SOURCE: Gordmans Stores, Inc.

December 01, 2010 16:00 ET

Gordmans Stores, Inc. Announces Third Quarter Fiscal 2010 Results

Net Sales Increased 11% to $123.6 Million; Comparable Store Sales up 6.0%; Company Raises Fourth Quarter Fiscal 2010 Outlook

OMAHA, NE--(Marketwire - December 1, 2010) - Gordmans Stores, Inc. (NASDAQ: GMAN), an Omaha-based apparel and home décor retailer, today announced results for third quarter (thirteen weeks) and nine month period (thirty-nine weeks) ended October 30, 2010.

Third Quarter Highlights
-- The Company's initial public offering of common stock was effective
   on August 4, 2010.
-- Net sales increased 11.0% to $123.6 million compared to $111.4 million
   in the third quarter of 2009.
-- Comparable store sales increased 6.0% over the third quarter of 2009.
-- Gross profit margin increased 70 basis points over the third quarter
   of 2009.
-- Adjusted net income, excluding non-recurring charges of $10.6 million,
   increased 10.7% to $4.3 million compared to $3.9 million in the
   third quarter of 2009.
-- Adjusted diluted earnings per share were $0.22, excluding non-recurring
   charges of $10.6 million.

Nine Month Highlights
-- Net sales increased 14.9% to $348.6 million compared to $303.5 million
   for the nine months ended October 31, 2009.
-- Comparable store sales increased 9.7% over the same nine month period
   last year.
-- Gross profit margin increased 100 basis points for the first nine
   months of 2010 compared to the same period of 2009.
-- Adjusted net income, excluding non-recurring charges of $11.8 million,
   increased 51.8% to $14.7 million compared to $9.7 million for the
   first nine months of 2009.
-- Adjusted diluted earnings per share of $0.87, excluding non-recurring
   charges of $11.8 million, compares to $0.61 last year.
-- Diluted earnings per share were $0.42.

Jeff Gordman, President and Chief Executive Officer, stated: "We delivered operating results in the third quarter that were above our plan, driven primarily by better than expected comparable stores sales growth and improved gross profit margin. We are very pleased with the recent progress we have made on several key initiatives that we believe will continue to drive sales and earnings growth, including enhancing our merchandise selection, refining our inventory optimization strategies and expanding our geographic footprint. We are optimistic about our prospects for the holiday selling season as well as our ability to scale the business over the long term."

Third Quarter Financial Results

Net sales for the thirteen weeks ended October 30, 2010, increased 11.0% to $123.6 million from $111.4 million for the thirteen weeks ended October 31, 2009, which translated into a 6.0% comparable store sales increase. Gross profit increased by 12.8% to $54.7 million, or 44.2% of net sales, from $48.5 million, or 43.5% of net sales in the prior year. Selling, general and administrative costs were $58.4 million and include one-time pre-tax charges of $10.6 million related to the initial public offering. Excluding these one-time expenses, non-GAAP adjusted selling, general and administrative expenses were $47.8 million, or 38.7% of net sales, compared to $42.0 million or 37.7% of net sales in the prior year. The Company reported a net loss of $2.5 million, or ($0.13) per diluted share during the third quarter compared to net income of $3.9 million, or $0.24 per diluted share, in the prior year. Excluding the one-time, pre-tax charges of $10.6 million related to the initial public offering, the non-GAAP adjusted net income grew by 10.7% to $4.3 million, or $0.22 per diluted share, in the third quarter of 2010.

