<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from________________to_______________.
Commission File No. 0-19972
BRAUN'S FASHIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 06-1195422
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2400 XENIUM LANE NORTH, PLYMOUTH, MINNESOTA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
55441
(ZIP CODE)
(612) 551-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------------
Indicate by check 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
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
--- ---
As of June 27, 1998, 4,523,393 shares of the registrant's common stock were
outstanding.
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<PAGE>
BRAUN'S FASHIONS CORPORATION
FORM 10-Q QUARTERLY REPORT
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheet
As of May 30, 1998 and February 28, 1998 . . . . . . . . . . . . . . . . 3
Consolidated Condensed Income Statement
For the Quarters Ended May 30, 1998 and May 31, 1997 . . . . . . . . . . .4
Consolidated Condensed Statement of Cash Flows
For the Quarters Ended May 30, 1998 and May 31, 1997 . . . . . . . . . . .5
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . . . . . .7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
PART 2
OTHER INFORMATION
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities and Use of Proceeds. . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . 10
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE>
BRAUN'S FASHIONS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS
MAY 30, FEBRUARY 28,
1998 1998
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 15,692,854 $ 15,848,439
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . 821,146 847,746
Merchandise inventory . . . . . . . . . . . . . . . . . . . . . . . . 10,184,672 10,735,681
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 303,814 414,341
Current deferred tax asset. . . . . . . . . . . . . . . . . . . . . . 322,570 322,570
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 27,325,056 28,168,777
Equipment and improvements, net. . . . . . . . . . . . . . . . . . . . . . 11,023,314 10,943,054
Other assets:
Long-term deferred tax asset. . . . . . . . . . . . . . . . . . . . . 1,414,789 1,414,789
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,141 63,424
------------ ------------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . 1,613,930 1,478,213
------------ ------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,962,300 $ 40,590,044
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,059,632 $ 3,666,921
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 3,708,804 4,461,532
Current maturities of long-term debt. . . . . . . . . . . . . . . . . 686,776 681,424
Income taxes payable. . . . . . . . . . . . . . . . . . . . . . . . . 830,606 186,982
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . 7,285,818 8,996,859
Long-term liabilities:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,622,793 9,616,311
Accrued rent obligation . . . . . . . . . . . . . . . . . . . . . . . 1,007,761 1,017,556
------------ ------------
Total long-term liabilities. . . . . . . . . . . . . . . . . . . 10,630,554 10,633,867
Stockholders' equity:
Preferred stock-$0.01 par value, 1,000,000 shares authorized;
none outstanding . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock-$0.01 par value, 9,000,000 shares authorized;
4,523,393 shares issued and outstanding at May 30, 1998
and February 28, 1998. . . . . . . . . . . . . . . . . . . . . . 45,234 45,234
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . 28,596,847 28,588,350
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (6,596,153) (7,674,266)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 22,045,928 20,959,318
------------ ------------
Total liabilities and stockholders' equity . . . . . . . . . . . $ 39,962,300 $ 40,590,044
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
BRAUN'S FASHIONS CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------
MAY 30, MAY 31,
1998 1997
------------ ------------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,002,626 $ 21,841,691
Cost of sales:
Merchandise, buying and occupancy . . . . . . . . . . . . . . . . . . 16,329,319 14,182,902
------------ ------------
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,673,307 7,658,789
Selling, general and administrative expenses . . . . . . . . . . . . . . . 6,158,688 5,472,334
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 659,158 606,043
------------ ------------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . 1,855,461 1,580,412
Interest, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,571 200,498
------------ ------------
Income before income taxes and extraordinary gain . . . . . . . . . . 1,738,890 1,379,914
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 660,778 524,367
------------ ------------
Net income before extraordinary gain. . . . . . . . . . . . . . . . . 1,078,112 855,547
Extraordinary gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 104,720
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,078,112 $ 960,267
------------ ------------
------------ ------------
Basic earnings per common share:
Net income before extraordinary gain. . . . . . . . . . . . . . . . . $ 0.24 $ 0.20
Extraordinary gain. . . . . . . . . . . . . . . . . . . . . . . . . . -- 0.02
