Claire’s Narrows Loss

Claire’s Stores Inc. cites its cost savings initiative that began in 2008.

Aggressive cost-cutting helped Claire’s Stores Inc. narrow its first-quarter net loss, but the mall-based jewelry and accessories retailer said sales trends softened in the second quarter.

This story first appeared in the June 15, 2009 issue of WWD.  Subscribe Today.

For the three months ended May 2, the firm said its loss fell to just over $29 million from $35.6 million in the year-ago period. Sales decreased 10.4 percent to $293.1 million from slightly more than $327 million a year earlier.

Comparable-store sales fell 2.9 percent in North America and dipped 0.9 percent in Europe. The company attributed the disparity to a more promotional North American environment and the superior performance of some licensed products in Europe.

Selling, general and administrative expenses shrank 17.4 percent to $108.5 million from $131.3 million in 2008, helping to lift adjusted earnings before interest, taxes, depreciation and amortization 5.8 percent to $36.3 million.

“The retail landscape remains volatile and was further complicated by the calendar shift of Easter, which is a larger percentage of our business, relative to other retailers,” chief executive officer Gene Kahn said on the company earnings call Friday. “However, we feel we have made progress in the form of an improved product assortment for each of our target customer groups.”

Kahn noted sales have continued to decline in the high-single digits in the second quarter.

As of May 2, cash and cash equivalents were $206.7 million. The Pembroke Pines, Fla.-based firm said it had drawn down its revolving credit facility during the 2008 third quarter because Lehman Brothers, a member of the facility’s syndicate, filed for bankruptcy. The company said it has yet to find a replacement for Lehman and is assessing whether to pay all or part of the outstanding balance on the facility.

Claire’s, which said it is operating the business with the expectation there will be no improvement in the economy in 2009, plans to open 17 stores this year. The company owns and operates 2,970 stores in North America and Europe. Another 411 operate through franchise or joint venture arrangements.

Apollo Management LP acquired Claire’s in 2007. Although no longer publicly traded, it reports financial results because it holds public debt.