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24.10.2008 11:00:00
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Cache Reports Third Quarter Fiscal 2008 Results
Cache Inc., (NASDAQ: CACH), a specialty chain of women’s apparel stores, reported results for the thirteen ("third quarter”) and thirty-nine week periods ("first nine months”) ended September 27, 2008.
For the 13-week period ended September 27, 2008:
- Net sales decreased 4.0% to $58.1 million compared to $60.6 million in the third quarter of 2007. Comparable store sales decreased 4% following a 4% increase in the third quarter of fiscal 2007;
- Net loss totaled $1.6 million or ($0.12) per share, including $0.02 per diluted share in store closure costs, as compared to net income of $161,000 or $0.01 per diluted share in the third quarter of fiscal 2007; and
- Adjusted net loss for the 13-week period in fiscal 2008 was $1.4 million or ($0.10) per diluted share and excludes store closure costs.
Thomas Reinckens, Chairman and Chief Executive Officer, commented: "As we anticipated, our third quarter results were negatively affected by the challenging economy, which heightened in severity in September. This caused a dramatic reduction in mall traffic, as consumers tightened their spending on discretionary items, which reduced our sales and profitability during the quarter. Importantly, we continue to be pleased with the positioning of our brand and the strength of our balance sheet. We are addressing more of our customers needs by increasing our day time assortments and intensifying our value proposition, while maintaining our Cache style. Our marketing vehicles are also assisting us to drive incremental traffic to our stores. Our Company remains in a strong balance sheet position with cash and marketable securities totaling $25.6 million at quarter end. In addition, average inventory per store was down 16% at quarter end from the same time a year ago. As we look ahead, we continue to plan our business conservatively and expect comparable store sales to remain negative in the fourth quarter. At the same time, we will maintain our successful merchandising and marketing strategies and increase our gift giving assortments in an effort to maximize market share in an expected difficult holiday season.”
For the 39-week period ended September 27, 2008:
- Net sales increased 2.0% to $199.8 million from $196.0 million in the first nine months of fiscal 2007. Comparable store sales increased 1% following a 2% gain in the first nine months of fiscal 2007;
- Net loss was $1.6 million or ($0.12) per share and included charges of: $1.7 million or $0.13 per diluted share related to store closures and $388,000 or $0.03 per diluted share related to the previously announced management change. This compares to net income of $1.6 million or $0.10 per diluted share, including $0.04 per diluted share in legal settlement costs, in the first nine months of fiscal 2007; and
- Adjusted net income for the first nine months of fiscal 2008 was $531,000 or $0.04 per diluted share and excludes store closure and management change costs. This compares to adjusted net income for the first nine months of fiscal 2007 of $2.2 million or $0.14 per diluted share, which excludes costs related to the legal settlement.
Gross profit in the third quarter of fiscal 2008 was $25.6 million, or 44.1% of net sales, compared to $27.7 million, or 45.7% of net sales, in the third quarter of fiscal 2007. For the first nine months of fiscal 2008, gross profit was $88.2 million, or 44.2% of net sales, compared to $90.6 million, or 46.2% of net sales, in the first nine months of fiscal 2007. The decline in gross profit margin for the third quarter and first nine months of fiscal 2008 was primarily due to lower sales and the effect of the new pricing strategy.
In total, operating expenses for the third quarter of fiscal 2008 were $28.3 million, or 48.7% of net sales, as compared to $27.9 million, or 46.1% of net sales, in the third quarter of fiscal 2007. For the first nine months of fiscal 2008, total operating expenses were $91.2 million, or 45.6% of net sales, compared to $90.0 million, or 45.9% of net sales, in the prior-year period. Operating expenses for the 13-week period in fiscal 2008 included $449,000 in store closure costs. Operating expenses for the first nine months of fiscal 2008 included $2.8 million in store closure costs and $616,000 in costs related to the management change announced in January 2008. Operating expenses for the first nine months of fiscal 2007 included $2.2 million in legal fees and settlement costs.
At September 27, 2008, cash and marketable securities totaled $25.6 million, after utilizing $28.6 million to fund the repurchase of 2.5 million shares since third quarter end last year. This compares to $49.2 million in cash and marketable securities at September 29, 2007. Average inventory per store, decreased 16% at quarter end from the prior-year period.
