Deutsche Bank Markets Research United States NY Corporate Credit Retailing Company Gymboree Corp Still Waiting For The Turnaround knday the 13th came a day uatly with fiscal 3O I:: rusultt; yusturcick: We were surprised and disappointed by the dismal results from Gymboree as the company took a step backwards on its turnaround effort. With new management installed in January 2013, admittedly there was little that could be done by them to refine committed designs for the fall and holiday seasons but the quarter was also beset by increased promotional activity and a fulfillment issue on the e-commerce platform. Modest silver linings on strong inventory control and a $25 million bond repurchase were encouraging but not nearly enough to turn investor sentiment on the credit. We recognize that the competitive environment in children's apparel is very challenging but feel that management is on the right path with its inventory control and a revised design aesthetic slated for the Spring 2014 season. With positive free cash flow and potential for additional bond repurchases, full access to the revolver as of the earnings call, no meaningful maturities until 2018 and attractive yield, we maintain our long-term positive view on the term loan and our BUY recommendation on the bonds. Getting design light We've heard a lot this year from the new management about needing to have clearer points of view on design, providing fresh takes on classic looks and continuing to stream new flow through the stores while still reducing the SKU proliferation but the major disappointment is that very little of these critical action items were actually actionable for the fall and holiday seasons. With nine month lead times in design the fall season was already done when management came on board and holiday was nearly complete as well. C1O/1" 8 paie:,e The Janie & Jack and Gymboree banners outperformed the company's value oriented growth concept Crazy 8 for the q