Claire's Stores, Inc. Reports Fiscal 2012 Third Quarter Results

       Claire's Stores, Inc. Reports Fiscal 2012 Third Quarter Results

PR Newswire

CHICAGO, Nov. 29, 2012

CHICAGO, Nov. 29, 2012 /PRNewswire/ -- Claire's Stores, Inc. (the "Company")
is one of the world's leading specialty retailers of fashionable jewelry and
accessories at affordable prices for young women, teens, tweens and kids. The
Company today reported its financial results for the fiscal 2012 third
quarter, which ended October 27, 2012.

Third Quarter Results

The Company reported net sales of $363.4 million for the fiscal 2012 third
quarter, an increase of $7.4 million, or 2.1%, compared to the 2011 third
quarter. The increase was attributable to new store sales and an increase in
same store sales, partially offset by the effect of store closures and foreign
currency translation effect of our non-U.S. store sales. Net sales would have
increased 4.4% excluding the impact from foreign currency exchange rate
changes.

Consolidated same store sales increased 2.4% in the 2012 third quarter, with
North America same store sales increasing 2.0%, and Europe same store sales
increasing 3.2%. Our 2012 fourth quarter consolidated quarter to date same
store sales performance is in the positive mid-single digits. We compute same
store sales on a local currency basis, which eliminates any impact from
changes in foreign currency exchange rates.

Gross profit percentage decreased 90 basis points to 50.6% during the fiscal
2012 third quarter compared to 51.5% during the comparable prior year quarter.
The decrease in gross profit percentage consisted of a 110 basis point
decrease in merchandise margin, partially offset by a 20 basis point decrease
in occupancy rate. The decrease in merchandise margin resulted primarily from
an increase in markdowns and lower initial markups. The decrease in occupancy
rate resulted primarily from the leveraging effect of an increase in same
store sales. 

Selling, general and administrative expenses decreased $2.2 million, or 1.8%,
compared to the fiscal 2011 third quarter. As a percentage of net sales,
selling, general and administrative expenses decreased 130 basis points
compared to the prior year (120 basis points decrease excluding the effect of
foreign currency exchange rate changes). Selling, general and administrative
expenses would have increased $0.8 million excluding the effect of foreign
currency exchange rate changes.

Adjusted EBITDA in the fiscal 2012 third quarter was $65.7 million compared to
$62.6 million in the fiscal 2011 third quarter. Adjusted EBITDA would have
been $67.4 million excluding the effect of foreign currency exchange rate
changes. The Company defines Adjusted EBITDA as earnings before provision for
income taxes, gain (loss) on early debt extinguishment, net interest expense,
and depreciation and amortization. Adjusted EBITDA excludes severance,
management fees, the impact of transaction-related costs and other
non-recurring or non-cash expenses, and normalizing occupancy costs for
certain rent-related adjustments. Net loss for the 2012 third quarter was
$13.7 million. A reconciliation of net loss to Adjusted EBITDA is attached.

At October 27, 2012, cash and cash equivalents were $62.7 million, and there
were no borrowings against the Company's recently amended $115 million
Revolving Credit Facility. In the 2012 third quarter, we paid in full $664.6
million of indebtedness under the Company's senior secured term loan with the
net proceeds from issuing additional Senior Secured First Lien Notes together
with cash on hand. In addition, the Company replaced its existing senior
secured revolving credit facility with the amended and restated $115 million
five-year senior secured revolving credit facility. 

The fiscal 2012 third quarter cash balance decrease of $67.8 million consisted
of a positive impact of $65.7 million of Adjusted EBITDA and reductions for
$52.0 million of cash interest, $40.5 million of repayment of indebtedness and
payment of debt financing costs, $21.6 million from seasonal working capital
use, $16.6 million of capital expenditures, and $2.8 million of tax payments
and other cash items.



Store Count as of:     October 27, 2012  January 28, 2012  October 29, 2011
North America          1,939             1,953             1,959
Europe                 1,149             1,118             1,088
Subtotal Company-Owned 3,088             3,071             3,047
Franchise and License  381               381               381
Total                  3,469             3,452             3,428



Conference Call Information

The Company will host its third quarter conference call on November 30, 2012
at 10:00 am. (EST). The call-in number is 210-839-8201 and the password is
"Claires." A replay will be available through December 30, 2012. The replay
number is 866-403-8762 and the password is 6582. The conference call is also
being webcast and archived until December 30, 2012 on the Company's corporate
website at http://www.clairestores.com, where it can be accessed by clicking
on the "Events" link located under "Financial Information" for a replay or
download as an MP3 file.

