Maidenform Brands, Inc. , a global branded marketer of intimate apparel, today reported third quarter 2012 net sales of $150.2 million, an increase of 1.3% over the third quarter of 2011. Reported EPS was $0.46 for the third quarter of 2012 compared to EPS of $0.44 for the third quarter of 2011.
"Our third quarter results met our EPS expectations as favorable expenses and higher gross profit more than offset lower than planned revenues. Looking forward, we anticipate global economic challenges and increased competition; we are addressing these concerns with a continued focus on product innovation, such as Comfort Devotion, amplified emphasis on leveraging the equity of the Maidenform brand and operational improvements," stated Maurice S. Reznik, Chief Executive Officer.
Financial Results for Third Quarter 2012 versus Third Quarter 2011
Net sales for the third quarter of 2012 increased $2.0 million, or 1.3%, to $150.2 million. Wholesale segment net sales for the third quarter of 2012 increased $1.3 million, or 1.0%, to $131.5 million. Retail segment net sales increased $0.7 million, or 3.9%, to $18.7 million.
The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.
Department Stores and National Chain Stores
Net sales for the department stores and national chain stores channel increased $4.3 million, or 7.2%, to $64.2 million for the third quarter of 2012. This increase was led by growth in the bra and pant categories, resulting from replenishment orders and new product launches.
Mass merchant channel net sales decreased $0.3 million, or 0.7%, to $44.8 million for the third quarter of 2012, resulting from a decline in shipments to a mass customer that was nearly offset by program shipments to a warehouse club.
Net sales in the other channel decreased $2.7 million, or 10.7%, to $22.5 million for the third quarter of 2012 from lower sales to a specialty retailer that was partially offset by increased sales to off-price retailers.
Total international net sales, which are included in the wholesale segment, increased $2.5 million, or 17.7%, to $16.6 million. This increase was driven by sales in Canada and Mexico that more than offset lower sales in most European countries.
Total retail segment net sales increased $0.7 million, or 3.9%, to $18.7 million, largely driven by e-commerce growth. Same store sales, defined as outlet stores that have been open for more than one year, increased 0.7%. Internet sales increased $0.6 million, or 35.3%, to $2.3 million for the third quarter of 2012. The retail segment operated 76 outlet stores as of the end of the third quarter of 2012 and 75 outlet stores as of the end of the third quarter of 2011.
Consolidated gross profit increased $1.3 million, or 2.7%, to $48.7 million for the third quarter of 2012. As a percentage of net sales, consolidated gross margins were 32.4% for the third quarter of 2012 versus 32.0% for the third quarter of 2011. The increase in gross margin was primarily a result of favorable product mix during the quarter. Partially offsetting this increase was a higher mix of sales to off-price retailers.
Consolidated selling, general and administrative expenses (SG&A) decreased $0.6 million, or 1.9%, to $30.9 million for the third quarter of 2012. This decrease was primarily due to a reduction in incentive compensation and the benefit of currency exchange rates, particularly in Mexico. These decreases were partially offset by increases in retail operating expenses, including costs associated with e-commerce sales promotion activities. As a percentage of net sales, SG&A decreased to 20.5% for the third quarter of 2012 compared to 21.3% for the third quarter of 2011.
Net interest expense for the third quarter of 2012 was $0.3 million compared to $0.2 million for the third quarter of 2011.
The Company's effective income tax rate for the third quarter of 2012 was 38.5% compared to 35.0% for the third quarter of 2011. The lower effective income tax rate in the third quarter of 2011 was primarily a result of discrete items recorded, such as the utilization of research and development credits and non-recurring state income tax benefits.
Net income for the third quarter of 2012 and 2011 was $10.8 million and $10.2 million, respectively, and EPS was $0.46 and $0.44, respectively.
Financial Results for Year-To-Date 2012 versus Year-To-Date 2011
Net sales for the first nine months of 2012 decreased $16.6 million, or 3.4%, to $465.2 million. Wholesale segment net sales, on a year-to-date basis, decreased $18.3 million, or 4.2%, to $417.7 million.
Department stores and national chain stores were relatively flat when compared to the prior year. In addition to the reasons mentioned for the third quarter, the Company experienced an assortment expansion in 2011 at one of the Company's chain store customers that did not repeat in 2012, and sales declines at a mid-tier department store as it transitions to a new pricing and merchandising strategy. These decreases were partially offset by sales of the Jennifer Lopez brand that shipped for the first time to a chain store customer in the second quarter of 2012.
