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SAN DIEGO--(BUSINESS WIRE)--
Charlotte Russe Holding, Inc. (Nasdaq: CHIC) today announced financial results for the fourth quarter and fiscal year ended September 27, 2008.
Also today, the Company announced that it has named new senior members of its management team (see separate press release). John D. Goodman, formerly President and Chief Executive Officer of Mervyn's LLC, has been named Chief Executive Officer; Emilia Fabricant, formerly President and Chief Merchandising Officer of babystyle(R), has been named President and Chief Merchandising Officer; and Frederick G. Silny, formerly Senior Vice President and Chief Financial Officer of Guess?, Inc. (NYSE: GES), has been named Executive Vice President and Chief Financial Officer. Goodman and Fabricant will also join the Charlotte Russe Board of Directors, and along with Silny, will be based at the Company's San Diego headquarters. Len Mogil, who currently serves as Interim Chief Executive and Chief Financial Officer, will work with the new team to ensure a smooth transition and will resume his position on the Board of Directors.
Fourth Quarter and Full Year Financial Performance
Fourth quarter net sales increased 8.6% to $206.7 million, compared to $190.3 million in the fourth quarter of 2007. Comparable store sales for the quarter decreased 3.8%. Diluted loss per share for the 2008 fourth quarter was $0.32 compared to diluted earnings per share of $0.33 for the 2007 quarter. For the fourth quarter of fiscal 2008, the Company recorded cash and non-cash charges of $4.1 million for costs related to the recent management transition, and a non-cash charge for store impairment of $6.1 million. Diluted earnings per share for the fourth quarter, excluding transition and impairment costs, were $0.01. The Company opened 18 new stores in the 2008 fourth quarter for a total of 57 new stores in fiscal 2008.
Fiscal year 2008 net sales increased 11.1% to $823.3 million compared to $740.9 million in fiscal year 2007, while comparable store sales for the 2008 full-year period decreased 1.5%. Diluted earnings per share for fiscal year 2008 were $0.79 compared to $1.43 per share in fiscal 2007. Excluding the $4.1 million of transition costs described above and $6.9 million of annual impairment charges, diluted earnings per share were $1.08 in fiscal year 2008. As of September 27, 2008, the Company had $45.5 million in cash and no long-term debt.
Fourth Quarter Ended Fiscal Year Ended
--------------------------- ---------------------------
September 27, September 29, September 27, September 29,
(in thousands,
except per
share data) 2008 2007 2008 2007
------------- ------------- ------------- -------------
Net sales $ 206,725 $ 190,329 $ 823,252 $ 740,939
GAAP net
(loss) income $ (6,645) $ 8,425 $ 18,166 $ 36,304
GAAP net
(loss) income
per share:
Basic $ (0.32) $ 0.33 $ 0.79 $ 1.44
Diluted $ (0.32) $ 0.33 $ 0.79 $ 1.43
Non-GAAP net
income (1) $ 269 $ 8,425 $ 24,916 $ 36,304
Non-GAAP net
income per
share:
Basic $ 0.01 $ 0.33 $ 1.09 $ 1.44
Diluted $ 0.01 $ 0.33 $ 1.08 $ 1.43
(1) Please refer to the financial statements portion of this press
release for an explanation of the non-GAAP financial measures
contained in the press release and the table above and a
reconciliation of such measures to the comparable GAAP financial
measures.
Len Mogil, Interim Chief Executive Officer, said "In the fourth quarter, net sales increased, and revenue, SG&A expenses, and comparable store sales were within our anticipated range. However, an increased level of markdowns was necessary to clear through our back-to-school merchandise, which drove earnings per share below our expectations. Importantly, we controlled costs and have taken immediate steps to implement a more disciplined approach to inventory management, ending the quarter with comp store inventories down 10%.
"Our decisive and aggressive actions in the fourth quarter allowed us to enter the holiday season with appropriate inventory levels and better position the Company for improved growth and profitability over the long-term."
Update on Strategic Development Process
Throughout the fourth quarter, the Company's Board of Directors continued its comprehensive review of operations and began to apply measures designed to strengthen the Charlotte Russe brand, bring new operating discipline to the organization and create an elevated platform for growth.
In order to transform the Company into a top-tier specialty retailer, the Board began developing a strategic plan focused on the following initiatives:
-- Brand Positioning: Further identifying Charlotte's customer
lifestyle and shopping preferences to better meet her needs
and increase her spend; and redefining Charlotte's brand image
and visibility.
-- Merchandise Assortment: Redefining product selection with
greater emphasis on trend-right fashion and value for
sophisticated shoppers.
-- Inventory Optimization: Improving productivity throughout the
buying and planning and allocation process and resetting
receipt flow and markdown cadence.
-- Real Estate Strategy: Determining optimal store size,
locations, layout/design and allocation of resources across
the fleet to enhance profitability across all stores.
-- Capital Utilization: Instilling a more disciplined and
return-oriented approach to capital allocation, and
establishing tools, metrics and procedures to improve
visibility.