Company Overview

Claire's Stores, Inc. is one of the world's leading specialty retailers of
fashionable jewelry and accessories at affordable prices for young women,
teens, tweens and girls ages 3 to 27. The Company operates through its two
store concepts: Claire's^® and Icing^®. As of October 27, 2012, Claire's
Stores, Inc. operated 3,088 stores in North America and Europe. The Company
also franchised or licensed 381 stores in Japan, the Middle East, Turkey,
Greece, Guatemala, Malta, Ukraine, Mexico, India, Dominican Republic, El
Salvador, Venezuela, and Panama. More information regarding Claire's Stores is
available on the Company's corporate website at http://www.clairestores.com.

Forward-looking Statements

This press release contains "forward-looking statements" which represent the
Company's expectations or beliefs with respect to future events. Statements
that are not historical are considered forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those anticipated. Those
factors include, without limitation: changes in consumer preferences and
consumer spending; competition; our level of indebtedness; general economic
conditions; general political and social conditions such as war, political
unrest and terrorism; natural disasters or severe weather events; currency
fluctuations and exchange rate adjustments; uncertainties generally associated
with the specialty retailing business, such as decreases in mall traffic due
to high gasoline prices or other general economic conditions; disruptions in
our supply of inventory; inability to increase same store sales; inability to
renew, replace or enter into new store leases on favorable terms; increase in
our cost of merchandise; significant increases in our merchandise markdowns;
inability to grow our store base in Europe or expand our international
franchising operations; inability to design and implement new information
systems or disruptions in adapting our information systems to allow for
expansion into new geographic markets or grow our e-commerce sales; delays in
anticipated store openings or renovations; uncertainty that definitive
financial results may differ from preliminary financial results due to, among
other things, final U.S. GAAP adjustments; results from any future asset
impairment analysis; changes in applicable laws, rules and regulations,
including changes in federal, state or local regulations governing the sale of
our merchandise, particularly regulations relating to the content in our
merchandise, general employment laws, including laws relating to overtime pay
and employee benefits, health care laws, tax laws and import laws; product
recalls; data or security breaches of confidential information; loss of key
members of management; increases in the cost of labor; labor disputes;
unwillingness of vendors and service providers to supply goods or services
pursuant to historical customary credit arrangements; increases in the cost of
borrowings; unavailability of additional debt or equity capital; and the
impact of our substantial indebtedness on our operating income and our ability
to grow. These and other applicable risks, cautionary statements and factors
that could cause actual results to differ from the Company's forward-looking
statements are included in the Company's filings with the SEC, specifically as
described in the Company's Annual Report on Form 10-K for the fiscal year
ended January 28, 2012 filed with the SEC on April 4, 2012. The Company
undertakes no obligation to update or revise any forward-looking statements to
reflect subsequent events or circumstances. The historical results contained
in this press release are not necessarily indicative of the future performance
of the Company.

Additional Information

Note: Other Claire's Stores, Inc. press releases, a corporate profile and the
most recent Form 10-K and Form 10-Q reports are available on Claire's business
website at: http://www.clairestores.com.

Contact Information

J. Per Brodin, Executive Vice President and Chief Financial Officer
Phone: (847) 765-1100, or E-mail, investor.relations@claires.com



CLAIRE'S STORES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS

OF OPERATIONS

(In thousands)
THIRD FISCAL QUARTER
                                            Three Months      Three Months
                                            Ended             Ended
                                            October 27, 2012  October 29, 2011
Net sales                                   $   363,388     $   356,000
Cost of sales, occupancy and buying
expenses

