Claire's same-store sales drop 7.2% in 4Q; 2009 to be challenging

By Jennifer Lanning Drey

Portland, Ore., April 23 - Claire's Stores, Inc. posted a 7.2% decline in same-store sales for the fourth quarter of fiscal 2008 and is planning for fiscal 2009 to show no improvement in the global economy, Gene Kahn, chief executive officer of Claire's, said Thursday during its fiscal year-end conference call.

Transactions per store were down more than 10% in the quarter due to the weak retail landscape, global economy and consumer uncertainty, which decreased mall traffic.

In response to the grim outlook for fiscal 2009, Claire's will remain focused on maximizing cash flow while improving sales in its existing store base, pursuing expense savings and reducing capital expenditures.

Claire's cash and cash equivalents balance improved by $11 million in the fourth quarter, totaling $204.6 million at the Jan. 31 end of the period.

Positive factors affecting the cash balance included $76.4 million of adjusted EBITDA, a $7 million seasonal decrease in working capital and $8 million of favorable foreign exchange translation adjustments.

Cash was reduced by $61 million of interest, $14 million of capital expenditures and $4 million of mandatory amortization during the period.

Adjusted EBITDA was down from $114.7 million in the prior-year fourth quarter.

"In light of the continued weak global retail environment, we are focused on maximizing cash flow in fiscal 2009 and are being extremely judicious in our approach to capital spending and new store openings," J. Per Brodin, chief financial officer of Claire's, said during the call.

As previously reported, Claire's drew the full available amount under its revolving credit facility during the third quarter in order to preserve availability of the commitment.

Claire's opened 15 new stores during the fourth quarter and closed 120 as part of its ongoing store portfolio review. The company is also working to reduce occupancy costs at many of its remaining stores by renegotiating leases on more favorable terms.

The company plans to reduce capital expenditures to $25 million in fiscal 2009, as compared to $59 million in fiscal 2008.

Claire's reported net sales of $393.0 million for the fourth quarter, representing a 12.2% decrease for the fourth quarter of 2007.

Claire's is a Pembroke Pines, Fla.-based specialty retailer of jewelry and accessories through its two store concepts, Claire's and Icing.

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