Charming Shoppes Reports Fourth Quarter Results; Announces Renewal of Master Trust’s $50.0 Million Credit Card Receivables Facility; Provides Outlook for First Quarter
- Non-GAAP loss from continuing operations of
- Loss from continuing operations of
-
- No outstanding borrowings on line of credit facility, committed through
-
Operating Results for the Fourth Quarter Ended
For the thirteen weeks ended
Charges of
The Company’s loss from continuing operations, on a GAAP basis, compares to a loss from continuing operations for the thirteen weeks ended
Net sales from continuing operations for the thirteen weeks ended
“We are also pleased to have strengthened our cash position during one of the most challenging retail environments we have seen in decades. Our strong liquidity includes year-end balances of cash, cash equivalents and available-for-sale securities of
Sensitivity Analysis for Free Cash Flow Generation
Rosskamm stated, “We are confident in our ability to deliver positive cash flow in fiscal year 2010, under the assumption that comparable store sales continue to trend at low double digit declines. If comparable store sales declines accelerate to the mid-teens, we expect to be cash-neutral. Our liquidity analysis assumes continued decreases in inventory levels across the retail brands, particularly in the first half of the year, gross margin improvement from stronger inventory management and enhanced merchandise assortments, additional reductions in capital expenditures, and significant savings related to our cost reduction program, as discussed below. Our analysis does not include potential cash proceeds from any further divestitures, nor from the refinancing of any existing real estate assets.”
Charming Shoppes Master Trust’s
The Company also announced today that its
Including term series asset-backed securities, the current receivables funding structure provides availability of
Business Transformation Initiatives
“We are making a great deal of progress in our strategy to return the Company’s focus and energies to our core brands – Lane Bryant, Fashion Bug and Catherines,” Rosskamm continued. “In addition to several previously announced actions we have taken to eliminate non-core assets, we have also announced the discontinuation of Figure Magazine, effective immediately, and the closing of the shoetrader.com website during the second half of the current year.
“In November, 2008, we announced a significant restructuring and cost reduction program, with the objectives of improving and simplifying critical processes, consolidating activities and infrastructure, and reducing our expense structure to be more appropriately aligned with our generation of revenues in a recessionary environment. At that time, expectations were for net cost reductions of approximately
“We now expect to realize cost savings of approximately
Merchandising Initiatives
Rosskamm continued, “Each of our brand leaders has developed improved strategies in order to better hone the fashion point-of-view for their brand, and provide a merchandising and marketing program that will focus exclusively on their defined target customer. Significant progress has been made in the clearing of inventories and go-forward receipt flows, the appointment of design executives, remerchandising by lifestyle for the fall selling season, and reworking store presentation and marketing to support our strategy.”
The Company has also begun the process of increasing the percentage of internally designed, developed and sourced fashion product, with the goal of enhancing its competitive position through a more compelling fashion assortment that provides better value to customers. A process has commenced to identify select vendors, both overseas and domestically, who can best help achieve this goal. The execution of this model is expected to drive sales, increase gross margins and contribute to improvement in the Company’s financial results over time. Deliveries to stores through this new model are expected to begin this fall, with the process more fully implemented by spring 2010.
