Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K JUNE 10, 2011 - CHARMING SHOPPES INC | form8kjune10_2011.htm |
June 10, 2011
Anthony M. Romano
President and
President and
Anthony M. Romano
President and
President and
Chief Executive Officer
Chief Executive Officer
Eric M. Specter
Executive Vice President and
Executive Vice President and
Eric M. Specter
Executive Vice President and
Executive Vice President and
Chief Financial Officer
Chief Financial Officer
2
Forward Looking Statements
The Company’s presentation may contain certain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 concerning the Company's operations, performance, and financial condition. Such forward-
looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from
those indicated. Such risks and uncertainties may include, but are not limited to: the failure to successfully execute our
business plans could result in lower than planned sales and profitability, the failure to realize the benefits from the
operation of our credit card program by our third-party provider, the impact of changes in laws and regulations governing
credit cards could limit the availability of, or increase the cost of, credit to our customers, the failure to enhance the
Company's merchandise and marketing and accurately predict fashion trends, customer preferences and other fashion-
related factors, the failure of growth in the women's plus apparel market, the failure to continue receiving financing at an
affordable cost through the availability of credit we receive from our bankers, suppliers and their agents, the failure to
effectively implement our planned store closing plans, the failure to continue receiving accurate and compliant e-commerce
and third-party processing services, the failure to achieve improvement in the Company's competitive position, the failure
to maintain efficient and uninterrupted order-taking and fulfillment in our e-commerce and direct-to-consumer businesses,
extreme or unseasonable weather conditions, economic downturns, escalation of energy and transportation costs, adverse
changes in the costs or availability of fabrics and raw materials, a weakness in overall consumer demand, the failure to find
suitable store locations, increases in wage rates, the ability to hire and train associates, trade and security restrictions and
political or financial instability in countries where goods are manufactured, the failure of our vendors to deliver quality and
timely shipments in compliance with applicable laws and regulations, the interruption of merchandise flow from the
Company's centralized distribution facilities and third-party distribution providers, inadequate systems capacity, inability to
protect trademarks or other intellectual property, competitive pressures, and the adverse effects of natural disasters, war,
acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and
other risks and uncertainties, are detailed in the Company's filings with the Securities and Exchange Commission, including
the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other Company filings with the Securities
and Exchange Commission. Charming Shoppes assumes no duty to update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
Litigation Reform Act of 1995 concerning the Company's operations, performance, and financial condition. Such forward-
looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from
those indicated. Such risks and uncertainties may include, but are not limited to: the failure to successfully execute our
business plans could result in lower than planned sales and profitability, the failure to realize the benefits from the
operation of our credit card program by our third-party provider, the impact of changes in laws and regulations governing
credit cards could limit the availability of, or increase the cost of, credit to our customers, the failure to enhance the
Company's merchandise and marketing and accurately predict fashion trends, customer preferences and other fashion-
related factors, the failure of growth in the women's plus apparel market, the failure to continue receiving financing at an
affordable cost through the availability of credit we receive from our bankers, suppliers and their agents, the failure to
effectively implement our planned store closing plans, the failure to continue receiving accurate and compliant e-commerce
and third-party processing services, the failure to achieve improvement in the Company's competitive position, the failure
to maintain efficient and uninterrupted order-taking and fulfillment in our e-commerce and direct-to-consumer businesses,
extreme or unseasonable weather conditions, economic downturns, escalation of energy and transportation costs, adverse
changes in the costs or availability of fabrics and raw materials, a weakness in overall consumer demand, the failure to find
suitable store locations, increases in wage rates, the ability to hire and train associates, trade and security restrictions and
political or financial instability in countries where goods are manufactured, the failure of our vendors to deliver quality and
timely shipments in compliance with applicable laws and regulations, the interruption of merchandise flow from the
Company's centralized distribution facilities and third-party distribution providers, inadequate systems capacity, inability to
protect trademarks or other intellectual property, competitive pressures, and the adverse effects of natural disasters, war,
acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and
other risks and uncertainties, are detailed in the Company's filings with the Securities and Exchange Commission, including
the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other Company filings with the Securities
and Exchange Commission. Charming Shoppes assumes no duty to update or revise its forward-looking statements even if
experience or future changes make it clear that any projected results expressed or implied therein will not be realized.