Jennifer Salopek, Chairman of Charlotte Russe, said, "We are very encouraged by the findings of this comprehensive review. We have identified meaningful opportunities to improve our competitive advantage and to enhance our performance. We are confident that our new executive leadership team will continue to execute these strategic initiatives and successfully drive increased returns to our shareholders."
Outlook
Based on the current operating environment and recent sales trends, the Company expects comparable store sales for the first quarter of fiscal 2009 to be in the negative mid to high-single digit range. Earnings per diluted share are expected to be between $0.10 and $0.18, exclusive of transition costs. This compares to a comparable store sales increase of 1.5% and diluted earnings per share of $0.55 in the first quarter of fiscal 2008. Additionally, the Company expects to open approximately 20-25 new stores in fiscal 2009.
Conference Call Information
A conference call to discuss 2008 fourth quarter and full year results is scheduled for November 12, 2008, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). To access the call, please dial (888) 841-5034 approximately ten minutes prior to the start of the call. The conference call will also be webcast live and archived at www.charlotterusse.com. A telephone replay of this call will be available until November 19, 2008, and can be accessed by dialing (800) 642-1687 and entering code 32616645.
About Charlotte Russe
Charlotte Russe Holding, Inc. is a mall-based specialty retailer of fashionable, value-priced apparel and accessories targeting young women in their teens and twenties. As of September 27, 2008, the Company operated 487 stores in 45 states and Puerto Rico. For more information about the Company, please visit http://www.charlotterusse.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: Except for the historical information contained herein, this press release contains forward-looking statements. Such statements include, but are not limited to, projections of our future results of operations or of our financial condition, our anticipated management and growth strategies (including our new strategic plan) and new store openings. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or from any results expressed or implied by such forward- looking statements. These risks and uncertainties include, but are not limited to, the risks that the Company will not achieve anticipated financial results or comparable store sales increases, the Company will not be able to execute its new strategic plan as intended, the Company will not open new Charlotte Russe stores or remodel existing stores in the numbers or on the schedule anticipated, general and regional economic conditions, industry trends, consumer demands and preferences, competition from other retailers and uncertainties generally associated with women's apparel and accessory retailing. A complete description of these factors, as well as others that could affect the Company's business, is set forth in the Company's annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission.
CHARLOTTE RUSSE HOLDING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in 000's, except per share data)
(unaudited)
Fourth Quarter Ended Fiscal Year Ended
--------------------------- ---------------------------
September 27, September 29, September 27, September 29,
2008 2007 2008 2007
------------- ------------- ------------- -------------
Net sales $ 206,725 $ 190,329 $ 823,252 $ 740,939
Cost of goods
sold 163,025 139,538 614,334 536,715
------------- ------------- ------------- -------------
Gross profit 43,700 50,791 208,918 204,224
Selling,
general
&
administrative
expenses 53,700 38,026 181,953 149,920
------------- ------------- ------------- -------------
Operating
(loss) income (10,000) 12,765 26,965 54,304
Interest
income, net 292 1,139 2,604 4,868
------------- ------------- ------------- -------------
(Loss) income
before income
taxes (9,708) 13,904 29,569 59,172
Income tax
(benefit)
expense (3,063) 5,479 11,403 22,868
------------- ------------- ------------- -------------
Net (loss)
income $ (6,645) $ 8,425 $ 18,166 $ 36,304
============= ============= ============= =============
(Loss) income
per basic
share $ (0.32) $ 0.33 $ 0.79 $ 1.44
============= ============= ============= =============
(Loss) income
per diluted
share $ (0.32) $ 0.33 $ 0.79 $ 1.43
============= ============= ============= =============
Basic weighted
average shares
outstanding 20,871 25,282 22,920 25,244
Diluted
weighted
average shares
outstanding 20,871 25,409 23,065 25,471
============= ============= ============= =============
CHARLOTTE RUSSE HOLDING, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(amounts in 000's, except per share data)
Fourth Quarter Ended
-----------------------------------------------------
September 27, 2008 September 29, 2007
---------------------------------- ------------------
Adjusted
As Reported Adjustments (non-GAAP) As Reported
(GAAP) (1) (2) (1) (2) (GAAP)
----------- ----------- ---------- ------------------
Net sales $206,725 $ - $206,725 $ 190,329
Cost of goods
sold 163,025 48 163,073 139,538
----------- ----------- ---------- ------------------
Gross profit 43,700 (48) 43,652 50,791
Selling, general
&
administrative
expenses 53,700 (10,193) 43,507 38,026
----------- ----------- ---------- ------------------
Operating (loss)
income (10,000) 10,145 145 12,765
Interest income,
net 292 - 292 1,139
----------- ----------- ---------- ------------------
(Loss) income
before income
taxes (9,708) 10,145 437 13,904
Income tax
(benefit)
expense (3,063) 3,231 168 5,479
----------- ----------- ---------- ------------------
Net (loss)
income $ (6,645) $ 6,914 $ 269 $ 8,425
=========== =========== ========== ==================
(Loss) income
per basic share $ (0.32) $ 0.01 $ 0.33
=========== ========== ==================
(Loss) income
per diluted
share $ (0.32) $ 0.01 $ 0.33
=========== ========== ==================
Basic weighted
average shares
outstanding 20,871 20,871 25,282
Diluted weighted
average shares
outstanding 20,871 20,961 25,409
=========== ========== ==================
(1) Adjustments include a non-cash charge for impairment of $6.1
million and cash and non-cash charges of $4.1 million associated with
severance payments to our former CEO, recruitment fees for the
replacement of three executive officers who resigned in the fourth
quarter and certain other transition costs directly associated with
these events. An adjustment has also been reflected for the related
tax impact.
