Tween Brands, Inc. (NYSE: TWB) today 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.
The Company recognized an income tax benefit of $10.7 million in
the second quarter of fiscal 2009 due to the pretax loss of $13.5
million as compared to the $4.5 million income tax benefit
recognized in conjunction with the pretax loss of $11.2 million in
2008. The amount of the second quarter tax benefit was driven by
the distribution of income and losses across legal entities and
among the taxing jurisdictions in which we operate, along with
expenses related to the proposed merger which are
non-deductible.
Capital
Investment
Capital expenditures for the second quarter of fiscal 2009 and
year-to-date were $2.4 million and $6.6 million, respectively. This
compares to $19.2 million and $40.8 million, respectively, for the
corresponding 2008 periods. Capital expenditures for fiscal 2009
net of cash tenant allowances received are expected to be
approximately $10 million, inclusive of the $6.6 million incurred
to date. This is primarily composed of store signage changes of
approximately $4 million, and new planned store openings as well as
remodels.
Balance Sheet
At August 1, 2009 the Company had total current assets of $247.8
million, including $71.5 million in cash and cash equivalents, and
total current liabilities of $107.8 million. Long term debt was
$163.3 million, inclusive of $14.3 million in current maturities of
long term debt. The Company’s current ratio was 2.3 and the
debt-to-equity ratio was 0.94.
Controlled
Inventories
Total inventories at the end of the second quarter of fiscal
2009 were down 18.5% per square foot at cost, compared to total
inventories at the end of the second quarter of fiscal 2008.
In-store inventories for the second quarter of fiscal 2009 were
down 19.0% per square foot at cost as compared to the second
quarter of 2008.
Stores
Tween Brands ended the quarter with 903 stores. During the
second quarter 2009, the Company closed 7 stores and 11 stores have
been closed year-to-date.
SEC Regulation
G
Results include non-cash store impairment charges related to 31
stores of $3.5 million and merger expenses of $1.9 million.
Excluding the store impairment charge of $3.5 million, or $0.04 of
net income per diluted share, and merger expenses of $1.9 million,
or $0.01 of net income per diluted share, the ongoing loss for the
quarter totaled $4.0 million or $0.16 per diluted share.
Reconciliation of second quarter net loss for the quarter and
loss per diluted share on a GAAP basis to net loss for the quarter
and loss per share on a non-GAAP basis:
Loss before
income taxes
(Benefit)/expense from
income taxes
Net
(Loss)/Income
(Loss)/Income
per share
Reported GAAP basis ($13,455 ) ($10,653 ) ($2,802 ) ($0.11 )
Adjustments: Merger expenses 1,867 2,052 (185 ) (0.01 ) Store
impairments 3,513 4,506 ( 993 )
(0.04 ) Non-GAAP basis ($8,075 ) ($4,095 ) ($3,980 ) ($0.16
)
Net loss and loss per diluted share, excluding the amounts shown
above are non-GAAP measures. Because management believes these
expenses may not be indicative of ongoing operations, management
believes that these non-GAAP measures are useful to investors as an
alternative method for measuring the Company’s operating
performance and comparing it against prior period’s
performance.
Merger Update
On June 25, 2009, the Company announced that it had entered into
a definitive agreement with Dress Barn, Inc. (NASDAQ: DBRN)
pursuant to which a subsidiary of Dress Barn will merge with the
Company in a stock-for-stock transaction. The transaction continues
on track with an anticipated completion in the fourth quarter of
calendar year 2009. On July 28, 2009, Dress Barn and the Company
submitted notification and report forms under the Hart Scott Rodino
Act with the FTC and the Antitrust Division of the U.S. Department
of Justice. In addition, on August 11, 2009, Dress Barn filed a
registration statement on Form S-4 with the Securities and Exchange
Commission. The Form S-4 contains the Company’s proxy statement.
Once the Form S-4 is declared effective, the Company will
distribute a definitive proxy statement to its stockholders in
connection with the stockholder meeting to vote on a proposal to
adopt the merger agreement.
Conference Call
Information
The Company will host a conference call beginning at 9:00 a.m.
EDT today to discuss this announcement and operating results for
the second quarter ended August 1, 2009. The phone number for the
live call is 877-407-8033 (international callers should use
201-689-8033). Reference the Tween Brands second quarter 2009
earnings conference call when dialing in to access the call.
