FORWARD LOOKING STATEMENTS
The discussion in this Annual Report on Form 10-K
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Inaccurate assumptions and known and unknown
risks and uncertainties can affect the accuracy of forward-looking statements,
and our actual results could differ materially from results that may be
anticipated by such forward-looking statements. Certain risks and uncertainties
that could cause our actual results to differ significantly from
management’s expectations are described in the section entitled
“Factors That May Affect Future Performance.” That section, along with
other sections of this Annual Report, describes some, but not all, of the
factors that could cause actual results to differ significantly from
management’s expectations. When used in this document, the words
“believes”, “expects”, “estimates” or
“anticipates” and similar expressions are intended to identify certain
of these forward-looking statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. The cautionary statements made in
this document should be read as being applicable to all related forward-looking
statements wherever they appear in this document. Readers are cautioned not to
place undue reliance on these forward-looking statements, which are based on
information available as of the date of this report. We undertake no obligation
to revise any forward-looking statements in order to reflect events or
circumstances that may subsequently arise.
PART 1
ITEM 1. BUSINESS
The Gymboree Corporation is an international specialty
retailer operating stores selling high quality apparel and accessories, as well
as play programs, for women and children under the GYMBOREE®, JANIE AND
JACK®, JANEVILLE™ and GYMBOREE PLAY & MUSIC® brands. The
Company operates stores in the United States, Canada, Ireland and the United
Kingdom, primarily in regional shopping malls and in selected suburban and urban
locations. All references to “we,” “our,” “us,”
and “the Company” in this Annual Report mean The Gymboree Corporation
and its subsidiaries.
GENERAL
As of January 31, 2004, the Company conducted its
business through three primary divisions: Gymboree, Janie and Jack, and Gymboree
Play & Music. In April 2004, the Company will launch its newest retail
concept, Janeville.
Gymboree. Gymboree retail stores offer high quality,
fashionable, child-appropriate apparel and accessories characterized by bright
colors, patterns and whimsical graphics, complex embellishments, comfort,
functionality, and durability for children ages newborn to 9 years. Under the
Gymboree brand name, we design and contract manufacture children’s apparel
and accessories for sale exclusively by Gymboree. As of January 31,
2004, we operated 587 Gymboree retail stores, including 536 stores in the United
States, 28 stores in Canada, and 23 stores in Europe, as well as an on-line
store at www.gymboree.com.
Janie and Jack. Janie and Jack is a new specialty retail
concept launched in the third quarter of 2002. The Janie and Jack shops are
highly differentiated from the Gymboree stores. Janie and Jack shops offer
distinctive, finely crafted clothing and accessories for boys and girls sizes
preemie to 3T. Lush fabrics, a hand-made quality and details such as
hand-embroidery, smocking and vintage prints are utilized to create classic
looks. Shops have an old mercantile boutique style with special details such as
wainscotting and distressed wooden armoires. As of January 31, 2004,
we operated 32 Janie and Jack stores in the United States, as well as an on-line
store at www.janieandjack.com.
Janeville. Janeville is the Company’s newest
specialty retail concept. Janeville offers trend-infused apparel and accessories
for women in their mid-30s and older. Clothing is modern, fresh and comfortable,
designed with high quality fabrics and flattering cuts and styling. Janeville
stores feature a residential environment with a cottage façade, front
porch, and french doors. Subtle feminine details are found throughout the store,
such as slip-covered furniture, one-of-a-kind fixtures, found objects,
distressed wood and contrasting, warm textures. The Company plans to open
approximately 10 Janeville stores in 2004.
