Christopher & Banks has reported a fourth-quarter loss of $0.13 a share $0.14 better than the consensus estimate.
There was no earnings quality since the company generated a loss. The beat was driven by better-than-expected sales (+2.7% versus the tear-sheet average), coupled with a higher-than-expected gross margin (+137 basis points versus tear sheet expectation) and lower-than-expected SG&A expenses (-672 bps versus expectations).
Revenues fell 1.9% year over year. Fourth-quarter same-store sales decreased 4%. CBK did have comparable store sales gains during the last two months of the year, however.
Gross profit for the quarter increased 66.7% and, as a percentage of sales, gross margin increased to 31.9% from 18.8% in the fourth quarter of 2009.
Management expects a mid to high single-digit increase in comparable-store sales in the first quarter 2011. Gross margin is expected to improve by a couple of hundred basis points and SG&A, as a percent of sales, is expected to be flat to slightly lower.
Sales & Comps:
Total sales were $101.9 million in the fourth quarter of fiscal 2010 compared to $103.9 million in the fourth quarter of fiscal 2009.
Comparable store sales declined 4% in the quarter. Bad weather hurt December sales. However, CBK had comp store gains in both January and February. The company also had continued improvement in conversion and average transaction value in the quarter. Management attributed the gain to improved merchandise assortment and excellent customer service.
For the full fiscal year, total sales declined to$455.4 million compared to $530.7 million in the prior year. Comparable store sales declined 15% last year.
Store Openings & Closing:
Store openings in fiscal 2010 by format:
1 Christopher & Banks store
3 CJ Banks stores
1 dual concept store
Store closings last year by format:
9 Christopher & Banks stores
5 CJ Banks stores
As of February 27, 2010, the company operates:
540 Christopher & Banks stores
265 CJ Banks stores
1 dual concept store.
This year CBK plans to open approximately 10 new stores and close 25 existing stores.
Margin Discussion:
Cost of merchandise buying and occupancy expense were $69.3 million or 68.1% of net sales in the fourth quarter of fiscal 2010, compared to $84.4 million or 81.2% of net sales in the fourth quarter of fiscal 2009. The increase in gross profit margin in the fourth quarter primarily resulted from a nearly 11 percentage point increase in merchandise margins due to smaller markdowns from a much cleaner inventory position Positive leverage in occupancy and freight expense also contributed to the increase in gross profit margin.
For the fourth quarter, SG&A expense totaled $32.8 million, or 32.2% of net sales compared to $43.3 million, or 41.7% of net sales in the fourth quarter of fiscal 2009. SG&A expense for the fourth quarter of fiscal 2009 included one-time charges related to severance costs associated with its field reorganization and workforce reduction at the corporate office, and software and implementation related costs. Excluding these charges in the fourth quarter of 2010, CBK realized savings of $8 million due to lower store payroll and other store operating expenses. Lower medical costs, marketing spend, travel, and IT related expenses also helped.
Balance Sheet:
The company ended the year with $113 million in cash, cash equivalents and investments, and no long-term debt.
Total inventory was $38.5 million last year, versus $38.8 million in the previous year.
Excluding the e-Commerce, inventory per store at the end of fiscal 2010 was down approximately 3% from fiscal 2009.
$6 million of capital expenditures last year were funded from cash on hand.
Outlook:
Same-store sales to increase in the mid- to high-single digit range in the first quarter.
In the second half of this year, CBK believes that year-over-year comparisons will be more challenging.
In the first quarter, total gross margin is expected to improve by a couple of hundred basis points due to reduced markdowns and better leveraging of buying and occupancy expenses.
Management believes that the cost controls implemented last year will leave little room for further SG&A expense reductions this year. As a result, they expect SG&A expense as a percent of sales in the first quarter to be roughly the same, or slightly lower, than in the first quarter of last fiscal year and they do not anticipate achieving additional year-over-year SG&A reductions in the remainder of this fiscal year.
Approximately $4 million of SG&A expense reductions in last fiscal year, resulted from one-time, savings related to legal settlements and insurance proceeds that will not be repeated in this fiscal year.
Depreciation and amortization is expected to be about the same in the first quarter of this year as is in the first quarter of last year.
The estimated effective tax rate is in the low 40% range.
Per store inventory, which excludes e-Commerce, is expected to be up mid to high single digits on a percentage basis at the end of the first quarter as compared to the end of the first quarter of last year.
Capital Expenditures are expected to be $12 million to $14 million for the full fiscal year.
CBK plans to be cash flow positive this fiscal year.
No earnings guidance was given.
Friday, April 16, 2010
Tuesday, April 13, 2010
Talbot's Fourth Quarter Conference Call Notes
Talbot’s has reported fourth-quarter earnings of $0.13 a share, excluding $0.01 in restructuring charges and $0.15 in merger costs, The consensus stands at $0.02.
