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The Children's Place Reports Second Quarter 2012 Financial Results

Outlook

The Company updated its earnings guidance for fiscal 2012 and now projects that non-GAAP adjusted earnings per diluted share will be between $3.20 and $3.30, compared to its previous guidance of $3.15 to $3.30, assuming positive low-single digit comparable retail sales.

The Company provided initial guidance for the third quarter of 2012, and is forecasting non-GAAP adjusted earnings per diluted share between $1.53 and $1.58, assuming positive low-single digit comparable retail sales.

This earnings guidance assumes that currency exchange rates will remain consistent with today's rates, and does not include the impact of further potential share repurchases.

Consolidating US Distribution Centers

The Company plans to consolidate into a single US distribution center in the Southeast in order to more effectively manage its inventory and optimize capacity. Its Southeast distribution center, located in Fort Payne, Alabama, is the Company's newest, largest and most efficient facility. The Company plans to cease operations in its Northeast distribution center located in Dayton, NJ effective December 31, 2012. The closure of the Northeast distribution center is expected to result in annual savings in excess of $4 million. This will result in charges of approximately $5 million in the third quarter and $11 million in the fourth quarter of 2012, which are excluded from non-GAAP adjusted earnings per share guidance for those periods.

Conference Call Information

The Children's Place will host a conference call to discuss its second quarter 2012 results today at 8:00 a.m. Eastern Time. The call will be broadcast live at http://investor.childrensplace.com . An audio archive will be available on the Company's website approximately one hour after the conclusion of the call.

About The Children's Place Retail Stores, Inc.

The Children's Place is the largest pure-play children's specialty apparel retailer in North America. The Company designs, contracts to manufacture and sells fashionable, high-quality merchandise at value prices, primarily under the proprietary "The Children's Place" brand name. As of July 28, 2012, the Company operated 1,080 stores and an online store at www.childrensplace.com .

Forward Looking Statements

This press release (and the above referenced call) may contain certain forward-looking statements regarding future circumstances, including statements relating to the Company's positioning, and forecasts regarding store openings and earnings per diluted share from continuing operations. These forward-looking statements are based upon the Company's current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results and performance to differ materially. Some of these risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission, including in the "Risk Factors" section of its annual report on Form 10-K for the fiscal year ended January 28, 2012. Included among the risks and uncertainties that could cause actual results and performance to differ materially are the risk that the Company will be unsuccessful in gauging fashion trends and changing consumer preferences, the risks resulting from the highly competitive nature of the Company's business and its dependence on consumer spending patterns, which may be affected by the continued weakness in the economy or by other factors such as increases in the cost of gasoline and food, and the uncertainty of weather patterns. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

(Tables Follow)
 
 
Table 1
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
         
         
  Second Quarter Ended Year-to-Date Ended
  July 28, July 30, July 28, July 30,
  2012 2011 2012 2011
         
Net sales  $ 360,826  $ 343,508  $ 799,334  $ 774,314
Cost of sales  246,583  227,943  508,304  475,102
Gross profit  114,243  115,565  291,030  299,212
Selling, general and administrative expenses  120,308  111,885  242,460  228,607
Asset impairment charges  280  980  1,530  1,378
Other costs  3,062  --   3,896  -- 
Depreciation and amortization   17,482  18,478  34,700  36,229
Operating income (loss)  (26,889)  (15,778)  8,444  32,998
Interest (expense), net  (30)  (314)  (81)  (585)
Income (loss) before taxes  (26,919)  (16,092)  8,363  32,413
Provision (benefit) for income taxes  (8,930)  (6,315)  2,760  13,106
Net income (loss)  $ (17,989)  $ (9,777)  $ 5,603  $ 19,307
         
         
Earnings (loss) per common share        
Basic  $ (0.74)  $ (0.38)  $ 0.23  $ 0.74
Diluted  $ (0.74)  $ (0.38)  $ 0.23  $ 0.74
         
Weighted average common shares outstanding        
Basic  24,249  25,738  24,392  25,925
Diluted  24,249  25,738  24,533  26,163
 
 
 
Table 2
THE CHILDREN'S PLACE RETAIL STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
  July 28, January 28, July 30,
  2012 2012* 2011
Assets:      
Cash and cash equivalents  $ 158,621  $ 176,655  $ 151,503
Accounts receivable  23,408  17,382  22,760
Inventories  239,012  212,916  244,061
Other current assets  64,793  66,372  64,576
Total current assets  485,834  473,325  482,900
       
Property and equipment, net  330,838  323,863  331,277
Other assets, net  51,878  53,461  59,074
Total assets  $ 868,550  $ 850,649  $ 873,251
       
Liabilities and Stockholders' Equity:      
Accounts payable  $ 72,809  $ 55,516  $ 67,738
Accrued expenses and other current liabilities  94,683  76,039  85,011
Total current liabilities  167,492  131,555  152,749
       
Other liabilities  113,314  109,728  120,623
Total liabilities  280,806  241,283  273,372
       
Stockholders' equity  587,744  609,366  599,879
       
Total liabilities and stockholders' equity  $ 868,550  $ 850,649  $ 873,251
       
       
*   Derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2012.
 
 
 
Table 3
THE CHILDREN'S PLACE RETAIL STORES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION TO GAAP
(In thousands, except per share amounts)
(Unaudited)
         
         
  Second Quarter Ended Year-to-Date Ended
  July 28, July 30, July 28, July 30,
  2012 2011 2012 2011
         
Net income (loss)  $(17,989)  $ (9,777)  $ 5,603  $ 19,307
         
Non-GAAP adjustments:        
Expenses:        
Store Impairment due to early termination  --   --   1,250  -- 
West Coast DC exit costs  3,062  --   3,896  -- 
Restructuring severance costs  --   --   1,971  -- 
Obsolete supply and fixture costs  164  --   883  -- 
Legal Settlement  1,087  --   1,087  -- 
Accelerated depreciation for Canadian store remodels  465  --   1,358  -- 
Aggregate impact of Non-GAAP adjustments  4,778  --   10,445  -- 
Income tax effect  (1,849)  --   (3,994)  -- 
Adjusted impact from Non-GAAP adjustments  2,929  --   6,451  -- 
         
Adjusted net income (loss)  $(15,060)  $ (9,777)  $ 12,054  $ 19,307
         
GAAP net income (loss) per common share  $ (0.74) $ (0.38) $0.23 $0.74
         
Adjusted net income (loss) per common share $ (0.62) $ (0.38) $0.49 $0.74
CONTACT: Jane Singer
         Vice President
         Investor Relations
         (201) 453-6955

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