BENSALEM, Pa., Aug. 27 /PRNewswire-FirstCall/ -- Charming Shoppes, Inc.
(Nasdaq: CHRS) a leading multi-brand, multi-channel specialty apparel retailer
specializing in women's plus-size apparel, today reported sales and operating
results for the second quarter ended August 2, 2008. The Company today also
provided its initial earnings outlook for the second half ending January 31,
2009.
Thirteen Weeks Ended August 2, 2008
For the thirteen weeks ended August 2, 2008, the Company reported a loss
from continuing operations of $(3.7) million, or $(0.03) per diluted share.
This compares to income from continuing operations of $20.9 million, or $0.16
per diluted share for the thirteen weeks ended August 4, 2007.
The Company's loss from continuing operations for the second quarter ended
August 2, 2008 includes after-tax charges of $5.8 million, or $0.05 per
diluted share, related to the severance agreement between Charming Shoppes and
its former Chief Executive Officer, and $3.5 million, or $0.03 per diluted
share, related to previously announced consolidation and streamlining
initiatives.
The Company's second quarter and first half results for the current and
prior year periods exclude the operating results of the non-core misses
apparel catalog titles within the Company's Direct-to-Consumer segment, which
have been classified as a "discontinued operation." This financial
presentation is related to the Company's April 25, 2008 announcement on the
Company's exploration of the sale of its non-core misses apparel catalog
titles, and the subsequent August 25, 2008 announcement of an agreement of
sale of such catalog titles.
Net sales from continuing operations for the thirteen weeks ended August
2, 2008 decreased 7% to $648.6 million, compared to net sales from continuing
operations of $694.4 million for the thirteen weeks ended August 4, 2007.
-- Net sales for the Company's Retail Stores segment were $622.0 million
during the thirteen weeks ended August 2, 2008, a decrease of 9% compared to
$685.1 million during the thirteen weeks ended August 4, 2007. Consolidated
comparable store sales for the Company's Retail Stores segment decreased 10%
during the thirteen weeks ended August 2, 2008, compared to a 3% decrease in
comparable store sales during the thirteen weeks ended August 4, 2007.
-- Net sales from continuing operations for the Company's Direct-to-
Consumer segment were $22.5 million during the thirteen weeks ended August 2,
2008, compared to $4.2 million during the thirteen weeks ended August 4, 2007.
The increase is related to incremental sales related to the launch of the Lane
Bryant Woman catalog in November 2007.
Commenting on sales and operating results for the quarter, Alan Rosskamm,
Chairman and Interim Chief Executive Officer of Charming Shoppes, Inc. stated,
"As we manage through this challenging environment, it has been our strategy
to operate with leaner inventories, execute on cost savings and streamlining
opportunities, and realign our businesses in order to focus our energies on
our core brands - Lane Bryant, Fashion Bug and Catherines.
"We have made progress on a number of initiatives that have contributed to
the generation of significant free cash flow, year to date. We are committed
to continue managing our inventories tightly, and plan to end the fiscal year
with lower levels of inventory. We have begun to realize decreases in overall
SG&A expenses through our implementation of several cost reduction
initiatives. Furthermore, we believe additional savings opportunities exist.
Despite our disappointing comparable store sales performance during the
quarter, we were able to maintain our SG&A ratio to sales as compared to a
year ago. We have closed 78 of the 150 underperforming stores identified for
closure during this fiscal year, which is expected to contribute to
improvements in our operating performance in future periods. Also, the
relocation of our Catherines' home office operations to Bensalem was completed
on schedule during the first quarter, and during the second quarter, we
completed the sale of our Memphis, Tennessee distribution center, which
provided $4.8 million in cash proceeds.
"Earlier this week, we signed an agreement for the sale of our non-core
misses catalog titles to Orchard Brands, and announced our plans to explore
the sale of our Figi's Gifts in Good Taste catalog business, based in
Wisconsin. These announcements support our strategy to refocus our energies
on our core brands and to leverage our leading market share position in
women's specialty plus apparel. Our decision to consider selling our Figi's
business should not be seen in any way as a negative reflection on the
performance of the Figi's business. In fact, Figi's continues to perform
quite profitably and generates substantial cash flow. We and our Board of
Directors are committed to identifying an appropriate buyer for this
attractive asset, but will only do so in a transaction that we deem
financially favorable."
