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Christopher & Banks Corporation Reports Second Quarter Fiscal 2019 Financial Results

MINNEAPOLIS--(BUSINESS WIRE)--

– Net Sales of $83.4 million reflecting 4.1 % comparable sales decrease –
– Adjusted EBITDA* Improved $1.4 Million Through Gross Margin Rate Expansion and Lower SG&A –
– Comparable Sales in the Third Quarter to-Date Running Positive Mid-Single Digits –

Christopher & Banks Corporation (CBKC), a specialty women’s apparel retailer, today reported results for the second quarter ended August 3, 2019.

Keri Jones, President and Chief Executive Officer, commented, “Our second quarter results reflect meaningful progress on our initiatives to drive improved bottom line performance. The $1.4 million year over year improvement in Adjusted EBITDA* reflects a combination of a higher gross margin rate and lower SG&A as we continue to drive merchandise margin expansion, advance our real estate optimization strategies and benefit from our cost reduction initiatives. While our top line initiatives have been slower to take hold, we are very pleased to see positive comparable sales for the third quarter-to-date in both brick and mortar stores, and in our eCommerce channel. We are confident that we are on the right path to delivering improved sales performance based on the continuation of higher conversion rates, increased full-price sell-through and the growth we experienced in new and reactivated customers during the second quarter. Based on current trends, we are confident that we have more than sufficient cash resources and liquidity to implement our strategies and effectuate the turnaround of the business.”

Results for the Second Quarter Ended August 3, 2019

  • Net sales totaled $83.4 million, a decrease of 4.5%, while operating on average 456 stores. This compares to $87.4 million in net sales for the second quarter of Fiscal 2018, while operating on average 462 stores.
  • Comparable sales declined 4.1% following a 0.8% increase in the same period last year.
  • Gross margin rate was 29.3%, as compared to 28.5% in last year's second quarter. The 88 basis point increase was due primarily to a 148 basis point increase in merchandise margin, partially offset by higher shipping costs related to our ship from store initiative.
  • Selling, general & administrative expenses (“SG&A”) decreased by 6.5% to $27.8 million. The decrease was primarily due to lower expenses for compensation, medical benefits, professional services, and eCommerce, and the sale of a claim regarding credit card interchange fees. As a percent of net sales, SG&A decreased approximately 69 basis points to 33.3%.
  • Net loss totaled $5.9 million, or ($0.16) per share, compared to a net loss for the prior year's second quarter of $7.4 million, or ($0.20) per share.
  • Excluding impairment charges related to long-lived assets and lease termination fees adjusted loss per share**, a non-GAAP measure, was ($0.15).
  • Adjusted EBITDA*, a non-GAAP measure, was ($3.1) million, compared to ($4.5) million for the same period last year.

Balance Sheet Highlights and Capital Expenditures
Cash and cash-equivalents totaled $2.2 million, with outstanding borrowings of $3.5 million and net availability of revolving credit loans under the Credit Facility of approximately $21.8 million at August 3, 2019.

Total inventory was $48.7 million at the end of the second quarter as compared to $40.2 million at the end of the second quarter last year, an increase of 21.2%. The increase was related to a pull forward of merchandise to mitigate anticipated tariff increases and to support our expanded pant program. The composition of inventory is healthy with aged inventory levels well below last year as the Company heads into the peak selling season.

Capital expenditures for the second quarter of Fiscal 2019 were $0.4 million compared to $0.8 million in last year’s second quarter. Capital expenditures in the second quarter primarily reflect expenditures to support new stores and investments in technology associated with eCommerce initiatives and merchandising capabilities.

The Company repurchased 141,752 shares for approximately $16,000 during the second quarter of Fiscal 2019.

______________________
*Adjusted EBITDA is a non-GAAP financial measure. The Company defines Adjusted EBITDA as Net income (loss), adjusted for Income tax provision (benefit); Other income; Interest expense, net; Depreciation and Amortization; Impairment of long-lived assets; and certain discretionary items. Please see “Non-GAAP Measures” below and reconciliations of this non-GAAP measure to the comparable GAAP measure that follows in the table below.

