Women's apparel chain CBK Corp sees weak earnings in Q3

September 26, 2008 - United States Of America

Christopher & Banks Corporation reported results for its fiscal 2009 second quarter ended August 30, 2008.

Second Quarter Highlights:
• Total sales for the quarter ended August 30, 2008 were $131.6 million compared to $141.1 million for the quarter ended September 1, 2007.
• Same-store sales for the quarter ended August 30, 2008 were down 13 percent as compared to the quarter ended September 1, 2007.
• Net income for the second fiscal quarter ended August 30, 2008 was $0.8 million or $0.02 per diluted share. Results for the second quarter were reduced by a non-cash pre-tax long-lived asset impairment charge of $1.2 million, or $0.02 per diluted share, related to the Company’s Acorn division. In last year’s second quarter, the Company had net income of $3.4 million or $0.09 per diluted share.

Second Quarter Results:
Total sales for the quarter ended August 30, 2008 were $131.6 million compared to $141.1 million for the quarter ended September 1, 2007. Same-store sales for the quarter ended August 30, 2008 were down 13 percent compared to the quarter ended September 1, 2007.

Merchandise buying and occupancy expense was $81.5 million or 61.9% of sales this quarter compared to $90.6 million or 64.2% of sales in last year’s second quarter. Merchandise margins improved by 480 basis points. This improvement was partially offset by deleveraging of buying and occupancy costs as a result of a 13 percent decline in same-store sales during the quarter.

Second quarter selling, general and administrative (“SG&A”) expenses were $41.4 million, or 31.5% of sales this fiscal quarter, compared to $40.6 million or 28.8% of sales in the second quarter of last year. The increase in SG&A as a percent of sales was primarily due to a general deleveraging across most expense categories as a result of the 13 percent decline in same-store sales during the quarter.

Depreciation and amortization was $8.0 million in the second quarter this year compared to $5.5 million in the second quarter last year. Depreciation and amortization this year includes approximately $1.2 million in long-lived asset impairment charges at the Company’s Acorn division.

The Company’s second quarter net income was $0.8 million or $0.02 per diluted share. In last year’s second quarter, the Company had net income of $3.4 million or $0.09 per diluted share.

At the end of the fiscal quarter, the Company had $84.0 million in cash, cash equivalents and short-term investments. The Company also had approximately $18.5 million in long-term investments consisting of auction rate securities. This compares to $90.9 million in cash, cash equivalents and short-term investments as of the end of the comparable quarter last year. Last year the Company’s auction rate securities were classified as short-term investments.

Six Month Results:
Total sales for the six months ended August 30, 2008 were $291.3 million compared to $290.5 million for the same six month period ended September 1, 2007. Same-store sales for the six months ended August 30, 2008 declined six percent. Net income for the six months ended August 30, 2008 was $12.1 million or $0.34 per diluted share compared to $15.1 million or $0.42 per diluted share for the first six months of last year.

The Company operated 854 stores as of August 30, 2008 as compared to 807 stores at September 1, 2007.

Lorna Nagler, President and Chief Executive Officer, commented, “We expect the extremely challenging economic and retail environment to continue to adversely impact our near-term sales and earnings. However, we believe that the progress we continue to make with our merchandise assortment and on our strategic initiatives in e-Commerce, planning and allocation, marketing and sourcing will position us for stronger performance when the economy improves.”

Third Quarter Guidance:
For the third quarter of fiscal 2009, assuming the percentage decline in same-store sales will be similar to the decline that occurred during the second quarter, the Company currently estimates that operating earnings per diluted share, prior to the operating results and closing costs associated with the Acorn division, will range from $0.10 to $0.13.

As previously announced, the Company anticipates pre-tax expenses associated with the closing of its Acorn division to range in total from $7 million to $10 million, with the charges being incurred in the second, third and fourth quarters of fiscal 2009.

During the second quarter, the Company incurred $1.2 million of long-lived asset impairment charges associated with the closing of the Acorn division. The Company’s outlook for the third quarter of fiscal 2009 reflects management’s expectation that the current economic and retail environment will remain difficult.