Twenty-six Weeks Ended August 2, 2008
For the twenty-six weeks ended August 2, 2008, the Company reported a loss
from continuing operations of $(3.1) million, or $(0.03) per diluted share.
This compares to income from continuing operations of $47.4 million, or $0.36
per diluted share for the twenty-six weeks ended August 4, 2007.
The Company's loss from continuing operations for the first half ended
August 2, 2008 includes after-tax charges of $5.8 million, or $0.05 per
diluted share, related to the severance agreement between Charming Shoppes and
its former Chief Executive Officer, $5.8 million, or $0.05 per diluted share,
related to previously announced consolidation and streamlining initiatives,
and $3.7 million, or $0.03 per diluted share, for advisory and legal fees
arising out of the proxy contest which was settled on May 8, 2008.
Net sales from continuing operations for the twenty-six weeks ended August
2, 2008 decreased 7% to $1.290 billion, compared to net sales from continuing
operations of $1.391 billion for the twenty-six weeks ended August 4, 2007.
-- Net sales for the Company's Retail Stores segment were $1.235 billion
during the twenty-six weeks ended August 2, 2008, a decrease of 10% compared
to $1.371 billion during the twenty-six weeks ended August 4, 2007.
Consolidated comparable store sales for the Company's Retail Stores segment
decreased 11% during the twenty-six weeks ended August 2, 2008, compared to a
2% decrease in comparable store sales during the twenty-six weeks ended August
4, 2007.
-- Net sales from continuing operations for the Company's Direct-to-
Consumer segment were $49.5 million during the twenty-six weeks ended August
2, 2008, compared to $14.6 million during the twenty-six weeks ended August 4,
2007. The strong increase is related to incremental sales related to the
launch of the Lane Bryant Woman catalog in November 2007.
Comparable store sales by retail brand for the three and six month periods
ended August 2, 2008, were:
Three Months Ended Six Months Ended
8/2/08 8/2/08
Lane Bryant Stores(1) -11% -11%
Fashion Bug Stores -9% -11%
Catherines Stores -12% -14%
Consolidated Retail Store Brands -10% -11%
(1) Includes Lane Bryant Outlet Stores
Net sales from continuing operations by brand for the three and six month
periods ended August 2, 2008 and August 4, 2007 were:
Three Months Three Months Six Months Six Months
Ended 8/2/08 Ended 8/4/07 Ended 8/2/08 Ended 8/4/07
($ in ($ in ($ in ($ in
millions) millions) millions) millions)
Lane Bryant(1) $283.3 $306.5 $581.6 $629.7
Fashion Bug $248.8 $279.9 $471.2 $536.9
Catherines $83.0 $93.7 $169.8 $194.4
Direct-to-Consumer $22.5 $4.2 $49.5 $14.6
Other(2) $11.0 $10.1 $17.9 $15.4
Consolidated Net
Sales from
Continuing Operations $648.6 $694.4 $1,290.0 $1,391.0
(1) Includes Lane Bryant Outlet Stores; (2) Includes Petite Sophisticate
Retail and Outlet Stores, and Corporate and Other.
Discontinued Operations
For the thirteen weeks ended August 2, 2008, the Company reported a loss
from discontinued operations of $(4.6) million, (net of tax), or $(0.04) per
diluted share, compared to a loss of $(2.6) million (net of tax), or $(0.02)
per diluted share for the corresponding period a year ago. The loss from
discontinued operations for the second quarter is primarily related to an
after-tax loss on results of operations of approximately $(6.1) million, from
the non-core misses catalog businesses.
For the twenty-six weeks ended August 2, 2008, the Company reported a loss
from discontinued operations of $(39.7) million (net of tax), or $(0.35) per
diluted share, compared to a loss of $(2.8) million (net of tax), or $(0.02)
per diluted share for the corresponding period a year ago. The loss from
discontinued operations for the first half includes an after-tax loss on
results of operations of approximately $(12.9) million, and an estimated loss
on disposal of approximately $(26.9) million, related to the planned sale of
the non-core misses catalog businesses.
