Claire’s Inc. converted higher sales and margins into a 26.2 percent increase in net income during the third quarter.
In the three months ended Oct. 30, the Chicago-based international accessories retailer generated profits of $3.6 million, up from $2.9 million in the 2009 quarter. Earnings before interest, taxes, depreciation and amortization rose 15.2 percent to $57.6 million from $50 million.
Net sales expanded 7.3 percent to $348.2 million from $324.4 million in year-over-year comparisons and rose 9.4 percent when currency fluctuation was excluded. Comparable-store sales were up 7.5 percent, with North American comps ahead 9.6 percent and European comps up 3.9 percent. Gross margin stretched to 51.9 percent of sales, up from 50.9 percent a year ago, with lower occupancy costs offsetting lower merchandise margin brought on by higher markdowns and freight expense.
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The company, acquired and taken private by Apollo Management LP in 2007, said that same-store sales so far in November were up in the mid-single digits.
Asked by an analyst on the company conference call about the expected impact of higher freight costs moving into 2011, J. Per Brodin, executive vice president and chief financial officer, noted, “Capacity has definitely decreased and, as such, we are working with longer lead times to ensure the same on-the-floor selling date for the product. But the plans that we have in place or the projections we have in place incorporate the current rate structure that we’re dealing with.”
He added that the usual four-week interval between shipment from Asia to the company’s distribution center has “stretched out now to longer, to almost five weeks.”
On the company balance sheet, long-term debt has contracted to $2.24 billion from $2.31 billion since Jan. 30, while inventories have expanded to $160.2 million from $110.3 million at the conclusion of the last fiscal year. Cash and cash equivalents totaled $154.1 million from $198.7 million at the start of the fiscal year.
For the nine months, Claire’s cut its net loss to $17 million from red ink of $29.9 million in the comparable 2009 period. Sales came in at $1 billion, up 7.8 percent from the $931.7 million sold in the first nine months of 2009.
At the end of the quarter, the company owned and operated 2,971 stores in North America and Europe and also operated stores through franchise, licensed and joint-venture arrangements.