updated 12/1/2010 9:15:50 PM ET 2010-12-02T02:15:50

Third Quarter Net Sales Increased 19.5% with Comparable Store Sales Increasing 1.8%

Management Raises Fiscal 2010 Earnings Guidance

WARRENDALE, Pa., Dec. 1, 2010 (GLOBE NEWSWIRE) -- rue21, inc. (Nasdaq:RUE) today announced its financial results for the third quarter and fiscal year-to-date ended October 30, 2010.

Highlights for the Quarter:

  • Net sales increased 19.5% to $163.9 million from $137.1 million for the comparable period a year ago, which ended October 31, 2009.
     
  • Comparable store sales increased 1.8% on top of a 13.5% increase for the same period in 2009.
     
  • The Company opened 33 stores in the quarter versus 29 in the same period last year. The Company converted an additional 9 stores to the rue21 etc! format versus 7 in the same period last year, and ended the quarter with 628 stores.
     
  • Gross margin increased 40 bps to 36.6% from 36.2% in the third quarter of fiscal 2009, driven by a merchandise margin increase of 60 bps. 
     
  • Selling, general and administrative expenses increased 21.4% to $42.6 million, which included incremental public company and share-based compensation costs of $1.1 million.  
     
  • Third quarter net income increased 19.5% to $7.1 million from $6.0 million in the third quarter of fiscal 2009. Adjusting for incremental public company expenses and share-based compensation costs in the third quarter of fiscal 2010, net income increased 29.4%.
     
  • Diluted earnings per share were $0.29 in the third quarter of fiscal 2010 compared to diluted earnings per share of $0.26 in the third quarter of fiscal 2009.
     
  • Average diluted shares outstanding were 25.0 million in the third quarter of fiscal 2010 versus 23.1 million in the third quarter of fiscal 2009. 
     
  • The Company ended the third quarter of fiscal 2010 with $18.7 million in cash and cash equivalents, and with no long-term debt.

Highlights for the Fiscal Year-to-Date:

  • Net sales increased 20.1% to $444.6 million from $370.2 million for the comparable period a year ago, which ended October 31, 2009. 
     
  • Comparable-store sales for the period increased 2.4% on top of a 7.4% increase for the same period in 2009.
     
  • Year-to-date the Company has opened 95 stores, closed 2 stores, and converted 31 stores to the rue21 etc! format.
     
  • Gross margin increased 170 bps from the comparable period in 2009.
     
  • Operating margin increased to 7.2% of net sales from 6.5% of net sales for the comparable period in 2009.
     
  • Year-to-date net income increased 35.4% to $19.4 million from $14.3 million for the comparable period in 2009. Adjusting for incremental public company expenses and share-based compensation costs, year-to-date net income increased 52.2%.

Bob Fisch, rue21's President and CEO, stated: "We are pleased to report strong total sales and profit growth this quarter.    We continue to successfully deliver fashion and quality at a great value to underserved communities while at the same time building our presence and market share in larger markets. We have exciting initiatives to drive the sales this holiday season, and we believe that rue21's increasing brand awareness combined with the strength of our product categories and assortments will allow us to achieve our goals."

Outlook:

For fiscal 2010, the Company is raising its full year guidance based on third quarter results, and expects diluted earnings per share to be in the range of $1.17 to $1.20 as compared to $0.96 in fiscal 2009. This incorporates 25.0 million average diluted shares expected for fiscal 2010 as compared to 23.0 million average diluted shares in fiscal 2009.  For the fourth quarter, the Company currently expects total sales growth in the range of 19% to 21%. Diluted earnings per share for the fourth quarter are expected to be in the range of $0.40 to $0.43 based on 25.0 million average diluted shares expected for the fourth quarter as compared to 24.3 million average diluted shares for the fourth quarter of fiscal 2009.

Conference Call Information:

A conference call to discuss third quarter fiscal 2010 financial results is scheduled for today, December 1, 2010 at 4:30 PM Eastern Time.  To participate, dial toll-free (888) 378-4439 or 1-719-325-2353 (international). The conference call will also be webcast live at www.rue21.com under the Investor Relations section. A replay of this call will be available on the Investor Relations section of the Company's website, www.rue21.com, within two hours of the conclusion of the call and will remain on the website for ninety days.

About rue21, inc.

rue21 is a leading specialty apparel retailer offering exclusive branded merchandise and the newest trends at a great value. At the end of the third quarter of fiscal 2010, the Company operated 628 stores in 44 states. Learn more at www.rue21.com .

