UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
Date
of report (Date of earliest event reported): August 23,
2007
THE
CHILDREN’S PLACE RETAIL STORES, INC.
(Exact
name of registrant as specified in charter)
|
Delaware
|
0-23071
|
31-1241495
|
|
(State
or Other Jurisdiction
|
(Commission
File
|
(IRS
Employer
|
|
of
Incorporation)
|
Number)
|
Identification
No.)
|
915
Secaucus Road, Secaucus, New Jersey, 07094
(Address
of Principal Executive Offices) (Zip Code)
(201)
558-2400
(Registrant’s
telephone number, including area code)
Not
applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
| o |
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
|
| o |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
| o |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
|
| o |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
|
Item
2.02 Results of Operations and Financial Condition
On
August 23, 2007 we issued a press release announcing
preliminary financial results for
the
fiscal second quarter ended August
4, 2007, provided guidance for the third and fourth fiscal quarters of 2007
and updated guidance for fiscal year 2007. In addition, the Company provided
an update regarding (a) its License Agreement with The Walt Disney Company,
(b) when it anticipates becoming current with its quarterly and annual filings
with the Securities and Exchange Commission and (c) its compliance with the
Nasdaq listing requirements and possible delisting.
A
copy of
our press release relating to the foregoing is attached hereto as Exhibit
99.1
and is
incorporated in this Item 2.02 by reference.
The
information contained under this Item 2.02 shall not be deemed “filed” for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended
(the
“Exchange Act”), or incorporated by reference in any filing under the Securities
Act of 1933, as amended, or the Exchange Act, except as shall be expressly
set
forth by specific reference in such a filing.
Item
9.01 Financial Statements and Exhibits
| (a) |
Financial
Statements of Business Acquired: Not
applicable
|
| (b) |
Pro
Forma Financial Information: Not
applicable
|
| (c) |
Exhibits:
|
| 99.1 |
Press
Release dated August 23, 2007.
|
[SIGNATURE
BLOCK FOLLOWS]
2
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| THE CHILDREN’S PLACE RETAIL STORES, INC. | ||
| |
|
|
| By: | /s/ Susan Riley | |
|
Name: Susan Riley |
||
| Title: Executive Vice President, Finance and Administration | ||
Dated:
August 23, 2007
3
FOR
IMMEDIATE RELEASE
THE
CHILDREN’S PLACE RETAIL STORES, INC. REPORTS PRELIMINARY FISCAL 2007 SECOND
QUARTER FINANCIAL RESULTS
~
Provides Updated Earnings Per Share Guidance for Fiscal 2007
~
~Company
Provides Update on License Agreement with The Walt Disney Company
~
~
Company Provides SEC Filings/Nasdaq Listing Update ~
Secaucus,
New Jersey - August 23, 2007 - The Children’s Place Retail Stores, Inc. (Nasdaq:
PLCE)
today
reported preliminary financial results for the fiscal second quarter ended
August 4, 2007. These preliminary results may be subject to adjustment until
the
Company completes its historical financial statements and files its SEC reports
on a timely basis. As a result, the Company is not providing net income on
a per
share basis or full comparative financial results for the second quarter
ended
July 29, 2006, and is providing only selected balance sheet data.
Second
Quarter
| · |
Consolidated
net sales for the second quarter ended August 4, 2007, increased
7% to
$424.3 million compared to $395.6 million last year. Second quarter
sales
were comprised of $290.5 million from The Children’s Place brand, an 8%
increase over last year, and $133.8 million from Disney Store, a
6%
increase over last year.
|
| · |
Due
to the 53rd
week in fiscal 2006, comparable store sales are compared to the
thirteen-week period ended August 5, 2006. On that basis, consolidated
comparable store sales decreased 1% in the quarter. The Children’s Place
brand’s comparable store sales decreased 1% versus last year’s 13%
increase. Disney Store’s comparable store sales were flat, compared to
last year’s 15% increase.
|
| · |
Preliminary
net loss for the second quarter was $27.1 million.
|
| · |
During
the quarter, the Company incurred approximately $1.8 million, pre-tax,
in
professional fees associated with the Company’s stock option
investigation.
|
| · |
Preliminary
shares outstanding in the second quarter are estimated at approximately
29
million.
|
| · |
During
the second quarter, the Company opened 16 Children’s Place stores and
closed one.