------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.24 $ 0.22
------------ ------------
------------ ------------
Weighted average common shares outstanding. . . . . . . . . . . . . . 4,523,393 4,432,588
------------ ------------
------------ ------------
Diluted earnings per common share:
Net income before extraordinary gain. . . . . . . . . . . . . . . . . $ 0.22 $ 0.18
Extraordinary gain. . . . . . . . . . . . . . . . . . . . . . . . . . -- 0.02
------------ ------------
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.22 $ 0.20
------------ ------------
------------ ------------
Weighted average common and common equivalent shares outstanding . . 4,874,940 4,776,700
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
BRAUN'S FASHIONS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------
MAY 30, MAY 31,
1998 1997
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,078,112 $ 960,267
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . 659,158 606,043
Extraordinary gain from early extinguishment of debt . . . . . . . . . . -- (168,903)
(Gain) loss on disposals of equipment, net . . . . . . . . . . . . . . . (2,500) (5,595)
(Increase) decrease in deferred tax asset. . . . . . . . . . . . . . . . -- 285,998
Increase (decrease) in accrued rent obligation . . . . . . . . . . . . . (9,795) 65,525
Changes in operating assets and liabilities:
(Increase) decrease in merchandise inventory,
prepaid expenses, receivables and other . . . . . . . . . . . . . . . 552,419 (1,307,400)
Increase (decrease) in accounts payable,
accrued liabilities and income taxes payable. . . . . . . . . . . . . (1,716,393) (388,554)
------------- ------------
Net cash provided by operating activities . . . . . . . . . . . . . . 561,001 47,381
Cash flows from investing activities:
Purchase of equipment and improvements . . . . . . . . . . . . . . . . . (739,418) (599,147)
Proceeds from sale of equipment. . . . . . . . . . . . . . . . . . . . . 2,500 14,225
------------- ------------
Net cash used in investing activities . . . . . . . . . . . . . . . . (736,918) (584,922)
Cash flows from financing activities:
Redemption of 12% Senior Notes . . . . . . . . . . . . . . . . . . . . . -- (640,000)
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . (60,400) (55,483)
Interest on 12% Senior Notes added to principal. . . . . . . . . . . . . 72,234 75,894
Income tax benefit on exercise of stock options. . . . . . . . . . . . . 8,498 --
------------- ------------
Net cash provided by (used in) financing activities . . . . . . . . . 20,332 (619,589)
------------- ------------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . (155,585) (1,157,130)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . 15,848,439 10,913,716
------------- ------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 15,692,854 $ 9,756,586
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
BRAUN'S FASHIONS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The financial statements included in this Form 10-Q have been prepared by
Braun's Fashions Corporation and subsidiary (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed, or omitted, pursuant to such rules and regulations. These
financial statements should be read in conjunction with the financial statements
and related notes included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998.
The results of operations for the interim periods shown in this report are
not necessarily indicative of results to be expected for the fiscal year. In the
opinion of management, the information contained herein reflects all adjustments
necessary to make the results of operations for the interim periods a fair
statement of such operations. All such adjustments are of a normal recurring
nature.
NOTE 2 -- NET INCOME PER SHARE
In fiscal 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FASB No. 128").
Under FASB No. 128, basic earnings per share ("EPS") is computed based on the
weighted average number of shares of common stock outstanding during the
applicable periods while diluted EPS is computed based on the weighted average
number of common and common equivalent shares (dilutive stock options)
outstanding.
The following is a reconciliation of the number of shares (denominator)
used in the basic and diluted EPS computations:
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
MAY 30, 1998 MAY 31, 1997
------------------------ -------------------------------------------
NET INCOME NET INCOME
BEFORE AFTER
NET EXTRAORDINARY EXTRAORDINARY
SHARES INCOME SHARES GAIN GAIN
--------- ------ --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Basic EPS 4,523,393 $0.24 4,432,588 $ 0.20 $ 0.22
Effect of dilutive stock options 351,547 (0.02) 344,112 (0.02) (0.02)
--------- ------ --------- ------------- -------------
Diluted EPS 4,874,940 $0.22 4,776,700 $ 0.18 $ 0.20
--------- ------ --------- ------------- -------------
--------- ------ --------- ------------- -------------
</TABLE>
NOTE 3 -- ACCOUNTING PRONOUNCEMENT
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FASB No, 130"), establishes standards of disclosure and
financial statement display for reporting total comprehensive income and the
individual components thereof in a full set of general-purpose financial
statements. The adoption of this standard in the first quarter of fiscal 1999
had no impact on the Company's financial statements.
