This summary is based on the second quarter fiscal 2008 earnings call conducted by The Gymboree Corp. (GYMB) on August 20, 2008.

Management:

- Vice President, Finance: Jeffrey P. Harris
- Chairman of the Board & Chief Executive Officer: Matthew K. McCauley
- President: Kip M. Garcia
- Chief Financial Officer, Chief Operating Officer and Director: Blair W. Lambert

Key Investors Issues

- Net sales were $205.7 million versus $182.4 million for the prior year, up 13%.
- Net income increased 38% to $8 million or 27 cents a share versus $5.8 million or 19 cents a share in 2007.
- The firm opened 26 new stores consisting of four new Gymboree and eight new Gymboree Outlet stores.

Second Quarter Highlights

Total net sales were $205.7 million versus $182.4 million for the prior year an increase of 13% as comparable store sales increased 1%.

- Net sales were $202.8 million a 13% increase over the $179.9 million in net sales from retail operations reported in 2007.
- Other revenue attributable to the Play and Music operations was $2.9 million compared to $2.5 million in the prior year.
- There was an increase in the total number of transactions and decreases in the average unit retail and units per transaction.
- The total number of stores open was 835 including 577 Gymboree stores in the US, 29 Gymboree stores in Canada, 104 Gymboree Outlet stores, 101 Janie and Jack shops and 24 Crazy 8 stores.

The firm opened 26 new stores consisting of four new Gymboree and eight new Gymboree Outlet stores.

- It also opened six Janie and Jack shops and eight new Crazy 8 stores.
- Total square footage under management was 1,623,000 square feet with an average store size at rough 1,945 square feet.
- Gross profit increased 170 basis points to 45.7% compared to 44% for the same quarter of the prior year.
- The improvement was the result of the company’s continuing product cost reduction strategies and leveraging of buying costs partially offset by increased occupancy costs and lower average unit retails.
- While average unit retails were down over the prior year, markdown management efforts allowed it to generate higher AURs than were anticipated increasing the gross margin rate.

SG&A as a percentage of sales was 39.4% of sales versus 39.3% in 2007 driven by higher stock-based and incentive compensation offset by reductions in professional fees, communications, marketing and travel costs.

- Operating income jumped 52% to $12.9 million versus $8.5 million in the second quarter of the prior year.
- Net income increased 38% to $8 million or 27 cents a share versus $5.8 million or 19 cents a share in the prior year on revenue growth.
- Cash, cash equivalents and investments were roughly $44 million with no short or long term borrowings outstanding.
- Inventories increased to $129.1 million versus $115.7 million in 2007 as on a per square foot basis inventories decreased 2%.
- Capital expenditures were $15.9 million and depreciation expense was $8.6 million.

Merchandising Activities:

- At the department level, Boy posted the strongest comp followed by Newborn with top performing classes being polos, fashion woven shorts and active tops or hoodies.
- Fashion shorts for Boy were planned as a key trend for the season and plaid, print and patchwork shorts consistently were the top performers across all lines.
- The firm launched the new Boys Will Be Boys marketing strategy which included a [Magdalon] press kit featuring the authentic styling, details, fabrics and treatments that we’re offering for Boys.

Newborn has also been identified as a key opportunity for increased market share.

- It was thrilled that the monkey concept product was featured in Minnie Driver’s baby shower which had great media coverage.
- At the category level for the quarter shorts and tanks were strong summer drivers across all of our Boy and Girl departments.
- Sales for this category were driven by our successful [Cat Fields] event which featured $6 and $8 price points during the highly competitive May and June selling season.
- The firm also featured [Tread Rite] most wanted fashion plaid and novelty shorts at higher price points during the summer season across all departments and those categories were strong performers as well.

Early back-to-school sales in July were primarily driven by back-to-school essentials.

- It expanded the assortment of uniforms and backpacks this year and both strategies performed above plan and posted solid comps.
- However, the early back-to-school fashion lines for Girls were slow to start and traditional Apple themed collection was disappointing.
- In Janie and Jack, for Girl the strongest performing line was the On Safari collection which featured bold, brown giraffe skin prints, hand crocheted details, orange pop colors and giraffe icons.
- For Boys customers loved the Ocean Blue collection which featured shark icons, white on white pass works, blue linens and mixed blue hued madras plaid shorts.

The Special Occasion collection which features elevated top of the line dressy dresses and accessories for Girls and suits, dress shirts and ties for Boys continues to perform over plan.

- April and May have been the strongest selling months supporting the strategy to capture the demand for dressy alternatives for Boys, Girls and Newborns to wear to graduations and weddings.
- Accessories has been underdeveloped in Outlet due to minimum purchase requirements. - The strongest line was Summer Rodeo which featured fashion plaid shorts and western graphic tees plus opening price point tanks and shorts at $6.99.
- In Crazy 8, the firm continued to be pleased with the Boy, Baby Boy and Baby Girl department performance.
- It has adjusted the styling for Girl going forward and have right sized Girl active wear based upon sales trends and productivity.