The Company’s international sourcing division will play a critical role in increasing the percentage of directly sourced merchandise. This week, the Company announced the appointment of Visa Vei as President –
Non-Cash Impairment Charges
During the fourth quarter, the Company completed its annual goodwill and intangible asset impairment testing, and based on the macro-economic climate and its performance outlook, the Company recorded a non-cash goodwill impairment charge in the amount of
Tax Valuation Allowance
As part of its quarterly closing and reporting process, the Company evaluated its deferred income taxes and determined that a tax valuation allowance was required. For the fourth quarter ended
Operating Results for the Year Ended
For the fifty-two weeks ended
After-tax charges of
The Company’s loss from continuing operations, on a GAAP basis, compares to income from continuing operations of
Net sales from continuing operations for the fifty-two weeks ended
Comparable store sales by retail brand for the three and twelve month
periods ended January 31, 2009, were:
Three Months Twelve Months
Ended 1/31/09 Ended 1/31/09
Lane Bryant Stores(1) -17% -12%
Fashion Bug Stores -14% -11%
Catherines Stores -11% -13%
Consolidated Retail Store Brands -15% -12%
(1) Includes Lane Bryant Outlet Stores
Net sales from continuing operations by brand for the three and twelve
month periods ended January 31, 2009 and February 2, 2008 were:
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
1/31/09 2/2/08 1/31/09 2/2/08
($in ($in ($in ($in
millions) millions) millions) millions)
Lane Bryant(1) $273.0 $323.6 $1,111.9 $1,237.6
Fashion Bug $183.8 $225.8 843.8 $984.1
Catherines $68.1 $76.8 $312.1 $353.2
Direct-to-Consumer
Segment $96.7 $95.9 $167.5 $120.6
Other (2) $10.3 $9.7 $39.6 $27.0
Consolidated Net Sales
from Continuing
Operations $631.9 $731.8 $2,474.9 $2,722.5
(1) Includes Lane Bryant Outlet Stores; (2) Includes Petite Sophisticate
Retail and Outlet Stores, Corporate and Other.
Discontinued Operations
For the fifty-two weeks ended
Outlook for the First Fiscal Quarter ending
For the three month period ending
The Company’s plans include further significant reductions in inventories during the first quarter of fiscal year 2010, in addition to decreases in inventories, on a same store basis, of 16% for the fiscal year ended
For the fiscal year ending
Planned store activity for the fiscal year currently includes approximately 6 new stores at the Company’s Lane Bryant brand, 12 relocations, primarily at the Lane Bryant brand, and as previously announced, approximately 100 store closings.
Charming Shoppes, Inc. will host its fourth quarter earnings conference call today at
A transcript of prepared remarks for the conference call will be accessible at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives prior to
The conference call will be recorded on behalf of Charming Shoppes, Inc. and consists of copyrighted material. It may not be re-recorded, reproduced, transmitted or rebroadcast, in whole or in part, without the Company’s express written permission. Accessing this call or the rebroadcast constitutes consent to these terms and conditions. Participation in this call serves as consent to having any comments or statements made appear on any transcript, broadcast or rebroadcast of this call.
At
Reconciliation of GAAP to Non-GAAP Financial Measures
For the Thirteen and Fifty-two Weeks Ended January 31, 2009 and
February 2, 2008
13 Weeks Ended 13 Weeks Ended 52 Weeks Ended 52 Weeks Ended
1/31/09 2/2/08 1/31/09 2/2/08
$in millions EPS $in millions EPS $in millions EPS $in millions EPS
Income/
(Loss) per
share from
continuing
operations,
on a GAAP
basis $(108.5) $(0.94) $(44.9) $(0.39) $(169.3) $(1.48) $0.7 $0.01
Impact of
impairment
of goodwill,
store assets
and trademarks
charges
(non-
cash) $(61.3) $(0.53) $(23.8) $(0.21) $(81.5) $(0.71) $(23.9) $(0.19)
Impact of
restructuring
and other
charges $(8.2) $(0.07) $(3.3) $(0.03) $(33.2) $(0.29) $(3.3) $(0.03)
Income (Loss)
per share from
continuing
operations,
on a
non-GAAP
basis $(39.0) $(0.34) $(17.8) $(0.15) $(54.6) $(0.48) $27.9 $0.23
For the Thirteen Weeks Ending May 2, 2009 and Ended May 3, 2008
13 Weeks Ending 13 Weeks Ended
5/2/09 5/3/08
EPS EPS
Income/(Loss) per share from
continuing operations, on a GAAP
basis $(0.09 - $0.13) $0.01
Impact of restructuring and other
charges $(0.06) $(0.04)
Income (Loss) per share from
continuing operations, on a
non-GAAP basis $(0.03 - $0.07) $0.05
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 one-time charges, 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. 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.
