Christopher & Banks Corporation Reports Fourth Quarter and Full Year Fiscal 2019 Financial Results

Christopher & Banks Corporation (OTC: CBKC), a specialty women’s apparel retailer, today reported results for the 13-week fourth quarter and 52-week fiscal year ended February 1, 2020, as compared to the 13-week fourth quarter and 52-week fiscal year ended February 2, 2019.

Fourth Quarter Fiscal 2019 Highlights:

• Comparable sales increased 3.6%
• Total revenue increased 4.5% to $88.1 million
• Net loss improved by $6.2 million to $5.1 million
• Adjusted EBITDA* improves by $4.1 million to negative $3.0 million

Keri Jones, President and Chief Executive Officer, commented, “Our fourth quarter results reflect substantial improvement over the prior year and is further evidence of the work we have done in enhancing her shopping experience, improving our marketing and promotional effectiveness, expanding omni-channel capabilities and reducing our costs. We saw a major change in the year-over-year trajectory for the fall season generating a 4.1% increase in comp sales while delivering gross margin expansion and SG&A expense reductions resulting in a $9.6 million EBITDA improvement to nearly breakeven EBITDA. We are also pleased to see that this positive sales momentum continued through fiscal February. We look forward to building on these accomplishments in the coming year as we have built the foundation to drive consistent long-term profitable growth and establish a differentiated brand positioning in the marketplace.”

Results for the Fourth Quarter Ended February 1, 2020

• Net sales grew 4.5% to $88.1 million, while operating on average 452 stores. This compares to $84.3 million in net sales for the fourth quarter of Fiscal 2018, while operating on average 460 stores.
• Comparable sales increased 3.6% following a flat comp sales result in the same period last year.
• Gross margin rate was 30.4%, as compared to 27.5% in last year's fourth quarter. The 290 basis point increase was due primarily to reduced occupancy costs as well as merchandise margin improvement.
• Selling, general & administrative expenses (“SG&A”) decreased by 1.7% to $29.9 million. The decrease was primarily due to lower expenses for medical benefits. As a percent of net sales, SG&A improved approximately 220 basis points to 34.0% due to lower expenses and leverage on higher sales.
• Net loss totaled $5.1 million, or ($0.14) per share, compared to a net loss for the prior year's fourth quarter of $11.3 million, or ($0.30) per share. Excluding impairment charges related to long-lived assets and executive severance, adjusted loss per share^**, a non-GAAP measure, was ($0.25) for the fourth quarter of Fiscal 2018.
• Adjusted EBITDA^*, a non-GAAP measure, improved $4.1 million to ($3.0) million, compared to ($7.0) million for the same period last year.

Results for the Fifty-Two Weeks Ended February 1, 2020

• Net sales totaled $348.9 million, flat compared to last year, while operating on average 1.4% fewer stores.
• Comparable sales increased 0.2% for the 52-week period as compared to the comparable period last year.
• Net loss for fiscal 2019 totaled $16.7 million, or ($0.44) per share. Net loss for Fiscal 2018 totaled $32.8 million, or $(0.88) per share. Excluding impairment charges related to long-lived assets and executive severance, adjusted loss per share^∗∗, a non-GAAP measure, was ($0.40) for Fiscal 2019, compared to an adjusted loss per share of ($0.71) for Fiscal 2018.
• Adjusted EBITDA^∗, a non-GAAP measure, improved by $9.8 million to $(6.1) million, compared to $(15.9) million for Fiscal 2018.

Balance Sheet Highlights and Capital Expenditures

Cash and cash-equivalents totaled $3.2 million, with no outstanding borrowings and net availability under the Company’s Credit Facility of approximately $16.7 million on February 1, 2020.

Total inventory was $41.7 million at the end of the fourth quarter of 2019, up 1.6% compared to $41.0 million at the end of the same period last year, largely due to in-transit inventory. The Company ended the fourth quarter with fresh inventory levels.

