This is a summary of the fourth quarter fiscal 2008 earnings call as presented by The Gymboree Corporation (GYMB) on March 4, 2009.
Management
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President: Kip Garcia
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Chairman and CEO: Matt McCauley
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COO and CFO: Blair Lambert
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Vice President of Finance: Jeff Harris
Key Investors Issues:
- Net income was $93.5 million or $3.21 per diluted share.
- Earnings per share grew 20% to $3.21 per share from $2.67 in the prior year.
- Gymboree Corporation opened 105 new stores during the fiscal year.
Full Year Highlights
- Total net sales increased to just over $1 billion, up 9% versus the prior year.
- Comparable store sales were flat to the prior year.
- Net income grew 16% to $93.5 million, while
- Gross capital expenditures were $56.2 million.
Fourth Quarter Highlights
Gymboree was down 2% in comp sales and up 4% in total sales, a significant accomplishment in the current retail environment.
- They were down more than expected due in part to charges incurred by complying with new product regulations.
- The firm was able to generate income of $1 per.
In August, Congress passed a new safety law called the CPSIA that limits the amount of lead that can be contained in any component of children''s clothing.
- In order to comply with the new laws, the firm launched an aggressive effort to test all styles in its 800 plus stores and remove any styles that did not meet the new limits.
- On February the 5th, the CPSC announced new legal requirements and that certain products could not be sold after February 10, 2009, regardless of the production date.
- This change rendered effectively 1.7 million of Gymboree''s product obsolete.
Inventory levels are below plan due to the write-off of noncompliant product, which is reducing sales.
- The loss of some styles negatively impacts the sale of their matching counterparts. The firm is also experiencing some delivery delays for products that were changed in the pipeline.
- Sell-through of reworked product lines has not been as strong as typically experienced due to missing fashion components.
- The firm has flexed the length of certain events rather than automatically taking deeper markdowns.
Net sales from retail operations were $284.8 million, a 3% increase over $275.3 million in the same period last year.
- Other revenue attributable to the Play & Music operations was $3.9 million compared to $3.2 million in the prior year.
- In total, net sales were $288.7 million versus $278.4 million for the prior year, an increase of 4%.
- The total number of stores was 886, including 584 Gymboree stores in the US, 29 Gymboree stores in Canada, two Gymboree stores in Puerto Rico, 118 Gymboree Outlet stores, 115 Janie and Jack shops, and 38 Crazy 8 stores.
Gymboree opened a total of 15 new stores and closed two.
- The total square footage under management at the end of the quarter was 1,735,000 square feet with an average store size at roughly 1960 square feet.
- Gross profit rates decreased roughly 510 basis points to 43% compared to 48.2% for the same period 2007.
The reduction was due to a number of items including:
- Lower average unit retail prices.
- The new consumer products safety laws.
- Negative occupancy expense leverage
- A relatively lower gross margin rate associated with the new Crazy 8 brand.
