EX-99.1 2 e18873ex99-1.txt PRESS RELEASE Exhibit 99.1 The Gymboree Corporation Reports Second Quarter 2004 Results and Closure of UK/Ireland Retail Operations; Management Change; Updates Earnings BURLINGAME, Calif., Aug. 17 /PRNewswire-FirstCall/ -- The Gymboree Corporation (Nasdaq: GYMB) today reported a net loss of ($3.2) million or ($0.10) per diluted share for the second fiscal quarter ended July 31, 2004, compared to a net loss of ($1.1) million or ($0.04) per diluted share for the second fiscal quarter ended August 2, 2003. As previously reported, net sales from retail operations for the second fiscal quarter of 2004 were $119.8 million, an increase of 9% compared to net sales from retail operations of $110.4 million for the same period last year. Comparable store sales for the second fiscal quarter increased 2% compared to the same period last year. Total net sales, including sales from Gymboree Play & Music operations, were $122.4 million, an increase of 8% compared to total net sales of $113.1 million in the second fiscal quarter last year. Closure of United Kingdom and Ireland Retail Operations On Monday, August 16, 2004, The Gymboree Corporation's Board of Directors authorized the Company to proceed with the closure of its United Kingdom and Ireland retail operations, as a result of the continued poor financial performance of those operations. "The closure of our UK and Ireland retail operations was the right decision to make. It will allow us to focus our attention and financial resources on the key drivers of our long-term growth strategy," said Lisa Harper, The Gymboree Corporation's chairman and chief executive officer. "We truly appreciate the extraordinary group of employees in the UK and Ireland who have been dedicated to the Gymboree brand over the years." The wind down of the United Kingdom and Ireland retail operations will begin immediately and the Company expects the process to be substantially complete by the end of the third fiscal quarter of this year. The Company anticipates recording extraordinary charges related to the closure of approximately $9.5 million, net of tax and exclusive of ongoing operating costs incurred during the wind down process. These charges, largely related to costs of lease disposition, asset write-offs and severances, are expected to be realized in the third and fourth fiscal quarters of this year. Gymboree Play & Music franchises will continue to operate in the United Kingdom and Ireland. Management Change The Gymboree Corporation announced today that Debbie Nash, vice president and general merchandise manager of Gymboree retail, has resigned from the Company in order to take some personal time off. Her responsibilities will now be handled by Kip Garcia, senior vice president of Merchandising, Kids. "I'd like to thank Debbie for her important contributions to the Company and we wish her the best," said Lisa Harper. "Kip Garcia, who will be assuming Debbie's responsibilities, has been with the Company since April. We anticipate a smooth transition, as we have a strong team in place and believe that Kip will bring a fresh perspective to the business." Business Outlook As previously stated, The Gymboree Corporation projects that comparable store sales in August will be flat compared to the prior year. For the third fiscal quarter, the Company expects comparable store sales to be in the positive low single digits. The United Kingdom and Ireland retail operations had been forecasted to earn a modest profit in the third and fourth fiscal quarters of 2004; therefore the Company's guidance on earnings from ongoing operations will be reduced in the third and fourth fiscal quarters by ($0.01) in each quarter to compensate for the exclusion of the previously forecasted earnings contribution from the United Kingdom and Ireland retail operations. The Company now expects its earnings from continuing operations for the third and fourth quarters to be in the range of $0.28 to $0.30 and $0.45 to $0.47 per diluted share respectively, which represents a reduction from its previous guidance of $0.29 to $0.31 and $0.46 to $0.48 respectively. For the full fiscal year, the Company expects earnings per diluted share from continuing operations to be in the range of $0.90 to $0.94. These estimates exclude the effect of a previously disclosed change in accounting principle recorded in the first quarter of 2004, which resulted in a one-time benefit of $0.04 per diluted share. Management Presentation The live broadcast of the discussion of second quarter 2004 earnings results will be available to interested parties at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time) on Tuesday, August 17. To listen to the live broadcast over the Internet, please log on to www.gymboree.com, click on "Our Company" at the bottom of the page, go to "Investor and Media Relations" and then "Conference Calls, Webcasts & Presentations." A