þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
001-31390 | 06 - 1195422 |
(Commission File Number) | (I.R.S. Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ý | Smaller reporting company ý |
Emerging growth company ¨ |
Class | Outstanding at September 6, 2019 | Trading Symbol | Name of each exchange on which registered | |||
Common stock, par value $.01 per share | 38,333,716 | CBKC | OTCQX |
Page | ||
August 3, 2019 | February 2, 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,242 | $ | 10,239 | ||||
Accounts receivable | 3,471 | 2,767 | ||||||
Merchandise inventories | 48,718 | 41,039 | ||||||
Prepaid expenses and other current assets | 3,894 | 3,372 | ||||||
Income taxes receivable | 294 | 268 | ||||||
Total current assets | 58,619 | 57,685 | ||||||
Non-current assets: | ||||||||
Property, equipment and improvements, net | 27,925 | 31,643 | ||||||
Operating lease assets | 121,782 | — | ||||||
Deferred income taxes | 499 | 499 | ||||||
Other assets | 668 | 1,276 | ||||||
Total non-current assets | 150,874 | 33,418 | ||||||
Total assets | $ | 209,493 | $ | 91,103 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 27,098 | $ | 17,834 | ||||
Short-term borrowings | 3,450 | — | ||||||
Current portion of long-term lease liabilities | 28,258 | — | ||||||
Accrued salaries, wages and related expenses | 5,139 | 4,954 | ||||||
Accrued liabilities and other current liabilities | 19,507 | 25,894 | ||||||
Total current liabilities | 83,452 | 48,682 | ||||||
Non-current liabilities: | ||||||||
Deferred lease incentives | — | 6,267 | ||||||
Long-term lease liabilities | 111,968 | 6,661 | ||||||
Other non-current liabilities | 2,013 | 8,970 | ||||||
Total non-current liabilities | 113,981 | 21,898 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock — $0.01 par value, 1,000 shares authorized, none outstanding | — | — | ||||||
Common stock — $0.01 par value, 74,000 shares authorized, 48,639 and 48,365 shares issued, and 38,336 and 38,386 shares outstanding at August 3, 2019 and February 2, 2019, respectively | 451 | 481 | ||||||
Additional paid-in capital | 129,118 | 128,714 | ||||||
Retained earnings | (4,634 | ) | 4,137 | |||||
Common stock held in treasury, 10,303 and 9,979 shares at cost at August 3, 2019 and February 2, 2019 | (112,875 | ) | (112,809 | ) | ||||
Total stockholders’ equity | 12,060 | 20,523 | ||||||
Total liabilities and stockholders’ equity | $ | 209,493 | $ | 91,103 |
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
August 3, | August 4, | August 3, | August 4, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 83,443 | $ | 87,418 | $ | 166,663 | $ | 173,319 | ||||||||
Merchandise, buying and occupancy costs | 58,969 | 62,546 | 116,575 | 121,103 | ||||||||||||
Gross profit | 24,474 | 24,872 | 50,088 | 52,216 | ||||||||||||
Other operating expenses: | ||||||||||||||||
Selling, general and administrative | 27,754 | 29,675 | 56,942 | 59,422 | ||||||||||||
Depreciation and amortization | 2,199 | 2,518 | 4,581 | 5,334 | ||||||||||||
Impairment of store assets | 311 | — | 311 | — | ||||||||||||
Total other operating expenses | 30,264 | 32,193 | 61,834 | 64,756 | ||||||||||||
Operating loss | (5,790 | ) | (7,321 | ) | (11,746 | ) | (12,540 | ) | ||||||||
Interest expense, net | (111 | ) | (42 | ) | (267 | ) | (99 | ) | ||||||||
Loss before income taxes | (5,901 | ) | (7,363 | ) | (12,013 | ) | (12,639 | ) | ||||||||
Income tax provision | 40 | 63 | 80 | 106 | ||||||||||||
Net loss | $ | (5,941 | ) | $ | (7,426 | ) | $ | (12,093 | ) | $ | (12,745 | ) | ||||
Other comprehensive income, net of tax | — | — | — | — | ||||||||||||
Comprehensive loss | $ | (5,941 | ) | $ | (7,426 | ) | $ | (12,093 | ) | $ | (12,745 | ) | ||||
Basic loss per share: | ||||||||||||||||
Net loss | $ | (0.16 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (0.34 | ) | ||||
Basic shares outstanding | 37,440 | 37,458 | 37,686 | 37,381 | ||||||||||||
Diluted loss per share: | ||||||||||||||||
Net loss | $ | (0.16 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (0.34 | ) | ||||
Diluted shares outstanding | 37,440 | 37,458 | 37,686 | 37,381 |
Thirteen Weeks Ended | |||||||||||||||||||||||||
Treasury | Common Stock | ||||||||||||||||||||||||
Shares Held | Amount Held | Shares Outstanding | Amount Outstanding | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||||||
May 4, 2019 | 10,161 | $ | (112,873 | ) | 38,193 | $ | 463 | $ | 128,964 | $ | 1,307 | $ | 17,861 | ||||||||||||
Total comprehensive loss | — | — | — | — | — | (5,941 | ) | (5,941 | ) | ||||||||||||||||
Issuance of restricted stock, net of forfeitures | — | — | 285 | 2 | (6 | ) | — | (4 | ) | ||||||||||||||||
Stock-based compensation expense | — | — | — | — | 160 | — | 160 | ||||||||||||||||||
Acquisition of common stock held in treasury, at cost | 142 | (2 | ) | (142 | ) | (14 | ) | — | — | (16 | ) | ||||||||||||||
August 3, 2019 | 10,303 | $ | (112,875 | ) | 38,336 | $ | 451 | $ | 129,118 | $ | (4,634 | ) | $ | 12,060 |
Twenty-six Weeks Ended | |||||||||||||||||||||||||
Treasury | Common Stock | ||||||||||||||||||||||||
Shares Held | Amount Held | Shares Outstanding | Amount Outstanding | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||||||
February 2, 2019 | 9,979 | $ | (112,809 | ) | 38,386 | $ | 481 | $ | 128,714 | $ | 4,137 | $ | 20,523 | ||||||||||||
Total comprehensive loss | — | — | — | — | — | (12,093 | ) | (12,093 | ) | ||||||||||||||||
Issuance of restricted stock, net of forfeitures | — | — | 274 | 2 | (9 | ) | — | (7 | ) | ||||||||||||||||
Stock-based compensation expense | — | — | — | — | 413 | — | 413 | ||||||||||||||||||
Acquisition of common stock held in treasury, at cost | 324 | (66 | ) | (324 | ) | (32 | ) | — | — | (98 | ) | ||||||||||||||
Cumulative effect of accounting change | — | — | — | — | — | 3,322 | 3,322 | ||||||||||||||||||
August 3, 2019 | 10,303 | $ | (112,875 | ) | 38,336 | $ | 451 | $ | 129,118 | $ | (4,634 | ) | $ | 12,060 |
Thirteen Weeks Ended | |||||||||||||||||||||||||