6
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Braun's Fashions Corporation is a Minneapolis-based regional retailer of
women's specialty apparel, which operates through its wholly-owned subsidiary,
Braun's Fashions, Inc. As of June 27, 1998, the Company operated 185 stores in
20 states, primarily in the Midwest. The Company's stores offer coordinated
assortments of moderately priced sportswear, sweaters, dresses and accessories.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's operating statement data expressed as a percentage of net
sales.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------
MAY 30, 1998 MAY 31, 1997
------------ ------------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . 100.0% 100.0%
Merchandise, buying and occupancy . . . . . . 65.3 64.9
---- ----
Gross profit. . . . . . . . . . . . . . . . . 34.7 35.1
Selling, general and administrative . . . . . 24.6 25.1
Depreciation and amortization . . . . . . . . 2.7 2.8
---- ----
Operating income. . . . . . . . . . . . . . . 7.4 7.2
Interest, net . . . . . . . . . . . . . . . . 0.5 0.9
---- ----
Income before income taxes and extraordinary
gain. . . . . . . . . . . . . . . . . . . . 6.9 6.3
Income tax provision. . . . . . . . . . . . . 2.6 2.4
---- ----
Net income before extraordinary gain. . . . . 4.3 3.9
Extraordinary gain. . . . . . . . . . . . . . -- 0.5
---- ----
Net income. . . . . . . . . . . . . . . . . . 4.3% 4.4%
---- ----
---- ----
</TABLE>
QUARTER ENDED MAY 30, 1998 COMPARED TO QUARTER ENDED MAY 31, 1997.
NET SALES. Net sales for the quarter ended May 30, 1998, were $25.0
million, an increase of 14% from $21.8 million for the quarter ended May 31,
1997. The increase in sales was attributable to a 9% increase in same-store
sales combined with an increase in the number of stores operated by the Company.
The Company operated 186 stores at May 30, 1998 compared to 170 at May 31, 1997.
GROSS PROFIT. Gross profit, which is net sales less cost of merchandise and
buying and occupancy expenses, was $8.7 million or 34.7% of net sales during the
first quarter of fiscal 1999 compared to $7.7 million or 35.1% of net sales
during the same period in fiscal 1998. Gross margin as a percent of net sales
decreased slightly as dresses, which have a lower margin than other product
lines, represented a greater part of the sales mix in the first quarter than a
year ago.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the first quarter of fiscal 1999 was $6.2 million or
24.6% of net sales compared to $5.5 million or 25.1% of net sales in the first
quarter of fiscal 1998. The decrease as a percent of net sales was a result of
leveraging associated with increased sales.
OPERATING INCOME. Operating income for the quarter ended May 30, 1998, was
$1.9 million or 7.4% of net sales compared to operating income of $1.6 million
or 7.2% of net sales in the quarter ended May 31, 1997.
7
<PAGE>
INTEREST, NET. Net interest decreased by $83,927 from $200,498 in the
first quarter of fiscal 1998 to $116,571 in the current year's quarter. This
decrease was primarily due to the Company's improved cash flow which resulted
in increased income from investments.
INCOME TAXES. Income tax expense in the first quarter of fiscal 1999 was
$660,778 compared to $524,367 in the first quarter of fiscal 1998.
EXTRAORDINARY GAIN. In April 1997, the Company purchased $800,000 principal
face amount of its 12% Senior Notes at a 20% discount from par. This resulted in
the recognition of an extraordinary gain on the early extinguishment of debt,
net of tax, of $104,720 or 0.5% of net sales.