Earnings quality was ok. An unexpected tax benefit added about $0.04 to results. Meanwhile, the gross margin was 44 basis points better than the tear-sheet average and SG&A expenses came in 106 basis points lower as a percentage of sales than the tear-sheet average.
Revenues fell 3.7% year over year. Comparable-store sales declined 7.2% in the quarter, with January comps up high single digits.
Cost of sales, as a percent of net sales improved 2,070 basis points compared to last year. This improvement was due primarily to a substantial increase in pure merchandise margin of 1,900 basis points, resulting from strong IMU, improved full-price selling and a decrease in buying and occupancy costs of 170 basis points.
SG&A expense as a percent of sales decreased 1,180 basis points, reflecting a $42.4 million or 30% decline in SG&A expenses over the prior year.
For the first quarter, the company anticipates a top line sales increase in the range of 4% to 5% compared to the prior year period. Adjusted operating income, excluding restructuring, impairment and merger costs, is anticipated to be in the range of approximately 4.5% to 6% of sales.
For the full year, the company anticipates a top-line sales increase in the range of approximately 3% to 5% compared to the prior year period. Adjusted operating income, excluding restructuring, impairment and merger costs, is anticipated to be in the range of 5% to 6% of sales.
Sales & Comps:
Total sales in the fourth quarter were $316 million compared to $328 million last year. Source sales were $261 million compared to $279 million last year. Markdown selling declined 21% in the quarter and full priced sales increased 10%. Direct marketing sales in the fourth quarter, which include catalog and internet, were up 11% to $55 million compared to $49 million last year. The gain in the direct channel was due to store associates continuing to aggressively promote direct marketing sales, a stronger mix of full priced merchandise, and better fulfillment.
Transactions were down in the quarter. But, dollars per transaction increased 13%, reflecting strong full-priced selling. Customer traffic was also down in the fourth quarter but remained stable from the third quarter.
Comp store sales were -7.2% in the fourth quarter. However, comps have shown sequential improvements over the last four quarters.
Margins:
Fourth quarter cost of sales buying and occupancy improved to 64.7% of net sales, versus 85.4% last year. The more than 2000 basis point improvement was primarily due to a 1900 basis point increase in merchandise margins, driven by improved IMU and strong full price selling, and a 170 basis point improvement in buying and occupancy.
SG&A expenses in the fourth quarter were $98 million at 31.1% of sales versus $141 million at 42.9% of sales last year. The 1180 basis point improvement came from an ongoing expense reduction program. In early 2009, TLB established a goal of reducing annualized expenses by $150 million by the end of fiscal 2010. By the end of fiscal 2009, TLB reduced expenses by $120 million in SG&A and $27 million in buying and occupancy.
Balance Sheet:
TLB ended the fourth quarter with total accounts receivable of $164 million versus $169 million last year.
Total inventory at quarter end was $143 million, down 31% from $207 million last year.
Total debt outstanding was $486 million, compared to $477 million in the same period last year. TLB has paid off its debt to AEON.
Capital expenditures were $21 million last year, compared to $45 million in the prior year.
Cash flow from operating activities was $81 million last year.
Outlook:
For the full year:
Sales growth of 3% to 5% compared to last year.
Operating profit, excluding non-recurring items, of 5% to 6% of sales.
Capital expenditures of about $40 million.
For the First Quarter:
Sales growth of 4% to 5% compared to last year's first quarter.
Operating income, excluding non-operating items, of 4.5% to 6% of sales.
Early read on the first quarter:
Comps are currently trending positive, with positive comps in each of the last three months. March was the strongest, up 10% over last year.
Earnings quality was ok. An unexpected tax benefit added about $0.04 to results. Meanwhile, the gross margin was 44 basis points better than the tear-sheet average and SG&A expenses came in 106 basis points lower as a percentage of sales than the tear-sheet average.
Revenues fell 3.7% year over year. Comparable-store sales declined 7.2% in the quarter, with January comps up high single digits.
Cost of sales, as a percent of net sales improved 2,070 basis points compared to last year. This improvement was due primarily to a substantial increase in pure merchandise margin of 1,900 basis points, resulting from strong IMU, improved full-price selling and a decrease in buying and occupancy costs of 170 basis points.
SG&A expense as a percent of sales decreased 1,180 basis points, reflecting a $42.4 million or 30% decline in SG&A expenses over the prior year.
For the first quarter, the company anticipates a top line sales increase in the range of 4% to 5% compared to the prior year period. Adjusted operating income, excluding restructuring, impairment and merger costs, is anticipated to be in the range of approximately 4.5% to 6% of sales.
For the full year, the company anticipates a top-line sales increase in the range of approximately 3% to 5% compared to the prior year period. Adjusted operating income, excluding restructuring, impairment and merger costs, is anticipated to be in the range of 5% to 6% of sales.
