Charming Shoppes Reports First Quarter 2012 Results

-First quarter net income is $17.8 million or $0.15 per diluted share

-First quarter Adjusted EBITDA is $42.6 million*

-Company ends period with $214.1 million in cash, an increase of $45.5 million from January 28, 2012

-First quarter comparable store sales flat to prior year, including 1% increase at Lane Bryant and 5% increase at Catherines; e-commerce sales increased 18%

*Refer to GAAP to non-GAAP reconciliation below

News provided by

Charming Shoppes, Inc.

Jun 01, 2012, 04:00 ET

BENSALEM, Pa., June 1, 2012 /PRNewswire/ -- Charming Shoppes, Inc. (NASDAQ: CHRS), a leading apparel retailer specializing in women's plus-size apparel, today reported sales and operating results for the three months ended April 28, 2012. 

First Quarter Consolidated Results

Commenting on the quarter, Anthony M. Romano, President and Chief Executive Officer of Charming Shoppes, Inc. said, "We are pleased to have delivered our sixth consecutive quarter of improved year over year Adjusted EBITDA results, with an increase of $1.3 million, or 3.1%, to $42.6 million for the first quarter.  Although we generated healthy gross margins during the quarter, our gross margins continued to be impacted by increases in product costs compared to a year ago.  We also executed deeper discounts to ensure seasonal unit sell-throughs as we experienced continuing challenging traffic trends.  Nonetheless, we were able to fully offset the impacts to our gross margin through strong expense management at each of our brands in both SG&A and Occupancy and Buying expenses.  At each of our brands, we produced improved conversion rates and higher Average Unit Retails.  We maintained our disciplined inventory management to reduce overall inventory levels.  Our consolidated comparable store inventories at cost at the end of the period were 7% lower than the prior year period, with units decreasing by 16%."

  • Net sales were $481.3 million for the first quarter ended April 28, 2012, a decrease of 4.6% compared to $504.4 million for the prior year period. The $23.1 million decrease includes the impact of operating 157 fewer stores than in the prior year period, partially offset by an increase of 18% in e-commerce sales.  First quarter comparable store sales were flat compared to the prior year, including a 1% comparable store sales increase for Lane Bryant, a 5% comparable store sales increase for Catherines, and a 3% comparable store sales decrease for Fashion Bug.  The inclusion of e-commerce sales with the bricks and mortar comparable store sales would result in a comparable sales increase of 2% for the quarter.
  • Gross profit was $261.7 million or 54.4% of sales in the quarter, compared to $285.3 million or 56.6% of sales in the same quarter last year.
  • SG&A and Occupancy and Buying expenses as a percent of sales improved by a combined 290 basis points and decreased $24.9 million to $219.1 million or 45.5% of sales in the quarter, compared to $244.0 million or 48.4% of sales in the prior year period. Decreased expenses were attributable to expense reductions across the Company and the operation of 157 fewer stores than in the prior year period. 
  • Adjusted EBITDA for the quarter increased 3.1% to $42.6 million or 8.9% of sales. This compares to $41.3 million or 8.2% of sales in the prior year period, reflecting an improvement of $1.3 million. (Refer to GAAP to non-GAAP reconciliation below.)
  • On a non-GAAP basis, income from operations improved 60 basis points as a percent of sales to $28.4 million or 5.9% as a percent of sales in the quarter. This compares to income from operations of $26.9 million or 5.3% as a percent of sales for the prior year period.  Both periods excluded restructuring and other items. (Refer to GAAP to non-GAAP reconciliation below.)
  • The income tax provision of $6.8 million for the first quarter resulted primarily from an increase in the Company's liability for unrecognized tax benefits and certain state and foreign income taxes payable as well as required deferred taxes.
  • On a GAAP basis, net income was $17.8 million or $0.15 per diluted share for the first quarter, compared to net income of $26.0 million or $0.22 per diluted share in the first quarter of the prior year.  Net income on a GAAP basis in the prior year included a gain from sale of office premises of $5.2 million or $0.04 per diluted share.
  • On a non-GAAP basis, net income was $0.16 per diluted share for the first quarter, compared to net income of $0.18 per diluted share in the first quarter of the prior year. Both periods excluded restructuring and other items. (Refer to GAAP to non-GAAP reconciliation below.)
  • The Company's cash position at April 28, 2012 was $214.1 million, compared to $168.6 million at January 28, 2012.