Nine Month Financial Results

Net sales for the thirty-nine weeks ended October 30, 2010, increased 14.9% to $348.6 million from $303.5 million for the thirty-nine weeks ended October 31, 2009, while comparable store sales increased by 9.7%. Gross profit increased by 17.3% to $157.2 million, or 45.1% of net sales, from $134.0 million, or 44.1% of net sales in the prior year. Selling, general and administrative expenses were $145.0 million, including one-time pre-tax charges of $11.8 million related to the initial public offering. Excluding the one-time pre-tax charges of $11.8 million, non-GAAP adjusted selling, general and administrative expenses as a percentage of net sales decreased by 60 basis points during the first nine months of 2010 to 38.2% of net sales compared to 38.8% of net sales in the previous year. Net income was $7.2 million, or $0.42 per diluted share compared to net income of $9.7 million, or $0.61 per diluted share in the prior year. Excluding the one-time pre-tax charges of $11.8 million related to the initial public offering, non-GAAP adjusted net income for the first nine months of fiscal 2010 increased 51.8% to $14.7 million over the prior year period, and diluted earnings per share were $0.87.

Outlook

For the fourth quarter ending January 29, 2011, the Company currently expects net sales to be between $160 million and $165 million, which reflects an expected mid-single digit comparable store sales increase, up from its previous forecast of net sales between $155 million and $160 million, which reflected a comparable store sales increase in the low single digits. The Company now projects net income in the range of $7.2 million to $8.1 million for the fourth quarter, which translates into diluted earnings per share in the range of $0.37 to $0.42 (using a diluted share count of approximately 19.3 million), up from its previous expectation for net income in the range of $5.9 million to $6.8 million and earnings per share in the range of $0.30 to $0.35 (using a diluted share count of approximately 19.5 million).

Conference Call Information

A conference call to discuss third quarter financial results is scheduled for today, December 1, 2010 at 4:30 p.m. Eastern Time. The conference call will be webcast live at http://investor.gordmans.com/events.com. A replay of this call will be available within two hours of the conclusion of the call and will remain on the website for one year.

About Gordmans Stores, Inc.

Gordmans (NASDAQ: GMAN) features a large selection of the latest name brands, fashions and styles at up to 60 percent off department and specialty store prices every day. The wide range of merchandise includes apparel for all ages, accessories, footwear, home décor, gifts, designer fragrances, fashion jewelry, bedding and bath, accent furniture and toys. Founded in 1915, Gordmans operates 68 stores in 16 Midwestern and surrounding states. For more information about Gordmans, visit www.gordmans.com.

Safe Harbor Language

Certain statements in this release are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "guidance," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions are used to identify these forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding expected net income, comparable store sales, diluted earnings per share, and store expansion, as well as any other statement that does not directly relate to any historical or current fact. Forward-looking statements are based on our current expectations and assumptions, which may not prove to be accurate. These statements are not guarantees and are subject to risks, uncertainties and changes in circumstances that are difficult to predict. Many factors could cause actual results to differ materially and adversely from these forward-looking statements. Among these factors are (1) changes in consumer spending and general economic conditions; (2) our ability to identify and respond to new and changing fashion trends, guest preferences and other related factors; (3) fluctuations in our sales and results of operations on a seasonal basis; (4) intense competition from other retailers; (5) our ability to maintain or improve levels of comparable store sales; (6) our successful implementation of advertising, marketing and promotional strategies, (7) termination of our license agreements; (8) our ability to obtain merchandise at acceptable prices; (9) shortages of inventory and harm to our reputation due to difficulties or shut-down of our distribution facilities; (10) our reliance on independent third-party transportation providers for substantially all of our merchandise shipments; (11) our growth strategy, including the ability to identify acceptable store locations at appropriate costs; (12) our dependence on a strong brand image; (13) our leasing of substantial amounts of space; (14) the inability to find a sufficient number of store associates that reflect our brand image and embody our culture; (15) our dependence upon key executive management; (16) our reliance on information systems; (17) system security risk issues that could disrupt our internal operations or information technology services; (18) changes in laws and regulations applicable to our business; (19) our inability to protect our trademarks or other intellectual property rights; (20) fluctuations in energy costs; (21) claims made against us resulting in litigation; (22) impairment on our long-lived assets; (23) our substantial lease obligations; and (24) restrictions imposed by our indebtedness on our current and future operations.

