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April 23
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gymboreeThe Gymboree Corp. reported consolidated financial results Monday for the fiscal quarter ended April 30, 2016.

First Quarter Fiscal 2016 Highlights Include:

* Comparable sales (including online sales) increased 4% during the first quarter of fiscal 2016.

* Adjusted EBITDA increased $8.9 million from the first quarter of fiscal 2015 to $24.5 million.

* Net income attributable to The Gymboree Corporation for the quarter was $32.8 million, including a gain on extinguishment of debt of $48.8 million, compared to a net loss of $23.0 million for the first quarter of fiscal 2015.

* The Company reaffirms full year guidance.

First Quarter Results (13 weeks ended April 30, 2016 versus 13 weeks ended May 2, 2015)

* Net sales were $285.0 million, compared to $276.1 million in the first quarter of fiscal 2015.

* Comparable sales (including online stores) increased 4% compared to the first quarter of fiscal 2015.

* Comparable sales increases by brand for the first quarter of fiscal 2016 compared to the first quarter of fiscal 2015 and for the first quarter of fiscal 2015 compared to the first quarter of fiscal 2014 were as follows:

Comparable Sales

Q1 2016

Q1 2015

Gymboree

+6%

-2%

Janie and Jack

+5%

+5%

Crazy 8

-2%

+4%

 

* Gross profit was $116.5 million, or 40.9% of net sales, compared to $105.4 million, or 38.2% of net sales, for the first quarter of fiscal 2015.

* Adjusted Gross Profit was $118.0 million, or 41.4% of net sales, compared to $107.1 million, or 38.8% of net sales, for the first quarter of fiscal 2015.

* SG&A expense was $114.0 million, or 40% of net sales, compared to $104.7 million, or 37.9% of net sales, in the first quarter of fiscal 2015. The $9.3 million increase in SG&A expense was primarily driven by a $5.7 million loss incurred as a result of terminating a contract with a third party fulfillment center forwww.gymboree.com.

* Adjusted SG&A Expense was $105.4 million, or 37% of net sales, compared to $101.1 million, or 36.6% of net sales, in the first quarter of fiscal 2015.

* Adjusted EBITDA, defined as net income (loss) attributable to The Gymboree Corporation before interest, income taxes and depreciation and amortization, adjusted for other items as described below, was $24.5 million compared to $15.6 million for the first quarter of fiscal 2015. The prior year quarter Adjusted EBITDA of $15.6 million was impacted by the port slowdown, which negatively impacted Adjusted EBITDA by approximately $6 million.

* Net income attributable to The Gymboree Corporation for the quarter was $32.8 million, including a gain on extinguishment of debt of $48.8 million, compared to a net loss of $23.0 million for the first quarter of fiscal 2015.

Adjusted EBITDA, Adjusted Gross Profit and Adjusted SG&A Expense are not financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).  For descriptions of Adjusted EBITDA, Adjusted Gross Profit and Adjusted SG&A Expense and a reconciliation of these measures to the relevant GAAP measures, see “Non-GAAP Financial Measures” below and Exhibit D of this press release.

Balance Sheet and Other Highlights

* During the 13 weeks ended April 30, 2016, the Company repurchased $77 million aggregate principal amount of its senior notes for $26.2 million through privately negotiated transactions.

* As of the end of the first quarter of fiscal 2016, there were $43 million in borrowings outstanding under the Company’s asset-backed revolving credit facility (after being reduced by $10 million from the proceeds of the ABL Term Loan) and approximately $90.7 million of undrawn availability after being reduced by letters of credit of $30.8 million and $50 million of the ABL Term Loan.

* On May 24, 2016, the Company announced the results of its tender offer in which it repurchased $39.6 million aggregate principal amount of its senior notes for $20.6 million. The Company funded these repurchases, as well as the $10 million pay down of the Company’s asset-backed revolving credit facility noted above, with the proceeds from borrowings under the ABL Term Loan. Following the tender offer, there was $171 million principal amount of senior notes outstanding.

* Capital expenditures were $3.6 million during the first quarter of fiscal 2016.

* Inventory balances at the end of the first quarter of fiscal 2016 were $198.6 million, compared to $208.9 million at the end of the first quarter of fiscal 2015.  On a per square foot basis, inventory cost was down 4% over the first quarter of fiscal 2015.  Inventory units were down mid-single digits.

The Company is continuing to actively pursue various other financing alternatives, including refinancing and/or repurchasing its existing debt, divestitures of certain of its assets and/or lines of business, as well as other opportunities to improve its capital structure.  If opportunities are favorable, the Company may consummate one or more of these initiatives and the amounts involved and related financial statement impact may be material.

Fiscal 2016 Business Outlook

The Company’s fiscal 2016 outlook is based on current economic environment trends, as well as management expectations for the remainder of the year.

Second Quarter

The Company anticipates Adjusted EBITDA for the second quarter of fiscal 2016 to be in the range of $13 million to $17 million.  The prior year quarter Adjusted EBITDA of $11.1 million was impacted by the port slowdown, which negatively impacted Adjusted EBITDA by approximately $5 million.

Full Year

For the full year, the Company expects Adjusted EBITDA to be in the range of $120 million to $135 million.  Based on this guidance, the Company expects to have sufficient liquidity during fiscal 2016 to service its debt and invest in the business to drive long-term growth.

Stores

During fiscal 2016, the Company plans to open approximately 6 new stores and expects to close approximately 20 to 30 stores, primarily in its Crazy 8 and Gymboree brands.

Capital Expenditures

During fiscal 2016, the Company anticipates spending approximately $30 million to $35 million for capital expenditures. The Company expects to finance its capital expenditures for fiscal 2016 through a combination of cash generated by operations, the remaining funds available under its asset-backed loan facility, senior secured term loan, ABL Term Loan and cash on hand.

 

About The Gymboree Corporation

The Gymboree Corporation’s specialty retail brands offer unique, high-quality products delivered with personalized customer service.  As of April 30, 2016, the Company operated a total of 1,303 retail stores: 592 Gymboree stores (543 in the United States, 48 in Canada and 1 in Puerto Rico), 175 Gymboree Outlet stores (174 in the United States and 1 in Puerto Rico), 149 Janie and Jack shops (148 in the United States and 1 inPuerto Rico), and 387 Crazy 8 stores in the United States.  The Company also operates online stores atwww.gymboree.com, www.janieandjack.com and www.crazy8.com, and offers directed parent-child developmental play programs at 732 franchised and Company-operated Gymboree Play & Music centers inthe United States and 43 other countries.

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