DGSE Companies, Inc. (NYSE MKT: DGSE), a leading wholesaler and retailer of jewelry, diamonds, fine watches, and precious metal bullion and rare coin products, today announced its financial results for the three and nine months ended September 30, 2013.
Third Quarter 2013 Summary
- Revenues were $23.8 million compared to $29.0 million in the year ago period. The continued volatile market for precious metals, including the unprecedented decline in gold prices year to date, drove lower sales volumes.
- Gross profit was $4.5 million, or 19.1% gross margin, compared to $6.2 million, or 21.4% gross margin in the same period last year.
- The third quarter of 2013 included $95,000 in non-recurring expenses related to the previously-disclosed financial restatement and shareholder lawsuits. The third quarter of 2012 included $1.4 million in non-recurring expenses related to the restatement and shareholder lawsuits.
- SG&A decreased to $5.5 million from $6.4 million in the prior-year third quarter. The third quarter of 2013 included incremental expenses from the opening of six additional retail locations totaling approximately $0.5 million. The Company also accrued a $0.7 million charge to earnings in the current quarter related to the expected resolution of a 2010 sales tax audit in the state of Texas.
- Total expenses, inclusive of the non-recurring expenses, sales tax accrual and incremental expenses from new stores, decreased 13.3% to $5.7 million from $6.6 million in the year-ago quarter as the Company's expense reduction efforts drove a more than 14% reduction in SG&A expense and expenses related to prior restatements.
- Net loss, inclusive of the non-recurring expenses and sales tax accrual, was $1.4 million compared to $0.5 million in the year-ago period. Excluding the sales tax accrual, the Company reduced its net loss by 30% sequentially compared to the second quarter of 2013.
James Vierling, Chief Executive Officer and Chairman of the Board, stated, “Our results for the third quarter continued to be affected by volatile macroeconomic conditions. The closing spot price of gold on September 30, 2013 was 25% lower than on the same day in 2012. Falling gold prices have created a disincentive for consumers to sell their unwanted scrap gold and silver, which caused a significantly lower volume of scrap buys in the third quarter. Therefore, we have continued to refocus our team on areas of our business that present the highest profit potential, including our high-end jewelry, diamond and watch segments. We have been able to add some excellent merchandise at favorable price points throughout the year, and we expect to see strong sell through of this inventory during the upcoming holiday season. Our customer financing initiative, which we tested in the second quarter, has now been rolled out to all of our stores and should make it easier for our customers to make purchases. These factors, coupled with improved volumes during September and the first part of October create increased optimism about the fourth quarter, which is traditionally our strongest quarter of the year.”
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