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| Tween Brands Reports 16% Increase in Fourth Quarter 2007 E.P.S. to $1.00 Including $0.11 Restructuring Charge |
Net sales for the thirteen weeks of the fourth quarter of 2007 reached a record $315.8 million, a 16% increase on the $272.3 million in sales for the fourteen weeks of the fourth quarter 2006. Comparable store sales for the 2007 period increased 8% compared to the 2% increase for the 2006 quarter. By brand, Justice delivered a 29% increase in comparable store sales and Limited Too delivered a 3% increase. The company's e-commerce sales increased 125%. Commenting on the improved fourth quarter results, Tween Brands Chairman and CEO Mike Rayden said, "In addition to great sales growth, we controlled our inventory, managed markdowns, and delivered better than expected operating income." Total inventories at the end of 2007 were flat on a per square foot at cost basis compared to inventories at the end of 2006. In-store inventories were down 5% per square foot at cost. Cost Savings Initiatives During the fourth quarter 2007, Tween Brands conducted a review of certain areas of its corporate expense base, with the aim of identifying cost savings opportunities that would benefit the company in fiscal 2008 and beyond. As a result of that review, Tween Brands eliminated 22 positions, primarily in the company's corporate services areas, and undertook a number of non-personnel related expense reduction measures. The company does not anticipate any additional staff reductions as a result of the cost study's initiatives. Tween Brands estimates the pretax savings resulting from the initiatives at $4.0 million in 2008 and $6.0 million in 2009. Fiscal Year Results Net sales for the fifty-two week fiscal year ended February 2, 2008 reached a record $1.0 billion, a 15% increase on the $883.7 million reported for the fifty-three week fiscal year ended February 3, 2007. The sales increase for 2007 is largely attributable to a 17% increase in the number of stores and Tween Brands' comparable store sales increase of 4%. Comparable store sales for 2007 increased 4% compared to the 6% increase for 2006. By brand, Justice delivered a 21% increase in comparable store sales and Limited Too's comparable store sales were flat. The company's e-commerce sales increased 92% during 2007. Earnings per diluted share for 2007 were $1.81 compared to $1.95 per diluted share for fiscal 2006. The 2007 figure includes a $0.09 per diluted share restructuring charge explained above. Compared to 2006 with its extra week, the company also had a lower gross income rate, a higher store operating general and administrative rate of sales and interest expense compared to interest income in 2007. These factors were partially offset by 12% fewer weighted average shares outstanding as a result of the company's aggressive share repurchase activity during the year. Share Repurchase During 2007, Tween Brands repurchased approximately 7.8 million common shares, or about 23% of the shares outstanding as of February 3, 2007. Of the 7.8 million, 5.2 million shares were repurchased as part of an accelerated share repurchase program (ASR) initiated in September 2007. The ASR was funded with a $175 million term loan, which produced a more effective capital structure and a lower weighted average cost of capital for the company. First Quarter 2008 Outlook Tween Brands said that it expects earnings per diluted share for the fiscal first quarter ending May 3, 2008 to be in the range of $0.35 to $0.40 per share. The company anticipates a $0.01 to $0.02 per share benefit in the quarter from the cost savings initiatives. The earnings guidance excludes any severance or recruitment charges related to the company's chief financial officer position. "Against the backdrop of what appears to be an uncertain economy, we believe it is prudent to be cautious in our outlook for 2008. For now, we are limiting our earnings guidance to the near term," said Mr. Rayden. "We believe that, given our new store growth, significant share repurchases in 2007 and the connection to our target customer, we will see earnings growth in 2008." Growth Plans for 2008 Tween Brands said that it is planning to open 90 to 100 Justice stores in 2008, compared to the 101 opened in 2007. In addition, the company plans to add a net 10 to 15 Limited Too stores in 2008, along with 35 remodels. Included among the new Limited Too store openings and remodels are 10 to 15 stores in a new store design format. Limited Too added a net 19 stores in 2007 and completed 33 remodels. Total capital expenditures for 2008 are expected to be between $75.0 to $80.0 million compared to the $101.6 million invested in 2007. The 2008 budget, compared to the 2007 spending, reflects a slightly lower number of planned new store openings and remodels. Additionally, the 2007 figure included the construction of Tween Brands' home office addition, which opened in November.
