Kidpik Corp. (“KIDPIK” or the “Company”), an online clothing
subscription-based e-commerce company, today reported its financial
results for the third quarter ended September 30, 2023.
Third Quarter 2023
Highlights:
- Revenue, net: was $3.4 million, a year over year
decrease of 6.7%
- Gross margin: was 61.1%, a year over year increase of 80
basis points from 60.3% in the third quarter of 2022
- Shipped items: were 292,000 items, compared to 358,000
shipped items in the third quarter of 2022
- Average shipment keep rate: increased to 82.6%, compared
to 68.5% in the third quarter of 2022
- Net Loss: was $1.9 million or $0.24 per share, compared
to a net loss of $2.4 million or a loss of $0.32 per share in the
third quarter of 2022
- Adjusted EBITDA: was a loss of $1.6 million (see
“Non-GAAP Financial Measures”, below)
“During the 3rd quarter, we continued to execute our plan to
reduce inventory levels while maintaining our gross margin of about
61%. Our 3rd quarter results were, for the most part, consistent
with our 2nd quarter earnings,” commented Ezra Dabah, CEO of
Kidpik.
“We have substantially reduced purchases on new inventory and
are focused on increasing sales from our current elevated inventory
level, which we believe will support our cash flow needs in the
short term. We are also working to increase our proprietary brand
sales through our own e-commerce site, and invite you all to visit
our newly launched holiday website at shop.kidpik.com,” concluded
Dabah.
As a result of the difficult economic environment in which
consumers are pulling back on spending on non-essential items,
including clothing, as well as increases in the Company’s cost to
acquire customers, due to changes in the use of “cookie” tracking
technologies, the Company is currently working to reduce expenses
and overhead, sell off inventory, and workforce reduction.
Additionally, the Company plans to initiate a formal review process
to evaluate strategic alternatives for the Company. The Board of
Directors and management team are committed to acting in the best
interests of the Company, its stockholders and its stakeholders.
Transactions which may be undertaken by the Company, may include,
but are not limited to, business combinations, liquidations of
assets and/or a sale of the Company or its assets. There is no
deadline or definitive timetable set for completion of the
strategic alternatives review process and there can be no assurance
that this process will result in the Company pursuing a transaction
or any other strategic outcome.
The Company does not intend to make any further public comment
regarding the review of strategic alternatives until it has been
completed or the Company determines that a disclosure is required
by law or otherwise deemed appropriate.
Kidpik Corp.
Condensed Interim Statements
of Operations
(Unaudited)
For the 13 weeks ended
For the 39 weeks ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Revenues, net
$
3,389,183
$
3,633,467
$
10,867,580
$
11,734,132
Cost of goods sold
1,317,684
1,442,258
4,309,473
4,649,552
Gross profit
2,071,499
2,191,209
6,558,107
7,084,580
Operating expenses
Shipping and handling
1,032,678
1,042,186
3,171,634
3,133,411
Payroll and related costs
991,044
1,191,515
3,196,280
4,137,495
General and administrative
1,939,108
2,366,283
5,988,543
5,850,066
Depreciation and amortization
12,503
7,670
35,616
19,989
Total operating expenses
3,975,333
4,607,654
12,392,073
13,140,961
Operating loss
(1,903,834
)
(2,416,445
)
(5,833,966
)
(6,056,381
)
Other expenses (income)
Interest expense
22,117
21,885
71,722
51,485
Other income
-
-
-
(286,795
)
Total other expense (income)
22,117
21,885
71,722
(235,310
)
Net loss
$
(1,925,951
)
$
(2,438,330
)
$
(5,905,688
)
$
(5,821,071
)
Net loss per share attributable to common
stockholders:
Basic
(0.24
)
(0.32
)
(0.76
)
(0.76
)
Diluted
(0.24
)
(0.32
)
(0.76
)
(0.76
)
Weighted average common shares
outstanding:
Basic
8,022,268
7,688,194
7,813,886
7,653,790
Diluted
8,022,268
7,688,194
7,813,886
7,653,790
Kidpik Corp.
