PEMBROKE PINES, Fla., Sept. 11 /PRNewswire/ -- Claire's Stores, Inc., a
leading specialty retailer offering value-priced jewelry and accessories,
today reported its financial results for the 2008 second quarter ending
August 2, 2008. Effective with the fiscal quarter ended May 3, 2008, the
Company has changed its fiscal year naming convention to coincide with the
calendar year in which the fiscal year begins. Accordingly, the current
fiscal quarter is referred to as the 2008 second quarter and the comparable
prior year quarter is referred to as the 2007 second quarter.
Second Quarter Results
The Company reported net sales of $360.0 million for the 2008 second
quarter, a 1.5% decrease from the 2007 second quarter. The decrease was
primarily attributable to a decline in same store sales, partially offset
by the growth in our new store base and the effect of foreign currency
translation.
Consolidated same store sales declined 5.8% in the 2008 second quarter.
A decline in average transactions per store of 12.0%, was partially offset
by a 7.5% increase in average sales per transaction. The increase in sales
per transaction reflects our strategy to increase average ticket through
good, better and best price tiering. The decline in the number of
transactions reflects both weaker mall traffic and less reliance on low
margin, low dollar value promotional transactions. In North America, same
store sales decreased 8.1%, with sales at our Claire's stores declining
less than at our Icing stores. European same store sales declined 1.7%. We
compute same store sales on a local currency basis, which eliminates any
impact from changes in foreign exchange rates.
Chief Executive Officer Gene Kahn said, "In the second quarter, we saw
an improvement in the tone of business as our comparable store sales
improved during each month of the quarter and our merchandise margin
increased. We also successfully completed phase one of our Pan-European
Transformation ("PET") project. As a result, we now have an integrated team
managing our European business, and a more focused North American
merchandising team, within which there are now dedicated groups responsible
for each of our Claire's and Icing brands. We launched our Cost Savings
Initiative ("CSI") during the quarter and are on target to achieve our
previously announced goals of $15 million of expense reductions this year
and an annualized amount in excess of $40 million.
I would also like to note, in the 14 months since the transaction was
completed, we have made significant progress in upgrading our management
team and refining our organizational structure, creating a strong
foundation to sustain us through this difficult retail environment and
positioning us to reach our performance goals."
The gross profit percentage was flat at 49.9% for both 2008 and 2007
second quarters. A 290 basis point increase in the merchandise margin was
offset by an equal increase in occupancy and buying costs. Excluding $1.4
million of non-recurring costs related to the PET project, gross profit
percentage increased to 50.3%.
Selling, general and administrative expenses increased 7.2% to $132.4
million in the second quarter of Fiscal 2008 compared to $123.5 million in
last year's comparable fiscal quarter. Adjusting for changes in foreign
exchange rates and excluding $2.0 million of non-recurring PET costs, $1.7
million of expense relating to CSI, and $0.3 million of additional sponsor
management fees this fiscal quarter compared to the 2007 second quarter,
SG&A increased $0.9 million or 0.7%.
Adjusted EBITDA in the 2008 second quarter was $58.1 million compared
to $64.3 million in the 2007 second quarter. The Company defines Adjusted
EBITDA as earnings before interest, income taxes, depreciation and
amortization, excluding the impact of transaction related costs incurred in
connection with its May 2007 acquisition and other non-recurring or
non-cash expenses, and normalizing occupancy costs for certain rent-related
adjustments.
At August 2, 2008 the Company's $200 million revolving credit facility
was undrawn and fully available aside from an ongoing $5.9 million letter
of credit in connection with our self-insured workers' compensation
program. Cash and cash equivalents were $35.2 million.
