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The Children's Place Reports Third Quarter 2013 Results

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) 453-6955Source:The Children's Place Retail Stores, Inc.