Sales results for the three month periods ended April 28, 2012 and April 30, 2011 were:

For the Three Month Periods

(Unaudited)

Net Sales

Period Ended

Net Sales

Period Ended

Total Net

Sales Change

Comparable

Store Sales

Period Ended

($ in millions)

4/28/2012

4/30/2011

4/28/2012

Lane Bryant(1)

$261.1

$262.8

(1)%

1%

Fashion Bug

127.0

150.0

(15)%

(3)%

Catherines

77.9

77.8

0%

5%

Direct-to-Consumer (primarily Figi's)

15.3

13.8

11%

Consolidated

$481.3

$504.4

(5)%

0%

(1) Includes Lane Bryant Outlet Stores.

 

Reconciliation of GAAP to Non-GAAP Financial Measures

Income from Operations and Adjusted EBITDA, on a non-GAAP basis

For the Three Months Ended April 28, 2012 and April 30, 2011

(Unaudited)

 

($ in millions)

3 Months Ended

4/28/12

3 Months Ended

4/30/11

Income from operations, on a GAAP basis

$27.4

$32.1

Restructuring and other charges

1.0

—

Gain from sale of office premises

—

(5.2)

Income from operations, excluding the above items, on a

non-GAAP basis

28.4

26.9

Depreciation and amortization

14.2

14.4

Adjusted EBITDA

$42.6

$41.3

Results may not add due to rounding.

 

Reconciliation of GAAP to Non-GAAP Financial Measures

Net income per diluted share, on a non-GAAP basis

For the Three Months Ended April 28, 2012 and April 30, 2011

(Unaudited)

 

3 Months Ended

4/28/12

3 Months Ended

4/30/11

Net income per diluted share, on a GAAP basis

$0.15

$0.22

Gain from sale of office premises

—

(0.04)

Restructuring and other charges

0.01

—

Net income per diluted share, on a non-GAAP basis

$0.16

$0.18

Results may not add due to rounding.

*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 certain charges that the Company does not consider part of its ongoing operating results when assessing the performance of the Company, 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. We believe that Adjusted EBITDA, along with other measures, provides a useful pre-tax measure of our ongoing operating performance and our ability to meet debt service and capital requirements on a comparable basis excluding the impact of certain items and capital-related non-cash charges.  We use Adjusted EBITDA to monitor and evaluate the performance of our business operations and we believe that it enhances our investors' ability to analyze trends in our business, compare our performance to other companies in our industry, and evaluate our ability to service our debt and capital needs.  In addition, we use Adjusted EBITDA as a component of our compensation programs.  Management believes that income per diluted share without effect of certain charges is a useful measure in evaluating the Company's operating performance. 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. operates 1,832 retail stores in 48 states under the names LANE BRYANT®, CACIQUE®, LANE BRYANT OUTLET®, FASHION BUG®, FASHION BUG PLUS® and CATHERINES PLUS SIZES®. The Company also operates the Figi's family of brands, including the holiday food and gifts catalog Figi's® Gifts in Good Taste®, the home and gifts catalog Figi's® Gallery and its wholesale unit Figi's Business Services, and Sonsi, an online marketplace featuring over 300 brands, and one of the largest online assortments for full figured women. During the three months ended April 28, 2012 the Company opened 8, relocated 5, and closed 33 stores.  The Company ended the period with 801 Lane Bryant and Lane Bryant Outlet stores, 601 Fashion Bug and Fashion Bug Plus stores and 430 Catherines stores, comprising approximately 11,620,500 square feet of leased space.  For more information about Charming Shoppes and its brands, please visit www.charmingshoppes.com, www.lanebryant.com, www.cacique.com, www.fashionbug.com, www.catherines.com, www.loop18.com, www.sonsi.com, www.figis.com, and www.figisgallery.com.

 

CHARMING SHOPPES, INC.

(Unaudited)

 

Percent

1st Quarter Ended

Percent of

1st Quarter Ended

Percent of

(In thousands, except per share amounts)

Change

April 28, 2012

Sales (a)

April 30, 2011

Sales (a)

Net sales

(4.6)

%

$

481,263

100.0

%

$

504,353

100.0

%

Cost of goods sold

0.2

%

219,529

45.6

%

219,032

43.4

%

Gross profit

(8.3)

%

261,734

54.4

%

285,321

56.6

%

Occupancy and buying expenses

(9.0)

%

81,344

16.9

%

89,411

17.7

%

Selling, general, and administrative expenses

(10.9)

%

137,779

28.6

%

154,587

30.7

%

Depreciation and amortization (b)

(1.4)

%

14,208

3.0

%

14,408

2.9

%

Gain from sale of office premises (c)

    NM

—

—

%

(5,185)

(1.0)

%

Restructuring and other charges (d)