Gymboree Play & Music. Gymboree Play & Music
offers directed parent-child developmental play programs designed to enhance
early childhood development through fun-filled sensory and motor activities that
engage
3
children
ages newborn to 5 years old through sight, touch, sound and movement. Gymboree
Play & Music also offers art classes and birthday party services and sells
certain developmentally appropriate toys and audiotapes. As of January 31, 2004,
Gymboree’s Play & Music programs included 15 Company-operated play
centers in California and 517 franchisee-operated play centers, of which
approximately 63% are located in the United States, and the remaining 37% are
located in other countries, including Australia, Brazil, Canada, China, France,
Ireland, Malaysia, Mexico, Norway, Singapore, South Korea, Switzerland, Taiwan,
Thailand, United Arab Emirates and the United Kingdom.
Gymboree was organized in October 1979, as a California
corporation, and re-incorporated as a Delaware corporation in June
1992.
RETAIL
STORES
As of January 31, 2004, the Company operated a
total of 619 stores: 587 Gymboree retail stores (536 in the United States, 28 in
Canada, and 23 in Europe) and 32 Janie and Jack retail shops in the United
States.
In 2003, the Company opened 17 Gymboree stores and
21 Janie and Jack shops in the United States, 4 Gymboree stores in Canada, and 1 Gymboree store in Ireland. The Company also relocated 16 Gymboree
stores in the United States and closed 5 Gymboree stores in the United States and 3 Gymboree stores in the United Kingdom. During 2004, the Company
plans to relocate and expand 15 Gymboree stores, open 20 new Gymboree stores, 25 new Janie and Jack shops, and 10 new Janeville stores. The Company
also expects the number of store closures in 2004 to approximate the number of stores closed in 2003.
The following table sets forth the net number of stores
opened and closed during each of the periods indicated.
|
Fiscal
Year |
|
Prior to
1999 |
|
1999 |
|
2000 |
|
2001 |
|
2002 |
|
2003 |
|
Total |
|
Gymboree |
564 |
|
22 |
|
–6 |
|
0 |
|
–7 |
|
14 |
|
587 |
|
Janie
and Jack |
0 |
|
0 |
|
0 |
|
0 |
|
11 |
|
21 |
|
32 |
|
Zutopia
(sold in 2001) |
0 |
|
19 |
|
0 |
|
–19 |
|
0 |
|
0 |
|
0 |
|
Total |
564 |
|
41 |
|
–6 |
|
–19 |
|
4 |
|
35 |
|
619 |
Less than 10% of the Company’s revenues were derived
from outside the United States in 2003, 2002 and 2001, and less than 10% of the
Company’s long-lived assets were located outside the United States in 2003,
2002 and 2001.
DIRECT-TO-CONSUMER
The Company first launched its Gymboree branded
e-commerce web site at www.gymboree.com in 1997. The Gymboree branded
e-commerce site currently offers our entire product offering for children
between the ages of newborn and nine years. The site also offers on-line
registration for our Gymboree Play & Music classes at selected U.S.
locations. In 2002, we launched the Janie and Jack branded e-commerce web site
at www.janieandjack.com, which offers our entire Janie and Jack product
offering for children between the ages of newborn and three years. We plan to
continue to invest in technology, operations, and merchandise offerings to meet
business demands and our customer’s expectations.
SUPPLIERS
The majority of our apparel is manufactured to our
specifications by approximately 200 independent manufacturers in key countries
in the Far East including China, Indonesia, Macau, Taiwan, and Thailand, as well
as Central America, Mexico, South America and the United States. The Company
sources its fabric from approximately 20 vendors. The Company purchases all
products in U.S. dollars. One buying agent accounts for 90% of our inventory
purchases. We have no long-term contracts with suppliers and typically transact
business on an order-by-order basis. All of our factories undergo annual audits
for social accountability and production quality by
an independent third party.
4
COMPETITION AND SEASONALITY
The Company’s operations are seasonal in nature,
with sales from our retail operations peaking during the fourth quarter,
primarily during the holiday season in November and December. During 2003, the fourth quarter accounted for approximately 30% of our net sales from
retail operations.