(exclusive of depreciation and        179,583           172,505
amortization shown

separately below)
Gross profit                                183,805           183,495
Other expenses:
Selling, general and administrative         121,211           123,378
Depreciation and amortization               16,042            17,129
Severance and transaction-related costs     (29)              180
Other income, net                           (3,234)           (1,840)
                                            133,990           138,847
Operating income                            49,815            44,648
Gain (loss) on early debt extinguishment    (5,105)           3,986
Interest expense, net                       54,042            43,543
Income (loss) before income tax expense     (9,332)           5,091
Income tax expense                          4,398             3,193
Net (loss) income                           $   (13,730)    $    1,898
YEAR TO DATE
                                            Nine Months       Nine Months
                                            Ended             Ended
                                            October 27, 2012  October 29, 2011
Net sales                                   $   1,063,622   $   1,060,993
Cost of sales, occupancy and buying
expenses

  (exclusive of depreciation and        531,452           519,246
amortization shown

 separately below)
Gross profit                                532,170           541,747
Other expenses:
Selling, general and administrative         360,122           380,309
Depreciation and amortization               48,232            50,535
Severance and transaction-related costs     1,168             949
Other (income) expense, net                 (2,654)           2,290
                                            406,868           434,083
Operating income                            125,302           107,664
Gain (loss) on early debt extinguishment    (9,707)           4,468
Interest expense, net                       149,943           134,113
Loss before income tax expense              (34,348)          (21,981)
Income tax expense                          6,576             5,861
Net loss                                    $  (40,924)     $    (27,842)



CLAIRE'S STORES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                     October 27, 2012       January 28, 2012
                                     (In thousands, except share and per share
                                     amounts)
ASSETS
Current assets:
Cash and cash equivalents and
restricted cash of $0 and $4,350,    $    62,673        $    174,374
respectively
Inventories                          192,417                142,104
Prepaid expenses                     18,880                 20,010
Other current assets                 30,667                 25,423
Total current assets                 304,637                361,911
Property and equipment:
Furniture, fixtures and equipment    223,919                207,620
Leasehold improvements               302,709                281,774
                                     526,628                489,394
Less accumulated depreciation and    (317,103)              (281,874)
amortization
                                     209,525                207,520
Leased property under capital lease:
Land and building                    18,055                 18,055
Less accumulated depreciation and    (2,483)                (1,805)
amortization
                                     15,572                 16,250
Goodwill                             1,550,056              1,550,056
Intangible assets, net of
accumulated amortization of $55,662  543,840                549,768
and $49,270, respectively
Deferred financing costs, net of
accumulated amortization of $24,922  43,249                 33,025
and $55,818, respectively
Other assets                         46,161                 44,495
                                     2,183,306              2,177,344
Total assets                         $   2,713,040        $   2,763,025
LIABILITIES AND STOCKHOLDER'S
DEFICIT
Current liabilities:
 Trade accounts payable          $     68,716      $     60,704
 Income taxes payable            4,889                  10,228
 Accrued interest payable        48,149                 31,859
 Accrued expenses and other      94,160                 104,525
current liabilities
Total current liabilities            215,914                207,316
Long-term debt                       2,373,906              2,386,382
Obligation under capital lease       17,249                 17,290
Deferred tax liability               119,404                120,452
Deferred rent expense                29,759                 28,861
Unfavorable lease obligations and    21,745                 25,020
other long-term liabilities
                                     2,562,063              2,578,005
Commitments and contingencies
Stockholder's deficit:
Common stock par value $0.001 per
share; authorized 1,000 shares;
issued and outstanding 100 shares    ―                      ―
Additional paid-in capital           618,050                619,453
Accumulated other comprehensive      (4,665)                (4,351)
loss, net of tax
Accumulated deficit                  (678,322)              (637,398)
                                     (64,937)               (22,296)
Total liabilities and stockholder's  $   2,713,040        $   2,763,025
deficit



Net Income (Loss) Reconciliation to EBITDA and Adjusted EBITDA

EBITDA represents net income (loss) before provision for income taxes, gain
(loss) on early debt extinguishment, interest income and expense, impairment
and depreciation and amortization. Adjusted EBITDA represents EBITDA further
adjusted to exclude non-cash and unusual items. Management uses Adjusted
EBITDA as an important tool to assess our operating performance. Management
considers Adjusted EBITDA to be a useful measure in highlighting trends in our
business and in analyzing the profitability of similar enterprises.
Management believes that Adjusted EBITDA is effective, when used in
conjunction with net income (loss), in evaluating asset performance, and
differentiating efficient operators in the industry. Furthermore, management
believes that Adjusted EBITDA provides useful information to potential
investors and analysts because it provides insight into management's
evaluation of our results of operations. Our calculation of Adjusted EBITDA
may not be consistent with "EBITDA" for the purpose of the covenants in the
agreements governing our indebtedness.

