Claire's Stores, Inc. Reports Fiscal 2012 Fourth Quarter And Full Year Results

CHICAGO, March 20, 2013 /PRNewswire/ -- Claire's Stores, Inc. (the "Company") is one of the world's leading specialty retailers of fashionable jewelry and accessories for young women, teens, tweens, and kids.  The Company today reported its financial results for the fiscal 2012 fourth quarter and fiscal year, which ended February 2, 2013. 

Fourth Quarter Results

The Company reported net sales of $493.4 million for the fiscal 2012 fourth quarter, an increase of $58.5 million, or 13.4% compared to the fiscal 2011 fourth quarter.  Fiscal 2012 fourth quarter included 14 weeks of operations compared to fiscal 2011 fourth quarter which included 13 weeks.  Net sales for the additional week of operations were $23.6 million.  The balance of the sales increase was attributable to an increase in same store sales, new store sales, increases in shipments to franchisees, and foreign currency translation effect of our non-U.S. sales, partially offset by the effect of store closures.  Excluding the extra week of net sales in fiscal 2012 fourth quarter, net sales would have increased 8.0% or 7.6%, excluding the impact from foreign currency exchange rate changes.

During fiscal 2012 fourth quarter, the Company entered two new countries, opening three stores in China and two stores in Italy.

Consolidated same store sales increased 5.4% for the 13 weeks ended January 26, 2013 compared to the 13 weeks ended January 28, 2012, with North America same store sales increasing 5.9%, and Europe same store sales increasing 4.4%.  Our first quarter consolidated quarter-to-date same store sales performance is currently in the low to mid positive single digits. We compute same store sales on a local currency basis, which eliminates any impact from changes in foreign exchange rates and the additional week.

Gross profit percentage increased 180 basis points to 54.5% during the fiscal 2012 fourth quarter compared to 52.7% during the prior year quarter. Excluding the additional week of operations, the gross profit percentage increased 140 basis points to 54.1%. This increase in gross profit percentage consisted of a 150 basis point decrease in occupancy costs and a 10 basis point decrease in buying and buying-related costs, partially offset by a 20 basis points decrease in merchandise margin. The improvement in occupancy rate resulted primarily from the leveraging effect of an increase in same store sales. The decrease in merchandise margin resulted primarily from an increase in shrink and a reduction in initial markup. 

Selling, general and administrative expenses increased $19.0 million, or 15.4%, and was 50 basis points higher as a percentage of sales compared to the fiscal 2011 fourth quarter. Excluding the additional week of operations and an unfavorable $0.3 million foreign currency translation effect, selling, general and administrative expenses would have increased $10.4 million, or 20 basis points as a percentage of sales.  The majority of this increase was due to compensation related expenses, such as non-cash stock compensation, bonuses and salaries.

Adjusted EBITDA for the 14 weeks ended February 2, 2013 was $129.6 million compared to $102.7 million in the 13 week fiscal 2011 fourth quarter.  Adjusted EBITDA for the additional week of operations was $6.2 million.  The Company defines Adjusted EBITDA as earnings before provision for income taxes, gain (loss) on early debt extinguishment, net interest expense, impairment, and depreciation and amortization.  Adjusted EBITDA excludes severance, management fees, the impact of transaction-related costs and other non-recurring or non-cash expenses, and normalizing occupancy costs for certain rent-related adjustments.  Net income for the 2012 fourth quarter was $42.2 million.  A reconciliation of net income to Adjusted EBITDA is provided below.

At February 2, 2013, cash and cash equivalents were $167.0 million.  The Company's Amended $115 million Revolving Credit Facility remains undrawn.  The fiscal 2012 fourth quarter cash balance increase of $104.3 million consisted of positive impacts of $129.6 million of Adjusted EBITDA and $44.0 million from seasonal working capital and reductions for $38.5 million of cash interest, $25.4 million of capital expenditures, and $5.4 million of tax payments and other cash items. 

Fiscal 2012 Results

Net sales in fiscal 2012 were $1,557.0 million, an increase of $61.1 million, or 4.1%, compared to 2011.  Fiscal 2012 included 53 weeks of operations compared to 52 weeks in Fiscal 2011.  Excluding the extra week of net sales in Fiscal 2012, net sales would have increased 2.5% or 4.3%, excluding the impact from foreign currency exchange rate changes.  Consolidated same store sales increased 1.8% for the 52 weeks ended January 26, 2013 compared to the 52 weeks ended January 28, 2012, with North America same stores increasing 1.9% and Europe same stores increasing 1.7%. 