Capital expenditures for the fourth quarter of 2019 were $0.4 million compared to $1.5 million in last year’s fourth quarter. This primarily reflects investments in technology associated with omni-channel initiatives and expenditures to support new stores.

*Adjusted EBITDA is a non-GAAP financial measure. The Company defines Adjusted EBITDA as Net income (loss), adjusted for Income tax provision (benefit); Other income; Interest expense, net; Depreciation and Amortization; Stock compensation; Impairment of long-lived assets; and certain discretionary items. Please see “Non-GAAP Measures” below and reconciliations of this non-GAAP measure to the comparable GAAP measure that follows in the table below.

**Adjusted loss per share is a non-GAAP financial measure. The Company defines adjusted loss per share as GAAP loss per share adjusted for certain discretionary items as outlined in the reconciliation of this non-GAAP measure to the comparable GAAP measure that follows in the table below.

Fiscal 2020 Outlook

For the full year of Fiscal 2020, the Company expects:

• Comparable sales to increase in the low-single digits;
• Gross margin expansion of 200 to 350 basis points;
• Adjusted EBITDA*, a non-GAAP measure, to be between breakeven and a positive $5.0 Million; and
• To end the fiscal year with positive cash and no outstanding borrowings under its asset-based Credit Facility.

In regard to the COVID-19 Coronavirus, the situation remains very fluid and the Company is monitoring it closely to assess the potential implications to the business. Accordingly, the guidance above does not reflect the potential impact of the COVID-19 outbreak.

Conference Call Information

The Company will discuss its fourth quarter and full year Fiscal 2019 results in a conference call scheduled for today, March 10, 2020, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial [phone] or [phone] if calling internationally. Please dial in approximately 10 minutes prior to the start of the call. The conference call will be simultaneously broadcast live over the Internet at http://www.christopherandbanks.com. An online archive of the broadcast will be available within approximately one hour of the completion of the call and will be accessible at http://www.christopherandbanks.com for thirty days. In addition, an audio replay of the call will be available shortly after its conclusion and will be archived until March 17, 2020. This call may be accessed by dialing 1-844-512-2921 and using the passcode 13699643.

Non-GAAP Measures

In addition to financial measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release contains non-GAAP financial measures, Adjusted EBITDA and adjusted loss per share. The presentation of these non-GAAP measures is not in accordance with GAAP, and should not be considered superior to or as a substitute for net income or net loss, or any other measure of performance derived in accordance with GAAP. The Company believes the inclusion of these non-GAAP measures provides useful supplemental information to investors regarding the underlying performance of the Company’s business operations, especially when comparing such results to previous periods. These non-GAAP measures are not an alternative for measures of financial performance prepared in accordance with GAAP and may be different from similarly titled non-GAAP measures used by other companies. Investors are encouraged to review the reconciliation of the non-GAAP financial measures to its most directly comparable GAAP measure as provided in the tables below.

About Christopher & Banks

Christopher & Banks Corporation is a Minneapolis-based specialty retailer featuring exclusively designed privately branded women’s apparel and accessories. As of March 10, 2020, the Company operates 447 stores in 44 states consisting of 311 MPW stores, 77 Outlet stores, 31 Christopher & Banks stores, and 28 stores in its women’s plus size clothing division CJ Banks. The Company also operates the www.ChristopherandBanks.com eCommerce website.

Forward-Looking Statements

Certain statements in this press release and in our upcoming earnings conference call may constitute forward-looking statements, made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, which reflect our current views with respect to certain events that could have an effect on our future performance. The forward-looking statements relate to expectations concerning matters that are not historical facts and may use the words “will”, "expect", "anticipate", "plan", "intend", "project", "believe", “should”, "drive" "in order to" and similar expressions. Except for historical information, matters discussed in this press release or on our earnings conference call may be considered forward-looking statements.