Forward Looking Statements:

Certain statements herein, including statements relating to future store openings and growth strategies, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, consumer spending, our ability to effectively identify and respond to changing fashion trends, our ability to compete with other retailers, our strategy and expansion plans, implementation of systems upgrades, reliance on key personnel, trade restrictions, events that may affect our vendors or their ability to finance their operations, availability of suitable new store locations and other factors which are set forth in the Company's Annual Report on Form 10-K filed March 31, 2010, and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures: 

Management has presented its operating results in accordance with GAAP and on an "adjusted" (or non-GAAP) basis for the thirteen week and thirty-nine week periods ended October 30, 2010. The Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to and facilitates additional analysis by investors. The Company uses these non-GAAP financial measures in connection with assessing its financial performance. These non-GAAP financial measures are in addition to, not a substitute for, or superior to, measures of financial performance prepared in conformity with GAAP.

         
rue21, inc. and subsidiary
Condensed Consolidated Statements of Income
         
  Thirteen weeks ended Thirty-nine weeks ended
  October 30, October 31, October 30, October 31,
  2010 2009 2010 2009
   (Unaudited)
   (in thousands, except per share data)
         
Net sales  $ 163,913  $ 137,110  $ 444,635  $ 370,214
Cost of goods sold (includes certain buying,        
occupancy and distribution center expenses)  103,860  87,539  277,807  237,733
Gross profit  60,053  49,571  166,828  132,481
         
Selling, general, and administrative expense  42,637  35,135  118,668  96,217
Depreciation and amortization expense  5,666  4,420  15,937  12,194
Income from operations  11,750  10,016  32,223  24,070
         
Interest expense, net  50  136  172  433
Income before income taxes  11,700  9,880  32,051  23,637
         
Provision for income taxes  4,557  3,902  12,696  9,342
Net income  $ 7,143  $ 5,978  $ 19,355  $ 14,295
         
Basic income per common share  $ 0.29  $ 0.27  $ 0.80  $ 0.65
Diluted income per common share  $ 0.29  $ 0.26  $ 0.77  $ 0.63
         
Weighted average basic common shares outstanding  24,310  22,201  24,267  22,111
Weighted average diluted common shares outstanding  24,972  23,058  25,003  22,828
         
       
rue21, inc. and subsidiary 
Condensed Consolidated Balance Sheets
       
  October 30, January 30, October 31,
  2010 2010 2009
  (Unaudited)
  (in thousands, except per share data)
Assets      
Current assets:      
Cash and cash equivalents  $ 18,696  $ 26,751  $ 5,330
Accounts receivable  8,464  3,834  4,522
Merchandise inventory, net  113,247  72,693  87,182
Prepaid expenses and other current assets  9,705  6,783  6,422
Deferred tax assets  5,831  4,286  3,774
Total current assets  155,943  114,347  107,230
       
Property and equipment, net  89,303  73,147  70,836
       
Other assets  940  937  1,682
Total assets  $ 246,186  $ 188,431  $ 179,748
Liabilities and stockholders' equity      
Current liabilities:      
Accounts payable  $ 84,590  $ 59,963  $ 73,977
Accrued expenses and other current liabilities  14,502  14,384  10,762
Accrued payroll and related taxes  9,544  10,486  8,699
Deferred rent and tenant allowances, current portion  6,815  5,509  5,256
Accrued income and franchise taxes  4,165  2,401  532
Total current liabilities  119,616  92,743  99,226
       
Long-term liabilities:      
Long-term debt  –  –  21,176
Deferred rent, tenant allowances and other long-term liabilities  33,261  23,991  22,983
Deferred tax liabilities  3,578  4,249  3,473
Total long-term liabilities  36,839  28,240  47,632
       
Total liabilities  156,455  120,983  146,858
       
Commitments and Contingencies      
       
Stockholders' equity:      
Common stock--- par value $0.001 per share; 200,000 shares authorized;

24,325 and 24,237 shares issued and outstanding at October 30, 2010 and January 30, 2010,

respectively, par value $0.004 per share; 50,000 shares authorized; 22,511 shares

issued and outstanding at October 31, 2009
 24  24  90
Additional paid in capital  30,043  27,115  213
Retained earnings  59,664  40,309  32,587
Total stockholder's equity  89,731  67,448  32,890
       
Total liabilities and stockholders' equity   $ 246,186  $ 188,431  $ 179,748
       
CONTACT:  ICR, Inc
          Joseph Teklits
            jteklits@icrinc.com
          Melissa Mackay
          203-682-8200

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