**Adjusted loss per share is a non-GAAP financial measure. The Company defines adjusted loss per share as GAAP loss per share adjusted for certain discretionary items as outlined in the reconciliation of this non-GAAP measure to the comparable GAAP measure that follows in the table below.

Fiscal 2019 Outlook
Ms. Jones continued, “Based on the strong top line results quarter-to-date, we are maintaining our financial guidance for the fiscal year.”

For the full year of Fiscal 2019, the Company expects:

  • Net sales to be flat to up 2% as the result of expanded omni-channel capabilities, enhancements to the overall product assortment, and more impactful marketing promotions intended to drive customer file growth;
  • Gross margin expansion of 100 to 200 basis points as a result of improved inventory management including supply chain and omni-channel initiatives, greater disciplines around promotions and the continued reduction of occupancy costs; the gross margin guidance reflects the impact of recently announced tariffs;
  • SG&A as a percentage of sales to decline 100 to 150 basis points due to ongoing cost reduction initiatives; and
  • To end the fiscal year with positive cash and no outstanding borrowings under its Credit Facility.

Conference Call Information
The Company will discuss its second quarter Fiscal 2019 results in a conference call scheduled for today, September 10, 2019, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 705-6003 or (201) 493-6725 if calling internationally. Please dial in approximately 10 minutes prior to the start of the call. The conference call will be simultaneously broadcast live over the Internet at http://www.christopherandbanks.com. An online archive of the broadcast will be available within approximately one hour of the completion of the call and will be accessible at http://www.christopherandbanks.com for thirty days. In addition, an audio replay of the call will be available shortly after its conclusion and will be archived until September 17, 2019. This call may be accessed by dialing 1-844-512-2921 and using the passcode 13693975.

Non-GAAP Measures
In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains non-GAAP financial measures, Adjusted EBITDA and adjusted loss per share. The presentation of these non-GAAP measures is not in accordance with GAAP, and should not be considered superior to or as a substitute for net income or net loss, or any other measure of performance derived in accordance with GAAP. The Company believes the inclusion of these non-GAAP measures provides useful supplemental information to investors regarding the underlying performance of the Company’s business operations, especially when comparing such results to previous periods. These non-GAAP measures are not an alternative for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures used by other companies. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to its most directly comparable GAAP measure as provided in the tables below.

About Christopher & Banks
Christopher & Banks Corporation is a Minneapolis-based specialty retailer featuring exclusively designed privately branded women’s apparel and accessories. As of September 10, 2019, the Company operates 455 stores in 44 states consisting of 310 MPW stores, 80 Outlet stores, 34 Christopher & Banks stores, and 31 stores in its women’s plus size clothing division CJ Banks. The Company also operates the www.ChristopherandBanks.com eCommerce website.

Forward-Looking Statements
Certain statements in this press release and in our upcoming earnings conference call may constitute forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to certain events that could have an effect on our future performance. The forward-looking statements relate to expectations concerning matters that are not historical facts and may use the words “will”, "expect", "anticipate", "plan", "intend", "project", "believe", “should”, "drive" "in order to" and similar expressions. Except for historical information, matters discussed in this press release or on our earnings conference call may be considered forward-looking statements.

These forward-looking statements are based largely on information currently available to our management and our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to a number of uncertainties and risks, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause the Company's future performance and financial results to differ materially from those expressed or implied by the forward-looking statements. We cannot guarantee their accuracy or our future performance, and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, be achieved or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to, those factors described in Item 1A, “Risk Factors” and in the “Forward-Looking Statements” disclosure in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our latest annual report on Form 10-K and in our subsequent Form 10-Q Reports. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

Thirteen Weeks Ended

Twenty-Six Weeks Ended

August 3,

August 4,

August 3,

August 4,

2019

2018

 

2019

 

2018

Net sales

$

83,443

$

87,418

$

166,663

$

173,319

Merchandise, buying and occupancy costs

 

