Casual Male Retail reports sales results Q1 of fiscal 2009

USA -- Casual Male Retail Group Inc, retail brand operator of Casual Male XL, Rochester Clothing, B&T Factory Direct, Living XL and Shoes XL, announced its sales and operating results for the first quarter of fiscal 2009.

Sales for the first quarter of fiscal 2009 decreased 9.4% to $97.6 million from $107.6 million for the first quarter of fiscal 2008. Comparable sales for the thirteen week period ended May 2, 2009 decreased 10.7%.

Our net income for the first quarter of fiscal 2009 was $336,000, or $0.01 per diluted share, as compared to net income for the first quarter of fiscal 2008 of $96,000, or $0.00 per diluted share.

David Levin, President and CEO, stated, "As we had anticipated, our sales trend in the first quarter continued to be negatively impacted by the weakened economy. However, the Company's sales performance is consistent with our 2009 business plan and profitability exceeded our planned expectations.

Even with the $10 million drop in sales, we had positive operating results and ended the first quarter with net income of $336,000, slightly better than the prior year. This resulting profitability was principally due to successful reductions in our SG&A cost structure. We believe that our current business model will allow us not only to strengthen our financial position during a very difficult economic downturn, but also position the Company for improved operating results and free cash flow for the future."

Dennis Hernreich, EVP and COO/CFO, added, "During the first quarter, in response to continued economic uncertainty and in order to align our operating infrastructure to the expected decline in top-line sales, we further reduced SG&A by an additional $15 million by reprioritizing business activities and functions.

These cost reductions, in combination with the originally planned reductions, result in a 17% decrease from 2008 SG&A levels, or $30 million on an annualized basis, of which approximately $26 million is expected to be realized in 2009. The cost reductions implemented during the quarter relate primarily to re-focusing our marketing spend on our most productive customer base, reductions in our corporate headcount, store and distribution productivity improvements, and renegotiation of numerous service and supply contracts. In total, these reductions will bring our 2009 SG&A back to 2005 levels."

Sales
Both our retail and direct channels experienced similar decreases during the first quarter of fiscal 2009, contributing to our overall 10.7% comparable sales decrease. Our Casual Male business had a comparable sales decrease of 6.7% while our Rochester business experienced a 26.9% comparable sales decrease. Similar to other luxury retailers, our Rochester division has been significantly impacted by the recession.

Gross Margin
Our first quarter gross margin rate rebounded from fourth quarter 2008 levels by 380 basis points but was lower than last year's first quarter by approximately 230 basis points, primarily the result of fixed occupancy costs on a lower sales base, accounting for 180 basis points. Our first quarter merchandise margins were impacted by residual fourth quarter 2008 clearance merchandise and dropped 50 basis points below last year's first quarter, but improved over fiscal year 2008's margin rate by 200 basis points.

SG&A
For the first quarter of fiscal 2009, our SG&A costs decreased $6.2 million, or 14.2% over last year. This decrease is a result of our cost-reduction initiatives and is in line with our expectation to reduce full-year SG&A costs by approximately $26.0 million.

Cash Flow
Our Free Cash Flow (as defined below) this quarter improved by $8.0 million to $(2.8) million as compared to $(10.8) million last year.

Balance Sheet & Liquidity
We have decreased our inventory levels by $17.9 million, or 14.5%, to $105.6 million from $123.6 million at the end of last year's first quarter. Our total debt is lower than last year's first quarter by $15.1 million and our credit line availability is at $30 million at the end of the first quarter.

Fiscal 2009 Outlook
Given the continued uncertainty in the economy, we continue to expect sales for the year to be approximately 10% less than last year. We expect our merchandise margins to improve 275 to 325 basis points, an increase of 50 basis points from our guidance provided in March 2009. However, as a result of the sales shortfall, our merchandise margin improvement will be partially offset by unfavorable leveraging of fixed occupancy costs of approximately 150 basis points.

With our total expected cost savings in SG&A of approximately $26.0 million, we anticipate that SG&A for the year will approximate $151.0 million, or a decrease of 15% over the prior year, representing an $11 million improvement from our previous guidance. Free Cash Flow for fiscal 2009 is expected to approximate $25 million and overall debt levels are anticipated to decline to $20-$25 million, an improvement of approximately $10 million in each case from our last guidance.
 
Casual Male Retail Group Inc