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Tween Brands Reports Record Second Quarter Sales and Earnings; Reiterates Positive Earnings Outlook for Full Year 2006

Posted on: Wednesday, 16 August 2006, 09:00 CDT

Tween Brands, Inc. (NYSE:TWB), formerly Too, Inc., a leading specialty retailer for tween girls, today announced a 50% increase in earnings per diluted share to $0.18 on net income of $5.9 million for the second quarter ended July 29, 2006, compared to earnings of $0.12 per diluted share on net income of $4.0 million reported for the 2005 quarter. The $0.18 was at the high end of the company's previously provided earnings guidance.

Second Quarter Performance

Net sales for the second quarter increased 20%, to a record $185.8 million, from $154.9 million for the 2005 period. Tween Brands' comparable store sales increased 10% during the quarter, on top of the 5% increase for the like period last year. The overall 10% increase was comprised of a 9% increase for Limited Too and a 30% increase for the 62 Justice stores that were open at least one year at the end of the quarter.

The higher earnings for the 2006 quarter were largely attributable to the 20% sales increase and a 120 basis point reduction in general, administrative and store operating expenses as a percentage of sales, due mostly to the elimination of Limited Too's summer sale television advertising. Tween Brands' gross income as a percentage of sales decreased 80 basis points. Lower store occupancy costs as a percentage of sales were more than offset by lower merchandise margin and the higher cost of additional Limited Too catazine mailings during the quarter.

"Our second quarter results cap off what was a great spring season for our Limited Too and Justice brands," said Mike Rayden, Tween Brands Chairman, President and Chief Executive Officer. "Limited Too continues to be recognized as the tween fashion headquarters in the mall, while our Justice division is gaining similar recognition in its predominantly off-mall locations."

Fiscal Year-to-Date Results

Net sales for the six months ended July 29, 2006 increased 19%, to $380.9 million, compared to $319.3 million for the like period last year.

Tween Brands' year-to-date earnings per diluted share increased 58%, to $0.52 on net income of $17.6 million, compared to earnings per diluted share of $0.33 on net income of $11.4 million, for the same six month period last year.

The earnings improvement for the 2006 period was primarily a result of the higher sales and a 150 basis point improvement in general, administrative and store operating expenses as a rate of sales, resulting mainly from the elimination of spring season television advertising. A portion of the advertising savings was reallocated to additional catazine mailings during the season.

Share Repurchase

During the second quarter 2006, the company repurchased approximately 515,000 of its common shares for about $20 million. Since the repurchase program began in November 2004, the company has returned approximately $100 million to shareholders. Tween Brands remains in excellent financial condition, with nearly $114 million in cash and short-term investments on its balance sheet as of July 29, 2006, and no debt.

Store Growth

Justice opened 13 stores during the second quarter, ending the period at 115 stores, an increase of 53 stores from a year ago. Justice is planning 42 to 47 additional store openings in the second half of 2006, and 90 to 100 new stores in 2007.

Limited Too remodeled 14 existing stores during the quarter and opened 1 new store, ending the quarter at 566 stores. Limited Too plans to open seven additional new stores in the second half of the year.

Based on a recently-completed strategic review, the company has identified a number of real estate growth opportunities that could mean the opening of 150 to 200 new Limited Too stores over the next five years.

"We have identified an array of exciting opportunities for new Limited Too store openings that very much complement the accelerated store growth planned for Justice," said Mr. Rayden. "This array includes the prospect of our first stores in Canada and our first U.S. urban street locations, the opening of additional premium outlet centers, outdoor lifestyles centers and select mid-grade mall sites These plans are being completed now and could be implemented in 2007," added Mr. Rayden.

Outlook

Tween Brands reiterated its guidance for earnings per share for fiscal 2006 of $2.00 to $2.10, which would be an increase of 25% to 31% on the earnings of $1.60 per diluted share reported for fiscal 2005.