The Company's mass merchant channel decreased $7.9 million, or 4.9%, resulting from the changes mentioned in the third quarter, along with mixed results with other mass merchant customers. The other channel decreased $10.3 million, or 12.4%, resulting from the reasons mentioned in the third quarter, along with fewer program sales to off-price retailers.
Total international net sales increased $3.8 million, or 8.6%, to $47.9 million, driven by growth in major markets, such as Canada, the United Kingdom and Mexico. Partially offsetting these increases were sales decreases in other major markets, such as the Benelux countries and Sweden.
Retail segment net sales for the first nine months of 2012 increased $1.7 million, or 3.7%, to $47.5 million. Same store sales for Maidenform's retail outlet stores increased 0.3%. Internet sales increased $1.9 million, or 38.0%, to $6.9 million, resulting from promotional events which increased sales. The Company's net sales performance by channel of distribution is highlighted in Exhibit 1 to this press release.
Consolidated gross margins on a year-to-date basis were 31.2% versus 33.7% for the same period in 2011. The decrease in gross margin was a result of increased off-price retailer activity to drive inventory productivity and inventory related clearing costs.
Consolidated SG&A increased $0.6 million, or 0.6%, to $98.6 million for the first nine months of 2012. This increase is a result of increased payroll and related benefits and increased retail operating expenses. Partially offsetting these increases were reductions in incentive compensation and professional fees, and the benefit of favorable currency exchange rates, primarily in Mexico. As a percentage of net sales, SG&A increased to 21.2% for the first nine months of 2012 compared to 20.4% for the same period of 2011.
Year-to-date operating income for 2012 was $46.6 million, or 10.0% of net sales. Year-to-date operating income for 2011, including a litigation settlement (which is separately listed on the consolidated statements of income), was $57.4 million, or 11.9% of net sales. Continued operating income for the first nine months of 2011, excluding the litigation settlement, was $64.2 million, or 13.3% of net sales.
The Company's effective income tax rate for the first nine months of 2012 was 38.8% compared to 36.0% for the same period of 2011. The lower effective rate for 2011 was a result of the discrete items mentioned above along with a discrete income tax benefit related to a New Jersey tax law change recorded in the second quarter of 2011.
Net income for the first nine months of 2012 and 2011 was $28.0 million and $36.3 million, respectively, and EPS was $1.19 and $1.55, respectively. Excluding the litigation settlement of $4.1 million after tax, or $0.17 EPS, net income was $40.4 million, or EPS of $1.72 for the first nine months of 2011.
Total cash and cash equivalents as of September 29, 2012 were $72.5 million compared to $51.8 million as of October 1, 2011. The Company's outstanding debt was $68.2 million as of September 29, 2012 versus $69.3 million as of October 1, 2011.
Financial Performance Guidance for 2012:
· Fourth quarter sales in a range of $130 to $135 million, including the impact of a weaker than expected European economy, suppressed sales due to Hurricane Sandy and increased shapewear competition
· Fourth quarter EPS in a range of 20 to 25 cents per share
· Full year EPS in a range of $1.39 to $1.44 per share
Conference Call Information
Maidenform will host a conference call and webcast on Wednesday, November 7, 2012 at 8:30 am ET to discuss its third quarter 2012 results, in addition to providing an update on its business. The conference call telephone number is (866) 578-5784 and the passcode is "Maidenform." The conference call will be simultaneously webcasted and can be accessed via the investor relations page of Maidenform's website at www.maidenformbrands.com. A dial-in replay of this event will be available through November 21, 2012 and will be hosted on the Company's website for a limited time. The replay telephone numbers are (888) 286-8010 or (617) 801-6888. The replay passcode is 71063165.
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About Maidenform Brands, Inc.
Maidenform Brands, Inc. is a global intimate apparel company with a portfolio of established, well-known brands, top-selling products and an iconic heritage. Maidenform designs, sources and markets an extensive range of intimate apparel products, including bras, panties and shapewear. During its 90-year history, Maidenform has built strong equity for its brands and established a platform for growth through a combination of innovative, first-to-market designs and creative advertising campaigns focused on increasing brand awareness with generations of women. Maidenform sells its products under some of the most recognized brands in the intimate apparel industry, including Maidenform®, Control It!®, Fat Free Dressing®, Flexees®, Lilyette®, Maidenform's Charmed®, Bodymates®, Inspirations®, Self Expressions® and Sweet Nothings®. Maidenform products are currently distributed in approximately 63 countries and territories outside the United States.