(2) This earnings release contains non-GAAP financial measures.
Pursuant to the requirements of Regulation G, the Company has
provided reconciliations of the non-GAAP financial measures to the
most directly comparable GAAP financial measures. The Company
believes presenting its 2008 results excluding impairment and
transition costs, which is on a non-GAAP basis, provides useful
additional information to investors. The Company believes that the
exclusion of such amounts facilitates the comparability of the
Company's results from period to period and provides a basis for
comparing current results against future results by eliminating
amounts that it believes are not comparable between periods. The
Company will use its results excluding these amounts to evaluate its
operating performance and to discuss its business with investment
institutions, the Company's Board of Directors and others. These non-
GAAP measures should be considered in addition to, not as a
substitute for, measures of financial performance prepared in
accordance with GAAP.
CHARLOTTE RUSSE HOLDING, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(amounts in 000's, except per share data)
Fiscal Year Ended
-----------------------------------------------------
September 27, 2008 September 29, 2007
---------------------------------- ------------------
Adjusted
As Reported Adjustments (non-GAAP) As Reported
(GAAP) (1) (2) (1) (2) (GAAP)
----------- ----------- ---------- ------------------
Net sales $ 823,252 $ - $823,252 $ 740,939
Cost of goods
sold 614,334 48 614,382 536,715
----------- ----------- ---------- ------------------
Gross profit 208,918 (48) 208,870 204,224
Selling, general
&
administrative
expenses 181,953 (11,032) 170,921 149,920
----------- ----------- ---------- ------------------
Operating income 26,965 10,984 37,949 54,304
Interest income,
net 2,604 - 2,604 4,868
----------- ----------- ---------- ------------------
Income before
income taxes 29,569 10,984 40,553 59,172
Income tax
expense 11,403 4,234 15,637 22,868
----------- ----------- ---------- ------------------
Net income $ 18,166 $ 6,750 $ 24,916 $ 36,304
=========== =========== ========== ==================
Earnings per
basic share $ 0.79 $ 1.09 $ 1.44
=========== ========== ==================
Earnings per
diluted share $ 0.79 $ 1.08 $ 1.43
=========== ========== ==================
Basic weighted
average shares
outstanding 22,920 22,920 25,244
Diluted weighted
average shares
outstanding 23,065 23,065 25,471
=========== ========== ==================
(1) Adjustments include a non-cash charge for impairment of $6.9
million and cash and non-cash charges of $4.1 million associated with
severance payments to our former CEO, recruitment fees for the
replacement of three executive officers who resigned in the fourth
quarter and certain other transition costs directly associated with
these events. An adjustment has also been reflected for the related
tax impact.
(2) This earnings release contains non-GAAP financial measures.
Pursuant to the requirements of Regulation G, the Company has
provided reconciliations of the non-GAAP financial measures to the
most directly comparable GAAP financial measures. The Company
believes presenting its 2008 results excluding impairment and
transition costs, which is on a non-GAAP basis, provides useful
additional information to investors. The Company believes that the
exclusion of such amounts facilitates the comparability of the
Company's results from period to period and provides a basis for
comparing current results against future results by eliminating
amounts that it believes are not comparable between periods. The
Company will use its results excluding these amounts to evaluate its
operating performance and to discuss its business with investment
institutions, the Company's Board of Directors and others. These non-
GAAP measures should be considered in addition to, not as a
substitute for, measures of financial performance prepared in
accordance with GAAP.
CHARLOTTE RUSSE HOLDING, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(amounts in 000's)
(unaudited)
September September
27, 29,
2008 2007
--------- ---------
ASSETS
--------------------------------------------------
Cash and cash equivalents $ 45,462 $ 68,212
Inventories 62,986 59,409
Prepaid rent expense - 10,789
Other current assets 14,648 14,299
Deferred tax assets 7,479 5,770
--------- ---------
Total current assets 130,575 158,479
Fixed assets, net 224,346 217,598
Goodwill 28,790 28,790
Other assets 1,006 1,126
Deferred taxes 3,958 1,120
--------- ---------
Total assets $ 388,675 $ 407,113
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------
Accounts payable, trade $ 39,754 $ 30,581
Accounts payable, other 14,974 8,096
Accrued payroll and related expense 8,049 6,208
Sales taxes payable 2,655 2,455
Other current liabilities 9,289 6,708
--------- ---------
Total current liabilities 74,721 54,048
Deferred rent 118,605 106,007
Other liabilities 2,099 -
--------- ---------
Total liabilities 195,425 160,055
Total stockholders' equity 193,250 247,058
--------- ---------
Total liabilities and stockholders' equity $ 388,675 $ 407,113
========= =========
Source: Charlotte Russe Holding, Inc.
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