The Children’s Place Inc. (PLCE)
Q3 2008 Earnings Call
November 20, 2008 10:00 am ET
Chuck Crovitz - Interim Chief Executive Officer
Sue Riley - Executive Vice President, Finance and Administration
Richard Flaks - Senior Vice President, Planning Allocation and Information Technology
Dina Sweeney - Group Vice President of Merchandising
Jane Singer - Investor Relations
John Zolidis - Buckingham Research
Kimberly Greenberger - Citigroup
Betty Chen - Wedbush Morgan Securities
Brian Tunick - JPMorgan
Janet Kloppenburg - JJK Research
Linda Tsai - MKM Partners
John Morris - Wachovia Securities
Thomas Filandro - SIG
Marnie Shapiro - The Retail Tracker
Dana Telsey - Telsey Advisory
Previous Statements by PLCE
» Children’s Place Retail Stores, Inc. Q3 2009 Earnings Call Transcript
» 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
It is now my pleasure to turn the program over to Ms. Jane Singer. Go ahead, ma’am.
Thank you, Austin. Good morning everyone and thank you for joining us today for a review of The Children’s Place Retail Stores Inc 2008 third quarter and year-to-date financial results.
Participating on this mornings call are Chuck Crovitz, Interim Chief Executive Officer and Sue Riley, Executive Vice President, Finance and Administration. Also, on hand to answer questions at the end of managements remarks are Richard Flaks, Senior Vice President, Planning Allocation and Information Technology, and Dina Sweeney, Group Vice President of Merchandising.
Before we begin, I would 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 and now I will turn the call over to Chuck for his opening remarks.
Thank you, Jane. Good morning everyone. Thank you for joining us today. Earlier this morning we reported our third quarter 2008 financial results. We delivered positive top line and bottom line growth for the quarter in spite of reduced shopper traffic and a more challenging macroeconomic environment. This speaks to the strength and resilience of The Children’s Place brand.
To briefly review the highlights of our financial performance during the quarter, net sales increased by 5%; comparable store sales increased by 2%; ecommerce sales increased by 40%, and excluding unusual and one time items, income from continuing operations increased 28% to $24.9 million or $0.84 a share during the third quarter of 2008. This compares to $19.4 million or $0.66 a share in the third quarter of last year.
During previous conference calls, I have talked to you about four significant actions that we undertook during the past year in order to strengthen our business and ensure the long term success of The Children’s Place. Looking back, I can tell you that we are very glad that we took those actions when we did, because they have significantly contributed to the solid results that we are reporting today.
Our first action was reducing inventory levels, which we believe were too high during 2007. At the time of our decision last year, we were able to partially impact the summer 2008 buy and fully impact the back-to-school and holiday buys. With lower inventories, we were able to better manage our markdown levels, significantly improve our gross margins, enhance the shop ability of our stores and at the same time, deliver modest increase in comp sales.
Second, we identified a number of opportunities to reduce our cost structure. We implemented a work force reduction in our shared services department. We have also instituted a disciplined focus on expense and cost management that is becoming an integral part of our culture in order to get our cost structure to a level that is consistent with that of a value-oriented retailer.
Third, we have focused on strengthening our balance sheet and cash flow by reducing the number of new store openings and delaying capital spending. We finalized an $85 million term loan at the end of the second quarter of 2008 to ensure the company would have adequate liquidity in the event the economy continued to worsen, which of course it has.
With many retailers struggling to fund their businesses, I am pleased to report that our balance sheet to date is strong and healthy and fourth, as part of a broader review of strategic alternatives undertaken by the Board, we have decided to exit the Disney Store North American business and focus all of our efforts on The Children’s Place brand. In this economy, we’re pleased to be focusing exclusively on the value price driven to apparel market.
I’d like to spend a few minutes talking about some of the broad trends that we are seeing in this market this year. Based on NPD data, fiscal year to date through August of 2008, the unit sales of children’s apparel has increased 3%, more than double the growth rate of the adult apparel market. We believe this indicates that many parents are choosing to buy clothing for their children instead of themselves this year. Not surprisingly, NPD also reports that the average unit retail sales price for children’s apparel has declined 4% year-to-date.
AUR across all income levels, including among those households making more than $100,000 per year, which confirms that on average all consumers, even the most affluent consumers, have begun trading down and looking for greater value in purchasing their children’s clothing. The Children’s Place is uniquely well positioned for this current climate. Our high quality, trend-right fashion and value pricing have always appealed to a broad spectrum of parents, from low to high income and across racial and cultural groups.