The Children’s Place Reports Third Quarter 2019 Results
Reports Q3 GAAP Earnings per Diluted Share of
Reports Q3 Adjusted Earnings per Diluted Share of
Updates Full Year 2019 Adjusted Earnings per Diluted Share Guidance to
Ms. Elfers continued, “Quarter-to-date, our digital penetration continues to increase and our AURs are strengthening as we focus on disciplined inventory management in a promotional environment. However, due to meaningfully weaker than planned mall traffic quarter-to-date, we are lowering our outlook for Q4.”
Ms. Elfers concluded, “With respect to
Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.
Third Quarter 2019 Results
Net sales increased 0.4% to
Net income was
Gross profit was
Selling, general, and administrative expenses were
Operating income was
For the three months ended
Fiscal Year-To-Date 2019 Results
Net sales decreased 3.5% to
Net income was
Gross profit was
Selling, general, and administrative expenses were
Operating income was
For the nine months ended
Store Openings and Closures
Consistent with the Company’s store fleet optimization initiative, the Company opened six stores and closed 12 stores in the three months ended
The Company’s international franchise partners opened 34 net new points of distribution in the three months ended
Capital Return Program
During the three months ended
During the first nine months of fiscal 2019, the Company repurchased approximately 1.0 million shares for approximately
Since 2009, the Company has repurchased approximately
Outlook
The Company is providing guidance for the fourth quarter and updated guidance for fiscal 2019.
For the fourth quarter of 2019, the Company expects:
- Net sales in the range of
$504 million to $509 million - A mid-single digit decrease in comparable retail sales
- Adjusted operating margin in the range of 6.1% to 6.8%
- Adjusted net income per diluted share in the range of
$1.48 to $1.68
For fiscal 2019, the Company’s updated outlook includes:
- Net sales in the range of
$1.862 billion to $1.867 billion - A comparable retail sales decrease of approximately 3%
- Adjusted operating margin in the range of 5.7% to 5.9%
- Adjusted net income per diluted share in the range of
$5.00 to $5.20 , including an adverse impact of approximately$0.13 per share from the announced tariffs effective onSeptember 1st andDecember 15th
Conference Call Information
The Children’s Place will host a conference call on
Financial Results
The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. Adjusted net income, adjusted net income per diluted share, adjusted gross profit, adjusted selling, general, and administrative expense, adjusted operating income, and adjusted operating margin are non-GAAP measures, and are not intended to replace GAAP financial information and may be different from non-GAAP measures reported by other companies. The Company believes the income and expense items excluded as non-GAAP adjustments are not reflective of the performance of its core business and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business. The Company uses non-GAAP results as one of the metrics to measure operating performance, including, to measure performance for purposes of the Company’s annual bonus and long-term incentive compensation plans.
About The Children’s Place
The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of
Forward Looking Statements
This press release contains or may contain forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company's filings with the
Contact:
(Tables Follow)
THE CHILDREN’S PLACE, INC. | ||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||
(In thousands, except per share amounts) |
||||||||||||||||
(Unaudited) | ||||||||||||||||
Third Quarter Ended | Year-To-Date Ended | |||||||||||||||
November 2, |
November 3, |
November 2, |
November 3, |
|||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 524,796 | $ | 522,495 | $ | 1,357,647 | $ | 1,407,526 | ||||||||
Cost of sales | 326,671 | 318,129 | 868,701 | 888,125 | ||||||||||||
Gross profit | 198,125 | 204,366 | 488,946 | 519,401 | ||||||||||||
Selling, general and administrative expenses | 120,514 | 123,207 | 364,937 | 365,933 | ||||||||||||
Asset impairment charges | 839 | 396 | 1,308 | 5,632 | ||||||||||||
Other costs (income) | - | (1,246 | ) | - | (1,255 | ) | ||||||||||