Treasury | Common Stock | ||||||||||||||||||||||||
Shares Held | Amount Held | Shares Outstanding | Amount Outstanding | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||||||
May 5, 2018 | 9,791 | $ | (112,711 | ) | 38,078 | $ | 478 | $ | 127,993 | $ | 31,658 | $ | 47,418 | ||||||||||||
Total comprehensive loss | — | — | — | — | — | (7,426 | ) | (7,426 | ) | ||||||||||||||||
Issuance of restricted stock, net of forfeitures | — | — | 354 | 3 | (10 | ) | — | (7 | ) | ||||||||||||||||
Stock-based compensation expense | — | — | — | — | 253 | — | 253 | ||||||||||||||||||
August 4, 2018 | 9,791 | $ | (112,711 | ) | 38,432 | $ | 481 | $ | 128,236 | $ | 24,232 | $ | 40,238 |
Twenty-six Weeks Ended | |||||||||||||||||||||||||
Treasury | Common Stock | ||||||||||||||||||||||||
Shares Held | Amount Held | Shares Outstanding | Amount Outstanding | Additional Paid-in Capital | Retained Earnings | Total | |||||||||||||||||||
February 3, 2018 | 9,791 | $ | (112,711 | ) | 37,834 | $ | 475 | $ | 127,652 | $ | 34,993 | $ | 50,409 | ||||||||||||
Total comprehensive loss | — | — | — | — | — | (12,745 | ) | (12,745 | ) | ||||||||||||||||
Issuance of restricted stock, net of forfeitures | — | — | 598 | 6 | (20 | ) | — | (14 | ) | ||||||||||||||||
Stock-based compensation expense | — | — | — | — | 604 | — | 604 | ||||||||||||||||||
Cumulative effect of accounting change | — | — | — | — | — | 1,984 | 1,984 | ||||||||||||||||||
August 4, 2018 | 9,791 | $ | (112,711 | ) | 38,432 | $ | 481 | $ | 128,236 | $ | 24,232 | $ | 40,238 |
Twenty-six Weeks Ended | ||||||||
August 3, 2019 | August 4, 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (12,093 | ) | $ | (12,745 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 4,581 | 5,334 | ||||||
Impairment of store assets | 311 | — | ||||||
Amortization of financing costs | 30 | 31 | ||||||
Lease expense | 12,867 | — | ||||||
Deferred lease-related liabilities | — | (486 | ) | |||||
Stock-based compensation expense | 413 | 604 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (704 | ) | (882 | ) | ||||
Merchandise inventories | (7,680 | ) | 1,178 | |||||
Prepaid expenses and other assets | (505 | ) | (1,579 | ) | ||||
Income taxes receivable | (26 | ) | (46 | ) | ||||
Accounts payable | 9,286 | 3,021 | ||||||
Accrued liabilities | (2,964 | ) | (5,757 | ) | ||||
Lease liabilities | (13,634 | ) | — | |||||
Other liabilities | (230 | ) | (59 | ) | ||||
Net cash used in operating activities | (10,348 | ) | (11,386 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of property, equipment and improvements | (996 | ) | (1,722 | ) | ||||
Proceeds from sale of assets | — | 13,329 | ||||||
Net cash (used in) provided by investing activities | (996 | ) | 11,607 | |||||
Cash flows from financing activities: | ||||||||
Shares redeemed for payroll taxes | (5 | ) | (13 | ) | ||||
Proceeds from short-term borrowings | 12,650 | 9,100 | ||||||
Payments of short-term borrowings | (9,200 | ) | (9,100 | ) | ||||
Payments of deferred financing costs | — | (171 | ) | |||||
Acquisition of common stock held in treasury, at cost | (98 | ) | — | |||||
Net cash provided by (used in) financing activities | 3,347 | (184 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (7,997 | ) | 37 | |||||
Cash and cash equivalents at beginning of period | 10,239 | 23,077 | ||||||
Cash and cash equivalents at end of period | $ | 2,242 | $ | 23,114 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | 267 | $ | 100 | ||||
Income taxes paid | $ | 198 | $ | 130 | ||||
Accrued purchases of equipment and improvements | $ | 98 | $ | 143 |
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||||
August 3, 2019 | August 4, 2018 | August 3, 2019 | August 4, 2018 | |||||||||||||||
Brick and mortar stores | $ | 65,595 | $ | 66,715 | $ | 130,647 | $ | 134,770 | ||||||||||
eCommerce sales | 16,698 | 19,216 | 1 | 35,598 | 38,010 | 1 | ||||||||||||
Other | 1,150 | 1,487 | 418 | 539 | ||||||||||||||
Net sales | $ | 83,443 | $ | 87,418 | $ | 166,663 | $ | 173,319 |
(1) | Includes approximately $2.4 million and $4.7 million of 2018 revenues for the thirteen and twenty-six week periods ended, respectively, from orders placed in store and fulfilled from another location. For 2019, similar sales are included in brick and mortar stores. |
Contract Liabilities | ||||||||||||||||
August 3, 2019 | February 2, 2019 | |||||||||||||||
Current | Non-Current | Current | Non-Current | |||||||||||||
Right of return | $ | 1,215 | $ | — | $ | 1,176 | $ | — | ||||||||
Friendship Rewards Program | 4,169 | — | 3,768 | — | ||||||||||||
Gift card revenue | 2,637 | — | 4,646 | — | ||||||||||||
Private label credit card | 274 | 1,210 | 274 | 1,348 | ||||||||||||
Total | $ | 8,295 | $ | 1,210 | $ | 9,864 | $ | 1,348 |
Remainder of | ||||||||||||
Fiscal 2019 | Fiscal 2020 | Thereafter | ||||||||||
Private label credit card | $ | 137 | $ | 274 | $ | 1,073 | ||||||
Total | $ | 137 | $ | 274 | $ | 1,073 |
Description | August 3, 2019 | February 2, 2019 | ||||||
Store leasehold improvements | $ | 50,071 | $ | 50,305 | ||||
Store furniture and fixtures | 70,442 | 70,815 | ||||||
Corporate office and distribution center furniture, fixtures and equipment | 6,220 | 6,179 | ||||||
Computer and point of sale hardware and software | 33,631 | 33,098 | ||||||
Construction in progress | 91 | 419 | ||||||
Total property, equipment and improvements, gross | 160,455 | 160,816 | ||||||
Less accumulated depreciation and amortization | (132,530 | ) | (129,173 | ) | ||||
Total property, equipment and improvements, net | $ | 27,925 | $ | 31,643 |
August 3, 2019 | February 2, 2019 | |||||||
Gift card and store credit liabilities | $ | 2,637 | $ | 4,646 | ||||
Accrued Friendship Rewards Program loyalty liability | 4,169 | 3,768 | ||||||
Accrued income, sales and other taxes payable | 1,200 | 911 | ||||||
Accrued occupancy-related expenses | 645 | 3,700 | ||||||
Sales return reserve | 1,215 | 1,176 | ||||||
eCommerce obligations | 4,842 | 6,194 | ||||||
Other accrued liabilities | 4,799 | 5,499 | ||||||