Outlook for the Third Fiscal Quarter ending November 1, 2008 and Fourth
Fiscal Quarter ending January 31, 2009
Given the continuing uncertain economic climate and the Company's
expectations for continuing weak traffic trends, the Company continues its
conservative approach in planning for the third quarter of fiscal year 2009.
As a result, the Company will maintain lean inventories and carefully control
operating expenses, in an effort to continue to generate positive free cash
flow.
For the three month period ending November 1, 2008, the Company has
projected diluted loss per share from continuing operations in the range of
$(0.11) to $(0.09), compared to diluted loss per share from continuing
operations of $(0.01) for the corresponding period ended November 3, 2007.
This projection includes pre-tax charges of $2.0 million ($1.3 million after-
tax, or $0.01 per diluted share), related to previously announced streamlining
initiatives. The Company's projection for the third quarter assumes net sales
from continuing operations in the range of $560 to $570 million, compared to
net sales from continuing operations of $599.7 million for the period ended
November 3, 2007. The Company's projection assumes high single digit
percentage decreases in consolidated comparable store sales for the Company's
Retail Stores segment, compared to an 8% decrease in consolidated comparable
store sales in the prior year.
For the three month period ending January 31, 2009, the Company
anticipates narrowing its diluted loss per share from continuing operations,
as compared to the corresponding period ended February 2, 2008. In the fourth
quarter of the previous year, the Company recorded a loss from continuing
operations before extraordinary item of $(0.19), excluding a charge* of $0.84
related to the impairment of goodwill and trademarks. (*Refer to the
Company's GAAP to non-GAAP reconciliation, below.)
*Reconciliation of GAAP to Non-GAAP Financial Measures
For the Quarter Ended February 2, 2008
13 Weeks Ended
2/2/08
Net (Loss) before Extraordinary Gain per Share on a GAAP basis $(1.03)
Impact of impairment charge $0.84
Net (Loss) before Extraordinary Gain per Share on a
non-GAAP basis $(0.19)
SEC REGULATION G -- Charming Shoppes, Inc. reports its financial results
in accordance with generally accepted accounting principles (GAAP). However,
management believes that non-GAAP performance measures, which exclude one-time
charges, present the operating results of the Company on a basis consistent
with those used in managing the Company's business, and provide users of the
Company's financial information with a more meaningful report on the condition
of the Company's business. Non-GAAP financial measures should be viewed in
addition to, and not as an alternative for, the Company's reported results
prepared in accordance with GAAP.
Charming Shoppes, Inc. will host its second quarter earnings conference
call today at 9:15 am Eastern time. To listen to the conference call, please
dial 877-407-8293 approximately 10 minutes prior to the scheduled event. The
conference call will also be simulcast at
http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives . The
general public is invited to listen to the conference call via the webcast or
the dial-in telephone number.
This press release, a transcript of prepared conference call remarks, and
certain other financial and statistical information will be available, prior
to today's conference call, on the Company's corporate website, at
http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives . An
audio rebroadcast of the conference call will be accessible at
http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives ,
following the live conference.
The conference call will be recorded on behalf of Charming Shoppes, Inc.
and consists of copyrighted material. It may not be re-recorded, reproduced,
transmitted or rebroadcast, in whole or in part, without the Company's express
written permission. Accessing this call or the rebroadcast constitutes
consent to these terms and conditions. Participation in this call serves as
consent to having any comments or statements made appear on any transcript,
broadcast or rebroadcast of this call.
At August 2, 2008, Charming Shoppes, Inc. operated 2,359 retail stores in
48 states under the names LANE BRYANT(R), FASHION BUG(R), FASHION BUG PLUS(R),
CATHERINES PLUS SIZES(R), LANE BRYANT OUTLET(R), and PETITE SOPHISTICATE
OUTLET(R). During the six months ended August 2, 2008 the Company opened 37,
relocated 36, and closed 87 retail stores. The Company ended the period with
929 Fashion Bug and Fashion Bug Plus stores, 908 Lane Bryant and Lane Bryant
Outlet stores, 463 Catherines stores, and 59 Petite Sophisticate and Petite
Sophisticate Outlet stores, comprising approximately 15,521,000 square feet of
leased space. Additionally, the Company operates the following direct-to-
consumer titles: Lane Bryant Woman(TM), Figi's(R), and shoetrader.com.
