Gymboree Slides to Loss in 4th Quarter

Kids’ clothing retailer Gymboree Corp. said Wednesday that it swung to a loss in its fiscal fourth quarter from profit in the year-earlier quarter because of lease termination charges related to the company’s move to new San Francisco headquarters.

Losses in the quarter that ended Jan. 29 totaled $2.1 million, or 7 cents a share, after year-earlier earnings of $11.2 million, or 36 cents a share. Excluding lease termination charges but including a $2-million tax benefit, Gymboree posted earnings from continuing operations of $7.8 million, or 25 cents a share.

Total sales for the quarter grew to $175.8 million from $166.6 million last year, and same-store sales, or sales at stores open at least a year, were flat.

Analysts surveyed by Thomson First Call were looking for the company to post quarterly earnings of 19 cents a share on sales of $175.7 million.

Like many other retailers, Gymboree is reviewing its accounting practices related to leasing transactions. The company said that it would restate quarterly information filed in fiscal 2004 and that it was likely to restate prior periods.

Based on its preliminary review, the company estimates that it will record a $3.5-million charge related to retail stores and other operating leases. This charge primarily affects years before fiscal 2000.

For fiscal year 2004, Gymboree reported net income of $9.9 million, or 32 cents a share, compared with $25.7 million in fiscal 2003.

The company reaffirmed its guidance for fiscal 2005 earnings from continuing operations of 40 cents to 50 cents a share. For the first quarter, Gymboree said it continued to expect same-store sales to be flat and earnings from continuing operations to be 11 cents to 14 cents a share.

The company is forecasting a loss of 23 cents to 26 cents a share for the second quarter.

Gymboree shares fell 9 cents to $12.74 on Nasdaq and in after-market trading dropped 34 cents to $12.40, after the earnings were released, before rising back to $12.74.