Interested participants should call a few minutes before the 9:00
a.m. start in order to be placed in the queue.
A telephonic replay of the call will be available through
midnight, August 26, 2009 at 877-660-6853. The account #286 and ID
#330118 are required for access to the replay.
Webcast
This call is also being webcast over the Internet by Thomson and
is being distributed over their investor distribution network.
Individual investors can listen to the webcast at
http://www.earnings.com. Institutional investors can access the
webcast at http://www.streetevents.com. The webcast will also be
available at the Events Calendar page of Tween Brands' corporate
Web site, http://www.tweenbrands.com.
About Tween Brands,
Inc.
Headquartered in New Albany, Ohio, Tween Brands (NYSE:TWB) is
the largest premier tween specialty retailer in the world. Through
powerhouse brands Justice and Limited Too, Tween Brands provides
the hottest fashion merchandise and accessories for tween (age
7-14) girls.
Known as the destination for fashion-aware tweens, Justice
proudly features outgoing sales associates who assist girls in
expressing their individuality and self-confidence through fashion.
Visually-driven catazines and direct mail pieces reach millions of
tween girls annually, further positioning Tween Brands as a
preeminent retailer in the tween marketplace.
Over 900 Justice stores are located throughout the United States
and internationally. Additionally, Tween Brands offers its fashions
to tween girls and their parents through its e-commerce site,
www.shopjustice.com.
In August 2008 Tween Brands announced plans to transition to a
single brand taking the best of Limited Too and the best of Justice
to create a fresh, new Justice. Select Justice stores now carry a
Limited Too clothing line and these apparel items can also be found
online at http://www.shopjustice.com/.
With a focus on providing tween girls the absolute best
experience possible, Tween Brands looks toward the future with a
single store brand, a single focus, and a mission: to celebrate
tween girls through an extraordinary experience of fashion and fun
in an everything for her destination.
For more information visit www.tweenbrands.com and
www.shopjustice.com.
Safe Harbor Statement Under the
Private Securities Litigation Reform Act of 1995
This press release contains various "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "PSLRA"). Such statements can be identified by the use
of the forward-looking words "anticipate," "estimate," "project,"
"target," "predict," "believe," "intend," "plan," "expect," "hope,"
"risk," "could," "pro forma," "potential," "prospect," "forecast,"
"outlook" or similar words. These statements discuss future
expectations, contain projections regarding future developments,
operations or financial conditions, or state other forward-looking
information. These forward-looking statements involve various
important risks, uncertainties and other factors that could cause
our actual results to differ materially from those expressed. The
following factors, among others, could affect our future financial
performance and cause actual future results to differ materially
from those expressed or implied in any forward-looking statements
included in this press release:
-- The failure of Tween Brands, Inc’s stockholders to adopt the
merger agreement with Dress Barn;
-- Delays in or failure to obtain any required regulatory
approvals with respect to the merger;
-- Failure to consummate or delay in consummating the merger for
other reasons:
-- Effectiveness of converting Limited Too stores to Justice
stores;
-- Ability to convert Limited Too customers to the Justice
brand;
-- Risk that the benefits expected from the brand conversion
program will not be achieved or may take longer to achieve than
expected;
-- Ability to grow or maintain comparable store sales;
-- Decline in the demand for our merchandise;
-- Ability to develop new merchandise;
-- The impact of competition and pricing;
-- Level of mall and power center traffic;
-- Effectiveness of expansion into new or existing markets;
-- Effectiveness of store remodels;
-- Availability of suitable store locations at appropriate
terms;
-- Effectiveness of our brand awareness and marketing
programs;
-- Ability to enforce our licenses and trademarks;
-- Ability to hire, retain, and train associates;
-- Ability to successfully launch a new brand;
-- A significant change in the regulatory environment applicable
to our business;
-- Risks associated with our sourcing and logistics
functions;
-- Changes in existing or potential trade restrictions, duties,
tariffs or quotas;
-- Currency and exchange risks;
-- Changes in consumer spending patterns, consumer preferences
and overall economic conditions;
-- Ability to comply with restrictions and covenants in our
credit facility;
-- Ability to satisfy NYSE continued listing standards;
-- Potential impairment of long-lived assets;
-- Ability to service our debt;
-- The security of our computer networks
-- The potential impact of health concerns relating to severe
infectious diseases, particularly on manufacturing operations of
our vendors in Asia and elsewhere;
-- Outcome of various legal proceedings;
-- Impact of product recalls;
-- Acts of terrorism in the U.S. or worldwide; and
-- Other risks as described in other reports and filings we make
with the Securities and Exchange Commission.