Safe Harbor Statement
This press release contains and the Company’s conference call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning the Company’s operations, performance, and financial condition. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: the failure to find a suitable permanent replacement for the Company’s former Chief Executive Officer within a reasonable time period, the failure to consummate our identified strategic solution for our non-core assets, the failure to effectively implement our planned consolidation, cost and capital budget reduction plans and store closing plans, the failure to implement the Company’s business plan for increased profitability and growth in the Company’s retail stores and direct-to-consumer segments, the failure to effectively implement the Company’s plans for a new organizational structure and enhancements in the Company’s merchandise and marketing, the failure to effectively implement the Company’s plans for the transformation of its brands to a vertical specialty store model, the failure to achieve increased profitability through the adoption by the Company’s brands of a vertical specialty store model, the failure to achieve improvement in the Company’s competitive position, the failure to continue receiving financing at an affordable cost through the availability of our credit card securitization facilities and through the availability of credit we receive from our suppliers and their agents, the failure to maintain efficient and uninterrupted order-taking and fulfillment in our direct-to-consumer business, changes in or miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, escalation of energy costs, a weakness in overall consumer demand, the failure to find suitable store locations, increases in wage rates, the ability to hire and train associates, trade and security restrictions and political or financial instability in countries where goods are manufactured, the interruption of merchandise flow from the Company’s centralized distribution facilities, competitive pressures, and the adverse effects of natural disasters, war, acts of terrorism or threats of either, or other armed conflict, on
CHARMING SHOPPES, INC.
(Unaudited)
4th Quarter 4th Quarter
(in thousands, Ended Ended
except per share Percent Jan. 31, Percent Feb. 2, Percent
Sales amounts) Change 2009 of Sales(a) 2008 of Sales(a)
Net sales (13.7)% $631,870 100.0% $731,824 100.0%
Cost of goods sold,
buying, catalog and
occupancy (12.5) 497,565 78.7 568,732 77.7
Selling, general, and
administrative (8.0) 173,441 27.4 188,564 25.8
Impairment of store
assets, goodwill
and trademarks 61,282 (b) 9.7 27,197 (c) 3.7
Restructuring & other
charges 53.8 8,198 (d) 1.3 5,332 (e) 0.7
Total operating
expenses (6.2) 740,486 117.2 789,825 107.9
Loss from operations 87.3 (108,616) (17.2) (58,001) (7.9)
Other income, principally
interest 24.0 1,247 (f) 0.2 1,006 0.1
Interest expense (9.4) (2,053) (0.3) (2,265) (0.3)
Loss from continuing
operations before
income taxes and
extraordinary item 84.6 (109,422) (17.3) (59,260) (8.1)
Income tax benefit (93.2) (971)(g) (0.2) (14,354) (2.0)
Loss from continuing
operations before
extraordinary item 141.5 (108,451) (17.2) (44,906) (6.1)
Loss from discontinued
operations, net of
tax (100.0) 0 0.0 (80,428)(h) (11.0)
Extraordinary item
(net of tax of $582) (100.0) 0 0.0 912 (i) 0.0
Net loss (12.8)% $(108,451) (17.2)% $(124,422) (17.0)%
Loss per share:
Basic:
Loss from continuing
operations before
extraordinary item $(0.94) $(0.39)
Loss from discontinued
operations, net of tax - (0.69)
Extraordinary item,
net of tax - 0.01
Net loss $(0.94) $(1.07)
Weighted average shares 114,953 116,576
Diluted:
Loss from continuing
operations before
extraordinary item $(0.94) $(0.39)
Loss from discontinued
operations, net of tax - (0.69)
Extraordinary item, net
of tax - 0.01
Net loss $(0.94) $(1.07)
Weighted average shares 114,953 116,576
(a) Results do not add due to rounding.