|
Six-Month
Period
| · |
Consolidated
net sales for the six-month period ended August 4, 2007, increased
10% to
$903.2 million compared to $822.1 million last year. Sales for the
six-month period were comprised of $646.5 million from The Children’s
Place brand, a 9% increase over last year, and $256.7 million from
Disney
Store, an 11% increase over last year.
|
| · |
Due
to the 53rd
week in fiscal 2006, comparable store sales are compared to the twenty-six
week period ended August 5, 2006. On that basis, consolidated comparable
store sales increased 2% for the six-month period. The Children’s Place
brand’s comparable store sales increased 1% on top of last year’s 12%
increase. Disney Store’s comparable store sales increased 3% compared to
last year’s 16% increase.
|
| · |
Preliminary
net loss for the six-month period was $14.0 million.
|
| · |
During
the six-month period, the Company incurred approximately $3.4 million,
pre-tax, in professional fees associated with the Company’s stock option
investigation.
|
| · |
Preliminary
shares outstanding in the six-month period are estimated at approximately
29 million.
|
| · |
For
the six-month period, the Company opened 22 Children’s Place stores and
closed five.
|
-more-
PLCE
- Second Quarter 2007 Financial Results
Page
2
Fiscal
Year 2007 Guidance
At
this
time, the Company anticipates reporting earnings per share of $2.25 to $2.40
for
fiscal 2007. This updated guidance includes the $3.4 million, pre-tax, in
stock
option investigation and related expenses incurred in the first half of fiscal
2007.
The
Company’s full year guidance assumes it will earn $0.94 to $1.02 per share in
the third fiscal quarter and $1.79 to $1.86 per share in the fourth fiscal
quarter.
Ezra
Dabah, Chief Executive Officer of The Children’s Place Retail Stores, Inc.
commented, “We remain cautiously optimistic regarding the second half and are
pleased with month-to-date sales trends. However, in view of the sales and
margin trends we have experienced through the first half, we believe it’s best
to take a conservative view for the remainder of the year.”
Disney
Update
The
Company also provided an update regarding its License Agreement with The
Walt
Disney Company under which the Company operates the Disney Store chain in
the
United States and Canada.
As
previously announced, on June 8, 2007, the Company and Disney executed a
letter
agreement which modified certain provisions of the parties’ long-term license
agreement, to address claims by Disney that the Company had committed numerous
material breaches of the license agreement. The June letter agreement provided
that Disney would treat the Company's breaches as having been cured so long
as
the Company complied with the terms of the June letter agreement. The June
letter agreement imposed specific obligations on the Company with respect
to the
remodeling and refreshing of numerous stores in the Disney Store chain between
fiscal 2007 and fiscal 2011 and, for the stores to be remodeled in fiscal
2007
and fiscal 2008, set forth a detailed timetable for submission of plans and
completion dates.
To date
the Company has been unable to meet several of the deadlines set forth in
the
June letter agreement. In every instance except for this most recent one,
Disney
has provided the Company with written confirmation that it does not consider
these missed deadlines to constitute breaches of the June letter agreement.
While the Company expects that the amendment to the license agreement described
below will defer the one remaining deadline that was missed, unless and until
this amendment agreement is signed, the Company will be in breach of the
June
letter agreement, entitling Disney to exercise its remedies under the June
letter agreement and the license agreement, including possible termination
of
the license agreement. In addition, this breach constitutes a cross-default
under the secured credit facility for the Disney Store chain, entitling the
lenders to exercise their contractual remedies. Neither Disney nor the lenders
have notified the Company that they have, or intend to, exercise their rights
mentioned above, but there can be no assurance that they will not exercise
their
rights in the future.
In
addition, the Company has identified various upcoming deadlines during the
third
and fourth quarters of fiscal 2007 that it will likely miss. The Company
and
Disney have been engaged in recent discussions regarding potential changes
to
the requirements of the June letter agreement that, would postpone the due
dates
of certain of the Company’s remodel obligations until later in fiscal 2007,
fiscal 2008 and fiscal 2009. In consideration for these changes, the parties
have also been discussing changes to the original license agreement to allow
Disney to relocate its flagship store in Manhattan.
-
more
-
PLCE
- Second Quarter 2007 Financial Results
Page
3
In
addition, the parties have been discussing modifications so that Disney’s
ability to grant direct licenses to other specialty retailers for the sale
of
Disney merchandise will apply only to specialty retailers primarily focused
on
the sale of children’s merchandise. It is expected that these various changes
would be incorporated in an amendment to the license agreement.
