EX-99.1 2 q406pressrelease.htm QUARTER 4 FISCAL 2006 PRESS RELEASE
 
EXHIBIT 99.1

FOR IMMEDIATE RELEASE
CHARMING SHOPPES REPORTS FOURTH QUARTER
NET INCOME OF $19.2 MILLION, AN INCREASE OF 294% OVER PRIOR YEAR;
REPORTS RECORD SALES AND EARNINGS FOR FISCAL YEAR 2006;
REAFFIRMS 1ST QUARTER EARNINGS OUTLOOK


Bensalem, PA, March 15, 2006 - Charming Shoppes, Inc. (NASDAQ:CHRS) a leading multi-brand, multi-channel specialty apparel retailer specializing in women's plus-size apparel, today reported sales and earnings for the fourth quarter and fiscal year ended January 28, 2006. The Company’s reported results for the three and twelve month periods ended January 28, 2006 include sales and earnings from Crosstown Traders, Inc., since its acquisition on June 2, 2005.

Three Months Ended January 28, 2006
For the three months ended January 28, 2006, net income increased 294% to $19.2 million or $0.15 per diluted share. For the corresponding period ended January 29, 2005, net income was $4.9 million or $0.04 per diluted share. The increase in net income is attributable to the combination of solid increases in sales and operating margin for the Company’s retail stores segment, and the earnings contribution from Crosstown Traders, which was acquired on June 2, 2005, as well as a reduction in the Company’s tax rate for the quarter.

Net sales for the three months ended January 28, 2006 increased 36% to $799.6 million, compared to sales of $588.0 million for the three months ended January 29, 2005. Net sales for the Company’s direct-to-consumer segment were $155.8 million. Net sales for the Company’s retail stores segment increased 9% to $643.8 million. Consolidated comparable store sales for the Company’s retail store brands increased 7% during the three months ended January 28, 2006.

Commenting on sales and earnings, Dorrit J. Bern, Chairman, Chief Executive Officer and President of Charming Shoppes, Inc., said, “We are pleased to report strong year-over-year improvement for our fourth quarter. The increase was led by healthy sales and operating margin improvements at our Lane Bryant and Catherines Plus Sizes brands, which resulted in an overall increase in gross margin at our retail store brands of 80 basis points. Additionally, in our direct-to-consumer segment, Crosstown Traders met our profit objectives during the quarter, delivering the accretive earnings anticipated in our operating plan.”

Twelve Months Ended January 28, 2006
For the twelve months ended January 28, 2006, net income increased 54% to a record $99.4 million or $0.76 per diluted share. For the corresponding period ended January 29, 2005, net income was $64.5 million or $0.52 per diluted share. The Company’s reported results for the twelve month period ended January 28, 2006 include sales and earnings from Crosstown Traders, Inc. since its acquisition on June 2, 2005.

Net sales for the twelve months ended January 28, 2006 increased 18% to a record $2.756 billion, compared to sales of $2.335 billion for the twelve months ended January 29, 2005. Net sales for the Company’s direct-to-consumer segment for the period June 2, 2005 through January 28, 2006 were $298.9 million. Net sales for the Company’s retail stores segment for the twelve months ended January 28, 2006 increased 5% to $2.457 billion. Consolidated comparable store sales for the Company’s retail store brands increased 3% for the twelve months ended January 28, 2006.

Bern continued, “Our solid improvement in net income for fiscal year 2006 follows a strong 70% increase in net income during fiscal year 2005. Our margin on Income From Operations has improved by 100 basis points in each of the last two years, resulting in meaningful progress toward our goal for significant expansion in the Income From Operations margin.”

Bern added, “Looking ahead to the current fiscal year, we have aggressive plans for accelerating store growth, including the roll-out of Lane Bryant’s new Cacique side-by-side store, and our entry into the outlet channel through Lane Bryant Outlet stores. The addition of Crosstown Traders catalog business has also provided growth for our direct to consumer business including further acceleration in our rapidly growing e-commerce businesses.”

Outlook Reaffirmed for the First Quarter ending April 29, 2006
For the first quarter ending April 29, 2006, the Company has reaffirmed its projections for diluted earnings per share in the range of $0.23 - $0.25. This projection assumes total sales in a range of $735 to $745 million and comparable store sales increases of low single digits for the consolidated corporation. For the corresponding period ended April 30, 2005, which included record net income for the first quarter, diluted earnings per share were $0.23.

