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Press release from GlobeNewswire (a Nasdaq OMX company)

The Children's Place Reports Second Quarter 2013 Results

Thursday, August 22, 2013

The Children's Place Reports Second Quarter 2013 Results

03:30 EDT Thursday, August 22, 2013

SECAUCUS, N.J., Aug. 22, 2013 (GLOBE NEWSWIRE) -- The Children's Place Retail Stores, Inc. (Nasdaq:PLCE), the largest pure-play children's specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended August 3, 2013.

"We delivered a solid second quarter and are raising our 2013 forecast to reflect these strong earnings results," commented Jane Elfers, President and Chief Executive Officer. "With the state tax-free promotional events behind us, we are encouraged by the solid start to the back-to-school season."

Second Quarter 2013 Results

Net sales increased 6.0% to $382.4 million, compared to $360.8 million in the second quarter the prior year. Comparable retail sales declined 0.4%.

Net loss was $(23.6) million, or $(1.05) per share, in the second quarter of 2013, compared to $(17.9) million, or $(0.74) per share, the previous year. Adjusted net loss was $(9.4) million, or $(0.42) per share, compared to $(15.0) million, or $(0.62) per share the previous year.

Gross profit increased 10.0% to $126.2 million, and increased 120 basis points to 33.0% of sales.

Selling, general and administrative expenses increased 3.1% to $124.4 million. Adjusted SG&A increased 2.7% to $122.7 million, and leveraged 100 basis points to 32.1% of sales.

Operating loss was $(35.6) million, compared to $(26.8) million in the second quarter of 2012. Excluding unusual items, adjusted operating loss was $(12.5) million, compared to $(22.0) million the previous year.

During the second quarter, the Company recorded charges of $23.2 million for unusual items. These consisted primarily of store impairment and early closure expenses associated with its decision to close approximately 100 underperforming stores over the next three years, and asset impairment and SG&A expenses associated with the write-down of some development costs and obsolete systems associated with its long-term systems initiative.

Adjusted SG&A, adjusted operating income and adjusted net income are Non-GAAP measures. The Company believes the excluded transactions are not indicative of the performance of its core business and that by providing this supplemental disclosure to investors it will facilitate comparisons of its past and present performance. A reconciliation to GAAP financial information is provided at the end of this release.

The Company opened 15 stores and closed 10, ending the second quarter with 1,116 stores.

Fiscal Year-to-Date

Net sales increased 0.8% to $805.6 million, compared to $799.3 million in the first half of the prior year. Comparable retail sales declined 3.2%.

Net loss was $(4.4) million, or $(0.19) per share, in the first half of 2013, compared to net income of $6.8 million, or $0.28 per share, the previous year. Adjusted net income was $9.9 million, or $0.43 per diluted share, compared to $13.3 million, or $0.54 per diluted share the previous year.

Gross profit decreased 1.3% to $289.4 million.

Selling, general and administrative expenses increased 0.2% to $243.4 million. Adjusted SG&A increased 0.9% to $241.2 million.

Operating loss was $(7.2) million, compared to operating income of $10.3 million in the first half of 2012. Adjusted operating income was $15.9 million, compared to $20.7 million the previous year.

Share Repurchase Program

The Company repurchased 456 thousand shares for approximately $23.6 million during the second quarter of 2013. Year-to-date, the Company repurchased 968 thousand shares for approximately $47.8 million. At the end of the quarter, $32.6 million of the $100 million share repurchase program authorized in November 2012 remained available for future share repurchases.

Outlook

The Company updated its guidance for fiscal 2013 to reflect second quarter results and now projects that adjusted earnings per diluted share will be between $3.15 and $3.28, assuming negative low-single digit comparable retail sales. This compares to its previous guidance of $3.05 to $3.20, assuming flat to slightly negative comparable retail sales.

The Company provided initial guidance for the third quarter of fiscal 2013, and is forecasting adjusted earnings per diluted share between $1.83 and $1.89, assuming flat comparable retail sales. This compares to adjusted earnings per share of $1.70 in the third quarter of 2012.

This earnings guidance assumes that currency exchange rates will remain where they are today and does not include the impact of further potential share repurchases.

Conference Call Information

The Children's Place will host a conference call to discuss its second quarter fiscal 2013 results today at 8:00 a.m. Eastern Time. The call will be broadcast live at http://investor.childrensplace.com. An audio archive will be available on the Company's website approximately one hour after the conclusion of the call.

About The Children's Place Retail Stores, Inc.

The Children's Place is the largest pure-play children's specialty apparel retailer in North America. The Company designs, contracts to manufacture and sells fashionable, high-quality merchandise at value prices, primarily under the proprietary "The Children's Place" brand name. As of August 3, 2013, the Company operated 1,116 stores and an online store at www.childrensplace.com.

Forward Looking Statements

This press release (and the above referenced call) may contain certain forward-looking statements regarding future circumstances, including statements relating to the Company's positioning, and forecasts regarding earnings per diluted share from continuing operations. These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including in the "Risk Factors" section of its annual report on Form 10-K for the fiscal year ended February 2, 2013. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company's business and its dependence on consumer spending patterns, which may be affected by the continued weakness in the economy or by other factors such as increases in the cost of gasoline and food, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
         
