The Gymboree Corporation Reports Fourth Quarter and Fiscal Year 2013 Results
San Francisco, Calif., April 30, 2014 - The Gymboree Corporation (the "Company") today reported consolidated financial results for the fiscal fourth quarter and full year ended February 1, 2014.
Full year results include:
- Net sales of $1.24 billion; comparable sales decreased 6%,
- Adjusted gross margin of 39.0%, up approximately 30 basis points versus last year,
- Adjusted EBITDA of $119.7 million, a decrease of 26% versus last year, and
- Reduced outstanding debt by approximately $25 million.
"The fourth quarter marked an end to a challenging year for the Company, and clearly we are disappointed with our performance," said Mark Breitbard, Chief Executive Officer. "We remain focused on four key areas to improve the long term performance of the business: solidifying our team, delivering compelling product, improving inventory management and upgrading our infrastructure. We made steady progress in 2013, but the full impact of our efforts is not yet reflected in our financial results. We expect to build upon these priorities in 2014, with a more meaningful impact in the second half of the year."
Fourth Quarter Results
- Net sales were $351.0 million, compared to $397.6 million in net sales for the 14 weeks ended February 2, 2013. The additional week in fiscal year 2012 added $19 million in net sales to the fourth quarter.
- Comparable sales (including online stores) declined 9% compared to the fourth quarter of fiscal 2012.
- Gross profit was $124.5 million, or 35.5% of net sales, compared to $144.8 million, or 36.4% of net sales, for the fourth quarter of fiscal 2012.
- Adjusted gross profit was $126.6 million, or 36.1% of net sales, compared to $147.4 million, or 37.1% of net sales, for the fourth quarter of fiscal 2012. Adjusted gross profit excludes purchase accounting adjustments of $2.1 million and $2.6 million for the fourth quarter of fiscal 2013 and the fourth quarter of fiscal 2012, respectively, relating to the November 2010 acquisition of the Company by investment funds sponsored by Bain Capital Partners, LLC (the "Acquisition") (see Exhibit D for relevant reconciliation information).
- SG&A expense was $126.6 million, or 36.1% of net sales, compared to $125.4 million, or 31.5% of net sales, in the fourth quarter of fiscal 2012.
- Adjusted SG&A expense was $122.6 million, or 34.9% of net sales, compared to $112.5 million, or 28.3% of net sales, in the fourth quarter of fiscal 2012. Adjusted SG&A excludes $4.0 million and $12.9 million, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments and non-recurring adjustments (see Exhibit D for relevant reconciliation information).
- The Company recorded a $157.2 million non-cash goodwill and intangible asset impairment charge in the fourth quarter of fiscal 2013. No such charge was recorded in the fourth quarter of fiscal 2012.
- Net loss for the quarter was $169.8 million compared to $5.4 million for the same quarter of fiscal 2012.
- Adjusted EBITDA, defined as net loss attributable to The Gymboree Corporation before interest (income) expense, income taxes and depreciation and amortization, adjusted for other items described above, was $25.0 million compared to $47.7 million for the fourth quarter of fiscal 2012.
Adjusted EBITDA is not a financial measure under U.S. generally accepted accounting principles ("GAAP"). For a description of these measures, see "Non-GAAP Financial Measures" below. A reconciliation of net loss attributable to The Gymboree Corporation to Adjusted EBITDA presented herein is included in Exhibit D of this press release.
The Company's fourth quarter and full fiscal year 2013 results reflect the 13 and 52 week periods ended February 1, 2014, and compare to the 14 and 53 week periods ended February 2, 2013. Comparable sales for the fourth quarter and fiscal year 2013 were calculated using the 13 and 52 week periods ended February 1, 2014, compared to the 13 and 52 week periods ended February 2, 2013, respectively.
Fiscal Year 2013
- Net sales were $1.24 billion compared to $1.28 billion for the 53 weeks ended February 2, 2013.. The additional week added $19 million in net sales to fiscal 2012.