Total accrued liabilities and other current liabilities | $ | 19,507 | $ | 25,894 |
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
August 3, | August 4, | August 3, | August 4, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Numerator (in thousands): | ||||||||||||||||
Net loss attributable to Christopher & Banks Corporation | $ | (5,941 | ) | $ | (7,426 | ) | $ | (12,093 | ) | $ | (12,745 | ) | ||||
Denominator (in thousands): | ||||||||||||||||
Weighted average common shares outstanding - basic | 37,440 | 37,458 | 37,686 | 37,381 | ||||||||||||
Dilutive shares | — | — | — | — | ||||||||||||
Weighted average common and common equivalent shares outstanding - diluted | 37,440 | 37,458 | 37,686 | 37,381 | ||||||||||||
Net loss per common share: | ||||||||||||||||
Basic | $ | (0.16 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (0.34 | ) | ||||
Diluted | $ | (0.16 | ) | $ | (0.20 | ) | $ | (0.32 | ) | $ | (0.34 | ) |
Twenty-six Weeks Ended | Fiscal Year Ended | |||||||
Long-Lived Assets Held and Used (in thousands): | August 3, 2019 | February 2, 2019 | ||||||
Carrying value | $ | 510 | $ | 4,829 | ||||
Fair value measured using Level 3 inputs | 199 | 445 | ||||||
Impairment charge | $ | 311 | $ | 4,384 |
(in thousands) | Lease Liabilities(1) | |||
Remainder of 2019 | $ | 19,479 | ||
2020 | 31,824 | |||
2021 | 26,201 | |||
2022 | 22,946 | |||
2023 | 22,170 | |||
Thereafter | 45,568 | |||
Total lease payments | 168,188 | |||
Less: Imputed interest | (27,962 | ) | ||
Present value of lease liabilities | 140,226 | |||
Less: Current lease liabilities | (28,258 | ) | ||
Long-term lease liabilities | $ | 111,968 |
(1) | Includes retail stores and the corporate headquarters facility, including the distribution center. |
(in thousands) | Lease Liabilities(1) | |||
2019 | $ | 36,965 | ||
2020 | 25,887 | |||
2021 | 21,386 | |||
2022 | 18,439 | |||
2023 | 17,811 | |||
Thereafter | 38,827 | |||
Total lease payments | $ | 159,315 |
(1) | Includes retail stores and the corporate headquarters facility, including the distribution center. |
Remaining lease term and discount rate: | August 3, 2019 | ||
Weighted average remaining lease term (years) | 6.0 | ||
Weighted average discount rate | 6.0 | % |
• | Enhance the customer shopping experience; |
• | Improve marketing and promotional effectiveness; |
• | Leverage omni-channel capabilities; |
• | Build loyalty and grow our customer file; |
• | Optimize our real estate portfolio; and |
• | Right-size our cost structure. |
• | Stores operating for at least 13 full months; |
• | Stores relocated within the same center; and |
• | eCommerce sales. |
• | Stores converted to the MPW format for 13 full months post conversion. |
Thirteen Weeks Ended | Net Change | Percent of Net Sales | |||||||||||||||||||
(dollars in thousands) | August 3, 2019 | August 4, 2018 | Amount | Percent | August 3, 2019 | August 4, 2018 | |||||||||||||||
Net sales | $ | 83,443 | $ | 87,418 | $ | (3,975 | ) | (4.5 | )% | 100.0 | % | 100.0 | % | ||||||||
Merchandise, buying and occupancy costs | 58,969 | 62,546 | (3,577 | ) | (5.7 | )% | 70.7 | % | 71.5 | % | |||||||||||
Gross profit | 24,474 | 24,872 | (398 | ) | (1.6 | )% | 29.3 | % | 28.5 | % | |||||||||||
Other operating expenses: | |||||||||||||||||||||
Selling, general and administrative | 27,754 | 29,675 | (1,921 | ) | (6.5 | )% | 33.3 | % | 33.9 | % | |||||||||||
Depreciation and amortization | 2,199 | 2,518 | (319 | ) | (12.7 | )% | 2.6 | % | 2.9 | % | |||||||||||
Impairment of store assets | 311 | — | 311 | — | % | 0.4 | % | — | % | ||||||||||||
Total other operating expenses | 30,264 | 32,193 | (1,929 | ) | (6.0 | )% | 36.3 | % | 36.8 | % | |||||||||||
Operating loss | (5,790 | ) | (7,321 | ) | 1,531 | (20.9 | )% | (6.9 | )% | (8.4 | )% | ||||||||||
Interest expense, net | (111 | ) | (42 | ) | (69 | ) | 164.3 | % | (0.1 | )% | — | % | |||||||||
Loss before income taxes | (5,901 | ) | (7,363 | ) | 1,462 | (19.9 | )% | (7.1 | )% | (8.4 | )% | ||||||||||
Income tax provision | 40 | 63 | (23 | ) | (36.5 | )% | — | % | 0.1 | % | |||||||||||
Net loss | $ | (5,941 | ) | $ | (7,426 | ) | $ | 1,485 | (20.0 | )% | (7.1 | )% | (8.5 | )% |
Thirteen Weeks Ended | ||||||
Rate trends as a percentage of net sales | August 3, 2019 | August 4, 2018 | ||||
Gross margin | 29.3 | % | 28.5 | % | ||
Selling, general, and administrative | 33.3 | % | 33.9 | % | ||
Depreciation and amortization | 2.6 | % | 2.9 | % | ||
Operating loss | (6.9 | )% | (8.4 | )% |
• | Net sales declined 4.5% compared to the same period last year due to declines in average unit retail, units per transaction, and average number of stores. These declines were partially offset by an increase in the number of transactions. |
• | Comparable sales decreased 4.1% following a 0.8% increase in the same period last year. |
• | eCommerce sales decreased 1.3% following a 16.4% increase in the same period last year. |
• | Gross margin rate improved 88 basis points compared to last year's second quarter primarily due to increased merchandise margin, partially offset by higher shipping costs related to our ship from store initiative. |
• | SG&A expense was $1.9 million, or 6.5%, less than last year's second quarter due to lower expenses for compensation, medical benefits, professional services and eCommerce, and the sale of a claim regarding credit card interchange fees. |
• | Net loss totaled $5.9 million, or a $(0.16) loss per share, compared to a net loss for the prior year's second quarter of $7.4 million, or a $(0.20) loss per share. |
• | As of August 3, 2019, we held $2.2 million of cash and cash equivalents, compared to $2.6 million as of May 4, 2019. Bank borrowings were $3.5 million as of the end of the second quarter versus $3.0 million at the end of the first quarter. |
Thirteen Weeks Ended | |||
Sales driver change components | August 3, 2019 | ||
Number of transactions | 2.1 | % | |
Units per transaction | (2.9 | )% | |
Average unit retail | (3.5 | )% | |
Other sales | (0.2 | )% | |