Depreciation and amortization | 18,821 | 17,404 | 55,877 | 51,405 | ||||||||||||
Operating income | 57,951 | 64,605 | 66,824 | 97,686 | ||||||||||||
Interest expense | (2,155 | ) | (831 | ) | (6,144 | ) | (2,074 | ) | ||||||||
Income before taxes | 55,796 | 63,774 | 60,680 | 95,612 | ||||||||||||
Provision (benefit) for income taxes | 12,748 | 13,861 | 11,620 | 6,675 | ||||||||||||
Net income | $ | 43,048 | $ | 49,913 | $ | 49,060 | $ | 88,937 | ||||||||
Earnings per common share | ||||||||||||||||
Basic | $ | 2.78 | $ | 3.04 | $ | 3.12 | $ | 5.33 | ||||||||
Diluted | $ | 2.77 | $ | 3.03 | $ | 3.10 | $ | 5.24 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 15,497 | 16,394 | 15,720 | 16,677 | ||||||||||||
Diluted | 15,546 | 16,496 | 15,837 | 16,982 | ||||||||||||
THE CHILDREN’S PLACE, INC. | |||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP |
|||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||
(Unaudited) | |||||||||||||||||
Third Quarter Ended | Year-To-Date Ended | ||||||||||||||||
November 2, | November 3, | November 2, | November 3, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Net income | $ | 43,048 | $ | 49,913 | $ | 49,060 | $ | 88,937 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||
Accelerated depreciation | 777 | 546 | 2,667 | 546 | |||||||||||||
Asset impairment charges | 839 | 396 | 1,308 | 5,632 | |||||||||||||
Organizational design costs | - | 934 | - | 1,649 | |||||||||||||
Restructuring costs | 1,435 | 241 | 2,118 | 2,498 | |||||||||||||
System transition costs | - | - | - | 250 | |||||||||||||
Distribution facility start-up costs | 721 | - | 721 | - | |||||||||||||
Distribution network review costs | - | 228 | - | 378 | |||||||||||||
Sales tax audit | - | (518 | ) | - | (518 | ) | |||||||||||
Gymboree integration costs | 494 | - | 1,068 | - | |||||||||||||
Other income | - | (1,097 | ) | - | (1,097 | ) | |||||||||||
Insurance claim settlement, net | - | 200 | - | (406 | ) | ||||||||||||
Fleet optimization costs | 1,221 | - | 1,193 | - | |||||||||||||
Aggregate impact of Non-GAAP adjustments | 5,487 | 930 | 9,075 | 8,932 | |||||||||||||
Income tax effect (1) | (1,454 | ) | (192 | ) | (2,405 | ) | (2,241 | ) | |||||||||
Prior year uncertain tax positions (2) | - | - | 135 | (112 | ) | ||||||||||||
Net impact of Non-GAAP adjustments | 4,033 | 738 | 6,805 | 6,579 | |||||||||||||
Adjusted net income | $ | 47,081 | $ | 50,651 | $ | 55,865 | $ | 95,516 | |||||||||
GAAP net income per common share | $ | 2.77 | $ | 3.03 | $ | 3.10 | $ | 5.24 | |||||||||
Adjusted net income per common share | $ | 3.03 | $ | 3.07 | $ | 3.53 | $ | 5.62 | |||||||||
(1) The tax effects of the non-GAAP items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides. | |||||||||||||||||
(2) Prior year tax related to uncertain tax positions. | |||||||||||||||||
Third Quarter Ended | Year-To-Date Ended | ||||||||||||||||
November 2, | November 3, | November 2, | November 3, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||
Operating income | $ | 57,951 | $ | 64,605 | $ | 66,824 | $ | 97,686 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||
Accelerated depreciation | 777 | 546 | 2,667 | 546 | |||||||||||||
Asset impairment charges | 839 | 396 | 1,308 | 5,632 | |||||||||||||
Organizational design costs | - | 934 | - | 1,649 | |||||||||||||
Restructuring costs | 1,435 | 241 | 2,118 | 2,498 | |||||||||||||
System transition costs | - | - | - | 250 | |||||||||||||
Distribution facility start-up costs | 721 | - | 721 | - | |||||||||||||
Distribution network review costs | - | 228 | - | 378 | |||||||||||||
Sales tax audit | - | (518 | ) | - | (518 | ) | |||||||||||
Gymboree integration costs | 494 | - | 1,068 | - | |||||||||||||
Other income | - | (1,097 | ) | - | (1,097 | ) | |||||||||||
Insurance claim settlement, net | - | 200 | - | (406 | ) | ||||||||||||
Fleet optimization costs | 1,221 | - | 1,193 | - | |||||||||||||
Aggregate impact of Non-GAAP adjustments | 5,487 | 930 | 9,075 | 8,932 | |||||||||||||
Adjusted operating income | $ | 63,438 | $ | 65,535 | $ | 75,899 | $ | 106,618 | |||||||||
THE CHILDREN’S PLACE, INC. | ||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP |
||||||||||||||||
(In thousands, except per share amounts) |
||||||||||||||||
(Unaudited) | ||||||||||||||||
