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Claire’s Stores Q1 net sales was $320 million

Staff writer |
Claire’s Stores reported its financial results for the fiscal 2015 first quarter ended May 2, 2015. Net sales was $320 million for the fiscal 2015 first quarter, a decrease of $33.3 million, or 9.4% compared to Q1 2014.

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The decrease was attributable to an unfavorable foreign currency translation effect of our non-U.S. net sales, the effect of store closures and a decrease in same store sales, partially offset by new store sales. Net sales would have decreased 2.8% excluding the impact of foreign currency exchange rate changes.

Consolidated same store sales decreased 2.5%, with North America same store sales decreasing 1.9% and Europe same store sales decreasing 3.6%. Our sales trend has improved since the end of the first quarter, as consolidated second quarter-to-date same store sales are flat.

The company computes same store sales on a local currency basis, which eliminates any impact from changes in foreign currency exchange rates.

Gross profit percentage decreased 110 basis points to 46.0% during the fiscal 2015 first quarter versus 47.1% for the prior year quarter. This reduction in gross profit percentage consisted of a 180 basis point decrease in merchandise margin, partially offset by a 50 basis point decrease in occupancy costs and a 20 basis point decrease in buying and buying-related costs.

The decrease in merchandise margin percentage resulted primarily from increased accessories penetration in Europe, higher freight costs and unfavorable foreign currency exchange rates. The decrease in occupancy costs, as a percentage of sales, resulted primarily from the reduction in costs associated with China store closures.

Selling, general and administrative expenses decreased $12.9 million, or 10.3%, compared to the fiscal 2014 first quarter. Excluding a favorable $9.2 million foreign currency translation effect, selling, general, and administrative expenses would have decreased $3.7 million. Of the remainder, the decrease was primarily due to lower store compensation and related expenses.

Adjusted EBITDA in the fiscal 2015 first quarter was $37.6 million compared to $48.1 million last year. Foreign currency exchange rate changes had a negative impact of $3.2 million in the first quarter of 2015. We believe the non-recurring EBITDA impact of the disruption to our supply chain caused by the west coast port issues, including lost sales and increased air freight costs, was approximately $6 million.

The company defines Adjusted EBITDA as earnings before income taxes, net interest expense, depreciation and amortization, loss (gain) on early debt extinguishments, and asset impairments. Adjusted EBITDA excludes management fees, severance, the impact of transaction-related costs and certain other non-cash and other items. Net loss for the fiscal 2015 first quarter was $35.4 million.

As of May 2, 2015, cash and cash equivalents were $22.5 million, including restricted cash of $2 million. The company had $67.5 million drawn on its revolver and an additional $83.1 million of borrowing availability under its Credit Facilities as of that date.

The fiscal 2015 first quarter cash balance decrease of $6.9 million consisted of positive impacts of $37.6 million of Adjusted EBITDA and $67.5 million from net borrowings under the Credit Facilities offset by reductions for $78.5 million of cash interest payments, $22.5 million from seasonal working capital uses, $6.3 million of capital expenditures and $4.7 million for tax payments and other items.

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