Please visit www.charmingshoppes.com for additional information about Charming
Shoppes, Inc.
Safe Harbor Statement
This press release contains and the Company's conference call will contain
certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 concerning appointments of
executives, the Company's operations, performance, and financial condition.
Such forward- looking statements are subject to various risks and
uncertainties that could cause actual results to differ materially from those
indicated. Such risks and uncertainties may include, but are not limited to:
the failure to consummate the sale of our non-core misses apparel catalogs to
Orchard Brands, the failure to sell the misses apparel catalog credit card
receivables to Alliance Data Systems, the failure to sell Figi's, the failure
to find a suitable permanent replacement for the Company's former Chief
Executive Officer within a reasonable time period, the failure to consummate
our identified strategic solution for our other non-core assets, the failure
to effectively implement our planned consolidation, cost and capital budget
reduction plans, the failure to implement the Company's business plan for
increased profitability and growth in the Company's retail stores and direct-
to-consumer segments, the failure to effectively implement the Company's plans
for consolidation of the Catherines Plus Sizes brand, a new organizational
structure and enhancements in the Company's merchandise and marketing, the
failure to generate a positive response to the Company's new Lane Bryant
catalog and the Lane Bryant credit card program, the failure to successfully
implement the Company's expansion of Cacique through new store formats, the
failure to achieve improvement in the Company's competitive position, adverse
changes in costs vital to catalog operations, such as postage, paper and
acquisition of prospects, declining response rates to catalog offerings, the
failure to maintain efficient and uninterrupted order- taking and fulfillment
in our direct-to-consumer business, changes in or miscalculation of fashion
trends, extreme or unseasonable weather conditions, economic downturns,
escalation of energy costs, a weakness in overall consumer demand, the failure
to find suitable store locations, increases in wage rates, the ability to hire
and train associates, trade and security restrictions and political or
financial instability in countries where goods are manufactured, the
interruption of merchandise flow from the Company's centralized distribution
facilities, competitive pressures, and the adverse effects of natural
disasters, war, acts of terrorism or threats of either, or other armed
conflict, on the United States and international economies. These, and other
risks and uncertainties, are detailed in the Company's filings with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the fiscal year ended February 2, 2008, our Quarterly Reports on
Form 10-Q and other Company filings with the Securities and Exchange
Commission. Charming Shoppes assumes no duty to update or revise its forward-
looking statements even if experience or future changes make it clear that any
projected results expressed or implied therein will not be realized.
CHARMING SHOPPES, INC.
(Unaudited)
2nd 2nd
Quarter Quarter
Ended Percent Ended Percent
(in thousands, except Percent Aug. 2, of Aug. 4, of
per share amounts) Change 2008 Sales(a) 2007 Sales(a)
Net sales (6.6)% $648,616 100.0% $694,359 100.0%
Cost of goods sold, buying,
catalog and occupancy (2.3) 473,868 73.1 485,236 69.9
Selling, general, and
administrative (6.4) 164,995 25.4 176,223 25.4
Restructuring & other
charges (b) n/a 14,945 2.3 0 0.0
Total operating expenses (1.2) 653,808 100.8 661,459 95.3
Income/(loss) from
operations (115.8) (5,192) (0.8) 32,900 4.7
Other income, principally
interest (79.0) 792 0.1 3,771 0.5
Interest expense (21.9) (2,201) (0.3) (2,818) (0.4)
Income/(loss) from
continuing operations
before income taxes (119.5) (6,601) (1.0) 33,853 4.9
Income tax (benefit)/
provision (122.3) (2,891) (0.4) 12,959 1.9
Income/(loss) from
continuing operations (117.8) (3,710) (0.6) 20,894 3.0
Loss from discontinued
operations (including
reduction in the
estimated loss on
disposal of $1,506),
net of tax (c) 76.9 (4,627) (0.7) (2,615) (0.4)
Net income/(loss) (145.6)% $(8,337) (1.3)% $18,279 2.6%
Earnings/(loss) per share:
Basic:
Income/(loss) from
continuing operations $(0.03) $0.17
Loss from discontinued
operations, net of tax (0.04) (0.02)
Net income/(loss) $(0.07) $0.15
Weighted average shares
and equivalents
outstanding 114,342 123,865
Diluted:
Income/(loss) from
continuing operations $(0.03) $0.16
Loss from discontinued
operations, net of tax (0.04) (0.02)
Net income/(loss) $(0.07) $0.14
Weighted average shares
and equivalents
outstanding 114,342 130,236
(a) Results do not add due to rounding.
