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Children's Place Retail Stores, Inc.$104.95$1.351.30%

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 The Children’s Place Reports Fourth Quarter and Fiscal 2014 Results
   Thursday, March 12, 2015 7:00:10 AM ET

Delivers Q4 Adjusted Earnings per Share Above Guidance

Reports Positive Comparable Retail Sales for Q4 and Fiscal 2014

Issues Guidance for First Quarter and Fiscal 2015

Updates Plan on Store Fleet Optimization Initiative

Increases Quarterly Dividend by 13% to $0.15 per Share

The Children’s Place, Inc. (PLCE ), the largest pure-play children’s specialty apparel retailer in North America, today announced financial results for the thirteen weeks ended January 31, 2015.

"The Children’s Place delivered fourth quarter adjusted EPS of $0.94 and an increase in comparable retail sales of 3.7%, which was driven by an increase in transactions and average transaction value. Our performance was consistent across product categories and regions during the quarter," commented Jane Elfers, President and Chief Executive Officer.

Ms. Elfers continued, "In fiscal 2014 we delivered positive comparable retail sales with improved momentum through the year, made significant progress on our growth initiatives and further strengthened our management team. Our solid financial results were driven by an enhanced merchandise assortment that resonated with our customers, disciplined expense management and strong inventory controls. In addition, we generated $161 million in operating cash flow and returned $86 million to shareholders through our share repurchase and dividend programs."

Elfers concluded, "Looking ahead to 2015, we are optimistic about our brand’s potential. Our merchandise assortments are compelling and our fundamentals are strong. We expect to begin to see results from our investments in seamless retail and state of the art planning and allocation systems in the back half of this year. We also announced today that we are expanding our capital return program with a 13 percent increase in our quarterly dividend to $0.15 per share. This dividend increase and our share repurchase program reflect our continued confidence in our ability to execute on our growth strategies and our ongoing commitment to return excess capital to our shareholders."

Fourth Quarter 2014 Results

Net sales were $479.2 million in the fourth quarter of 2014. The quarter included the negative impact of approximately $4.6 million from currency exchange rate fluctuations. This compares to net sales of $467.5 million for the fourth quarter of 2013. Comparable retail sales increased 3.7% for the fourth quarter 2014.

Net income was $17.0 million, or $0.79 per diluted share, in the fourth quarter of 2014, compared to net income of $15.7 million, or $0.69 per diluted share, the previous year. Adjusted net income was $20.2 million, or $0.94 per diluted share, compared to $21.8 million, or $0.96 per diluted share, in the fourth quarter last year.

Gross profit in the fourth quarter of 2014 was $164.8 million, compared to $164.3 million in the fourth quarter of 2013. Adjusted gross profit was $164.4 million this year, compared to $166.1 million last year, and declined 120 basis points to 34.3% of sales primarily as a result of merchandise margin deleverage.

Selling, general and administrative expenses were $123.7 million compared to $118.7 million in the fourth quarter of 2013. Adjusted SG&A was $120.1 million compared to adjusted SG&A of $118.8 million in the fourth quarter last year; $1.3 million higher than the prior year period, and leveraged 30 basis points to 25.1% of sales.

Operating income was $20.7 million, compared to $21.9 million in the fourth quarter of 2013. Adjusted operating income in the fourth quarter of 2014 was $28.8 million compared to adjusted operating income of $31.3 million in the fourth quarter last year, and de-leveraged 70 basis points to 6.0% of sales.

During the fourth quarter, the Company recorded charges of $8.1 million for unusual items, which primarily consisted of asset impairment charges as a result of the Company’s fleet optimization initiative and severance associated with corporate restructuring.

Adjusted net income, adjusted gross profit, adjusted SG&A, and adjusted operating income are non-GAAP measures, and are not intended to replace GAAP financial information. The Company believes the excluded items are not indicative of the performance of its core business and that by providing this supplemental disclosure to investors it will facilitate comparisons of its past and present performance. A reconciliation to GAAP financial information is provided at the end of this release.

Store Openings and Closures

Consistent with our store fleet optimization initiative, the Company opened one store and closed 21 during the fourth quarter of 2014. The Company ended the year with 1,097 stores and square footage of 5.129 million, a decrease of 1.5% compared to the prior year. The Company’s international franchise partners opened 5 stores in the fourth quarter, and the Company ended the year with 72 international franchise stores open.

Fiscal 2014 Results

Net sales declined 0.3% to $1,761.3 million for fiscal 2014, compared to $1,765.8 million for the prior year. Comparable retail sales increased 0.4%. Year to date sales include the negative impact of approximately $14.7 million from currency exchange rate fluctuations.

Net income for fiscal 2014 was $56.9 million, or $2.59 per diluted share, compared to net income of $53.0 million, or $2.32 per diluted share in the prior year period. Adjusted net income was $66.9 million, or $3.05 per diluted share, compared to $74.4 million, or $3.26 per diluted share in the prior year period.