SEC Regulation G
Reconciliation of fourth quarter and full-year 2007 earnings per
diluted share on a GAAP basis to earnings per diluted share on a non-
GAAP basis:
Thirteen Weeks Fifty-two Weeks
Ended Ended
February 2, 2008 February 2, 2008
Earnings per diluted share on a GAAP
basis $1.00 $1.81
ADD: expenses associated with
restructuring 0.11 0.09
---------------- ----------------
Earnings per diluted share on a non-
GAAP basis (a) $1.11 $1.90
================ ================
(a)Earnings per diluted share excluding the amounts shown above are a non-GAAP measure. The company believes this is an important measure since it represents the earnings per diluted share from ongoing operations. Conference Call and Webcast Tween Brands will host a conference call with security analysts beginning at 9:00 a.m. Eastern time today, February 20, 2008, to review the operating results for the fourth quarter and fiscal year ended February 2, 2008. Interested participants can call 877-407-8033 a few minutes before the 9:00 a.m. start in order to be placed in queue. The conference call ID is 270656. The live call and replay are also being webcast. Individual investors can listen to the webcast at www.earnings.com, and institutional investors can access the webcast at www.streetevents.com. The webcast will also be available at Tween Brands' corporate Web site, www.tweenbrands.com. About Tween Brands, Inc. Tween Brands, Inc. is a leading specialty retailer for tweens (ages 7 to 14). At Limited Too, the company sells sportswear, related accessories and key lifestyle items for active, fashion-aware tween girls. Limited Too currently operates 582 stores across the United States, and has 25 international franchised stores. Limited Too publishes a catazine coinciding with key tween shopping times throughout the year and conducts e-commerce on its Web site, www.limitedtoo.com. Justice is the company's newer specialty retail concept for tween girls, offering moderately-priced sportswear, accessories and lifestyle items in predominantly off-the-mall store sites. Justice also publishes a catazine for its tween customers and currently operates 261 stores across the United States, the locations of which can be found on their Web site, www.justicejustforgirls.com. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This press release contains various "forward-looking statements" specifically related to the company's operating results for fiscal 2008 and beyond, within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Such statements can be identified by the use of the forward-looking words "anticipate," "estimate," "project," "target," "predict," "believe," "intend," "plan," "expect," "hope," "risk," "could," "pro forma," "potential," "prospects, " "outlook," or similar words. These statements discuss future expectations, contain projections regarding future developments, operations or financial conditions, or state other forward-looking information. These forward-looking statements involve various important risks, uncertainties and other factors that could cause our actual results for 2008 and beyond to differ materially from those expressed. The following factors, among others, could affect our future financial performance and cause actual future results to differ materially from those expressed or implied in any forward-looking statements included in this press release: changes in consumer spending patterns, consumer preferences and overall economic conditions; decline in the demand for our merchandise; the impact of competition and pricing; the effectiveness of our brand awareness and marketing programs; a significant change in the regulatory environment applicable to our business; risks associated with our sourcing and logistics functions; the impact of modifying and implementing new information technology systems; changes in existing or potential trade restrictions, duties, tariffs or quotas; currency and exchange risks; availability of suitable store locations at appropriate terms; ability to develop new merchandise; ability to hire and train associates; the potential impact of health concerns relating to severe infectious diseases, particularly on manufacturing operations of our vendors in Asia and elsewhere; acts of terrorism in the U.S. or worldwide; and other risks that may be described in other reports and filings we make with the Securities and Exchange Commission. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included here will prove to be accurate. The inclusion of forward-looking statements should not be regarded a representation by us, or any other person, that our objectives will be achieved. The forward-looking statements made herein are based on information presently available to us, as the management of the company. We assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. Company home page: www.tweenbrands.com
Tween Brands, Inc.
Consolidated Statements of Operations
For the Thirteen Weeks Ended February 2, 2008 and the Fourteen Weeks
Ended February 3, 2007
(unaudited, in thousands, except per share amounts)
Thirteen Weeks Ended Fourteen Weeks Ended
-------------------- --------------------
February 2, % of February 3, % of
2008 Sales 2007 Sales
------------ ------- ------------- ------
Net sales $315,821 100.0% $272,264 100.0%
Cost of goods sold,
including buying and
occupancy costs 193,432 61.2% 167,358 61.5%
------------ ------- ------------- ------
Gross income 122,389 38.8% 104,906 38.5%
Store operating, general and
administrative expenses 79,446 25.2% 63,379 23.2%
------------ ------- ------------- ------
Operating income 42,943 13.6% 41,527 15.3%
Interest (expense)/income,
net (2,503) (0.8%) 1,454 0.5%
------------ ------- ------------- ------
Earnings before income taxes 40,440 12.8% 42,981 15.8%
Provision for income taxes 15,441 4.9% 14,766 5.4%
------------ ------- ------------- ------
Net Income $ 24,999 7.9% $ 28,215 10.4%
============ ======= ============= ======
Net income per share:
Basic $ 1.01 $ 0.88
============ =============
Diluted $ 1.00 $ 0.86
============ =============
Weighted average common
shares:
Basic 24,657 32,045
============ =============
Diluted 25,082 32,781
============ =============
Tween Brands, Inc.