3
We Have A Strong And Unique Platform Of
Leading Plus Apparel Brands
Leading Plus Apparel Brands
4
Our Market And Leadership Positions
• More than half of American women wear size 14 or larger
• Charming Shoppes ranks #1* in the U.S. in the women’s
specialty plus-size apparel market
specialty plus-size apparel market
• Charming Shoppes ranks #2* in the U.S. in the women’s
plus-size apparel market, a $17.6B market, second only to
Wal-Mart
plus-size apparel market, a $17.6B market, second only to
Wal-Mart
• Lane Bryant’s Cacique brand ranks #3* in the U.S. in the
women’s intimate plus-size apparel market, a $3.2B
market
women’s intimate plus-size apparel market, a $3.2B
market
• Charming Shoppes ranks #1* in the U.S. in the women’s
specialty plus-size denim apparel market, a $679M market
specialty plus-size denim apparel market, a $679M market
*According to The NPD Group, Inc./Consumer Tracking Service 12 months ending April 2011
5
1st Quarter 2011 Overview
> First quarter year over year operating improvement at all
brands, led by Lane Bryant and Fashion Bug
brands, led by Lane Bryant and Fashion Bug
> Through strong inventory management, we have made
excellent progress in the productivity of seasonal
merchandise
excellent progress in the productivity of seasonal
merchandise
> Less units drove improved turns of Spring merchandise and fewer
markdowns
markdowns
> Inventory +4% at end of quarter, including -MSDs in Spring
inventory
inventory
> Opportunity remains to rationalize year-round inventory
> Macroeconomic Environment
> Cotton, Inflation, Disposable Income
> Addressing the headwinds
> Marketing
> Product and technology launches
6
Then and Now - What is Different
>Now
– Fashion
– Relevance
– Outfitting
– Fit
– In-stock
– Value
>Size is no longer our sole differentiator
7
>Then
– Fit
– In-stock
– Core basics
Historical Profitability
• Significant progress made in 1st Quarter 2011
• $8.7M improvement in Gross Profit, with 180 basis point improvement in the Gross
Margin
Margin
• $9.1M Reduction in Total Expenses, with 170 basis point improvement
• 8.1% EBITDA Margin, with 310 basis point improvement
• +$15.5M improvement in adjusted EBITDA*
• +2% comparable store sales; 16% increase in e-commerce
*Refer to GAAP to non-GAAP reconciliation at http://www.charmingshoppes.com/investors/manage/index.asp
8
Returning To Consistent Profitability
9
>For each of our brands,
returning to consistent
profitability requires:
returning to consistent
profitability requires:
> Eliminating negative EBITDA
stores
stores
> 240 stores closing in 2011,
with more than half at our
Fashion Bug brand
with more than half at our
Fashion Bug brand
> 30 Catherines outlet locations
closing over the next two
years
closing over the next two
years
> Generated $6 million in
negative EBITDA in 2010
negative EBITDA in 2010
Returning To Consistent Profitability
>For each of our brands,
returning to consistent
profitability requires:
returning to consistent
profitability requires:
> Eliminating negative
EBITDA stores
EBITDA stores
> Improving our product
assortments
assortments
10
Returning To Consistent Profitability
>For each of our brands,
returning to consistent
profitability requires:
returning to consistent
profitability requires:
> Eliminating negative
EBITDA stores
EBITDA stores
> Improving our product
assortments
assortments
> Increasing inventory
productivity
productivity
Returning To Consistent Profitability
>For each of our brands,
returning to consistent
profitability requires:
returning to consistent
profitability requires:
> Eliminating negative
EBITDA stores
EBITDA stores
> Improving our product
assortments
assortments
> Increasing inventory
productivity
productivity
> Continued growth in digital
sales
sales
12
Returning To Consistent Profitability
>For each of our brands,
returning to consistent
profitability requires:
returning to consistent
profitability requires:
> Eliminating negative EBITDA
stores
stores
> Improving our product
assortments
assortments
> Increasing inventory
productivity
productivity
> Continued growth in digital
sales
sales
> Distorting resources to our
higher margining Lane Bryant
brand
higher margining Lane Bryant
brand
Leveraging Our Lane Bryant and Cacique Opportunities
> One Brand - One Vision
– Align Lane Bryant and Lane Bryant
Outlet
Outlet
– Consistency of product, design,
sourcing, marketing, and pricing
strategies
sourcing, marketing, and pricing
strategies
> Cacique company-wide opportunity
> Distort resources to Lane Bryant
