BENSALEM, Pa., May 27 /PRNewswire-FirstCall/ -- Charming Shoppes, Inc.
(Nasdaq: CHRS), a leading multi-brand apparel retailer specializing in women's
plus-size apparel, today reported sales and operating results for the first
quarter ended May 2, 2009.
Results for the quarter, compared to the same quarter of the prior year,
include:
-- A net sales decrease of $103.2 million or 16.1%, reflecting a 13%
decrease in comparable store sales and the impact of store closings;
-- Decreases in total expenses (excluding restructuring charges) were
$103.3 million or 16.3%, with a decrease in cost of goods sold,
buying, catalog and occupancy expense of $74.6 million or 16.7%, and a
decrease in selling, general and administrative expense of $28.7
million or 15.4%;
-- Improvement in the merchandise margin, as a percent of sales, of 190
basis points, with a decrease in same store inventories of 21%;
-- Income from operations, excluding restructuring charges, was $7.4
million, essentially flat year over year, despite a 16% sales decline;
-- Total liquidity was $331 million, including $124 million in cash and
net availability of $207 million on the Company's unused line of
credit;
-- Cash was $124 million, reflecting an increase of $24 million from the
period ended January 31, 2009;
-- The repurchase of $13.5 million face value of the Company's 1.125%
Convertible Notes due 2014 (the "Notes") during the quarter, at a cost
of $5.6 million. An additional $16.5 million face value of the Notes
were repurchased subsequent to the closing of the first quarter at a
cost of $8.2 million. In aggregate, the Company has repurchased $30.0
million of Notes, as of May 26, 2009, at a cost of $13.9 million.
For the thirteen weeks ended May 2, 2009, the Company reported a loss from
continuing operations of ($6.6) million or ($0.06) per diluted share, compared
to the Company's previous guidance for a loss of ($0.09) - ($0.13) per diluted
share. This compares to a loss from continuing operations for the thirteen
weeks ended May 3, 2008 of $(0.9) million or $(0.01) per diluted share, which
included restructuring charges and non-cash interest related to the adoption
of FSP APB 14-1 (further detail provided below) of $0.03 per diluted share.
The Company's loss from continuing operations of ($6.6) million or ($0.06)
per diluted share includes net charges of $0.07 per diluted share related to
restructuring charges, a gain on the repurchase of Notes, and non-cash
interest related to the adoption of FSP APB 14-1.
Jim Fogarty, President and Chief Executive Officer of Charming Shoppes
Inc., said, "While our performance for the first quarter reflected a difficult
retail environment and did exceed our earnings guidance, our results were
nevertheless disappointing. Our results reflect comparable store sales
performance that was not on par with other retailers, and a disappointing
level of earning power for our brands. We are focused on improving our
business model and our marketing. We are also focused on improving our
merchandise assortment planning to reflect more balanced and compelling
offerings across our brands."
First Quarter Fiscal 2010 Consolidated Results
-- Net sales from continuing operations for the thirteen weeks ended May
2, 2009 decreased $103.2 million or 16.1% to $538.1 million, compared
to $641.3 million for the thirteen weeks ended May 3, 2008. The
decrease in sales was primarily as a result of a comparable store
sales decrease of 13% and the impact to sales from 162 store closings
during the last four quarters. Comparable store sales declined 15%,
13% and 9% at the Company's Lane Bryant, Fashion Bug and Catherines
brands, respectively.
-- Gross profit (net sales less cost of goods sold, buying, catalog and
occupancy expense) decreased $28.6 million or 14.7% to $165.5 million
in the first quarter, compared to $194.2 million in the same quarter
last year, primarily related to lower sales volumes, and partially
offset by decreased buying, catalog and occupancy expenses. Gross
profit, as a percent of sales, improved by 50 basis points to 30.8% as
a percent of sales for the quarter ended May 2, 2009, compared to
30.3% as a percent of sales for the quarter ended May 3, 2008, driven
by an improved merchandise margin, and offset by negative leverage on
occupancy expenses from the decrease in consolidated net sales. The
merchandise margin improved by 190 basis points, related to lean
inventories and reduced promotional activity, particularly at the
Company's Lane Bryant and Catherines brands.
-- Selling, general and administrative expense decreased by $28.7 million
or 15.4% to $158.1 million in the first quarter, compared to $186.8
million in the same quarter last year, primarily related to the
closing of under-performing stores and expense reduction initiatives.
SG&A expense was 29.4% as a percent of sales, and increased by 30
basis points, primarily as a result of negative leverage from the
decrease in net sales from the prior-year period.