Total sales driver change | (4.5 | )% |
Thirteen Weeks Ended | |||
Comparable sales | August 3, 2019 | ||
Comparable sales | (4.1 | )% |
Thirteen Weeks Ended | |||
Store metrics | August 3, 2019 | ||
Net sales per store % change | (4.2 | )% | |
Net sales per square foot % change | (5.0 | )% |
Store Count | Square Footage (1) | |||||||||||||||||||||||
May 4, | MPW | August 3, | Avg Store | August 3, | May 4, | |||||||||||||||||||
Stores by Format | 2019 | Open | Close | Conversions | 2019 | Count | 2019 | 2019 | ||||||||||||||||
MPW | 313 | 1 | (3 | ) | (1 | ) | 310 | 311 | 1,227 | 1,234 | ||||||||||||||
Outlet | 81 | — | (1 | ) | — | 80 | 80 | 321 | 325 | |||||||||||||||
Christopher and Banks | 33 | 1 | — | — | 34 | 34 | 112 | 109 | ||||||||||||||||
C.J. Banks | 30 | 1 | — | — | 31 | 31 | 111 | 109 | ||||||||||||||||
Total Stores | 457 | 3 | (4 | ) | (1 | ) | 455 | 456 | 1,771 | 1,777 |
(1) | Square footage presented in thousands |
Twenty-six Weeks Ended | Net Change | Percent of Net Sales | |||||||||||||||||||
(dollars in thousands) | August 3, 2019 | August 4, 2018 | Amount | Percent | August 3, 2019 | August 4, 2018 | |||||||||||||||
Net sales | $ | 166,663 | $ | 173,319 | $ | (6,656 | ) | (3.9 | )% | 100.0 | % | 100.0 | % | ||||||||
Merchandise, buying and occupancy costs | 116,575 | 121,103 | (4,528 | ) | (3.7 | )% | 69.9 | % | 69.9 | % | |||||||||||
Gross profit | 50,088 | 52,216 | (2,128 | ) | (4.1 | )% | 30.1 | % | 30.1 | % | |||||||||||
Other operating expenses: | |||||||||||||||||||||
Selling, general and administrative | 56,942 | 59,422 | (2,480 | ) | (4.2 | )% | 34.2 | % | 34.3 | % | |||||||||||
Depreciation and amortization | 4,581 | 5,334 | (753 | ) | (14.1 | )% | 2.7 | % | 3.1 | % | |||||||||||
Impairment of store assets | 311 | — | 311 | — | % | 0.2 | % | — | % | ||||||||||||
Total other operating expenses | 61,834 | 64,756 | (2,922 | ) | (4.5 | )% | 37.1 | % | 37.4 | % | |||||||||||
Operating loss | (11,746 | ) | (12,540 | ) | 794 | (6.3 | )% | (7.0 | )% | (7.2 | )% | ||||||||||
Interest expense, net | (267 | ) | (99 | ) | (168 | ) | 169.7 | % | (0.2 | )% | (0.1 | )% | |||||||||
Loss before income taxes | (12,013 | ) | (12,639 | ) | 626 | (5.0 | )% | (7.2 | )% | (7.3 | )% | ||||||||||
Income tax provision | 80 | 106 | (26 | ) | (24.5 | )% | — | % | 0.1 | % | |||||||||||
Net loss | $ | (12,093 | ) | $ | (12,745 | ) | $ | 652 | (5.1 | )% | (7.3 | )% | (7.4 | )% |
Twenty-six Weeks Ended | ||||||
Rate trends as a percentage of net sales | August 3, 2019 | August 4, 2018 | ||||
Gross margin | 30.1 | % | 30.1 | % | ||
Selling, general, and administrative | 34.2 | % | 34.3 | % | ||
Depreciation and amortization | 2.7 | % | 3.1 | % | ||
Operating loss | (7.0 | )% | (7.2 | )% |
• | Net sales decreased 3.9% compared to the same period last year primarily due to declines in average unit retail, units per transaction and average number of stores. These declines were partially offset by increases in the number of transactions. |
• | Comparable sales decreased 3.9% following a 0.9% decrease in the same period last year. |
• | eCommerce sales increased 4.8% following a 9.1% increase in the same period last year. |
• | Gross margin percentage improved 7 basis points compared to the same period last year as increased merchandise margin was offset by higher shipping costs relating to our ship from store initiative. |
• | SG&A expense was $2.5 million, or 4.2%, less than last year's first half due to lower expenses for corporate and store compensation, medical benefits, professional services and eCommerce, and the sale of a claim regarding credit card interchange fees in the second quarter. These expense decreases were partially offset by increases in insurance and recruiting and training expenses. |
• | Net loss for the first half totaled $12.1 million, or $(0.32) loss per share, compared to a net loss for the prior year's first half of $12.7 million, or a $(0.34) loss per share. |
• | As of August 3, 2019, we held $2.2 million of cash and cash equivalents, compared to $10.2 million as of February 2, 2019. Bank borrowings were $3.5 million as of the end of the second quarter versus zero at February 2, 2019. |
Twenty-six Weeks Ended | |||
Sales driver change components | August 3, 2019 | ||
Number of transactions | 0.7 | % | |
Units per transaction | (0.5 | )% | |
Average unit retail | (4.3 | )% | |
Other sales | 0.2 | % | |
Total sales driver change | (3.9 | )% |
Twenty-six Weeks Ended | |||
Comparable sales | August 3, 2019 | ||
Comparable sales | (3.9 | )% |
Twenty-six Weeks Ended | |||
Store metrics | August 3, 2019 | ||
Net sales per store % change | (5.2 | )% | |
Net sales per square foot % change | (5.9 | )% |
Store Count | Square Footage (1) | |||||||||||||||||||||||
February 2, | MPW | August 3, | Avg Store | August 3, | February 2, | |||||||||||||||||||
Stores by Format | 2019 | Open | Close | Conversions | 2019 | Count | 2019 | 2019 | ||||||||||||||||
MPW | 312 | 2 | (3 | ) | (1 | ) | 310 | 312 | 1,227 | 1,227 | ||||||||||||||
Outlet | 80 | 1 | (1 | ) | — | 80 | 81 | 321 | 321 | |||||||||||||||
Christopher and Banks | 33 | 1 | — | — | 34 | 33 | 112 | 109 | ||||||||||||||||
C.J. Banks | 30 | 1 | — | — | 31 | 30 | 111 | 109 | ||||||||||||||||
Total Stores | 455 | 5 | (4 | ) | (1 | ) | 455 | 456 | 1,771 | 1,766 |
(1) | Square footage presented in thousands |
• | Net sales to be flat to up 2% as the result of expanded omni-channel capabilities, enhancements to the overall product assortment, and more impactful marketing promotions intended to drive customer file growth; |
• | Gross margin expansion of 100 to 200 basis points as a result of improved inventory management, including supply chain and omni-channel initiatives, greater disciplines around promotions and the continued reduction of occupancy costs; the gross margin guidance reflects the impact of recently announced tariffs; |
• | SG&A as a percentage of sales to decline 100 to 150 basis points due to ongoing cost reduction initiatives; and |
