Why TheStreet Ratings Team Rates dELiA*s, Inc (DLIA) Stock A 'Sell'

NEW YORK (TheStreet) -- TheStreet Ratings team rated dELiA*s (DLIA) a "sell" with a ratings score of D-.

Shares of the clothing retailer were skyrocketing 16.98% to $0.54 on Monday.

About 567,000 shares of dELiA*s were traded by 3:21 p.m., compared to the average trading volume of 655,000 shares a day.

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TheStreet Ratings Team has this to say about their recommendation:

"We rate DELIAS INC (DLIA) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 26.0% when compared to the same quarter one year ago, falling from -$9.22 million to -$11.61 million.
  • The debt-to-equity ratio of 1.25 is relatively high when compared with the industry average, suggesting a need for better debt level management. To add to this, DLIA has a quick ratio of 0.57, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, DELIAS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for DELIAS INC is currently lower than what is desirable, coming in at 27.59%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -44.78% is significantly below that of the industry average.
  • Net operating cash flow has declined marginally to -$14.91 million or 4.19% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, DELIAS INC has marginally lower results.
  • You can view the full analysis from the report here: DLIA Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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