(b) Represents $5,617 of lease termination charges, relocation charges,
and accelerated depreciation related to the consolidation and streamlining
initiatives announced during the 4th Quarter of Fiscal 2008 and $9,328 related
to severance for our former chief executive officer.
(c) Loss from discontinued operations for the 2nd Quarter of Fiscal 2009
represents the results of operations and an adjustment to the estimated loss
on disposal, net of taxes of $3,150, for the non-core misses apparel catalog
businesses.
CHARMING SHOPPES, INC.
(Unaudited)
Six Six
Months Months
Ended Percent Ended Percent
(in thousands, except Percent Aug. 2, of Aug. 4, of
per share amounts) Change 2008 Sales(a) 2007 Sales(a)
Net sales (7.3)% $1,289,962 100.0% $1,390,973 100.0%
Cost of goods sold,
buying, catalog and
occupancy (3.9) 921,051 71.4 958,387 68.9
Selling, general, and
administrative (1.3) 351,790 27.3 356,321 25.6
Restructuring & other
charges (b) n/a 18,556 1.4 0 0.0
Total operating
expenses (1.8) 1,291,397 100.1 1,314,708 94.5
Income/(loss) from
operations (101.9) (1,435) (0.1) 76,265 5.5
Other income,
principally interest (74.4) 1,307 0.1 5,101 0.4
Interest expense (24.8) (4,570) (0.4) (6,081) (0.4)
Income/(loss) from
continuing operations
before income taxes (106.2) (4,698) (0.4) 75,285 5.4
Income tax
(benefit)/provision (105.9) (1,645) (0.1) 27,925 2.0
Income/(loss) from
continuing operations (106.4) (3,053) (0.2) 47,360 3.4
Loss from discontinued
operations (including
estimated loss on
disposal of $26,884),
net of tax (c) n/a (39,741) (3.1) (2,783) (0.2)
Net income/(loss) (196.0)% $(42,794) (3.3)% $44,577 3.2%
Earnings/(loss) per share:
Basic:
Income/(loss) from
continuing operations $(0.03) $0.38
Loss from discontinued
operations, net of
tax (0.35) (0.02)
Net income/(loss) $(0.37) $0.36
Weighted average shares
and equivalents
outstanding 114,465 123,434
Diluted:
Income/(loss) from
continuing operations $(0.03) $0.36
Loss from discontinued
operations, net of
tax (0.35) (0.02)
Net income/(loss) $(0.37) $0.34
Weighted average shares
and equivalents
outstanding 114,465 135,087
(a) Results do not add due to rounding.
(b) Represents $9,228 of lease termination charges, relocation charges,
and accelerated depreciation related to the consolidation and streamlining
initiatives announced during the 4th Quarter of Fiscal 2008 and $9,328 related
to severance for our former chief executive officer.
