Dress Barn, Inc. (NASDAQ - DBRN) today reported sales and
earnings results for its fiscal second quarter ended January 23,
2010.
Fiscal Second Quarter
Results
Net sales for the fiscal second quarter ended January 23, 2010
increased 73% to $594.1 million compared to $343.2 million for the
fiscal second quarter ended January 24, 2009. The increase is
primarily due to the inclusion of Justice sales since the
merger on November 25, 2009 to the close of the fiscal quarter.
Comparable store sales for the quarter increased 10%.
By division, net sales for dressbarn increased 7% to
$209.3 million compared to $196.5 million for the second quarter of
fiscal 2009, primarily due to a comparable store sales increase of
6% for the quarter. Net sales for maurices increased 12% to
$163.7 million compared to $146.7 million for the second quarter of
fiscal 2009. The increase was due to a comparable store sales
increase of 5% and a 7% increase in average square footage versus
the prior year. Net sales for Justice were $221.1 million
since the merger on November 25, 2009. During this period,
comparable store sales increased 19%.
Net earnings for the fiscal second quarter increased to $21.7
million, or $0.28 per diluted share compared to the recast GAAP net
loss of $1.8 million, or $0.03 loss per diluted share for the
second quarter of fiscal 2009. Interest expense for both periods
includes non-cash, imputed interest from the adoption of ASC 470-20
as further described below.
Net earnings on a non-GAAP basis increased to $28.1 million, or
$0.37 per diluted share compared to a net loss for the second
quarter of 2009 of $1.8 million, or $0.03 loss per share. During
the quarter, the Company incurred certain items that management
believes are not indicative of ongoing operations totaling $10.5
million in pretax charges. These charges include the accounting
loss on the extinguishment of debt and merger related costs. The
Company believes it is valuable for users of the Company’s
financial statements to be made aware of the non-GAAP financial
information; as such measures are used by management to evaluate
the operating performance of the Company on a comparable basis.
Accordingly, a GAAP to non-GAAP reconciliation of these items is
provided later in this release.
SG&A expenses for the fiscal second quarter were $171.7
million, or 28.9% of sales compared to $103.0 million, or 30.0% of
sales in the prior year’s comparable period. SG&A expenses on a
non-GAAP basis were $167.0 million, or 28.1% of sales compared to
$103.0 million, or 30.0% of sales in the prior year’s comparable
period. The decrease of 190 basis points as a percent of sales was
primarily due to leverage from the increased comparable store
sales.
Operating income for the fiscal second quarter was $43.1
million, or 7.3% of sales compared to a $2.4 million loss, or
(0.7%) of sales in the prior year second quarter. On a non-GAAP
basis operating income increased to $47.8 million, or 8.1% of sales
compared to a $2.4 million loss, or (0.7%) of sales in the prior
year second quarter. This increase is primarily due to improved
gross profit and leverage from increased comparable store
sales.
Fiscal Six Month
Results
Net sales for the fiscal six months ended January 23, 2010
increased 39% to $998.2 million from $719.6 million for the fiscal
six months ended January 24, 2009. Comparable store sales for the
fiscal six months increased 8%.
By division, net sales for dressbarn increased 6% to
$457.3 million compared to $429.4 million for the first six months
of fiscal 2009, driven primarily by a comparable store sales
increase of 5% for the fiscal six months. Net sales for
maurices increased 10% to $319.8 million compared to $290.2
million for the first six months of fiscal 2009. The increase was
driven by a comparable store sales increase of 4% and a 7% increase
in average square footage. Net sales for Justice were $221.1
million since the merger on November 25, 2009. During this period,
comparable store sales increased 19%.
Net earnings for the fiscal six months increased to $43.4
million, or $0.61 per diluted share compared to recast GAAP net
earnings of $17.9 million, or $0.29 per diluted share for the first
six months of fiscal 2009. Interest expense in both periods
includes non-cash, imputed interest recorded in accordance with our
adoption of Accounting Standards Codification (ASC) 470-20.
Net earnings on a non-GAAP basis increased to $53.1 million, or
$0.74 per diluted share compared to net earnings for the first six
months of 2009 of $16.9 million, or $0.27 per diluted share. During
this six month period, the Company incurred items that management
believes are not indicative of ongoing operations in the amount of
$15.0 million of pretax charges versus a pretax benefit of $1.6
million last year. A GAAP to non-GAAP reconciliation of these items
is provided later in this release.
SG&A expenses for the fiscal six months were $285.5 million,
or 28.6% of sales compared to $205.7 million, or 28.6% of sales in
the prior year six month period. SG&A expenses on a non-GAAP
basis were $276.2 million, or 27.7% of sales compared to $207.3
million, or 28.8% of sales in the prior year six month period. The
decrease of 110 basis points as a percent of sales was primarily
due to leverage from the increased comparable store sales.