Conference Call and Webcast

Tween Brands, Inc. will host a conference call with security analysts beginning at 9:00 a.m. ET today, Wednesday, August 16th, 2006, to review the operating results for the quarter ended July 29, 2006. Interested participants can call (888) 202-2422 a few minutes before the 9:00 a.m. start in order to be placed in queue. The conference call passcode is 7911084. This call and replay are also being webcast by CCBN and will be distributed over their investor distribution network. Individual investors can listen to the webcast at www.earnings.com. Institutional investors can access the webcast at www.streetevents.com. The webcast will also be available at the Event Calendar page of Tween Brands' corporate Web site, www.tweenbrands.com.

About Tween Brands, Inc.

Tween Brands, Inc. is a leading specialty retailer for tween (ages 7 to 14) girls. At Limited Too, the company sells sportswear, related accessories and key lifestyle items for active, fashion-aware tween girls. Limited Too currently operates 567 stores in 46 states and Puerto Rico, and has a select number of international franchised stores. Limited Too publishes a catazine coinciding with key tween shopping times throughout the year and conducts e-commerce on its Web site, www.limitedtoo.com.

Justice is the company's newer specialty retail concept for tween girls, offering moderately-priced sportswear, key accessories and lifestyle items in predominantly off-the-mall store sites. Justice also publishes a catazine for its tween customers and currently operates 119 stores across the United States, the locations of which can be found on their Web site, www.justicejustforgirls.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This press release contains various "forward-looking statements" specifically related to the company's earnings outlook for 2006 and store growth plans for 2006 and beyond, within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable securities laws. Such statements can be identified by the use of the forward-looking words "anticipate,""estimate,""project,""target,""believe,""intend,""plan,""expect,""hope,""risk,""could,""pro forma,""potential,""prospects,""outlook," or similar words. These statements discuss future expectations, contain projections regarding future developments, operations or financial conditions, or state other forward-looking information. These forward-looking statements involve various important risks, uncertainties and other factors that could cause our actual results for 2006 and beyond to differ materially from those expressed. The following factors, among others, could affect our future financial performance and cause actual future results to differ materially from those expressed or implied in any forward-looking statements included in this press release: changes in consumer spending patterns, consumer preferences and overall economic conditions; decline in the demand for our merchandise; the impact of competition and pricing; the effectiveness of our brand awareness and marketing programs; a significant change in the regulatory environment applicable to our business; risks associated with our sourcing and logistics functions; changes in existing or potential trade restrictions, duties, tariffs or quotas; currency and exchange risks; availability of suitable store locations at appropriate terms; ability to develop new merchandise; ability to hire and train associates; the potential impact of health concerns relating to severe infectious diseases, particularly on manufacturing operations of our vendors in Asia and elsewhere; acts of terrorism in the U.S. or worldwide; and other risks that may be described in other reports and filings we make with the Securities and Exchange Commission. Future economic and industry trends that could potentially impact revenue and profitability are difficult to predict. Therefore, there can be no assurance that the forward-looking statements included here will prove to be accurate. The inclusion of forward-looking statements should not be regarded a representation by us, or any other person, that our objectives will be achieved. The forward-looking statements made herein are based on information presently available to us, as the management of the company. We assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Company Home Page: www.tweenbrands.com