Additional information concerning these and other factors can be found in our filings with the Securities and Exchange Commission, including our Registration Statement on Form S-1 (File No. 333-166436), as amended, quarterly reports on Form 10-Q, and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

                GORDMANS STORES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                   (in 000's except share data)


                                                  October 30,   January 30,
                                                     2010          2010
                                                  -----------  ------------
                                                  (Unaudited)
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                    $     8,418  $     16,601
     Accounts receivable                                2,007         2,544
     Landlord receivable                                1,269           423
     Income tax receivable                              2,496            --
     Merchandise inventories                          101,717        49,291
     Deferred income taxes                              2,767         2,491
     Prepaid expenses                                   6,305         4,581
                                                  -----------  ------------
        Total current assets                          124,979        75,931
PROPERTY, BUILDINGS AND EQUIPMENT, net                 17,400        10,444
INTANGIBLE ASSETS, net                                  2,189         2,262
DEFERRED INCOME TAXES                                   1,149         1,050
OTHER ASSETS                                            2,368         2,431
                                                  -----------  ------------

TOTAL ASSETS                                      $   148,085  $     92,118
                                                  ===========  ============


LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                             $    68,995  $     30,685
     Income taxes payable                                  --         3,715
     Accrued expenses                                   25,011       24,633
     Notes payable, current portion                     1,502           667
     Capital lease obligations, current portion           427            68
                                                  -----------  ------------

        Total current liabilities                      95,935        59,768
                                                  -----------  ------------

NONCURRENT LIABILITIES:
     Notes payable, net of current portion                705           778
     Deferred rent                                      6,471         4,686
     Capital lease obligations, net of current
      portion                                             737            --
     Other liabilities                                    757           937
                                                  -----------  ------------

        Total noncurrent liabilities                    8,670         6,401
                                                  -----------  ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock                                       --            --
     Common stock                                          19            15
     Additional paid-in capital                        50,682        20,328
     Retained earnings (deficit)                       (7,221)        5,606
                                                  -----------  ------------

        Total stockholders' equity                     43,480        25,949
                                                  -----------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $   148,085  $     92,118
                                                  ===========  ============






                GORDMANS STORES, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in 000's except share data)
                            (Unaudited)


                     13 Weeks     13 Weeks        39 Weeks     39 Weeks
                      Ended         Ended          Ended         Ended
                    October 30,   October 30,    October 30,  October 30,
                       2010          2009           2010         2009
                    -----------   -----------   -----------   -----------
Net sales           $   123,606   $   111,396   $   348,615   $   303,499
License fees from
 leased departments       1,676         1,481         4,643         4,059
Cost of sales           (70,590)      (64,394)     (196,076)     (173,604)
                    -----------   -----------   -----------   -----------

  Gross profit           54,692        48,483       157,182       133,954
Selling, general
 and administrative
 expenses               (58,412)      (42,038)     (144,983)     (117,761)
                    -----------   -----------   -----------   -----------

Income / (loss)
 from operations         (3,720)        6,445        12,199        16,193
Interest expense           (167)         (326)         (571)         (860)
                    -----------   -----------   -----------   -----------

  Income / (loss)
   before taxes          (3,887)        6,119        11,628        15,333
Income tax
 (expense) / benefit      1,409        (2,257)       (4,455)       (5,655)
                    -----------   -----------   -----------   -----------

  Net income /
   (loss)           $    (2,478)  $     3,862   $     7,173   $     9,678
                    ===========   ===========   ===========   ===========

Basic earnings /
 (loss) per share   $     (0.13) $      0.25    $      0.43   $      0.62
Basic weighted
 average shares
 outstanding         18,869,339    15,488,800    16,729,537    15,488,800
Diluted earnings /
 (loss) per share   $     (0.13)  $      0.24   $      0.42   $      0.61
Dilutive weighted
 average shares
 outstanding         18,869,339    15,930,974    16,960,722    15,968,643






                          GORDMANS STORES, INC. AND SUBSIDIARIES
                      RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                             (in 000's except share data)
                                    (Unaudited)

The following information provides reconciliations of non-GAAP financial measures presented in the accompanying earnings release to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"). The company has provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the accompanying earnings release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the earnings release. The non-GAAP financial measures in the accompanying earnings release may differ from similar measures used by other companies.