• | To end the fiscal year with positive cash and no outstanding borrowings under its Credit Facility. |
Twenty-six Weeks Ended | ||||||||
(in thousands) | August 3, 2019 | August 4, 2018 | ||||||
Net cash used in operating activities | $ | (10,348 | ) | $ | (11,386 | ) | ||
Net cash (used in) provided by investing activities | (996 | ) | 11,607 | |||||
Net cash provided by (used in) financing activities | 3,347 | (184 | ) | |||||
Net (decrease) increase in cash and cash equivalents | $ | (7,997 | ) | $ | 37 |
Total Number of | Maximum Number of | |||||||||||||
Shares Purchased as | Shares that May Yet | |||||||||||||
Total Number of | Part of Publicly | Be Purchased Under | ||||||||||||
Shares | Average Price | Announced Plans or | the Plans or | |||||||||||
Period | Purchased (1) | Paid per Share | Programs | Programs | ||||||||||
5/5/19 - 6/1/19 | 2,126 | $ | 0.25 | — | $ | — | ||||||||
6/2/2019 - 7/6/2019 | 2,126 | 0.14 | — | — | ||||||||||
7/7/2019 - 8/3/2019 | 11,571 | 0.11 | — | — | ||||||||||
Total | 15,823 | — | — |
(1) | The shares of common stock in this column represent shares surrendered to us by stock plan participants in order to satisfy minimum withholding tax obligations related to the vesting of restricted stock awards. |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program | ||||||||||
5/5/19 - 6/1/19 | — | $ | — | — | $ | 1,818,583 | ||||||||
6/2/2019 - 7/6/2019 | — | — | — | 1,818,583 | ||||||||||
7/7/2019 - 8/3/2019 | 141,752 | 0.11 | 141,752 | 1,802,932 | ||||||||||
Total | 141,752 | 141,752 | — |
(1) | On December 20, 2018, the Company announced that the Board of Directors authorized a stock repurchase program to purchase up to $2.0 million of the Company’s outstanding common stock during the period ending December 31, 2019. The shares may be repurchased from time to time through open market purchases, block transactions, privately negotiated transactions or derivative transactions in a manner consistent with applicable securities laws and regulations. |
Exhibit No. | Exhibit Description | |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101* | Financial statements from the Quarterly Report on Form 10-Q of Christopher & Banks Corporation for the fiscal quarter ended August 3, 2019, formatted in eXtensible Business Reporting Language ("XBRL"): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Loss, (iv) the Condensed Consolidated Statements of Cash Flows and (vi) the Notes to Condensed Consolidated Financial Statements |
CHRISTOPHER & BANKS CORPORATION | |||
Dated: September 11, 2019 | By: | /s/ Keri L. Jones | |
Keri L. Jones | |||
President, Chief Executive Officer | |||
(Principal Executive Officer) | |||
Dated: September 11, 2019 | By: | /s/ Richard Bundy | |
Richard Bundy | |||
Senior Vice President, Chief Financial Officer | |||
(Principal Financial Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Christopher & Banks Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: September 11, 2019 | |||
/s/ Keri L. Jones | |||
Keri L. Jones | |||
President, Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Christopher & Banks Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: September 11, 2019 | |||
/s/ Richard Bundy | |||
Richard Bundy | |||
Senior Vice President, Chief Financial Officer |
1. | The quarterly report of the Company on Form 10-Q for the period ended August 3, 2019 as filed with the United States Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: September 11, 2019 | ||||
By: | /s/ Keri L. Jones | |||
Keri L. Jones | ||||
President, Chief Executive Officer |
1. | The quarterly report of the Company on Form 10-Q for the period ended August 3, 2019 as filed with the United States Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: September 11, 2019 | ||||
By: | /s/ Richard Bundy | |||
Richard Bundy | ||||
Senior Vice President, Chief Financial Officer |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED) - USD ($) shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 03, 2019 |
Aug. 04, 2018 |
Aug. 03, 2019 |
Aug. 04, 2018 |
|
Income Statement [Abstract] | ||||
Net sales | $ 83,443,000 | $ 87,418,000 | $ 166,663,000 | $ 173,319,000 |
Merchandise, buying and occupancy costs | 58,969,000 | 62,546,000 | 116,575,000 | 121,103,000 |
Gross profit | 24,474,000 | 24,872,000 | 50,088,000 | 52,216,000 |
Other operating expenses: | ||||
Selling, general and administrative | 27,754,000 | 29,675,000 | 56,942,000 | 59,422,000 |
Depreciation and amortization | 2,199,000 | 2,518,000 | 4,581,000 | 5,334,000 |
Impairment of store assets | 311,000 | 0 | 311,000 | 0 |
Total other operating expenses | 30,264,000 | 32,193,000 | 61,834,000 | 64,756,000 |
Operating loss | (5,790,000) | (7,321,000) | (11,746,000) | (12,540,000) |
Interest expense, net | (111,000) | (42,000) | (267,000) | (99,000) |
Loss before income taxes | (5,901,000) | (7,363,000) | (12,013,000) | (12,639,000) |
Income tax provision | 40,000 | 63,000 | 80,000 | 106,000 |
Net loss | (5,941,000) | (7,426,000) | (12,093,000) | (12,745,000) |
Other comprehensive income, net of tax | 0 | 0 | 0 | 0 |
Comprehensive loss | $ (5,941,000) | $ (7,426,000) | $ (12,093,000) | $ (12,745,000) |
Basic loss per share: | ||||
Net loss (in dollars per share) | $ (0.16) | $ (0.20) | $ (0.32) | $ (0.34) |
Basic shares outstanding (in shares) | 37,440 | 37,458 | 37,686 | 37,381 |
Diluted loss per share: | ||||
Net loss (in dollars per share) | $ (0.16) | $ (0.20) | $ (0.32) | $ (0.34) |
Diluted shares outstanding (in shares) | 37,440 | 37,458 | 37,686 | 37,381 |
Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Merchandise sales We sell merchandise through our brick and mortar and eCommerce sales channels. Revenues are recognized when control of the promised merchandise is transferred to our customers. Within our brick and mortar sales channel, control is transferred at the point of sale. Within our eCommerce sales channel, control is transferred upon delivery of the merchandise to our customers. Shipping revenues associated with the eCommerce channel are recognized upon the completion of the delivery. The revenue recorded reflects the consideration that we expect to receive in exchange for our merchandise. The Company has elected, as an accounting policy, to exclude from the transaction price all taxes assessed by governmental authorities imposed on merchandise sales. Right of return As part of our merchandise sales, we offer customers a right of return on merchandise that lapses, after a specified period of time, based on the original purchase date. The Company estimates the amount of sales that may be returned by our customers and records this estimate as a reduction of revenue in the period in which the related revenues are recognized. We utilize historical and industry data to estimate the total return liability. Conversely, the reduction in revenue results in a corresponding reduction in merchandise, buying and occupancy costs which results in a contract asset for the anticipated merchandise returned. The total reduction in revenue from estimated returns was $1.2 million and as of both August 3, 2019 and February 2, 2019, this amount is included within accrued liabilities and other current liabilities in the Condensed Consolidated Balance Sheets. Friendship rewards program The Company established the Friendship Rewards Program as a loyalty program where customers earn points towards future discount certificates based on their purchase activity. We have identified the additional benefits received from this program as a separate performance obligation within a sales contract in the form of the discount certificates earned by customers. Accordingly, we assess any incremental discounts issued to our customers through the program and allocate a portion of the transaction price associated with merchandise sales from loyalty program members to the future discounts earned. The transaction price allocated to future discounts is recorded as deferred revenue until the discounts are used or forfeited. In addition, the Company estimates breakage on the points earned within the program that will not be used by customers for future discounts. The Company estimates breakage based on the historical redemption rate and considers industry trends. Breakage is recorded as a reduction to the deferred revenue associated with the program. As of August 3, 2019, and February 2, 2019, the Company recorded $4.2 million and $3.8 million, respectively, in deferred revenue associated with the program, which is included in accrued liabilities and other current liabilities in the Condensed Consolidated Balance Sheets. Gift card revenue The Company sells gift cards to customers which can be redeemed for merchandise within our brick and mortar and eCommerce sales channels. Gift cards are recorded as deferred revenue when issued and are subsequently recorded as revenue upon redemption. The Company estimates breakage related to gift cards when the likelihood of redemption is remote. This estimate utilizes historical trends based on the vintage of the gift card. Breakage on gift cards is recorded as revenue in proportion to the rate of gift card redemptions by vintage. As of August 3, 2019, and February 2, 2019, the Company had $2.6 million and $4.6 million, respectively, of deferred revenue associated with the issuance of gift cards. The deferred gift card revenue is included in accrued liabilities and other current liabilities in the Condensed Consolidated Balance Sheets. Private label credit card The Company offers a private label credit card ("PLCC") which bears the Christopher and Banks brand name offered under an agreement with Comenity Bank. Pursuant to this agreement, there are several obligations on behalf of Comenity Bank that impact the recording of revenue. In connection with extending the term of the agreement, the Company received a signing bonus. We have determined that the benefits associated with signing the agreement are recognized over time throughout its term. This is the most accurate depiction of the transfer of services as the customer receives and consumes the benefits by obtaining and having the ability to use financing through Comenity Bank for purchases within our brick and mortar and eCommerce sales channels throughout the agreement's term. The deferred signing bonus is included in other liabilities and is being recognized in net sales ratably over the term of the contract. The other revenue based on customer usage of the card is recognized in net sales in the periods in which the related customer transaction occurs. As of August 3, 2019 and February 2, 2019, the Company had $1.5 million recorded as deferred revenue associated with the signing bonus, of which $0.3 million is included in accrued liabilities and other current liabilities and the remaining $1.2 million is included in other non-current liabilities in the Condensed Consolidated Balance Sheets. The Company recorded $0.1 million into revenue for the thirteen and twenty-six-week periods ended August 3, 2019 and August 4, 2018, respectively, associated with the signing bonus. The Company records revenue associated with royalties received for purchases made using the PLCC. Royalty revenue is recognized based on the total amount to which we have a right to invoice in accordance with the practical expedient included in ASC 606. Accordingly, royalty revenue is recognized in the period in which the related purchases are recognized. The Company receives a performance bonus based on the total amount of new PLCC accounts that are opened during the year. We have determined that this is a form of variable consideration. Variable consideration is recorded if, in the Company’s judgment, it is probable that a significant future reversal of revenue under the contract will not occur. Disaggregation of revenue The following table provides information about disaggregated revenue by sales channel. All revenue illustrated below is included within our one reportable segment.