NET INCOME. As a result of the foregoing factors, net income for the
quarter ended May 30, 1998 was $1.1 million or 4.3% of net sales compared to
$1.0 million or 4.4% of net sales for the quarter ended May 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal needs for liquidity are to finance the purchase of
merchandise inventories and other working capital requirements. Merchandise
purchases vary on a seasonal basis, peaking in the fall. As a result, the
Company's cash requirements historically reach their peak in October and
November. Conversely, cash balances reach their peak in January, after the
holiday season is completed.
Net cash provided by operating activities totaled $561,000 for the first
three months of fiscal 1999. Cash was used to finance $739,000 of capital
expenditures to open eight new stores and for other miscellaneous capital
expenditures. During the remainder of the fiscal year the Company intends to
spend approximately $5.5 million on capital expenditures to open 17 additional
new stores, to complete nine major remodels and to install new computer
software. Management expects its cash on hand combined with cash flow from
operations to be sufficient to meet its capital expenditure and working capital
requirements and its other needs for liquidity during the year.
In December 1996, the Company entered into a borrowing agreement with
Norwest Bank Minnesota, National Association (the "Norwest Revolver") expiring
April 1, 1999. In the first quarter of fiscal 1999, the Company initiated
discussions with Norwest regarding a new revolving credit facility to replace
the Norwest Revolver upon its expiration.
The Norwest Revolver provides the Company with revolving credit loans and
letters of credit up to $10 million, subject to a borrowing base formula. Loans
under the Norwest Revolver bear interest at Norwest's base rate plus 3/4%,
subject to a rate reduction provision based on the financial performance of the
Company (as described in the Norwest Revolver). Due to the Company's financial
performance the interest rate at June 27, 1998 was Norwest's base rate plus 1/4%
or 8-3/4%. Interest is payable monthly in arrears.
The Norwest Revolver carries commitment fees of 1/4% of the difference
between $5 million and the average amount outstanding under the facility
(including letters of credit). If the average amount outstanding under the
facility (including letters of credit) is between $5 million and $7.5
million, the commitment fee shall be based on the difference between $7.5
million and the average amount outstanding under the facility (including
letters of credit) and if the average amount outstanding (including letters
of credit) is in excess of $7.5 million, the commitment fee is on the
difference between $10 million and the average amount outstanding under the
facility (including letters of credit). This facility is secured by
substantially all of the Company's assets. The borrowing base at June 27,
1998, was $6.6 million. As of June 27, 1998, the Company had no borrowings
and outstanding letters of credit in the amount of $2.4 million under the
Norwest Revolver. Accordingly, the availability of revolving credit loans
under the Norwest Revolver was $4.2 million at that date.
The Norwest Revolver contains certain restrictive covenants, including a
limitation on capital expenditures, restrictions on incurring additional
indebtedness, limitations on certain types of investments and prohibitions on
paying dividends, as well as requiring the maintenance of certain financial
ratios.
In December 1996, the Company issued $10,300,200 of public debt in the form
of 12% Senior Notes (the "Senior Notes") due January, 2005 pursuant to an
Indenture dated as of December 2, 1996. The principal amount of the Senior Notes
bears interest at the rate of 12% per annum. Interest at the rate of 9% per
annum on the outstanding principal amount is to be paid monthly on the last day
of each calendar month until all amounts due and owing on the Senior Notes and
under the Indenture have been paid in full. Interest at the rate of 3% per annum
on the outstanding principal amount shall accrue monthly and shall, upon
accrual, be treated as principal for all purposes, including without limitation,
the calculation of all interest payments due thereafter, and shall be payable in
full on January 1, 2005.
8
<PAGE>
The Senior Notes are general unsecured senior obligations of the Company.
The Indenture for the Senior Notes contains certain covenants which, among other
things, limit the ability of the Company to incur liens, incur additional
indebtedness, and restrict the Company's ability to declare dividends.
During fiscal 1998, the Company purchased $1,033,000 principal face
amount of its Senior Notes at a discount from par. The purchase resulted in
an extraordinary gain of $115,000, net of tax, and satisfied all of the
January 1, 1998, and a portion of the January 1, 1999 redemption
requirements. The remaining scheduled principal payments, due January 1 of
the following years, are as follows: 1999 - $431,938, 2000 - $803,902, 2001 -
$875,752, 2002 - $958,207, 2003 -$1,040,074, 2004 - $1,133,443 and 2005 -
$6,031,476.
