This includes 565 Gymboree stores in the US, 30 Gymboree stores in Canada, 2 Gymboree stores in Puerto Rico, 82 Gymboree Outlet stores, 93 Janie and Jack shops, and 14 Crazy 8 stores. During the quarter, the firm opened a total of 16 new stores consisting of 8 new Gymboree stores, 5 Janie and Jack shops, 2 Gymboree Outlet stores, and 1 Crazy 8 store. Total square footage under management at the end of the quarter was 1,513,000 square feet, with average store size at roughly 1925 square feet.

Performance Analysis of Segments

Gymboree

At Gymboree, the high level of planning and execution of key holiday and gift initiatives definitely moved the needle to a successful quarter.

- The firm elevated its holiday in-store environment this year with three-dimensional trees decorated with festive multi-color lights and surrounded them with decorated gift boxes to create a festive gift-giving experience for customers. The customers were also treated with special red holiday plaid shopping bags and gift boxes which completed the experience.
- The firm’s increased investments in key holiday classification paid off this year exemplified by the success of dresses, outerwear, sleepwear, and polar fleece. The firm ramped up its execution of its tried-and-true holiday events for Q4 and launched new incremental campaigns for the season. Jingle Deals – a campaign that was in its third year double-digit cost over last year as a result of fine-tuning offerings and price points based upon key learnings from the prior year. New this year was stocking stuffer headquarters, which offered accessory gift items packaged in holiday plaid complete with to and from tags. The company gave gift cards more exposure this year by including them in its stocking stuffer headquarters and made them more giftable by printing them in its holiday plaids and added value by offering a special knitted mitten gift cardholder free with purchase. The stocking stuffer collection became a popular easy pick-up gift destination and as a result the program exceeded plan. Next, we maximized Black Friday by offering special door buster items in addition to additional percent off. Finally, the firm had consistently strong product concept and themes throughout the quarter which increased regular priced sales.

The firm is committed to be the destination for shower baby gifts and has targeted 2008 as the year that it maximizes newborn. In support of this initiative, the company raised the curtain on its new comprehensive newborn strategy during February baby event. The management heard from ots customers that it was hard to find essential layette pieces within the ever-changing fast new collection, and to address that void in service, the firm launched a brand new concept, which addresses the customer who wants classic essentials for brand new babies that are available every day in stores. Key to the collection are super-soft knit fabrics, adorable icons, and classic styling for the littlest one. The firm also has provided pre-selected shower gift options for easy gifting at every price point, from opening price point classics to the ultimate collection, perfect for a wild individual gift or the big from the office gift. The company has also created a shower gift destination within its stores and online, offering new adorable packaging, gift wrap, shopping bags, and gift cards. For the customer who wants an even more special gift, the firm is offering a diaper tote to present their gift in complete with organza wrap, ribbon bow, and boy-girl gift toppers.

The firm’s boy initiative in 2007 was successful, and it is continuing on its long-range plan to gain market share in this category. The firm is pleased with the efforts that it has made in styling supported by overwhelming customer comments to offer an even broader assortment. As a result, the firm has expanded its assortments to support more outfitting and layering as well as increasing its offering as key boy classifications, as denim, shorts, polos, and woven shirts. The firm is also continuing to ensure that its product fields are tested by adding masculine details and finishes for woven shirts, polos, rugbys, denim, and woven bottoms.

Janie and Jack

The management was pleased that all departments positive comparisons with Accessories and Boy departments leading the pack. A key initiative for Q4 was to increase the gift offerings across the departments and giftable sweaters were a key classification driver. In addition, dresses were particularly strong and the shoe business continues to grow at Janie and Jack.

The firm is focused on ensuring that Janie and Jack continues to be the destination for best-dressed children by offering timeless styling, heirloom quality and details. In support of this initiative for 2008, this last February, the company launched Special Occasion, which includes top-of-the-line dresses and boy suiting. For the February launch, this product was only offered online and in a very select store group. This very special product resonated with Janie and Jack customers, and based up on the success of this launch, the firm will offer the assortment year around and expand its store count. The firm launched extended sizes to 6 and 8, and it will continue to offer this size range to keep its customer longer.

Crazy 8

The strong performance came from Baby departments where fashion outfits and denim were the key drivers. At the class level, the firm was pleased that graphic jean denim categories performed well across all departments and boy fashion hoodies were also particularly strong. Also, $8 sleepwear door busters successfully drove traffic in sales for the quarter.

The firm learned a lot in 2007 and is consistently tweaking and fine-tuning our assortments based upon its key learnings. The graphic tees imagings across the departments have been a big win. The customers have responded positively to the unique graphic tee art work, themes, sense of humour, as well as fit detailed styling for denim jeans. The firm feels that it has growth potential within these categories and will continue to position itself as the headquarters for jeans and graphic tees. The firm underestimated the potential of its baby departments in 2007 and sees baby as the great opportunity in 2008 by providing unique fashion outfitting as well as key denim and graphic tee presentations styled specifically for that age range. For kids, the firm feels that it is on track targeting an 8-year-old who wants cool fashion and easy outfitting with all-American age-appropriate style and details. At Crazy 8, the firm will continue to offer key categories at opening price points to go head to head with its competition as well as offering competitive priced fashion collection.

Gymboree Outlet

The strongest performance came from Boy and Accessories. Jolly Deals continued to be a customer favorite and the firm is pleased with performance of its Jolly Deals promotions with strong selling coming from polar fleece and sleepwear. Finally, the company maximized Midnight Madness and Black Friday with a successful door buster promotion.

The firm has been pleased with its performance and will continue to offer Gymboree’s styling, outfitting, and fashion details at value prices. To support its value equation for Outlet, the firm has fine-tuned its in-store and window communication packages including window banners and signage in order to ensure that the firm is clearly communicating value on a consistent basis in all of its stores.

First Quarter Guidance

- The firm is planning for first quarter earnings from continued operations to be in the range of 73 cents to 75 cents per diluted share. This first quarter earning adjustments include the loss of roughly 2 cents per diluted share associated with Crazy 8.
- The company expects low single digit comparable store sales increases for the quarter.
- The firm plans to open 25 new stores during the first quarter consisting of 7 new Gymboree stores, 14 new Gymboree Outlets, 2 new Janie and Jack shops, and 2 Crazy 8 stores. The company also plans to re-model, expand, or relocate 6 Gymboree stores.
- In terms of gross margin and SG&A performance for the first quarter, the company continues to anticipate modest improvements versus the prior year.

Fiscal 2008 Outlook

- The firm is planning for diluted per share earnings in the range of $3 to $3.05, on 29 million diluted shares outstanding. These earnings targets include a net loss of 7 to 9 cents per diluted share associated with the firm’s new Crazy 8 concept.
- The firm plans for low single-digit comparable store sales increases for each quarter of fiscal 2008.
- The company plans to open 100 new stores consisting of 20 Gymboree stores, 40 Gymboree Outlets stores, 20 Janie and Jack shops, and 20 Crazy 8 stores.