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'We continue to make progress on the merger with Dress Barn' – TWB Chairman

Aug '09
Tween Brands, Inc. reported a second quarter net loss of $2.8 million, or $0.11 per diluted share, compared to a net loss of $6.7 million, or $0.27 per diluted share for the same period last year.

“While we faced the ongoing headwind of a tough economy, our business began to show improvement in the second quarter, particularly as the period progressed. The increased marketing efforts we had planned for the second quarter were meaningfully launched in June which, when combined with the positive response we have had to our back to school merchandise, allowed us to significantly improve comp store sales trends when compared to our first quarter of 2009,” said Michael Rayden, Tween Brands chairman and chief executive officer.

“We continue to make progress on the merger with Dress Barn, as well as our brand transition. At a time when the tween girl apparel market continues to contract, market research shows that we have actually begun to increase our market share. This demonstrates to us that our brand transition to Justice is effectively doing what we had anticipated as our value message is reaching consumers and they are acting on it. We plan to continue to reinforce this message so that we can accelerate our market share momentum,” said Rayden.

Quarter Performance Analysis
Net sales for the second quarter of fiscal 2009 declined 8.1% to $205.1 million compared to the $223.1 million in 2008, driven predominantly by a 12% decline in comparable store sales. The decline is attributable to the ongoing macroeconomic pressures and the strong performance associated with Webkinz in 2008.

Gross income for the second quarter of fiscal 2009 totaled $54.3 million, or 26.5% of net sales. This compares to second quarter 2008 gross income of $61.8 million, or 27.7% of net sales. The year-over-year decline as a percentage of net sales was primarily attributable to the inability to leverage the $2.3 million reduction in buying and occupancy expense, primarily because of the inclusion of a $3.5 million pretax store impairment charge.

The Company recognized a $3.5 million pretax impairment charge in the second quarter, reflecting an adjustment of store assets. The non-cash store asset impairment charge related to 31 stores offset an otherwise significant decline in buying and occupancy expenses during the period.

Store operating, general and administrative expenses, inclusive of merger-related expenses of $1.9 million, improved substantially to $64.6 million from $71.1 million in 2008. The majority of the improvement was associated with reductions in store payroll, home office headcount, and marketing expense. Although net sales declined by 8.1%, SG&A improved by 40 basis points as a percentage of net sales.

Net interest expense was $3.2 million for the second quarter of fiscal 2009 compared to $1.9 million in 2008. The increase was primarily due to higher interest rates in 2009 related to the Company's February 23, 2009 amended credit facility.

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