Charming Shoppes, Inc. will host its fourth quarter fiscal year 2006 earnings conference call today at 9:15 am Eastern time. To listen to the conference call, please dial 866-225-4091 approximately 10 minutes prior to the scheduled event. The conference call will also be simulcast at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives. The general public is invited to listen to the conference call via the webcast or the dial-in telephone number.

This press release, a transcript of prepared conference call remarks, and certain other financial and statistical information will be available, prior to today’s conference call, on the Company’s corporate website, at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives. An audio rebroadcast of the conference call will be accessible at http://phx.corporate-ir.net/phoenix.zhtml?c=106124&p=irol-audioArchives, following the live conference.

The conference call will be recorded on behalf of Charming Shoppes, Inc. and consists of copyrighted material. It may not be re-recorded, reproduced, transmitted or rebroadcast, in whole or in part, without the Company's express written permission. Accessing this call or the rebroadcast represents consent to these terms and conditions. Participation in this call serves as consent to having any comments or statements made appear on any transcript, broadcast or rebroadcast of this call.

At January 28, 2006, Charming Shoppes, Inc. operated 2,236 retail stores in 48 states under the names LANE BRYANT®, FASHION BUG®, FASHION BUG PLUS®, and CATHERINES PLUS SIZES®. Additionally, apparel, accessories, footwear and gift catalogs, including the following titles, are operated by Charming Shoppes’ Crosstown Traders: Old Pueblo Traders, Bedford Fair, Willow Ridge, Lew Magram, Brownstone Studio, Regalia, Intimate Appeal, Monterey Bay Clothing Company, Coward Shoe and Figi's. During the fifty-two weeks ended January 28, 2006 the Company opened 70, relocated 66, and closed 55 retail stores.  The Company ended the period with 1,025 Fashion Bug and Fashion Bug Plus stores, 748 Lane Bryant stores, 463 Catherines Plus Sizes stores, and approximately 15,355,000 square feet of leased space. Additionally, Crosstown Traders operates 3 outlet stores. Please visit www.charmingshoppes.com for additional information about Charming Shoppes, Inc.




 
 
 

This press release contains and the Company’s conference call will contain certain forward-looking statements concerning the Company's operations, performance, and financial condition. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: failure to implement the Company’s business plan for entry into the outlet store distribution channel, the failure to implement the Company’s business plan for increased profitability and growth in the Company’s retail stores and direct-to-consumer segments, the failure to successfully implement the Company’s expansion of Cacique through new store formats, the failure to successfully implement the Company’s integration of operations of and the business plan for Crosstown Traders, Inc., adverse changes in costs vital to catalog operations, such as postage, paper and acquisition of prospects, declining response rates to catalog offerings, failure to maintain efficient and uninterrupted order-taking and fulfillment in our direct-to-consumer business, changes in or miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, a weakness in overall consumer demand, failure to find suitable store locations, the ability to hire and train associates, trade and security restrictions and political or financial instability in countries where goods are manufactured, the interruption of merchandise flow from its centralized distribution facilities, competitive pressures, and the adverse effects of natural disasters, war, acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and other risks and uncertainties, are detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2005 and other Company filings with the Securities and Exchange Commission. Charming Shoppes assumes no duty to update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

CONTACT:
Gayle M. Coolick
 
Director of Investor Relations
 
215-638-6955

 
 
 
 

CHARMING SHOPPES, INC.
  
(Unaudited)
  
                       
   
 
 
4th Quarter
 
 
 
4th Quarter
 
 
 
 
 
 
 
Ended
 
 
 
Ended
 
 
 
 
 
Percent
 
Jan. 28,
 
Percent
 
Jan. 29,
 
Percent
 
(in thousands, except per share amounts)
  
Change
 
2006
 
of Sales (a)
 
2005 (b)
 
of Sales (a)
  
Net sales
    
36.0
 
$
799,620
    
100.0
 
$
587,952
    
100.0
 
                                 
Cost of goods sold, buying, catalog, and occupancy
    
34.4
   
578,346
   
72.3
   
430,281
   
73.2
 
Selling, general, and administrative
    
32.8
   
193,951
   
24.3
   
146,041
   
24.8
 
Total operating expenses
    
34.0
   
772,297
   
96.6
   
576,322
   
98.0
 
                                 
Income from operations
    
134.9
   
27,323
   
3.4
   
11,630
   
2.0
 
                                 
Other income, principally interest
    
56.2
   
2,352
   
0.3
   
1,506
   
0.3
 
Interest expense
    
12.7
   
(4,477
)
  
(0.6
)
  
(3,971
)
  
(0.7
)
                                 
Income before income taxes
    
174.9
   
25,198
   
3.2
   
9,165
   
1.6
 
Income tax provision
    
40.6
   
6,044
   
0.8
   
4,300
   
0.7
 
Net income
    
293.7
 
$
19,154
    
2.4
 
$
4,865
    
0.8
 
                                 
Basic net income per share
      
$
0.16
        
$
0.04
        
Weighted average shares outstanding
        
120,785
         
118,362
       
                                 
Net income per share, assuming dilution
      
$
0.15
        
$
0.04
        
Weighted average shares and equivalents outstanding
        
138,351
         
120,311
       
                                 
(a) Results do not add due to rounding.
  
