First Quarter Net Income Increased 95%
First Quarter Net Sales Increased 28% and Comparable Store Sales Increased 7.7%
Management Raises Fiscal 2010 Earnings Guidance
WARRENDALE, Pa., May 26, 2010 (GLOBE NEWSWIRE) -- rue21, inc. (Nasdaq:RUE) today announced financial results for the first quarter of fiscal 2010 ending May 1, 2010.
Highlights for the quarter:
- Net sales increased 28.0% to $137.8 million, compared to $108.0 million in the first quarter of fiscal 2009. Comparable store sales increased by 7.7% on top of 8.3% in the first quarter of 2009.
- Gross margin increased 280 bps to 37.9% from 35.1% in the first quarter of 2009.
- Selling, general and administrative expenses increased 28% from the first quarter of fiscal 2009 to $37.3 million, which included non-recurring expenses of $0.6 million associated with the secondary offering completed in the quarter and incremental public company and share based compensation costs of $0.9 million.
- Operating margin increased to 7.2% for the first quarter of fiscal 2010, compared to 4.7% in the first quarter of fiscal 2009, driven primarily by sales growth and gross margin expansion.
- First quarter net income increased 95% to $5.8 million from $3.0 million in the first quarter of 2009. Adjusting for secondary offering costs, net income increased 115%.
- Diluted earnings per share were $0.23 in the first quarter of fiscal 2010 compared to diluted earnings per share of $0.13 in the first quarter of fiscal 2009. Adjusting for secondary offering costs, diluted earnings per share were $0.26.
- Average diluted shares outstanding were 25.0 million in the first quarter of fiscal 2010 versus 23.0 million in the first quarter of fiscal 2009.
- During the first quarter of fiscal 2010 the Company opened 31 stores, converted an additional 13 stores to the rue21 etc! format, closed one store, and ended the quarter with 565 stores.
Bob Fisch, rue21's President and CEO, stated: "We are pleased that 2010 is off to a strong start. Our first quarter results included record sales, gross margin, and operating margin for the period, and we remain focused on continuing to grow our top and bottom line consistently using a combination of new store growth, store conversions, same-store sales growth, combined with margin expansion. Our plan continues to be 100 new stores this year, and we have opened 31 stores in the first quarter with approximately 60 planned for the first half of the year. I'm proud that the rue team was able to achieve results above plan this quarter up against a strong first quarter last year, and we look to deliver consistent performance throughout the remainder of the year."
Balance sheet highlights as of May 1, 2010:
- Cash and cash equivalents increased to $27.8 million as of May 1, 2010, as compared to $5.7 million as of May 2, 2009, with no long-term debt.
- Inventories at the end of first quarter 2010 were $86.7 million, or up 7.1% compared to the first quarter of 2009. Inventory per square foot at the end of the first quarter 2010 declined 12% compared to the first quarter of 2009.
Outlook:
For fiscal 2010, the Company is raising its full year guidance based on first quarter results, and now expects diluted earnings per share to be in the range of $1.14 to $1.19 as compared to $0.96 in fiscal 2009. This incorporates 25.1 million average diluted shares expected for fiscal 2010 as compared to 23.0 million average diluted shares in fiscal 2009. For the second quarter, the Company currently expects total sales growth of approximately 20% driven by the anticipated opening of 30 new stores, 6 store conversions, and a low-single digit comparable store sales increase. Diluted earnings per share for the second quarter are expected to be in the range of $0.23 to $0.25. This is based on 25.1 million average diluted shares expected for the second quarter of fiscal 2010 as compared to 23.0 million average diluted shares for the second quarter of fiscal 2009. Adjusting out non-recurring and incremental public company and share based compensation costs, net income is expected to increase by approximately 27% for the second quarter and 38% for the full year in fiscal 2010.
Conference Call Information:
A conference call to discuss first quarter 2010 financial results is scheduled for today, May 26, 2010 at 4:30 PM Eastern Time. To participate, dial toll-free 1-888-271-8601 or 1-913-312-0418 (international). The conference call will also be webcast live at www.rue21.com under the Investor Relations section. A replay of this call will be available on the Investor Relations section of the Company's website, www.rue21.com, within two hours of the conclusion of the call and will remain on the website for ninety days.
About rue21, inc.
rue21 is a leading specialty apparel retailer offering exclusive branded merchandise and the newest trends at a great value. At the end of the first quarter of fiscal 2010, rue21 operated 565 stores in 43 states. Learn more at www.rue21.com.
Forward Looking Statements:
Certain statements herein, including statements relating to future store openings and growth strategies, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, consumer spending, our ability to effectively identify and respond to changing fashion trends, our ability to compete with other retailers, our strategy and expansion plans, implementation of systems upgrades, reliance on key personnel, trade restrictions, events that may affect our vendors or their ability to finance their operations, availability of suitable new store locations and other factors which are set forth in the Company's Annual Report on Form 10-K filed March 31, 2010, and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures:
Management has presented its operating results in accordance with GAAP and on an "adjusted" (or non-GAAP) basis for the thirteen weeks ended May 1, 2010. The Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses these non-GAAP financial measures in connection with assessing its financial performance. These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP. Further, our reconciliations of GAAP to "adjusted" operating results, which are included on the attached tables, are presented to facilitate a reader's understanding of the impact of the various adjustments to our GAAP operating results, individually and in the aggregate, and are not intended to place any undue prominence on our adjusted operating results.