> Brand image and marketing activities
> Expanding our Lane Bryant and
Cacique opportunities
Cacique opportunities
> Caciquebody
Classic / Traditional
Fashion
Brand Positioning
15
www.lanebryant.com
She is 35-55 years old
She is a woman of many
lifestyles - work, casual, active
lifestyles - work, casual, active
Likes to experiment with fashion
She shops frequently and likes
to buy clothes with good quality
at a reasonable price
to buy clothes with good quality
at a reasonable price
She is brand-conscious and
prefers retailers that offer
fashionable choices
prefers retailers that offer
fashionable choices
‘One Brand - One Vision’
16
www.cacique.com
Known for solutions, fit,
quality, fashion and style
quality, fashion and style
Represents 31% of sales
from the full-line
Lane Bryant chain
from the full-line
Lane Bryant chain
Offers key intimates
categories and
complementary products
categories and
complementary products
Introducing caciquebody
17
She is 30-50 years old
She is value-minded
Loves the challenge of
finding a great deal with
coupons and store
promotions that are easy
to understand
finding a great deal with
coupons and store
promotions that are easy
to understand
Likes to shop for
complete outfits
complete outfits
www.fashionbug.com
18
www.catherines.com
She’s our baby-boomer,
45+ years old
45+ years old
Classic styling with an
emphasis on fit and
comfort
emphasis on fit and
comfort
Offering styling for the
woman wearing extended
sizes
woman wearing extended
sizes
She prefers clothing that is
more appropriate for her
age - she does not want to
dress “younger” than she is
more appropriate for her
age - she does not want to
dress “younger” than she is
Likes to look “put together”
19
Financial Review - 1st Quarter 2011
|
($ in millions, except EPS)
|
1st Quarter 2011
|
1st Quarter 2010
|
Change
|
|
Net Sales
|
$504.4
|
$504.8
|
-10 bps
|
|
Same Store Sales
|
+2%
|
-2%
|
|
|
Gross Profit
|
$285.3
|
$276.6
|
+$8.7
|
|
Gross Margin
|
56.6%
|
54.8%
|
+180 bps
|
|
Total Operating Expenses*
|
$259.1
|
$268.2
|
-$9.1
|
|
Expense to Sales
|
51.4%
|
53.1%
|
-170 bps
|
|
Adjusted EBITDA*
|
$40.7
|
$25.2
|
+$15.5
|
|
EBITDA to Sales
|
8.1%
|
5.0%
|
+310 bps
|
|
GAAP income per diluted share
|
$0.22
|
$0.03
|
+$0.19
|
|
Non-GAAP income per diluted share*
|
$0.17
|
$0.04
|
+$0.13
|
*Refer to GAAP to non-GAAP reconciliation at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioarchives
20
Financial Review - Fiscal Year 2010
|
($ in millions, except EPS)
|
2010
|
2009
|
Change
|
|
Net Sales
|
$2,061.8
|
$2,064.6
|
-10 bps
|
|
Same Store Sales
|
+3%
|
-13%
|
|
|
Gross Profit
|
$1,015.0
|
$1,023.6
|
-$8.6
|
|
Gross Margin
|
49.2%
|
49.6%
|
-40 bps
|
|
Total Operating Expenses*
|
$1,033.2
|
$1,049.5
|
-$16.3
|
|
Expense to Sales
|
50.1%
|
50.8%
|
-70 bps
|
|
Adjusted EBITDA*
|
$50.2
|
$50.5
|
-$0.3
|
|
EBITDA to Sales
|
2.4%
|
2.4%
|
- - -
|
|
GAAP loss per diluted share
|
$(0.47)
|
$(0.67)
|
+$0.20
|
|
Non-GAAP loss per diluted share*
|
$(0.26)
|
$(0.52)
|
+$0.26
|
*Refer to GAAP to non-GAAP reconciliation at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioarchives
21
>Cash of $180.4 million, with increase of $62.9 million
> Improved Operating Results
> Reduction of Inventories, Net of Accounts Payable
>$189.9 million available on our fully committed and
undrawn revolving line of credit
undrawn revolving line of credit
– Liquidity of $370.3 million
>Convertible debt
– $140.5 million of 1.125% convertible notes due 2014
– No financial covenants
– Repurchased $134.5 million (face value) for $89.2 million during
2009 and 2010, at an average price of 66% of face value
2009 and 2010, at an average price of 66% of face value
>We have shifted from a net debt to a net cash position
Balance Sheet and Liquidity at April 30, 2011
22
Stores
• 1,989 stores at April 30, 2011
• Capital for store growth in 2011 being distorted to Lane
Bryant
Bryant
– 6-8 new and 10-13 relocations for Lane Bryant and Lane
Bryant Outlet locations
Bryant Outlet locations
– Continue to migrate from unprofitable malls to lifestyle
strip centers
strip centers
23
Summary
• Consistent, improving performance will be
the measure of our success
the measure of our success
• We remain committed to:
– Intensifying brand focus on each primary target
customer
customer
– Improving profitability at both the corporate and
brand level
brand level
– Increasing inventory productivity
– Building a winning corporate culture by
attracting and retaining key talent
attracting and retaining key talent
24
June 10, 2011
25