SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
Quarterly Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended July 31, 1999
Commission file number 33-27126
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PEEBLES INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0332635
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(State of Incorporation) (I.R.S. Employer
Identification No.)
One Peebles Street
South Hill, Virginia 23970-5001 (804) 447-5200
- ------------------------------- ----------------
(Address of principal executive (Telephone Number)
offices)
Indicate by check (x) mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes__x___.
No_____.
As of July 31, 1999, 1,000 shares of Common Stock of Peebles
Inc. were outstanding.
<PAGE>
<TABLE>
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET
PEEBLES INC. & SUBSIDIARIES
(in thousands, except shares and per share amounts)
<CAPTION>
July 31, January 30, August 1,
1999 1999 1998
-------- ----------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 87 $ 64 $ 534
Accounts receivable, net 30,355 33,495 28,269
Merchandise inventories 73,346 71,362 70,257
Prepaid expenses 1,555 1,084 2,005
Income taxes receivable 952 1,045 --
Other 2,578 1,289 875
------ ------- -------
TOTAL CURRENT ASSETS 108,873 108,339 101,940
PROPERTY AND EQUIPMENT, NET 53,325 51,949 47,402
OTHER ASSETS
Excess of cost over net assets
acquired, net 40,057 41,017 41,623
Deferred financing cost 2,609 3,289 3,986
Other 3,237 3,692 2,816
------ ------- -------
45,903 47,998 48,425
------ ------- -------
$208,101 $208,286 $197,767
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $12,688 $17,516 $16,489
Accrued compensation and other expenses 4,346 6,625 5,197
Deferred income taxes 2,433 2,433 4,592
Current maturities of long-term debt 3,700 3,700 3,600
Other 1,942 2,271 1,103
------ ------- -------
TOTAL CURRENT LIABILITIES 25,109 32,545 30,981
LONG-TERM DEBT 111,557 106,325 103,232
LONG-TERM CAPITAL LEASE OBLIGATIONS 777 896 1,037
DEFERRED INCOME TAXES 6,990 6,990 5,025
STOCKHOLDERS' EQUITY
Preferred stock- no par value,
authorized 1,000,000 shares, none
issued and outstanding -- -- --
Common stock-- par value $.10 per
share, authorized 5,000,000 shares,
1,000 issued and outstanding. 1 1 1
Additional capital 59,307 59,307 59,307
Retained earnings (deficit):
accumulated from May 27, 1995; 4,360 2,222 (1,816)
------ ------- -------
63,668 61,530 57,492
------ ------- -------
$208,101 $208,286 $197,767
======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
PEEBLES INC. & SUBSIDIARIES
(in thousands, except shares and per share amounts)
(Unaudited)
<CAPTION>
Three-Month Six-Month
Period Ended Period Ended
-------------------- -------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $70,547 $57,698 $134,969 $108,711
COSTS AND EXPENSES
Cost of sales 41,228 33,512 80,291 64,737
Selling, general and 21,303 17,450 41,016 32,250
administrative expenses
Depreciation and amortization 2,140 1,828 4,269 3,677
------ ------ ------- -------
64,671 52,790 125,576 100,664
OPERATING INCOME 5,876 4,908 9,393 8,047
INTEREST EXPENSE 2,820 2,482 5,575 4,682
------ ------ ------- -------
INCOME BEFORE INCOME TAXES 3,056 2,426 3,818 3,365
INCOME TAXES
Federal, state and deferred 1,345 970 1,680 1,346
------ ------ ------- -------
NET INCOME $1,711 $1,456 $2,138 $2,019
====== ====== ====== ======
RETAINED EARNINGS (DEFICIT)
BEGINNING OF PERIOD 2,649 (3,272) 2,222 (3,835)
RETAINED EARNINGS (DEFICIT)
END OF PERIOD $4,360 $(1,816) $4,360 $(1,816)
====== ====== ====== ======
EARNINGS PER SHARE $1,711 $1,456 $2,138 $2,019
====== ====== ====== ======
Weighted average common stock
outstanding 1,000 1,000 1,000 1,000
====== ====== ====== ======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
PEEBLES INC. & SUBSIDIARIES
(in thousands)
(Unaudited)
Six-Month Period Ended
------------------------
July 31, August 1,
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $2,138 $2,019
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation 3,124 2,646
Amortization 1,842 1,626
Provision for doubtful accounts 787 657
Changes in operating assets and
liabilities:
Accounts receivable 2,353 4,140
Merchandise inventories (1,984) (1,682)
Accounts payable (4,828) 2,378