(b) Based on our assessment of the carrying value of long-lived assets
conducted in accordance with SFAS No. 144, in the Fiscal 2009
4th Quarter we identified 152 stores with asset carrying values in
excess of such stores' respective forecasted undiscounted cash flows.
Accordingly, we incurred non-cash charges of $16,577 to write down
the long-lived assets at these stores to their respective fair values.
Also, as a result of our annual impairment review during the Fiscal
2009 4th Quarter, we recorded a non-cash charge of $43,229 related to
the impairment of Catherines goodwill and $1,476 related to the
impairment of trademarks and tradenames.
(c) During the Fiscal 2008 4th Quarter we recorded a non-cash charge of
$27,197 related to the impairment of goodwill for our Figi's Gifts in
Good Taste business and write down of impaired store assets.
(d) Represents costs related to our multi-year transformational
initiatives which included the elimination of positions, shutdown of
Lane Bryant catalog and figure magazine. Additionally, includes
non-cash accelerated depreciation for store assets and non-cash
accelerated depreciation related to fixed assets retained from the
sale of the non-core misses apparel catalog businesses.
(e) Represents non-cash accelerated depreciation and severance for the
Catherines consolidation program announced during the Fiscal 2008
4th Quarter.
(f) Includes $882 of interest income related to refunds from amended tax
returns completed during the Fiscal 2009 4th Quarter.
(g) As part of our quarterly closing and reporting process, we evaluated
our deferred income taxes and determined that based on our cumulative
three years of losses and other available evidence, a tax valuation
allowance against our existing deferred tax assets was required.
Accordingly, the tax benefit for Fiscal 2009 is net of a valuation
allowance of $21,085 for continuing operations.
(h) Includes impairment of goodwill for $68,654 and trademarks for $11,393
($7,086 net of tax) related to our discontinued non-core misses
apparel catalog businesses.
(i) Represents an eminent domain settlement of $1,494 (pretax) at one of
our distribution centers.
CHARMING SHOPPES, INC.
(Unaudited)
Twelve Twelve
Months Months
(in thousands, Ended Ended
except per share Percent Jan. 31, Percent Feb. 2, Percent
Sales amounts) Change 2009 of Sales(a) 2008 of Sales(a)
Net sales (9.1)% $2,474,898 100.0% $2,722,462 100.0%
Cost of goods sold,
buying, catalog and
occupancy (5.5) 1,846,954 74.6 1,954,495 71.8
Selling, general, and
administrative (3.8) 692,110 28.0 719,107 26.4
Impairment of store
assets, goodwill and
trademarks 199.7 81,498 (b) 3.3 27,197 (c) 1.0
Restructuring & other
charges 521.6 33,145 (d) 1.3 5,332 (e) 0.2
Total operating
expenses (1.9) 2,653,707 107.2 2,706,131 99.4
Income/(loss) from
operations N/A (178,809) (7.2) 16,331 0.6
Other income,
principally interest (49.6) 4,430 (f) 0.2 8,793 0.3
Interest expense (16.7) (8,795) (0.4) (10,552) (0.4)
Income/(loss) from
continuing operations
before income taxes
and extraordinary item N/A (183,174) (7.4) 14,572 0.5
Income tax (benefit)/
provision (200.2) (13,885)(g) (0.6) 13,858 0.5
Income/(loss) from
continuing operations
before extraordinary
item N/A (169,289) (6.8) 714 0.0
Loss from discontinued
operations (including
loss on disposal of
$46,736 in Fiscal
2009), net of tax (11.9) (74,922)(g) (3.0) (85,039)(h) (3.1)
Extraordinary item
(net of tax of
$582) (100.0) 0 0.0 912 (i) 0.0
Net loss 192.8% $(244,211) (9.9)% $(83,413) (3.1)%
Earnings/(loss) per share:
Basic:
Income/(loss) from
continuing
operations before
extraordinary item $(1.48) $0.01
Loss from discontinued
operations, net of tax (0.65) (0.70)
Extraordinary item, net of tax - 0.01
Net loss $(2.13) $(0.69)
Weighted average shares 114,690 121,160
Diluted:
Income/(loss) from
continuing operations
before extraordinary
item $(1.48) $0.01
Loss from discontinued
operations, net of tax (0.65) (0.69)
Extraordinary item,
net of tax - 0.01
Net loss $(2.13) $(0.68)
Weighted average
shares and equivalents
outstanding 114,690 122,426
(a) Results do not add due to rounding.