During the 2008 second quarter, cash used in operating activities was
$12.0 million, compared with cash used in operating activities of $59.5
million during the 2007 second quarter. The change in cash used in
operating activities was impacted by an increase in operating income, due
primarily to a decrease in transaction-related costs, and a decrease in
working capital, partially offset by higher interest expense paid on the
debt incurred to fund the acquisition of the Company. Capital expenditures
during the 2008 second quarter were $16.0 million, of which $9.2 million
related to new store openings and remodeling projects. Capital expenditures
during the 2007 second quarter were $24.6 million.
Year to Date Results
Net sales for the first six months of 2008 declined 2.7% to $687.0 million
from $706.1 million. Same store sales decreased 7.0%. For the first six months
of 2008, Adjusted EBITDA was $92.4 million compared to $125.0 million in the
first six months of 2007.
Store Count as of: August 2, February 2, August 4,
2008 2008 2007
North America 2,142 2,135 2,133
Europe 911 905 883
Subtotal Company-Owned 3,053 3,040 3,016
Joint Venture 205 198 203
Franchise 175 166 149
Subtotal Non-Owned 380 364 352
Total 3,433 3,404 3,368
Conference Call Information
The Company will host its second quarter conference call on September
12, 2008, at 10:00 a.m. (EDT). The call-in number is 630-395-0260 and the
password is "Claires." A replay will be available through September 19,
2008. The replay number is 402-530-7636 and the password is 25247. The
conference call is also being webcast and archived until September 19, 2008
on the Company's corporate website at http://www.clairestores.com, where it
can be accessed by clicking on the "Conference Calls" link located under
"Financial Information" for a replay or download as an MP3 file.
Company Overview
Claire's Stores, Inc. is a leading specialty retailer of value-priced
jewelry and accessories for girls and young women through its two store
concepts: Claire's(R) and Icing(R). While the latter operates only in North
America, Claire's operates worldwide. As of August 2, 2008, Claire's
Stores, Inc. operated 3,053 stores in North America and Europe. Claire's
Stores, Inc. also operates through its subsidiary, Claire's Nippon, Co.,
Ltd., 205 stores in Japan as a 50:50 joint venture with AEON, Co., Ltd. The
Company also franchises 175 stores in the Middle East, Turkey, Russia,
South Africa, Poland and Guatemala.
Forward-looking Statements:
This press release contains "forward-looking statements" which
represent the Company's expectations or beliefs with respect to future
events. Statements that are not historical are considered forward-looking
statements. These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those anticipated. Those factors include, without limitation: changes in
consumer preferences and consumer spending; competition; general economic
conditions such as increased energy costs; general political and social
conditions such as war, political unrest and terrorism; natural disasters
or severe weather events; currency fluctuations and exchange rate
adjustments; uncertainties generally associated with the specialty
retailing business; disruptions in our supply of inventory; inability to
increase same store sales; inability to renew, replace or enter into new
store leases on favorable terms; significant increases in our merchandise
markdowns; inability to grow our store base in Europe; inability to design
and implement new information systems; delays in anticipated store openings
or renovations; uncertainty that definitive financial results may differ
from preliminary financial results due to, among other things, final GAAP
adjustments; changes in applicable laws, rules and regulations, including
changes in federal, state or local regulations governing the sale of our
products, particularly regulations relating to the metal content in
jewelry, and employment laws relating to overtime pay, tax laws and import
laws; product recalls; loss of key members of management; increases in the
cost of labor; labor disputes; unwillingness of vendors and service
providers to supply goods or services pursuant to historical customary
credit arrangements; increases in the cost of borrowings; unavailability of
additional debt or equity capital; and the impact of our substantial
indebtedness on our operating income, and our ability to grow. These and
other applicable risks, cautionary statements and factors that could cause
actual results to differ from the Company's forward-looking statements are
included in the Company's filings with the SEC, specifically as described
in the Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 2008 filed with the SEC on April 25, 2008. The Company
undertakes no obligation to update or revise any forward-looking statements
to reflect subsequent events or circumstances. The historical results
contained in this press release are not necessarily indicative of the
future performance of the Company.