Sales & Comps:
Total sales in the fourth quarter were $316 million compared to $328 million last year. Source sales were $261 million compared to $279 million last year. Markdown selling declined 21% in the quarter and full priced sales increased 10%. Direct marketing sales in the fourth quarter, which include catalog and internet, were up 11% to $55 million compared to $49 million last year. The gain in the direct channel was due to store associates continuing to aggressively promote direct marketing sales, a stronger mix of full priced merchandise, and better fulfillment.
Transactions were down in the quarter. But, dollars per transaction increased 13%, reflecting strong full-priced selling. Customer traffic was also down in the fourth quarter but remained stable from the third quarter.
Comp store sales were -7.2% in the fourth quarter. However, comps have shown sequential improvements over the last four quarters.
Margins:
Fourth quarter cost of sales buying and occupancy improved to 64.7% of net sales, versus 85.4% last year. The more than 2000 basis point improvement was primarily due to a 1900 basis point increase in merchandise margins, driven by improved IMU and strong full price selling, and a 170 basis point improvement in buying and occupancy.
SG&A expenses in the fourth quarter were $98 million at 31.1% of sales versus $141 million at 42.9% of sales last year. The 1180 basis point improvement came from an ongoing expense reduction program. In early 2009, TLB established a goal of reducing annualized expenses by $150 million by the end of fiscal 2010. By the end of fiscal 2009, TLB reduced expenses by $120 million in SG&A and $27 million in buying and occupancy.
Balance Sheet:
TLB ended the fourth quarter with total accounts receivable of $164 million versus $169 million last year.
Total inventory at quarter end was $143 million, down 31% from $207 million last year.
Total debt outstanding was $486 million, compared to $477 million in the same period last year. TLB has paid off its debt to AEON.
Capital expenditures were $21 million last year, compared to $45 million in the prior year.
Cash flow from operating activities was $81 million last year.
Outlook:
For the full year:
Sales growth of 3% to 5% compared to last year.
Operating profit, excluding non-recurring items, of 5% to 6% of sales.
Capital expenditures of about $40 million.
For the First Quarter:
Sales growth of 4% to 5% compared to last year's first quarter.
Operating income, excluding non-operating items, of 4.5% to 6% of sales.
Early read on the first quarter:
Comps are currently trending positive, with positive comps in each of the last three months. March was the strongest, up 10% over last year.
Thursday, April 1, 2010
Dollar General Fourth Quarter Conference Call Notes
Dollar General (DG) has reported fourth-quarter earnings of $0.51 a share, excluding non-recurring items, $0.08 better than the consensus estimate.
Earnings quality was solid. Although a lower-than-expected tax rate added $0.02 a share versus the tear-sheet average, the brunt of the beat was driven by a higher-than-expected gross margin, which accounted for the remainder of the beat.
Revenues rose 11.9% year over year. Same-store sales increased 7.4% versus 9.4% last year. Customer traffic and average transaction amount both contributed to the same-store sales increase. Sales were strongest in the consumables and seasonal categories.
The gross margin increased by 275 basis points on a year over year basis to 32.2% of sales from 29.4% of sales in the 2008 period. SG&A expenses were down 40 basis points year over year.
For the full year, the company is guiding earnings to a range of $1.55 – $1.63. The consensus stands at $1.57.
Notes From The Call:
Sales and Comps:
Sales increased 12.8% to a record $11.8 billion in fiscal 2009. Same-store sales rose 9.5%, on top of a 9% gain in 2008. Every region had positive comps.
Total net sales increased across all four merchandise categories led by 14% growth in both consumables and seasonal. DG saw good sell-through of holiday seasonal merchandise, and they are encouraged by the progress in their apparel area.
Margin Discussion:
Gross margin for the quarter was 32.2%, an increase of 275 basis points from the prior year quarter. Margins benefited mostly from private label product growth, better product sourcing, and lower shrinkage.
In 2010 they expect expansion of their private label products to help improve the gross margin further. In 2009, private label penetration was more than 21% of their consumables sales, with about 1300 SKUs. The private brand initiatives will be supported by a new comprehensive in-store marketing campaign.
Another opportunity for gross margin expansion will come from direct sourcing of merchandise. During 2009, they realigned and overhauled the organizational responsibilities of the Hong Kong office and expanded into India. Going forward, they are developing new sourcing alternatives such as improved sourcing for apparel products.
In 2010, shrinkage should decrease due to the relocation of high shrink items, additional closed-circuit TV, scan-based trading, and automated exception-based reporting.
Balance Sheet:
Total debt declined by $734 million last year, to $3.4 billion. The company used excess cash and the proceeds from the IPO to retire debt. The ratio of long-term obligations, net of cash to adjusted EBITDA, decreased from 4.1 at year-end 2008 to 2.5 at year-end 2009.