Other assets and liabilities (3,690) (3,319)
------ ------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES (258) 8,465
INVESTING ACTIVITIES
Acquisition of the Ira A. Watson -- (4,451)
Purchase of property and equipment (5,051) (5,958)
Other -- 383
------ ------
NET CASH USED IN INVESTING ACTIVITIES (5,051) (10,026)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 183,101 188,248
Reduction in revolving line of credit and
long-term debt (177,769) (191,577)
Proceeds from 1998 Credit Agreement-
acquisition Ira A. Watson Co. -- 24,000
Retirement of Ira A. Watson Co. Pre-
acquisition bank debt & trade liabilities -- (17,895)
Financing Fees- Credit Agreement, as
amended and restated -- (1,113)
------ ------
NET CASH PROVIDED BY FINANCING ACTIVITIES $5,332 $1,663
------ ------
INCREASE IN CASH AND CASH EQUIVALENTS 23 102
Cash and cash equivalents beginning of
period 64 432
------ ------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 87 $ 534
====== ======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARIES
July 31, 1999
(in thousands)
NOTE A-ORGANIZATION AND BASIS OF PRESENTATION
Consolidation: The consolidated financial statements include
the accounts of Peebles Inc. and its wholly owned
subsidiaries, Carlisle Retailers, Inc. and Ira A. Watson Co.,
(together "Peebles" or the "Company"). All significant
intercompany balances and transactions have been eliminated.
The Watson Merger: On June 29, 1998, Peebles Inc. acquired
the Ira A. Watson Co. ("Watson's') for a cash purchase price
of $4,451, which included $1,848 paid to the equity holders of
Watson's, $1,352 paid to a financial services company for the
proprietary credit card accounts receivable, $1,251 in
acquisition expenses. The purchase method of accounting was
used to allocate the purchase price as follows:
Purchase Price $ 4,451
Tangible net assets (liabilities) acquired:
Accounts receivable, net $ 1,185
Merchandise inventory, net 10,000
Fixed assets, net 5,446
Bank debt (10,403)
Trade liabilities, net (6,290)
Other net liabilities (1,589)
Tangible net assets (liabilities) acquired (1,651)
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Excess of cost over net assets acquired $ 6,102
=======
The excess of cost over net assets acquired is being amortized
over a twenty-five year period beginning June 29, 1998.
The accompanying unaudited condensed financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting of normal and
recurring accruals) considered necessary for a fair
presentation have been included. In addition, the operating
results for the current fiscal periods are not necessarily
indicative of the results that may be expected for the fiscal
year ended January 29, 2000, due to the seasonal nature of the
business of Peebles. For further information, refer to the
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended
January 30, 1999. Certain prior year amounts have been
reclassified to conform to the current year presentation.
NOTE B-ACCOUNTS RECEIVABLE
Accounts receivable are shown net of $1,700, representing the
allowance for uncollectible accounts at July 31, 1999, January
30, 1999 and August 1, 1998. As a service to its customers,
the Company offers credit through the use of its own charge
card, certain major credit cards and a layaway plan. The
Peebles' customer usually resides in the local community
immediately surrounding the store location. Peebles stores
serve these local customers in 15 states: Virginia,
Tennessee, North Carolina, Maryland, Kentucky, West Virginia,
Alabama, Pennsylvania, South Carolina, Ohio, Delaware, New
York, Indiana, New Jersey and Missouri. The Company does not
require collateral from its customers.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PEEBLES INC. & SUBSIDIARIES
NOTE C-MERCHANDISE INVENTORIES
Merchandise inventories are accounted for by the retail
inventory method applied on a last in, first out ("LIFO")
basis. In connection with an acquisition of the Company in
May 1995 accounted for using the purchase method, the then
existing LIFO reserve was eliminated and a new LIFO base year
was established, which included an adjustment to fair value
(the "Fair Value Adjustment"). The net effect of the LIFO and
market reserves adjusts inventory to lower of LIFO cost or
market.
