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Claire’s Stores Q3 net sales $332.7 million, down 5.1%

Staff writer |
Claire’s Stores reported its financial results for the fiscal 2015 third quarter, which ended October 31, 2015. Net sales were $332.7 million, a decrease of $18 million, or 5.1% compared to the fiscal 2014 third quarter.

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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, a decrease in same store sales and decreased shipments to franchisees, partially offset by concession and new store sales. Net sales would have decreased 0.2% excluding the impact from foreign currency exchange rate changes.

Consolidated same store sales decreased 0.6%, with North America same store sales increasing 0.1% and Europe same store sales decreasing 1.6%. The company computes same store sales on a local currency basis, which eliminates any impact from changes in foreign currency exchange rates.

Q4 quarter-to-date sales trend is currently in the negative low single digits and has been negatively impacted by the events in France.

Gross profit percentage decreased 170 basis points to 46.0% during the fiscal 2015 third quarter versus 47.7% for the prior year quarter. This reduction in gross profit percentage consisted of a 220 basis point decrease in merchandise margin, partially offset by a 30 basis point decrease in buying and buying-related costs and a 20 basis point decrease in occupancy costs.

The decrease in merchandise margin percentage resulted primarily from the adverse effect of foreign currency exchange rates and an increase in markdowns. The decrease in occupancy costs, as a percentage of net sales, was primarily caused by the leveraging effect of concession store sales, which do not have associated occupancy costs.

Selling, general and administrative expenses decreased $4.2 million, or 3.4%, compared to the fiscal 2014 third quarter. Excluding a favorable $6.1 million foreign currency translation effect, selling, general, and administrative expenses would have increased $1.9 million.

Of the remainder, the increase was primarily due to increased concession store commission expense, partially offset by lower compensation and related expenses.

Adjusted EBITDA in the fiscal 2015 third quarter was $39.2 million compared to $50.7 million last year. Adjusted EBITDA would have been $46.1 million excluding both foreign currency translation effect and the unfavorable foreign exchange effect on merchandise margin.

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 third quarter was $35.9 million.

As of October 31, 2015, cash and cash equivalents were $23.9 million. The company had $121.6 million drawn on its Credit Facilities and an additional $39.8 million f borrowing availability under its Credit Facilities as of October 31, 2015.

The fiscal 2015 third quarter cash balance decrease of $59.1 million consisted of positive impacts of $39.2 million of Adjusted EBITDA and $10.2 million from net borrowings under the Credit Facilities, offset by reductions for $79.3 million of cash interest payments, $16.9 million for seasonal working capital uses, $8 million of capital expenditures and $4.3 million for tax payments and other items.

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