PEMBROKE PINES, Fla., Dec. 14 /PRNewswire-FirstCall/ -- Claire's
Stores, Inc., a leading specialty retailer offering value-priced jewelry
and accessories, today reported its financial results for the third quarter
of Fiscal 2008, which ended November 3, 2007.
Third Quarter Results
The Company reported net sales of $357.4 million for the quarter, a
2.8% increase over the third quarter of Fiscal 2007, which ended October
28, 2006. The increase was primarily attributable to the growth in our new
store base, particularly in Europe, and foreign currency translation gains,
offset by a slight decrease in same store sales. A 0.5% increase in our
average sale per transaction was insufficient to offset a 3.5% decline in
the average number of transactions per store.
Third quarter consolidated same store sales declined 0.7%. In North
America, same store sales decreased 1.0% versus last year's third fiscal
quarter. European same store sales were essentially flat with last year's
third fiscal quarter, at negative 0.1%. Please note that we compute same
store sales on a local currency basis, and as such they are not impacted by
changes in foreign exchange.
Commenting on third quarter results, Chief Executive Officer Gene Kahn
said, "This quarter concludes my first full quarter as Claire's CEO. Our
third quarter results are reflective of a softening retail environment. In
response to consumer demand, we began to shift our product mix from jewelry
to accessory classifications in order to capitalize on the strength of
handbags, fashion accessories and cosmetics as we completed Back to School
and transitioned into Fall. Jewelry sales are currently challenging, except
among our younger customers. Our repositioning of Icing is still in its
early stages as we work to refine and improve the concept and content. Our
merchandise margins improved and through disciplined buying and markdown
activity, inventory levels remained low and fresh."
Gross margin, which represents merchandise margin less occupancy and
buying expense, declined 170 basis points to 50.7%. A 60 basis point
improvement in merchandise margin was more than offset by a loss of
operating leverage in rent and rent related items that resulted in a 190
basis point decline, and by higher buying expenses resulting in a 40 basis
point decrease.
Selling, general and administrative expenses increased 7.5% to $127.8
million in the third quarter of Fiscal 2008 compared to $118.8 million in
last year's comparable fiscal quarter. On a constant currency basis, SG&A
expenses increased by only 4.3%, due largely to a 2.1% growth in company
operated stores.
For the quarter, Adjusted EBITDA was $60.5 million compared to $68.5
million in the third quarter of Fiscal 2007. 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 the acquisition and other non-recurring or non-cash
expenses, and normalizing occupancy costs for certain rent-related
adjustments.
At November 3, 2007, our $200 million revolving credit facility was
undrawn aside from a $4.5 million letter of credit. Cash and cash
equivalents were $78.0 million. During the third quarter of Fiscal 2008,
cash provided by operating activities was approximately $24.4 million,
compared with cash provided by operating activities of $56.6 million during
the third quarter of Fiscal 2007. The change in cash provided by operating
activities was impacted by the interest expense associated with debt
incurred to fund the acquisition. Capital expenditures during the third
quarter of Fiscal 2008 were $23.8 million, of which $19.0 million related
to store openings and remodeling projects, with the remainder relating
primarily to the enhanced POS rollout. Capital expenditures during the
third quarter of Fiscal 2007 were $30.1 million.
Year to Date Results
Net sales for the first nine months of Fiscal 2008 grew 5.4% to
$1,063.5 million from $1,008.7 million. Consolidated same store sales
decreased 0.4%. For the first nine months of Fiscal 2008, Adjusted EBITDA
was $185.5 million compared to $196.6 million in the first nine months of
Fiscal 2007.
Store Count: End of Third Quarter:
November 3, 2007 October 28, 2006
Claire's North America 2,151 2,145
Claire's Europe 900 842
Claire's Nippon 202 192
Total 3,253 3,179
Conference Call Information
The Company will host its third quarter conference call on December 14,
2007, at 10:00 a.m. (EST). The call in number is 630-395-0260 and the
password is "Claires." A replay will be available through December 20,
2007. The replay number is 203-369-0434 and the password is 25247. The
conference call is also being webcast and archived until December 20th 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 and Icing. While the latter operates only in North
America, Claire's operates internationally. As of December 1, 2007,
Claire's Stores, Inc. operated 3,061 stores in the United States, Canada,
Puerto Rico, the Virgin Islands, the United Kingdom, Ireland, France,
Switzerland, Austria, Germany, Spain, Portugal, Belgium, and the
Netherlands. Claire's Stores, Inc. operates through its subsidiary,
Claire's Nippon, Co., Ltd., 202 stores in Japan as a 50:50 joint venture
with AEON, Co., Ltd. The Company also franchises 162 stores in the Middle
East, Turkey, Russia, Poland, and South Africa.