Our Gymboree and Janie and Jack brands compete on a
national level with BabyGap and GapKids (divisions of The Gap, Inc.), The
Children’s Place, Talbots Kids and certain leading department stores, as
well as certain discount retail chains such as Old Navy (a division of The Gap,
Inc.) and Target. Our Gymboree and Janie and Jack brands also compete with a
wide variety of local and regional specialty stores, with certain other retail
chains, and with children’s retailers that sell their products by mail
order or over the Internet. Our new concept, Janeville, will compete on a
national level with J. Jill, Chico’s, Talbots, Anthropologie, Banana
Republic and Ann Taylor. The principle factors of competition for retail sales
focus around product design, product quality, brand image, customer service, and
pricing. Our goal is to provide our customers with high quality apparel with an
excellent price/value relationship. We design our apparel exclusively for sale
at our retail and on-line stores.
TRADEMARKS AND SERVICE MARKS
In the United States, the Company is the owner of the
trademarks and service marks “GYMBOREE” and “JANIE AND
JACK”, the service mark “MATCHMATICS” and the trademarks
“GYMBO” and “GYMBABY”. These marks and certain other of our
marks are registered in the United States Patent and Trademark Office, and the
mark “GYMBOREE” is also registered, or is the subject of pending
applications, in approximately 68 foreign countries. The Company is also the
owner of a federal trademark and service mark application for
“JANEVILLE”. Each federal registration is renewable indefinitely if
the mark is still in use at the time of renewal. Our rights in the
“GYMBOREE” mark and other marks are a significant part of our
business. Accordingly, we intend to maintain the mark and the related
registrations. We are not aware of any material claims of infringement or other
challenges to our right to use the “GYMBOREE” mark in the United
States.
The Company uses a number of other trademarks, certain of
which have been registered with the United States Patent and Trademark Office
and in certain foreign countries. We believe that our registered and common law
trademarks have significant value and that some of our trademarks are
instrumental to our ability to create and sustain demand for and market our
products.
TEAM MEMBERS
As of January 31, 2004, we had 9,345 full-time and
part-time team members or 3,900 full-time equivalents. In addition, a
significant number of seasonal team members are hired during each holiday
selling season. None of our team members is represented by a labor
union.
SEGMENT
AND INTERNATIONAL FINANCIAL INFORMATION
Financial information for the Company’s segments and
international subsidiaries for each of the three years ended January
31, 2004, February 1, 2003, and February 2, 2002 is
contained in Note 8 of the Notes to Consolidated Financial
Statements.
AVAILABLE INFORMATION
We make available on our website at
www.gymboree.com, under “Financial Resources,” free of charge,
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, code of ethics, and amendments to those reports as soon as
reasonably practicable after we electronically file or furnish such materials to
the U.S. Securities and Exchange Commission.
5
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth current information
regarding our executive officers.
| Name
|
|
Age |
|
Position |
|
Lisa
M. Harper |
|
44 |
|
Chair
of the Board and Chief Executive Officer |
|
Myles
B. McCormick |
|
32 |
|
Chief
Financial Officer, Vice President and Secretary |
|
Lisa
Bayne |
|
51 |
|
Senior
Vice President, Brand |
|
Marina
Armstrong |
|
41 |
|
Vice
President, Human Resources, and Assistant Secretary |
|
Matthew
K. McCauley |
|
31 |
|
Vice
President, Planning and Allocation |
|
Deborah
J. Nash |
|
41 |
|
Vice
President and General Merchandise Manager |
Lisa M. Harper has served as Chairman of our Board
of Directors since June 2002 and Chief Executive Officer since February 2001.
She was Vice Chair of the Board from February 2001 through June 2002. Ms.
Harper joined Gymboree in January 1999 as Vice President, Design. From December
1999 until February 2000, she served as our Senior Vice President, Merchandising
and Design. From February 2000 until September 2000, Ms. Harper served as
our General Merchandise Manager. From September 2000 until February 2001, she
served as our President. Prior to that, Ms. Harper served as our Director
of Design and Merchandising from 1993 to 1995. Ms. Harper has also held
merchandising and design positions with several other clothing retailers,
including Limited Too, Esprit de Corp, GapKids, Mervyn’s, and Levi
Strauss.
