The Gymboree Corporation Reports Second Quarter Fiscal 2015 Results
- Net Sales of $273.5 million, an increase of 3.5% compared to the second quarter of fiscal 2014
- Comparable sales (including online sales) increased 2% during the second quarter of fiscal 2015
- Adjusted EBITDA was $11.1 million for the second quarter of fiscal 2015 compared to $9.6 million for the second quarter of fiscal 2014, an increase of 15.7%
San Francisco, Calif., September 10, 2015 - The Gymboree Corporation (the "Company") today reported consolidated financial results for the second fiscal quarter ended August 1, 2015.
Second Quarter Results (13-weeks ended August 1, 2015 versus 13-weeks ended August 2, 2014)
- Net sales were $273.5 million, compared to $264.3 million in the second quarter of fiscal 2014;
- Comparable sales (including online stores) increased 2%;
- Gross profit was $100.7 million, or 36.8% of net sales, compared to $96.4 million, or 36.5% of net sales, for the second quarter of fiscal 2014;
- Adjusted gross profit was $102.3 million, or 37.4% of net sales, compared to $98.2 million, or 37.1% of net sales, for the second quarter of fiscal 2014, an increase of 30 basis points;
- SG&A expense was $103.4 million, or 37.8% of net sales, compared to $107.1 million, or 40.5% of net sales, in the second quarter of fiscal 2014. The $3.8 million decline in SG&A expense was primarily driven by a decline in impairment charges of $3.2 million from the comparable prior year period;
- Adjusted SG&A expense was $100.8 million, or 36.9% of net sales, compared to $104.9 million, or 39.7% of net sales, in the second quarter of fiscal 2014;
- Adjusted EBITDA, defined as net loss attributable to The Gymboree Corporation before interest, income taxes and depreciation and amortization, adjusted for other items as described below, was $11.1 million compared to $9.6 million for the second quarter of fiscal 2014, an increase of $1.5 million;
- Adjusted EBITDA was negatively impacted by approximately $5 million as a result of receipt flow disruption driven by the west coast port slowdown; and
- Net loss attributable to The Gymboree Corporation for the quarter was $26.6 million compared to $31.2 million for the same quarter of fiscal 2014.
Adjusted EBITDA, Adjusted gross profit and Adjusted SG&A expense are not financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). For a description of Adjusted EBITDA and a reconciliation of these measures to GAAP measures, see "Non-GAAP Financial Measures" below and Exhibit D of this press release.
Balance Sheet Highlights
- As of the end of the second quarter of fiscal 2015, there were $70.0 million in borrowings outstanding under the Company's $225 million asset-backed loan facility and approximately $95.7 million of undrawn availability after being reduced by letters of credit of $30.4 million.
- Capital expenditures were $4.4 million during the second quarter of fiscal 2015.
- Inventory balances at the end of the second quarter of fiscal 2015 were $243.0 million, compared to $223.7 million at the end of the second quarter of fiscal 2014. On a per square foot basis, inventory cost was up 9% over the second quarter of fiscal 2014. Inventory units were up on a mid-teens percentage basis.
As previously announced, on May 5, 2015, the Company entered into an agreement to sell and lease-back its distribution center located in Dixon, California. Net proceeds received from the sale were $25.9 million of which approximately $10.9 million were restricted to fund capital expenditures or reduce the Company's liability under the Term loan.
Fiscal 2015 Business Outlook
The Company's fiscal 2015 outlook is based on the current economic environment trends, as well as management expectations for the remainder of the year.
For the full year, the Company continues to expect Adjusted EBITDA to be in the range of $95 million to $105 million, which includes the net impact to Adjusted EBITDA of approximately $11 million resulting from the west coast port slowdown in the first half of the year. Based on this guidance, the Company expects to have sufficient liquidity during fiscal 2015 to service its debt and invest in the business to drive long-term growth.
During fiscal 2015, the Company continues to plan to open approximately 12 stores and expects to close approximately 30 to 40 stores.
During fiscal 2015, the Company continues to anticipate spending approximately $25 million to $30 million for capital expenditures.
Non-GAAP Financial Measures
The Company defines "Adjusted EBITDA" as net loss attributable to The Gymboree Corporation before interest, income taxes, and depreciation and amortization ("EBITDA") adjusted for other items including, 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. The Company is likely to exclude these items from Adjusted EBITDA in the future and may also exclude other similar items, the effect of which is uncertain but may be significant in amount. The determination of the amounts that are excluded from non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts.
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 second quarter fiscal 2015 financial results and fiscal 2015 business outlook will be available to interested parties at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, September 10, 2015. 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, September 24, 2015, at 855-859-2056, passcode 93757199.
About The Gymboree Corporation
The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of August 1, 2015, the Company operated a total of 1,317 retail stores: 604 Gymboree® stores (550 in the United States, 48 in Canada, 1 in Puerto Rico and 5 in Australia), 172 Gymboree Outlet stores (171 in the United States and 1 in Puerto Rico), 150 Janie and Jack® shops (149 in the United States and 1 in Puerto Rico), and 391 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 712 franchised and Company-operated Gymboree Play & Music® centers in the United States and 42 other countries.
Gymboree, Janie and Jack, Crazy 8 and Gymboree Play & Music are registered trademarks of The Gymboree Corporation.
The foregoing financial information for the second quarter of fiscal 2015 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 2015 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 recent disruptions in the west coast ports and the timing of the ports resuming normal operations, ongoing volatility in the commodities markets, uncertainties relating to high levels of consumer debt and general economic conditions, volatility in the financial markets, potential data breaches of the Company's or the Company's vendors or suppliers computer networks, the Company's ability to anticipate and timely respond to changes in trends, consumer preferences and customer reactions to new merchandise (particularly given the Company's need to build up inventory significantly in advance of potential product sales), competitive market conditions, including promotional activities of the Company's competitors, success in meeting the Company's delivery targets, 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, the limited data available in the future upon which to base its expectations for stabilizing sales trends, 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 January 31, 2015, filed with the Securities and Exchange Commission ("SEC") on May 1, 2015. 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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