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 inflation and 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 at historical rates; significant increases in our
merchandise markdowns; 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; loss of key members of
management; increases in the cost of labor; labor disputes; 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 3, 2007 and Form
10-Q Equivalent for the quarterly period ended May 5, 2007. 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 Annual Report on Form 10-K and Form 10-Q Equivalent are
available on Claire's business website at: http://www.clairestores.com.
THIRD FISCAL QUARTER
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)
Three Months Ended Three Months Ended
November 3, 2007 October 28, 2006
Successor Entity Predecessor Entity
Net sales $357,366 100.0% $347,593 100.0%
Cost of sales,
occupancy and buying
expenses 176,215 49.3 165,487 47.6
Gross profit 181,151 50.7 182,106 52.4
Other expenses
(income):
Selling, general and
administrative 127,772 35.8 118,843 34.2
Depreciation and
amortization 26,428 7.4 14,249 4.1
Transaction-related
costs 1,200 0.3 - 0.0
Other income (1,310) (0.4) (754) (0.2)
154,090 43.1 132,338 38.1
Operating income 27,061 7.6 49,768 14.3
Interest expense
(income), net 56,322 15.8 (3,162) (0.9)
Income (loss) before
income taxes (29,261) (8.2) 52,930 15.2
Income taxes (15,449) (4.3) 16,303 4.7
Net income (loss) $(13,812) (3.9%) $36,627 10.5%
YEAR TO DATE
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)
Successor Entity Predecessor Entity
May 29 February 4, Nine
2007 2007 Months
through through Ended
November 3, May 28, October 28,
2007 2007 2006
Net sales $638,556 $424,899 $1,008,680
Cost of sales, occupancy and
buying expenses 314,490 206,438 480,540
Gross profit 324,066 218,461 528,140
Other expenses (income):
Selling, general and
administrative 220,513 154,482 348,569
Depreciation and amortization 39,598 19,652 41,319
Transaction-related costs 3,261 72,672 -
Other income (1,706) (1,476) (1,914)
261,666 245,330 387,974
Operating income (loss) 62,400 (26,869) 140,166
Interest expense (income), net 92,250 (4,876) (11,191)
Income (loss) before income
taxes (29,850) (21,993) 151,357
Income taxes (15,231) 21,779 49,067
Net income (loss) $(14,619) $(43,772) $102,290
CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
Successor Predecessor
Entity Entity
November 3, February 3,
2007 2007
(In thousands, except share
and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $78,038 $340,877
Inventories 156,538 121,119
Prepaid expenses 41,275 35,565
Other current assets 25,498 41,081
Total current assets 301,349 538,642
Property and equipment:
Land and building 22,288 17,350
Furniture, fixtures and equipment 118,730 283,556
Leasehold improvements 214,223 288,499
355,241 589,405
Less accumulated depreciation and
amortization (36,532) (324,080)
318,709 265,325
Intangible assets, net 816,212 51,582
Deferred debt issuance costs, net of
accumulated amortization of $4,421 73,140 -
Other assets 71,949 34,775
Goodwill 1,807,052 200,942
2,768,353 287,299
Total assets $3,388,411 $1,091,266
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $83,960 $56,323
Current portion of long-term debt 14,500 -
Income taxes payable 7,941 35,102
Accrued interest payable 49,321 -
Accrued expenses and other liabilities 105,379 104,026
Total current liabilities 261,101 195,451
Long-term debt 2,366,875 -
Deferred tax liability 142,254 19,424
Deferred rent expense 8,623 26,125
Other liabilities 12,683 2,604
2,530,435 48,153
Stockholders' equity:
Preferred stock par value $1.00 per share;
authorized 1,000,000 shares, issued and
outstanding 0 shares (predecessor
entity) - -
Class A common stock par value $0.05 per
share; authorized 40,000,000 shares,
issued and outstanding 4,869,041 shares
(predecessor entity) - 243
Common stock par value $0.05 per share;
authorized 300,000,000 shares, issued and
outstanding 88,202,733 shares
(predecessor entity); par value $0.001
per share;
authorized 1,000 shares; issued and
outstanding 100 shares (successor
entity) - 4,410
Additional paid-in capital 598,507 75,486
Accumulated other comprehensive income,
net of tax 12,987 33,956
Retained earnings (accumulated deficit) (14,619) 733,567
596,875 847,662
Total liabilities and stockholders' equity $3,388,411 $1,091,266
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.
