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Claire's Stores Q2 net sales increased $7.1 million

Staff writer |
Claire's Stores reported its financial results for the fiscal 2013 second quarter, which ended August 3, 2013. Net sales were $366.7 million, an increase of $7.1 million, or 2% compared to Q2 2012.

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The increase was attributable to new store sales and a favorable foreign currency translation effect on the company's non-U.S. net sales. This was partially offset by the effect of store closures and decreased shipments to franchisees. Net sales would have increased 1.3% excluding the impact from foreign currency exchange rate changes.

Consolidated same store sales decreased 0.1%, which included a 1.1% increase in North America and a 2.0% decrease in Europe. 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 increased 10 basis points to 50.6% during the fiscal 2013 second quarter versus the comparable prior year quarter. The improvement consisted of a 60 basis point increase in merchandise margin and a 10 basis point decrease in buying costs, partially offset by a 60 basis point increase in occupancy costs.

The increase in occupancy costs, as a percentage of net sales, was primarily due to normal rent increases, which were not offset by an increase in same store sales.

Selling, general and administrative expenses increased $6.1 million, or 5.1%, compared to the fiscal 2012 second quarter. As a percentage of net sales, selling, general and administrative expenses increased 100 basis points versus the comparable prior year quarter. Of the increase, $0.7 million was caused by changes in the foreign currency exchange rates. The remainder of the increase was primarily the result of compensation-related expenses, such as store payroll and non-cash stock-based compensation.

Adjusted EBITDA in the fiscal 2013 second quarter was $62.3 million compared to $62.2 million in the fiscal 2012 second quarter. The fiscal 2013 second quarter Adjusted EBITDA would have been $1.7 million higher without the one-time investments in newly launched stores in China as well as the company's recently launched e-commerce platforms for Europe, the Icing Brand in North America, and Claire's in Canada.

As of August 3, 2013, cash and cash equivalents were $73.8 million and the company's Revolving Credit Facility was undrawn. In the fiscal 2013 second quarter, the company issued $320 million aggregate principal amount of 7.75% Senior Notes due 2020.

Claire's Stores used the net proceeds from these notes, together with cash on hand, of $467.8 million to redeem all of the outstanding Senior Fixed Rate Notes and the Senior Toggle Notes, due in 2015, at par plus accrued interest and to pay transaction fees.


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