Operating income for the fiscal six months was $80.9 million, or
8.1% of sales compared to $29.9 million, or 4.2% of sales in the
prior year fiscal six month period. On a non-GAAP basis operating
income increased to $90.1 million, or 9.0% of sales compared to
$28.2 million, or 3.9% of sales in the prior year six month period.
This increase is primarily due to improved gross profit and
leverage from increased comparable store sales.
Commentary
David R. Jaffe, President and Chief Executive Officer commented,
“Our combination of fashion, attractive pricing, and strong
customer service is a winning formula that is providing great value
to our customers. We are very pleased with the performance of each
of our three concepts. Our sales trends are strong, our inventory
and margins are at good levels, and we are seeing improving
unit-level productivity.”
Mr. Jaffe continued, “We are very pleased to have maintained a
very strong balance sheet after our recent merger with Justice. We
believe that, over time, the adoption of best-practices across our
organization will yield material benefits for each concept we
operate. Our strong cash position, low debt levels, and excellent
cash generation ability position us well to drive value to
shareholders through a range of potential methods and strategies.
We are very excited to be emerging from the difficult market of the
past few years as one of the industry’s largest and most
diversified specialty retailers with powerful opportunities for
continued growth.”
Impact of Adoption of ASC
470-20
At the beginning of the fiscal year, the Company adopted ASC
470-20 (formerly FASB Staff Position APB No.14-1), Debt with
Conversion and Other Options. The adoption impacts the accounting
treatment of our 2.5% Convertible Senior Notes. As required, prior
period results are recast to conform with this pronouncement. This
increased non-cash, imputed interest expense by $1.3 million and
$1.3 million for the fiscal second quarter of 2010 and 2009,
respectively and by $2.6 million and $2.5 million for the fiscal
six month periods of 2010 and 2009, respectively. Effective as of
January 22, 2010, all of the 2.5% Convertible Senior Notes were
redeemed and, therefore, the Company will no longer incur interest
expense related to the Notes.
Reconciliation of GAAP to
Non-GAAP Earnings and Diluted EPS
Earnings and diluted earnings per share are shown below from a
GAAP to non-GAAP basis for both the thirteen weeks and twenty six
weeks ended January 23, 2010 and January 24, 2009. The following
items are excluded from GAAP: 1) loss on debt extinguishment, 2)
merger related costs, 3) partial impairment of our Studio Y trade
name and 4) charges (benefits) related to our deferred compensation
plan that result from stock market appreciation that impacts the
liability for this plan, and are shown below as non-GAAP measures.
Because management believes these items may not be indicative of
normal operating items, management believes these non-GAAP measures
are useful to investors as an alternative for measuring the
Company’s operating performance and comparing it against the prior
year fiscal second quarter and six month periods.
Thirteen weeks ended January 23, 2010
January 24, 2009
(in millions, except per
shareamounts)
Earningsbeforeincometaxes
Incometaxes
Netearnings
Dilutedearningsper share
Earningsbeforeincometaxes
Incometaxes
Netearnings
Dilutedearningsper share
Reported GAAP Basis $ 35.6 $ 13.9 $ 21.7 $ 0.28 $ (3.0 ) $ (1.2 ) $
(1.8 ) $ (0.03 ) Adjustments to expenses: Loss on debt
extinguishment 5.8 2.1 3.7 0.05 -- -- -- -- Merger related costs
4.2 1.8 2.4 0.03 -- -- -- -- Charges related to deferred
compensation plan 0.5 0.2 0.3 0.01
-- -- -- --
Non-GAAP basis $ 46.1 $ 18.0 $ 28.1 $ 0.37 $ (3.0 ) $
(1.2 ) $ (1.8 ) $ (0.03 )
Twenty-six
weeks ended January 23, 2010 January 24, 2009
(in millions, except per
shareamounts)
Earningsbeforeincometaxes
Incometaxes
Netearnings
Dilutedearningsper share
Earningsbeforeincometaxes
Incometaxes
Netearnings
Dilutedearningsper share
Reported GAAP Basis $ 72.1 $ 28.7 $ 43.4 $ 0.61 $ 29.3 $ 11.4 $
17.9 $ 0.29 Adjustments to expenses: Loss on debt extinguishment
5.8 2.1 3.7 0.05 -- -- -- -- Merger related costs 5.8 1.9 3.9 0.05
-- -- -- -- Impairment of trade name 2.0 0.8 1.2 0.02 -- -- -- --
Charges (benefits) related to deferred compensation Plan 1.5
0.6 0.9 0.01 (1.6 ) (0.6
) (1.0 ) (0.02 ) Non-GAAP basis $ 87.2 $ 34.1
$ 53.1 $ 0.74 $ 27.7 $ 10.8 $ 16.9
$ 0.27
Reconciliation of GAAP to
Non-GAAP Selling, general and administrative
expenses:
Selling, general and administrative expenses are shown below
from a GAAP to non-GAAP basis. The following items are excluded
from GAAP: 1) merger related costs, 2) partial impairment of our
Studio Y trade name and 3) charges (benefits) related to our
deferred compensation plan that result from stock market
appreciation that impacts the liability for this plan, and are
shown below as non-GAAP measures. Because management believes these
items may not be indicative of normal operating items, management
believes these non-GAAP measures are useful to investors as an
alternative for measuring the Company’s operating performance and
comparing it against the prior year fiscal second quarter and six
month periods.