Consolidated Statements of Operations
For the Fifty-Two Weeks Ended February 2, 2008 and the Fifty-Three
Weeks Ended February 3, 2007
(unaudited, in thousands, except per share amounts)
Fifty-Two Fifty-Three
Weeks Ended Weeks Ended
------------------- ------------------
February 2, % of February 3, % of
2008 Sales 2007 Sales
----------- ------- ----------- ------
Net sales $1,013,661 100.0% $ 883,683 100.0%
Cost of goods sold, including
buying and occupancy costs 644,280 63.6% 549,715 62.2%
----------- ------- ----------- ------
Gross income 369,381 36.4% 333,968 37.8%
Store operating, general and
administrative expenses 285,059 28.1% 238,278 27.0%
----------- ------- ----------- ------
Operating income 84,322 8.3% 95,690 10.8%
Interest (expense)/income, net (1,665) (0.1%) 5,138 0.6%
----------- ------- ----------- ------
Earnings before income taxes 82,657 8.2% 100,828 11.4%
Provision for income taxes 30,083 3.0% 36,007 4.1%
----------- ------- ----------- ------
Net Income $ 52,574 5.2% $ 64,821 7.3%
=========== ======= =========== ======
Net income per share:
Basic $ 1.84 $ 1.99
=========== ===========
Diluted $ 1.81 $ 1.95
=========== ===========
Weighted average common shares:
Basic 28,548 32,521
=========== ===========
Diluted 29,099 33,198
=========== ===========
Tween Brands, Inc.
Consolidated Balance Sheets
As of February 2, 2008 and February 3, 2007
(unaudited, in thousands, except share amounts)
February 2, February 3,
2008 2007
------------- ------------------
ASSETS
Current Assets:
Cash and equivalents $ 46,009 $ 48,394
Investments 70,215 99,164
Restricted assets 1,295 1,235
Accounts receivable, net 12,557 13,878
Inventories, net 107,483 91,742
Store supplies 16,949 14,806
Prepaid expenses and other
current assets 19,087 15,236
------------- ------------------
Total current assets 273,595 284,455
Property and equipment, net 301,405 235,516
Long-term investments 0 17,054
Deferred income taxes 10,302 8,166
Assets held in trust and other 26,335 24,486
------------- ------------------
Total assets $ 611,637 $ 569,677
============= ==================
LIABILITIES
Current Liabilities:
Accounts payable $ 37,749 $ 37,150
Accrued expenses 56,810 38,849
Deferred revenue 16,077 13,584
Current portion long-term debt 8,750 -
Income taxes payable 11,909 20,879
------------- ------------------
Total current liabilities 131,295 110,462
------------- ------------------
Long-term debt 166,250 -
Deferred tenant allowances from
landlords 66,377 53,687
Supplemental retirement and
deferred compensation liability 21,289 20,362
Accrued straight-line rent and
other 31,427 13,840
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 50
million shares authorized
Common stock, $.01 par value, 100
million shares authorized, 37.0
million and 36.6 million shares
issued, 24.7 million and 32.1
million shares outstanding at
February 2, 2008 and February 3,
2007, respectively 370 366
Treasury stock, at cost, 12.3
million and 4.5 million shares at
February 2, 2008 and February 3,
2007, respectively (356,545) (120,554)
Paid in capital 185,893 173,394
Retained earnings 368,108 318,120
Accumulated other comprehensive
income (2,827) -
------------- ------------------
Total shareholders' equity 194,999 371,326
------------- ------------------
Total liabilities and shareholders'
equity $ 611,637 $ 569,677
============= ==================
Tween Brands, Inc.
Other Financial and Store Operating Information
(unaudited, dollars in thousands)
Thirteen/Fourteen Weeks Fifty-Two/Fifty-Three
Ended Weeks Ended
-------------------------- --------------------------
February February February February
2, 3, % 2, 3, %
2008 2007 Change 2008 2007 Change
--------- --------- ------ --------- --------- ------
Gross income $122,389 $104,906 17% $369,381 $333,968 11%
Gross income as
percentage of
net sales 38.8% 38.5% 36.4% 37.8%
Depreciation $ 10,339 8,106 28% $ 37,615 31,229 20%
Amortization of
tenant
allowances $ (2,656) $ (2,394) $ (9,670) $ (8,548)
Capital
expenditures $ 15,331 $ 15,916 $101,647 $ 66,012
Number of
stores:
Beginning of
period 834 711 722 666
Opened 21 22 140 79
Closed (13) (11) (20) (23)
--------- --------- --------- ---------
End of period 842 722 842 722
========= ========= ========= =========
Number of
Limited Too
stores 582 563 582 563
Number of
Justice stores 260 159 260 159
Total gross
square feet at
period end
(thousands) 3,510 3,006 3,510 3,006
Comparable store
sales % change 8% 2% 4% 6%
Limited Too
stores 3% 0% 0% 4%
Justice stores 29% 21% 21% 28%
SOURCE: Tween Brands, Inc. Tween Brands Robert Atkinson, 614-775-3739 |
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