As used in the accompanying earnings release, the company defines non-GAAP as reported amounts for the periods presented to exclude the effects of one-time pre-tax charges related to the initial public offering primarily including fees associated with the termination of our consulting agreement with Sun Capital Partners Management V, LLC ("Sun Capital Management"). These non-GAAP financial measures provide the company and investors with an understanding of the company's financial measures adjusted to exclude the effect of the charges described above.

These non-GAAP financial measures assist the company and investors in making a ready comparison of the company's financial measures for its first nine months of fiscal 2010, against the company's results for the respective current year period.

The following tables reconcile non-GAAP measures to the related GAAP financial measure for the periods presented:


                                   13 Weeks Ended October 30, 2010

                                GAAP Basis     Amounts        Non-GAAP
                               As Reported    Adjusted       As Adjusted
                               -----------   ----------     -------------
Net sales                      $   123,606   $       --     $     123,606
License fees from leased
 departments                         1,676           --             1,676
Cost of sales                      (70,590)          --           (70,590)
                               -----------   ----------     -------------

  Gross profit                      54,692           --            54,692
Selling, general and
 administrative expenses           (58,412)      10,589(1)        (47,823)
                               -----------   ----------     -------------

Income / (loss) from
 operations                         (3,720)      10,589             6,869
Interest expense                      (167)          --              (167)
                               -----------   ----------     -------------

  Income / (loss) before taxes      (3,887)      10,589             6,702
Income tax (expense) /
 benefit                             1,409       (3,837)           (2,428)
                               -----------   ----------     -------------

  Net income / (loss)          $    (2,478)  $    6,752     $       4,274
                               ===========   ==========     =============

Basic earnings / (loss) per
 share                         $     (0.13)  $     0.36     $        0.23
Basic weighted average shares
 outstanding                    18,869,339   18,869,339        18,869,339
Diluted earnings / (loss) per
 share                         $     (0.13)  $     0.35     $        0.22
Dilutive weighted average
 shares outstanding             18,869,339   19,034,912        19,034,912


(1) Includes one-time pre-tax charges of $10.6 million related to the
    initial public offering primarily including fees associated with
    the termination of our consulting agreement with Sun Capital
    Management.




                     GORDMANS STORES, INC. AND SUBSIDIARIES
                   RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                          (in 000's except share data)
                                     (Unaudited)

                                   39 Weeks Ended October 30, 2010

                                GAAP Basis     Amounts        Non-GAAP
                               As Reported    Adjusted       As Adjusted
                               -----------    -----------     -----------
Net sales                       $  348,615    $        --     $   348,615
License fees from leased
 departments                         4,643             --           4,643
Cost of sales                     (196,076)            --        (196,076)
                               -----------    -----------     -----------

     Gross profit                  157,182             --         157,182
Selling, general and
 administrative expenses          (144,983)        11,849(2)     (133,134)
                               -----------    -----------     -----------

Income from operations              12,199         11,849          24,048
Interest expense                      (571)            --            (571)
                               -----------    -----------     -----------

     Income before taxes            11,628         11,849          23,477
Income tax expense                  (4,455)        (4,327)         (8,782)
                               -----------    -----------     -----------

     Net income                 $    7,173    $     7,522     $    14,695
                                ==========    ===========     ===========

Basic earnings per share        $     0.43    $      0.45     $      0.88
Basic weighted average shares
 outstanding                    16,729,537     16,729,537      16,729,537
Diluted earnings per share      $     0.42    $      0.44     $      0.87
Dilutive weighted average
 shares outstanding             16,960,722     16,960,722      16,960,722


(2) Includes one-time pre-tax charges of $11.8 million related to the
    initial public offering primarily including fees associated with
    the termination of our consulting agreement with Sun Capital
    Management.

Contact Information

  • Company Contact:
    Mike James
    Chief Financial Officer
    (402) 691-4126

    Investor Relations:
    ICR, Inc.
    Brendon Frey / James Palczynski
    (203) 682-8200