Selling, general and
administrative expenses:
(in millions) Thirteen weeks ended
Twenty-six weeks ended
January23, 2010
January24, 2009
January23, 2010
January24, 2009
Reported GAAP Basis $ 171.7 $ 103.0 $ 285.5 $ 205.7 Adjustments to
SG&A expenses: Merger related costs 4.2 -- 5.8 -- Impairment of
trade name -- -- 2.0 -- Charges (benefits) related to deferred
compensation plan 0.5 -- 1.5 (1.6 )
Non-GAAP basis $ 167.0 $ 103.0 $ 276.2 $ 207.3
Increases Fiscal July 2010
Earnings Guidance
Given the Company’s better than expected second quarter results
and the favorable impact to earnings from the pay-off of our
Convertible Senior Notes, the Company is increasing its guidance
for earnings per diluted share for the fiscal year ending July,
2010 to a range of $1.55 to $1.60. This guidance includes an impact
of approximately $0.05 to earnings per diluted share as a result of
a 53rd week of operations in fiscal 2010. This estimate is also
based upon various assumptions for the year including a mid single
digit increase in comparable store sales.
Conference Call
Information
The Company will conduct a conference call today, March 1, 2010
at 4:30 PM Eastern Time to review its second quarter results
followed by a question and answer session. Parties interested in
participating in this call should dial in at (857) 350-1669 prior
to the start time, the passcode is 53458742. The call will also be
simultaneously broadcast at www.dressbarn.com. A recording of the
call will be available shortly after its conclusion and until April
1, 2010 by dialing (617) 801-6888, the passcode is 62963247.
ABOUT DRESS BARN,
INC.
Dress Barn, Inc. (NASDAQ - DBRN), is a leading national
specialty apparel retailer offering quality casual and career
women’s fashion apparel at value prices through its
dressbarn and maurices brands and tween girls’
fashion apparel through its Justice brand. As of January 23,
2010, the Company operated 837 dressbarn stores in 47
states, 739 maurices stores in 44 states and 899
Justice stores in 45 states and Puerto Rico. For more
information, please visit www.dressbarn.com, www.maurices.com and
www.shopjustice.com.
Forward-Looking
Statements
Certain statements made within this press release may constitute
“forward-looking statements”, within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially. The Company does
not undertake to publicly update or review its forward-looking
statements even if experience or future changes make it clear that
our projected results expressed or implied will not be achieved.
Detailed information concerning a number of factors that could
cause actual results to differ materially from the information
contained herein is available in our most recent report on Form
10-K for the year ended July 25, 2009 and Form 10-Q for the quarter
ended October 24, 2009.