Merchandise inventories consisted of the following:
July 31, January August 1,
1999 30, 1999 1998
-------- -------- --------
Merchandise inventories at
FIFO cost $67,347 $65,288 $64,132
Fair Value Adjustment 7,436 7,436 7,436
LIFO/market reserve (1,437) (1,362) (1,311)
-------- -------- --------
Merchandise inventories at
lower of cost or market $73,346 $71,362 $70,257
====== ====== ======
NOTE D-INCOME TAXES
Differences between the effective rate of income taxes and the
statutory rate arise principally from state income taxes and
non-deductible amortization related to certain purchase
accounting adjustments.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(in thousands)
RESULTS OF OPERATIONS
The following management's discussion and analysis provides
information with respect to the results of operations for the
three-month period (or "Fiscal Quarter") and six-month period
ended July 31, 1999 in comparison with the Fiscal Quarter and
six-month period ended August 1, 1998. At July 31, 1999, the
Company operated 120 stores, with one new store location
opened during the period. New store growth has significantly
impacted consolidated operations since June 29, 1998, when the
Watson Merger added 24 stores. In the twelve-month period
following August 1, 1998, 10 store locations were added to
consolidated operations. In the third Fiscal Quarter of 1998,
2 of the former Watson stores were closed as planned.
The Company defines a comparable store as having operations
for the entire twelve-month period in both the current and
previous fiscal years. For fiscal 1999, 84 stores will have
had operations for the entire twelve- month periods ending
January 29, 2000 and ended January 30, 1999.
Three-Month Six-Month
Period Ended Period Ended
-------------------- -------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- -------- -------- --------
(dollars in thousands)
Net sales $70,547 $57,698 $134,969 $108,711
% increase 22.3% 15.8% 24.2% 14.5%
Comparable stores % increase
in net sales: 3.6% 2.9% .5% 4.5%
Stores in operation at
period end 120 112 120 112
Total stores opened during
Period 1 24 3 28
Operations as a Percentage of
Net Sales:
- -------------------------------
Cost of sales 58.4% 58.1% 59.5% 59.5%
Selling, general &
administrative expenses 30.2 30.2 30.4 29.7
Depreciation and amortization 3.1 3.2 3.1 3.4
---- ---- ---- ----
Operating Income 8.3 8.5 7.0 7.4
Interest Expense 4.0 4.3 4.2 4.3
Provision for income taxes 1.9 1.7 1.2 1.2
---- ---- ---- ----
Net Income 2.4% 2.5% 1.6% 1.9%
==== ==== ==== ====
In the second Fiscal Quarter, net sales increased $12,849, or
22.3%, in comparison to the prior year as sales at comparable
stores increased $1,862, or 3.6%, and sales at non-comparable
stores increased $10,987. The sales increase in the second
Fiscal Quarter at comparable stores offset the $1,307, or
2.6%, decline in the three-month period ended May 1, 1999. In
the current fiscal year, consumer demand for seasonal
merchandise was weaker than the prior year in early Spring,
but strengthened in June and July. As a result, net sales at
comparable stores increased $555, or .5%, comparing the six-
month periods ended July 31, 1999 and August 1, 1998. New
store growth, including the 22 former Watson's stores,
provided the remaining $25,703 in net sales growth for the six-
month period ended July 31, 1999. The former Watson's stores,
opened the entire six-month period ended July 31, 1999, added
$21,858 to net sales, versus a $4,587 contribution to net
sales for both the three and six-month periods ended August 1,
1998.
Cost of sales as a percentage of net sales was 58.4% and 58.1%
for the three-month periods ended July 31, 1999 and August 1,
1998, respectively, and 59.5% for each of the six-month
periods then ended. At comparable stores, cost of sales was
58.1% and 57.9% as a percentage of net sales for the Fiscal
Quarters ended July 31, 1999 and August 1, 1998, respectively.
The slight increase in the cost of sales percentage is
consistent with the earlier seasonal sales strength of the
prior year Fiscal Quarter relative to the current year.
Although sales for the current year Fiscal Quarter surpassed
the prior year by the end of the three-month period, those
sales increases occurred later in the seasonal markdown cycle.