Tween Brands, Inc. Consolidated Statements of Operations For the Thirteen Weeks Ended July 29, 2006 and July 30, 2005 (unaudited, in thousands, except per share amounts) Thirteen Weeks Thirteen Weeks Ended Ended ------------------ ------------------- July 29, % of July 30, % of 2006 Sales 2005 Sales ---------- ------- ---------- -------- Net sales $185,801 100.0% $154,939 100.0% Cost of goods sold, including buying and occupancy costs 122,979 66.2% 101,272 65.4% ---------- ------- ---------- -------- Gross income 62,822 33.8% 53,667 34.6% General, administrative and store operating expenses 55,603 29.9% 48,203 31.1% ---------- ------- ---------- -------- Operating income 7,219 3.9% 5,464 3.5% Interest income, net 1,245 0.7% 368 0.2% ---------- ------- ---------- -------- Earnings before income taxes 8,464 4.6% 5,832 3.7% Provision for income taxes 2,552 1.4% 1,865 1.1% ---------- ------- ---------- -------- Net Income $5,912 3.2% $3,967 2.6% ========== ======= ========== ======== Net income per share: Basic $0.18 $0.12 ---------- ---------- Diluted $0.18 $0.12 ---------- ---------- Weighted average common shares: Basic 32,696 33,400 ========== ========== Diluted 33,419 33,691 ========== ========== Tween Brands, Inc. Consolidated Statements of Operations For the Twenty-Six Weeks Ended July 29, 2006 and July 30, 2005 (unaudited, in thousands, except per share amounts) Twenty-Six Weeks Twenty-Six Weeks Ended Ended ------------------ ------------------- July 29, % of July 30, % of 2006 Sales 2005 Sales ---------- ------- ---------- -------- Net sales $380,937 100.0% $319,348 100.0% Cost of goods sold, including buying and occupancy costs 244,369 64.1% 204,078 63.9% ---------- ------- ---------- -------- Gross income 136,568 35.9% 115,270 36.1% General, administrative and store operating expenses 111,901 29.4% 98,590 30.9% ---------- ------- ---------- -------- Operating income 24,667 6.5% 16,680 5.2% Interest income, net 2,598 0.7% 827 0.3% ---------- ------- ---------- -------- Earnings before income taxes 27,265 7.2% 17,507 5.5% Provision for income taxes 9,664 2.6% 6,131 1.9% ---------- ------- ---------- -------- Net Income $17,601 4.6% $11,376 3.6% ========== ======= ========== ======== Net income per share: Basic $0.53 $0.33 ---------- ---------- Diluted $0.52 $0.33 ---------- ---------- Weighted average common shares: Basic 32,925 34,079 ========== ========== Diluted 33,607 34,389 ========== ========== Tween Brands, Inc. Consolidated Balance Sheets As of July 29, 2006 and January 28, 2006 (unaudited, in thousands, except share amounts) July 29, January 28, 2006 2006 ---------- ----------- ASSETS Current Assets: Cash and equivalents $40,601 $22,248 Investments 72,907 163,451 Restricted assets 1,204 1,193 Accounts receivable 11,195 8,040 Income taxes receivable - - Inventories 97,731 66,033 Store supplies 13,136 12,216 Prepaid expenses and other current assets 12,811 11,932 ---------- ----------- Total current assets 249,585 285,113 Property and equipment, net 211,750 201,983 Long-term investments 12,291 8,464 Deferred income taxes 12,982 10,208 Assets held in trust and other 22,232 17,962 ---------- ----------- Total assets $508,840 $523,730 ========== =========== LIABILITIES Current Liabilities: Accounts payable $32,823 $30,223 Accrued expenses 41,629 38,713 Deferred revenue 8,489 11,859 Income taxes payable 7,221 18,050 ---------- ----------- Total current liabilities 90,162 98,845 Deferred tenant allowances from landlords 49,080 45,817 Supplemental retirement and deferred compensation liability 18,220 16,907 Accrued straight-line rent and other 12,224 11,378 Commitments and contingencies - - SHAREHOLDERS' EQUITY Preferred stock, 50 million shares authorized - - Common stock, $.01 par value, 100 million shares authorized, 36.4 million and 36.1 million shares issued, 33.7 million and 33.3 million shares outstanding at July 29, 2006 and January 28, 2006, respectively 364 361 Treasury stock, at cost, 3.9 million and 2.7 million shares at July 29, 2006 and January 28, 2006, respectively (100,593) (60,595) Paid in capital 168,483 157,718 Retained earnings 270,900 253,299 ---------- ----------- Total shareholders' equity 339,154 350,783 ---------- ----------- Total liabilities and shareholders' equity $508,840 $523,730 ========== ===========

Source: Business Wire

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