- Comparable sales (including online stores) decreased 6% compared to fiscal 2012.
- Gross profit was $476.0 million, or 38.2% of net sales, compared to $481.4 million, or 37.7% of net sales, for fiscal 2012.
- Adjusted gross profit was $485.8 million, or 39.0% of net sales, compared to $493.1 million, or 38.7% of net sales, in fiscal 2012. Adjusted gross profit excludes purchase accounting adjustments of $9.8 million and $11.7 million in fiscal 2013 and fiscal 2012, respectively (see Exhibit D for relevant reconciliation information).
- SG&A expense was $443.9 million, or 35.7% of net sales, compared to $411.7 million, or 32.3% of net sales, in the prior year. SG&A in fiscal 2013 included a $7.6 million asset impairment charge related to underperforming stores and a $3.1 million asset impairment charge related to an abandonment of assets. SG&A in fiscal 2012 included a $1.9 million asset impairment charge related to underperforming stores.
- Adjusted SG&A expense was $430.6 million, or 34.6% of net sales, compared to $383.1 million, or 30.0% of net sales, in fiscal 2012. Adjusted SG&A excludes $13.3 million and $28.6 million in fiscal 2013 and 2012, respectively, of additional costs resulting from the Acquisition, including the effect of purchase accounting adjustments and non-recurring adjustments (see Exhibit D for relevant reconciliation information).
- The Company recorded a $157.2 million non-cash goodwill and intangible asset impairment charge in fiscal 2013. No such charge was recorded in fiscal 2012.
- Net loss for fiscal year 2013 was $206.4 million compared to $10.4 million for the same period last year.
- Adjusted EBITDA totaled $119.7 million, compared to $161.8 million for fiscal 2012 (see "Non-GAAP Financial Measures" included in Exhibit D of this press release for a reconciliation of Adjusted results to GAAP).
Goodwill and other Intangible Asset Impairment
In the fourth quarter of fiscal 2013, as a result of the recent decline in the performance of its business, the Company recorded a $157.2 million non-cash goodwill and intangible asset impairment charge. This impairment charge does not have any effect on the Company's operations, liquidity or debt covenants, and does not change management's long-term business outlook and strategy.
Balance Sheet Highlights
- There were no borrowings outstanding under the Company's $225 million asset-backed loan facility and approximately $127.6 million of undrawn availability.
- Cash was $39.4 million, an increase of $6.1 million from $33.3 million at the end of fiscal 2012.
- During fiscal 2013 the Company reduced its outstanding debt by approximately $24.8 million.
- Capital expenditures were $52.6 million during fiscal 2013.
- Inventory balances at the end of fiscal 2013 were $175.5 million, compared to $197.9 million at the end of fiscal 2012. On a per square foot basis inventory cost was down 16% and inventory units declined in the high teens.
Fiscal 2014 Business Outlook
The Company's fiscal 2014 outlook is based on the current economic environment and trends, as well as management's expectations for the remainder of the year.
The Company anticipates Adjusted EBITDA for the first quarter of fiscal 2014 to be in the range of $17 million to $22 million. This expectation reflects a comparable sales decline of low double digits quarter to date with an improvement in trend in April. The Company expects inventory cost and units on a per square foot basis at quarter end to be down in the high teens versus the same quarter of fiscal 2013.
For the full year, the Company expects Adjusted EBITDA to be approximately flat compared to fiscal 2013. Based on this guidance, the Company expects to have sufficient liquidity during fiscal 2014 to service its debt and invest in the business to drive long-term growth.
During fiscal 2014, the Company plans to open approximately 50 new stores, distributed fairly evenly across the brands, and close approximately 25 to 30 stores.
During fiscal 2014, the Company anticipates spending approximately $40 million to $45 million for capital expenditures.
