Gross profit was $53.9 million, or 43.2% of net sales in the first six months of fiscal 2012, as compared to $57.7 million, or 44.4% of net sales, in the prior year period. The $3.7 million decrease in gross profit was primarily related to the decrease in sales from closed stores as well as the 120 basis point decrease in gross margin and $1.1 million decrease related to translating the gross profit of the Canadian operation to U.S. dollars. The 120 basis point decrease in gross margin was primarily attributable to the sale of higher priced products which have a lower margin rate representing a larger percentage of the overall sales as well as a strategic decision to more aggressively reduce inventory of discontinued products and brands.
Selling, general and administrative expenses (“SG&A”) for the period were $52.7 million, or 42.2% of net sales, as compared to $55.3 million, or 42.6% of net sales, in the prior-year period. The $2.6 million decrease in SG&A includes a $1.0 million decrease in expenses related to foreign currency translation resulting from the translation of Canadian expenses into U.S. dollars with a relatively weaker Canadian dollar, and lower expenses related to the seven closed stores.
Inventory totaled $153.9 million at September 29, 2012, as compared to $146.0 million at September 24, 2011, an increase of $7.8 million or 5.4%. The increase in inventory is primarily attributable to $3.6 million of higher inventory related to translating the Company’s Canadian inventory into U.S. dollars with a relatively weaker Canadian dollar and the decision to accelerate the timing of purchases of diamonds in order to take advantage of more favorable pricing.
Jean-Christophe Bédos, President and Chief Executive Officer of Birks & Mayors, commented: “While our sales decline in the first half of the fiscal year was somewhat anticipated by the decrease in the number of retail stores, our business in Florida continues to be impacted by lower customer traffic in that state. However, we are experiencing stronger sales and traffic performance in the state of Georgia. We are optimistic about the favorable same store sales growth in Canada experienced during the first half of the fiscal year and are confident that the introduction of new Birks products and a stronger holiday season will help us experience sales increases in the second half of the year thereby allowing us to achieve an improvement in our bottom line profitability for the year.”