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The Children's Place Reports First Quarter 2015 Results

Q1 Adjusted Earnings Per Share of $0.83

Reports Positive Comparable Retail Sales of 0.7%, Fourth Consecutive Quarter of Growth

Adjusted Gross Margin Increases by 150 Basis Points

Adjusted Operating Margin Increases by 110 Basis Points

SECAUCUS, N.J., May 14, 2015 (GLOBE NEWSWIRE) -- The Children's Place, Inc. (Nasdaq:PLCE), the largest pure-play children's specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended May 2, 2015.

Jane Elfers, President and Chief Executive Officer, commented, "We have been sharply focused on the execution of our transformation plan, and we are pleased that our efforts are yielding substantial financial and operational results. We delivered our fourth consecutive quarter of positive comparable retail sales, an increase in adjusted gross margin of 150 basis points and an increase in adjusted operating margin of 110 basis points compared to last year. Our strategy is generating results across the entirety of our business, and we expect to continue to deliver enhanced value to shareholders throughout 2015 and beyond as we realize the full benefits of our transformation."

First Quarter 2015 Results

Net sales were $404.9 million in the first quarter of 2015. The quarter included the negative impact of approximately $4.7 million from currency exchange rate fluctuations. This compares to net sales of $410.1 million for the first quarter of 2014. Comparable retail sales increased 0.7% for the first quarter 2015.

Net income was $15.6 million, or $0.73 per diluted share, in the first quarter of 2015, compared to net income of $13.6 million, or $0.61 per diluted share, the previous year. Adjusted net income was $17.7 million, or $0.83 per diluted share, compared to $15.3 million, or $0.68 per diluted share, in the first quarter last year.

Gross profit in the first quarter of 2015 was $152.1 million, compared to $148.3 million in the first quarter of 2014. Adjusted gross profit was $152.5 million this year, compared to $148.4 million last year, and increased 150 basis points to 37.7% of sales primarily as a result of merchandise margin leverage and a higher AUR.

Selling, general and administrative expenses were $114.5 million compared to $113.7 million in the first quarter of 2014. Adjusted SG&A was $111.3 million compared to adjusted SG&A of $111.4 million in the first quarter last year and deleveraged 30 basis points as a percentage of sales primarily as a result increased expenses associated with our systems transformation partially offset by a decrease in store payroll and corporate expenses.

Operating income was $23.2 million, compared to $20.1 million in the first quarter of 2014. Adjusted operating income in the first quarter of 2015 was $26.7 million compared to adjusted operating income of $22.7 million in the first quarter last year, and leveraged 110 basis points to 6.6% of sales.

During the first quarter, the Company recorded charges of $3.5 million for unusual items, which primarily consisted of certain non-recurring items, including costs related to the proxy contest, restructuring costs, and store disposition and distribution center exit costs.

Adjusted net income, adjusted gross profit, adjusted SG&A, and adjusted operating income are non-GAAP measures, and are not intended to replace GAAP financial information. The Company believes the excluded items 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.

Store Openings and Closures

Consistent with our store fleet optimization initiative, the Company opened 2 stores and closed 7 during the first quarter of 2015. The Company ended the first quarter with 1,092 stores and square footage of 5.103 million, a decrease of 1.8% compared to the prior year. The Company's international franchise partners opened 7 stores in the first quarter, and the Company ended the quarter with 79 international franchise stores open.

Capital Return Program

During the first quarter of 2015, the Company increased the pace of its share repurchase program, returning approximately $43 million to shareholders through the repurchase of 647,700 shares and its quarterly dividend payment. At the end of the first quarter of 2015, $100 million remained available for future share repurchases.

Outlook

For fiscal 2015, the Company expects adjusted net income per diluted share will be in the range of $3.30 to $3.45, inclusive of a $0.15 negative impact from foreign exchange. This compares to adjusted net income per diluted share of $3.05 in fiscal 2014. This guidance assumes an increase in comparable retail sales for the year of approximately 1%.

For the second quarter of 2015, the Company expects adjusted net loss per share between ($0.36) and ($0.32), inclusive of an estimated $0.02 negative impact from foreign exchange. This compares to adjusted net loss per share of ($0.37) in the second quarter of 2014. This guidance assumes an increase in comparable retail sales of approximately 1%.

Conference Call Information

The Children's Place will host a conference call to discuss its first quarter 2015 results today at 8:00 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, Inc.

The Children's Place is the largest pure-play children's specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary "The Children's Place," "Place" and "Baby Place" brand names. As of May 2, 2015, the Company operated 1,092 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 79 international stores open and operated by its franchise partners.