Condensed Interim Balance
Sheets
September 30,
2023
December 31,
2022
(Unaudited)
(Audited)
Assets
Current assets
Cash
$
55,687
$
600,595
Restricted cash
4,618
4,618
Accounts receivable
147,499
336,468
Inventory
8,754,629
12,625,948
Prepaid expenses and other current
assets
721,011
1,043,095
Total current assets
9,683,444
14,610,724
Leasehold improvements and equipment,
net
109,639
67,957
Operating lease right-of-use assets
1,066,825
1,469,665
Total assets
$
10,859,908
$
16,148,346
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable
$
1,930,858
$
2,153,389
Accounts payable, related party
1,709,708
1,107,665
Accrued expenses and other current
liabilities
365,650
587,112
Operating lease liabilities, current
273,840
438,957
Short-term debt, related party
850,000
2,050,000
Total current liabilities
5,130,056
6,337,123
Operating lease liabilities, net of
current portion
853,261
1,061,469
Total liabilities
5,983,317
7,398,592
Commitments and contingencies
Stockholders’ equity
Preferred stock, par value $0.001,
25,000,000 shares authorized, of which no shares are issued and
outstanding as of September 30, 2023 and December 31, 2022,
respectively
-
-
Common stock, par value $0.001, 75,000,000
shares authorized, of which 9,362,166 shares are issued and
outstanding as of September 30, 2023, and 7,688,194 shares issued
and outstanding on December 31, 2022
9,362
7,688
Additional paid-in capital
52,307,362
50,276,511
Accumulated deficit
(47,440,133
)
(41,534,445
)
Total stockholders’ equity
4,876,591
8,749,754
Total liabilities and stockholders’
equity
$
10,859,908
$
16,148,346
Kidpik Corp.
Condensed Interim Statements
of Cash Flows
(Unaudited)
39 Weeks Ended
September 30, 2023
October 1, 2022
Cash flows from operating activities
Net loss
$
(5,905,688
)
$
(5,821,071
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
35,616
19,989
Equity-based compensation
838,972
1,355,068
Bad debt expense
236,200
456,388
Changes in operating assets and
liabilities:
Accounts receivable
(47,231
)
(343,455
)
Inventory
3,871,319
(2,674,680
)
Prepaid expenses and other current
assets
322,084
680,359
Operating lease right-of-use assets and
liabilities
29,515
15,599
Accounts payable
(222,532
)
(503,167
)
Accounts payable, related parties
602,044
65,944
Accrued expenses and other current
liabilities
(221,461
)
(291,554
)
Net cash used in operating activities
(461,162
)
(7,040,580
)
Cash flows from investing activities
Purchases of leasehold improvements and
equipment
(77,299
)
(42,903
)
Net cash used in investing activities
(77,299
)
(42,903
)
Cash flows from financing activities
Cash used to settle net share equity
awards
(6,447
)
(33,692
)
Net repayments from advance payable
-
(932,155
)
Net repayments from loan payable
-
(150,000
)
Net cash used in financing activities
(6,447
)
(1,115,847
)
Net decrease in cash and restricted
cash
(544,908
)
(8,199,330
)
Cash and restricted cash, beginning of
period
605,213
8,420,500
Cash and restricted cash, end of
period
$
60,305
$
221,170
Reconciliation of cash and restricted
cash:
Cash
$
55,687
$
216,552
Restricted cash
4,618
4,618
$
60,305
$
221,170
Supplemental disclosure of cash flow
data:
Interest paid
$
2,315
$
21,830
Supplemental disclosure of non-cash
investing and financing activities:
Conversion of stockholder debt to
equity
$
1,200,000
-
Record right-of use asset and operating
lease liabilities
$
-
1,857,925
Revenue by Channel
13 weeks ended
September 30, 2023
13 weeks ended
October 1, 2022
Change
($)
Change
(%)
Revenue by channel
Subscription boxes
$
2,427,615
$
2,867,930
$
(440,315
)
(15.4
)%
3rd party websites
491,851
468,835
23,016
4.9
%
Online website sales
469,717
296,702
173,015
58.3
%
Total revenue
$
3,389,183
$
3,633,467
$
(244,284
)
(6.7
)%
39 weeks ended
September 30, 2023
39 weeks ended
October 1, 2022
Change
($)
Change
(%)
Revenue by channel
Subscription boxes
$
8,006,725
$
9,326,331
$
(1,319,606
)
(14.1
)%
3rd party websites
1,355,062
1,577,412
(222,350
)
(14.1
)%
Online website sales
1,505,793
830,389
675,404
81.3
%
Total revenue
$
10,867,580
$
11,734,132
$
(866,552
)
(7.4
)%
Subscription Boxes Revenue
13 weeks ended
