The Children’s Place Retail Stores today reported preliminary unaudited financial results for the fourth quarter and fiscal year ended January 29, 2005.
As discussed below, all results presented in this press release exclude the effect of any potential corrections to the Company’s lease-related accounting practices in light of a recent SEC clarification.
Net sales for the fourth quarter increased 97% to $462.1 million, compared with $234.6 million for the same period in 2003. Fourth quarter sales results included 10 weeks of sales totaling $163.4 million from the Disney Store North America, which was acquired as of November 21, 2004. Comparable store sales at The Children’s Place stores increased 17% in the quarter, on top of a 9% increase for the same period last year. The Company’s fourth quarter net income was $24.0 million and income before extraordinary gain was $23.7 million, as compared to net income of $15.2 million for the fourth quarter last year. The extraordinary gain, net of taxes, of $0.3 million, in the fourth quarter of 2004, resulted from the acquisition of Disney Store North America, and represents the excess of the fair value of assets acquired and liabilities assumed over the amounts paid for the Disney Store North America business. Fourth quarter earnings per share were $0.85, compared to earnings per share of $0.55 in the fiscal 2003 period. Earnings per share before the extraordinary gain were $0.84 in the fourth quarter.
To facilitate the analysis of net income, the Company has adjusted fourth quarter and fiscal 2004 net income to exclude a non-cash item and the extraordinary gain mentioned above, both associated with the Disney Store North America acquisition. The Company has excluded such items, because it does not believe they are indicative of the core business and that the adjusted presentation is a beneficial supplemental disclosure to investors in analyzing its past and future performance. Adjusted net income was $26.8 million in the fourth quarter 2004, a 76% increase over net income of $15.2 million in fiscal 2003. Adjusted earnings per share were $0.95 in the fourth quarter, a 73% increase over earnings per share of $0.55 in the fiscal 2003 period. Accompanying this press release is a reconciliation of net income to adjusted net income for the fourth quarter and fiscal year ended January 29, 2005.
The Company opened 17 Children’s Place stores and closed one store during the fourth quarter. In addition, consistent with its plans, the Company closed seven Disney Stores.
Net sales for the fiscal year increased 45% to $1.157 billion, from $797.9 million in 2003. Fiscal 2004 sales results included 10 weeks of sales totaling $163.4 million from the Disney Store North America. Comparable store sales at The Children’s Place stores increased 16% for the fiscal year, compared to a 4% increase last year. Net income was $43.3 million and income before extraordinary gain was $43.0 million, compared to net income of $23.0 million last year. Fiscal 2004 earnings per share were $1.57 compared to earnings per share of $0.85 in fiscal 2003. Earnings per share before the extraordinary gain were $1.56 in fiscal 2004.
Adjusted net income, as defined above, was $46.1 million in fiscal 2004, a 100% increase over net income of $23.0 million in fiscal 2003. Adjusted earnings per share were $1.67 compared to earnings per share of $0.85 in 2003.
The Company opened 62 Children’s Place stores and closed three stores during the fiscal year. In addition, the Company closed seven Disney Stores.
“Fiscal 2004 was a remarkable year. We are pleased with our fourth quarter and full year financial performance, as evidenced by our strong revenues and earnings results,” said Ezra Dabah, Chairman and Chief Executive Officer of The Children’s Place. “Especially gratifying is that we achieved our strong results while consummating and seamlessly integrating the Disney Store business. This is a testament to the team, the teamwork, and the infrastructure we have in place.”
Mr. Dabah concluded, “The Children’s Place brand achieved new heights, while the Disney Store acquisition gives us an extraordinary new platform for growth and earnings. We are intent on continuing our strong growth into 2005, and are confident that our business is well-positioned to achieve profitable growth over the long term.”
The Company now anticipates fiscal 2005 earnings per share in the range of $2.10 to $2.20, before any changes made to the way the Company accounts for lease-related transactions, a non-cash item associated with the Disney Store acquisition, and the effect of new accounting rules requiring the expensing of stock options. The Company plans to initiate the expensing of stock options prospectively beginning with the third quarter of fiscal 2005, in accordance with the requirements of FASB Statement No. 123R.
As previously announced and as discussed above, the Company is re-evaluating its lease-related accounting practices in light of a recent SEC clarification. While this evaluation has not been completed, and therefore no decisions have been made, management believes that a restatement of the Company’s previously issued financial statements is likely.
Management continues to believe that any correction to the Company’s lease-related accounting practices, if necessary, would not have a material impact on net income for the year ended January 29, 2005, nor will any potential restatement have any impact on net sales, comparable store sales or overall cash flows for any period. Further, any correction to the Company’s lease accounting practices would not materially impact its anticipated results of operations for the year ending January 28, 2006. The Company is in the process of completing its analysis, which it will review with its audit committee and independent auditors, and will report the results of its review as soon as it has been completed.
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