Gymboree Reports Increased Sales and Adjusted EBITDA in the Fourth Quarter of Fiscal 2014
San Francisco, Calif., April 23, 2015 - The Gymboree Corporation (the "Company") today reported consolidated financial results for the fourth quarter and fiscal year ended January 31, 2015.
Fourth Quarter Highlights include:
- Net sales of $375.6 million, increased 7% from the fourth quarter of fiscal 2013,
- Comparable sales (including online sales) increase of 5% with increases in all brands,
- Adjusted gross profit margin of 37.2%, an increase of approximately 110 basis points versus last year, and
- Adjusted EBITDA of $32.3 million increased 29.1% from the fourth quarter last year.
"We're very pleased with the progress we made in the fourth quarter across our businesses, particularly in Janie and Jack and Crazy 8," said Mark Breitbard, Chief Executive Officer. "Gymboree brand continues to be our primary focus and we believe we have the right initiatives and strategies in place to achieve our 2015 plans."
Fiscal 2014 Fourth Quarter Results (13 weeks ended January 31, 2015 versus 13 weeks ended February 1, 2014)
- Net sales were $375.6 million, compared to $351.0 million in the fourth quarter of fiscal 2013, an increase of 7%.
- Comparable sales (including online sales) increased 5% compared to the fourth quarter of fiscal 2013.
- Gross profit was $137.9 million, or 36.7% of net sales, compared to $124.5 million, or 35.5% of net sales for the fourth quarter of fiscal 2013.
- Adjusted gross profit was $139.7 million, or 37.2% of net sales, compared to $126.6 million, or 36.1% of net sales, for the fourth quarter of fiscal 2013.
- SG&A expense was $125.2 million, or 33.3% of net sales, compared to $126.6 million, or 36.1% of net sales in the fourth quarter of fiscal 2013.
- Adjusted SG&A expense was $123.1 million, or 32.8% of net sales, compared to $122.6 million, or 34.9% of net sales in the fourth quarter of fiscal 2013.
- 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 $32.3 million compared to $25.0 million for the fourth quarter of fiscal 2013.
- Net loss attributable to The Gymboree Corporation for the quarter was $7.4 million compared to $167.2 million for the same period last year. The Company recorded a $157.2 million non-cash goodwill and intangible asset impairment charge in the fourth quarter of fiscal 2013.
Fiscal Year 2014 (52 weeks ended January 31, 2015 versus 52 weeks ended February 1, 2014)
- Net sales were $1.23 billion compared to $1.24 billion in fiscal year 2013.
- Comparable sales (including online sales) decreased 3% compared to fiscal 2013.
- Gross profit was $468.5 million, or 38.1% of net sales, compared to $476.0 million, or 38.2% of net sales for fiscal 2013.
- Adjusted gross profit was $475.8 million, or 38.7% of net sales, compared to $485.8 million, or 39.0% of net sales in fiscal 2013.
- SG&A expense was $448.4 million, or 36.5% of net sales, compared to $443.9 million, or 35.7% of net sales in the prior year. SG&A expense in fiscal 2014 included a $6.0 million asset impairment charge related to underperforming stores. SG&A expense 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 abandonment of assets.
- Adjusted SG&A expense was $441.2 million, or 35.9% of net sales, compared to $430.6 million, or 34.6% of net sales in fiscal 2013.
- Adjusted EBITDA totaled $93.7 million, compared to $119.7 million for fiscal 2013.
- Net loss attributable to The Gymboree Corporation for fiscal year 2014 was $574.1 million compared to $203.0 million for the same period last year. The Company recorded a $591.4 million non-cash goodwill and intangible asset impairment charge in the third quarter of fiscal 2014. The Company recorded a $157.2 million non-cash goodwill and intangible asset impairment charge in the fourth quarter of fiscal 2013.
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 and Other Highlights
- There were $33.0 million in borrowings outstanding under the Company's $225 million asset-backed loan facility and approximately $103.3 million of undrawn availability after deducting letters of credit and outstanding borrowings at the end of the fourth quarter of fiscal 2014.
- Capital expenditures were $32.0 million during fiscal 2014.
- Inventory balances at the end of fiscal 2014 were $198.3 million compared to $175.5 million at the end of fiscal 2013. On a per square foot basis, inventory cost increased 13% year over year and inventory units increased by a mid-teen percentage year over year.
Fiscal 2015 Business Outlook
The Company's fiscal 2015 outlook is based on current economic environment trends, as well as management expectations for the remainder of the year.
The Company anticipates Adjusted EBITDA for the first quarter of fiscal 2015 to be in the range of $12 million to $15 million. This expectation reflects flat to slightly negative comparable sales, as well as the impact of the port slowdown, which is estimated to negatively impact Adjusted EBITDA by approximately $6 million.
For the full year, the Company expects Adjusted EBITDA to be in the range of $95 million to $105 million, which includes a negative impact to Adjusted EBITDA of approximately $9 million to $12 million resulting from the 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 plans to open approximately 12 stores and expects to close approximately 30 to 40 stores.
During fiscal 2015, the Company anticipates 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 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. 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 fourth quarter and fiscal 2014 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, April 23, 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, Thursday, May 7, 2015, at 855-859-2056, passcode 91942931.
About The Gymboree Corporation
The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of January 31, 2015, the Company operated a total of 1,326 retail stores: 608 Gymboree® stores (554 in the United States, 48 in Canada, 1 in Puerto Rico and 5 in Australia), 169 Gymboree Outlet stores (168 in the United States and 1 in Puerto Rico), 147 Janie and Jack® shops and 402 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 698 franchised and Company-operated Gymboree Play & Music® centers in the United States and 41 other countries.
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" and the Company's expectation that it has the right initiatives and strategies in place to achieve its goals in 2015. 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, if at all, the 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 February 1, 2014, filed with the Securities and Exchange Commission ("SEC") on May 2, 2014. 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.