Exhibit 99.1

 

 

THE CHILDREN’S PLACE REPORTS SECOND QUARTER 2016 RESULTS

 

Delivers Q2 Comparable Retail Sales Increase of 2.4%

Reports Q2 GAAP Loss per Diluted Share of ($0.11) vs ($0.67) in Q2 2015 and

Q2 Adjusted Loss per Diluted Share of ($0.01) vs ($0.33) in Q2 2015

Increases Fiscal 2016 Adjusted EPS Guidance to $4.60 to $4.70 vs Previous Guidance of $4.17 to $4.27

Returns $86 Million to Shareholders Year to Date

 

Secaucus, New Jersey – August 17, 2016 – The Children’s Place, Inc. (Nasdaq: PLCE), the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended July 30, 2016.

 

Jane Elfers, President and Chief Executive Officer, said, “We delivered another outstanding quarter. Based on these results and the consistently positive customer response to our merchandise assortments, we are raising our guidance for the full year. We continue to demonstrate our ability to deliver on our multi-pronged transformation strategy - superior product, business transformation through technology, global growth through alternate channels of distribution and store fleet optimization - despite the challenging retail environment and the continued weakness in store traffic.”

 

Financial Results

The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.

 

Second Quarter 2016 Results

Net sales increased 1.4% to $371.4 million in the second quarter of 2016. The quarter included the negative impact of approximately $1.7 million from currency exchange rate fluctuations. On a constant currency basis, net sales were $373.1 million, a 1.8% increase, compared to net sales of $366.5 million in the second quarter of 2015. Comparable retail sales increased 2.4% in the second quarter of 2016.

 

Net loss was ($2.0) million, or ($0.11) per diluted share, in the second quarter of 2016, compared to a net loss of ($13.7) million, or ($0.67) per diluted share, the previous year. Adjusted net loss was ($0.2) million, or ($0.01) per diluted share, inclusive of a negative ($0.02) impact due to foreign exchange, compared to an adjusted net loss of ($6.8) million, or ($0.33) per diluted share, in the second quarter last year. On a constant currency basis, adjusted net income per diluted share was $0.01.

 

Gross profit and adjusted gross profit were $123.9 million in the second quarter, compared to $115.0 million in the second quarter of 2015 and leveraged 200 basis points to 33.4% of sales primarily as a result of merchandise margin and fixed cost leverage and a higher AUR.

 

Selling, general and administrative expenses were $107.9 million compared to $118.3 million in the second quarter of 2015. Adjusted SG&A was $107.9 million compared to $108.6 million in the second quarter last year and leveraged 50 basis points as a percentage of sales primarily as a result of decreased store and administrative expenses which were partially offset by increased incentive compensation expenses.

 

Operating loss was ($2.9) million, compared to ($20.1) million in the second quarter of 2015. Adjusted operating income in the second quarter of 2016 was $0.1 million compared to an adjusted operating loss of ($8.9) million in the second quarter last year, and leveraged 240 basis points compared to last year.

 

For the second quarter, the Company’s adjusted results exclude charges of approximately $3.0 million, compared to excluded charges of approximately $11.2 million in the second quarter of 2015, comprising certain items which the Company believes are not reflective of the performance of its core business. These excluded charges are primarily related to asset impairment charges in the second quarter of 2016 and proxy and legal settlement costs in the second quarter of 2015.

 

 

Fiscal Year to Date

Net sales increased 2.5% to $790.8 million, including the negative impact of approximately $4.0 million from currency exchange rate fluctuations. On a constant currency basis, net sales were $794.8 million, a 3.0% increase compared to net sales of $771.3 million in the prior year. Comparable retail sales increased 3.8% in the first half of fiscal 2016.

 

Net income was $24.0 million, or $1.24 per diluted share, in the first half of fiscal 2016, compared to net income of $1.9 million, or $0.09 per diluted share, the previous year. Adjusted net income was $25.6 million, or $1.32 per diluted share, inclusive of a negative ($0.03) impact due to foreign exchange, compared to $10.9 million, or $0.52 per diluted share, an increase of 154%, compared to the previous year. On a constant currency basis, adjusted net income per diluted share was $1.35, a 160% increase compared to the previous year.