Non-GAAP Financial Measures
The Company defines "Adjusted EBITDA" as net income (loss) attributable to The Gymboree Corporation before interest (income) expense, income tax expense (benefit), and depreciation and amortization ("EBITDA") adjusted for other items including (gain) or loss on extinguishment of debt, non-cash share-based compensation, loss on disposal/impairment of assets and sponsor management fees and expenses, as well as the impact of purchase accounting adjustments resulting from the Acquisition and other non-recurring or unusual items.
Adjusted EBITDA is a non-GAAP measure but is considered an important supplemental measure of the Company's performance and is believed to be used frequently by securities analysts, investors and other interested parties in the evaluation of similar retail companies. Adjusted EBITDA is not a presentation made in accordance with GAAP and the Company's computation of Adjusted EBITDA may vary from others in the industry. Adjusted EBITDA should not be considered an alternative to operating income or net income, as a measure of operating performance or cash flow, or as a measure of liquidity. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP (see Exhibit D for a reconciliation of Adjusted EBITDA to net loss attributable to The Gymboree Corporation).
The live broadcast of the discussion of fourth quarter and fiscal 2013 financial results and fiscal 2014 business outlook will be available to interested parties at 1:00 p.m. PT (4:00 p.m. ET) on Wednesday, April 30, 2014. To listen to the live broadcast over the internet, please log on to www.gymboree.com, click on "Company Information" at the bottom of the page, go to "Investor & Media" and then "Conference Calls & Webcasts." A replay of the call will be available two hours after the broadcast through midnight PT, Wednesday, May 7, 2014, at 855-859-2056, passcode 12112024.
About The Gymboree Corporation
The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of February 1, 2014, the Company operated a total of 1,323 retail stores: 626 Gymboree® stores (576 in the United States, 43 in Canada, 1 in Puerto Rico and 6 in Australia), 167 Gymboree Outlet stores (165 in the United States and 2 in Puerto Rico), 140 Janie and Jack® shops and 390 Crazy 8® stores in the United States. The Company also operates online stores at www.gymboree.com, www.janieandjack.com and www.crazy8.com, and offers directed parent-child developmental play programs at 708 franchised and Company-operated Gymboree Play & Music® centers in the United States and 41 other countries.
The foregoing financial information for the fourth fiscal quarter and the fiscal year ended February 1, 2014 is unaudited and subject to quarter-end and year-end adjustments. This press release includes forward-looking statements, including statements relating to The Gymboree Corporation's anticipated future financial performance, especially those set forth under the heading "Fiscal 2014 Business Outlook." These forward-looking statements generally can be identified by the use of words such as "anticipate," "expect," "plan," "could," "may," "will," "believe," "estimate," "forecast," "goal," "project," and other words of similar meaning. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. The Company presently considers the following risks and uncertainties to be important factors that could cause actual results to differ materially from the Company's expectations: the ongoing volatility in the commodities market for cotton, uncertainties relating to high levels of unemployment and consumer debt, volatility in the financial markets, general economic conditions, the Company's ability to anticipate and timely respond to changes in trends, consumer preferences and customer reactions to new merchandise and concepts, competitive market conditions, success in meeting the Company's delivery targets, the Company's promotional activity, gross margin achievement, the Company's ability to appropriately manage inventory, effects of future embargos from countries used to source product, the Company's ability to attract and retain key personnel and other qualified team members, and other factors, including those discussed under "Risk Factors" in "Item 1A, Risk Factors," of the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2013, filed with the Securities and Exchange Commission ("SEC") on May 2, 2013, and its subsequent SEC filings, including under "Item 1A, Risk Factors" in its quarterly report on Form 10-Q for the quarterly period ended November 2, 2013. The Company cautions investors to carefully consider the risks associated with, and not to place considerable reliance on, the forward-looking statements contained in this press release. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements.
Gymboree, Janie and Jack, Crazy 8, and Gymboree Play & Music are registered trademarks of The Gymboree Corporation.
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