Children’s Place Retail Stores, Inc. (PLCE)
Q3 2009 Earnings Call
November 19, 2009 10:00 am ET
Jane Singer – Vice President Investor Relations
Charles K. Crovitz – Interim Chief Executive Officer & Director
Susan Riley – Chief Financial Officer & Executive Vice President Finance & Administration
Dina Sweeney – Senior Vice President Merchandising
Richard Jaffe – Stifel Nicolaus
John Morris – BMO Capital Market
Kimberly Greenberger – Citigroup
Linda Tasi – MKM Partners
Rick Patel – Bank of America Merrill Lynch
Janet Kloppenberg – JJK Research
Brian Tunick – JP Morgan
Margaret Whitfield – Sterne Agee
Thomas Filandro – SIG Susquehanna Financial Group
Dorothy Lakner – Caris & Co.
Lee Giordano – Imperial Capital
Analyst for John Zolidis – Buckingham Research
Dana Telsey – Telsey Advisory Group
Previous Statements by PLCE
» Children’s Place Retail Stores Inc. Q2 2009 Earnings Call Transcript.
» The Children’s Place Retail Stores, Inc. F4Q08 (Qtr End 01/31/09) Earnings Call Transcript
» The Children’s Place Inc Q3 2008 Earnings Call Transcript
Thank you for joining us today for a review of the Children’s Place Retail Stores Inc. third quarter 2009 financial results. Participating on this morning’s call are Chuck Crovitz, Interim Chief Executive Officer and Sue Riley, Executive Vice President Finance & Administration. Dina Sweeney, Senior Vice President of Merchandising is on hand to answer questions at the end of management’s remarks.
Before we begin, I’d like to remind participants that any forward looking remarks made today are subject to the Safe Harbor statement found in this morning’s press release as well as in our SEC filings. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially. The company undertakes no obligation to publically release any revision to these forward-looking statements to reflect events or circumstances after the date hereof.
Please also note that a reconciliation of certain non-GAAP financial measures discussed on the call this morning is contained in this morning’s press release which can be found on our www.ChildrensPlace.com website and now I will turn the call over to Chuck for his opening remarks.
Charles K. Crovitz
We’re very pleased to have delivered sales and earnings growth in the third quarter of 2009 despite the ongoing economic uncertainty. The Children’s Place delivered top line growth of 3% and income from continuing operations increased 34% to $38.2 million. Earnings per diluted share were $1.38 compared to $0.96 per share in the third quarter last year. We were also pleased to see customer transactions increase during the third quarter. While customers remain somewhat price sensitive we were encouraged to see a 1% increase in transactions during the third quarter following a 7% decline during the second quarter.
Comp sales declined 2% due to the impact of promotional pricing on average transaction size which is consistent with what’s going on in the industry. We attribute our success primarily to the resiliency to the children’s apparel market which has outperformed the sales of adult apparel. We believe the children’s category will continue to outperform the adult apparel because it is more need based. Growing kids just simply can’t wait for the economy to improve but mom’s can make their budget’s stretch further by buying more of their children’s clothing at value oriented retailers.
The Children’s Place has grown market share among specialty retailers over the past year by offering a combination of trend right, high quality merchandise at great value price points. During the third quarter our wear now apparel and key items drove sales as we believe customer look to get the most value out of every purchase. Customers also reacted favorably to specialty items we offered to update children’s wardrobe such as our look maker fashion items, shoes and accessories.
Our primary focus this year has been to maximize profitable sales while maintaining costs in order to minimize downside risk as we operate in this difficult economic environment. This prudent approach has enabled us to significantly improve profitability and gain leverage on higher revenues. The 3% increase in net sales coupled with our strong cost containment efforts resulted in approximately 380 basis points of leverage in SG&A excluding unusual and one-time items and a 34% increase in net income for the quarter.
Moving on to the progress we achieved on our growth initiative. First, our ecommerce business had another strong quarter with a 44% growth in sales. Online sales now account for 7% of net sales compared to 5% last year. Next, we remain on plan to open approximately 35 new stores in 2009 which would increase by a net of approximately 25 to 30 stores for the year. Much of our expansion this year has been in value oriented centers primarily in strip malls and in smaller markets. The yearly sales results from these centers were encouraging and we may improve more on our mix next year.
We also remain pleased with our new Tech II store format which we think looks great, is easier to shop and has significantly lower build out stores. Our Paramus Park New Jersey store which was remodeled in to the Tech II format reopened last week to rave reviews from customers. Last, we are pleased with the progress being made by various departments in containing cost this year. We’ve already exceeded the planned SG&A expense reductions in cost savings we announced in February. The increased savings are coming across departments from store operations to real estate, to marketing and administration and we now expect SG&A spending will be more than $20 million lower in 2009 than in 2008.