These forward-looking statements are based largely on information currently available to our management and our current expectations, assumptions, plans, estimates, judgments and projections about our business and our industry, and are subject to a number of uncertainties and risks, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause the Company's future performance and financial results to differ materially from those expressed or implied by the forward-looking statements. We cannot guarantee their accuracy or our future performance, and there are a number of known and unknown risks, uncertainties, contingencies, and other factors (many of which are outside our control) that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there is no assurance that our expectations will, in fact, be achieved or that our estimates or assumptions will be correct, and we caution investors and all others not to place undue reliance on such forward-looking statements.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to, those factors described in Item 1A, “Risk Factors” and in the “Forward-Looking Statements” disclosure in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our latest annual report on Form 10-K and in our subsequent Form 10-Q Reports. All forward-looking statements that are made or attributable to us are expressly qualified in their entirety by this cautionary notice. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
				Thirteen Weeks Ended							Fifty-Two Weeks Ended
				February 1,			February 2,				February 1,			February 2,
				2020			2019				2020			2019
Net sales				$	88,126		$	84,293			$	348,850		$	348,900
Merchandise, buying and occupancy costs					61,313			61,071				240,023			246,269
Gross profit					26,813			23,222				108,827			102,631
Other operating expenses:
Selling, general and administrative					29,930			30,460				116,143			120,371
Depreciation and amortization					1,987			2,362				8,565			10,158
Impairment of long-lived assets					—			1,385				311			4,384
Total other operating expenses					31,917			34,207				125,019			134,913
Operating loss					(5,104)			(10,985)				(16,192)			(32,282)
Interest expense, net					(70)			(47)				(475)			(183)
Loss before income taxes					(5,174)			(11,032)				(16,667)			(32,465)
Income tax provision					(86)			245				27			374
Net loss				$	(5,088)		$	(11,277)			$	(16,694)		$	(32,839)
Basic loss per share:
Net loss				$	(0.14)		$	(0.30)			$	(0.44)		$	(0.88)
Basic shares outstanding					37,538			37,565				37,891			37,492
Diluted loss per share:
Net loss				$	(0.14)		$	(0.30)			$	(0.44)		$	(0.88)
Diluted shares outstanding					37,538			37,565				37,891			37,492

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
				February 1,			February 2,
				2020			2019
ASSETS
Current assets:
Cash and cash equivalents				$	3,198		$	10,239
Accounts receivable					2,975			2,767
Merchandise inventories					41,698			41,039
Prepaid expenses and other current assets					4,072			3,372
Income taxes receivable					291			268
Total current assets					52,234			57,685
Non-current assets:
Property, equipment and improvements, net					24,952			31,643
Operating lease assets					110,509			—
Deferred income taxes					613			499
Other assets					1,098			1,276
Total non-current assets					137,172			33,418
Total assets				$	189,406		$	91,103
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable				$	23,715		$	17,834
Current portion of long-term lease liabilities					26,185			—
Accrued salaries, wages and related expenses					4,723			4,954
Accrued liabilities and other current liabilities					24,053			25,894
Total current liabilities					78,676			48,682
Non-current liabilities:
Deferred lease incentives					—			6,267
Long-term lease liabilities					99,793			6,661
Other non-current liabilities					1,829			8,970
Total non-current liabilities					101,622			21,898
Stockholders' equity:
Common stock					452			481
Additional paid-in capital					129,413			128,714
Retained earnings					(7,882)			4,137
Common stock held in treasury					(112,875)			(112,809)
Total stockholders' equity					9,108			20,523
Total liabilities and stockholders' equity				$	189,406		$	91,103

