,274 57,805 Diluted shares of common stock 61,232 60,869   Selected operating data for continuing operations: (Dollars in thousands, except square foot data) Comparable store sales decrease (6.6 )% (0.7 )% Net sales per average selling square foot (a) $ 81 $ 84 Net sales per average store (b) $ 464 $ 507 Average selling square footage per store (c) 5,711 6,010 (a)   Net sales per average selling square foot is defined as net sales divided by the average of beginning and end of period selling square feet. (b) Net sales per average store is defined as net sales divided by the average of beginning and end of period number of stores. (c) Average selling square footage per store is defined as end of period selling square feet divided by end of period number of stores. Exhibit (2)   New York & Company, Inc. and Subsidiaries Condensed Consolidated Balance Sheets       (Amounts in thousands) May 3, 2008 February 2, 2008 May 5, 2007 (Unaudited) (Audited) (Unaudited) Assets Current assets: Cash and cash equivalents $ 61,312 $ 73,734 $ 36,527 Accounts receivable 22,605 18,523 23,004 Income taxes receivable 3,108 11,730 — Inventories, net 119,685 103,923 124,351 Prepaid expenses 21,649 21,991 19,791 Other current assets 2,323 1,913 2,630 Current assets of discontinued operations 494 716 7,639 Total current assets 231,176 232,530 213,942   Property and equipment, net 243,882 239,557 205,236 Intangible assets 14,843 14,843 14,843 Other assets 1,425 1,500 1,429 Non-current assets of discontinued operations 5 26 35,918 Total assets $ 491,331 $ 488,456 $ 471,368 Liabilities and stockholders’ equity Current liabilities: Current portion – long-term debt $ 6,000 $ 6,000 $ 6,000 Accounts payable 77,842 77,177 73,534 Accrued expenses 53,708 53,618 49,517 Income taxes payable — — 2,478 Deferred income taxes 2,631 3,928 2,882 Current liabilities of discontinued operations 2,029 7,328 5,554 Total current liabilities 142,210 148,051 139,965   Long-term debt, net of current portion 18,000 19,500 24,000 Deferred income taxes 3,410 3,747 1,923 Deferred rent 75,911 72,537 59,866 Other liabilities 4,671 4,660 613 Non-current liabilities of discontinued operations — — 2,087 Total liabilities 244,202 248,495 228,454   Total stockholders’ equity 247,129 239,961 242,914 Total liabilities and stockholders’ equity $ 491,331 $ 488,456 $ 471,368 Exhibit (3) New York & Company, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)     (Amounts in thousands) Three monthsendedMay 3,2008 Three monthsendedMay 5,2007   Operating activities Net income $ 6,723 $ 802 Less: Loss from discontinued operations, net of taxes — (4,375 ) Income from continuing operations 6,723 5,177 Adjustments to reconcile net income to net cash provided by (used in) operating activities of continuing operations: Depreciation and amortization 10,397 8,723 Amortization of deferred financing costs 44 69 Share-based compensation expense 330 442 Deferred income taxes (1,634 ) (1,608 ) Changes in operating assets and liabilities: Accounts receivable (4,082 ) (9,218 ) Income taxes receivable 8,622 — Inventories, net (15,762 ) (22,095 ) Prepaid expenses 342 (208 ) Accounts payable 665 10,580 Accrued expenses 90 (9,676 ) Income taxes payable — (6,226 ) Deferred rent 3,374 6,033 Other assets and liabilities   (411 )   (301 ) Net cash provided by (used in) operating activities of continuing operations   8,698   (18,308 )   Investing activities Capital expenditures (a)   (14,679 )   (11,537 ) Net cash used in investing activities of continuing operations   (14,679 )   (11,537 )   Financing activities Repayment of debt (1,500 ) (1,500 ) Proceeds from exercise of stock options 11 123 Excess tax benefit from exercise of stock options 104 3,061 Other   —   (36 ) Net cash (used in) provided by financing activities of continuing operations   (1,385 )   1,648   Cash flows from discontinued operations Operating cash flows (5,278 ) (3,201 ) Investing cash flows — (75 ) Financing cash flows — — Net cash used in discontinued operations (5,278 ) (3,276 )   Net decrease in cash and cash equivalents (12,644 ) (31,473 )   Cash and cash equivalents at beginning of period (including cash at discontinued operations of $223 and $206, respectively)   73,957   68,064 Cash and cash equivalents at end of period (including cash at discontinued operations of $1 and $64, respectively) $ 61,313 $ 36,591 (a)   The increase as compared to the prior year was primarily caused by Information Technology expenditures substantially relating to new or enhanced systems and to a lesser extent, due to the timing of new store openings. For full fiscal year 2008, capital expenditures are estimated in the range of $48 million to $52 million versus $75.5 million in fiscal year 2007. Exhibit (4) New York & Company, Inc. and Subsidiaries Store Count and Selling Square Footage (Unaudited)           Fiscal Year 2008 Total stores openat beginning ofthe quarter Number of storesopened duringthe quarter Number of storesremodeled duringthe quarter Number of storesclosed duringthe quarter Total storesopen at end ofthe quarter 1st Quarter (Actual) 578 10 2 (2 ) 586 2nd Quarter (Projected) 586 13 5 — 599 3rd Quarter (Projected) 599 3 5 (2 ) 600 4th Quarter (Projected) 600 — — (8 ) 592   Fiscal Year 2008 Total selling squarefeet at beginning ofthe quarter Selling square feetfor stores openedduring the quarter Reduction of selling square feetfor stores remodeledduring the quarter Reduction of selling square feetfor stores closedduring the quarter Total selling squarefeet at end ofthe quarter 1st Quarter (Actual) 3,327,450 42,139 (8,761 ) (14,122 ) 3,346,706 2nd Quarter (Projected) 3,346,706 54,952 (15,475 ) — 3,386,183 3rd Quarter (Projected) 3,386,183 13,013 (15,736 ) (10,415 ) 3,373,045 4th Quarter (Projected) 3,373,045 — — (54,484 ) 3,318,561