A table summarizing financial results follows:
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Thirty-Nine Weeks Ended |
Thirteen Weeks Ended |
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| Sept. 27, | Sept. 29, | Sept. 27, | Sept. 29, | ||||||||||||||
|
2008 |
2007 |
2008 |
2007 |
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($ thousands, except for per share data, share numbers and store count) |
|||||||||||||||||
| Net sales | $ | 199,820 | $ | 195,953 | $ | 58,140 | $ | 60,572 | |||||||||
| Operating income (loss) | (2,953 | ) | 568 | (2,680 | ) | (233 | ) | ||||||||||
| Store exit and management change costs | 3,373 | - | 449 | - | |||||||||||||
| Legal settlement costs | - | 1,015 | - | - | |||||||||||||
|
Operating income (loss) before one-time costs |
420 | 1,583 | (2,231 | ) | (233 | ) | |||||||||||
| Net income (loss) | (1,594 | ) | 1,589 | (1,646 | ) | 161 | |||||||||||
| Net income (loss) before one-time costs | 531 | 2,235 | (1,362 | ) | 161 | ||||||||||||
| Basic earnings (loss) per share | $ | (0.12 | ) | $ | 0.10 | $ | (0.12 | ) | $ | 0.01 | |||||||
| Diluted earnings (loss) per share | $ | (0.12 | ) | $ | 0.10 | $ | (0.12 | ) | $ | 0.01 | |||||||
|
Per share - Store exit and management |
$ | 0.16 | $ | - | $ | 0.02 | $ | - | |||||||||
| Per share - Legal settlement costs | $ | - | $ | 0.04 | $ | - | $ | - | |||||||||
|
Diluted earnings (loss) per share |
$ | 0.04 | $ | 0.14 | $ | (0.10 |
) |
$ |
0.01 | ||||||||
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Basic weighted average shares outstanding |
13,372,000 | 16,189,000 | 13,229,000 | 15,988,000 | |||||||||||||
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Diluted weighted average shares outstanding |
13,372,000 | 16,454,000 | 13,229,000 | 16,187,000 | |||||||||||||
| Number of stores open at end of period | 295 | 296 | 295 | 296 | |||||||||||||
Guidance
The Company indicated that October 2008 sales trends continue to be soft with comparable store sales down between 9% and 10% month-to-date. The Company also noted that the majority of its fourth quarter sales occur in November and December, when the Company faces easier comparisons. As a result, the Company currently expects fourth quarter and fiscal 2008 guidance will be at the low end of the range provided on September 22, 2008.
For the fourth quarter of fiscal 2008, the Company estimates net sales in the range of $77 million to $79 million, which compares to actual fourth quarter fiscal 2007 net sales of $78.5 million. This guidance assumes comparable store sales in the range of flat to a decrease in the low-single-digit range, as compared to a decline of 7% in the fourth quarter of fiscal 2007. Diluted earnings per share for the fourth quarter of fiscal 2008 are currently estimated at the low end of our previous guidance range of $0.24 to $0.29, which compares to actual fourth quarter fiscal 2007 diluted earnings per share of $0.32.
For the full fiscal 2008 year, the Company estimates net sales in the range of $277 million to $279 million, which compares to actual fiscal 2007 net sales of $274.5 million. Diluted earnings per share on a GAAP basis for fiscal 2008 are currently estimated at the lower end of our previous guidance range of $0.12 to $0.17. This guidance includes costs related to store closures and a management change totaling $0.16 per diluted share and incurred during the first quarter of fiscal 2008. On an adjusted basis, excluding store closing and management change costs, the Company currently expects fiscal 2008 diluted earnings per share at the lower end of its previous guidance range of $0.28 to $0.33, as compared to actual fiscal 2007 diluted earnings per share of $0.40, inclusive of $0.04 per diluted share in legal settlement costs. Adjusted diluted earnings per share for fiscal 2007 were $0.44.
Store Opening Plans
During the third quarter, the Company opened three new stores and closed five locations, ending the period with 295 stores open. The Company expects to open approximately 3 new Cache stores and close 3 locations during the fourth quarter of fiscal 2008, ending the year with approximately 295 locations and 590,000 square feet in operation.
Conference call information
The Company announced that it will conduct a conference call to discuss its third quarter fiscal 2008 results today, October 24, 2008 at 9:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0789 approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.cache.com. A replay of this call will be available until October 31, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference code 300418.
About Cache, Inc.
Cache is a nationwide, mall-based specialty retailer of sophisticated sportswear and social occasion dresses targeting style-conscious women. Cache targets women between the ages of 25 and 45 who have a youthful attitude, are self-confident and fashion-conscious, and require a missy fit. We operate 295 Cache and Cache Luxe stores, primarily situated in central locations in high traffic, upscale malls in 43 states, the Virgin Islands and Puerto Rico.
