Hello, this is Jeff Harris, Vice President of Finance for Gymboree. Thank you for your interest in the Gymboree Corporation, and welcome to our report on business for the fiscal month of May 2008.
Before I continue, allow me to point out that the information presented in this recorded call contains forward-looking statements, including statements about trends and operations, future sales, expectations and financial performance. Actual results could differ materially from those forecasts as a result of a number of factors, including those set forth in our annual report on Form 10-K filed March 28, 2008 with the SEC.
Looking first at product deliveries in the Gymboree division, we delivered our summer vacation line in the first week of the month. The boys’ line for summer vacation is themed “Shark Reef”, and the girls’ entitled “Palm Springs”. In week 4, we sent the trends 1 line with the girls’ product featuring a Beach Shack theme; and boys, Safari Outback.
The strongest performing departments during the month were kid boy and newborn, followed by accessories, baby boy, baby girl and kid girl. By geographic region, the Mid-Atlantic was the strongest performing during the month, followed by the Ohio Valley, Midwest, the Southeast and South.
Gross margins finished the month on plan and inventories are well positioned for our upcoming promotional events in June. In regards to events for the month of May, the first weekend of both years featured our “Circle of Friends” promotion, offering our most loyal customers 30% off of their entire purchase. Starting in week 3 of both years, we held our holiday-related event, offering 20% off of already marked-down product. To maximize gross margin dollars, the event continued through the end of the fiscal month this year. The prior year campaign ended after the holiday weekend.
Our Gymbucks issuance period started in the second half of the month in both years.
Sales during the first half of the month were also supported by our summer product theme mailer, which hit homes in the back half of the month of April in both the current and prior year. Consistent with most of our direct mail efforts, the mailer is targeting prospective customers with a value proposition and was valid through the first two weeks of fiscal May.
Turning to the Janie & Jack division, in terms of line sets we set our summer 2 and swim 3 lines in week 2 of May. For the month, the strongest performing department was boy, followed by the girl, layette and then accessories. Janie & Jack division results were on plan with our expectations.
Looking at new store openings, during the month of May we opened two Gymboree stores, three Gymboree outlets and one Crazy 8 store. Our total store count now stands at 817, consisting of 606 Gymboree stores, 99 Gymboree outlets, 95 Janie & Jack shops and 17 Crazy 8 stores.
Turning to sales and earnings expectations, we continue to expect second fiscal quarter same-store sales growth in the range of low single-digits. We also continue to anticipate earnings per diluted share for the quarter in the range of $0.18 to $0.20.
As mentioned previously, when reviewing this estimate, please keep in mind that the prior year second quarter earnings of $0.19 per diluted share included a $0.02 net benefit due to a lower tax rate of just 36%.
This concludes our call for the fiscal month of May. Again, thank you for your interest in Gymboree. For further information you can reach us at 415-278-7933.
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