EBITDA and Adjusted EBITDA are not measures of financial performance under
U.S. GAAP, are not intended to represent cash flow from operations under U.S.
GAAP and should not be used as an alternative to net income (loss) as an
indicator of operating performance or to cash flow from operating, investing
or financing activities as a measure of liquidity. Management compensates for
the limitations of using EBITDA and Adjusted EBITDA by using it only to
supplement our U.S. GAAP results to provide a more complete understanding of
the factors and trends affecting our business. Each of EBITDA and Adjusted
EBITDA has its limitations as an analytical tool, and you should not consider
them in isolation or as a substitute for analysis of our results as reported
under U.S. GAAP.

Some of the limitations of EBITDA and Adjusted EBITDA are:

  oEBITDA and Adjusted EBITDA do not reflect our cash used for capital
    expenditures;

  oAlthough depreciation and amortization are non-cash charges, the assets
    being depreciated or amortized often will have to be replaced and EBITDA
    and Adjusted EBITDA do not reflect the cash requirements for such
    replacements;

  oEBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements
    for, our working capital requirements;

  oEBITDA and Adjusted EBITDA do not reflect the cash necessary to make
    payments of interest or principal on our indebtedness; and

  oEBITDA and Adjusted EBITDA do not reflect extraordinary items and
    non-recurring expenses such as one-time write-offs to inventory and
    reserve accruals.

While EBITDA and Adjusted EBITDA are frequently used as a measure of
operations and the ability to meet indebtedness service requirements, they are
not necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.

While management believes that these measures provide useful information to
investors, the SEC may require that EBITDA and Adjusted EBITDA be presented
differently or not at all in future filings we will make with the SEC.



CLAIRE'S STORES, INC. AND SUBSIDIARIES

ADJUSTED EBITDA

(UNAUDITED)

(In Thousands)
                        Three Months   Three        Nine Months   Nine Months
                        Ended          Months       Ended         Ended
                        October 27,    Ended        October 27,   October 29,
                        2012           October 29,  2012          2011
                                       2011
Net (loss) income (a)   $  (13,730)  $         $           $ 
                                       1,898        (40,924)      (27,842)
Income tax expense      4,398          3,193        6,576         5,861
Loss (gain) on early    5,105          (3,986)      9,707         (4,468)
debt extinguishment
Interest expense        54,060         43,654       150,025       134,391
Interest income         (18)           (111)        (82)          (278)
Depreciation and        16,042         17,129       48,232        50,535
amortization
Reported EBITDA         65,857         61,777       173,534       158,199
– stock compensation,
book to cash rent,
intangible              53             1,580        167           5,117

 amortization (b)
– management fee,       544            750          2,679         2,250
consulting (c)
– other (d)             (706)          (1,491)      2,081         6,475
Adjusted EBITDA         $   65,748   $          $  178,461  $  172,041
                                       62,616

   Fiscal 2011 includes a $(0.7) million gain and $1.5 million charge for the
a) three and nine months ended October 27, 2011, respectively, to remeasure
   the Euro Loan at the period end foreign exchange rate.
   Includes: non-cash stock compensation expense, net non-cash rent expense,
b) amortization of rent free periods, the inclusion of cash landlord
   allowances, and the net accretion of favorable (unfavorable) lease
   obligations and non-cash amortization of lease rights.
c) Includes: the management fee paid to Apollo Management and Morgan Joseph
   Tri-Artisan Capital Partners, and non-recurring consulting expenses.
   Includes: non-cash losses on property and equipment associated with
   remodels, relocations and closures; non-cash loss on disposition of lease
   rights upon exiting certain European locations; costs, including third
   party charges and compensation, incurred in conjunction with the relocation
d) of new employees; severance and transaction related costs; non-cash foreign
   exchange gains/losses resulting from intercompany transactions and
   remeasurements of U.S. dollar denominated cash accounts and foreign
   currency denominated debt of our foreign entities into their functional
   currency; and severance and transaction related costs. A majority of the
   fiscal 2011 adjustments is foreign exchange related.

SOURCE Claire's Stores, Inc.

Website: http://www.clairestores.com