Dress Barn, Inc. and Subsidiaries
Condensed Consolidated
Statements of Earnings- Unaudited Amounts in thousands, except
per share amounts
Thirteen Weeks Ended
January 23, January 24,
2010 *
2009
Net sales $ 594,120 100.0 % $ 343,201 100.0 % Cost of sales,
including occupancy and buying costs 361,617 60.9 %
230,516 67.2 % Gross Profit 232,503 39.1 % 112,685
32.8 % Selling, general and administrative expenses 171,704 28.9 %
102,987 30.0 % Depreciation and amortization 17,697
3.0 % 12,111 3.5 % Operating income (loss) 43,102 7.3
% (2,413 ) -0.7 % Loss on debt extinguishment (5,792 ) -1.0
% - - Interest income 560 0.1 % 1,422 0.4 % Interest expense (2,696
) -0.5 % (2,457 ) -0.7 % Other income 443 0.1 %
452 0.1 % Earnings (loss) before income taxes 35,617
6.0 % (2,996 ) -0.9 % Income tax provision (benefit) 13,929
2.3 % (1,160 ) -0.3 %
Net earnings (loss)
$ 21,688 3.7 %
($1,836 ) -0.5 % Earnings
(loss) per share: Basic $ 0.32
($0.03 ) Diluted $ 0.28
($0.03 ) Weighted average
shares outstanding: Basic 68,735
59,880
Diluted 76,379 59,880
* The Condensed Consolidated Statements of Earnings include the
results of Justice since the merger on November 25, 2009 to
the end of the fiscal quarter. The following are the Justice
results included above and are being provided for more meaningful
comparison purposes:
Thirteen
WeeksEndedJanuary 23, 2010
Net sales $ 221,105 100.0 % Cost of sales, including occupancy and
buying costs 125,777 56.9 % Gross Profit 95,328 43.1 %
Selling, general and administrative expenses 52,923 23.9 %
Depreciation and amortization 5,514 2.5 % Operating income $
36,891 16.7 % Dress Barn, Inc. and Subsidiaries
Condensed
Consolidated Statements of Earnings- Unaudited Amounts in
thousands, except per share amounts
Twenty-Six
Weeks Ended January 23,
January 24, 2010 * 2009
Net sales $ 998,209 100.0 % $ 719,599 100.0 % Cost of
sales, including occupancy and buying costs 601,909
60.3 % 459,714 63.9 % Gross Profit 396,300 39.7 %
259,885 36.1 % Selling, general and administrative expenses 285,475
28.6 % 205,675 28.6 % Depreciation and amortization 29,908
3.0 % 24,315 3.4 % Operating income 80,917 8.1
% 29,895 4.2 % Loss on debt extinguishment (5,792 ) -0.6 % -
- Interest income 1,275 0.1 % 3,424 0.5 % Interest expense (5,256 )
-0.5 % (4,937 ) -0.7 % Other income 989 0.1 %
905 0.1 % Earnings before income taxes 72,134 7.2 % 29,287
4.1 % Income taxes 28,774 2.9 % 11,397
1.6 %
Net earnings $ 43,360 4.3
% 17,890 2.5 %
Earnings per share: Basic $ 0.67
$ 0.30 Diluted $ 0.61
$ 0.29 Weighted average
shares outstanding: Basic 64,636
60,117
Diluted 71,593 62,430
* The Condensed Consolidated Statements of Earnings include the
results of Justice since the merger on November 25, 2009 to
the end of the fiscal quarter. The following are the Justice
results included above and are being provided for more meaningful
comparison purposes:
Twenty-SixWeeks
EndedJanuary 23, 2010
Net sales $ 221,105 100.0 % Cost of sales, including
occupancy and buying costs 125,777 56.9 % Gross Profit
95,328 43.1 % Selling, general and administrative expenses 52,923
23.9 % Depreciation and amortization 5,514 2.5 % Operating
income $ 36,891 16.7 %
Dress Barn, Inc. and Subsidiaries
Condensed Consolidated Balance
Sheets- Unaudited Amounts in thousands
January 23,
January 24, ASSETS 2010 *
2009
Current Assets: Cash and cash equivalents $ 252,280 $
164,548 Investment securities 125,299 96,230 Merchandise
inventories 242,458 159,199 Deferred income tax assets 20,450 9,030
Prepaid expenses and other current assets 46,908
28,014
Total Current Assets 687,395 457,021
Property and Equipment 784,143 540,873 Less accumulated
depreciation and amortization 301,968 270,650
Property and Equipment, net 482,175 270,223
Intangible Assets, net 186,318 107,340
Goodwill
226,897 130,656
Investment Securities 26,697 42,033
Other
Assets 28,904 16,957
TOTAL ASSETS $
1,638,386 $ 1,024,230
LIABILITIES AND SHAREHOLDERS'
EQUITY Current Liabilities: Accounts payable – trade $
126,293 $ 102,784 Payable – debt extinguishment 117,000 - Accrued
salaries, wages and related expenses 57,190 28,136 Other accrued
expenses 73,615 43,119 Customer liabilities 36,258 18,564 Current
portion of long-term debt 1,383 1,312
Total
Current Liabilities 411,739 193,915
Long-Term Debt 25,351 125,594
Lease Related
Liabilities 182,862 63,977
Deferred Compensation and Other
Long Term Liabilities 60,173 42,177
Deferred Income Tax
Liabilities 11,475 20,457
Total
Liabilities 691,600 446,120
Shareholders'
Equity 946,786 578,110
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY $ 1,638,386 $ 1,024,230
* The Condensed Consolidated Balance Sheets above include the
Justice balances as of January 23, 2010 for the following
selected line items and are being provided for more meaningful
comparison purposes: Merchandise inventories - $86,786, Property
and Equipment - $215,240, Intangible Assets, net - $83,716,
Goodwill - $96,241, Accounts payable – trade - $20,669 and Lease
Related Liabilities - $114,709.
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