In addition, our calculation of Adjusted EBITDA is consistent with the
equivalent measurement in the covenants for the indentures governing the
senior notes.
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 will we make with
the SEC.
For the three and nine month periods ended November 3, 2007 and October
28, 2006, a reconciliation of net income (loss) to EBITDA, EBITDA after
rent related adjustments and Adjusted EBITDA is set forth in the following
tables:
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED) (IN THOUSANDS)
Three Months Ended Three Months Ended
November 3, 2007 October 28, 2006
Net income (loss) $(13,812) $36,627
Income tax (15,449) 16,303
Interest expense 57,169 17
Interest income (847) (3,179)
Depreciation and amortization 26,428 14,249
Reported EBITDA 53,489 64,017
Book to cash rent adjustment (a) 2,736 552
EBITDA after rent related
adjustment 56,225 64,569
Amortization of intangible
assets (b) 540 438
Equity income (c) (531) (130)
Loss on retirement of property
and equipment, net (d) (62) 570
Stock compensation expense (e) 1,944 2,171
Consulting expenses (g) 77 182
Fixture leases (h) 360 406
Cost savings (i) - 337
Management fee (j) 750 -
Transaction related costs (k) 1,200 -
Adjusted EBITDA $60,503 $68,543
See below for related footnotes.
CLAIRE'S STORES, INC. AND SUBSIDIARIES
(UNAUDITED) (IN THOUSANDS)
Nine Months Ended Nine Months Ended
November 3, 2007 October 28, 2006
Net income (loss) $(58,391) $102,290
Income tax 6,548 49,067
Interest expense 94,095 75
Interest income (6,721) (11,266)
Depreciation and amortization 59,250 41,319
Reported EBITDA 94,781 181,485
Book to cash rent adjustment (a) 4,741 1,558
EBITDA after rent related
adjustment 99,522 183,043
Amortization of intangible
assets (b) 1,410 1,141
Equity income (c) (1,163) (475)
Loss on retirement of property
and Equipment, net (d) 1,600 1,140
Stock compensation expense (e) 4,108 5,981
Legal settlement & related costs (f) 200 1,250
Consulting expenses (g) 612 700
Fixture leases (h) 1,101 2,075
Cost savings (i) 930 1,731
Management fee (j) 1,250 -
Transaction related costs (k) 75,933 -
Adjusted EBITDA $185,503 $196,586
(a) Represents the elimination of non-cash straight-line 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 related to our
50:50 joint venture with AEON Co. Ltd.
(d) Represents the elimination of non-cash losses or gains 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) Represents the elimination of consulting expenses related to our
European distribution center. We began to centralize our distribution
operations in continental Europe by transitioning to a third party
distribution center in the Netherlands.
(h) 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.
(i) 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 have assumed an annual air travel budget
of $250,000 for our senior executive officers.
(j) Represents the management fee paid to Apollo Management.
(k) Transaction costs represent legal, financial advisory, compensation,
and other Acquisition related expenses.
SOURCE Claire's Stores, Inc.
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Related links:
http://www.clairestores.com
http://www.prnewswire.com/comp/174913.html /
CONTACT:
Marisa F. Jacobs, Vice President of Corporate
Communications and Investor Relations of Claire's Stores, Inc.,
+1-212-594-3127, +1-212-244-4237 (fax), marisa.jacobs@claires.com
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