This summary is based on the fourth quarter fiscal 2007 earnings call conducted by The Dress Barn, Inc. (DBRN) on September 18, 2007.
President and CEO: David Jaffe
CFO: Armand Correia
Chief Merchandising Officer for Dress Barn stores and Maurices stores: Keith Fulsher
Chief Merchandising Officer for Dress Barn stores and Maurices stores: Lisa Rhodes
Key Investors Issues
- EPS were 48 cents a share compared to 35 cents a share last year.
- Net income was $33.6 million compared to $24.4 million last year.
- Sales rose to $379.9 million from $343.3 million a year ago.
Fourth Quarter Highlights
Operating earnings increased 15% and comparable store sales growth of 5%.
On a division level, Dress Barn was 1%, while Maurices was up 13%. While Maurices has continued its strong performance in the first quarter, the company has seen Dress Barn’s consumer pull back more. This is in response to the broader slow-down across the economy, apparel retailers in specific. The more junior oriented stores so far seemed to have been less impacted.
The company was pleased to deliver solid top line growth, outstanding profitability and strong cash flow.
Record performance reflects financial and operating consistency with 14 consecutive quarters of comparable store sales increases.
Total sales increased 11% to $379.9 million, compared to $343.3 million last year, while comparable store sales increased 5% on top of last year’s strong 7% increase.
Comparable store sales were led by Maurices stores 13% increase, with all regions posting comparable store sales increases. This compares to a 3% decrease last year or as Dress Barn stores increased 1% on top of last year’s strong 12% increase.
Net earnings increased 38% to $33.6 million or 48 cents per share, and/or 8.9% of sales.
This performance was on top of last year’s strong $24.4 million or 35 cents per share.
The company recognized within sales $3.7 million of revenues from the non-redemption of a portion of gift cards and gift certificates sold, as well as merchandise credits issued.
This amount represents the past cumulative effect of what is called breakage income. Excluding this $3.7 million breakage income impact on earnings, which the company believes is more appropriate for comparison purposes of operating results, this year’s quarterly earnings would have been $31.4 million or 45 cents per share. The estimated amount of breakage income in the future will be less and is estimated to be in the range of $500,000 annually.
Operating margins as a percent to sales came in at an impressive 13.6% compared to last year’s 11.1%.
By division, Dress Barn stores increased 290 basis points or 14.2% compared to 11.3% last year, while Maurices stores increased 190 basis points to 12.7% compared to 10.8% last year. For comparison purposes, quarterly operating margins would have been 12.8%, an increase of 170 basis points versus the prior year’s 11.1%. By division, Dress Barn’s operating margin would have improved 200 basis points at 13.3% versus last year’s 11.3%, half of the improvement was increases in merchandise margin from increased initial mark up with the remaining improvement a decrease in SG&A.
Maurices stores operating margins would have improved 110 basis points to 11.9% versus last year’s 10.8%. The improvement was in gross profits from leverage on occupancy costs.
Gross profit net of occupancy and buying costs, without the breakage effect increased 80 basis points to 42.6% compared to 41.8% last year.
The increase was primarily due to occupancy cost leverage on the 5% comparable store sales increase. By division Dress Barn stores increased 70 basis points to 42.6% versus last year’s 41.9% and the increase was split between higher merchandise margins and reduced occupancy costs. Overall, markdowns increased from more promotional activity in order to balance inventories, but were more than offset by the higher initial markup. Whereas Maurices stores increased 90 basis points to 42.5% versus last year’s 41.6%. This increase was primarily leverage on occupancy costs.
