Continued cost-cutting efforts and improved margins helped Claire’s Stores Inc. return to the black in its third quarter.
This story first appeared in the December 9, 2009 issue of WWD. Subscribe Today.
In the three months ended Oct. 31, the Pembroke Pines, Fla.-based accessories retailer posted a profit of $2.9 million versus a loss of $21.6 million a year ago. Net sales in the quarter fell 2.6 percent to $324.4 million from $333 million in 2008.
Comparable-store sales at the company’s North American operations fell 1.9 percent in the quarter but, when measured in local currencies, rose 2.3 percent in Europe, making for a consolidated comp decline of 0.3 percent.
Claire’s said store closures and currency translations also contributed to the net sales decline.
On a morning conference call, chief executive officer Gene Kahn said the firm’s accessories sales increased its share of sales 560 basis points compared with last year’s quarter and accounted for 49.3 percent of sales, while its jewelry business continued to decline. “Attitude” glasses, hats, scarves and cold weather-related products all sold well, the ceo said.
“During the third quarter, we believe our execution for back-to-school showed significant improvement compared to last year,” Kahn said. “In addition, our assortments were improved and have better balance between the basic, fashion core and trendy categories.”
The company continued its recent efforts to cut costs in the quarter, reducing cost of sales by $12.7 million to $158.3 million and selling, general and administrative expenses by $12.2 million to $116.9 million.
The cuts contributed to a 250 basis point improvement in gross margin in the quarter to 51.2 percent of sales from 48.7 percent. The firm said higher initial markup, reduced markdowns and lower freight costs contributed to a better merchandise margin.
In the nine months, Claire’s losses contracted 59.7 percent to $29.9 million from $74.1 million in 2008. Sales in the three quarters fell 8.7 percent to $931.7 from $1.02 billion a year ago.
Apollo Management LP acquired Claire’s in 2007. Although no longer publicly traded, it reports financial results because it holds public debt.