Claire's Stores, Inc. Announces Selected Preliminary, Unaudited Fiscal 2009 Fourth Quarter and Full Year Results

PEMBROKE PINES, Fla., Feb. 9 /PRNewswire/ --Claire's Stores, Inc., a leading specialty retailer offering value-priced fashion accessories and jewelry for kids, tweens, teens, and young women ages 3 to 27, today announced selected preliminary, unaudited financial results for the 2009 fourth quarter and the fiscal year, which ended January 30, 2010.

The financial results discussed in this press release regarding selected fiscal 2009 results are unaudited and should be considered preliminary and subject to change.  The Company does not currently expect to update this information prior to the release of its fourth quarter and fiscal 2009 financial results.  The Company expects to hold its regular quarterly conference call in April after those results are released.  The Company plans to file its 2009 Annual Report on Form 10-K on or before the due date of April 30, 2010.

Fourth Quarter Results

The Company expects to report net sales of $411 million for the 2009 fourth quarter, an increase of $18 million, or 4.5%, compared to the 2008 fourth quarter.  The increase was primarily attributable to foreign currency translation effect of our foreign locations' sales and an increase in same store sales and new store revenue, which was partially offset by the effect of stores closed in North America at the end of fiscal 2008 and the first half of fiscal 2009.  Sales would have increased 0.5% excluding the impact from foreign currency rate changes.  

Consolidated same store sales increased 2.1% in the 2009 fourth quarter. In North America, same store sales increased 1.2% with sales at our Icing stores increasing more than at our Claire's stores.  European same store sales increased 3.7%.  We compute same store sales on a local currency basis, which eliminates any impact from changes in foreign exchange rates.  Consolidated same store sales during the first nine days of fiscal 2010 were in the positive mid-single digits.

Adjusted EBITDA in the 2009 fourth quarter is expected to be between $91 million and $95 million, compared to $76 million in the 2008 fourth quarter.  The Company defines Adjusted EBITDA as earnings before interest, income taxes, gain from early debt extinguishment, depreciation and amortization, excluding the impact of transaction related costs incurred in connection with its May 2007 acquisition and other non-recurring or non-cash expenses, and normalizing occupancy costs for certain rent-related adjustments.  

At January 30, 2010, cash and cash equivalents were $199 million, and $194 million continued to be drawn on the Company's Revolving Credit Facility.  In addition, during the 2009 fourth quarter, the Company paid $10 million to retire $3 million of Senior Toggle Notes and $10 million of Senior Subordinated Notes.

Fiscal 2009 Results

The Company expects to report net sales of $1,342 million for fiscal 2009, a decrease of $71 million, or 5.0%, compared to fiscal 2008.  Consolidated same store sales declined 1.7% in fiscal 2009. Adjusted EBITDA in fiscal 2009 is expected to be between $231 million and $235 million, compared to $213 million in fiscal 2008.  In addition, during fiscal 2009, the Company paid $46 million to retire $31 million of Senior Toggle Notes and $53 million of Senior Subordinated Notes.

In connection with finalizing our financial results, the Company is currently performing its annual valuation of goodwill and other intangible assets and fixed assets to determine if an impairment is necessary.  This valuation will be finalized prior to the filing of the 2009 Form 10-K Annual Report.  Any such impairment charge would be non-cash, would not affect any of the terms of the Company's Credit Facility or Indenture agreements, and would not have any effect on our liquidity or cash flow.

Adjusted EBITDA

EBITDA and Adjusted EBITDA are not measures of financial performance under GAAP, are not intended to represent cash flow from operations under GAAP and should not be used as an alternative to net income (loss) as an indicator of operating performance or to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using EBITDA and Adjusted EBITDA by using it only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business. Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Management uses Adjusted EBITDA as an important tool to assess our operating performance. Management considers Adjusted EBITDA to be a useful measure in highlighting trends in our business and in analyzing the profitability of similar enterprises. Management believes that Adjusted EBITDA is effective, when used in conjunction with net income (loss), in evaluating asset performance, and differentiating efficient operators in the industry. Furthermore, management believes that Adjusted EBITDA provides useful information to potential investors and analysts because it provides insight into management's evaluation of our results of operations. Our calculation of Adjusted EBITDA may not be consistent with "EBITDA" for the purpose of the covenants in the agreements governing our indebtedness.

While EBITDA and Adjusted EBITDA are frequently used as a measure of operations and the ability to meet indebtedness service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.  Management believes that these measures provide useful information to investors.

Company Overview

Claire's Stores, Inc. is a leading specialty retailer of value-priced fashion accessories and jewelry for girls and young women through its two store concepts: Claire's® and Icing®.  While the latter operates only in North America, Claire's operates worldwide.  As of January 30, 2010, Claire's Stores, Inc. operated 2,948 stores in North America and Europe.  Claire's Stores, Inc. also operates through its subsidiary, Claire's Nippon, Co., Ltd., 211 stores in Japan as a 50:50 joint venture with AEON, Co., Ltd.  The Company also franchises 187 stores in the Middle East, Turkey, Russia, South Africa, Poland and Guatemala.