| CACHE, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| September 27, | December 29, | September 29, | ||||||||||
| ASSETS | 2008 | 2007 | 2007 | |||||||||
| Current assets: | ||||||||||||
| Cash and equivalents | $ | 2,023,000 | $ | 7,243,000 | $ | 8,975,000 | ||||||
| Marketable securities | 23,570,000 | 42,887,000 | 40,245,000 | |||||||||
| Receivables, net | 4,848,000 | 4,788,000 | 4,571,000 | |||||||||
| Inventories, net | 33,802,000 | 30,547,000 | 36,329,000 | |||||||||
| Prepaid expenses and other current assets | 5,611,000 | 2,465,000 | 5,439,000 | |||||||||
| Total current assets | 69,854,000 | 87,930,000 | 95,559,000 | |||||||||
| Equipment and leasehold improvements, net | 46,393,000 | 49,298,000 | 49,768,000 | |||||||||
| Goodwill | 10,089,000 | 10,089,000 | 10,089,000 | |||||||||
| Intangible assets, net | 1,334,000 | 1,423,000 | 1,365,000 | |||||||||
| Other assets | 389,000 | 385,000 | 383,000 | |||||||||
| Total assets | $ | 128,059,000 | $ | 149,125,000 | $ | 157,164,000 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 8,931,000 | $ | 10,510,000 | $ | 12,623,000 | ||||||
| Note payable | 1,248,000 | 1,586,000 | 1,695,000 | |||||||||
| Accrued compensation | 2,682,000 | 1,910,000 | 2,589,000 | |||||||||
| Accrued liabilities | 10,366,000 | 14,252,000 | 10,489,000 | |||||||||
| Total current liabilities | 23,227,000 | 28,258,000 | 27,396,000 | |||||||||
| Note payable | 3,450,000 | 4,348,000 | 4,640,000 | |||||||||
| Other liabilities | 16,335,000 | 16,172,000 | 15,983,000 | |||||||||
| Deferred income taxes, net | 133,000 | 83,000 | 198,000 | |||||||||
| Commitments and contingencies | ||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Common stock | 164,000 | 163,000 | 163,000 | |||||||||
| Additional paid-in capital | 47,075,000 | 46,136,000 | 45,800,000 | |||||||||
| Retained earnings | 76,581,000 | 78,175,000 | 73,243,000 | |||||||||
| Treasury Stock | (38,906,000 | ) | (24,210,000 | ) | (10,259,000 | ) | ||||||
| Total stockholders' equity | 84,914,000 | 100,264,000 | 108,947,000 | |||||||||
| Total liabilities and stockholders' equity | $ | 128,059,000 | $ | 149,125,000 | $ | 157,164,000 | ||||||
| CACHE, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||
| FOR THE THIRTY NINE WEEKS ENDED | |||||||||
| September 27, | September 29, | ||||||||
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2008 |
2007 | |||||||
| Net sales | $ | 199,820,000 | $ | 195,953,000 | |||||
| Cost of sales, including occupancy and buying costs | 111,599,000 | 105,361,000 | |||||||
| Gross profit | 88,221,000 | 90,592,000 | |||||||
| Costs and expenses | |||||||||
| Store operating expenses | 71,741,000 | 72,703,000 | |||||||
| General and administrative expenses | 16,676,000 | 17,399,000 | |||||||
| Store exit costs | 2,757,000 | (78,000 | ) | ||||||
| 91,174,000 | 90,024,000 | ||||||||
| Operating income (loss) | (2,953,000 | ) | 568,000 | ||||||
| Other income (expense): | |||||||||
| Interest expense | (189,000 | ) | (78,000 | ) | |||||
| Interest income | 612,000 | 2,007,000 | |||||||
| Income (loss) before income taxes | (2,530,000 | ) | 2,497,000 | ||||||
| Income tax provision (benefit) | (936,000 | ) | 908,000 | ||||||
| Net income (loss) | $ | (1,594,000 | ) | $ | 1,589,000 | ||||
| Basic earnings (loss) per share | ($0.12 | ) | $ | 0.10 | |||||
| Diluted earnings (loss) per share | ($0.12 | ) | $ | 0.10 | |||||
| Basic weighted average shares outstanding | 13,372,000 | 16,189,000 | |||||||
| Diluted weighted average shares outstanding | 13,372,000 | 16,454,000 | |||||||
| CACHE, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||
| FOR THE THIRTEEN WEEKS ENDED | |||||||||
| September 27, | September 29, | ||||||||
| 2008 | 2007 | ||||||||
| Net sales | $ | 58,139,000 | $ | 60,572,000 | |||||
| Cost of sales, including occupancy and buying costs | 32,525,000 | 32,905,000 | |||||||
| Gross profit | 25,614,000 | 27,667,000 | |||||||
| Costs and expenses | |||||||||
| Store operating expenses | 23,040,000 | 23,072,000 | |||||||
| General and administrative expenses | 4,805,000 | 4,906,000 | |||||||
| Store exit costs | 449,000 | (78,000 | ) | ||||||
| 28,294,000 | 27,900,000 | ||||||||
| Operating income (loss) | (2,680,000 | ) | (233,000 | ) | |||||
| Other income (expense): | |||||||||
| Interest expense | (58,000 | ) | (78,000 | ) | |||||
| Interest income | 125,000 | 523,000 | |||||||
| Income (loss) before income taxes | (2,613,000 | ) | 212,000 | ||||||
| Income tax provision (benefit) | (967,000 | ) | 51,000 | ||||||
| Net income (loss) | $ | (1,646,000 | ) | $ | 161,000 | ||||
| Basic earnings (loss) per share | ($0.12 | ) | $ | 0.01 | |||||
| Diluted earnings (loss) per share | ($0.12 | ) | $ | 0.01 | |||||
| Basic weighted average shares outstanding | 13,229,000 | 15,988,000 | |||||||
| Diluted weighted average shares outstanding | 13,229,000 | 16,187,000 | |||||||
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