(b) Based on our assessment of the carrying value of long-lived assets
conducted in accordance with SFAS No. 144, we identified approximately
275 stores in the Fiscal 2009 3rd and 4th Quarters with asset carrying
values in excess of such stores' respective forecasted undiscounted
cash flows. Accordingly, we incurred non-cash charges of
$36,793 to write down the long-lived assets at these stores to their
respective fair values. Also, as a result of our annual impairment
review during the Fiscal 2009 4th Quarter, we recorded a non-cash
charge of $43,229 related to the impairment of Catherines goodwill and
$1,476 related to the impairment of trademarks and trade names.
(c) During the Fiscal 2008 4th Quarter we recorded a non-cash charge of
$27,197 related to the impairment of goodwill for our Figi's Gifts in
Good Taste business and write down of impaired store assets.
(d) Represents costs related to our multi-year transformational
initiatives which included the elimination of positions, shutdown of
Lane Bryant catalog and figure magazine. Additionally, includes
severance for our former CEO, non-cash accelerated depreciation for
store assets and non-cash accelerated depreciation related to fixed
assets retained from the sale of the non-core misses apparel catalog
businesses.
(e) Represents non-cash accelerated depreciation and severance for the
Catherines consolidation program announced during the Fiscal 2008
4th Quarter.
(f) Includes $2,274 of interest income related to refunds from amended tax
returns completed in Fiscal 2009.
(g) As part of our quarterly closing and reporting process, we evaluated
our deferred income taxes and determined that based on our cumulative
three years of losses and other available evidence, a tax valuation
allowance against our existing deferred tax assets was required.
Accordingly, the tax benefit for Fiscal 2009 is net of a valuation
allowance of $38,551 and $18,304 for continuing operations and
discontinued operations, respectively.
(h) Includes impairment of goodwill for $68,654 and trademarks for $11,393
($7,086 net of tax) related to our discontinued non-core misses
apparel catalog businesses.
(i) Represents an eminent domain settlement of $1,494 (pretax) at one of
our distribution centers.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
January 31, February 2,
(In thousands, except share amounts) 2009 2008
ASSETS
Current assets
Cash and cash equivalents $93,759 $60,978
Available-for-sale securities 6,398 13,364
Accounts receivable, net of allowances of $6,018
and $6,262 33,300 33,535
Investment in asset-backed securities 94,453 115,912
Merchandise inventories 268,142 330,224
Deferred taxes 0 8,708
Prepayments and other 155,430 155,997
Current assets of discontinued operations 0 122,673
Total current assets 651,482 841,391
Property, equipment, and leasehold improvements
- at cost 1,076,972 1,117,559
Less accumulated depreciation and amortization 693,796 658,410
Net property, equipment, and leasehold
improvements 383,176 459,149
Trademarks and other intangible assets 187,365 189,562
Goodwill 23,436 66,666
Other assets 30,167 56,536
Total assets $1,275,626 $1,613,304
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $99,520 $130,061
Accrued expenses 166,631 161,476
Current liabilities of discontinued operations 0 46,909
Current portion - long-term debt 6,746 8,827
Total current liabilities 272,897 347,273
Deferred taxes 42,758 36,964
Other non-current liabilities 188,470 192,454
Long-term debt 305,635 306,169
Stockholders' equity
Common stock $.10 par value
Authorized - 300,000,000 shares
Issued -153,482,368 shares and 151,569,850
shares 15,348 15,157
Additional paid-in capital 411,623 407,499
Treasury stock at cost - 38,482,213 shares and
36,477,246 shares (347,730) (336,761)
Accumulated other comprehensive income 5 22
Retained earnings 386,620 644,527
Total stockholders' equity 465,866 730,444
Total liabilities and stockholders' equity $1,275,626 $1,613,304
Certain prior-year amounts have been reclassified to conform to the
current-year presentation.