58,969

 

62,546

 

116,575

 

121,103

Gross profit

24,474

24,872

50,088

52,216

Other Operating Expenses:

Selling, general and administrative

 

27,754

 

29,675

56,942

59,422

Depreciation and amortization

 

2,199

 

2,518

4,581

5,334

Impairment of long-lived assets

 

311

 

 

311

 

Total other operating expenses

 

30,264

 

32,193

 

61,834

 

64,756

Operating loss

 

(5,790)

 

(7,321)

(11,746)

(12,540)

Interest expense, net

(111)

(42)

(267)

(99)

Loss before income taxes

 

(5,901)

 

(7,363)

 

(12,013)

 

(12,639)

Income tax provision

 

40

 

63

 

80

 

106

Net loss

$

(5,941)

$

(7,426)

$

(12,093)

$

(12,745)

 

Basic loss per share:

Net loss

$

(0.16)

$

(0.20)

$

(0.32)

$

(0.34)

Basic shares outstanding

 

37,440

 

37,458

 

37,686

 

37,381

 

Diluted loss per share:

Net loss

$

(0.16)

$

(0.20)

$

(0.32)

$

(0.34)

Diluted shares outstanding

 

37,440

 

37,458

 

37,686

 

37,381

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS)

(in thousands)

(unaudited)

 

August 3,

 

August 4,

2019

 

2018

ASSETS

 

Current assets:

 

Cash and cash equivalents

$

2,242

 

$

23,114

Accounts receivable

3,471

 

3,508

Merchandise inventories

 

48,718

 

 

40,184

Prepaid expenses and other current assets

3,894

 

4,263

Income taxes receivable

 

294

 

 

218

Total current assets

 

58,619

 

 

71,287

Non-current assets:

 

Property, equipment and improvements, net

 

27,925

 

 

38,383

Operating lease assets

121,782

 

Deferred income taxes

499

 

 

597

Other assets

 

668

 

 

1,213

Total non-current assets

 

150,874

 

 

40,193

Total assets

$

209,493

 

$

111,480

 

 

 
   

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current liabilities:

 

Accounts payable

$

27,098

 

$

23,689

Short-term borrowings

3,450

 

Current portion of long-term lease liabilities

28,258

 

Accrued salaries, wages and related expenses

 

5,139

 

 

5,045

Accrued liabilities and other current liabilities

 

19,507

 

 

19,655

Total current liabilities

 

83,452

 

 

48,389

   

Non-current liabilities:

 

Deferred lease incentives

 

 

 

7,023

Long-term lease liabilities

 

111,968

 

 

6,459

Other non-current liabilities

 

2,013

 

 

9,372

Total non-current liabilities

 

113,981

 

 

22,854

   

Stockholders' equity:

 

Common stock

 

451

 

 

481

Additional paid-in capital

 

129,118

 

 

128,236

Retained earnings

 

(4,634)

 

 

24,231

Common stock held in treasury

 

(112,875)

 

 

(112,711)

Total stockholders' equity

 

12,060

 

 

40,237

Total liabilities and stockholders' equity

$

209,493

 

$

111,480

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

Twenty-Six Weeks Ended

August 3,

 

August 4,

2019

 

2018

Cash flows from operating activities:

 

Net loss

$

(12,093)

 

$

(12,745)

Adjustments to reconcile net loss to net cash used in operating activities:

 

Depreciation and amortization

 

4,581

 

 

5,334

Impairment of long-lived assets

311

 

Amortization of financing costs

 

30

 

 

31

Lease expense

12,867

 

Deferred lease-related liabilities

 

 

 

(486)

Stock-based compensation expense

 

413

 

 

604

Changes in operating assets and liabilities:

 

Accounts receivable

 

(704)

 

 

(882)

Merchandise inventories

 

(7,680)

 

 

1,178

Prepaid expenses and other assets

 

(505)

 

 

(1,579)

Income taxes receivable

 

(26)

 

 

(46)

Accounts payable

 

