Christopher & Banks Corporation (NYSE:CBK) Q2 2020 Earnings Conference Call - Final Transcript

Sep 11, 2020 • 08:30 am ET

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Christopher & Banks Corporation (NYSE:CBK) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Richard Bundy

second quarter. Sales were impacted by 36% fewer selling days due to temporary store closures related to COVID-19 partially offset by a 71% increase in our e-commerce business for the quarter. The net sales decrease was comprised of a 16.2% decrease in the number of transactions due to temporary store closures and continued depressed traffic, partially offset by an increase in transactions from e-commerce growth and split shipments due to higher store fulfillment.

We saw a 2.3% decline in units per transaction due to split shipments. Excluding those splits shipments, UPT's were up 22%, which is more reflective of the actual demand for products. Average unit retail was down 14% as a result of deeper promotions to move the seasonal product and to drive sales and traffic, both online and in re-opened stores. The increased promotions drove significant improvements in conversion rates across all channels and helped us work through excess seasonal inventory.

Gross margin rate decreased to 10.9% from 29.3% in the same period last year. This decrease was due primarily to three factors: lower merchandise margin, increased fulfillment expenses and occupancy cost deleverage. Merchandise margin rate declined significantly due to markdowns on seasonal product as a result of temporary store closures and traffic pressure resulting from COIVD-19. We also realized higher shipping costs associated with the increase in the e-commerce sales and the higher percent of those orders that were shipped from stores, which led to a significant amount of split shipments. Lastly, occupancy cost deleverage. Despite the $2.2 million dollars in rent savings related to negotiations in 2019, we booked occupancy at full contract rent, and therefore our gross profit does not reflect rent concessions or deferrals related to COVID.

Looking ahead to the third quarter, we expect less merchandise margin pressure related to promotions and markdowns. In addition, we expect to see less deleverage on occupancy costs and a smaller increase in shipping costs related to split shipments. As a percentage of sales SG&A levered 20 basis points to 33.1% as compared to 33.3% last year. Despite the 30% decline in sales.Through ongoing cost reductions as well as expense discipline SG&A expense decreased 30% $19.4 million from $27.8 million in the prior-year period. Of the $8.4 million decline, more than three-quarters was due to lower store and corporate compensation expense related to furloughs and salary reduction, with the remainder of the decrease primarily due to reduced marketing expense and lower cost related to medical benefits, professional services and store operations.

Depreciation and amortization was $1.9 million compared to $2.2 million in last year's second quarter. The $300,000 decrease was primarily due to a decline in the average number of stores, as well as reduced capital spending. We delivered second quarter net loss of $15.1 million or $0.40 per share compared to a net loss for the prior-period of $5.9 million or $0.16 per share.

Adjusted EBITDA, a non-GAAP measure, decreased to negative $12.8 million, compared to negative $5.9 million for the same period last year.

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