(c) Loss from discontinued operations for Fiscal 2009 represents the
results of operations and estimated loss on disposal, net of taxes of $24,004,
related to the planned sale of the non-core misses apparel catalog businesses.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
August 2, February 2,
(In thousands, except share amounts) 2008 2008
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $131,319 $61,335
Available-for-sale securities 6,380 13,364
Accounts receivable, net of allowances of
$2,105 and $6,262 3,540 33,535
Investment in asset-backed securities 109,301 115,912
Merchandise inventories 337,330 330,216
Deferred advertising 11,269 5,546
Deferred taxes 10,437 9,773
Prepayments and other 179,621 151,716
Current assets of discontinued operations 65,650 119,994
Total current assets 854,847 841,391
Property, equipment, and leasehold
improvements -- at cost 1,069,830 1,117,559
Less accumulated depreciation and amortization 620,154 658,410
Net property, equipment, and leasehold
improvements 449,676 459,149
Trademarks and other intangible assets 189,203 189,562
Goodwill 66,666 66,666
Other assets 40,343 56,536
Total assets $1,600,735 $1,613,304
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $158,711 $122,629
Accrued expenses 178,511 168,573
Current liabilities of discontinued operations 43,150 46,086
Current portion -- long-term debt 8,155 8,827
Total current liabilities 388,527 346,115
Deferred taxes 38,746 38,122
Other non-current liabilities 196,643 192,454
Long-term debt 308,329 306,169
Stockholders' equity
Common Stock $.10 par value:
Authorized -- 300,000,000 shares
Issued -- 152,144,426 shares and
151,569,850 shares 15,214 15,157
Additional paid-in capital 412,971 407,499
Treasury stock at cost -- 38,482,213 shares
and 36,477,246 shares (347,730) (336,761)
Accumulated other comprehensive income/(loss) (2) 22
Retained earnings 588,037 644,527
Total stockholders' equity 668,490 730,444
Total liabilities and stockholders' equity $1,600,735 $1,613,304
Certain prior-year amounts have been reclassified to conform to the
current-year presentation.
Amounts are preliminary and subject to reclassifications and adjustments.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-six Weeks Ended
August 2, August 4,
(In thousands) 2008 2007
Operating activities
Net income/(loss) $(42,794) $44,577
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities
Depreciation and amortization 50,566 46,256
Estimated loss on disposition of discontinued
operations 42,768 0
Deferred income taxes (277) 350
Stock-based compensation 5,014 7,760
Excess tax benefits related to stock-based
compensation 0 (780)
Write-down of deferred taxes related to
stock-based compensation (1,333) 0
Write-down of capital assets 2,217 0
Net (gain)/loss from disposition of capital
assets (1,066) 1,191
Net gain from securitization activities (83) (1,170)
Changes in operating assets and liabilities
Accounts receivable, net 29,995 30,257
Merchandise inventories 95 23,800
Accounts payable 32,242 (13,330)
Deferred advertising (1,957) 5,266
Prepayments and other (5,295) 8,580
Accrued expenses and other 1,425 5,358
Net cash provided by operating activities 111,517 158,115
Investing activities
Investment in capital assets (38,459) (74,016)
Proceeds from sales of capital assets 4,813 0
Gross purchases of securities (3,489) (26,501)
Proceeds from sales of securities 10,719 2,579
(Increase)/decrease in other assets 459 (7,789)
Net cash used by investing activities (25,957) (105,727)
Financing activities
Proceeds from issuance of senior convertible notes 0 275,000
Proceeds from long term borrowings 108 790
Repayments of long-term borrowings (4,579) (5,968)
Payments of deferred financing costs (46) (7,541)
Excess tax benefits related to stock-based
compensation 0 780
Purchase of hedge on senior convertible notes 0 (90,475)
Sale of common stock warrants 0 53,955
Purchases of treasury stock (10,969) (149,416)
Funds deposited with third party for purchases
of treasury stock 0 (40,000)
Net proceeds/(payments) from shares issued under
employee stock plans (62) (77)
Net cash provided/(used) by financing activities (15,548) 37,048
Increase in cash and cash equivalents 70,012 89,436
Cash and cash equivalents, beginning of period 61,842 143,838
Cash and cash equivalents, end of period $131,854 $233,274
Non-cash financing and investing activities
Common stock issued on redemption of
convertible notes $0 $149,564
Assets acquired through capital leases $5,959 $4,137
Amounts are preliminary and subject to reclassifications and adjustments.
SOURCE Charming Shoppes, Inc.
CONTACT: Gayle M. Coolick, Vice President, Investor Relations of
Charming Shoppes, Inc., +1-215-638-6955/