Third Quarter Ended | Year-To-Date Ended | |||||||||||||||
November 2, | November 3, | November 2, | November 3, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Gross Profit | $ | 198,125 | $ | 204,366 | $ | 488,946 | $ | 519,401 | ||||||||
Non-GAAP adjustments: | ||||||||||||||||
Fleet optimization costs | - | - | (550 | ) | - | |||||||||||
Restructuring costs | - | - | - | 1,239 | ||||||||||||
Aggregate impact of Non-GAAP adjustments | - | - | (550 | ) | 1,239 | |||||||||||
Adjusted Gross Profit | $ | 198,125 | $ | 204,366 | $ | 488,396 | $ | 520,640 | ||||||||
Third Quarter Ended | Year-To-Date Ended | |||||||||||||||
November 2, | November 3, | November 2, | November 3, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Selling, general and administrative expenses | $ | 120,514 | $ | 123,207 | $ | 364,937 | $ | 365,933 | ||||||||
Non-GAAP adjustments: | ||||||||||||||||
Restructuring costs | (1,435 | ) | (1,236 | ) | (2,126 | ) | (2,263 | ) | ||||||||
Organizational design costs | - | (1,185 | ) | - | (1,900 | ) | ||||||||||
System transition costs | - | - | - | (250 | ) | |||||||||||
Distribution facility start-up costs | (721 | ) | - | (721 | ) | - | ||||||||||
Distribution network review costs | - | (228 | ) | - | (378 | ) | ||||||||||
Fleet optimization costs | (1,221 | ) | - | (1,735 | ) | - | ||||||||||
Gymboree integration costs | (494 | ) | - | (1,068 | ) | - | ||||||||||
Sales tax audit | - | 518 | - | 518 | ||||||||||||
Other income | - | 1,097 | - | 1,097 | ||||||||||||
Insurance claim settlement, net | - | (200 | ) | - | 406 | |||||||||||
Aggregate impact of Non-GAAP adjustments | (3,871 | ) | (1,234 | ) | (5,650 | ) | (2,770 | ) | ||||||||
Adjusted Selling, general and administrative expenses | $ | 116,643 | $ | 121,973 | $ | 359,287 | $ | 363,163 | ||||||||
THE CHILDREN’S PLACE, INC. | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
November 2, | February 2, | November 3, | |||||||
2019 | 2019* | 2018 | |||||||
Assets: | |||||||||
Cash and cash equivalents | $ | 66,059 | $ | 69,136 | $ | 92,950 | |||
Accounts receivable | 39,471 | 35,123 | 40,111 | ||||||
Inventories | 389,815 | 303,466 | 376,858 | ||||||
Other current assets | 20,722 | 27,670 | 37,467 | ||||||
Total current assets | 516,067 | 435,395 | 547,386 | ||||||
Property and equipment, net | 246,234 | 260,357 | 262,380 | ||||||
Right-of-use assets | 418,151 | - | - | ||||||
Tradenames, net | 73,386 | - | - | ||||||
Other assets, net | 31,884 | 31,294 | 27,487 | ||||||
Total assets | $ | 1,285,722 | $ | 727,046 | $ | 837,253 | |||
Liabilities and Stockholders' Equity: | |||||||||
Revolving loan | $ | 184,179 | $ | 48,861 | $ | 65,000 | |||
Accounts payable | 235,491 | 194,786 | 223,607 | ||||||
Current lease liabilities | 124,281 | - | - | ||||||
Accrued expenses and other current liabilities | 116,647 | 87,752 | 123,181 | ||||||
Total current liabilities | 660,598 | 331,399 | 411,788 | ||||||
Long-term lease liabilities | 331,615 | - | - | ||||||
Other liabilities | 39,070 | 81,210 | 82,007 | ||||||
Total liabilities | 1,031,283 | 412,609 | 493,795 | ||||||
Stockholders' equity | 254,439 | 314,437 | 343,458 | ||||||
Total liabilities and stockholders' equity | $ | 1,285,722 | $ | 727,046 | $ | 837,253 | |||
* Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K | |||||||||
for the fiscal year ended February 2, 2019. |
THE CHILDREN’S PLACE, INC. | ||||||||||
CONDENSED CONSOLIDATED CASH FLOWS | ||||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
39 Weeks Ended | 39 Weeks Ended | |||||||||
November 2, | November 3, | |||||||||
2019 | 2018 | |||||||||
Net income | $ | 49,060 | $ | 88,937 | ||||||
Non-cash adjustments | 184,043 | 78,117 | ||||||||
Working Capital | (132,537 | ) | (83,576 | ) | ||||||
Net cash provided by operating activities | 100,566 | 83,478 | ||||||||
Net cash used in investing activities | (119,125 | ) | (41,121 | ) | ||||||
Net cash provided by (used in) financing activities | 15,075 | (194,471 | ) | |||||||
Effect of exchange rate changes on cash | 407 | 545 | ||||||||
Net decrease in cash and cash equivalents | (3,077 | ) | (151,569 | ) | ||||||
Cash and cash equivalents, beginning of period | 69,136 | 244,519 | ||||||||
Cash and cash equivalents, end of period | $ | 66,059 | $ | 92,950 | ||||||
Source: The Children's Place, Inc.