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Press release from GlobeNewswire (a Nasdaq OMX company)

The Children's Place Reports Third Quarter 2013 Results

Tuesday, November 26, 2013

The Children's Place Reports Third Quarter 2013 Results

04:30 EST Tuesday, November 26, 2013

GAAP Net Income per Diluted Share +19%, Adjusted Net Income per Diluted Share +11%

Management Updates Fiscal 2013 Earnings Guidance

SECAUCUS, N.J., Nov. 26, 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 November 2, 2013.

"We achieved the high-end of our earnings guidance as a result of strong execution of our important back-to-school period, and the continuation of disciplined expense management across the organization," commented Jane Elfers, President and Chief Executive Officer. "We are well-positioned as we enter the fourth quarter and look forward to making substantive progress on our key strategic initiatives."

Third Quarter 2013 Results

Net sales were $492.7 million, compared to $500.9 million in the third quarter of 2012. Comparable retail sales declined 0.7%.

Net income was $41.7 million, or $1.84 per diluted share, in the third quarter of 2013, compared to $37.3 million, or $1.54 per share, the previous year. Adjusted net income was $42.7 million, or $1.89 per diluted share, compared to $41.3 million, or $1.70 per diluted share, the previous year.

Gross profit was $201.8 million, compared to $209.5 million in the third quarter of 2012. Adjusted gross profit in the third quarter of 2013 was $202.9 million, and deleveraged 60 basis points to 41.2% of sales.

As a result of the Company's strong expense management, selling, general and administrative expenses were $123.5 million, compared to $131.9 million in the third quarter of 2012. Adjusted SG&A in the third quarter of 2013 was $123.2 million, and leveraged 130 basis points to 25.0% of sales.

Operating income was $61.6 million, compared to $53.5 million in the third quarter of 2012. Adjusted operating income in the third quarter of 2013 was $63.2 million, and leveraged 80 basis points to 12.8% of sales.

Adjusted net income, adjusted gross profit, adjusted SG&A, and adjusted operating 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 10 stores and closed 3, ending the third quarter with 1,123 stores.

Fiscal 2013 Year-to-Date

Net sales were $1,298.3 million, compared to $1,300.3 million for the same time period last year. Comparable retail sales declined 2.3%.

Net income fiscal year-to-date 2013 was $37.4 million, or $1.63 per diluted share, compared to $44.1 million, or $1.80 per diluted share, the previous year. Adjusted net income was $52.6 million, or $2.30 per diluted share, compared to $54.5 million, or $2.23 per diluted share the previous year.

Gross profit was $491.2 million, compared to $502.9 million in the third quarter of 2012. Adjusted gross profit fiscal year-to-date 2013 was $492.3 million, and deleveraged 80 basis points to 37.9% of sales.

Selling, general and administrative expenses were $366.9 million, compared to $374.8 million in the third quarter of 2012. Adjusted SG&A fiscal year-to-date 2013 was $364.4 million, and leveraged 40 basis points to 28.1% of sales.

Operating income was $54.4 million, compared to operating income of $63.8 million for the same time period last year. Adjusted operating income was $79.1 million, and deleveraged 10 basis points to 6.1% of sales.

Share Repurchase Program

During the third quarter of 2013, the Company repurchased 129 thousand shares for approximately $6.9 million. Year-to-date, the Company repurchased 1.1 million shares for approximately $54.7 million. At the end of the quarter, $25.7 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 and now projects that adjusted net income per diluted share will be between $3.20 and $3.28, assuming negative low-single digit comparable retail sales. This compares to its previous guidance of $3.15 to $3.28, assuming negative low-single digit comparable retail sales.

The Company provided initial guidance for the fourth quarter of fiscal 2013, and is forecasting adjusted net income per diluted share for the 13-week period ending February 1, 2014 will be between $0.90 and $0.98, assuming negative low-single digit comparable retail sales. This compares to adjusted net income per diluted share of $1.02 for the 14-week period ending February 2, 2013.

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 third quarter fiscal 2013 results today at 9:30 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," "Place" and "Baby Place" brand names. As of November 2, 2013, the Company operated 1,123 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 adjusted net income per diluted share. 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)
 
  Third Quarter Ended Year-to-Date Ended
  November 2, October 27, November 2, October 27,
  2013 2012 2013 2012
Net sales  $ 492,680  $ 500,928  $ 1,298,292  $ 1,300,262
Cost of sales  290,919  291,395  807,081  797,379
Gross profit  201,761  209,533  491,211  502,883
Selling, general and administrative expenses  123,521  131,875  366,937  374,833
Asset impairment charges  --   539  21,766  2,069
Other costs (income)  200  570  (762)  4,466
Depreciation and amortization  16,473  23,023  48,890  57,723
Operating income  61,567  53,526  54,380  63,792
Interest income (expense), net  82  (23)  142  (104)
Income before taxes  61,649  53,503  54,522  63,688
Provision for income taxes  19,910  16,198  17,147  19,577
Net income  $ 41,739  $ 37,305  $ 37,375  $ 44,111
         
Earnings per common share        
Basic  $ 1.87  $ 1.55  $ 1.65  $ 1.82
Diluted  $ 1.84  $ 1.54  $ 1.63  $ 1.80
         
Weighted average common shares outstanding        
Basic  22,337  24,086  22,632  24,290
Diluted  22,628  24,293  22,896  24,453
 