Future economic and industry trends that could potentially
impact revenue and profitability are difficult to predict.
Therefore, there can be no assurance the forward-looking statements
included herein will prove to be accurate. The inclusion of
forward-looking statements should not be regarded as a
representation by us, or any other person, that our objectives will
be achieved. The forward-looking statements made herein are based
on information presently available to us as the management of Tween
Brands, Inc. We assume no obligation to publicly update or revise
our forward-looking statements even if experience or future changes
make it clear that any projected results expressed or implied
therein will not be realized.
Company home page: www.tweenbrands.com
Additional information and
where to find it
In connection with the proposed merger transaction, Dress Barn,
Inc. (“Dress Barn”) filed with the Securities and Exchange
Commission (“SEC”) a Registration Statement on Form S-4 containing
a proxy statement/prospectus for the stockholders of Tween Brands,
Inc. (“the Company”) and each of the Company and Dress Barn plan to
file other documents with the SEC regarding the proposed merger
transaction. The definitive proxy statement/prospectus will be
mailed to stockholders of the Company. BEFORE MAKING ANY VOTING OR
INVESTMENT DECISION, THE COMPANY’S STOCKHOLDERS AND INVESTORS ARE
URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE PROPOSED MERGER TRANSACTION. Company stockholders and other
investors will be able to obtain copies of these materials (when
they are available) without charge from the SEC through the SEC’s
Web site at www.sec.gov. These documents (when they are available)
can also be obtained free of charge from Dress Barn by directing a
request to Dress Barn, 30 Dunnigan Drive, Suffern, NY 10901
Attention: Investor Relations Department (telephone: 845-469-4602)
or accessing them on Dress Barn’s corporate Web site at
www.dressbarn.com, or from the Company by directing a request to
the Company, 8323 Walton Parkway, New Albany, OH 43054 Attention:
Investor Relations (telephone: 614 775-3739) or accessing them on
the Company’s corporate Web site at www.tweenbrands.com.
Dress Barn, the Company and certain of their respective
directors and executive officers may be deemed to be participants
in the solicitation of proxies from stockholders in connection with
the proposed transaction under the rules of the SEC. Information
about the directors and executive officers of Dress Barn may be
found in its 2008 Annual Report on Form 10-K filed with the SEC on
September 24, 2008 and in its definitive proxy statement relating
to its 2008 Annual Meeting of Shareholders filed with the SEC on
November 5, 2008. Information about the directors and executive
officers of the Company may be found in its 2008 Annual Report on
Form 10-K filed with the SEC on March 31, 2009 and in its
definitive proxy statement relating to its 2009 Annual Meeting of
Stockholders filed with the SEC on April 9, 2009. These documents
can be obtained free of charge from the sources indicated above.
Additional information regarding the interests of these
participants will also be included in the proxy
statement/prospectus regarding the proposed transaction when it
becomes available.
Tween Brands, Inc.
Consolidated Statements of Operations For the Thirteen
Weeks Ended August 1, 2009 and August 2, 2008 (unaudited, in
thousands, except per share amounts) Thirteen
Weeks Ended Thirteen Weeks Ended August 1, %
of August 2, % of 2009 Net Sales
2008 Net Sales Net sales $ 205,124 100.0 % $
223,102 100.0 %
Cost of goods sold, including
buying and occupancy costs
150,784 73.5 % 161,316 72.3 % Gross
income 54,340 26.5 % 61,786 27.7 %
Store operating, general
and administrative expenses
64,575 31.5 % 71,101 31.9 % Operating
loss (10,235 ) (5.0 %) (9,315 ) (4.2 %) Interest (income) (70 )
(0.0 %) (337 ) (0.2 %) Interest expense 3,290 1.6 %
2,207 1.0 % Loss before income taxes (13,455 ) (6.6
%) (11,185 ) (5.0 %) Benefit from income taxes (10,653 )
(5.2 %) (4,506 ) (2.0 %) Net Loss $ (2,802 ) (1.4 %) $
(6,679 ) (3.0 %) Loss per share: Basic $ (0.11
) $ (0.27 ) Diluted $ (0.11 ) $ (0.27 ) Weighted average
common shares: Basic 24,824 24,763
Diluted 24,824 24,763
Tween Brands, Inc.