    NM

1,027

0.2

%

47

—

%

Total operating expenses

(7.5)

%

234,358

48.7

%

253,268

50.2

%

Income from operations

(14.6)

%

27,376

5.7

%

32,053

6.4

%

Other income

146.8

%

348

0.1

%

141

—

%

Non-cash interest expense

7.5

%

(1,827)

(0.4)

%

(1,700)

(0.3)

%

Interest expense

(36.8)

%

(1,313)

(0.3)

%

(2,076)

(0.4)

%

Income before income taxes

(13.5)

%

24,584

5.1

%

28,418

5.6

%

Income tax provision

186.2

%

6,812

1.4

%

2,380

0.5

%

Net income

(31.7)

%

$

17,772

3.7

%

$

26,038

5.2

%










Income per share:








Basic:








Net income

$

0.15



$

0.22


Weighted average shares outstanding

117,080



116,176












Diluted:








Net income

$

0.15



$

0.22


Weighted average shares outstanding

118,696



117,732














 

(a) Results may not add due to rounding.

(b) Excludes amortization of deferred financing fees which are included as a component of interest expense.

(c) During the Fiscal 2011 First Quarter we completed the sale of our international sourcing operations office premises

      and recognized a gain of $5,185. Our international sourcing operations now utilize leased space in Hong Kong.

(d) Fiscal 2012 restructuring and other charges primarily related to transformational initiatives.

 

 

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share amounts)

April 28,
2012

January 28,
2012

(Unaudited)

ASSETS


Current assets


Cash and cash equivalents

$

214,086

$

168,607

Accounts receivable, net of allowances of $6,413 and $5,688

11,576

39,379

Merchandise inventories

278,070

257,180

Deferred taxes

3,570

3,570

Prepayments and other

87,033

90,583

Total current assets

594,335

559,319

Property, equipment, and leasehold improvements – at cost

1,003,682

1,020,334

Less accumulated depreciation and amortization

776,566

790,969

Net property, equipment, and leasehold improvements

227,116

229,365

Trademarks, tradenames, and internet domain names

187,132

187,132

Goodwill

23,436

23,436

Other assets

18,846

18,674

Total assets

$

1,050,865

$

1,017,926




LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities


Accounts payable

$

134,817

$

111,630

Accrued expenses

134,467

145,667

Current portion – long-term debt

4,050

4,682

Total current liabilities

273,334

261,979

Deferred taxes

56,339

55,526

Other non-current liabilities

150,647

149,836

Long-term debt, net of debt discount of $15,863 and $17,690

134,709

133,639

Stockholders' equity


Common Stock $.10 par value:


Authorized – 300,000,000 shares


Issued – 155,442,947 shares and 155,211,278 shares

15,544

15,521

Additional paid-in capital

514,200

513,105

Treasury stock at cost – 38,617,180 shares

(348,400)

(348,400)

Retained earnings

254,492

236,720

Total stockholders' equity

435,836

416,946

Total liabilities and stockholders' equity

$

1,050,865

$

1,017,926

 

CHARMING SHOPPES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Thirteen Weeks Ended

(In thousands)

April 28,
2012

April 30,
2011

Operating activities


Net income

$

17,772

$

26,038

Adjustments to reconcile net income to net cash provided by operating activities


Depreciation and amortization 

14,447

15,099

Stock-based compensation     

1,351

1,031

Accretion of discount on 1.125% Senior Convertible Notes                   

1,827

1,700

Deferred income taxes

813

886

Write-down of capital assets due to restructuring

—

558

Net (gain)/loss from disposition of capital assets                                            

69

(5,157)

Changes in operating assets and liabilities


Accounts receivable, net

27,803

26,390

Merchandise inventories

(20,890)

(22,467)

Accounts payable 

23,187

29,901

Prepayments and other  

3,550

(4,280)

Accrued expenses and other

(9,676)

(2,355)

Net cash provided by operating activities

60,253

67,344




Investing activities


Investment in capital assets

(13,128)

(8,888)

Proceeds from sales of capital assets

—

7,521

Increase in other assets

(24)

(594)

Net cash used by investing activities

(13,152)

(1,961)




Financing activities


Repayments of long-term borrowings

(1,389)

(1,611)

Issuance of common stock under employee stock plans, net of amounts

    withheld for payroll taxes

(233)

(851)

Net cash used by financing activities

(1,622)

(2,462)




Increase in cash and cash equivalents

45,479

62,921

Cash and cash equivalents, beginning of period

168,607

117,482

Cash and cash equivalents, end of period

$

214,086

$

180,403




SOURCE Charming Shoppes, Inc.

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