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
			Fifty-Two Weeks Ended
			February 1,			February 2,
			2020			2019
Cash flows from operating activities:
Net loss			$	(16,694)		$	(32,839)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization				8,565			10,158
Impairment of long-lived assets				311			4,384
Deferred income taxes, net				(71)			98
Amortization of financing costs				61			61
Lease expense				25,449			—
Deferred lease-related liabilities				—			(950)
Stock-based compensation expense				715			1,101
Loss on disposal of assets				—			3
Changes in operating assets and liabilities:
Accounts receivable				(208)			(141)
Merchandise inventories				(659)			323
Prepaid expenses and other assets				(1,143)			(605)
Income taxes receivable				(23)			(96)
Accounts payable				5,920			(2,857)
Accrued liabilities				1,141			251
Lease liabilities				(27,882)			—
Other liabilities				(406)			(399)
Net cash used in operating activities				(4,924)			(21,508)
Cash flows from investing activities:
Purchases of property, equipment and improvements				(2,006)			(4,294)
Proceeds from sale of assets				—			13,329
Net cash (used in) provided by investing activities				(2,006)			9,035
Cash flows from financing activities:
Shares redeemed for payroll taxes				(13)			(32)
Proceeds from short-term borrowings				15,400			9,100
Payments of short-term borrowings				(15,400)			(9,100)
Payments of deferred financing costs				—			(234)
Acquisition of common stock held in treasury, at cost				(98)			(99)
Net cash provided by (used in) financing activities				(111)			(365)
Net decrease in cash and cash equivalents				(7,041)			(12,838)
Cash and cash equivalents at beginning of period				10,239			23,077
Cash and cash equivalents at end of period			$	3,198		$	10,239
Supplemental cash flow information:
Interest paid			$	475		$	190
Income taxes paid			$	87		$	147
Accrued purchases of equipment and improvements			$	98		$	156

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA
(in thousands)
(unaudited)

The following table reconciles from Net loss accordance with generally accepted accounting principles (GAAP) to Adjusted EBITDA, a non-GAAP measure, for the thirteen and fifty-two weeks ended February 1, 2020 and February 2, 2019:

					Thirteen Weeks Ended								Fifty-Two Weeks Ended
					February 1,				February 2,				February 1,				February 2,
					2020				2019				2020				2019
Net loss on a GAAP basis				$	(5,088)			$	(11,277)			$	(16,694)			$	(32,839)
Income tax provision					(86)				245				27				374
Interest expense, net					(70)				(47)				(475)				(183)
Depreciation & amortization					1,987				2,362				8,565				10,158
Impairment of long-lived assets					—				1,385				311				4,384
Lease termination fees and other related costs, net					—				—				144				161
Executive severance					—				—				396				625
Stock based compensation					145				213				715				1,101
Adjusted EBITDA				$	(2,972)			$	(7,025)			$	(6,061)			$	(15,853)

CHRISTOPHER & BANKS CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF LOSS PER SHARE
(in thousands, except per share amounts)
(unaudited)

The following table reconciles Net loss per share in accordance with GAAP to Adjusted net loss per share, on a non-GAAP basis, for the thirteen and fifty-two weeks ended February 1, 2020 and February 2, 2019:

				Thirteen Weeks Ended
				February 1,							February 2,
				2020							2019
				Pretax		Net of tax		Per share amounts			Pretax		Net of tax		Per share amounts
GAAP net loss per share							$	(0.14)						$	(0.30)
Adjustments
Impairment of long-lived assets				—		—		0.00			1,385		1,354		0.04
Lease termination fees and other related costs, net				—		—		0.00			—		—		0.00
Executive Severance				—		—		0.00			—		—		0.00
Stock based compensation				145		143		0.00			213		208		0.01
Adjusted loss per share							$	(0.14)						$	(0.25)
				Fifty-Two Weeks Ended
				February 1,							February 2,
				2020							2019
				Pretax		Net of tax		Per share amounts			Pretax		Net of tax		Per share amounts
GAAP net loss per share							$	(0.44)						$	(0.88)
Adjustments
Impairment of long-lived assets				311		310		0.01			4,384		4,334		0.12
Lease termination fees and other related costs, net				144		144		0.00			161		159		0.00
Executive Severance				396		395		0.01			625		618		0.02
Stock based compensation				715		714		0.02			1,101		1,088		0.03
Adjusted loss per share							$	(0.40)						$	(0.71)

 

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