-- Restructuring and non-cash interest charges of $11.6 million recorded
during the quarter ended May 2, 2009 include $8.7 million, primarily
related to accelerated depreciation on discontinued or divested
catalog businesses, and $2.9 million for accretion of discount on the
Company's Notes related to the retrospective adoption of FSP APB 14-1.
$6.7 million of these charges were non-cash charges. Restructuring
and non-cash interest charges of $6.3 million recorded during the
quarter ended May 3, 2008 included charges of $3.6 million in
accelerated depreciation related to consolidation and streamlining
initiatives, and $2.7 million for accretion of discount on the
Company's Notes related to the adoption of FSP APB 14-1.
-- Income from operations, excluding $8.7 million in restructuring
charges, was $7.4 million, essentially flat year over year on a 16%
sales decline. Please refer to the Company's reconciliation of GAAP
to non-GAAP financial measures, below.
-- The Company's operating results for the thirteen weeks ended May 2,
2009 include depreciation and amortization in the amount of $20.1
million and equity based compensation expense of $1.7 million. For
the thirteen weeks ended May 3, 2008, depreciation and amortization
was $26.5 million and equity based compensation expense was $2.9
million.
-- The income tax provision for the thirteen weeks ended May 2, 2009 was
$4.7 million, compared to $0.3 million for the thirteen weeks ended
May 3, 2008. Included in the above tax provision is a tax valuation
allowance of $3.6 million, or $0.03 per diluted share. The recording
of a tax valuation allowance does not have any impact on cash, nor
does such an allowance preclude the Company from using its tax loss
carry forwards or other deferred tax assets in the future when results
return to profitability.
Balance Sheet and Liquidity
In the first quarter of fiscal year 2010, the Company has adopted FASB
Staff Position ("FSP") APB 14-1 "Accounting for Convertible Debt Instruments
That May Be Settled in Cash Upon Conversion (Including Partial Cash
Settlements)", which changes the accounting treatment for convertible
securities that the issuer may settle fully or partially in cash. This
relates to the Company's 1.125% Senior Convertible Notes (the "Notes") due
2014, and has been retrospectively applied to the Company's accompanying
income statements, balance sheets and statements of cash flows for all periods
presented.
The adoption of FSP APB 14-1 resulted in an initial reduction in long-term
debt and an increase in stockholders' equity of $91.7 million as of May 2007,
the date of issuance. The non-cash amortization of this discount component
increases interest expense and long-term debt over the life of the debt. The
pre-tax amortization of interest expense and increase in long-term debt
recognized retrospectively was $11.0 million for Fiscal 2009 and $7.8 million
for Fiscal 2008 (from the date of original issuance). The adoption of the FSP
does not affect the Company's cash flows.
Commenting on the quarter and the Company's liquidity, Eric M. Specter,
Executive Vice President and Chief Financial Officer, said, "Our balance sheet
remained strong, and our total liquidity increased to $331 million at the end
of the quarter. Our strong liquidity allowed us to opportunistically
repurchase Notes with a principal amount of $13.5 million for a cash purchase
price of $5.6 million. We recognized a gain on this repurchase of $4.3
million. Subsequent to the close of the quarter, we repurchased additional
Notes with a principal amount of $16.5 million for a cash purchase price of
$8.2 million, bringing our cumulative repurchases to $30.0 million of
principal amount of Notes. Our liquidity at the end of the quarter includes
net availability of $207 million on our fully committed and unused $375
million line of credit, and $124 million in cash, which increased by $24
million during the quarter."
Sales results for the three month periods ended May 2, 2009 and May 3,
2008 were:
Net Sales for Net Sales for Total Net Comparable Store
the Three Months the Three Months Sales Sales Change for
Ended 5/2/09 Ended 5/3/08 Change the Three Months
($in millions) ($in millions) (%) Ended 5/2/09
Lane Bryant Stores (1) $253.8 $297.0 -15% -15%
Fashion Bug Stores $178.7 $221.8 -19% -13%
Catherines Stores $78.7 $86.5 -9% -9%
Catalog Sales $19.5 $26.9 -28% NA
Other (2) $7.4 $9.1 -19% NA
Consolidated $538.1 $641.3 -16% -13%
(1) Includes Lane Bryant Outlet Stores; (2) Includes Petite Sophisticate
Retail and Outlet Stores, Corporate and Other.
Charming Shoppes, Inc. will host its first 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 and rebroadcast 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.
A transcript of prepared remarks for the conference call will be
accessible at
http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives
following the conference call on Wednesday, May 27, 2009.