Myles B. McCormick joined The Gymboree Corporation
in May 2001 as Vice President of Finance and was promoted to Chief Financial
Officer in February 2002. Prior to joining The Gymboree Corporation, Mr.
McCormick served as Senior Manager of Global Publishing for Electronic Arts from
August of 2000 to May 2001. Mr. McCormick was Vice President of Finance
and Operations for Xuny.com from January 2000 to August 2000, and was the
Director of Financial Planning for Bebe Stores, Inc. from 1998 to
2000.
Lisa Bayne joined The Gymboree Corporation in
December 2003 as Senior Vice President, Brand, and is responsible for in-store
marketing, visual merchandising, packaging, public relations, direct mail,
advertising and corporate communications. Ms. Bayne was previously Senior
Vice President of Marketing for Smith & Hawken from 2001 to 2003 and Senior
Vice President of Creative Services and Brand Marketing for Eddie Bauer from
1998 to 2001.
Marina Armstrong joined The Gymboree Corporation
in May 1997 as a District Manager. In 1998, Ms. Armstrong became a Human
Resources Staffing Manager at the corporate office and later that year was
promoted to Director, Recruiting and Staffing. In 1999, Ms. Armstrong was
named Vice President, Human Resources. Ms. Armstrong was named Assistant
Secretary in March 2002. Prior to joining The Gymboree Corporation, Ms.
Armstrong held several human resources and store operations positions with other
retailers including Saks Fifth Avenue, Robinsons-May and The Bon
Marche.
Matthew K. McCauley joined The Gymboree
Corporation in July 2001 as Director of Allocation and was named Vice President
of Planning and Allocation in 2003. Prior to joining The Gymboree Corporation,
Mr. McCauley served as a Manager of Business Solutions for The Gap, Inc.
from 1999 to 2001.
Deborah J. Nash joined The Gymboree Corporation in
April 1997 as a Merchandise Manager. She was named Director, Merchandising for
Gymboree retail in February 2000, and was named Vice President, Merchandising
for Gymboree retail in September 2000. Ms. Nash was named General
Merchandise Manager for Gymboree retail in January 2003. Ms. Nash has 17
years experience in the retail industry and before joining the Gymboree
Corporation, held various positions with other retailers including Nordstrom,
Byer California and Esprit de Corp.
FACTORS
THAT MAY AFFECT FUTURE PERFORMANCE
We may
not be able to operate successfully if we lose key personnel, are unable to hire
qualified additional personnel, or experience turnover of our management
team.
The continued success of the Company is largely dependent
on the individual efforts and abilities of our senior management and certain
other key personnel and on our ability to retain current management and to
attract and
6
retain
qualified key personnel in the future. The loss of certain key employees or our
inability to continue to attract and retain other qualified key employees could
have a material adverse effect on our growth, our operations and our financial
position.
Our
business may be harmed by additional United States regulation of foreign trade
or customs delays.
Our business is subject to the risk that the United
States may adopt additional regulations relating to imported apparel products,
including quotas, duties, taxes and other charges or restrictions on imported
apparel. We cannot predict whether additional United States quotas, duties,
taxes or other charges or restrictions will be imposed upon the importation of
our products in the future, or what effect any such actions would have on our
business, financial position and results of operations. If the U.S. government
imposes any such charges or restrictions, the supply of products could be
disrupted and their cost could substantially increase, either of which could
have a material adverse effect on our operating results. Unforeseen delays in
customs clearance of any goods could have a material adverse impact on our
ability to deliver complete shipments to our stores, which in turn could have a
material adverse effect on our business and operating results.
Because
we purchase our products internationally, our business is sensitive to risks
associated with international business.
Our products are currently manufactured to our
specifications by independent factories located primarily in Asia, as well as
Central America, South America, Mexico, the Middle East, and the United States.