September 30, 2023
13 weeks ended
October 1, 2022
Change
($)
Change
(%)
Subscription boxes revenue from
Active subscriptions – recurring boxes
$
1,971,223
$
2,297,212
$
(325,989
)
(14.2
)%
New subscriptions - first box
456,392
570,718
(114,326
)
(20.0
)%
Total subscription boxes revenue
$
2,427,615
$
2,867,930
$
(440,315
)
(15.4
)%
39 weeks ended
September 30, 2023
39 weeks ended
October 1, 2022
Change
($)
Change
(%)
Subscription boxes revenue from
Active subscriptions – recurring boxes
$
6,549,547
$
8,084,104
$
(1,534,557
)
(19.0
)%
New subscriptions - first box
1,457,178
1,242,227
214,951
17.3
%
Total subscription boxes revenue
$
8,006,725
$
9,326,331
$
(1,319,606
)
(14.1
)%
Revenue by Product Line
13 weeks ended
September 30, 2023
13 weeks ended
October 1, 2022
Change
($)
Change
(%)
Revenue by product line
Girls’ apparel
$
2,599,762
$
2,692,466
$
(92,704
)
(3.4
)%
Boys’ apparel
642,051
758,733
(116,682
)
(15.4
)%
Toddlers’ apparel
147,370
182,268
(34,898
)
(19.1
)%
Total revenue
$
3,389,183
$
3,633,467
$
(244,284
)
(6.7
)%
39 weeks ended
September 30, 2023
39 weeks ended
October 1, 2022
Change
($)
Change
(%)
Revenue by product line
Girls’ apparel
$
8,284,482
$
8,712,027
$
(427,545
)
(4.9
)%
Boys’ apparel
2,070,147
2,448,178
(378,031
)
(15.4
)%
Toddlers’ apparel
512,951
573,927
(60,976
)
(10.6
)%
Total revenue
$
10,867,580
$
11,734,132
$
(866,552
)
(7.4
)%
Balance Sheet and Cash Flow
- Cash at the end of the third quarter totaled $0.06 million
compared to $0.6 million as of December 31, 2022.
- Net cash used in operating activities was $0.5 million at the
end of the third quarter, compared to $7.0 million of cash used in
operating activities in the third quarter of 2022.
- As of September 30, 2023, we had $9.7 million in total current
assets, $5.1 million in total current liabilities and working
capital of $4.6 million.
RESULTS OF OPERATIONS
The Company’s revenue, net, is disaggregated based on the
following categories:
For the 13 weeks ended
For the 39 weeks ended
September 30, 2023
October 2, 2022
September 30, 2023
October 2, 2022
Subscription boxes
$
2,427,615
$
2,867,930
$
8,006,725
$
9,326,331
3rd party websites
491,851
468,835
1,355,062
1,577,412
Online website sales
469,717
296,702
1,505,793
830,389
Total revenue
$
3,389,183
$
3,633,467
$
10,867,580
$
11,734,132
Gross Margin
For the 13 weeks ended
For the 26 weeks ended
September 30, 2023
October 2, 2022
September 30, 2023
October 2, 2022
Gross margin
61.1
%
60.3
%
60.3
%
60.4
%
Gross profit is equal to our net sales less cost of goods sold.
Gross profit as a percentage of our net sales is referred to as
gross margin. Cost of sales consists of the purchase price of
merchandise sold to customers and includes import duties and other
taxes, freight in, returns from customers, inventory write-offs,
and other miscellaneous shrinkage.
Shipped Items
We define shipped items as the total number of items shipped in
a given period to our customers through our active subscription,
third party and online website sales.
For the 13 weeks ended
For the 39 weeks ended
(in thousands)
(in thousands)
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Shipped Items
292
358
923
1,083
Average Shipment Keep Rate
Average shipment keep rate is calculated as the total number of
items kept by our customers, divided by total number of shipped
items in a given period.
For the 13 weeks ended
For the 39 weeks ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Average Keep Rate
82.6
%
68.5
%
74.9
%
69.4
%
Non-GAAP Financial Measures
We report our financial results in accordance with generally
accepted accounting principles in the United States (“GAAP”).
However, management believes that certain non-GAAP financial
measures provide users of our financial information with additional
useful information in evaluating our performance. We believe that
adjusted EBITDA is frequently used by investors and securities
analysts in their evaluations of companies, and that this
supplemental measure facilitates comparisons between companies.
This non-GAAP financial measure may be different than similarly
titled measures used by other companies.
