Claire's Stores, Inc. Announces Selected Preliminary, Unaudited Fiscal 2010 First Quarter Results

HOFFMAN ESTATES, Ill., May 13 /PRNewswire/ -- Claire's Stores, Inc., a leading specialty retailer offering value-priced, fashion-right accessories and jewelry for kids, tweens, teens, and young women ages 3 to 27, today announced selected preliminary, unaudited financial results for the 2010 first quarter, which ended May 1, 2010.

The financial results discussed in this press release regarding selected fiscal 2010 first quarter 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 first quarter 2010 financial results.  The Company expects to hold its regular quarterly conference call in May after those results are released.  The Company plans to file its 2010 First Quarterly Report on Form 10-Q on or before the due date of June 15, 2010.

First Quarter Results

The Company expects to report net sales of $322 million for the 2010 first quarter, an increase of $29 million, or 9.9%, compared to the 2009 first quarter.  The increase was attributable to an increase in same store sales, foreign currency translation effect of our foreign locations' sales and new store sales, partially offset by closed stores and reduced shipments to franchisees.  Sales would have increased 7.2% excluding the impact from foreign currency rate changes.  

Consolidated same store sales increased 7.6% in the 2010 first quarter.  In North America, same store sales increased 8.9% and European same store sales increased 5.0%.  Our same store sales trend through the first eleven days of the fiscal 2010 second quarter is in the low double digits.  As a point of reference, our fiscal 2009 second quarter same store sales declined 6.9%.  We compute same store sales on a local currency basis, which eliminates any impact from changes in foreign exchange rates.

Adjusted EBITDA in the 2010 first quarter is expected to be between $47 million and $50 million, compared to $36 million in the 2009 first 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 May 1, 2010, cash and cash equivalents were $220 million, and $194 million continued to be drawn on the Company's Revolving Credit Facility.  In addition, during the 2010 first quarter, the Company paid $17 million to retire $6 million of Senior Toggle Notes and $16 million of Senior Subordinated Notes.

Adjusted EBITDA

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 (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 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.

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-right 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 May 1, 2010, Claire's Stores, Inc. operated 2,955 stores in North America and Europe.  Claire's Stores, Inc. also operates through its subsidiary, Claire's Nippon, Co., Ltd., 210 stores in Japan as a 50:50 joint venture with AEON, Co., Ltd.  The Company also franchises 199 stores in the Middle East, Turkey, Russia, South Africa, Poland, Greece, Guatemala and Malta.

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 or expand our international franchising operations; 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; 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 30, 2010 filed with the SEC on April 13, 2010.  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]

SOURCE Claire's Stores, Inc.