Apparel retailer Charming Shoppes Inc. (CHRS) on Wednesday posted a narrower loss for the third quarter, aided by lower expenses, despite a 17% drop in top line.
Net loss for the latest quarter was $48.4 million or $0.42 per share, compared to a net loss of $83.8 million or $0.73 per share in the previous year.
The most recent quarter included restructuring charges of $14.7 million, comprising lease termination charges and accelerated depreciation on discontinued or divested catalog businesses. The year-earlier quarter reflected charges of $20.2 million for the impairment of store assets and restructuring charges of $6.4 million related to consolidation and streamlining initiatives.
The Bensalem, Pennsylvania-based company's third-quarter net loss from continuing operations was $48.4 million or $0.42 per share, narrower than $59.9 million or $0.52 per share in the year-ago quarter.
On a non-GAAP basis, loss from continuing operations before income tax narrowed to $43.4 million or $0.37 per share from $71.7 million or $0.62 per share in the same quarter of last year.
On average, 3 analysts polled by Thomson Reuters expected the company to post a loss of $0.13 per share. Analysts' estimates typically exclude certain items.
Quarterly net sales totaled $460.2 million, 16.8% lower than the previous year's $553.1 million, and fell shy of the $486.03 million revenue consensus estimate of two Wall Street analysts.
The company noted that the 16.8% downswing in net sales reflects a 13% drop in comparable store sales, the impact of store closings, and a 6% increase in e-commerce sales. Same store inventories decreased 17%.
E-commerce sales rose 6% to $21.7 million from $20.5 million last year. Comparable store sales dropped 14% at both Lane Bryant and Fashion Bug brands, and 5% at Catherines brands.
Jim Fogarty, President and Chief Executive Officer of Charming Shoppes, said, "During the quarter, we closed on the sale of our private label credit operations, significantly bolstering our liquidity and leverage profile. At the end of the quarter, liquidity totaled $421 million and our leverage reflected debt, net of cash, of $14 million."
While the company's gross margin rate improved 560 basis points, gross profit declined 7%, as rate improvement did not fully offset the sales declines. Charming Shoppes' expense management more than offset gross profit downturns and allowed the company to make progress on key financial priorities, including focus on the customer, stabilize and begin to grow profitable revenue, increase EBITDA, increase cash flow, and employee empowerment with accountability.
Total operating expenses fell 14.2% to $276.9 million from $322.6 million incurred in the same quarter of last year.
Occupancy and Buying expense decreased 10.8% to $95.0 million from $106.6 million a year ago, primarily related to the operation of fewer stores and rent reductions related to lease renegotiations. Selling, general and administrative expense declined 18.6% to $135.5 million from $166.3 million last year, primarily related to expense reduction initiatives and the closing of under-performing stores. Depreciation and Amortization expense dropped 21.2% to $18.3 million from $23.1 million a year earlier.
The company's overall cash position during the recent quarter increased by about $107.2 million to $224.3 million, primarily due to the proceeds from the sale of the credit card receivables program, cash freed up that was previously set aside to satisfy regulatory requirements in the operation of the company's former credit card bank, and the receipt of a federal income tax refund received during the quarter, somewhat offset by seasonal working capital needs and repurchases of its Notes.
During the third quarter, Charming Shoppes decided to close the Petite Sophisticate Outlet stores and convert the majority of the space to Catherines outlet locations. The company converted five stores already, with an additional 28 stores to be converted to Catherines outlet locations by February 2010.
For the nine-month period, the company's net loss was $49.9 million or $0.43 per share, compared to a loss of $141.3 million or $1.23 per share in the nine months ended November 1, 2008.
The company reported loss from continuing operations of $49.9 million or $0.43 per share, compared to a loss of $66.4 million or $0.58 per share in the prior-year period.
For nine months, non-GAAP loss from continuing operations before income tax was $39.6 million or $0.34 per share, compared to a loss of $81.7 million or $0.71 per share in the corresponding period of the previous year.
Net sales for the year-to-date period were $1.53 billion, down from $1.84 billion reported in the year-earlier period.
Among other players in the field, Ann Taylor Stores Corp. (ANN) posted a third-quarter net income of $2.07 million or $0.03 per share, compared to a loss of $13.45 million or $0.24 per share a year ago, aided by strong gross margin growth as well as cost saving initiatives, despite a drop in quarterly revenues. Net sales decreased to $462.41 million from $527.22 million last year.
Another peer, Talbots Inc. (TLB) is scheduled to report financial results for the third quarter on December 8, 2009. Talbots expects to report a loss from continuing operations of about $0.24 - $0.30 per share, excluding restructuring and impairment charges. This projection is based on a top-line sales decline estimate of about 14% - 17%. Analysts currently expect a loss of $0.15 per share on revenues of $318.53 million for the third quarter.
CHRS shares, which have been trading between $0.45 and $5.84 in the past 52 weeks, closed Tuesday's trading session at $4.80, down 2 cents or 0.41%.
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