Amounts included within other revenue relate to revenues earned from our private label credit card, net of any revenue adjustments and accruals. Contract balances The following table provides information about contract assets and liabilities from contracts with customers (in thousands):
The Company recognized revenue of $1.4 million and $1.5 million in the thirteen-week periods ended August 3, 2019 and August 4, 2018, respectively, related to contract liabilities recorded at the beginning of the period. The Company recognized revenue of $3.1 million and $3.4 million in the twenty-six-week periods ended August 3, 2019 and August 4, 2018, respectively, related to contract liabilities recorded at the beginning of the period. Such revenues were comprised of the redemption and forfeiture of Friendship Rewards Program discount certificates, redemption of gift cards, and amortization of the PLCC signing bonus. As of August 3, 2019, and February 2, 2019, the Company did not have any material contract assets. For the thirteen and twenty-six-week periods ended August 3, 2019 and August 4, 2018, the Company did not recognize any revenue resulting from changes in the estimated variable consideration to be received associated with performance obligations satisfied or partially satisfied in prior periods. Transaction price allocated to remaining performance obligations The following table includes the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied as of August 3, 2019:
Contract Costs The Company has not incurred any costs to obtain or fulfill a contract. |
Leases (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maturities of Lease Liabilities | Maturities of our lease liabilities as of August 3, 2019 are as follows:
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Maturities of Lease Liabilities under ASC 840 | Maturities of our lease liabilities as of February 2, 2019 (under ASC 840, Leases) were as follows:
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Weighted Average Remaining Lease Terms and Discount Rates | The weighted average remaining lease terms and discount rates for all leases as of August 3, 2019 were as follows:
|
Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Thousands |
Aug. 03, 2019 |
Feb. 02, 2019 |
---|---|---|
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
Remainder of 2019 | $ 19,479 | |
2020 | 31,824 | |
2021 | 26,201 | |
2022 | 22,946 | |
2023 | 22,170 | |
Thereafter | 45,568 | |
Total lease payments | 168,188 | |
Less: Imputed interest | (27,962) | |
Present value of lease liabilities | 140,226 | |
Less: Current lease liabilities | (28,258) | $ 0 |
Long-term lease liabilities | $ 111,968 | $ 6,661 |
Leases |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company leases its store locations and vehicles under operating leases. The store lease terms, including rental period, renewal options, escalation clauses and rent as a percentage of sales, vary among the leases. Most store leases require the Company to pay real estate taxes and common area maintenance charges. In addition, we have lease agreements that contain both lease and non-lease components. We have elected to combine lease and non-lease components for all classes of assets. Maturities of our lease liabilities as of August 3, 2019 are as follows:
Maturities of our lease liabilities as of February 2, 2019 (under ASC 840, Leases) were as follows:
The weighted average remaining lease terms and discount rates for all leases as of August 3, 2019 were as follows:
Operating expense for the thirteen weeks ended August 3, 2019 totaled approximately $10.2 million, with $0.5 million of that amount representing operating lease variable rent that was recorded in cost of sales. In addition, all but $20 thousand of the $9.7 million of non-variable operating lease rent is included in cost of sales. $20 thousand of operating lease expense is included in selling, general and administrative expenses. For the thirteen weeks ended August 3, 2019, cash lease payments were $11.2 million, and right of use assets obtained in exchange for lease liabilities were $0.5 million. Operating expense for the twenty-six weeks ended August 3, 2019 totaled approximately $20.6 million, with $0.9 million of that amount representing operating lease variable rent that was recorded in cost of sales. In addition, all but $52 thousand of the $19.7 million of non-variable operating lease expense is included in cost of sales. $52 thousand of operating lease expense is included in selling, general and administrative expenses. For the twenty-six weeks ended August 3, 2019, cash lease payments were $21.3 million, and right of use assets obtained in exchange for lease liabilities were $2.6 million. |
Credit Facility |
6 Months Ended |
---|---|
Aug. 03, 2019 | |
Debt Disclosure [Abstract] | |
Credit Facility | Credit Facility The Company is party to an amended and restated credit agreement ("the Credit Facility") with Wells Fargo Bank, National Association ("Wells Fargo"), as lender. On August 3, 2018, the Company entered into a second amendment ("Second Amendment") to the Credit Facility. The Second Amendment, among other changes, (i) extended the term of the Credit Facility to August 3, 2023; and (ii) supplemented the existing $50.0 million revolving Credit Facility by adding a new $5.0 million revolving "first-in, last-out" tranche credit facility (the "FILO Facility"), subject to borrowing base restrictions applicable to the FILO Facility. The Company must draw under the FILO Facility before making any borrowings under the revolving Credit Facility. Loans under the FILO Facility will bear interest based on quarterly excess available under the Borrowing Base as defined in the Credit Facility. The interest rate under the FILO Facility will be either (i) the London Interbank Offered Rate ("LIBOR") plus 3.00% for FILO loans that are LIBOR loans; or (ii) 2.00% above the Base Rate for FILO loans that are Base Rate loans as such terms are defined in the Credit Facility. Borrowings under the Credit Facility will generally accrue interest at a rate ranging from 1.50% to 1.75% over the LIBOR or 0.50% to 0.75% over the Wells Fargo Prime Rate based on the amount of Average Daily Availability for the Fiscal Quarter immediately preceding each Adjustment Date, as such terms are defined in the Credit Facility. The Company has the ability to select between the LIBOR or prime based rate at the time of the cash advance. The Credit Facility has an unused commitment fee of 0.25%. In addition to these changes, the Second Amendment eliminates availability against the Company's real property, which was the subject of a sale-leaseback transaction on April 27, 2018. The Company expensed approximately $30 thousand of deferred financing costs during the twenty-six week period ended