Jane Singer – Investor Relations
The Children’s Place Retail Stores, Inc. (PLCE) December Sales Results Call January 10, 2008 7:30 AM ET
Thank you for your interest in The Children’s Place Retail Stores and welcome to our report on business for the fiscal month of December, 2007. Before I continue I’d like to remind you that any forward-looking remarks made today are subject to the Safe Harbor Statements found in this morning’s press release as well as in our SEC filings. The company undertakes no obligation to publically release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof.
For the five weeks into January 5, 2008 The Children’s Place Retail Stores, Inc. reported total consolidated sales of $314.6 million, a 1% decrease compared to last year. December sales included $199.9 million from The Children’s Place, a 1% increase over last year. And $114.7 million from Disney Store, a 5% decrease compared to last year.
December consolidated comparable store sales increased 2%. The Children’s Place brand comparable store sales increased 6% on top of last year’s 4% increase. Disney Stores comparable sales declined 4% compared to a 10% increase last year.
During the fiscal month we opened one Children’s Place store and seven Disney Stores.
For the nine week holiday selling period, The Children’s Place brand achieved a 7% increase in comparable store sales on top of a 4% increase for the same period last year. Disney Store reported a 5% decline in comparable store sales compared to a 12% increase last year.
Total consolidated sales for the 48 weeks ended January 5, 2008 increased 8% to $2,041.1 million. Sales for the year to date period included $1,438 million from The Children’s Place brand, a 9% increase over last year, and $603.1 million from Disney Store, a 6% increase over last year. For the year to date period consolidated comparable store sales increased 2%. The Children’s Place brand comparable store sales increased 2% on top of last year’s 11% increase. Disney Store comparable store sales were flat compared to last year’s 13% increase.
For the year to date period, we opened 52 Children’s Place stores and closed six. In addition, we opened nine Disney stores.
The following discussion reflects The Children’s Place brand only.
During December we were pleased with the positive customer response to our holiday merchandise assortment and great gifts floor set that arrived in stores after Thanksgiving. Key items such as fleece, long sleeve knits, denims and accessories performed well across all departments. We believe the positive comp for the month was a result of our return to a brighter color pallet, our deeper inventory position on key items and the newness of our great gifts floor set. Our deep inventory position on key items helped drive comp sales, but the high inventories also resulted in more unit markdowns for the month in order to clear through the holiday merchandise.
We registered our strongest comps in the latter part of the month as a result of the strong post Christmas mall traffic and the positive response to our semi annual monster sale. Our 6% comp for December reflects a 5% increase in comparable store sales transactions and a 1% increase in average transaction size. We had positive comps across all store types by a low teen increase in outlets.
By geography, we had positive comps in all markets except the South East which declined low single digits. By department, accessories comped in the positive low 30s, boys were up high single digits, new born comped positive mid single digits and girls were down mid single digits.
As part of our monster sale we began our take an additional 30% off sale on winter and holiday merchandise this week consistent with last year. Strategically we decided to set the spring one line the third week of January instead of the first week of January as we did last year in order to more fully clear through our seasonal inventory in early January. Spring one will be supported by a best customer direct mail piece which is being delivered to approximately 1.75 million homes mid January, an increased [cert] of 15% compared to last year.
During now to the Disney Store, the negative 4% comp in December was measured against a positive double digit comp last year when The Cars DVD blockbuster release drove significant traffic and sales. Toys, which typically accounts for approximately 40% of Disney Store sales during the holiday, comped in the negative low double digits during December and negative mid teens for the nine week holiday period. Our holiday toy business was impacted by the strength of Cars last year, a lackluster response to this year’s merchandise and our previously disclosed shipping delays on certain toy products during November.
The weak mall traffic during the first half of December coupled with lower toy sales, which typically drive heavy traffic into Disney Stores during the holiday resulted in negative comps across all regions. As a result, Disney Store had to significantly increase its promotional activity in order to stimulate traffic and drive sales. The negative 4% comp for the month reflects a 6% decline in transactions partially offset by a 2% increase in average transaction size. By department, soft lines comped in the positive mid single digits led by seasonal and role-play, tween and adult sleepwear and fashion. Hard lines comped in the negative low double digits primarily due to the shortfall in toys. Media comps were positive for the month, albeit a small portion of overall sales.
During December, three remodeled Disney Stores opened in the Tangor Branson Outlet Mall in Branson, Missouri, Monmouth Mall in Eaton Town, New Jersey and Potomac Mills Mall in Prince William, Virginia. That makes a total of seven remodels that have opened during the past three months, achieving our goal for the year. While still early, we continue to be very pleased by the response to the new store format and initial business results in these remodeled stores.
The spring one line will set in stores during the third week of January to capitalize on strong demand for the Hanna Montana and High School Musical 2 merchandise; we set our twin line for spring ahead of schedule in early January. As of January 5, 2008 we owned and operated a total of 1,249 stores, 912 The Children’s Place Stores and 337 Disney Stores. For fiscal 2007, we will have opened 58 The Children’s Place Stores and 15 Disney Stores.
As previously announced on our third quarter call, during 2008 we anticipate opening approximately 44 stores comprised of 30 The Children’s Place Stores and 14 Disney Stores.
We are continuing to make progress on the strategic review that was begun in October, 2007. During December we retained a retail consulting firm to help identify operational improvements going forward. In addition, the Board and management team are in the process of assessing a wide variety of options to improve the company’s business and competitive position, including a long-term strategy to realize the full potential for the Disney Store brand.
Further, as we noted in the press release, we will not hold our 2006 Shareholder Meeting by the February 3rd, 2008 deadline required by NASDAQ due to the delayed filing of our 2006 10-K which was filed on December 5, 2007. We plan to request an extension from NASDAQ to hold the meeting in the spring.
This concludes our call for the month of December. We will review our January sales results on Thursday, February 7, 2008. On behalf of everyone at The Children’s Place, we thank you for your interest in our company.