 

Gross profit was $289.2 million in the first half of fiscal 2016, compared to $267.1 million last year. Adjusted gross profit was $289.2 million, or 36.6% of net sales, leveraging 190 basis points compared to last year.

 

Selling, general and administrative expenses in the first half of fiscal 2016 were $217.1 million, compared to $232.9 million last year. Adjusted SG&A was $217.5 million, compared to $219.9 million last year, leveraging 100 basis points compared to last year.

 

Operating income was $36.7 million, compared to operating income of $3.1 million in the first half of fiscal 2015. Adjusted operating income was $39.3 million, or 5.0% of net sales, compared to $17.8 million, or 2.3% of net sales last year.

 

For the first half, the Company’s adjusted results exclude charges of approximately $2.6 million, compared to excluded charges of approximately $14.8 million in the first half of 2015, comprising certain items which the Company believes are not reflective of the performance of its core business. These excluded charges are primarily related to asset impairment charges in the first half of 2016 and proxy and legal settlement costs in the first half of 2015.

 

Store Openings and Closures

The Company closed 2 stores and opened 2 stores during the second quarter of 2016. The Company ended the second quarter with 1,064 stores and square footage of 4.967 million, a decrease of 2.0% compared to the prior year. The Company’s international franchise partners opened 13 points of distribution in the second quarter, and the Company ended the quarter with 123 international points of distribution open and operated by its 6 franchise partners in 16 countries.

 

Capital Return Program

During the second quarter of 2016, the Company returned approximately $39 million to shareholders through the repurchase of 454,711 shares and its quarterly dividend payment of $0.20 per share. Year to date, the Company returned approximately $86 million to shareholders compared to approximately $68 million last year. Since 2009, the Company has returned over $710 million to its investors through share repurchases and dividends. At the end of the second quarter, approximately $192 million remained available for future share repurchases under the Company’s existing share repurchase program.

 

Additionally, the Company’s Board of Directors authorized a quarterly dividend of $0.20 per share, payable October 6, 2016 to shareholders of record at the close of business on September 16, 2016.

 

Outlook

The Company is updating its outlook for fiscal 2016 and now expects adjusted net income per diluted share to be in the range of $4.60 to $4.70, inclusive of a ($0.08) negative impact from foreign exchange. This compares to the Company’s previous guidance of $4.17 to $4.27 per adjusted diluted share and to adjusted net income per diluted share of $3.60 in fiscal 2015. This guidance assumes a positive low single digit increase in comparable retail sales for the year. This guidance for adjusted net income per diluted share excludes year to date charges of approximately $2.6 million primarily related to asset impairment charges that the Company believes are not reflective of the performance of its core business.

 

 

The Company expects adjusted net income per diluted share in the third quarter of 2016 to be between $1.93 and $2.01, inclusive of an estimated ($0.03) negative impact from foreign exchange. This compares to adjusted net income per diluted share of $1.93 in the third quarter of 2015. This guidance assumes a positive low single digit increase in comparable retail sales for the quarter.

 

Financial Results

The Company’s results are reported in this press release on a GAAP and as adjusted, non-GAAP basis. Adjusted net income, adjusted net loss, adjusted net income per diluted share, adjusted net loss per diluted share, adjusted gross profit, adjusted SG&A, and adjusted operating income are non-GAAP measures, and are not intended to replace GAAP financial information and may be different from non-GAAP measures reported by other companies. The Company believes the items excluded as non-GAAP adjustments are not reflective of the performance of its core business and that providing this supplemental disclosure to investors will facilitate comparisons of the past and present performance of its core business. The Company uses non-GAAP measures to evaluate and measure operating performance, including, as previously disclosed, to measure performance for purposes of the Company’s annual bonus and long-term incentive compensation plans. A reconciliation of non-GAAP to GAAP financial information is provided at the end of this press release.

 

Conference Call Information

The Children’s Place will host a conference call to discuss its second quarter 2016 results today at 8:00 a.m. Eastern Time. The call will be broadcast live at http://investor.childrensplace.com. An audio archive will be available on the Company’s website approximately one hour after the conclusion of the call.