As a result, our business is subject to the risks generally associated with
doing business abroad, such as foreign governmental regulations, currency
fluctuations, adverse conditions including epidemics, natural disasters, social
or political unrest, disruptions or delays in transportation or customs
clearance, local business practices and changes in economic conditions in
countries in which our suppliers are located. We cannot predict the effect of
such factors on our business relationships with foreign suppliers. If our
current foreign manufacturing sources or mills were to cease doing business with
us for any reason, such actions could have a material adverse effect on our
operating results and financial position.
We may
suffer negative publicity if any of our products are found to be
unsafe.
We currently test products sold in our stores. If these
products have safety problems of which we are not aware or if the Consumer
Product Safety Commission recalls a product sold in our stores, we may
experience not only negative publicity, which could adversely impact our sales
and reputation, but also product liability lawsuits, which could have a material
adverse effect on our reputation, business and financial
position.
We may be
subject to negative publicity or be sued if our manufacturers violate labor laws
or engage in practices that our customers believe are unethical.
We seek to require our independent manufacturers to
operate their businesses in compliance with the laws and regulations that apply
to them. Our sourcing personnel periodically visit and monitor the operations of
our independent manufacturers, but we cannot control their business and labor
practices. We also rely on an independent third party to audit all of our
factories on an annual basis. If an independent manufacturer violates labor laws
or other applicable regulations, or if such a manufacturer engages in labor or
other practices that diverge from those typically acceptable in the United
States, Canada or Europe, we could in turn experience negative publicity or be
sued. Negative publicity regarding the production of our products could have a
material adverse affect on our sales, business and financial
position.
The loss
of a key buying agent could impair our ability to deliver our inventory in a
timely fashion, impacting its value.
In 2003, one buying agent accounted for 90% of the
company’s inventory purchases. Although we believe that other buying agents
could be identified and retained to place our required foreign production, the
loss of this buying agent could result in delays in procuring inventory and as a
result could have a material adverse effect on our business and operating
results.
7
Our
business is sensitive to economic conditions that impact consumer
spending.
Our financial performance is sensitive to changes in
overall economic conditions that impact consumer spending, particularly
discretionary spending. Future economic conditions affecting disposable consumer
income such as employment levels, business conditions, interest rates and tax
rates could reduce consumer spending or cause consumers to shift their spending
to other products. A general reduction in the level of discretionary spending or
shifts in consumer discretionary spending to other products could have a
material adverse effect on our growth, sales and profitability.
Our
business is sensitive to changes in seasonal consumer spending patterns that are
beyond our control.
Historically, a disproportionate amount of our retail
sales and a significant portion of our net income have been realized during the
holiday season in November and December. We have also experienced periods of
increased sales activity in the early spring, during the period leading up to
the Easter holiday, and in the early fall, in connection with back-to-school
sales. Changes in seasonal consumer spending patterns for reasons beyond our
control could result in lower-than-expected sales during these periods. Such a
circumstance could cause us to have excess inventory, necessitating markdowns to
minimize this excess, which would reduce our profitability. Any failure by us to
meet our business plans for, in particular, the third and fourth quarter of any
fiscal year would have a material adverse effect on our earnings, which in all
likelihood would not be offset by satisfactory results achieved in other
quarters of the same fiscal year. Also, because we typically spend more in labor
costs during the holiday season, hiring temporary store employees in
anticipation of holiday spending, a shortfall in expected sales during that
period could result in a disproportionate decrease in our net
income.
The
highly competitive business in which we operate may impair our ability to
maintain and grow our sales and results.
The apparel segment of the specialty retail business is
highly competitive, and we may not be able to compete successfully in the
future. Our Gymboree and Janie and Jack brands compete on a national level with
BabyGap and GapKids (divisions of The Gap, Inc.), The Children’s Place and
Talbots Kids and certain leading department stores, as well as certain discount
retail chains such as Old Navy (a division of The Gap, Inc.) and Target. Our
Gymboree and Janie and Jack brands also compete with a wide variety of local and
regional specialty stores, with certain other retail chains, and with
children’s retailers that sell their products by mail order or over the
Internet. Our new concept, Janeville, will compete on a national level with J.