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  November 2, February 2, October 27,
  2013 2013* 2012
Assets:      
Cash and cash equivalents  $ 141,746  $ 194,128  $ 203,101
Short-term investments  52,500  15,000  -- 
Accounts receivable  26,267  18,490  25,948
Inventories  337,172  266,976  296,398
Other current assets  48,498  50,641  43,929
Total current assets  606,183  545,235  569,376
       
Property and equipment, net  318,021  330,101  335,953
Other assets, net  50,513  48,074  53,682
Total assets  $ 974,717  $ 923,410  $ 959,011
       
Liabilities and Stockholders' Equity:      
Accounts payable  $ 117,554  $ 87,461  $ 99,342
Accrued expenses and other current liabilities  134,334  104,045  113,175
Total current liabilities  251,888  191,506  212,517
       
Other liabilities  107,294  110,955  112,164
Total liabilities  359,182  302,461  324,681
       
Stockholders' equity  615,535  620,949  634,330
       
Total liabilities and stockholders' equity  $ 974,717  $ 923,410  $ 959,011
 
 
* 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)
 
  Thirty-nine Weeks Ended
  November 2, October 27,
  2013 2012
     
Net income  $ 37,375  $ 44,111
Non-cash adjustments  71,655  63,250
Working Capital  (9,853)  36,113
Net cash provided by operating activities  99,177  143,474
     
     
Net cash used in investing activities  (94,653)  (71,416)
     
     
Net cash used in financing activities  (53,358)  (45,455)
     
     
Effect of exchange rate changes on cash  (3,548)  (157)
     
     
Net (decrease) increase in cash and cash equivalents  (52,382)  26,446
     
     
Cash and cash equivalents, beginning of period  194,128  176,655
     
     
Cash and cash equivalents, end of period  $ 141,746  $ 203,101
 
THE CHILDREN'S PLACE RETAIL STORES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
 
  Third Quarter Ended Year-to-Date Ended
  November 2, October 27, November 2, October 27,
  2013 2012 2013 2012
         
Net income  $ 41,739  $ 37,305  $ 37,375  $ 44,111
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  1,221  --   13,874  1,250
Asia Reorganization  170  --   1,237  -- 
DC exit costs  200  6,256  (762)  10,152
IT Impairment and Costs  --   --   10,323  -- 
Restructuring severance costs  --   --   --   1,971
Obsolete supply and fixture costs  --   --   --   883
Legal Settlement  --   --   --   1,087
Accelerated depreciation for Canadian store remodels  --   272  --   1,630
Aggregate impact of Non-GAAP adjustments  1,591  6,528  24,672  16,973
Income tax effect (1)  (596)  (2,574)  (9,448)  (6,568)
Net impact of Non-GAAP adjustments  995  3,954  15,224  10,405
         
Adjusted net income  $ 42,734  $ 41,259  $ 52,599  $ 54,516
         
GAAP net income per common share $1.84 $1.54 $1.63 $1.80
         
Adjusted net income per common share $1.89 $1.70 $2.30 $2.23
         
(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.
         
         
  Third Quarter Ended Year-to-Date Ended
  November 2, October 27, November 2, October 27,
  2013 2012 2013 2012
         
Operating income  $ 61,567  $ 53,526  $ 54,380  $ 63,792
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  1,221  --   13,874  1,250
Asia Reorganization  170  --   1,237  -- 
DC exit costs  200  6,256  (762)  10,152
IT Impairment and Costs  --   --   10,323  -- 
Restructuring severance costs  --   --   --   1,971
Obsolete supply and fixture costs  --   --   --   883
Legal Settlement  --   --   --   1,087
Accelerated depreciation for Canadian store remodels  --   272  --   1,630
Aggregate impact of Non-GAAP adjustments  1,591  6,528  24,672  16,973
         
Adjusted operating income  $ 63,158  $ 60,054  $ 79,052  $ 80,765
         
         
  Third Quarter Ended Year-to-Date Ended
  November 2, October 27, November 2, October 27,
  2013 2012 2013 2012
         
Gross Profit  $ 201,761  $ 209,533  $ 491,211  $ 502,883
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  1,104  --   1,104  -- 
Aggregate impact of Non-GAAP adjustments  1,104  --   1,104  -- 
         
Adjusted Gross Profit  $ 202,865  $ 209,533  $ 492,315  $ 502,883
         
         
  Third Quarter Ended Year-to-Date Ended
  November 2, October 27, November 2, October 27,
  2013 2012 2013 2012
         
Selling, general and administrative expenses  $ 123,521  $ 131,875  $ 366,937  $ 374,833
         
Non-GAAP adjustments:        
Expenses:        
Store disposition  (117)  --   (117)  -- 
Asia Reorganization  (178)  --   (1,190)  -- 
IT Costs  --   --   (1,210)  -- 
Restructuring severance costs  --   --   --   (1,971)
Obsolete supply and fixture costs  --   --   --   (883)
Legal Settlement  --   --   --   (1,087)
Aggregate impact of Non-GAAP adjustments  (295)  --   (2,517)  (3,941)
         
Adjusted Selling, general and administrative expenses  $ 123,226  $ 131,875  $ 364,420  $ 370,892
CONTACT: Jane Singer, Vice President, Investor Relations
(201) 453-6955

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