| rue21, inc. and subsidiary | ||||
| Consolidated Balance Sheets | ||||
| May 1, | January 30, | May 2, | ||
| 2010 | 2010 | 2009 | ||
| (Unaudited) | ||||
| (in thousands, except per share data) | ||||
| Assets | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ 27,785 | $ 26,751 | $ 5,713 | |
| Accounts receivable | 7,288 | 3,834 | 3,892 | |
| Merchandise inventory, net | 86,689 | 72,693 | 80,893 | |
| Prepaid expenses and other current assets | 7,609 | 6,783 | 6,124 | |
| Deferred tax assets | 4,335 | 4,286 | 3,409 | |
| Total current assets | 133,706 | 114,347 | 100,031 | |
| Property and equipment, net | 76,718 | 73,147 | 59,448 | |
| Other assets | 925 | 937 | 824 | |
| Total assets | $ 211,349 | $ 188,431 | $ 160,303 | |
| Liabilities and stockholders' equity | ||||
| Current liabilities: | . | |||
| Accounts payable | $ 74,346 | $ 59,963 | $ 74,059 | |
| Accrued expenses and other current liabilities | 13,488 | 14,384 | 9,374 | |
| Accrued payroll and related taxes | 8,222 | 10,486 | 6,160 | |
| Deferred rent and tenant allowances, current portion | 6,088 | 5,509 | 4,557 | |
| Accrued income and franchise taxes | 4,279 | 2,401 | 545 | |
| Total current liabilities | 106,423 | 92,743 | 94,695 | |
| Long-term liabilities: | ||||
| Long-term debt | – | – | 21,341 | |
| Deferred rent, tenant allowances and other long-term liabilities | 27,313 | 23,991 | 21,088 | |
| Deferred tax liabilities | 3,677 | 4,249 | 1,785 | |
| Total long-term liabilities | 30,990 | 28,240 | 44,214 | |
| Total liabilities | 137,413 | 120,983 | 138,909 | |
| Commitments and Contingencies | ||||
| Stockholders' equity: | ||||
| Common stock--- par value $0.001 per share; 200,000 shares authorized; 24,265 and 24,237 shares issued and outstanding at May 1, 2010 and January 30, 2010 ,respectively, par value $0.004 per share; 50,000 shares authorized; 22,090 shares issued and outstanding | 24 | 24 | 88 | |
| Additional paid in capital | 27,782 | 27,115 | 25 | |
| Retained earnings | 46,130 | 40,309 | 21,281 | |
| Total stockholder's equity | 73,936 | 67,448 | 21,394 | |
| Total liabilities and stockholders' equity | $ 211,349 | $ 188,431 | $ 160,303 | |
| rue21, inc. and subsidiary | ||
| Consolidated Statements of Income | ||
| Thirteen weeks ended | ||
| May 1, | May 2, | |
| 2010 | 2009 | |
| (Unaudited) | ||
| (in thousands, except per share data) | ||
| Net sales | $ 137,772 | $ 107,998 |
|
Cost of goods sold (includes certain buying, occupancy and distribution center expenses) |
85,541 | 70,080 |
| Gross profit | 52,231 | 37,918 |
| Selling, general, and administrative expense | 37,294 | 29,135 |
| Depreciation and amortization expense | 4,951 | 3,667 |
| Income from operations | 9,986 | 5,116 |
| Interest expense, net | 60 | 172 |
| Income before income taxes | 9,926 | 4,944 |
| Provision for income taxes | 4,105 | 1,955 |
| Net income | $ 5,821 | $ 2,989 |
| Basic income per common share | $ 0.24 | $ 0.14 |
| Diluted income per common share | $ 0.23 | $ 0.13 |
| Weighted average basic common shares outstanding | 24,248 | 22,090 |
| Weighted average diluted common shares outstanding | 25,044 | 23,006 |
| rue21, inc. and subsidiary | |||
| Reconciliation of GAAP Earnings to Adjusted Earnings | |||
| (In thousands, except per share data) | |||
| (Unaudited) | |||
| Thirteen Weeks Ended May 1, 2010 | |||
| GAAP | Secondary offering costs (1) | As Adjusted | |
| Income from Operations | $ 9,986 | $ 611 | $ 10,597 |
| Interest expense, net | 60 | 60 | |
| Income before income taxes | 9,926 | 10,537 | |
| Provision for income taxes | 4,105 | 6 | 4,111 |
| Net income | $ 5,821 | $ 6,426 | |
| Basic income per common share | $ 0.24 | $ 0.27 | |
| Diluted income per common share | $ 0.23 | $ 0.26 | |
| Weighted average basic common shares outstanding | 24,248 | 24,248 | |
| Weighted average diluted common shares outstanding | 25,044 | 25,044 | |
|
1 As adjusted basic and diluted earnings per common share represents management's estimate of basic and diluted earnings per common share for the thirteen weeks ended May 1, 2010, before expenses associated with our secondary offering of common stock in March. Adjusted basic and diluted earnings per common share is presented because management believes it is a useful adjunct to basic and diluted earnings per common share under accounting principles generally accepted in the United States since it is a meaningful measure of the Company's ongoing operating performance excluding the non-recurring costs for our secondary offering of common stock. Adjusted basic and diluted earnings per common share is not a measure of financial performance under accounting principles generally accepted in the United States and should not be considered as an alternative to basic and diluted earnings per common share. |
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