Jill, Chico’s, Talbots, Anthropologie, Banana Republic and Ann Taylor. Many
of these competitors are larger and have substantially greater financial,
marketing and other resources than the Company. Increased competition may
reduce sales and gross margins, increase operating expenses and decrease profit
margins.
Our new
concepts require a substantial commitment of resources and are not certain of
ultimate success.
The Company’s ongoing efforts to develop, launch and
grow new concepts, such as Janie and Jack and Janeville, require significant
capital expenditures and management attention. Our commitment of management
resources and capital to a new concept means that those resources and capital
are unavailable for other Company activities and operations. Our decision to
launch a niche brand concept is based on our assessment that a significant
opportunity exists for that concept in the marketplace. Though initial consumer
reaction to Janie and Jack has been positive, it is too early to tell whether
the Janie and Jack business will grow into a significant and profitable division
of the Company. There are no assurances that the Janeville concept will
initially be accepted by consumers or that ongoing consumer acceptance will
permit the growth and expansion of Janeville into a profitable division of the
Company. Janeville, which targets women in their mid-30s, is being launched in
a very competitive market in which the Company hasn’t historically
operated. Many of the competitors of Janie and Jack and Janeville are larger and
have substantially greater financial, marketing and other resources than the
Company. If either or both of Janie and Jack or Janeville do not grow
substantially and achieve profitability, this could have a material adverse
effect on the Company’s long-term growth, operating results, margins and
profitability.
8
Our
results may be impaired by changes in fashion trends and consumer
preferences.
Our sales and profitability depend upon the continued
demand by customers for our apparel and accessories. We believe that our success
depends in large part upon our ability to anticipate, gauge and respond in a
timely manner to changing consumer demands and fashion trends and upon the
appeal of our products. There can be no assurance that the demand for our
apparel or accessories will not decline or that we will be able to anticipate,
gauge and respond to changes in fashion trends. A decline in demand for our
apparel and accessories or a misjudgment of fashion trends could have a material
adverse effect on our business, financial condition and operating
results.
A
significant disruption in the implementation of new systems could impair our
ability to manage various aspects of our store operations and our ability to
report results in a timely way.
We have embarked on a comprehensive strategy to upgrade
the Company’s legacy information systems infrastructure. A significant
disruption in the implementation process resulting in the failure of systems to
integrate properly could result in delays in reporting and inventory management
which could in turn have a material adverse effect on our business and operating
results. There can also be no assurance that the Company can maintain or protect
its web application from a significant disruption that could result in a
material adverse effect on its web revenue.
Damage to
our computer systems could severely hamper our ability to manage our
business.
Our operations depend on our ability to maintain and
protect our computer systems, on which we rely to manage our purchase orders,
store inventory levels, web applications, accounting functions and other aspects
of our business. We have computer systems located in each of our stores, with
the main database server for our systems located in Burlingame, California,
which exists on or near known earthquake fault zones. An earthquake or similar
disaster could have a material adverse impact on our business and operating
results not only by damaging our stores, but also by damaging our main server,
which could disrupt our business for an indeterminate length of time. Our
systems are vulnerable to damage from fire, floods, earthquakes, power loss,
telecommunications failures, and similar events.
ITEM
2. PROPERTIES
Our corporate campus is located in two office buildings
in Burlingame, California, which we occupy under leases expiring at various dates through 2006. In
March 2004, the Company signed a lease agreement for a new corporate office
building in San Francisco, California. The new lease expires on April 14, 2018.
See Note 10 of the Notes to Consolidated Financial Statements.
