This summary is based on the second quarter fiscal 2009 earnings call conducted by Christopher & Banks Corporation (CBK) on September 25, 2008.
Management:
Integrated Corporate Relations: Jean Fontana
President & CEO: Lorna Nagler
Exec. VP & CFO: Andrew Moller
Sr. VP of Planning & Allocation and e-Commerce: Monica Dahl
Key Investors Issues
- EPS was 2 cents per share compared to 9 cents per share last year.
- Net income was $0.8 million compared to $3.4 million a year ago.
- Total sales were $131.6 million compared to $141.1 million last year.
Second Quarter Highlights
The company delivered earnings per share of 2 cents and these earnings are after 2 cents per share charge associated with the closing of the Acorn division.
- Comparable store sales hampered by a continuation of weak traffic trends declined 13%.
- Despite the disappointing same store sales comparison the company saw an improvement in average transaction value and merchandise margins as customer continues to give approval on new products.
- Customer buying patterns did not change much from the first quarter meaning that when customers do buy, they continue to spend more then in the recent past. The company was pleased with petites business which was expanded to 300 stores this month.
- Reaction continues to be favorable. E-Commerce site continues to perform well continuing to track above planned.
- The result of the Hot Sun initiative has been positive particularly at Christopher & Banks. The company opened six new stores and closed two. This brings total store count as of August 30 to 854 stores compared with 807 as of September 1 last year.
- The company ended the quarter in a much cleaner inventory position with inventory per store down approximately 6% versus a year ago.
Total sales declined 7% to $131.6 million.
- Same store sales were down 13% from last year. In terms of regional performance approximately half comparable stores are located in the eight states that touch the Great Lakes and Iowa.
- Same store sales for this group of stores were down approximately 11%. Comparable store sales for the stores located in all other states were down approximately 14%. The company had a decline of approximately 19% in the number of transactions per average store.
- This was offset by an increase of approximately 6% in the average transaction value.
- Merchandise, buying and occupancy costs were $81.5 million or 61.9% of sales this year.
- The company gained 230 basis points of improvement over last year.
- Merchandise margins improved by 480 basis points due to lower mark-downs. This gain was offset by deleveraging of buying and occupancy expenses due to the 13% decline in comparable store sales.
- SG&A was $41.4 million, up approximately 2% from last year. As a reminder in last year’s second quarter the company had a one-time $2.1 million CEO transition charge. Expenses where it saw the greatest increase over last year included marketing where it planned for an increase, e-Commerce which is a new business this year, and medical claims.
- The 2% increase in SG&A was not as large as the high single-digit increase the company expected at the beginning of the quarter. The company worked to control expenses across categories. The biggest area of savings from previous projection was in the areas of store salaries, travel, and IT related costs.
- Depreciation was $8 million compared to $5.5 million last year. This year’s depreciation included approximately $1.2 million related to long-life asset impairment at Acorn division.
- Operating income was $0.8 million or six-tenths of 1% of sales. This compares to $4.4 million or 3.1% of sales last year. Net income was $0.8 million compared to $3.4 million for the same period last year.
- The company had approximately $84 million in cash as of August 30. In addition it had $18.5 million of long-term investments consisting of auction rate securities and are in a strong cash position.
- Total inventory was $51.5 million this year compared to $50.2 million last year. Excluding inventory for e-Commerce, inventory per store at the end of the second quarter was down approximately 6% from last year.
- The aging of inventory was more than 2% of inventory was more then 120 days old.
Year-to-Date Financial Highlights
- Total sales were $291.3 million compared to $290.5 million for the same six month period ended September 1, 2007.
- Same-store sales declined six percent.
- Net income was $12.1 million or 34 cents per share compared to $15.1 million or 42 cents per share for the first six months of last year.
- The company operated 854 stores as of August 30, 2008 as compared to 807 stores at September 1, 2007.
Third Quarter 2008 Outlook
- Assuming the percentage decline in same-store sales will be similar to the decline that occurred during the second quarter, the company currently estimates that operating earnings per share, prior to the operating results and closing costs associated with the Acorn division, will range from 10 cents to 13 cents. As previously announced, the company anticipates pre-tax expenses associated with the closing of its Acorn division to range in total from $7 million to $10 million, with the charges being incurred in the second, third and fourth quarters of fiscal 2009.
- During the second quarter, the company incurred $1.2 million of long-lived asset impairment charges associated with the closing of the Acorn division. The company’s outlook for the third quarter of fiscal 2009 reflects management’s expectation that the current economic and retail environment will remain difficult.
- For all of fiscal 2009 excluding Acorn of course, the company anticipates opening 29 new stores and closing approximately 12 stores for a net increase of 17 stores or 2%.
- The company forecasts approximately $5 million to $7 million in additional capital expenditures for the remainder of the year.
Key questions from the second quarter earnings call conducted by Christopher & Banks Corporation on September 25, 2008.