(b) Certain prior year amounts have been reclassified to conform to the current-year presentation.
  
 
 
 
 
 
Twelve Months
 
 
 
Twelve Months
 
 
 
 
 
 
 
Ended
 
 
 
Ended
 
 
 
 
Percent
 
Jan. 28,
 
Percent
 
Jan. 29,
 
Percent
 
(in thousands, except per share amounts)
  
Change
 
2006(a)
 
of Sales (c)
 
2005 (b)
 
of Sales (c)
  
Net sales
    
18.0
 
$
2,755,725
    
100.0
 
$
2,334,735
    
100.0
 
                                 
Cost of goods sold, buying, catalog, and occupancy
    
16.4
   
1,911,275
   
69.4
   
1,642,649
   
70.4
 
Selling, general, and administrative
    
18.3
   
683,231
   
24.8
   
577,301
   
24.7
 
Expenses related to cost reduction plan
   
(100.0
)
  
0
   
-
   
605
   
0.0
 
Total operating expenses
    
16.8
   
2,594,506
   
94.1
   
2,220,555
   
95.1
 
                                 
Income from operations
    
41.2
   
161,219
   
5.9
   
114,180
   
4.9
 
                                 
Other income, principally interest
    
193.5
   
9,093
   
0.3
   
3,098
   
0.1
 
Interest expense
    
14.7
   
(17,911
)
  
(0.6
)
  
(15,610
)
  
(0.7
)
                                 
Income before income taxes
    
49.9
   
152,401
   
5.5
   
101,668
   
4.4
 
Income tax provision
    
42.8
   
53,044
   
1.9
   
37,142
   
1.6
 
Net income
   
54.0
 
$
99,357
    
3.6
 
$
64,526
    
2.8
 
                                 
Basic net income per share
      
$
0.83
        
$
0.56
        
Weighted average shares outstanding
        
119,831
         
116,196
       
                                 
Net income per share, assuming dilution
      
$
0.76
        
$
0.52
        
Weighted average shares and equivalents outstanding
        
137,064
         
133,174
       
                                 
(a) Includes results of operations for Crosstown Traders from the acquisition date (June 2, 2005).
  
(b) Certain prior year amounts have been reclassified to conform to the current-year presentation.
  
(c) Results do not add due to rounding.
  
 
 
 
 
 

CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)


   
January 28,
  
January 29,
  
(Dollars in thousands, except share amounts)
  
2006
  
2005
  
               
ASSETS
              
Current assets
              
Cash and cash equivalents 
  
$
130,132
  
$
273,049
  
Available-for-sale securities 
    
86,978
    
52,857
  
Accounts receivable, net of allowances of $6,588 in 2006 
    
38,603
    
0
  
Merchandise inventories 
    
376,409
    
285,120
  
Deferred advertising 
    
20,591
    
0
  
Deferred taxes 
    
36,083
    
15,500
  
Prepayments and other 
    
89,245
    
86,382
  
Total current assets
    
778,041
    
712,908
  
               
Property, equipment, and leasehold improvements - at cost 
    
888,481
    
786,028
  
Less accumulated depreciation and amortization 
    
525,882
    
465,365
  
Net property, equipment, and leasehold improvements
    
362,599
    
320,663
  
               
Trademarks and other intangible assets 
    
250,074
    
169,818
  
Goodwill 
    
154,553
    
66,666
  
Available-for-sale securities 
    
240
    
240
  
Other assets 
    
44,748
    
33,476
  
Total assets 
  
$
1,590,255
  
$
1,303,771
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
              
Current liabilities
              
Short-term borrowings 
  
$
50,000
  
$
0
  
Accounts payable 
    
133,236
    
127,819
  
Accrued expenses 
    
222,544
    
154,681
  
Current portion - long-term debt 
    
14,765
    
16,419
  
Total current liabilities
    
420,545
    
298,919
  
               
Deferred taxes and other non-current liabilities 
    
162,800
    
101,743
  
Long-term debt 
    
191,979
    
208,645
  
               
Stockholders’ equity
              
Common stock $.10 par value
              
Authorized - 300,000,000 shares
              
Issued - 133,954,852 shares and 132,063,290 shares
    
13,395
    
13,206
  
Additional paid-in capital 
    
275,147
    
249,485
  
Treasury stock at cost - 12,265,993 shares 
    
(84,136
)
  