Our non-GAAP financial measure should not be considered in
isolation from, or as substitutes for, financial information
prepared in accordance with GAAP. Adjusted EBITDA has limitations
as an analytical tool, and you should not consider it in isolation
or as a substitute for analysis of our results as reported under
GAAP. Some of these limitations are:
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized may have to be replaced
in the future, and Adjusted EBITDA does not reflect cash capital
expenditure requirements for such replacements or for new capital
expenditure requirements;
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- Adjusted EBITDA does not consider the potentially dilutive
impact of equity-based compensation;
- Adjusted EBITDA does not reflect tax payments that may
represent a reduction in cash available to us;
- Adjusted EBITDA does not reflect certain non-routine items that
may represent a reduction in cash available to us; and
- Other companies, including companies in our industry, may
calculate Adjusted EBITDA differently, which reduces its usefulness
as a comparative measure.
We compensate for these limitations by providing a
reconciliation of this non-GAAP measure to the most comparable GAAP
measure. We encourage investors and others to review our business,
results of operations, and financial information in their entirety,
not to rely on any single financial measure, and to view this
non-GAAP measure in conjunction with the most directly comparable
GAAP financial measure. For more information on these non-GAAP
financial measures, please see the section titled “Unaudited
Reconciliation of Net Loss to Adjusted Earnings before Interest,
Taxes, Depreciation and Amortization (EBITDA)”, included at the end
of this release.
Unaudited Reconciliation of Net Loss to Adjusted Earnings
before Interest, Taxes, Depreciation and Amortization
(EBITDA)
We define adjusted EBITDA as net loss excluding interest income,
other (income) expense, net, provision for income taxes,
depreciation and amortization, and equity-based compensation
expense. The following table presents a reconciliation of net loss,
the most comparable GAAP financial measure, to adjusted EBITDA for
each of the periods presented:
For the 13 weeks ended
For the 39 weeks ended
September 30, 2023
October 1, 2022
September 30, 2023
October 1, 2022
Net loss
$
(1,925,951
)
$
(2,438,330
)
$
(5,905,688
)
$
(5,821,071
)
Add (deduct)
Interest expense
22,117
21,885
71,722
51,485
Other expense
-
-
-
(286,795
)
Depreciation and amortization
12,503
7,670
35,616
19,989
Equity-based compensation
280,543
303,980
838,972
1,355,068
Adjusted EBITDA
$
(1,610,788
)
$
(2,104,795
)
$
(4,959,378
)
$
(4,681,324
)
Earnings Call Information:
Today at 4:30pm ET, the Company will host a live teleconference
call that is accessible over the internet at the Company’s website,
https://investor.kidpik.com and additionally by dialing at
1-833-816-1388 or at 1-412-317-0481 for international callers.
A replay of the conference call will be available approximately
two hours after the conclusion of the call on the investor
relations section of the KIDPIK website at
https://investor.kidpik.com or by dialing 1-844-512-2921, or
1-412-317-6671, internationally, with the Replay Pin
Number:10184290. The replay will be available until November 28,
2023.
About Kidpik Corp.
Founded in 2016, KIDPIK (NASDAQ:PIK) is an online clothing
subscription box for kids, offering mix & match, expertly
styled outfits that are curated based on each member’s style
preferences. KIDPIK delivers a surprise box monthly or seasonally,
providing an effortless shopping experience for parents and a fun
discovery for kids. Each seasonal collection is designed in-house
by a team with decades of experience designing childrenswear.
KIDPIK combines the expertise of fashion stylists with proprietary
data and technology to translate kids’ unique style preferences
into surprise boxes of curated outfits. We also sell our branded
clothing and footwear through our e-commerce website,
shop.kidpik.com. For more information, visit www.kidpik.com.