Amounts are preliminary and subject to reclassifications and adjustments.
CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Year Ended
January February February
31, 2, 3,
(In thousands) 2009 2008 2007
Operating activities $(244,211) $(83,413)$108,923
Adjustments to reconcile net income/(loss) to
net cash provided by operating activities:
Depreciation and amortization 95,219 97,249 91,244
Loss on disposition of discontinued
operations 46,736 0 0
Impairment of store assets, goodwill, and
trademarks 81,498 98,219 0
Deferred income taxes 13,719 (4,933) 20,719
Stock-based compensation 5,576 7,101 10,386
Excess tax benefits related to
stock-based compensation 0 (613) (5,119)
Write-down of deferred taxes related to
stock-based compensation (1,427) 0 0
Write-down of capital assets 6,105 11,325 0
Net (gain)/loss from disposition of
capital assets (559) 2,147 1,618
Net loss/(gain) from securitization
activities 3,969 (6,445) (1,012)
Extraordinary item, net of income taxes 0 (912) 0
Changes in operating assets and liabilities:
Accounts receivable, net 235 (169) 5,237
Merchandise inventories 72,530 37,906 (53,024)
Accounts payable (25,814) (38,076) 45,393
Prepayments and other 13,655 (514) (55,506)
Income taxes payable 0 0 3,376
Accrued expenses and other (30,120) 40,973 14,719
Proceeds from sale of Crosstown Traders
credit card receivables portfolio 12,455 0 0
Purchase of Lane Bryant credit card
receivables portfolio 0 (230,975) 0
Securitization of Lane Bryant credit card
receivables portfolio 0 230,975 0
Net cash provided by operating activities 49,566 159,845 186,954
Investing activities
Investment in capital assets (55,800) (137,709)(133,156)
Proceeds from sales of capital assets 4,813 0 0
Gross purchases of securities (3,143) (84,665) (37,022)
Proceeds from sales of securities 10,367 22,335 62,185
Net proceeds from sale of discontinued
operations 34,440 0 0
Proceeds from eminent domain settlement, net
of taxes 0 912 0
Increase/(decrease) in other assets 11,099 (11,502) (14,399)
Net cash provided/(used) by investing
activities 1,776 (210,629)(122,392)
Financing activities
Repayments of short-term borrowings 0 0 (50,000)
Proceeds from issuance of senior convertible
notes 0 275,000 0
Proceeds from long-term borrowings 108 1,316 0
Repayments of long-term borrowings (8,682) (11,814) (14,733)
Payments of deferred financing costs (48) (7,640) 0
Excess tax benefits related to stock-based
compensation 0 613 5,119
Purchase of hedge on senior convertible notes 0 (90,475) 0
Sale of common stock warrants 0 53,955 0
Purchases of treasury stock (10,969) (252,625)
Net proceeds from shares issued under
employee stock plans 166 458 8,758
Net cash used by financing activities (19,425) (31,212) (50,856)
Increase/(decrease) in cash and cash
equivalents 31,917 (81,996) 13,706
Cash and cash equivalents, beginning of year 61,842 143,838 130,132
Cash and cash equivalents, end of year $93,759 $61,842 $143,838
Non-cash financing and investing activities
Common stock issued on conversion of
debentures $0 $149,564 $0
Assets acquired through capital leases $5,959 $8,047 $0
Certain prior-year amounts have been reclassified to conform to the
current-year presentation.
Amounts are preliminary and subject to reclassifications and adjustments.
SOURCE Charming Shoppes, Inc.