Forward-looking Statements:

This press release contains "forward-looking statements" which represent the Company's expectations or beliefs with respect to future events.  Statements that are not historical are considered forward-looking statements.  These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated.  Those factors include, without limitation: changes in consumer preferences and consumer spending; competition; our level of indebtedness, general economic conditions; general political and social conditions such as war, political unrest and terrorism; natural disasters or severe weather events; currency fluctuations and exchange rate adjustments; uncertainties generally associated with the specialty retailing business; disruptions in our supply of inventory; inability to increase same store sales; inability to renew, replace or enter into new store leases on favorable terms; significant increases in our merchandise markdowns; inability to grow our store base in Europe; inability to design and implement new information systems; delays in anticipated store openings or renovations; uncertainty that definitive financial results may differ from preliminary financial results due to, among other things, final U.S. GAAP adjustments; changes in applicable laws, rules and regulations, including changes in federal, state or local regulations governing the sale of our merchandise, particularly regulations relating to the content in our merchandise, and employment laws relating to overtime pay, tax laws and import laws; product recalls; loss of key members of management; increases in the cost of labor; labor disputes; unwillingness of vendors and service providers to supply goods or services pursuant to historical customary credit arrangements; increases in the cost of borrowings; unavailability of additional debt or equity capital; and the impact of our substantial indebtedness on our operating income, and our ability to grow.  These and other applicable risks, cautionary statements and factors that could cause actual results to differ from the Company's forward-looking statements are included in the Company's filings with the SEC, specifically as described in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2009 filed with the SEC on April 28, 2009.  The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances.  The historical results contained in this press release are not necessarily indicative of the future performance of the Company.

Additional Information:

Note:  Other Claire's Stores, Inc. press releases, a corporate profile and the most recent Form 10-K and Form 10-Q reports are available on Claire's business website at: http://www.clairestores.com.

Contact Information:

J. Per Brodin, Senior Vice President and Chief Financial Officer

Phone: (954) 433-3900, Fax: (954) 442-3999 or E-mail, [email protected]

    
    
                          CLAIRE'S STORES, INC. AND SUBSIDIARIES
                                    ADJUSTED EBITDA
                             (PRELIMINARY AND UNAUDITED)
                                    (IN MILLIONS)
    
    
                              Three         Three      Twelve     Twelve 
                              Months        Months     Months     Months
                              Ended         Ended      Ended      Ended
                            January 30,  January 31, January 30, January 31,
                               2010          2009       2010        2009    
                            -----------  ----------- ----------- ----------- 
    Operating income (a)      $69 to 73      $41     $144 to 148     $78
    Depreciation and 
     amortization                 17          20          71          85
                            -----------  ----------- ----------- ----------- 
    Reported EBITDA            86 to 90       61      215 to 219     163
    Book to cash rent 
     adjustment (b)                -           1           2           6
    Amortization of 
     intangible assets (c)         -           -           2           2
    Loss in equity of 
     joint venture (d)             -           -           1           -
    Gain on retirement of 
     property and equipment, net  (1)          -          (1)          -
    Gain on sale of intangible 
     assets                        -           -          (1)         (1)
    Stock compensation 
     expense (e)                   2           2           6           8 
    Relocation costs (f)           1           1           2           2 
    Consulting expenses (g)        1           -           1           1 
    Management fee (h)             1           1           3           3 
    Severance and Transaction 
     related costs (i)             1           8           1          14
    Pan European Transformation 
     costs (j)                     -           -           -           9
    Cost Savings Initiative 
     costs (k)                     -           2           -           6     
                            -----------  ----------- ----------- ----------- 
    Adjusted EBITDA           $91 to 95      $76     $231 to 235    $213     
                            ===========  =========== =========== ===========
    
    (a) Operating income excludes the effect of any impairment charges for 
        goodwill, identifiable intangible assets or fixed assets. 
    (b) Represents net non-cash rent expense, amortization of rent free 
        periods, the inclusion of cash landlord allowances, and the net 
        accretion of favorable (unfavorable) lease obligations.
    (c) Represents non-cash amortization of lease rights.
    (d) Represents non-cash equity loss from our 50:50 joint venture with 
        AEON Co. Ltd.
    (e) Represents non-cash stock compensation expense.
    (f) Consists of costs, including third party charges and compensation,
        incurred in conjunction with the relocation of new employees.
    (g) Represents non-recurring consulting expenses.
    (h) Represents the management fee paid to Apollo Management and 
        Tri-Artisan Capital Partners.
    (i) Consists of severance, legal, financial advisory, compensation, and
        other acquisition related expenses.
    (j) Represents the costs of our strategic Pan-European Transformation 
        project.  These costs consist primarily of severance, consulting fees,
        compensation and legal expense which are included in buying and SG&A 
        expenses.
    (k) Represents the costs relating to our Cost Savings Initiative project.
        These costs consist primarily of consulting fees.

SOURCE Claire's Stores, Inc.