Consolidated Statements of Operations For the Twenty-Six
Weeks Ended August 1, 2009 and August 2, 2008 (unaudited, in
thousands, except per share amounts) Twenty-Six Weeks
Ended Twenty-Six Weeks Ended August 1, %
of August 2, % of 2009 Net Sales
2008 Net Sales Net sales $ 410,349 100.0 % $
474,840 100.0 %
Cost of goods sold, including
buying and occupancy costs
291,018 70.9 % 326,713 68.8 % Gross
income 119,331 29.1 % 148,127 31.2 %
Store operating, general
and administrative expenses
127,523 31.1 % 148,993 31.4 % Operating
loss (8,192 ) (2.0 %) (866 ) (0.2 %) Interest (income) (184 ) (0.0
%) (898 ) (0.2 %) Interest expense 7,280 1.7 %
4,549 1.0 % Loss before income taxes (15,288 ) (3.7 %)
(4,517 ) (1.0 %) Benefit from income taxes (11,050 ) (2.7 %)
(2,119 ) 0.5 % Net Loss $ (4,238 ) (1.0 %) $ (2,398 ) (0.5
%) Loss per share: Basic $ (0.17 ) $ (0.10 )
Diluted $ (0.17 ) $ (0.10 ) Weighted average common shares:
Basic 24,817 24,749 Diluted
24,817 24,749
Tween Brands, Inc. Consolidated Balance Sheets
As of August 1, 2009 and January 31, 2009 (in thousands,
except share amounts) (Unaudited) August
1, January 31, 2009 2009 ASSETS
Current Assets: Cash and cash equivalents $ 71,545 $ 72,154
Investments - 8,000 Restricted assets 1,802 2,592 Accounts
receivable, net 37,358 35,607 Inventories, net 103,960 88,523 Store
supplies 17,186 18,053 Prepaid expenses and other current assets
15,940 17,734 Total current assets
247,791 242,663 Property and equipment, net 282,088 301,085
Other assets 3,497 1,710 Total
assets $ 533,376 $ 545,458
LIABILITIES
Current Liabilities: Accounts payable $ 30,108 $ 29,782
Accrued expenses 45,264 44,418 Deferred revenue 14,871 15,808
Current portion long-term debt 14,250 8,750 Income taxes payable
3,328 2,748 Total current liabilities
107,821 101,506 Long-term debt
149,000 157,500 Deferred tenant allowances from landlords 63,303
68,439 Supplemental retirement and deferred compensation liability
538 1,213 Accrued straight-line rent and other 39,339 41,027
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value,
50 million shares authorized
Common stock, $.01 par value, 100
million shares authorized, 37.1 million shares issued, 24.9
and 24.8 million shares outstanding at August 1, 2009
and January 31, 2009
371 371
Treasury stock, at cost, 12.3
million shares at August 1, 2009 and January 31, 2009
(362,459 ) (362,459 ) Paid in capital 193,796 192,367 Retained
earnings 346,725 350,963 Accumulated other comprehensive income
(5,058 ) (5,469 ) Total shareholders' equity
173,375 175,773 Total liabilities and
shareholders' equity $ 533,376 $ 545,458
Tween Brands,
Inc. Other Financial and Store Operating Information
(unaudited, dollars in thousands) Thirteen Weeks
Ended Twenty-Six Weeks Ended August 1, August
2, % August 1, August 2, %
2009 2008 Change 2009 2008
Change Gross income $ 54,340 $ 61,786 -12% $ 119,331
$ 148,127 -19% Gross income as percentage of net sales 26.5% 27.7%
29.1% 31.2% Depreciation expense $ 10,943 $ 10,999 -1% $ 21,831 $
21,374 2% Amortization of tenant allowances $ (2,914) $ (2,712) 7%
$ (5,930) $ (5,575) 6% Capital expenditures $ 2,385 $ 19,235 -88% $
6,637 $ 40,762 -84% Number of stores: Beginning of period
910 867 914 842 Opened - 29 - 57 Closed (7) (1) (11) (4) End of
period 903 895 903 895 Total gross square feet at period end
(thousands) 3,783 3,736 3,783 3,736 Comparable store sales %
change -12% -8% -18% -4%
Tween Brands (NYSE:TWB)
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