Additional Information:
Note: Other Claire's Stores, Inc. press releases, a corporate profile
and the most recent Form 10-K and 10-Q reports are available on Claire's
business website at: http://www.clairestores.com.
SECOND FISCAL QUARTER
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)
Successor Entity Predecessor Entity
Three Months May 29, 2007 May 6, 2007
Ended Through Through
August 2, 2008 August 4, 2007 May 28, 2007
Net sales $359,973 $281,190 $84,328
Cost of sales, occupancy
and buying expenses 180,267 138,276 44,846
Gross profit 179,706 142,914 39,482
Other expenses (income):
Selling, general and
administrative 132,421 92,746 30,798
Depreciation and
amortization 22,561 13,165 4,417
Transaction-related costs 296 2,061 69,186
Other income (549) (396) (135)
154,729 107,576 104,266
Operating income (loss) 24,977 35,338 (64,784)
Interest expense (income),
net 48,739 35,928 (1,123)
Loss before income taxes (23,762) (590) (63,661)
Income taxes (6,831) 217 8,890
Net loss $(16,931) $(807) $(72,551)
YEAR TO DATE Predecessor
Successor Entity Entity
Six Months May 29, 2007 February 4, 2007
Ended Through Through
August 2, 2008 August 4, 2007 May 28, 2007
Net sales $686,976 $281,190 $424,899
Cost of sales, occupancy
and buying expenses 352,249 138,276 206,438
Gross profit 334,727 142,914 218,461
Other expenses (income):
Selling, general and
administrative 263,756 92,746 154,482
Depreciation and
amortization 44,662 13,165 19,652
Transaction-related costs 6,264 2,061 72,672
Other income (1,109) (396) (1,476)
313,573 107,576 245,330
Operating income (loss) 21,154 35,338 (26,869)
Interest expense (income),
net 97,396 35,928 (4,876)
Loss before income taxes (76,242) (590) (21,993)
Income taxes (23,741) 217 21,779
Net loss $(52,501) $(807) $(43,772)
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
August 2, 2008 February 2, 2008
(In thousands, except share and per
share amounts)
ASSETS
Current assets:
Cash and cash equivalents $35,236 $85,974
Inventories 119,552 117,679
Prepaid expenses 47,643 37,315
Other current assets 47,591 37,658
Total current assets 250,022 278,626
Property and equipment:
Land and building 22,288 22,288
Furniture, fixtures and equipment 140,446 130,130
Leasehold improvements 227,550 211,163
390,284 363,581
Less accumulated depreciation
and amortization (90,143) (53,972)
300,141 309,609
Intangible assets, net of accumulated
amortization of $11,046 and $4,762 809,954 777,130
Deferred financing costs, net of
accumulated amortization of $12,370
and $7,079, respectively 65,220 70,511
Other assets 76,307 71,754
Goodwill 1,841,346 1,840,867
2,792,827 2,760,262
Total assets $3,342,990 $3,348,497
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade accounts payable $68,405 $56,089
Current portion of long-term debt 14,500 14,500
Income taxes payable 6,063 12,191
Accrued interest payable 22,565 19,536
Accrued expenses and other liabilities 120,206 117,076
Total current liabilities 231,739 219,392
Long-term debt 2,362,052 2,363,250
Deferred tax liability 116,486 139,506
Deferred rent expense 14,968 10,572
Unfavorable lease obligations and
other liabilities 48,986 10,577
2,542,492 2,523,905
Commitments and contingencies - -
Stockholder's equity:
Common stock par value $0.001 per
share; authorized 1,000 shares;
issued and outstanding 100 shares - -
Additional paid-in capital 605,116 601,201
Accumulated other comprehensive
income, net of tax 15,503 3,358
Retained earnings (deficit) (51,860) 641
568,759 605,200
Total liabilities and stockholder's
equity $3,342,990 $3,348,497
Net income (loss) reconciliation to EBITDA and Adjusted EBITDA
EBITDA represents net income (loss) before provision for income taxes,
interest income and expense, and depreciation and amortization. Adjusted
EBITDA represents EBITDA further adjusted to exclude non-cash and unusual
items. Management uses Adjusted EBITDA as an important tool to assess our
operating performance. Management considers Adjusted EBITDA to be a useful
measure in highlighting trends in our business and in analyzing the
profitability of similar enterprises. Management believes that Adjusted
EBITDA is effective, when used in conjunction with net income (loss), in
evaluating asset performance, and differentiating efficient operators in
the industry. Furthermore, management believes that Adjusted EBITDA
provides useful information to potential investors and analysts because it
provides insight into management's evaluation of our results of operations.