We own a 300,000 square foot distribution center on 21
acres in Dixon, California. All products are distributed to our U.S. stores from
this facility. Gymboree leases a 26,000 square foot distribution center in
Shannon, Ireland for European operations, and utilizes a third-party owned and
operated distribution center in Mississauga, Ontario, Canada for Canadian
operations.
At January 31, 2004, the Company’s 619 stores
included an aggregate of approximately 1,116,000 square feet of space. Our
stores are all leased, typically for a 10-year term, and include a cancellation
clause if minimum revenue levels are not achieved. In most cases, we pay a
minimum rent plus a percentage rent based on the store’s net sales in
excess of a certain threshold. Substantially all of the leases require us to pay
insurance, utilities, real estate taxes, and repair and maintenance expenses. In
addition, we operate 15 Gymboree Play & Music sites in California under
leases that expire between 2004 and 2010. See Note 2 of the Notes to
Consolidated Financial Statements.
ITEM
3. LEGAL PROCEEDINGS
The Company is subject to various legal proceedings and
claims arising in the ordinary course of business. Our management does not
expect that the results in any of these legal proceedings, either individually
or in the aggregate, would have a material adverse effect on our financial
position, results of operations or cash flow.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
9
PART II
| ITEM 5. |
|
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS |
The Gymboree Corporation’s common stock is traded on the Nasdaq National Market under the symbol “GYMB.” The following table sets forth the quarterly high and low sale prices per share of our common stock over the last two fiscal years, as reported on the Nasdaq National Market.
|
Fiscal
2003 |
|
Fiscal
2002 |
|
High |
|
Low |
|
High |
|
Low |
|
First
Quarter |
$17.50 |
|
$11.79 |
|
$19.30 |
|
$10.90 |
|
Second
Quarter |
18.32 |
|
13.36 |
|
19.94 |
|
10.98 |
|
Third
Quarter |
18.32 |
|
12.62 |
|
20.30 |
|
11.41 |
|
Fourth
Quarter |
18.38 |
|
14.13 |
|
21.50 |
|
13.08 |
As of April 3, 2004, the number of holders of record of
the Company’s common stock totaled approximately 656. The Company has never
declared or paid cash dividends on its common stock and anticipates that all
future earnings will be retained for development of its business. The payment of
any future dividends will be at the discretion of the Company’s Board of
Directors and will depend upon, among other things, future earnings, capital
requirements, our financial position and general business conditions. In
addition, the Company is restricted from paying dividends under the terms of its
existing credit facility.
10
ITEM
6. SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data have been derived
from the consolidated financial statements of the Company. The data set forth
below should be read in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and notes thereto.
|
|
2003
|
|
2002
|
|
2001
|
|
2000
(1) |
|
1999
|
| |
|
(In
thousands, except operating data and per share amounts) |
|
| Statement
of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Retail |
|
$ |
566,346 |
|
|
$ |
534,049 |
|
|
$ |
509,069 |
|
|
$ |