 

About The Children’s Place, Inc.

The Children’s Place is the largest pure-play children’s specialty apparel retailer in North America. The Company designs, contracts to manufacture, sells at retail and wholesale, and licenses to sell fashionable, high-quality merchandise at value prices, primarily under the proprietary “The Children’s Place,” “Place” and “Baby Place” brand names. As of July 30, 2016, the Company operated 1,064 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 123 international points of distribution open and operated by its 6 franchise partners in 16 countries.

 

Forward Looking Statements

 

This press release contains, and the above referenced conference call may contain, forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. Forward-looking statements typically are identified by use of terms such as “may,” “will,” “should,” “plan,” “project,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including in the “Risk Factors” section of its Annual Report on Form 10-K for the fiscal year ended January 30, 2016. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company’s business and its dependence on consumer spending patterns, which may be affected by weakness in the economy that continues to affect the Company’s target customer, the risk that the Company’s strategic initiatives to increase sales and margin are delayed or do not result in anticipated improvements, the risk of delays, interruptions and disruptions in the Company’s global supply chain, including resulting from foreign sources of supply in less developed countries or more politically unstable countries, the risk that the cost of raw materials or energy prices will increase beyond current expectations or that the Company is unable to offset cost increases through value engineering or price increases, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

 

Contact: Robert Vill, Group Vice President, Finance, (201) 453-6693 (Tables Follow)

 

    THE CHILDREN’S PLACE, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share amounts)

    (Unaudited)

 

		Second Quarter Ended								Year-to-Date Ended
		July 30,				August 1,				July 30,				August 1,
		2016				2015				2016				2015
Net sales		$	371,416			$	366,455			$	790,767			$	771,320
Cost of sales			247,545				251,451				501,545				504,207
Gross profit			123,871				115,004				289,222				267,113
Selling, general and administrative expenses			107,903				118,342				217,115				232,856
Asset impairment charges			2,826				1,452				2,826				1,452
Other costs (income)			191				76				259				73
Depreciation and amortization			15,891				15,252				32,352				29,646
Operating income (loss)			(2,940	)			(20,118	)			36,670				3,086
Interest income (expense), net			(176	)			(205	)			(250	)			(381	)
Income (loss) before taxes			(3,116	)			(20,323	)			36,420				2,705
Provision (benefit) for income taxes			(1,105	)			(6,628	)			12,446				793
Net income (loss)		$	(2,011	)		$	(13,695	)		$	23,974			$	1,912
Earnings (loss) per common share
Basic		$	(0.11	)		$	(0.67	)		$	1.26			$	0.09
Diluted		$	(0.11	)		$	(0.67	)		$	1.24			$	0.09
Weighted average common shares outstanding
Basic			18,811				20,576				19,006				20,794
Diluted			18,811				20,576				19,357				21,059

 

 

THE CHILDREN’S PLACE, INC.

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP

(In thousands, except per share amounts)

(Unaudited)

 

 

		Second Quarter Ended								Year-to-Date Ended
		July 30,				August 1,				July 30,				August 1,
		2016				2015				2016				2015
Net income (loss)		$	(2,011	)		$	(13,695	)		$	23,974			$	1,912
Non-GAAP adjustments:
Asset impairment charges			2,826				1,452				2,826				1,452
DC exit costs			191				76				259				73
Restructuring costs			(4	)			337				(471	)			1,125
Proxy costs			-				3,025				12				5,763
Legal Settlement			-				5,000				-				5,000
Sales tax audit			-				1,350				-				1,350
Aggregate impact of Non-GAAP adjustments			3,013				11,240				2,626				14,763
Income tax effect (1)			(1,175	)			(4,382	)			(1,013	)			(5,775	)
Net impact of Non-GAAP adjustments			1,838				6,858				1,613				8,988
Adjusted net income (loss)		$	(173	)		$	(6,837	)		$	25,587			$	10,900
GAAP net income (loss) per common share		$	(0.11	)		$	(0.67	)		$	1.24			$	0.09
Adjusted net income (loss) per common share		$	(0.01	)		$	(0.33	)		$	1.32			$	0.52

 

(1) The tax effects of the non-GAAP items are calculated based on the statutory rate of the jurisdiction in which the discrete item resides.