replay of the call will be available shortly after the broadcast through midnight Eastern Time, August 24, 2004, at 703-925-2533, pass code 386507, as well as archived on our Web site at the same location as the live Web cast. About The Gymboree Corporation The Gymboree Corporation's specialty retail brands offer unique, high-quality products delivered with personalized customer service. As of July 31, 2004, the Company operated a total of 646 stores: 593 Gymboree(R) retail stores (543 in the United States, 28 in Canada, and 22 in Europe), 46 Janie and Jack(R) retail shops and 7 Janeville(TM) stores in the United States. The Company also operates online stores at gymboree.com and janieandjack.com, and offers directed parent-child developmental play programs at 525 franchised and company-operated centers in the United States and 29 other countries. Forward-Looking Statements The foregoing sales and income figures for the second fiscal quarter of 2004 are un-audited and subject to year-end adjustment, and actual results could differ materially from those indicated. The foregoing paragraphs contain forward-looking statements relating to The Gymboree Corporation's anticipated sales growth and future financial performance. These are forward looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially as a result of a number of factors, including customer reactions to new merchandise, service levels and new concepts, success in meeting our delivery targets, the level of our promotional activity, our gross margin achievement, our ability to appropriately manage inventory, general economic conditions, and competitive market conditions. Other factors that may cause actual results to differ materially include those set forth in the reports that we file from time to time with the Securities and Exchange Commission. NOTE: Gymboree and Janie and Jack are registered trademarks of The Gymboree Corporation. Janeville is a trademark of The Gymboree Corporation. THE GYMBOREE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share and store data) (Unaudited) 13 Weeks Ended 26 Weeks Ended July 31, August 2, July 31, August 2, 2004 2003 2004 2003 Net sales: Retail $119,794 $110,356 $271,175 $246,438 Play & Music and Other 2,585 2,734 5,252 6,107 Total net sales 122,379 113,090 276,427 252,545 Cost of goods sold, including buying and occupancy expenses (78,271) (71,855) (166,540) (152,489) Gross profit 44,108 41,235 109,887 100,056 Selling, general and administrative expenses (49,232) (43,506) (101,932) (90,432) Operating income (loss) (5,124) (2,271) 7,955 9,624 Other income 138 468 368 379 Income (loss) before income taxes and cumulative effect of change in accounting principle (4,986) (1,803) 8,323 10,003 Income tax benefit (expense) 1,820 744 (3,038) (3,801) Income (loss) before cumulative effect of change in accounting principle (3,166) (1,059) 5,285 6,202 Cumulative effect of change in accounting principle, net of tax -- -- 1,228 -- Net income (loss) $(3,166) $(1,059) $6,513 $6,202 Basic per share amounts: Income (loss) before cumulative effect of change in accounting principle $(0.10) $(0.04) $0.17 $0.21 Cumulative effect of change in accounting principle, net of tax -- -- 0.04 -- Net income (loss) $(0.10) $(0.04) $0.21 $0.21 Diluted per share amounts: Income (loss) before cumulative effect of change in accounting principle $(0.10) $(0.04) $0.17 $0.20 Cumulative effect of change in accounting principle, net of tax -- -- 0.04 -- Net income (loss) $(0.10) $(0.04) $0.21 $0.20 Weighted average shares outstanding: Basic 30,693 29,552 30,584 29,433 Diluted 30,693 29,552 31,374 30,723 Number of stores at end of period 646 594 646 594 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) July 31, January 31, August 2, 2004 2004 2003 Current Assets Cash and cash equivalents $76,495 $89,553 $48,440 Accounts receivable 14,575 11,456 7,943 Merchandise inventories 78,542 73,017 67,618 Prepaid expenses and deferred taxes 4,161 5,564 10,624 Total current assets 173,773 179,590 134,625 Property and Equipment, net 132,870 112,743 104,620 Lease Rights, Deferred Taxes and Other Assets 11,039 6,378 7,303 Total Assets $317,682 $298,711 $246,548 Current Liabilities Accounts payable $33,036 33,356 30,756 Accrued liabilities 40,653 34,963 17,866 Total current liabilities 73,689 68,319 48,622 Long Term Liabilities Deferred rent and other liabilities 27,905 26,644 20,151 Stockholders' Equity 216,088 203,748 177,775 Total Liabilities and Stockholders' Equity $317,682 $298,711 $246,548 SOURCE The Gymboree Corporation -0- 08/17/2004 /CONTACT: investors, Charles Bracher, +1-650-373-7137, or charles_bracher@gymboree.com, or media, Jennifer Bonzagni Marshall, +1-650-373-7637, or jennifer_bonzagni@gymboree.com, both of The Gymboree Corporation/ /Web site: http://www.gymboree.com / (GYMB) CO: Gymboree Corporation ST: California, England, Ireland IN: REA TEX SU: ERN ERP RCN PER CCA