Maidenform Brands, Inc. Reports 2012 Results and Provides Guidance for 2013

ISELIN, N.J., March 6, 2013 /PRNewswire/ -- Maidenform Brands, Inc. (NYSE: MFB), a global branded marketer of intimate apparel, today reported fourth quarter 2012 net sales of $135.1 million, an increase of 8.5% over the fourth quarter of 2011.  Full year 2012 sales totaled $600.3 million, a decrease of 1.0% when compared to fiscal 2011.   Reported EPS was $0.24 for the fourth quarter of 2012 compared to a reported loss per share of $(0.13) for the fourth quarter of 2011.  For the full year, reported EPS was $1.43 for 2012 compared to $1.42 for 2011.

Reported 2012 results included $0.08 of EPS from a non-recurring state income tax benefit and a charge of $(0.06) relating to exiting the Maidenform's Charmed brand and a workforce reduction (see Exhibit 2 to this press release for further details).  2012 EPS excluding these items was $0.22 for the fourth quarter and $1.41 for the full year.

Reported 2011 EPS includes charges in the fourth quarter and full year of $0.13 per share and $0.31 per share, respectively, relating to a litigation settlement, discontinuation of a product line and a workforce reduction (see Exhibit 2 to this press release for further details).  2011 EPS excluding these items was $0.00 for the fourth quarter and $1.73 for the full year.

"We met our fourth quarter expectations in sales and earnings, but 2012 was a disappointing year overall, with weak category, customer and consumer trends in our key markets, and increased shapewear competition in department and chain stores," stated Maurice Reznik, Chief Executive Officer.  

"2013 will be a transition year for us as we take additional and more substantial steps to invest in our iconic brand, processes and infrastructure. Additionally, we will be pruning underperforming businesses and slow moving products, while improving gross margins and carefully investing in infrastructure.  

The goal of these actions is to return Maidenform to sustained long-term growth with top line increases in the mid-single digits and EPS growth of 10% or better starting in 2014.

While we focus on these actions, we will continue to introduce new and innovative products.  In 2013, we are excited to expand upon our Comfort Devotion collection and, in the fourth quarter, launch a new full figure collection at department and chain stores," concluded Mr. Reznik.

Financial Results for Fourth Quarter 2012 versus Fourth Quarter 2011

Net sales for the fourth quarter of 2012 increased $10.6 million, or 8.5%, to $135.1 million.  Wholesale segment net sales for the fourth quarter of 2012 increased $11.0 million, or 10.0%, to $120.8 million. Retail segment net sales decreased $0.4 million, or 2.7%, to $14.3 million.  

The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.

Wholesale Segment

Department Stores and National Chain Stores

Net sales for the department stores and national chain stores channel increased $2.0 million, or 3.9%, to $53.9 million for the fourth quarter of 2012.  This increase was led by growth in the bra and pants categories, which included the introduction of the Company's Comfort Devotion collection that shipped for the first time in the fourth quarter of 2012.  Partially offsetting these increases were sales declines in the shapewear category from increased competition along with a sales decline at a mid-tier department store as it transitions to a new pricing and merchandising strategy.    

Mass Merchants

Mass merchant channel net sales increased $2.4 million, or 6.6%, to $38.7 million for the fourth quarter of 2012, resulting from increased shipments to most customers that were partially offset by lower sales to a warehouse club.   

Other

Net sales in the other channel increased $6.6 million, or 30.6%, to $28.2 million for the fourth quarter of 2012 from increased program sales to off-price retailers that more than offset sales declines to a private label customer.      

Total international net sales, which are included in the wholesale segment, decreased $1.3 million, or 9.1%, to $13.0 million.  This sales decline was driven by Canada, Germany, and the Benelux countries, which more than offset sales increases in smaller markets such as Brazil.

Retail Segment

Total retail segment net sales decreased $0.4 million, or 2.7%, to $14.3 million.  Same store sales, defined as outlet stores that have been open for more than one year, decreased 5.9% due to reduced customer traffic.    Internet sales increased $0.4 million, or 23.5%, to $2.1 million for the fourth quarter of 2012.  The retail segment operated 77 outlet stores as of the end of fiscal 2012 and 74 outlet stores as of the end of fiscal 2011.   

Consolidated gross profit increased $11.1 million, or 38.0%, to $40.3 million for the fourth quarter of 2012.  As a percentage of net sales, consolidated gross margins were 29.8% for the fourth quarter of 2012 versus 23.5% for the fourth quarter of 2011.  The improvement in gross margin over the prior year was a result of the discontinuation of a product line that did not repeat in the current year.  Additionally, the Company had lower inventory related clearing costs and lower liquidation sales to off-price retailers.  Included in the fourth quarter 2012 results are markdowns associated with exiting the Maidenform's Charmed brand.          

