Charming Shoppes Inc. Reports Operating Results (10-Q)
Charming Shoppes, Inc. operates 2,258 retail stores in 48 states under the names LANE BRYANT(R), LANE BRYANT OUTLET(R), FASHION BUG(R), FASHION BUG PLUS(R), CATHERINES PLUS SIZES(R), and PETITE SOPHISTICATE OUTLET(R). The Company also operates the Figi's Gifts in Good Taste catalog, specializing in holiday fare, gift-giving convenience, and exclusive and personalized items. Charming Shoppes Inc. has a market cap of $552.9 million; its shares were traded at around $4.79 with and P/S ratio of 0.2. Charming Shoppes Inc. had an annual average earning growth of 8.4% over the past 10 years. Highlight of Business Operations:Net sales for the Fiscal 2009 Second Quarter were $527.2 million, a decrease of 19% from the Fiscal 2008 Second Quarter. Net sales for our Retail Stores segment decreased $104.6 million or 17%, primarily as a result of a comparable store sales decrease of 14%. Additionally, Retail Stores segment net sales were impacted by 99 net store closings over the preceding 12-month period. The comparable store sales decrease is due primarily to reduced traffic levels impacted by weakened consumer demand as a result of the downturn in the economy and partially due to our year-over-year reduction in inefficient promotional spending. Additionally, our conservative inventory planning and a lack of balanced assortments in inventory negatively impacted our net sales. Net sales for our Direct-to-Consumer segment decreased $16.2 million primarily as a result of the planned shutdown of our LANE BRYANT WOMAN catalog announced in Fiscal 2008, which we completed during the Fiscal 2009 Second Quarter.
Our gross profit as a percentage of sales increased 3.3% during the Fiscal 2009 Second Quarter as compared to the Fiscal 2008 Second Quarter. This increase reflects our efforts to tightly manage our inventories in response to the challenging retail environment to limit the level of markdown activity on spring and summer merchandise. Our inventories as of the end of the Fiscal 2009 Second Quarter have decreased approximately 18% as compared to the end of the Fiscal 2008 Second Quarter on a comparable-store basis.
Our occupancy and buying expenses decreased 5.2% as a result of the operation of fewer stores and occupancy reductions secured from landlords, partially offset by increases in buying costs. Our selling, general, and administrative expenses decreased 18.4% during the Fiscal 2009 Second Quarter as compared to the Fiscal 2008 Second Quarter primarily as a result of our expense reduction initiatives and the closing of under-performing stores.
Although net sales decreased across all brands in our Retail Stores segment, income before interest and income taxes, as a percentage of sales, increased for our LANE BRYANT and CATHERINES brands, reflecting our ability to limit markdown activity and improve the quality of the sales for these brands. For LANE BRYANT, income before interest and income taxes as a percentage of sales increased from 4.4% to 5.0% for the Fiscal 2009 Second Quarter and increased from 7.3% to 8.6% for the first half of Fiscal 2009. For CATHERINES, income before interest and income taxes as a percentage of sales increased from 6.8% to 7.9% for the Fiscal 2009 Second Quarter and increased from 7.6% to 8.9% for the first half of Fiscal 2009. For our FASHION BUG brand, income before interest and income taxes, as a percentage of sales, decreased from 7.9% to 3.5% for the Fiscal 2009 Second Quarter and decreased from 5.7% to 1.7% for the first half of Fiscal 2009, reflecting a difficult second quarter with spring and summer assortments that were not compelling to our customer and that did not yet reflect the impact of our new product leadership.
Read the The complete ReportCHRS is in the portfolios of Robert Rodriguez of FPA Capital, Michael Price of MFP Investors LLC.