Claire’s Q2 Loss Widens Hit by Decline in EU Sales

Back to school looks from Claire's

Chicago–Claire’s Stores reported last week that its second quarter loss widened as comparable store sales declined, especially in its European stores.

For the quarter ended July 30, the company, which operates Claire’s and Icing, posted a $10.1 million loss compared with an $8.3 million loss in the year ago period.

Net sales increased 7.3% to $358.5, an increase of $24.3 million, or 7.3% over last year. The company attributed the increases to favorable foreign currency exchanges, new stores and an increase in shipments to its franchisees which help offset a comparable store sales decrease and store closures. Net sales would have increased 1.7% excluding the impact from foreign currency rate changes.

‘Macroeconomic Environment, especially in Europe, Remains Uncertain’

Comparable store sales fell 1.4%, consisting of a 2.0% increase in North America and a 6.5% decrease in Europe.

“While we are disappointed with our 1.4% global decline in same store sales, our results were significantly impacted by underperformance in our European Division,” said Gene Kahn, ceo. “We have identified several opportunities for improved results and, while we believe we are well positioned for the balance of the year, consumer spending globally continues to be under pressure and the macroeconomic environment, especially in Europe, remains uncertain.”

Gross profit percentage decreased 130 basis points to 51.1% from 52.4% during the prior year quarter.

“The decrease in merchandise margin resulted primarily from an increase in markdowns and a reduction in inventory shrink benefit partially offset by lower freight expense,” the company said.

Selling, general and administrative expenses increased $8.5 million, or 7.0%, compared to the second quarter last year.  As a percentage of net sales, selling, general and administrative expenses decreased 0.1% compared to the prior year period.  Excluding an unfavorable $6.4 million foreign currency exchange effect, the net increase in selling, general and administrative expenses would have been $2.1 million, primarily for new store-related expenses.

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