1
EXHIBIT 13.1
To our Stockholders,
1999 was a difficult year for Gymboree. We look forward in the coming year to
correcting the false starts of the past year, and re-establishing our core
customer base and rebuilding our profitability. We feel confident that our
current strategies are correct and the improved results will be seen in the
third and fourth quarters of 2000.
I'd like to review the developments of the past year, and outline for you our
strategy going forward.
Our historic model is familiar to many of you. We created lines of coordinated
items for each age range and gender, delivered these lines on a regular basis to
create "events" in store, displayed the items together, marked them down on a
timed basis, and repeated the process through the years.
During 1999, we altered our historic model, and we made some mis-steps, in
particular reducing merchandise inventories well below historic levels. By doing
so, we lost the benefit of profitable markdown sales. While we believe our
experiences in 1999 taught us more about our customers' taste for fashion, we
were not satisfied with our sales volume.
We are in the process of reinstating the majority of our old merchandising
practices. We put in place a new General Merchandise Manager, Lisa Harper, a
Gymboree veteran who understands our customer very intimately, who understands
that our customers want coordinated outfits, want unique Gymboree details and
colors, and have a keen sense of value. We plan to return to the historic
delivery model, to create excitement among customers, and give us a predictable
"lift" in sales volume. Importantly, the all-at-once first markdown of a line
will give us another event in store, and another predictable lift in profitable
sales volume.
Although our retail operations stumbled in 1999, our Play & Music business
expanded into new territories when we sold master franchise agreements in the
United Kingdom, Ireland, and Puerto Rico. Further, we expanded our curriculum by
adding music classes, designed to interest and challenge children to appreciate
different styles of music and to enhance their mental and physical development.
We enjoyed profits from the Play & Music business in excess of $2.3 million, our
best year yet.
I feel a great sense of responsibility for our stockholders, our customers and
our team members. As many of you know, I am one of the founders of Gymboree and
an early investor. I watched proudly as the chain expanded from a few stores in
California to a national and now international presence. When I looked at the
state of the business at the end of 1999, I felt I had to take a more active
role charting the right course. I took on responsibility as the Chief Executive
Officer determined that our people and our processes will be successful.
We have a strong brand that historically delivered unique merchandise, quality
and fun for our customers, profits for our shareholders, and a great environment
for our team members. As we re-institute our profitable merchandise strategies
in our 605 stores, we believe we will see a return of sales increases and
profits during the second half of the current year.
We believe that with your support we will once again be the market leader in
quality, innovative children's apparel. We are looking forward to reclaiming our
place in the lives of the young families we serve, and rebuilding the
stockholder value inherent in Gymboree.
Stuart G. Moldaw
Chairman and Chief Executive Officer
2
Corporate Profile
The Gymboree Corporation is a leading specialty retailer of high quality apparel
and accessories for children. As of January 29, 2000, Gymboree operated 605
stores, including 555 stores in the United States, 19 stores in Canada and 31 in
Europe, as well as an online store at www.gymboree.com. Our apparel is
characterized by child-appropriate, fashionable colors and prints, complex
embellishment, comfort, functionality and durability. Gymboree also offers
directed parent-child developmental play programs for children ages newborn to 4
years old at more than 420 franchised and Gymboree-operated locations.
GYMBOREE [LOGO]
FINANCIAL HIGHLIGHTS
(In thousands, except stores and
per share amounts)
Fiscal Year
-------------------------------------------------------------
1999 1998 1997
--------- --------- ---------
OPERATING RESULTS:
Net sales $ 437,076 $ 457,219 $ 373,440
Operating income (loss) (18,057) 9,454 53,884
Net income (loss) (10,600) 6,241 35,170
Net income (loss) as a % of sales -2.4% 1.4% 9.4%
Diluted income (loss) per share $ (0.44) $ 0.26 $ 1.41
BALANCE SHEET DATA:
Working capital $ 57,225 $ 76,314 $ 71,590
Total assets 240,918 255,594 229,200
Long term debt 10,877 11,460 --
Total stockholders' equity $ 158,462 $ 168,372 $ 157,710
STORES OPEN AT YEAR END: 605 564 435
3
CORPORATE INFORMATION
HEADQUARTERS
The Gymboree Corporation
700 Airport Boulevard
Burlingame, CA 94010-1912
Telephone: 650-579-0600
EUROPEAN OFFICE
Gymboree
First Floor Office Suite
Stonecroft House,
Ervington Court.
Meridian Business Park
Leicester LE3 2Wl England
Telephone: 44-116-282-7400
WEBSITE
www.gymboree.com
NORTH AMERICAN GYMBOREE STORES
1-800-558-9885
ZUTOPIA STORES
1-877-DO-YOU-ZU
GYMBOREE PLAY & MUSIC
1-800-520-PLAY
4
BOARD OF DIRECTORS
Walter Loeb
Director
Stuart G. Moldaw
Chairman of the Board and Chief Executive Officer
Barbara Rambo
Director
Alan R. Schlesinger
Director
Deborah A. Sorondo
Director
William U. Westerfield
Director
OFFICERS
Stuart G. Moldaw
Chairman of the Board and Chief Executive Officer
Lisa Harper
Senior Vice President, General Merchandise Manager
Lawrence H. Meyer
Senior Vice President, Chief Financial Officer and Corporate Secretary
Kenneth F. Meyers
Senior Vice President, Store Operations and Human Resources
Edward Wong
Senior Vice President, Supply Chain and Technology
STOCKHOLDERS INFORMATION
ANNUAL MEETING
Stockholders are invited to attend our annual meeting at 8:30 a.m. on Friday,
June 2, 2000 at our corporate offices, 700 Airport Boulevard, Burlingame,
California, in the 4th floor conference room.
COMMON STOCK TRADING
Common stock of The Gymboree Corporation is traded on the NASDAQ National Market
System under the symbol GYMB.
FISCAL 1999 HIGH LOW
----- ----
1st Quarter 12.19 6.50
2nd Quarter 13.88 4.88
3rd Quarter 7.63 4.75
4th Quarter 7.50 4.63
As of April 12, 2000, there were approximately 810 stockholders of record,
excluding stockholders whose stock is held in the nominee or street name by
brokers.
5
INDEPENDENT AUDITORS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, CA 94105
Telephone: 415-247-4000
GENERAL COUNSEL
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Telephone: 650-493-9300
REGISTRAR AND TRANSFER AGENT
Inquiries from our stockholders regarding address changes and lost certificates
should be directed to:
Fleet National Bank
c/o Equiserve
P.O. Box 8040
Boston, MA 02266
Telephone: 1-800-733-5001
INVESTOR RELATIONS
Copies of The Gymboree Corporation's 1999 Annual Report/Form 10-K and Form 10-Q
are available from:
The Gymboree Corporation
Investor Relations
700 Airport Boulevard, Suite 200
Burlingame, CA 94010
Or through our website:
www.gymboree.com
ZUTOPIA [LOGO]
GYMBOREE PLAY & MUSIC [LOGO]
GYMBOREE [LOGO]
(c) 2000 The Gymboree Corporation