Our calculation of Adjusted EBITDA may not be consistent with "EBITDA" for
the purpose of the covenants in the agreements governing our indebtedness.
EBITDA and Adjusted EBITDA are not measures of financial performance
under GAAP, are not intended to represent cash flow from operations under
GAAP and should not be used as an alternative to net income (loss) as an
indicator of operating performance or to cash flow from operating,
investing or financing activities as a measure of liquidity. Management
compensates for the limitations of using EBITDA and Adjusted EBITDA by
using it only to supplement our GAAP results to provide a more complete
understanding of the factors and trends affecting our business. Each of
EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and
you should not consider them in isolation or as a substitute for analysis
of our results as reported under GAAP.
Some of the limitations of EBITDA and Adjusted EBITDA are:
-- EBITDA and Adjusted EBITDA do not reflect our cash used for capital
expenditures;
-- Although depreciation and amortization are non-cash charges, the
assets being depreciated or amortized often will have to be replaced
and EBITDA and Adjusted EBITDA do not reflect the cash requirements for
such replacements;
-- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital requirements;
-- EBITDA and Adjusted EBITDA do not reflect the cash necessary to make
payments of interest or principal on our indebtedness; and
-- EBITDA and Adjusted EBITDA do not reflect non-recurring expenses
which qualify as extraordinary items such as one-time write-offs to
inventory and reserve accruals.
While EBITDA and Adjusted EBITDA are frequently used as a measure of
operations and the ability to meet indebtedness service requirements, they
are not necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.
While management believes that these measures provide useful
information to investors, the SEC may require that EBITDA and Adjusted
EBITDA be presented differently or not at all in filings we will make with
the SEC.
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED)
(IN THOUSANDS)
Successor Predecessor Successor
Entity Entity Entity Combined
May 29, 2007 Thirteen
May 4, 2008 May 6, 2007 Through Weeks Ended
Through Through August 4, August 4,
August 2, 2008 May 28, 2007 2007 2007
Net loss $(16,931) $(72,551) $(807) $(73,358)
Income tax
expense (benefit) (6,831) 8,890 217 9,107
Interest expense 49,096 19 36,840 36,859
Interest income (357) (1,142) (912) (2,054)
Depreciation and
amortization 22,561 4,417 13,165 17,582
Reported EBITDA 47,538 (60,367) 48,503 (11,864)
Book to cash rent
adjustment (a) 1,556 177 1,328 1,505
EBITDA after rent
related adjustment 49,094 (60,190) 49,831 (10,359)
Amortization of
intangible assets (b) 574 119 248 367
Equity loss
(income) (c) (32) (17) 33 16
(Gain) loss on retirement
of property and
equipment, net (d) (81) 270 461 731
Stock compensation
expense (e) 1,148 - 889 889
Legal settlement &
related costs (f) 161 100 - 100
Relocation costs (g) 744 - - -
Consulting expenses (h) 297 90 194 284
Fixture leases (i) 96 103 262 365
Cost savings (j) - 150 33 183
Management fee (k) 750 - 500 500
Transaction related
costs (l) 296 69,186 2,061 71,247
Pan European
Transformation
costs (m) 3,428 - - -
Cost Savings Initiative
costs (n) 1,671 - - -
Adjusted EBITDA $58,146 $9,811 $54,512 $64,323
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED)
(IN THOUSANDS)
Successor Predecessor Successor
Entity Entity Entity Combined
May 29, 2007 Twenty Six
Feb. 3, 2008 Feb. 4, 2007 Through Weeks Ended
Through Through August 4, August 4,