(84,136
)
Deferred employee compensation 
    
(13,453
)
  
(8,715
)
Accumulated other comprehensive loss 
    
(3
)
  
0
  
Retained earnings 
    
623,981
    
524,624
  
Total stockholders’ equity
    
814,931
    
694,464
  
Total liabilities and stockholders’ equity 
  
$
1,590,255
  
$
1,303,771
  
               
Amounts are preliminary and subject to reclassifications and adjustments.








 
 
 

CHARMING SHOPPES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


   
Year Ended
  
   
January 28,
  
January 29,
  
January 31,
  
(In thousands)
  
2006
  
2005
  
2004
  
                     
Operating activities
                    
Net income 
  
$
99,357
  
$
64,526
  
$
38,042
  
Adjustments to reconcile net income to net cash provided by operating activities:
                    
Depreciation and amortization 
    
91,309
    
79,606
    
84,534
  
Deferred income taxes 
    
(12,004
)
  
11,521
    
6,067
  
Net (gain)/loss from disposition of capital assets 
    
(725
)
  
736
    
1,537
  
Gain from securitization of Catherines portfolio 
    
(759
)
  
0
    
0
  
Tax benefit related to stock plans 
    
4,233
    
6,469
    
23
  
Other, net 
    
0
    
185
    
(142
)
Changes in operating assets and liabilities:
                    
Accounts receivable
    
(38,603
)
  
0
    
0
  
Merchandise inventories
    
(20,051
)
  
24,875
    
(23,523
)
Accounts payable
    
(6,481
)
  
(7,958
)
  
(12,175
)
Deferred advertising
    
(7,797
)
  
0
    
0
  
Prepayments and other
    
13,215
    
(28,888
)
  
16,802
  
Income taxes payable
    
(3,602
)
  
(1,128
)
  
(6,016
)
Accrued expenses and other
    
49,263
    
17,178
    
(5,849
)
Net cash provided by operating activities 
    
167,355
    
167,122
    
99,300
  
                     
Investing activities
                    
Investment in capital assets 
    
(104,538
)
  
(60,565
)
  
(54,028
)
Proceeds from sales of capital assets 
    
3,432
    
0
    
500
  
Gross purchases of available-for-sale securities 
    
(52,976
)
  
(30,887
)
  
(35,440
)
Proceeds from sales of available-for-sale securities 
    
18,849
    
48,206
    
31,463
  
Acquisition of Crosstown Traders, Inc., net of cash acquired 
    
(256,717
)
  
0
    
0
  
Purchase of Catherines receivables portfolio 
    
(56,582
)
  
0
    
0
  
Securitization of Catherines receivables portfolio 
    
56,582
    
0
    
0
  
Securitization of Crosstown Traders, Inc. apparel-related receivables 
    
50,000
    
0
    
0
  
Increase in other assets 
    
(4,607
)
  
(6,984
)
  
(6,704
)
Net cash used by investing activities 
    
(346,557
)
  
(50,230
)
  
(64,209
)
                     
Financing activities
                    
Proceeds from short-term borrowings 
    
382,573
    
186,173
    
221,423
  
Repayments of short-term borrowings 
    
(332,573
)
  
(186,173
)
  
(221,423
)
Proceeds from long-term borrowings 
    
0
    
18,098
    
1,557
  
Repayments of long-term borrowings 
    
(22,212
)
  
(18,530
)
  
(14,566
)
Payments of deferred financing costs 
    
(1,371
)
  
(350
)
  
(1,500
)
Proceeds from issuance of common stock 
    
9,868
    
33,158
    
1,173
  
Net cash provided/(used) by financing activities 
    
36,285
    
32,376
    
(13,336
)
                     
Increase/(decrease) in cash and cash equivalents 
    
(142,917
)
  
149,268
    
21,755
 
Cash and cash equivalents, beginning of year 
    
273,049
    
123,781
    
102,026
  
Cash and cash equivalents, end of year 
  
$
130,132
  
$
273,049
  
$
123,781
  
                     
Non-cash financing and investing activities
                    
Equipment acquired through capital leases 
  
$
3,892
  
$
5,399
  
$
17,466
  
                     
Certain prior-year amounts have been reclassified to conform to the current-year presentation.
Amounts are preliminary and subject to reclassifications and adjustments.