In June 1998, the Company approved the repurchase of up to $2.0 million of
the Company's outstanding Senior Notes on the open market at a discount. This
is in addition to a $1.0 million repurchase of Senior Notes the Company
previously authorized during the first quarter of fiscal 1999.
The Company is unaware of any environmental liability that would have a
material adverse effect on the financial position or the results of
operations of the Company.
The Company purchases approximately 50% of its merchandise from overseas
vendors. Since the Company purchases this merchandise using letters of
credit denominated in U.S. dollars, primarily from vendors in countries whose
currency is pegged to the U.S. dollar, management does not believe the
Company will be materially affected by foreign currency fluctuations.
SEASONALITY
The Company's sales reflect seasonal variation as sales in the third and
fourth quarters, which include the fall and holiday season, generally have
been higher than sales in the first and second quarters. Sales generated
during the fall and holiday season have a significant impact on the Company's
annual results of operations. Quarterly results may fluctuate significantly
depending on a number of factors including adverse weather conditions, shifts
in the timing of certain holidays and promotional events, timing of new store
openings, and customer response to the Company's seasonal merchandise mix.
INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation has had a material
effect of the results of operations during the quarters ended May 30, 1998, and
May 31, 1997.
FORWARD LOOKING INFORMATION
Information contained in this Form 10-Q contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995, which can be identified by the use of forward-looking
terminology such as "may", "will", "expect", "plan", "anticipate", "estimate"
or "continue" or the negative thereof or other variations thereon or
comparable terminology. There are certain important factors that could cause
results to differ materially from those anticipated by some of these
forward-looking statements. Investors are cautioned that all forward-looking
statements involve risks and uncertainty. The factors, among others, that
could cause actual results to differ materially include: consumers' spending
and debt levels; the Company's ability to execute its business plan; the
acceptance of the Company's merchandising strategies by its target customers;
the ability of the Company to anticipate marketing trends and consumer needs;
continuity of a relationship with or purchases from major vendors,
particularly those from whom the Company imports merchandise; competitive
pressures on sales and pricing; increases in other costs which cannot be
recovered through improved pricing of merchandise; and the adverse effect of
weather conditions from time to time on consumers' ability or desire to
purchase new clothing.
ITEM 3.
QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK
Not Applicable.
9
<PAGE>
PART II.
ITEM 1.
LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Company.
ITEM 2.
CHANGES IN SECURITIES
AND USE OF PROCEEDS
There have been no material modifications to the Company's registered
securities.
ITEM 3.
DEFAULTS UPON
SENIOR SECURITIES
There has been no default with respect to any indebtedness of the Company.
ITEM 4.
SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the first
quarter of fiscal 1999.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Exhibit 27 -- Financial Data Schedules (submitted for SEC use only)
(b) Reports on Form 8-K
None
10
<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.
Dated: July 10, 1998
BRAUN'S FASHIONS CORPORATION
By /S/ ANDREW K. MOLLER
-------------------------------
Andrew K. Moller
Vice President Finance and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10Q FOR THE QUARTER ENDED MAY 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-27-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-30-1998
<CASH> 15,692,854
<SECURITIES> 0
<RECEIVABLES> 821,146
<ALLOWANCES> 0
<INVENTORY> 10,184,672
<CURRENT-ASSETS> 27,325,056
<PP&E> 24,492,895
<DEPRECIATION> 13,469,581
<TOTAL-ASSETS> 39,962,300
<CURRENT-LIABILITIES> 7,285,818
<BONDS> 9,622,793
0
0
<COMMON> 45,234
<OTHER-SE> 22,000,694
<TOTAL-LIABILITY-AND-EQUITY> 39,962,300
<SALES> 25,002,626
<TOTAL-REVENUES> 25,002,626
<CGS> 16,329,319
<TOTAL-COSTS> 16,329,319
<OTHER-EXPENSES> 6,817,846
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116,571
<INCOME-PRETAX> 1,738,890
<INCOME-TAX> 660,778
<INCOME-CONTINUING> 1,078,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,078,112
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.22
</TABLE>