For the six-month periods ended July 31, 1999 and August 1,
1998, cost of sales as a percentage of net sales at comparable
stores was 59.0% and 59.4%, respectively. The improvement in
comparing the six-month periods results primarily from first
Fiscal Quarter ended May 1, 1999, where a reduction in winter
clearance markdowns favorably impacted cost of sales.
Cost of sales continues to be impacted by new store growth.
New and acquired store locations, especially those in markets
new to the Company, typically run a higher cost of sales
percentage relative to mature stores. A greater number of
promotions are used during the first few seasons after opening
to establish market share. Cost of sales are also impacted by
inventory levels and assortments based on expected performance
only until a sales history is established. As the store
location matures, inventory levels and assortments are
adjusted to align with historical market demand, and cost of
sales are favorably impacted.
Selling, general and administrative expenses ("SG&A") as a
percentage of net sales, exclusive of depreciation and
amortization, were 30.2% for each of the current and prior
year second Fiscal Quarters. For the six-month periods ended
July 31, 1999 and August 1, 1998, SG&A as a percentage of net
sales were 30.4% and 29.7%, respectively. The increase is
primarily a result of the new store growth. New and acquired
stores are planned to have a higher expense structure than
mature stores for the first 12 to 18 months of operation as
advertising and payroll expenses are increased to achieve a
market presence. In addition, newer stores typically have
higher occupancy costs than mature stores.
Depreciation and amortization expenses as a percentage of net
sales were 3.1% for both the three and six-month periods ended
July 31, 1999. For the comparable prior year periods ended
August 1, 1998, depreciation and amortization expenses were
3.2% and 3.4% of net sales. Amortization expense in the
current fiscal year has increased in comparison to the prior
year due to the goodwill and deferred financing costs
capitalized in the Watson Merger. Depreciation expense has
increased primarily due to the capital expenditures required
in the newer store locations. These increases however, were
leveraged by the increase in total net sales.
Interest expense was 4.0% and 4.3% of net sales for the Fiscal
Quarters ended July 31, 1999 and August 1, 1998, respectively,
and 4.2% and 4.3% for the six-month periods then ended.
Increased borrowings to consummate the Watson Merger and to
fund the inventory and capital expenditures for the newer
store locations resulted in an increase in interest expense.
This increase, however, was not proportionate to the increase
in net sales.
The effective income tax rate for the three and six-month
periods ended July 31, 1999 and August 1, 1998 was 44.0% and
40.0%, respectively. The effective tax rate differs from the
statutory rate primarily due to state income taxes and
nondeductible amortization relating to certain acquisition
related assets.
As a result of the changes discussed above, net income for the
three-month and six-month periods ended July 31, 1999 was 2.4%
and 1.6% of net sales, respectively. For the prior year three
and six-month periods ended August, 1998, net income as a
percentage of net sales was 2.5% and 1.9%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital
expenditures in connection with the new store expansion and
remodeling program and for working capital needs. The
Company's primary sources of funds are cash flow from
continuing operations, borrowings under the 1998 Credit
Agreement and trade accounts payable. Merchandise inventory
levels typically build throughout the fall, peaking during the
Christmas selling season, while accounts receivable peak
during December and decrease during the first quarter.
Capital expenditures typically occur evenly throughout the
first three quarters of each year.
The Company's operating activities used cash of $258 in the
six-month period ended July 31, 1999. In the six-month period
ended August 1, 1998, operating activities provided cash of
$8,465. Accordingly, the Company's working capital grew to
$83,764 at July 31, 1999, up from $70,959 at August 1, 1998.
Operating cash flow was adversely impacted by a change in the
payment cycle required by Frederick Atkins, Inc., the
international cooperative buying service the Company uses as a
primary supplier of its private label merchandise. As a
result of a financial restructuring at Frederick Atkins, Inc.,
the members, including the Company, have been required to
significantly shorten the payment cycle for overseas
purchases. As a result, trade accounts payable were lower
during the three and six month periods and $4,828 less at July
31, 1999 than at January 30, 1999. In the prior year, trade
accounts payable at August 1, 1998 had increased $2,378 over
the balance at January 31, 1998. The Company continues to
evaluate its ability to procure merchandise through the
cooperative buying service under terms satisfactory to the
Company. With alternative sources of similar merchandise
available, the Company believes that if any change in the
supplier becomes necessary, the interruption to the flow of
merchandise will not be material to the overall purchasing
process or the Company's merchandise mix. As the result of a
July promotion for the Company's proprietary credit card
holders, the accounts receivable balance declined less in the
current year than in the prior, impacting operating cash flow
and working capital by $2,353 in the six-month period ended
July 31, 1999 versus $4,140 in the comparable prior year
period ended August 1, 1998.