                  

		Second Quarter Ended								Year-to-Date Ended
		July 30,				August 1,				July 30,				August 1,
		2016				2015				2016				2015
Operating income (loss)		$	(2,940	)		$	(20,118	)		$	36,670			$	3,086
Non-GAAP adjustments:
Asset impairment charges			2,826				1,452				2,826				1,452
DC exit costs			191				76				259				73
Restructuring costs			(4	)			337				(471	)			1,125
Proxy costs			-				3,025				12				5,763
Legal Settlement			-				5,000				-				5,000
Sales tax audit			-				1,350				-				1,350
Aggregate impact of Non-GAAP adjustments			3,013				11,240				2,626				14,763
Adjusted operating income (loss)		$	73			$	(8,878	)		$	39,296			$	17,849

 

 

THE CHILDREN’S PLACE, INC.

RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP

(In thousands, except per share amounts)

(Unaudited)

 

		Second Quarter Ended								Year-to-Date Ended
		July 30,				August 1,				July 30,				August 1,
		2016				2015				2016				2015
Gross Profit		$	123,871			$	115,004			$	289,222			$	267,113
Non-GAAP adjustments:
Restructuring costs			-				(38	)			(50	)			304
Aggregate impact of Non-GAAP adjustments			-				(38	)			(50	)			304
Adjusted Gross Profit		$	123,871			$	114,966			$	289,172			$	267,417

 

		Second Quarter Ended								Year-to-Date Ended
		July 30,				August 1,				July 30,				August 1,
		2016				2015				2016				2015
Selling, general and administrative expenses		$	107,903			$	118,342			$	217,115			$	232,856
Non-GAAP adjustments:
Restructuring costs			4				(375	)			421				(821	)
Proxy costs			-				(3,025	)			(12	)			(5,763	)
Legal Settlement			-				(5,000	)			-				(5,000	)
Sales tax audit			-				(1,350	)			-				(1,350	)
Aggregate impact of Non-GAAP adjustments			4				(9,750	)			409				(12,934	)
Adjusted Selling, general and administrative expenses		$	107,907			$	108,592			$	217,524			$	219,922

 

 

THE CHILDREN’S PLACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

		July 30,				January 30,				August 1,
		2016				2016*				2015
Assets:
Cash and cash equivalents		$	170,829			$	187,534			$	145,753
Short-term investments			75,100				40,100				59,580
Accounts receivable			35,255				26,315				31,283
Inventories			296,584				268,831				314,030
Other current assets			49,774				58,528				65,641
Total current assets			627,542				581,308				616,287
Property and equipment, net			277,195				290,980				307,100
Other assets, net			28,800				25,660				38,567
Total assets		$	933,537			$	897,948			$	961,954
Liabilities and Stockholders' Equity:
Revolving loan		$	43,860			$	-			$	29,584
Accounts payable			198,675				154,541				193,723
Accrued expenses and other current liabilities			116,629				120,481				121,934
Total current liabilities			359,164				275,022				345,241
Other liabilities			91,953				95,133				87,888
Total liabilities			451,117				370,155				433,129
Stockholders' equity			482,420				527,793				528,825
Total liabilities and stockholders' equity		$	933,537			$	897,948			$	961,954

 

*

Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2016.

 

 

THE CHILDREN’S PLACE, INC.

CONDENSED CONSOLIDATED CASH FLOWS

(In thousands)

(Unaudited)

 

		26 Weeks Ended
		July 30,				August 1,
		2016				2015
Net income		$	23,974			$	1,912
Non-cash adjustments			30,946				33,770
Working Capital			20,263				4,419
Net cash provided by operating activities			75,183				40,101
Net cash used in investing activities			(51,187	)			(27,715	)
Net cash used in financing activities			(46,481	)			(38,488	)
Effect of exchange rate changes on cash			5,780				(1,436	)
Net decrease in cash and cash equivalents			(16,705	)			(27,538	)
Cash and cash equivalents, beginning of period			187,534				173,291
Cash and cash equivalents, end of period		$	170,829			$	145,753

 

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