9,286

 

 

3,021

Accrued liabilities

 

(2,964)

 

 

(5,757)

Lease liabilities

(13,634)

 

Other liabilities

 

(230)

 

 

(59)

Net cash used in operating activities

 

(10,348)

 

 

(11,386)

   

Cash flows from investing activities:

 

Purchases of property, equipment and improvements

 

(996)

 

 

(1,722)

Proceeds from sale of assets

 

13,329

Net cash (used in) provided by investing activities

 

(996)

 

 

11,607

   

Cash flows from financing activities:

 

Shares redeemed for payroll taxes

 

(5)

 

 

(13)

Proceeds from short-term borrowings

12,650

 

9,100

Payments of short-term borrowings

(9,200)

 

(9,100)

Payments of deferred financing costs

 

 

 

(171)

Acquisition of common stock held in treasury, at cost

(98)

 

Net cash provided by (used in) financing activities

 

3,347

 

 

(184)

   

Net (decrease) in cash and cash equivalents

 

(7,997)

 

 

37

Cash and cash equivalents at beginning of period

 

10,239

 

 

23,077

Cash and cash equivalents at end of period

$

2,242

 

$

23,114

   

Supplemental cash flow information:

 

Interest paid

$

267

 

$

100

Income taxes paid

$

198

 

$

130

Accrued purchases of equipment and improvements

$

98

 

$

143

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(in thousands)
(unaudited)

The following table reconciles from Net loss in accordance with generally accepted accounting principles (GAAP) to Adjusted EBITDA, a non-GAAP measure, for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018:

Thirteen Weeks Ended

 

 

Twenty-Six Weeks Ended

August 3,

 

 

August 4,

 

 

August 3,

 

 

August 4,

2019

 

 

2018

 

 

2019

 

 

2018

Net loss on a GAAP basis

$

(5,941)

 

$

(7,426)

 

$

(12,093)

 

$

(12,745)

Income tax provision

40

 

63

 

80

 

106

Interest expense, net

(111)

 

(42)

 

(267)

 

(99)

Depreciation & amortization

2,199

 

2,518

 

4,581

 

5,334

Impairment of long-lived assets

311

 

 

311

 

Lease termination fees and other related costs, net

144

 

 

144

 

161

Executive severance

 

310

 

396

 

310

Adjusted EBITDA

$

(3,136)

 

$

(4,493)

 

$

(6,314)

 

$

(6,735)

       

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF LOSS PER SHARE
(in thousands, except per share amounts)
(unaudited)

The following table reconciles Net loss per share in accordance with GAAP to Adjusted net loss per share, on a non-GAAP basis, for the thirteen and twenty-six weeks ended August 3, 2019 and August 4, 2018:

Thirteen Weeks Ended

August 3,

 

August 4,

2019

 

2018

Pretax

 

Net of
tax

 

Per share
amounts

 

Pretax

 

Net of
tax

 

Per share
amounts

GAAP net loss per share

 

$

(0.16)

   

$

(0.20)

Adjustments

     

Impairment of long-lived assets

311

 

309

0.01

 

 

0.00

Lease termination fees and other related costs, net

144

 

143

0.00

 

 

0.00

Executive Severance

 

0.00

 

310

 

307

0.01

Adjusted loss per share

 

 

 

$

(0.15)

 

 

 

 

$

(0.19)

       
       

Twenty-Six Weeks Ended

August 3,

 

August 4,

2019

 

2018

Pretax

 

Net of
tax

 

Per share
amounts

 

Pretax

 

Net of
tax

 

Per share
amounts

GAAP net loss per share

 

$

(0.32)

   

$

(0.34)

Adjustments

     

Impairment of long-lived assets

311

 

309

0.01

 

 

0.00

Lease termination fees and other related costs, net

144

 

143

0.00

 

161

 

160

0.00

Executive Severance

396

 

393

0.01

 

310

 

307

0.01

Adjusted loss per share

 

 

 

$

(0.30)

 

 

 

 

$

(0.33)

 

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