  Second Quarter Ended Year-to-Date Ended
  August 3,
2013
July 28,
2012
August 3,
2013
July 28,
2012
Net sales  $ 382,448  $ 360,826  $ 805,612  $ 799,334
Cost of sales  256,266  246,121  516,162  505,984
Gross profit  126,182  114,705  289,450  293,350
Selling, general and administrative expenses  124,408  120,671  243,416  242,954
Asset impairment charges  21,766  280  21,766  1,530
Other costs (income)  61  3,062  (962)  3,896
Depreciation and amortization   15,593  17,482  32,417  34,700
Operating income (loss)  (35,646)  (26,790)  (7,187)  10,270
Interest income (expense), net  --   (30)  60  (81)
Income (loss) before taxes  (35,646)  (26,820)  (7,127)  10,189
Provision (benefit) for income taxes  (12,010)  (8,896)  (2,763)  3,379
Net income (loss)  $ (23,636)  $ (17,924)  $ (4,364)  $ 6,810
         
         
Earnings (loss) per common share        
Basic  $ (1.05)  $ (0.74)  $ (0.19)  $ 0.28
Diluted  $ (1.05)  $ (0.74)  $ (0.19)  $ 0.28
         
Weighted average common shares outstanding        
Basic  22,514  24,249  22,779  24,392
Diluted  22,514  24,249  22,779  24,533
 
 
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
       
  August 3,
2013
February 2,
2013*
July 28,
2012
Assets:      
Cash and cash equivalents  $ 149,675  $ 194,128  $ 158,621
Short-term investments  35,000  15,000  -- 
Accounts receivable  29,722  18,490  23,408
Inventories  325,695  266,976  265,708
Other current assets  52,085  50,641  54,907
Total current assets  592,177  545,235  502,644
       
Property and equipment, net  311,867  330,101  330,838
Other assets, net  53,937  48,074  51,878
Total assets  $ 957,981  $ 923,410  $ 885,360
       
Liabilities and Stockholders' Equity:      
Accounts payable  $ 153,235  $ 87,461  $ 72,809
Accrued expenses and other current liabilities  123,854  104,045  94,683
Total current liabilities  277,089  191,506  167,492
       
Other liabilities  105,576  110,955  113,314
Total liabilities  382,665  302,461  280,806
       
Stockholders' equity  575,316  620,949  604,554
       
Total liabilities and stockholders' equity  $ 957,981  $ 923,410  $ 885,360
       
* Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2013.
 
 
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
(Unaudited)
     
  Twenty-six Weeks Ended
  August 3,
2013
July 28,
2012
     
Net income  $ (4,364)  $ 6,810
Non-cash adjustments  51,447  42,107
Working Capital  17,073  11,641
Net cash provided by operating activities  64,156  60,558
     
     
Net cash used in investing activities  (58,680)  (44,265)
     
     
Net cash used in financing activities  (46,474)  (33,891)
     
     
Effect of exchange rate changes on cash  (3,455)  (436)
     
     
Net increase (decrease) in cash and cash equivalents  (44,453)  (18,034)
     
     
Cash and cash equivalents, beginning of period  194,128  176,655
     
     
Cash and cash equivalents, end of period  $ 149,675  $ 158,621
 
 
THE CHILDREN'S PLACE RETAIL STORES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
         
  Second Quarter Ended Year-to-Date Ended
  August 3,
2013
July 28,
2012
August 3,
2013
July 28,
2012
         
Net income (loss)  $ (23,636)  $ (17,924)  $ (4,364)  $ 6,810
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  12,074  --   12,653  1,250
Asia Reorganization  714  --   1,067  -- 
DC exit costs  61  3,062  (962)  3,896
IT Impairment and Costs  10,323  --   10,323  -- 
Restructuring severance costs  --   --   --   1,971
Obsolete supply and fixture costs  --   164  --   883
Legal Settlement  --   1,087  --   1,087
Accelerated depreciation for Canadian store remodels  --   465  --   1,358
Aggregate impact of Non-GAAP adjustments  23,172  4,778  23,081  10,445
Income tax effect (1)  (8,971)  (1,849)  (8,851)  (3,994)
Net impact of Non-GAAP adjustments  14,201  2,929  14,230  6,451
         
Adjusted net income (loss)  $ (9,435)  $ (14,995)  $ 9,866  $ 13,261
         
GAAP net income (loss) per common share  ($1.05) ($0.74) ($0.19) $0.28
         
Adjusted net income (loss) per common share ($0.42) ($0.62) $0.43 $0.54
         
(1) The tax effects of the non-GAAP items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides.
         
Operating income (loss)  $ (35,646)  $ (26,790)  $ (7,187)  $ 10,270
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  12,074  --   12,653  1,250
Asia Reorganization  714  --   1,067  -- 
DC exit costs  61  3,062  (962)  3,896
IT Impairment and Costs  10,323  --   10,323  -- 
Restructuring severance costs  --   --   --   1,971
Obsolete supply and fixture costs  --   164  --   883
Legal Settlement  --   1,087  --   1,087
Accelerated depreciation for Canadian store remodels  --   465  --   1,358
Aggregate impact of Non-GAAP adjustments  23,172  4,778  23,081  10,445
         
Adjusted operating income (loss)  $ (12,474)  $ (22,012)  $ 15,894  $ 20,715
         
Selling, general and administrative expenses  $ 124,408  $ 120,671  $ 243,416  $ 242,954
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  160  --   --   -- 
Asia Reorganization  (672)  --   (1,012)  -- 
IT Costs  (1,210)  --   (1,210)  -- 
Restructuring severance costs  --   --   --   (1,971)
Obsolete supply and fixture costs  --   (164)  --   (883)
Legal Settlement  --   (1,087)  --   (1,087)
Aggregate impact of Non-GAAP adjustments  (1,722)  (1,251)  (2,222)  (3,941)
         
Adjusted Selling, general and administrative expenses  $ 122,686  $ 119,420  $ 241,194  $ 239,013
CONTACT: Jane Singer, Vice President,
Investor Relations,
(201) 453-6955

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