Capital expenditures are the primary use of cash in investing
activities. In the six-month periods ended July 31, 1999 and
August 1, 1998, capital expenditures totaled $5,051 and
$5,958, respectively. New store locations accounted for the
majority of the capital expenditures in both the current and
prior years. In the current year, the Company has opened 3
new store locations totaling approximately 65,000 in gross
square footage, and completed several planned store
remodelings/space reallocations, primarily in the former
Watson's stores. In the comparable prior year period,
exclusive of the stores acquired in the Watson Merger, the
Company opened 4 new store locations totaling approximately
77,000 gross square feet. In the prior year, the Company used
investing cash of $4,451 in the Watson Merger.
The Company currently plans to open a total of 5 new store
locations in fiscal 1999, adding approximately 114,000 gross
square feet. The Company has signed non-cancelable leases for
all five planned locations, with the final two stores scheduled
to open in the third Fiscal Quarter of 1999. Based on
historical experience, the Company estimates that the cost of
opening a new store will include capital expenditures of
approximately $425 for leasehold improvements and fixtures and
approximately $425 for initial inventory, approximately one-
third of which is normally financed through vendor credit.
Accounts receivable for new stores typically build to 15% of
net sales or approximately $300 within 24 months of the store
opening. The Company may also incur capital expenditures to
acquire existing stores.
The Company finances its operations, capital expenditures, and
debt service payments with funds available under its Revolver.
The maximum amount available under the Revolver is $75 million
less amounts outstanding under letters of credit. The actual
amount available is determined by an asset-based formula. In
the six-month period ended July 31, 1999, the Company drew a
net $5,332, primarily for working capital and capital
expenditures. In the comparable prior year period, exclusive
of the funding requirements of the Watson Merger, the Company
reduced the outstanding Revolver balance by $3,329. The
Company believes the cash flow generated from operating
activities together with funds available under the Revolver
will be sufficient to fund its investing activities and the
debt service of the 1998 Credit Agreement.
SEASONALITY AND INFLATION
As a retailer offering predominately soft-apparel and selected
home accessories, the Company's business is seasonal, although
less heavily weighted in the fourth quarter than retailers
with comparable offerings of merchandise. Over the past three
fiscal years, quarterly sales as a percentage of total sales
have been consistent at approximately 20%, 22%, 24% and 34%
for the first through fourth quarters, respectively. Peebles'
positioning of its stores in small to medium sized communities
with limited competition, along with the Company's less-
promotional, every day fair value, pricing strategy, produces
operations less dependent on the fourth quarter. However, the
third and fourth quarters are generally bolstered by the back-
to-school and Christmas holiday selling seasons.
The Company does not believe that inflation has had a material
effect on its results of operations during the past three
fiscal years. Peebles uses the retail inventory method
applied on a LIFO basis in accounting for its inventories.
Under this method, the cost of products sold reported in the
financial statements approximates current costs and thus
reduces the likelihood of a material impact that increases
costs. However, there can be no assurance that the Company's
business will not be impacted by inflation in the future.
MARKET RISK
The Company's interest expense is affected by changes in short-
term interest on the debt outstanding under the 1998 Credit
Agreement. The 1998 Credit Agreement bears interest at rates
based on both the LIBOR and prime lending rates (the
"Borrowing Rates"). Assuming: i) the Borrowing Rates vary by
100 basis points from their current levels at any given fiscal
month, and ii) the Company maintains an aggregate outstanding
debt balance subject to these rates of $120,000 during the
fiscal month of variance, interest expense would vary by
approximately $100 for that fiscal month.
YEAR 2000 TECHNOLOGICAL ISSUES
In 1998, the Company completed an assessment of the impact on
technological systems, information and non-information, of
date-related processing when the year changes to 2000 and
those systems do not recognize this year as greater than 1999.
The Company's primary information systems are on two IBM AS400
mainframes, with the majority of the software developed
internally. The Company uses purchased software, both
packaged and customized, and certain local networks as support
systems interfacing with the mainframe system. Non-
information systems support physical operations and are
primarily purchased or leased from third parties.