Gross profit decreased 5.1% to $622.3 million, compared to $655.5 million in the prior year period. Adjusted gross profit was $622.2 million and deleveraged 200 basis points compared to adjusted gross profit of $658.4 million for the same period in fiscal 2013.

Selling, general and administrative expenses decreased 3.1% to $470.7 million, compared to $485.7 million in the prior year period. Adjusted SG&A decreased 4.3% to $462.6 million, compared to $483.2 million last year, and leveraged 110 basis points compared to the prior year period.

Operating income was $80.0 million, compared to operating income of $76.3 million in 2013. Adjusted operating income was $99.1 million, compared to $110.4 million the previous year and de-leveraged 70 basis points to 5.6% of sales.

Capital Return Program

During the fourth quarter of 2014, the Company repurchased 293,013 shares for approximately $16.1 million. At the end of fiscal 2014, $39.9 million of the $100 million share repurchase program authorized in March 2014 remained available for future share repurchases. On January 7, 2015, the Company’s Board of Directors authorized a new $100 million share repurchase authorization.

Additionally, the Company’s Board of Directors increased the quarterly dividend by 13% from $0.1325 per share to $0.15 per share, payable on April 30, 2015 to shareholders of record at the close of business on April 9, 2015.

Outlook

The Company is providing initial guidance for the first quarter and full year 2015. We expect the weakness in the Canadian dollar to have a negative impact on our 2015 results, as outlined below.

For fiscal 2015, the Company expects adjusted net income per diluted share will be in the range of $3.15 to $3.30, inclusive of a $0.15 negative impact from foreign exchange. This compares to adjusted net income per diluted share of $3.05 in fiscal 2014. This guidance assumes a flat to positive 1% increase in comparable retail sales for the year.

The Company expects adjusted net income per diluted share in the first quarter of 2015 will be between $0.60 and $0.65, inclusive of an estimated $0.01 negative impact from foreign exchange. This compares to adjusted net income per diluted share of $0.68 in the first quarter of 2014. This guidance assumes a flat to negative 2% decrease in comparable retail sales.

The Company is updating its targeted level of store closures pursuant to its store fleet optimization initiative. The Company now expects to close a total of approximately 200 stores through 2017, including the 76 stores closed in 2013 and 2014, an increase from the previous target of 125 store closures in the period from 2013 to 2016.

Conference Call Information

The Children’s Place will host a conference call to discuss its fourth quarter 2014 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 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 January 31, 2015, the Company operated 1,097 stores in the United States, Canada and Puerto Rico, an online store at www.childrensplace.com, and had 72 international stores open and operated by its franchise partners.

Forward Looking Statements

This press release (and the above referenced call) may contain certain forward-looking statements regarding future circumstances, including statements relating to the Company’s strategic initiatives and adjusted net income per diluted share. 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 February 1, 2014. 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 the 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 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. The inclusion of any statement in this release (or on the above referenced call) does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

(Tables Follow)

THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
                                             Fourth Quarter Ended    Year-to-Date Ended
                                             January 31, February 1, January 31, February 1,
                                             2015        2014        2015        2014
Net sales                                    $ 479,243   $ 467,497   $ 1,761,324 $ 1,765,789
Cost of sales                                314,433     303,187     1,139,024   1,110,268
Gross profit                                 164,810     164,310     622,300     655,521
Selling, general and administrative expenses 123,735     118,716     470,686     485,653
Asset impairment charges                     4,794       7,867       11,145      29,633
Other costs (income)                         85          (144)       (68)        (906)
Depreciation and amortization                15,542      15,968      60,494      64,858
Operating income                             20,654      21,903      80,043      76,283
Interest income (expense), net               (45)        123         (168)       265
Income before taxes                          20,609      22,026      79,875      76,548
Provision for income taxes                   3,572       6,375       22,987      23,522
Net income                                   $ 17,037    $ 15,651    $ 56,888    $ 53,026
Earnings per common share
Basic                                        $ 0.80      $ 0.70      $ 2.62      $ 2.35
Diluted                                      $ 0.79      $ 0.69      $ 2.59      $ 2.32
Weighted average common shares outstanding
Basic                                        21,195      22,253      21,681      22,537
Diluted                                      21,512      22,652      21,924      22,835
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
                                         Fourth Quarter Ended                                      Year-to-Date Ended
                                         January 31,                  February 1,                  January 31,                  February 1,
                                         2015                         2014                         2015                         2014
Net income                               $ 17,037                     $ 15,651                     $ 56,888                     $ 53,026
Non-GAAP adjustments:
Store disposition                        5,429                        9,842                        12,041                       23,716
Restructuring costs                      2,604                        --                           7,085                        1,237
DC exit costs (income)                   85                           (144)                        (68)                         (906)
IT Impairment and Costs                  --                           --                           --                           10,323
Legal Settlement                         --                           (267)                        --                           (267)
Aggregate impact of Non-GAAP adjustments 8,118                        9,431                        19,058                       34,103
Income tax effect (1)                    (3,190)                      (3,325)                      (7,302)                      (12,774)
International tax structure (2)          (1,793)                      --                           (1,793)                      --
Net impact of Non-GAAP adjustments       3,135                        6,106                        9,963                        21,329
Adjusted net income                      $ 20,172                     $ 21,757                     $ 66,851                     $ 74,355
GAAP net income per common share         $0.79                        $0.69                        $2.59                        $2.32
Adjusted net income per common share     $0.94                        $0.96                        $3.05                        $3.26
(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.
(2) Prior year tax benefit related to the allocation of certain foreign income.
Operating income                         $ 20,654                     $ 21,903                     $ 80,043                     $ 76,283
Non-GAAP adjustments:
Store disposition                        5,429                        9,842                        12,041                       23,716
Restructuring costs                      2,604                        --                           7,085                        1,237
DC exit costs (income)                   85                           (144)                        (68)                         (906)
IT Impairment and Costs                  --                           --                           --                           10,323
Legal Settlement                         --                           (267)                        --                           (267)
Aggregate impact of Non-GAAP adjustments 8,118                        9,431                        19,058                       34,103
Adjusted operating income                $ 28,772                     $ 31,334                     $ 99,101                     $ 110,386
THE CHILDREN’S PLACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
                                                      Fourth Quarter Ended    Year-to-Date Ended
                                                      January 31, February 1, January 31, February 1,
                                                      2015        2014        2015        2014
Gross Profit                                          $ 164,810   $ 164,310   $ 622,300   $ 655,521
Non-GAAP adjustments:
Store disposition                                     440         1,816       701         2,920
Restructuring costs                                   (821)       --          (821)       --
Aggregate impact of Non-GAAP adjustments              (381)       1,816       (120)       2,920
Adjusted Gross Profit                                 $ 164,429   $ 166,126   $ 622,180   $ 658,441
Selling, general and administrative expenses          $ 123,735   $ 118,716   $ 470,686   $ 485,653
Non-GAAP adjustments:
Store disposition                                     (195)       (159)       (195)       (276)
Restructuring costs                                   (3,425)     --          (7,906)     (1,190)
IT Costs                                              --          --          --          (1,210)
Legal Settlement                                      --          267         --          267
Aggregate impact of Non-GAAP adjustments              (3,620)     108         (8,101)     (2,409)
Adjusted Selling, general and administrative expenses $ 120,115   $ 118,824   $ 462,585   $ 483,244
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                                                     January 31,                                          February 1,
                                                     2015                                                 2014*
Assets:
Cash and cash equivalents                            $ 173,291                                            $ 173,997
Short-term investments                               52,000                                               62,500
Accounts receivable                                  31,928                                               25,960
Inventories                                          297,631                                              322,422
Other current assets                                 54,429                                               44,441
Total current assets                                 609,279                                              629,320
Property and equipment, net                          310,301                                              312,149
Other assets, net                                    39,038                                               49,161
Total assets                                         $ 958,618                                            $ 990,630
Liabilities and Stockholders’ Equity:
Accounts payable                                     $ 155,323                                            $ 150,652
Accrued expenses and other current liabilities       119,144                                              120,697
Total current liabilities                            274,467                                              271,349
Other liabilities                                    95,033                                               102,503
Total liabilities                                    369,500                                              373,852
Stockholders’ equity                                 589,118                                              616,778
Total liabilities and stockholders’ equity           $ 958,618                                            $ 990,630
* Derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 1, 2014.
THE CHILDREN’S PLACE, INC.
CONDENSED CONSOLIDATED CASH FLOWS
(In thousands)
(Unaudited)
                                               52 Weeks Ended
                                               January 31, February 1,
                                               2015        2014
Net income                                     $ 56,888    $ 53,026
Non-cash adjustments                           88,089      106,830
Working Capital                                16,433      13,614
Net cash provided by operating activities      161,410     173,470
Net cash used in investing activities          (61,707)    (119,700)
Net cash used in financing activities          (87,603)    (64,140)
Effect of exchange rate changes on cash        (12,806)    (9,761)
Net decrease in cash and cash equivalents      (706)       (20,131)
Cash and cash equivalents, beginning of period 173,997     194,128
Cash and cash equivalents, end of period       $ 173,291   $ 173,997
CONTACT: Robert Vill, Group Vice President, Finance, (201) 453-6693

http://www.globenewswire.com/newsroom/ti?nf=MTMjMTAxMjQzOTkjNzYzMg==



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