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 May 2, 2009, Charming Shoppes, Inc. operated 2,272 retail stores in 48
states under the names LANE BRYANT(R), LANE BRYANT OUTLET(R), FASHION BUG(R),
FASHION BUG PLUS(R), CATHERINES PLUS SIZES(R), and PETITE SOPHISTICATE
OUTLET(R). During the three months ended May 2, 2009 the Company opened 6,
relocated 5, and closed 35 retail stores. The Company ended the period with
884 Lane Bryant and Lane Bryant Outlet stores, 879 Fashion Bug and Fashion Bug
Plus stores, 465 Catherines stores, and 44 Petite Sophisticate Outlet stores,
comprising approximately 14,918,000 square feet of leased space. Please visit
www.charmingshoppes.com for additional information about Charming Shoppes,
Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
For the Thirteen Weeks Ended May 2, 2009 and May 3, 2008*
13 Weeks Ended 5/2/09 13 Weeks Ended 5/3/08
$in millions (pre-tax) $in millions (pre-tax)
----------------------- -----------------------
(Loss) / Income from operations,
on a GAAP basis $(1.3) $3.8
Impact of restructuring charges $8.7 $3.6
Income from operations, on a
non-GAAP basis $7.4 $7.4
*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.
Safe Harbor Statement
This press release contains and the Company's conference call may contain
certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 concerning 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 our identified
strategic alternatives for our non-core assets, the failure to effectively
implement our planned consolidation, cost and capital budget reduction plans
and store closing 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 a new organizational structure and enhancements in the
Company's merchandise and marketing, the failure to effectively implement the
Company's plans for the transformation of its brands to a vertical specialty
store model, the failure to achieve increased profitability through the
adoption by the Company's brands of a vertical specialty store model, the
failure to achieve improvement in the Company's competitive position, the
failure to continue receiving financing at an affordable cost through the
availability of our credit card securitization facilities and through the
availability of credit we receive from our suppliers and their agents, 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 January 31, 2009, 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)
1st 1st
Quarter Quarter
Ended Ended
(in thousands, except Percent May 2, Percent of May 3, Percent of
per share amounts) Change 2009 Sales (a) 2008 Sales (a)
--------------------- ------ ------ -------- ------ --------
Net sales (16.1)% $538,136 100.0% $641,346 100.0%
----- -------- ----- -------- -----
Cost of goods sold, buying,
catalog and occupancy (16.7) 372,599 69.2 447,183 69.7
Selling, general, and
administrative (15.4) 158,102 29.4 186,795 29.1
Restructuring charges (b) 141.1 8,705 1.6 3,611 0.6
----- ----- --- ----- ---
Total operating expenses (15.4) 539,406 100.2 637,589 99.4
----- ------- ----- ------- ----
Income/(loss) from operations (133.8) (1,270) (0.2) 3,757 0.6
Other income, principally
interest (61.6) 198 0.0 515 0.1
Gain on repurchase of debt n/a 4,251 0.8 0 0.0
Non-cash interest expense (c) 7.5 (2,884) (0.5) (2,684) (0.4)
Interest expense (6.2) (2,136) (0.4) (2,277) (0.4)
---- ------ ---- ------ ----
Loss from continuing operations
before income taxes 167.2 (1,841) (0.3) (689) (0.1)
Income tax provision n/a 4,720 0.9 260 0.0
--- ----- --- --- ---
Loss from continuing
operations 591.4 (6,561) (1.2) (949) (0.1)
Loss from operations of
discontinued component
(including loss on disposal
of $39,170), net of tax (d) n/a 0 0.0 (45,894) (7.2)
--- - --- ------- ----
Net loss (86.0)% $(6,561) (1.2)% $(46,843) (7.3)%
===== ======= ==== ======== ====
Loss per share:
Basic:
Loss from continuing
operations $(0.06) $(0.01)
Loss from discontinued
operations, net of tax - (0.40)
- -----
Net loss $(0.06) $(0.41)
====== ======
Weighted average shares and
equivalents outstanding 115,180 114,588
======= =======
Diluted:
Loss from continuing
operations $(0.06) $(0.01)
Loss from discontinued
operations, net of tax - (0.40)
- -----
Net loss $(0.06) $(0.41)
====== ======
Weighted average shares and
equivalents outstanding 115,180 114,588
======= =======
(a) Results do not add due to rounding.
(b) Fiscal 2010 costs are related to our multi-year transformational
initiatives and non-cash accelerated depreciation related to fixed
assets retained from the sale of the non-core misses apparel catalog
business; the shutdown of Lane Bryant Woman catalog; and the
outsourcing of our e-commerce platform. Fiscal 2009 costs represent
primarily accelerated depreciation, relocation charges and lease
termination charges related to the consolidation and streamlining
initiatives announced during the 4th Quarter of Fiscal 2008.
