Christopher & Banks (CBK) Tops Q4 EPS by 1c, Revenues Miss

Christopher & Banks (NYSE: CBK) reported Q4 EPS of ($0.26), $0.01 better than the analyst estimate of ($0.27). Revenue for the quarter came in at $84.3 million versus the consensus estimate of $86.26 million.

Keri Jones, President and Chief Executive Officer, commented, “During the fourth quarter, we made further progress on the strategic initiatives we laid out for fiscal 2018. We delivered positive comparable sales through the holiday season as customers responded favorably to our enhanced product assortment and visual merchandising. Absent the frigid temperatures in January that hampered our momentum and led to a flat comp for the quarter, we believe that comparable sales would have remained up in the low single digits. We saw strong momentum in our eCommerce business as we further advanced our omni-channel capabilities and our merchandise margin also showed significant improvement with expansion of 225 basis points resulting primarily from lower product costs.

“Looking ahead, we will continue to refine our merchandising strategy, execute disciplined and effective marketing programs and leverage our expanding omni-channel capabilities, while we also focus on our cost reduction initiatives. While quarter-to-date sales trends are below expectations, in large part due to lower traffic levels adversely impacted by weather, we believe that our initiatives position us to drive improved year-over-year financial performance in fiscal 2019 and beyond.”

Results for the Fourth Quarter Ended February 2, 2019

• Net sales totaled $84.3 million, a decrease of 8.6%, while operating on average 460 stores. This compares to $92.3 million in net sales for the fourth quarter of fiscal 2017, while operating on average 469 stores. Adjusting for the net sales attributable to the 53rd week in the fourth quarter of last year, on a shifted basis, net sales would have declined 1.6%.
• Comparable sales were flat following a 5.7% increase in the same period last year. eCommerce comparable sales increased 26% following an 11.6% increase in the same period last year.
• Gross margin rate was 27.5%, as compared to 27.2% in last year’s fourth quarter. The increase was driven by higher merchandise margins partially offset by the higher fulfillment expense resulting from the increased sales penetration in the eCommerce channel and the launch of our ship from store initiative. Going forward, we expect to further optimize the ship from store process which should result in lower fulfilment costs due to a lower percentage of split shipments as compared to the fourth quarter.
• Selling, general & administrative expenses (“SG&A”) decreased by 3.1% to $30.5 million. The decrease was primarily due to SG&A associated with the 53rd week last year, partially offset by higher professional fees and medical expenses. As a percent of net sales, SG&A increased approximately 200 basis points to 36.1% due to deleverage.
• A non-cash impairment charge of $1.4 million was recorded related to long-lived assets in connection with underperforming stores.
• Net loss totaled $11.3 million, or ($0.30) per share, compared to a net loss for the prior year’s fourth quarter of $8.8 million, or ($0.23) per share. The fourth quarter of 2017 includes a net loss of approximately $0.3 million, or $(0.01) per share, from the 14th week.
• Excluding impairment costs of $1.4 million related to long-lived assets, adjusted loss per share*, a non-GAAP measure, was ($0.26) per share.
• Adjusted EBITDA**, a non-GAAP measure, was ($7.2) million, compared to ($6.3) million for the same period last year.

Fiscal 2019 Outlook
Quarter-to-date sales have been trending below plan, largely attributable to an overall decline in traffic related to the extremely cold and snowy weather in the Upper Midwest and Great Lakes areas where the majority of our stores are located. In response to the sales trends to-date we have adjusted our marketing and promotional calendar and as the weather improves we expect sales to trend more in line with our expectations for the remainder of the quarter.

Ms. Jones continued, “We are maintaining our overall fiscal 2019 guidance, despite the recent sales pressure, as we believe that the headwinds created largely by weather are mostly behind us and our strategic initiatives will yield improved financial performance as we progress through the year.”

• Net sales to increase 2% to 3% as the result of expanded omni-channel capabilities, enhancements to the overall product assortment, and more impactful marketing promotions to drive customer file growth. Gross margin expansion of 300 to 350 basis points as a result of improved inventory management including supply chain and omni-channel initiatives, greater disciplines around promotions and the continued reduction of occupancy costs.
• SG&A as a percentage of sales to decline 150 to 200 basis points due to ongoing cost reduction initiatives.
• Inventory turns to improve as compared to fiscal 2018.

For earnings history and earnings-related data on Christopher & Banks (CBK) click here.

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