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 strategic initiatives and 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 January 31, 2015. 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 weakness in the economy that continues to affect the Company's target customer, the risk that the Company's strategic initiatives to increase sales and margin are delayed or do not result in anticipated improvements, 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 (or on the above referenced call) 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, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
First Quarter Ended
May 2, May 3,
2015 2014
Net sales $ 404,865 $ 410,149
Cost of sales 252,756 261,888
Gross profit 152,109 148,261
Selling, general and administrative expenses 114,514 113,720
Other costs (income) (3) 231
Depreciation and amortization 14,394 14,227
Operating income 23,204 20,083
Interest income (expense), net (176) 19
Income before taxes 23,028 20,102
Provision for income taxes 7,421 6,506
Net income $ 15,607 $ 13,596
Earnings per common share
Basic $ 0.74 $ 0.61
Diluted $ 0.73 $ 0.61
Weighted average common shares outstanding
Basic 21,012 22,150
Diluted 21,366 22,419
THE CHILDREN'S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
First Quarter Ended
May 2, May 3,
2015 2014
Net income $ 15,607 $ 13,596
Non-GAAP adjustments:
Store disposition 342 98
Restructuring costs 446 2,274
Proxy costs 2,738 --
DC exit costs (income) (3) 231
Aggregate impact of Non-GAAP adjustments 3,523 2,603
Income tax effect (1) (1,393) (916)
Net impact of Non-GAAP adjustments 2,130 1,687
Adjusted net income $ 17,737 $ 15,283
GAAP net income per common share $0.73 $0.61
Adjusted net income per common share $0.83 $0.68
(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.
Operating income $ 23,204 $ 20,083
Non-GAAP adjustments:
Store disposition 342 98
Restructuring costs 446 2,274
Proxy costs 2,738 --
DC exit costs (income) (3) 231
Aggregate impact of Non-GAAP adjustments 3,523 2,603
Adjusted operating income $ 26,727 $ 22,686
THE CHILDREN'S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
First Quarter Ended
May 2, May 3,
2015 2014
Gross Profit $ 152,109 $ 148,261
Non-GAAP adjustments:
Store disposition 342 98
Aggregate impact of Non-GAAP adjustments 342 98
Adjusted Gross Profit $ 152,451 $ 148,359
Selling, general and administrative expenses $ 114,514 $ 113,720
Non-GAAP adjustments:
Restructuring costs (446) (2,274)
Proxy costs (2,738) --
Aggregate impact of Non-GAAP adjustments (3,184) (2,274)
Adjusted Selling, general and administrative expenses $ 111,330 $ 111,446
THE CHILDREN'S PLACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
May 2, January 31, May 3,
2015 2015* 2014
Assets:
Cash and cash equivalents $ 141,282 $ 173,291 $ 131,432
Short-term investments 59,280 52,000 64,000
Accounts receivable 25,041 31,928 25,099
Inventories 281,059 297,631 304,291
Other current assets 52,295 54,429 52,940
Total current assets 558,957 609,279 577,762
Property and equipment, net 309,548 310,301 315,314
Other assets, net 41,598 39,038 44,463
Total assets $ 910,103 $ 958,618 $ 937,539
Liabilities and Stockholders' Equity:
Revolving loan $ 11,186 $ -- $ --
Accounts payable 130,899 155,323 120,654
Accrued expenses and other current liabilities 104,679 119,144 111,137
Total current liabilities 246,764 274,467 231,791
Other liabilities 92,546 95,033 100,335
Total liabilities 339,310 369,500 332,126
Stockholders' equity 570,793 589,118 605,413
Total liabilities and stockholders' equity $ 910,103 $ 958,618 $ 937,539
* Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2015.
THE CHILDREN'S PLACE, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
(Unaudited)
13 Weeks Ended
May 2, May 3,
2015 2014
Net income $ 15,607 $ 13,596
Non-cash adjustments 14,135 12,143
Working Capital (16,346) (21,578)
Net cash provided by operating activities 13,396 4,161
Net cash used in investing activities (17,346) (17,396)
Net cash used in financing activities (31,925) (30,483)
Effect of exchange rate changes on cash 3,866 1,153
Net decrease in cash and cash equivalents (32,009) (42,565)
Cash and cash equivalents, beginning of period 173,291 173,997
Cash and cash equivalents, end of period $ 141,282 $ 131,432

CONTACT: Robert Vill, Group Vice President, Finance, (201) 453-6693Source:The Children's Place, Inc.