Consolidated selling, general and administrative expenses (SG&A) increased $0.5 million, or 1.5%, to $34.6 million for the fourth quarter of 2012.  As a percentage of net sales, SG&A decreased to 25.6% for the fourth quarter of 2012 compared to 27.4% for the fourth quarter of 2011. The results in the fourth quarter of 2012 and 2011 include severance expense of $1.5 million and $1.2 million, respectively, related to corporate workforce reductions and, in 2012, store personnel reductions due to planned store closings of 10 stores in the first quarter of 2013.  

Net interest expense for the fourth quarter of 2012 was unchanged at $0.3 million compared to the fourth quarter of 2011.         

The Company's effective income tax rate for the fourth quarter of 2012 was (0.3)% compared to 40.5% for the fourth quarter of 2011.  The lower effective income tax rate in the fourth quarter of 2012 was primarily due to a non-recurring state income tax benefit.      

Net income (loss) for the fourth quarter of 2012 and 2011 was $5.5 million and $(3.1) million, respectively, and EPS was $0.24 and loss per share of $(0.13), respectively.  Excluding the items mentioned in paragraphs 2 and 3 above and detailed in Exhibit 2 to this press release, adjusted fourth quarter EPS was $0.22 in 2012 and $0.00 in 2011.         

Financial Results for Fiscal 2012 versus Fiscal 2011  

Net sales for 2012 decreased $6.0 million, or 1.0%, to $600.3 million.  Wholesale segment net sales for 2012 decreased $7.3 million, or 1.3%, to $538.5 million. 

Department stores and national chain stores net sales increased $1.9 million, or 0.8%, to $247.1 million for 2012.  This increase was led by growth in the bra and pant categories, which included the introduction of the Comfort Devotion collection and a private label brand that shipped for the first time during 2012.   Partially offsetting this increase was an assortment expansion in 2011 at one of the Company's chain store customers that did not repeat in 2012, a sales decline at a mid-tier department store customer as it transitions to a new pricing and merchandising strategy and sales declines in the shapewear category from increased competition.

The Company's mass merchant channel net sales decreased $5.5 million, or 2.8%, to $190.7 million from varying results with our mass merchant customers.  Some of the factors that drove this decrease were decreased doors at retail and program sales that did not repeat in 2012.  Partially offsetting this decrease was a strong performance in full figure and shapewear sales at one of our mass customers.

The other channel decreased $3.7 million, or 3.5%, to $100.7 million due to lower sales to a specialty retailer that was partially offset by increased program sales to off-price retailers. 

Total international net sales increased $2.5 million, or 4.3%, to $60.9 million, driven by growth in major markets, such as Canada, the United Kingdom and Mexico.  Partially offsetting these increases were sales decreases in other major markets, such as the Benelux countries, Sweden and Germany, including the impact of unfavorable currency exchange rates on sales. 

Retail segment net sales for 2012 increased $1.3 million, or 2.1%, to $61.8 million.  Same store sales for Maidenform's retail outlet stores decreased 1.2%.  Internet sales increased $2.3 million, or 34.3%, to $9.0 million, resulting primarily from promotional events that more than offset the sales declines at our stores.  The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.

Consolidated gross margins for 2012 were 30.9% versus 31.6% for the same period in 2011.  Changes in channel and product mix favorably impacted gross margin but were more than offset by unfavorable off-price retailer activity to drive inventory productivity, additional promotional activities and inventory related clearing costs.  Included in 2012 results are markdowns associated with exiting the Maidenform's Charmed brand.  Included in the 2011 results was the discontinuation of a product line that did not repeat in the current year.   

Consolidated SG&A increased $1.1 million, or 0.8%, to $133.2 million for 2012.  As a percentage of net sales, SG&A increased to 22.2% for 2012 compared to 21.8% for the same period of 2011.   In fiscal 2012 and 2011, the Company recorded severance expense of $1.5 million and $1.2 million, respectively, related to workforce reductions mentioned above.  The remaining increase was due to increased payroll and related benefits, including medical benefits, and retail operating expenses. Partially offsetting these increases was a reduction in incentive compensation, professional fees and the benefit of favorable currency exchange rates.          

The Company's effective income tax rate for fiscal 2012 was 34.7% compared to 35.6% for the same period of 2011. The lower effective rate for 2012 is primarily from a non-recurring state income tax benefit recorded in the fourth quarter of 2012. The effective rate for 2011 included discrete items recorded during the year such as the utilization of research and development credits and non-recurring state income tax benefits, including the impact of the New Jersey tax law change enacted in the second quarter of 2011.