At year-end total merchandise inventories at costs were $1.52 billion compared to $1.41 billion in '08. That is an increase of 7.4% or 1.7% on a per store basis. Increases in the consumables and seasonal inventories were partially offset by decreases in apparel and home product inventories. Annual inventory turns improved to 5.3 times in 2009 compared to 5.2 times in 2008.
Cash flow from operating activities was $669 million, up 16% from the $575 million generated in 2008.
Store Openings:
In 2009, DG opened 500 new stores and remodeled or relocated an additional 450. In 2010, the plan is to open stores in their new customer-centric format, which has an improved layout. They plan to open 600 new customer-centric stores while also remodeling or relocating an additional 500 stores to fit the new model. The new store format improves the store’s appearance and creates a better shopping environment based on extensive customer insights from focus groups and from proprietary market basket data. By the end of fiscal 2010, they plan to have 1500 stores in the new format.
Fiscal 2010 Guidance:
• Total sales growth of 8%-10%.
• Same-store sales growth of 4%-6%.
• Adjusted operating profit growth of 15%-20%.
• Tax rate of 38%-39%.
• Earnings excluding non-recurring items to increase at an annual rate of 18% - 24% to $1.55 - $1.63 a share. The consensus stands at $1.57.
• Capital expenditures of $325 million to $350 million.
Earnings quality was solid. Although a lower-than-expected tax rate added $0.02 a share versus the tear-sheet average, the brunt of the beat was driven by a higher-than-expected gross margin, which accounted for the remainder of the beat.
Revenues rose 11.9% year over year. Same-store sales increased 7.4% versus 9.4% last year. Customer traffic and average transaction amount both contributed to the same-store sales increase. Sales were strongest in the consumables and seasonal categories.
The gross margin increased by 275 basis points on a year over year basis to 32.2% of sales from 29.4% of sales in the 2008 period. SG&A expenses were down 40 basis points year over year.
For the full year, the company is guiding earnings to a range of $1.55 – $1.63. The consensus stands at $1.57.
Notes From The Call:
Sales and Comps:
Sales increased 12.8% to a record $11.8 billion in fiscal 2009. Same-store sales rose 9.5%, on top of a 9% gain in 2008. Every region had positive comps.
Total net sales increased across all four merchandise categories led by 14% growth in both consumables and seasonal. DG saw good sell-through of holiday seasonal merchandise, and they are encouraged by the progress in their apparel area.
Margin Discussion:
Gross margin for the quarter was 32.2%, an increase of 275 basis points from the prior year quarter. Margins benefited mostly from private label product growth, better product sourcing, and lower shrinkage.
In 2010 they expect expansion of their private label products to help improve the gross margin further. In 2009, private label penetration was more than 21% of their consumables sales, with about 1300 SKUs. The private brand initiatives will be supported by a new comprehensive in-store marketing campaign.
Another opportunity for gross margin expansion will come from direct sourcing of merchandise. During 2009, they realigned and overhauled the organizational responsibilities of the Hong Kong office and expanded into India. Going forward, they are developing new sourcing alternatives such as improved sourcing for apparel products.
In 2010, shrinkage should decrease due to the relocation of high shrink items, additional closed-circuit TV, scan-based trading, and automated exception-based reporting.
Balance Sheet:
Total debt declined by $734 million last year, to $3.4 billion. The company used excess cash and the proceeds from the IPO to retire debt. The ratio of long-term obligations, net of cash to adjusted EBITDA, decreased from 4.1 at year-end 2008 to 2.5 at year-end 2009.
At year-end total merchandise inventories at costs were $1.52 billion compared to $1.41 billion in '08. That is an increase of 7.4% or 1.7% on a per store basis. Increases in the consumables and seasonal inventories were partially offset by decreases in apparel and home product inventories. Annual inventory turns improved to 5.3 times in 2009 compared to 5.2 times in 2008.
Cash flow from operating activities was $669 million, up 16% from the $575 million generated in 2008.
Store Openings:
In 2009, DG opened 500 new stores and remodeled or relocated an additional 450. In 2010, the plan is to open stores in their new customer-centric format, which has an improved layout. They plan to open 600 new customer-centric stores while also remodeling or relocating an additional 500 stores to fit the new model. The new store format improves the store’s appearance and creates a better shopping environment based on extensive customer insights from focus groups and from proprietary market basket data. By the end of fiscal 2010, they plan to have 1500 stores in the new format.
Fiscal 2010 Guidance:
• Total sales growth of 8%-10%.
• Same-store sales growth of 4%-6%.
• Adjusted operating profit growth of 15%-20%.
• Tax rate of 38%-39%.
• Earnings excluding non-recurring items to increase at an annual rate of 18% - 24% to $1.55 - $1.63 a share. The consensus stands at $1.57.
• Capital expenditures of $325 million to $350 million.
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