Charming Shoppes Q1 profit up
Charming Shoppes Inc, a leading multi-brand apparel retailer specializing in women's plus-size apparel, reported sales and operating results for the three month period ended April 30, 2011.
Commenting on the quarter, Anthony M. Romano, President and Chief Executive Officer of Charming Shoppes, Inc. said, "We are pleased to report year over year operating improvement in our first quarter, which was driven by a more fashionable apparel assortment and aggressive inventory management across all of our brands. Our 2% increase in consolidated comparable store sales was driven by a 7% comparable store sales increase at Lane Bryant, and sales through our e-commerce channel increased 16% for the quarter.
"Our Spring assortments of both core and fashion apparel are resonating with our customer, as evidenced by our increased conversion rates. However, traffic levels were down on a year over year basis and were below our expectations, particularly in the back half of the quarter. We did not see the typical sales and traffic builds leading up to the Easter holiday. In response, we will be more aggressive with our marketing efforts in an attempt to drive additional traffic to our stores and websites."
Consolidated adjusted EBITDA increased by $15.5 million compared to the year-ago quarter (refer to GAAP to non-GAAP reconciliation below) as a result of both improved gross profit and decreased operating expenses at each of the Company's brands. Consolidated gross profit dollars increased by $8.7 million and were primarily driven by higher gross profit dollars at Lane Bryant on a flat gross margin. The consolidated gross margin improved by 180 basis points as a percent of sales as a result of gross margin expansion at Fashion Bug and Catherines. Gross profit benefitted from improved assortments and inventory management, resulting in fewer markdowns compared to the year-ago period and faster turns of Spring merchandise.
Consolidated operating expenses decreased by $9.1 million or 170 basis points as a percent of sales during the period, primarily attributable to expense reductions at the Company's Lane Bryant brand. Leverage on operating expenses was driven by positive comparable store sales at Lane Bryant, as well as decreased marketing and store operating expenses. Across all brands, the Company experienced a higher penetration in the usage of private label credit cards, resulting in increased income from its card programs, which offsets selling, general and administrative expense.
The Company generated $62.9 million in cash during the quarter, and ended the period with total cash of $180.4 million.
Romano continued, "Looking ahead, we recognize that our consumer is facing a number of inflationary headwinds - including rising food and gasoline prices - that affect her disposable income and discretionary purchases. Sharp increases in cotton-based raw materials pricing were a modest factor in our first quarter results, but will have a greater impact for Fall and Holiday. We have only partially mitigated these price increases through value engineering product, shifting production to lower-cost countries, and adjusting our product mix. Additionally, each of our brands has strategically increased initial ticket pricing. However, there remains uncertainty of her ability and willingness to pay higher prices. We will make pricing adjustments as warranted to ensure an appropriate value proposition for our customer."