Net income for fiscal 2012 and 2011 was $33.5 million and $33.2 million, respectively, and EPS was $1.43 and $1.42, respectively.  Excluding the items mentioned in paragraphs 2 and 3 above and detailed in Exhibit 2 to this press release, EPS for fiscal 2012 was $1.41 and for fiscal 2011 EPS was $1.73.

Total cash and cash equivalents as of December 29, 2012 were $83.7 million compared to $68.0 million as of December 31, 2011.  The Company's outstanding debt was $68.2 million as of December 29, 2012 versus $69.1 million as of December 31, 2011.  During fiscal 2012, we returned approximately $6.5 million to shareholders through share repurchases.        

Financial Performance Guidance for 2013: 

2013 First Quarter:

• The Company's first quarter outlook includes a sales decline of approximately $20 million compared to 2012, as a result of non-recurring warehouse club and private label business.  During the quarter, the Company also expects to increase promotional spending to clear unproductive inventory.
• Accordingly, total Company net sales are estimated to decline in the teens percentage range versus the first quarter of 2012.
• The Company projects a first quarter loss per share in a range of $0.05 to $0.10.

2013 Full Year Outlook:

• Total Company net sales in a range of $575 million to $595 million.
• Full year EPS in a range of $1.20 to $1.30 per share.

Conference Call Information

Maidenform will host a conference call and webcast on Wednesday, March 6, 2013 at 8:30 am ET to discuss its fourth quarter and full year 2012 results, in addition to providing an update on its business.  The conference call telephone number is (866) 578-5784 and the passcode is "Maidenform."  The conference call will be simultaneously webcasted and can be accessed via the investor relations page of Maidenform's website at www.maidenformbrands.com.  A dial-in replay of this event will be available through March 20, 2013 and will be hosted on the Company's website for a limited time.  The replay telephone numbers are (888) 286-8010 or (617) 801-6888.  The replay passcode is 20624257.

About Maidenform Brands, Inc.

Maidenform Brands, Inc. is a global intimate apparel company with a portfolio of established, well-known brands, top-selling products and an iconic heritage. Maidenform designs, sources and markets an extensive range of intimate apparel products, including bras, panties and shapewear.  During its 91-year history, Maidenform has built strong equity for its brands and established a platform for growth through a combination of innovative, first-to-market designs and creative advertising campaigns focused on increasing brand awareness with generations of women.  Maidenform sells its products under some of the most recognized brands in the intimate apparel industry, including Maidenform^®, Control It!^®, Fat Free Dressing^®, Flexees^®, Lilyette^®, Bodymates^®, Inspirations^®, Self Expressions^® and Sweet Nothings^®. Maidenform products are currently distributed in approximately 63 countries and territories outside the United States.

Forward Looking Statement: This press release contains forward-looking statements relating to future events and the Company's future performance within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," "predicts," "projects" or similar words or phrases, although not all forward-looking statements contain such identifying words.  All forward-looking statements included in this press release are based on information available to the Company on the date hereof.  It is routine for the Company's internal projections and expectations to change as the year or each quarter in the year progress, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change prior to the end of each quarter or the year.  Although these expectations may change, we assume no obligation to update or revise publicly any forward-looking statements whether as a result of new information, future events or otherwise. Actual events or results may differ materially from those contained in the projections or forward-looking statements. 

The following factors, among others, could cause the Company's actual results to differ materially from those expressed in any forward-looking statements: the worldwide apparel industry may continue to be harmed by the current global economic downturn, the conditions in the financial and credit markets may affect the availability and cost of our funding, the Company's growth cannot be assured and any growth may be unprofitable; potential fluctuations in our results of operations or rate of growth; our dependence on a limited number of customers; the Company has larger competitors with greater resources; retail trends in the intimate apparel industry, including consolidation and continued growth in the development of private brands, resulting in downward pressure on prices, reduced floor space and other harmful changes; failure to anticipate, identify or promptly react to changing trends, styles, or consumer preferences; the Company's credit agreement could limit growth opportunities; external events that disrupt the Company's supply chain, result in increased cost of goods or an inability to deliver its products; events which result in difficulty in procuring or producing products on a cost-effective basis; disputes with third parties for infringement or misappropriation of their proprietary rights; increases in the prices of raw materials; changing international trade regulation, including as it relates to the imposition or elimination of quotas on imports of textiles and apparel; foreign currency exposure; and the sufficiency of cash to fund operations and capital expenditures.

This list is intended to identify only certain of the principal factors that could cause actual results to differ from those discussed in the forward-looking statements.  Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements.

SOURCE Maidenform Brands, Inc.

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