Adjusted EBITDA for the 53 weeks ended February 2, 2013 was $308.0 million, compared to $274.7 million in fiscal 2011 which consisted of 52 weeks.  Net income for fiscal 2012 was $1.3 million.  A reconciliation of net income to Adjusted EBITDA is provided below.

Store Count as of:

February 2, 2013


October 27, 2012


January 28, 2012







North America

1,921


1,939


1,953

Europe

1,161


1,149


1,118

China

3


-


-

Subtotal Company-Owned

3,085


3,088


3,071

Franchise

392


381


381

Total

3,477


3,469


3,452

Conference Call Information

The Company will host its fourth quarter conference call on March 21, 2013 at 10:00 am. (EDT).  The call-in number is 210-839-8081 and the password is "Claires."  A replay will be available through April 21, 2013.  The replay number is 800-391-9851 and the password is 6582.  The conference call is also being webcast and archived until April 21, 2013 on the Company's corporate website at http://www.clairestores.com, where it can be accessed by clicking on the "Events" link located under "Financial Information" for a replay or download as an MP3 file.

Company Overview

Claire's Stores, Inc. is one of the world's leading specialty retailers of fashionable jewelry and accessories for young women, teens, tweens and girls ages 3 to 35.  The Company operates through its two store concepts: Claire's® and Icing®.  As of February 2, 2013, Claire's Stores, Inc. operated 3,085 stores in North America, Europe, and China.  The Company also franchised 392 stores in Japan, the Middle East, Turkey, Greece, Guatemala, Malta, Ukraine, Mexico, India, Dominican Republic, El Salvador, Venezuela, Panama, Honduras, and Indonesia.  More information regarding Claire's Stores is available on the Company's corporate website at http://www.clairestores.com.

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, such as decreases in mall traffic due to high gasoline prices or other general economic conditions; 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; increase in our cost of merchandise; significant increases in our merchandise markdowns; inability to grow our store base in Europe and China or expand our international franchising operations; inability to design and implement new information systems or disruptions in adapting our information systems to allow for e-commerce sales; 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; results from any future asset impairment analysis; 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, general employment laws, including laws relating to overtime pay and employee benefits, health care laws, 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 28, 2012 filed with the SEC on April 4, 2012.  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, Executive Vice President and Chief Financial Officer
Phone: (847) 765-1100 or E-mail, investor.relations@claires.com

 

CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(In thousands)



FOURTH FISCAL QUARTER





Three Months


Three Months


Ended


Ended


February 2, 2013


January 28, 2012

Net sales

$       493,398


$       434,907

Cost of sales, occupancy and buying expenses (exclusive of depreciation
  and amortization shown separately below)

224,544


205,529

Gross profit

268,854


229,378

Other expenses:




Selling, general and administrative

143,132


124,051

Depreciation and amortization

16,647


18,218

Severance and transaction-related costs

1,660


5,979

Other income, net

(3,451)


(3,544)


157,988


144,704

Operating income

110,866


84,674

Gain on early debt extinguishment


1,937

Interest expense, net

60,854


42,362

Income before income tax expense

50,012


44,249

Income tax expense

7,806


4,775

Net income

$       42,206


$       39,474

 


YEAR TO DATE





Twelve Months


Twelve Months


Ended


Ended


February 2, 2013


January 28, 2012

Net sales

$     1,557,020


$     1,495,900

Cost of sales, occupancy and buying expenses (exclusive of depreciation
  and amortization shown separately below)

755,996


724,775

Gross profit

801,024


771,125

Other expenses:




Selling, general and administrative

503,254


504,360

Depreciation and amortization

64,879


68,753

Severance and transaction-related costs

2,828


6,928

Other income, net

(6,105)


(1,254)


564,856


578,787

Operating income

236,168


192,338

Gain (loss) on early debt extinguishment

(9,707)


6,405

Interest expense, net

210,797


176,475

Income before income tax expense

15,664


22,268

Income tax expense

14,382


10,636

Net income

$        1,282


$       11,632

 


CLAIRE'S STORES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



February 2, 2013


January 28, 2012


(In thousands, except share and per share amounts)

ASSETS




Current assets:




Cash and cash equivalents and restricted cash of $0 and $4,350,
            respectively

$       166,956


$       174,374

Inventories

157,549


142,104

Prepaid expenses

19,701


20,010

Other current assets

29,621


25,423

Total current assets

373,827


361,911

Property and equipment:




Furniture, fixtures and equipment

234,209


207,620

Leasehold improvements

312,789


281,774


546,998


489,394

Less accumulated depreciation and amortization

(325,618)