The Company implemented in-house programming standards to
address the year 2000 in 1985, and as a result, the majority
of internally developed software was written with a four digit
date field to properly process information after the year
becomes 2000. The programming code has been reviewed,
however, for all internally developed software to look for
possible processing problems related to the year 2000. All
programming code modifications necessary to properly process
information in the year 2000 have been completed. The Company
has substantially completed testing of all major systems which
do not rely or interact with purchased software to verify
accurate processing. All testing is expected to be completed
during September 1999.
Information systems which rely or utilize purchased software,
either solely or in conjunction with internally developed
software, have been evaluated for proper processing of the
year 2000. The Company, with assistance and certification
from applicable third parties, has completed its evaluation of
all purchased information software and related systems and
determined those requiring upgrades and those requiring
replacement. All upgrades and/or replacement software are
either in place and functional or scheduled to be installed
and functioning by the end of September 1999.
Non-information systems critical to the Company's operations,
including phone systems, energy management systems, security
systems, and merchandise handling systems have either been
certified by the appropriate third party to properly operate
after January 1, 2000 or are not expected to be affected.
The Company relies on a number of third party business
partners to operate its business. These business partners
include merchandise vendors supplying the Company with
inventory, banks serving corporate cash management and
individual store locations, First Data Corp. providing
bankcard authorization and reimbursement, the three major
credit bureaus assisting in proprietary charge card account
authorization and risk management, and a number of contract
carriers delivering merchandise from vendors to the Company's
two distribution centers. The Company has one merchandise
supplier which represented 9% of purchases in 1998. No other
vendor supplied the Company with more than 5% of its
merchandise inventory in 1998. The Company is in continuing
communication with its primary vendors to determine the impact
on merchandise purchases of potential Year 2000 business
interruptions. The Company has received assurances from a
majority of its non-merchandise business partners that
operations and services will be provided without interruption
after the year turns to 2000.
Although there can be no guarantee that third parties are able
to provide the same level of service after the year turns to
2000 as they are able to provide prior to that date, the
Company believes that its operations will not be materially,
adversely affected. Related to both its own information and
non-information systems, the Company believes that
preliminary, non-comprehensive contingency plans previously
developed for a number of systems are no longer valid given
the progress of remediation. The Company's normal and ongoing
catastrophic failure plans for fire, natural disaster,
extended power loss, and similar situations now serve as the
primary contingency plan.
The costs associated with the evaluation and modification of
information and non-information systems are being expensed as
incurred and are not material to the financial position or
results of operations of the Company.
FORWARD-LOOKING STATEMENTS
Certain statements in this quarterly report on Form 10-Q are
forward-looking, based on the Company's evaluation of
historical information and judgments on future events, based
on the best information available at the time. Underlying
these statements are risks and uncertainties which could cause
actual results to differ materially from those forward-looking
statements. These risks and uncertainties include, but are
not limited to: i) consumer demand for the Company's soft-
apparel merchandise; ii) competitive and consumer demographic
shifts within the Company's markets; iii) the Company's access
to, and cost of, capital; iv) the Company's ability to locate
and open new store locations on a timely and profitable basis;
v) the Company's ability to integrate acquired stores into
Peebles' overall operations on a timely basis; vi) the
successful management of inventory levels, related costs and
selling, general and administrative costs; and vii) the timely
resolution of Year 2000 compliance issues by the Company and
its vendors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information called for by this item is provided under the
caption "Market Risk" under Item 2 - Management's Discussion
and Analysis of Financial Condition and Results of Operations.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule
b. Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
PEEBLES INC.
Date: September 3, 1999 By /s/ Michael F. Moorman
-------------------------
Michael F. Moorman
President and Chief Executive Officer
(Principal Executive Officer)
/s/ E. Randolph Lail
-------------------------
E. Randolph Lail
Chief Financial Officer, Senior Vice
President-Finance, Treasurer and
Secretary
(Principal Financial Officer)
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<FISCAL-YEAR-END> JAN-29-2000 JAN-29-2000
<PERIOD-END> JUL-31-1999 JUL-31-1999
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<ALLOWANCES> 1,700 1,700
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0 0
0 0
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