Forward-Looking Statements
This press release may contain statements that constitute
“forward-looking statements” within the federal securities laws,
including The Private Securities Litigation Reform Act of 1995,
which provide a safe-harbor for forward-looking statements. In
particular, when used in the preceding discussion, the words “may,”
“could,” “expect,” “intend,” “plan,” “seek,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “continue,”
“likely,” “will,” “would” and variations of these terms and similar
expressions, or the negative of these terms or similar expressions
are intended to identify forward-looking statements within the
meaning of such laws, and are subject to the safe harbor created by
such applicable laws. Any statements made in this news release
other than those of historical fact, about an action, event or
development, are forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors,
which may cause the results of KIDPIK to be materially different
than those expressed or implied in such statements. The
forward-looking statements may include projections and estimates of
KIDPIK’s corporate strategies, future operations and plans,
including the costs thereof. We have based these forward-looking
statements on our current expectations and assumptions and analyses
made by us in light of our experience and our perception of
historical trends, current conditions and expected future
developments, as well as other factors we believe are appropriate
under the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is
subject to a number of risks and uncertainties, including our
ability to meet Nasdaq’s minimum bid price requirement; our ability
to maintain the listing of our common stock on Nasdaq; our ability
to obtain additional funding, the terms of such funding and
potential dilution caused thereby; the continuing effect of rising
interest rates and inflation on our operations, sales, and market
for our products; deterioration of the global economic environment;
rising interest rates and inflation and our ability to control our
costs, including employee wages and benefits and other operating
expenses; our history of losses; the review and evaluation of
potential strategic transactions and their impact on stockholder
value; the process by which the Company engages in evaluation of
strategic transactions; the outcome of potential future strategic
transactions and the terms thereof; our ability to achieve
profitability; our ability to execute our growth strategy and scale
our operations and risks associated with such growth; our ability
to maintain current members and customers and grow our members and
customers; risks associated with the effect of global pandemics,
and governmental responses thereto on our operations, those of our
vendors, our customers and members and the economy in general;
risks associated with our supply chain and third-party service
providers, interruptions in the supply of raw materials and
merchandise; increased costs of raw materials, products and
shipping costs due to inflation; disruptions at our warehouse
facility and/or of our data or information services, our ability to
locate new warehouse and distribution facilities and the lease
terms of any such facility; issues affecting our shipping
providers; disruptions to the internet; risks that effect our
ability to successfully market our products to key demographics;
the effect of data security breaches, malicious code and/or
hackers; increased competition and our ability to maintain and
strengthen our brand name; changes in consumer tastes and
preferences and changing fashion trends; material changes and/or
terminations of our relationships with key vendors; significant
product returns from customers, excess inventory and our ability to
manage our inventory; the effect of trade restrictions and tariffs,
increased costs associated therewith and/or decreased availability
of products; our ability to innovate, expand our offerings and
compete against competitors which may have greater resources;
certain anti-dilutive, drag-along and tag-along rights which may be
deemed to be held by a former minority stockholder; our significant
reliance on related party transactions and loans; the fact that our
Chief Executive Officer has majority voting control over the
Company; if the use of “cookie” tracking technologies is further
restricted, regulated, or blocked, or if changes in technology
cause cookies to become less reliable or acceptable as a means of
tracking consumer behavior; our ability to comply with the
covenants of future loan and lending agreements and covenants; our
ability to prevent credit card and payment fraud; the risk of
unauthorized access to confidential information; our ability to
protect our intellectual property and trade secrets, claims from
third-parties that we have violated their intellectual property or
trade secrets and potential lawsuits in connection therewith; our
ability to comply with changing regulations and laws, penalties
associated with any non-compliance (inadvertent or otherwise), the
effect of new laws or regulations, and our ability to comply with
such new laws or regulations; changes in tax rates; our reliance
and retention of our current management; the outcome of future
lawsuits, litigation, regulatory matters or claims; the fact that
we have a limited operating history; the effect of future
acquisitions on our operations and expenses; our significant
indebtedness; and others that are included from time to time in
filings made by KIDPIK with the Securities and Exchange Commission,
many of which are beyond our control, including, but not limited
to, in the “Cautionary Note Regarding Forward-Looking Statements”
and “Risk Factors” sections in its Form 10-Ks and Form 10-Qs and in
its Form 8-Ks, which it has filed, and files from time to time,
with the U.S. Securities and Exchange Commission, including, but
not limited to its Annual Report on Form 10-K for the year ended
December 31, 2022 and its Quarterly Report on Form 10-Q for the
quarter ended September 30, 2023. These reports are available at
www.sec.gov and on our website at
https://investor.kidpik.com/sec-filings. The Company cautions that
the foregoing list of important factors is not complete. All
subsequent written and oral forward-looking statements attributable
to the Company or any person acting on behalf of the Company are
expressly qualified in their entirety by the cautionary statements
referenced above. Other unknown or unpredictable factors also could
have material adverse effects on KIDPIK’s future results and/or
could cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements.
The forward-looking statements included in this press release are
made only as of the date hereof. KIDPIK cannot guarantee future
results, levels of activity, performance or achievements.
Accordingly, you should not place undue reliance on these
forward-looking statements. We undertake no obligation to update
publicly any of these forward-looking statements to reflect actual
results, new information or future events, changes in assumptions
or changes in other factors affecting forward-looking statements,
except to the extent required by applicable laws and take no
obligation to update or correct information prepared by third
parties that is not paid for by the Company. If we update one or
more forward-looking statements, no inference should be drawn that
we will make additional updates with respect to those or other
forward-looking statements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231114953079/en/
Investor Relations Contact: ir@kidpik.com
Media: press@kidpik.com
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