August 3, 2019 in connection with the Credit Agreement. The deferred financing costs have been combined with the balance of the deferred financing costs remaining from the prior amendment on September 8, 2014. Deferred financing costs are included in other assets on the Condensed Consolidated Balance Sheet and are being amortized as interest expense over the related term of the Second Amendment. The Credit Facility contains customary events of default and various affirmative and negative covenants. The sole financial covenant contained in the Credit Facility requires the Company to maintain Availability at least equal to the greater of (a) ten percent (10%) of the borrowing base or (b) $3.0 million. In addition, the Credit Facility permits the payment of dividends to the Company's stockholders if certain financial conditions are met. The Company was in compliance with all financial covenants and other financial provisions of the Credit Facility as of August 3, 2019. The Company's obligations under the Credit Facility are secured by the assets of the Company and its subsidiaries. The Company has pledged substantially all of its assets as collateral security for the loans, including accounts owed to the Company, bank accounts, inventory, other tangible and intangible personal property, intellectual property (including patents and trademarks), and stock or other evidences of ownership of 100% of all of the Company's subsidiaries. There were $3.5 million and zero in outstanding borrowings under the Credit Facility as of August 3, 2019 and February 2, 2019, respectively. The capped borrowing base at August 3, 2019 was approximately $39.8 million. As of August 3, 2019, the Company had open on-demand letters of credit of approximately $11.1 million. Accordingly, after reducing the capped borrowing base, current borrowings of $3.5 million, open letters of credit and the required minimum availability of the greater of $3.0 million, or $3.4 million (10.0% of the revolving loan cap), the net availability of revolving credit loans under the Credit Facility was approximately $21.8 million at August 3, 2019. |
Property, Equipment and Improvements, Net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property, equipment and improvements | Property, equipment and improvements, net consisted of the following (in thousands):
|
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Aug. 03, 2019 |
Aug. 04, 2018 |
Aug. 03, 2019 |
Aug. 04, 2018 |
Feb. 02, 2019 |
|
Operating Loss Carryforwards | |||||
Income tax expense | $ 40 | $ 63 | $ 80 | $ 106 | |
Effective rate, percent | (0.70%) | (0.90%) | (0.80%) | ||
Tax credit carryforward | $ 859 | ||||
Charitable contribution carryforwards | $ 726 | ||||
Minimum | |||||
Operating Loss Carryforwards | |||||
State operating loss carryforwards, period | 5 years | ||||
Maximum | |||||
Operating Loss Carryforwards | |||||
State operating loss carryforwards, period | 20 years | ||||
Federal | |||||
Operating Loss Carryforwards | |||||
Net operating loss carryforwards | $ 145,500 | ||||
State | |||||
Operating Loss Carryforwards | |||||
Net operating loss carryforwards | $ 73,600 |
Leases - Maturities of Lease Liabilities Under ASC 840 (Details) $ in Thousands |
Feb. 02, 2019
USD ($)
|
---|---|
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2019 | $ 36,965 |
2020 | 25,887 |
2021 | 21,386 |
2022 | 18,439 |
2023 | 17,811 |
Thereafter | 38,827 |
Total lease payments | $ 159,315 |
Revenue (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The following table provides information about disaggregated revenue by sales channel. All revenue illustrated below is included within our one reportable segment.
|
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Contract Assets and Liabilities from Contract with Customers | The following table provides information about contract assets and liabilities from contracts with customers (in thousands):
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Estimated Revenue Expected to Be Recognized in Future Periods Related to Performance Obligations | The following table includes the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially unsatisfied as of August 3, 2019:
|
Fair Value Measurements |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Aug. 03, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows: Level 1 – Quoted prices in active markets for identical assets or liabilities Level 2 – Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable Level 3 – Unobservable inputs that are significant to the fair value of the asset or liability. Assets that are Measured at Fair Value on a Non-recurring Basis: The following table summarizes certain information for non-financial assets for the twenty-six weeks ended August 3, 2019 and the fiscal year ended February 2, 2019, that are measured at fair value on a non-recurring basis in periods subsequent to an initial recognition period. The Company places amounts into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.
Approximately $0.2 million of the Fiscal 2019 impairment charge reduced the carrying value of operating lease assets. The remainder of the Fiscal 2019 and 2018 impairment charges reduced the carrying value of fixed assets. All of the fair value measurements included in the table above were based on significant unobservable inputs (Level 3). The Company determines fair value for measuring assets on a non-recurring basis using a discounted cash flow approach as discussed in Note 3, Property, Plant and Equipment. In determining future cash flows, the Company uses its best estimate of future operating results, which requires the use of significant estimates and assumptions, including estimated sales, merchandise margin and expense levels, and the selection of an appropriate discount rate; therefore, differences in the estimates or assumptions could produce significantly different results. General economic uncertainty impacting the retail industry and continuation of recent trends in company performance makes it reasonably possible that additional long-lived asset impairments could be identified and recorded in future periods. Fixed asset fair values were derived using a discounted cash flow ("DCF") model to estimate the present value of net cash flows that the asset or asset group is expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. In the case of assets for which the impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal. |
Accrued Liabilities |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 03, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities, Current [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Accrued Liabilities Accrued liabilities and other current liabilities consisted of the following (in thousands):
|
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