August 2, 2008 May 28, 2007 2007 2007
Net loss $(52,501) $(43,772) $(807) $ (44,579)
Income tax expense
(benefit) (23,741) 21,779 217 21,996
Interest expense 98,283 86 36,840 36,926
Interest income (887) (4,962) (912) (5,874)
Depreciation and
amortization 44,662 19,652 13,165 32,817
Reported EBITDA 65,816 (7,217) 48,503 41,286
Book to cash rent
adjustment (a) 3,623 677 1,328 2,005
EBITDA after rent
related adjustment 69,439 (6,540) 49,831 43,291
Amortization of
intangible assets (b) 1,102 622 248 870
Equity loss
(income) (c) 101 (665) 33 (632)
(Gain) loss on retirement
of property and
equipment, net (d) (54) 1,201 461 1,662
Stock compensation
expense (e) 3,915 1,275 889 2,164
Legal settlement &
related costs (f) 373 200 - 200
Relocation costs (g) 744 - - -
Consulting expenses (h) 1,132 341 194 535
Fixture leases (i) 255 479 262 741
Cost savings (j) - 897 33 930
Management fee (k) 1,500 - 500 500
Transaction related
costs (l) 6,264 72,672 2,061 74,733
Pan European
Transformation
costs (m) 5,983 - - -
Cost Savings Initiative
costs (n) 1,671 - - -
Adjusted EBITDA $ 92,425 $ 70,482 $54,512 $124,994
The following footnotes relate to the tables on pages 7 and 8:
(a) Represents the elimination of net non-cash rent expense, amortization
of rent free periods and the inclusion of cash landlord allowances.
(b) Represents the elimination of non-cash amortization of lease rights.
(c) Represents the elimination of non-cash equity income or loss related
to our 50:50 joint venture with AEON Co. Ltd.
(d) Represents the elimination of non-cash losses on store related
property and equipment primarily associated with remodels,
relocations and closures.
(e) Represents the elimination of non-cash stock compensation expense.
(f) Represents the elimination of a legal settlement and fees in
connection with wage and hour class action litigation in California.
(g) Consists of costs, including third party charges and compensation,
incurred in conjunction with the relocation of new employees.
(h) Represents the elimination of non-recurring consulting expenses.
(i) Represents the elimination of non-cash amortization expenses
associated with synthetic leases of store fixtures. The Company has
not entered into any new synthetic leases after 2001.
(j) Reflects the adjustment of executive air travel and other costs to
the Company's estimate for such costs on a normalized basis and the
estimated savings on directors' and officers' insurance reflective of
the Company no longer being a public company. For purposes of
estimating these savings, we assumed an annual air travel budget of
$250,000 for our senior executive officers.
(k) Represents the management fee paid to Apollo Management and
Tri-Artisan Capital Partners.
(l) Transaction costs represent legal, financial advisory, compensation,
severance and other acquisition related expenses.
(m) Represents the non-recurring costs of our strategic Pan-European
Transformation project. These costs consist primarily of consulting
fees, compensation and legal expense incurred under the buying and
SG&A expense lines.
(n) Represents the non-recurring costs relating to our Cost Savings
Initiative project. These costs consist primarily of consulting
fees.
SOURCE Claire's Stores, Inc.
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Related links:
http://www.clairestores.com
http://www.prnewswire.com/comp/174913.html /
CONTACT:
J. Per Brodin, Senior Vice President and
Chief Financial Officer of Claire's Stores, Inc.,
+1-954-433-3900, or Fax, +1-954-433-3999 or E-mail,
investor.relations@claires.com
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