(281,874)


221,380


207,520

Leased property under capital lease:




Land and building

18,055


18,055

Less accumulated depreciation and amortization

(2,708)


(1,805)


15,347


16,250





Goodwill

1,550,056


1,550,056

Intangible assets, net of accumulated amortization of $57,672 and 
      $49,270, respectively

547,433


549,768

Deferred financing costs, net of accumulated amortization of $27,156

41,381


33,025

and $55,818, respectively

Other assets

49,848


44,495


2,188,718


2,177,344





Total assets

$      2,799,272


$     2,763,025





LIABILITIES AND STOCKHOLDER'S DEFICIT




Current liabilities:




Trade accounts payable

$        73,445


$       60,704

Income taxes payable

10,508


10,228

Accrued interest payable

68,254


31,859

Accrued expenses and other current liabilities

99,529


104,525

Total current liabilities

251,736


207,316





Long-term debt

2,373,366


2,386,382

Obligation under capital lease

17,232


17,290

Deferred tax liability

120,968


120,452

Deferred rent expense

29,859


28,861

Unfavorable lease obligations and other long-term liabilities

20,551


25,020


2,561,976


2,578,005





Commitments and contingencies








Stockholder's deficit:




Common stock par value $0.001 per share; authorized 1,000 shares;




issued and outstanding 100 shares


Additional paid-in capital

618,403


619,453

Accumulated other comprehensive income (loss), net of tax

3,273


(4,351)

Accumulated deficit

(636,116)


(637,398)


(14,440)


(22,296)





Total liabilities and stockholder's deficit

$     2,799,272


$     2,763,025

 

Net Income Reconciliation to EBITDA and Adjusted EBITDA

EBITDA represents net income before provision for income taxes, gain (loss) on early debt extinguishment, interest income and expense, impairment and depreciation and amortization.  Adjusted EBITDA represents EBITDA further adjusted to exclude non-cash and unusual items.  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, 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.

EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP, are not intended to represent cash flow from operations under U.S. GAAP and should not be used as an alternative to net income 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 U.S. 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 U.S. GAAP.

Some of the limitations of EBITDA and Adjusted EBITDA are:

  • EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;

  • Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;

  • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;

  • EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and

  • EBITDA and Adjusted EBITDA do not reflect extraordinary items and non-recurring expenses such as one-time write-offs to inventory and reserve accruals.

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.

While management believes that these measures provide useful information to investors, the SEC may require that EBITDA and Adjusted EBITDA be presented differently or not at all in future filings we will make with the SEC.


 

CLAIRE'S STORES, INC. AND SUBSIDIARIES
ADJUSTED EBITDA
(UNAUDITED)
(In Thousands)



Three Months
Ended

February 2, 2013


Three Months
Ended

January 28, 2012


Twelve Months
Ended

February 2, 2013


Twelve Months
Ended

January 28, 2012

Net income (a)

$    42,206


$    39,474


$      1,282


$    11,632

Income tax expense

7,806


4,775


14,382


10,636

Loss (gain) on early debt extinguishment


(1,937)


9,707


(6,405)

Interest expense

60,971


42,465


210,996


176,856

Interest income

(117)


(103)


(199)


(381)

Depreciation and amortization

16,647


18,218


64,879


68,753

Reported EBITDA

127,513


102,892


301,047


261,091

– stock compensation, book to cash rent,
     intangible amortization (b)

690


(3,242)


857


1,875

– management fee, consulting (c)

839


750


3,518


3,000

– other (d)

531


2,291


2,612


8,766

Adjusted EBITDA

$  129,573


$  102,691


$ 308,034


$    274,732


a) Fiscal 2011 includes a $3.4 million and $2.0 million gain for the three and twelve months ended January 28, 2012, respectively, to remeasure the Euro loan at the period end foreign exchange rate.


b) Includes: non-cash stock compensation expense, 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 and non-cash amortization of lease rights.


c) Includes: the management fee paid to Apollo Management and Morgan Joseph Tri-Artisan Capital Partners and non-recurring consulting expenses.


d) Includes: non-cash losses on property and equipment primarily associated with remodels, relocations and closures; costs, including third party charges and compensation, incurred in conjunction with the relocation of new employees; non-cash foreign exchange gains/losses resulting from intercompany transactions and remeasurements of U.S. dollar denominated cash accounts and foreign currency denominated debt of our foreign entities into their functional currency; and severance and transaction related costs.

SOURCE Claire's Stores, Inc.



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