There
can
be no assurance that the Company’s discussions with Disney will result in any
agreement or that the dates for the Company’s remodel obligations will be
deferred. Whether or not these dates are deferred, the Company's ability
to meet
its obligations under the June letter agreement will depend on numerous factors,
some of which are beyond the Company's control, and there can be no assurance
that it will be able to fully comply. If the Company fails to comply with
these obligations, it will be in breach of the June letter agreement, entitling
Disney to exercise its remedies under the June letter agreement and the license
agreement.
SEC/Nasdaq
Update
The
Company has been working diligently on completing its delayed financial
statements and SEC reports, including its Annual Report on Form 10-K for
the
fiscal year ended February 3, 2007, and its quarterly reports on Form 10-Q
for
the second and third quarters of fiscal 2006 and first quarter of fiscal
2007.
The Company remains committed to making every effort to complete these filings
by August 31, 2007, as previously announced. However, these filings may not
be
completed by August 31st,
in
which case the Company would expect to file its SEC reports in September.
While
the Company believes the work surrounding the accounting for its historical
stock option grants is substantially completed, additional factors have arisen
causing further delay, which include the above mentioned discussions with
Disney. The Company currently does not anticipate that it will complete its
delinquent SEC filings until the current discussions with Disney regarding
possible modifications to the June letter agreement and the license agreement
are completed and full disclosure regarding any such modifications is included
in its SEC reports. In addition, in connection with the Board’s ongoing review
of internal controls and compliance, the Company has identified certain
violations of the Company’s policies and procedures by two executives of the
Company. The Board expects to complete its consideration of these matters
prior
to filing the Form 10-K.
As
previously announced, the Company has been advised by the Nasdaq Stock Market
on
several occasions that the Company is not in compliance with Nasdaq listing
requirements because of its delinquent SEC filings and that the Company will
be
delisted if it does not file these reports with the SEC. The Nasdaq Listing
and
Hearing Review Council granted the Company an extension of the time in which
to
file these reports with the SEC through September 4, 2007. The Company has
since
received notification that the Nasdaq Board of Directors has put on hold
any
future action by the Council to delist the Company’s stock from Nasdaq pending
further consideration by the Nasdaq Board. If the Company is unable to file
its
delinquent SEC reports by the end of August, the Company will request that
the
Nasdaq Board grant it an additional period of time to file the required reports
with the SEC. There is no assurance that the Nasdaq Board will grant additional
time to file with the SEC the required reports or, if granted, that the Company
will be able to file the reports by such new deadline.
The
Children’s Place will host a conference call to discuss its preliminary second
quarter results today at 10:00 a.m. Eastern Time. Interested parties are
invited
to listen to the call by dialing (785) 830-1916 and providing the Conference
ID,
PLCE. The call will also be webcast live and can be accessed via the Company’s
web site, www.childrensplace.com.
A
replay of the call will be available approximately one hour after the conclusion
of the call, until midnight on August 30, 2007. To access the replay, please
dial (402) 220-0119, or you may listen to the audio archive on the Company’s
website, www.childrensplace.com.
-
more
-
PLCE
- Second Quarter 2007 Financial Results
Page
4
The
Children’s Place Retail Stores, Inc., is a leading specialty retailer of
children’s merchandise. The Company designs, contracts to manufacture and sells
high-quality, value-priced merchandise under the proprietary “The Children’s
Place” and licensed “Disney Store” brand names. As of August 4, 2007, the
Company owned and operated 883 The Children’s Place stores and 328 Disney Stores
in North America and its online store, www.childrensplace.com.
This
press release and above referenced call may contain certain forward-looking
statements regarding future circumstances. These forward-looking statements
are
based upon the Company’s current expectations and assumptions and are subject to
various risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements including,
in particular, the risks and uncertainties described in the Company’s filings
with the Securities and Exchange Commission, as well as the risks and
uncertainties relating to the Company's stock option grants and procedures
and
the recently completed investigation by the special committee of the Company’s
Board of Directors, the previously announced pending restatement of the
Company’s historical financial statements, the delays in filing the Company’s
periodic reports with the Securities and Exchange Commission, the outcome
of the
informal investigation of the Company being conducted by the Securities and
Exchange Commission, potential other governmental proceedings, the shareholder
litigation commenced against the Company and certain of its officers and
directors,
and
the potential impact of each
of these matters on the Company, as well as matters relating to the Company’s
discussions with The Walt Disney Company. Actual
results, events, and performance may differ. Readers or listeners (on the
call)
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation
to
release publicly any revisions to these forward-looking statements that may
be
made to reflect events or circumstances after the date hereof or to reflect
the
occurrence of unanticipated events. The inclusion of any statement in this
release does not constitute an admission by the Company or any other person
that
the events or circumstances described in such statement are
material.
|
Contact:
|
The
Children’s Place Retail Stores, Inc.
|
|
Susan
Riley, EVP, Finance & Administration, 201/558-2400
|
|
|
Heather
Anthony, Senior Director, Investor Relations, 201/558-2865
|
(Tables
Follow)
THE
CHILDREN’S PLACE RETAIL STORES, INC.
PRELIMINARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In
thousands)
(Unaudited)
|
13
Weeks Ended:
|
26
Weeks Ended:
|
||||||||||||
|
August
4,
2007
|
%
of
Sales
|
August
4,
2007
|
%
of
Sales
|
||||||||||
|
Net
sales
|
$
|
424,297
|
100.0
|
%
|
$
|
903,160
|
100.0
|
%
|
|||||
|
Cost
of sales
|
293,957
|
69.3
|
%
|
582,934
|
64.5
|
%
|
|||||||
|
Gross
profit
|
130,340
|
30.7
|
%
|
320,226
|
35.5
|
%
|
|||||||
|
Selling,
general and administrative expenses
|
154,316
|
36.4
|
%
|
306,540
|
33.9
|
%
|
|||||||
|
Asset
impairment charge
|
635
|
0.1
|
%
|
635
|
0.1
|
%
|
|||||||
|
Depreciation
and amortization
|
18,047
|
4.3
|
%
|
35,669
|
4.0
|
%
|
|||||||
|
Operating
(loss)
|
(42,658
|
)
|
(10.1
|
)%
|
(22,618
|
)
|
(2.5
|
)%
|
|||||
|
Interest
(income), net
|
(370
|
)
|
(0.1
|
)%
|
(1,688
|
)
|
(0.2
|
)%
|
|||||
|
(Loss)
before income taxes
|
(42,288
|
)
|
(10.0
|
)%
|
(20,930
|
)
|
(2.3
|
)%
|
|||||
|
(Benefit)
for income taxes
|
(15,150
|
)
|
(3.6
|
)%
|
(6,893
|
)
|
(0.7
|
)%
|
|||||
|
Net
(loss)
|
$
|
(27,138
|
)
|
(6.4
|
)%
|
$
|
(14,037
|
)
|
(1.6
|
)%
|
|||
THE
CHILDREN’S PLACE RETAIL STORES, INC.
SELECTED
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In
thousands)
(Unaudited)
|
August
4, 2007
|
February
3, 2007
|
July
29, 2006
|
||||||||
|
Cash
and short term investments
|
$
|
83,118
|
$
|
192,039
|
$
|
110,084
|
||||
|
Inventories
|
339,497
|
241,717
|
256,093
|
|||||||
|
Revolving
credit facility
|
$
|
72,225
|
$
|
0
|
$
|
0
|
||||
|
Accounts
payable
|
126,848
|
85,360
|
103,626
|
|||||||
THE
CHILDREN’S PLACE RETAIL STORES, INC.
SEGMENT
INFORMATION
(In
millions)
(Unaudited)
|
Thirteen
Weeks Ended August 4, 2007
|
|||||||||||||
|
The
Children’s
Place
|
Disney
Store
|
Shared
Services
|
Total
Company
|
||||||||||
|
Net
sales
|
$
|
290.5
|
$
|
133.8
|
$
|
-
|
$
|
424.3
|
|||||
|
Segment
operating (loss)
|
(8.0
|
)
|
(10.6
|
)
|
(24.1
|
)
|
(42.7
|
)
|
|||||
|
Operating
(loss) as a percent of net sales
|
(2.8
|
)%
|
(7.9
|
)%
|
N/A
|
(10.1
|
)%
|
||||||
|
Twenty-six
Weeks Ended August 4, 2007
|
|||||||||||||
|
The
Children’s
Place
|
Disney
Store
|
Shared
Services
|
Total
Company
|
||||||||||
|
Net
sales
|
$
|
646.5
|
$
|
256.7
|
$
|
-
|
$
|
903.2
|
|||||
|
Segment
operating profit (loss)
|
45.8
|
(15.1
|
)
|
(53.3
|
)
|
(22.6
|
)
|
||||||
|
Operating
profit (loss) as a percent of net sales
|
7.1
|
%
|
(5.9
|
)%
|
N/A
|
(2.5
|
)%
|
||||||
###