448,843 |
|
|
$ |
437,378 |
|
| Play
& Music |
|
|
11,647 |
|
|
|
14,940 |
|
|
|
13,977 |
|
|
|
13,140 |
|
|
|
11,675 |
|
| Total
net sales |
|
|
577,993 |
|
|
|
548,989 |
|
|
|
523,046 |
|
|
|
461,983 |
|
|
|
449,053 |
|
| Cost
of goods sold, including buying and occupancy expenses |
|
|
(343,200 |
) |
|
|
(319,093 |
) |
|
|
(331,201 |
) |
|
|
(329,049 |
) |
|
|
(285,972 |
) |
| Gross
profit |
|
|
234,793 |
|
|
|
229,896 |
|
|
|
191,845 |
|
|
|
132,934 |
|
|
|
163,081 |
|
| Selling,
general and administrative expenses |
|
|
(194,149 |
) |
|
|
(194,071 |
) |
|
|
(180,792 |
) |
|
|
(191,141 |
) |
|
|
(181,138 |
) |
| Operating
income (loss) |
|
|
40,644 |
|
|
|
35,825 |
|
|
|
11,053 |
|
|
|
(58,207 |
) |
|
|
(18,057 |
) |
| Foreign
exchange gains (losses), net |
|
|
154 |
|
|
|
204 |
|
|
|
(432 |
) |
|
|
130 |
|
|
|
(55 |
) |
| Interest
income (expense), net |
|
|
331 |
|
|
|
(533 |
) |
|
|
(3,174 |
) |
|
|
(1,871 |
) |
|
|
877 |
|
| Income
(loss) before income taxes |
|
|
41,129 |
|
|
|
35,496 |
|
|
|
7,447 |
|
|
|
(59,948 |
) |
|
|
(17,235 |
) |
| Income
tax benefit (expense) |
|
|
(15,423 |
) |
|
|
(13,666 |
) |
|
|
(2,867 |
) |
|
|
23,080 |
|
|
|
6,635 |
|
| Net
income (loss) |
|
$ |
25,706 |
|
|
$ |
21,830 |
|
|
$ |
4,580 |
|
|
$ |
(36,868 |
) |
|
$ |
(10,600 |
) |
| Basic
income (loss) per share |
|
$ |
0.87 |
|
|
$ |
0.75 |
|
|
$ |
0.16 |
|
|
$ |
(1.38 |
) |
|
$ |
(0.44 |
) |
| Diluted
income (loss) per share |
|
$ |
0.83 |
|
|
$ |
0.71 |
|
|
$ |
0.16 |
|
|
$ |
(1.38 |
) |
|
$ |
(0.44 |
) |
| Basic
weighted average shares outstanding |
|
|
29,656 |
|
|
|
28,992 |
|
|
|
28,326 |
|
|
|
26,686 |
|
|
|
24,315 |
|
| Diluted
weighted average shares outstanding |
|
|
30,853 |
|
|
|
30,633 |
|
|
|
29,377 |
|
|
|
26,686 |
|
|
|
24,315 |
|
| Operating
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Number
of stores at end of period |
|
|
619 |
|
|
|
584 |
|
|
|
580 |
|
|
|
599 |
|
|
|
605 |
|
| Net
sales per gross square foot at period-end (2) |
|
$ |
507 |
|
|
$ |
513 |
|
|
$ |
494 |
|
|
$ |
425 |
|
|
$ |
417 |
|
| Net
sales per average store |
|
$ |
915,000 |
|
|
$ |
914,000 |
|
|
$ |
872,000 |
|
|
$ |
749,000 |
|
|
$ |
723,000 |
|
| Comparable
store net sales increase (decrease) (3) |
|
|
1 |
% |
|
|
4 |
% |
|
|
16 |
% |
|
|
(1 |
%) |
|
|
(17 |
%) |
| Balance
Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Working
capital |
|
$ |
111,271 |
|
|
$ |
76,739 |
|
|
$ |
49,268 |
|
|
$ |
33,374 |
|
|
$ |
57,225 |
|
| Total
assets |
|
|
298,711 |
|
|
|
255,136 |
|
|
|
219,629 |
|
|
|
244,442 |
|
|
|
240,918 |
|
| Long-term
debt |
|
|
— |
|
|
|
— |
|
|
|
8,830 |
|
|
|
16,443 |
|
|
|
10,877 |
|
| Stockholders’
equity |
|
|
203,748 |
|
|
|
169,418 |
|
|
|
142,429 |
|
|
|
134,116 |
|
|
|
158,462 |
|
__________
Notes:
(1) |
|
2000 includes 53 weeks. |
(2) |
|
Equals retail sales divided by total square feet of store space as of
each fiscal year-end. |
(3) |
|
A comparable store is one that has been opened for a full 14 months.
Stores that are relocated or expanded by more than 15% of their original square
footage become comparable 14 months after final relocation or the completion of
the expansion project. Comparable stores net sales in fiscal years 2003 through
1999 were calculated on a 52-week basis. |
11