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Claire's Stores, Inc. Reports Fiscal 2009 Second Quarter Results.

Article Excerpt
PEMBROKE PINES, Fla., Sept. 9 /PRNewswire/ -- Claire's Stores, Inc., a leading specialty retailer offering value-priced fashion accessories and jewelry for kids, tweens, teens, and young women ages 3 to 27, today reported its financial results for the 2009 second quarter, which ended August 1, 2009.

Second Quarter Results

The Company reported net sales of $314.2 million for the 2009 second quarter, a 12.7% decrease from the 2008 second quarter. The decrease was primarily attributable to the effect of foreign currency exchange rate changes, a decline in same store sales and the effect of store closures, partially offset by new store sales. Sales would have declined 7.4% excluding the impact from changes in foreign currency exchange rates.

Consolidated same store sales declined 6.9% in the fiscal 2009 second quarter caused primarily by a decline in average transactions per store of 6.7%. The decline in the number of transactions reflects weaker traffic. In North America, same store sales decreased 9.9%, with sales at our Icing brand outperforming Claire's. European same store sales declined 1.6%. We compute same store sales on a local currency basis, which eliminates any impact from changes in foreign currency exchange rates.

Chief Executive Officer Gene Kahn commented, "While we continue to feel the effect of a challenging retail environment as well as the impact of negative consumer confidence, our second quarter sales performance had monthly sequential same store sales improvement. During the second quarter, a decline in traffic coupled with a highly promotional teen apparel specialty business caused a more competitive environment for every customer dollar. Since we are very confident in our value proposition, we did not overreact to the promotional activity, allowing us to improve our merchandise margin.

While it is difficult to compare our third quarter performance at this point, because of various changes in the calendar, our quarter to date same store sales are in the negative low single digits. Looking forward, we see no reason to believe the retail environment will see significant near-term improvement and, therefore, will continue to focus on controlling expenses and maximizing available sales while generating positive free cash flow."

Gross profit percentage decreased 20 basis points during the fiscal 2009 second quarter to 49.7% compared to the fiscal 2008 second quarter of 49.9%. The decrease consisted of an 80 basis point improvement in merchandise margin and a 30 basis point decrease in buying cost, offset by a 130 basis point increase in occupancy cost. The improvement in merchandise margin was due to increased initial mark-up on purchases, reduced markdowns and decreased freight costs. Occupancy costs decreased approximately $6.1 million, $0.6 million net of foreign exchange effect, but increased as a percentage of sales due to the deleveraging effect of lower sales. Excluding $1.6...

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