(c) The Company adopted FSP APB 14-1 "Accounting for Convertible Debt
Instruments That May Be Settled in Cash Upon Conversion (Including
Partial Cash Settlements)" on February 1, 2009, which required
retrospective application. Accordingly, the Company's operating
results since the issuance of the Senior Convertible Notes in Fiscal
2008 and future operating results until maturity will reflect
additional non-cash interest expense.
(d) Loss from operations of discontinued component for the 1st Quarter
of Fiscal 2009 represents the results of operations and estimated
loss on disposal, net of taxes of $10,074, related to the planned
sale of the non-core misses apparel catalog businesses.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 2, January 31,
(In thousands, except share amounts) 2009 2009
---- ----
(As Adjusted)
ASSETS
Current assets
Cash and cash equivalents $123,885 $93,759
Available-for-sale securities 400 6,398
Accounts receivable, net of
allowances of $6,125 and $6,018 8,021 33,300
Investment in asset-backed securities 86,998 94,453
Merchandise inventories 300,214 268,142
Deferred taxes 3,439 3,439
Prepayments and other 173,485 155,430
------- -------
Total current assets 696,442 654,921
------- -------
Property, equipment, and leasehold
improvements - at cost 1,072,087 1,076,972
Less accumulated depreciation and
amortization 707,519 693,796
------- -------
Net property, equipment, and
leasehold improvements 364,568 383,176
------- -------
Trademarks and other intangible assets 187,184 187,365
Goodwill 23,436 23,436
Other assets 26,348 28,243
------ ------
Total assets $1,297,978 $1,277,141
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $145,815 $99,520
Accrued expenses 155,293 166,631
Current portion - long-term debt 6,463 6,746
----- -----
Total current liabilities 307,571 272,897
------- -------
Deferred taxes 47,440 46,197
Other non-current liabilities 186,943 188,470
Long-term debt, net of debt discount
of $66,591 and $72,913 223,986 232,722
Stockholders' equity
Common Stock $.10 par value:
Authorized - 300,000,000 shares
Issued - 153,890,388 shares and
153,482,368 shares 15,389 15,348
Additional paid-in capital 500,258 498,550
Treasury stock at cost -
38,482,213 shares (347,730) (347,730)
Accumulated other comprehensive income 0 5
Retained earnings 364,121 370,682
------- -------
Total stockholders' equity 532,038 536,855
------- -------
Total liabilities and
stockholders' equity $1,297,978 $1,277,141
========== ==========
Amounts are preliminary and subject to reclassifications and adjustments.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
--------------------
May 2, May 3,
(In thousands) 2009 2008
---- ----
(As Adjusted)
Operating activities
Net loss $(6,561) $(46,863)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 20,524 27,096
Accretion of discount on 1.125% Senior
Convertible Notes 2,884 2,684
Estimated loss on disposition of
discontinued operations 0 45,251
Deferred income taxes 1,246 (2,002)
Stock-based compensation 1,710 2,898
Gain on repurchase of 1.125% Senior
Convertible Notes (4,251) 0
Write-down of deferred taxes related to
stock-based compensation 0 (263)
Write-down of capital assets 3,828 1,919
Net loss from disposition of capital assets 143 558
Net loss/(gain) from securitization
activities 1,225 (367)
Changes in operating assets and liabilities
Accounts receivable, net 25,279 25,345
Merchandise inventories (32,072) (39,060)
Accounts payable 46,295 30,864
Prepayments and other (11,547) (3,314)
Accrued expenses and other (13,464) 1,414
-------- -----
Net cash provided by operating activities 35,239 46,160
------ ------
Investing activities
Investment in capital assets (4,702) (22,014)
Gross purchases of securities 0 (12,636)
Proceeds from sales of securities 7,471 19,404
(Increase)/decrease in other assets (449) (36)
----- ----
Net cash provided/(used) by investing
activities 2,320 (15,282)
----- --------
Financing activities
Proceeds from long term borrowings 0 87
Repayments of long-term borrowings (1,841) (2,271)
Repurchase of 1.125% Senior Convertible Notes (5,631) 0
Payments of deferred financing costs 0 (45)
Purchases of treasury stock 0 (10,969)
Net proceeds from shares issued under
employee stock plans 39 69
-- --
Net cash used by financing activities (7,433) (13,129)
------- --------
Increase in cash and cash equivalents 30,126 17,749
Cash and cash equivalents, beginning of
period 93,759 61,842
------ ------
Cash and cash equivalents, end of period $123,885 $79,591
======== ========
Non-cash financing and investing activities
Assets acquired through capital leases $0 $1,793
== ======
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
Web Site: http://www.charmingshoppes.com
(CHRS)
