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Cache Earnings Drop Sharply in Second Quarter

Modification of assortment expected to provide long-term benefit.

Caché, its home page shown here, wants to improve marketing to counter falling profits.

Caché Inc. reported a 59.9 percent decline in second-quarter profits late Monday as the missy apparel retailer transitioned from its core prom dress business to a more casual assortment.

Although tight inventory and cost management helped it to top Wall Street’s expectations, the firm said it expects the current quarter’s results to fall below analysts’ estimates.

Net income for the quarter ended June 27 dropped to $845,000, or 7 cents a diluted share, compared with $2.1 million, or 16 cents a share, in the year-ago period. Quarterly net sales contracted 23.1 percent, to $56.9 million from $74 million, as comparable-store sales declined 23 percent.

Analysts polled by Yahoo forecasted a profit of 6 cents a share on revenues of $58.6 million.

Gross profit was $25.2 million, or 44.4 percent of net sales, compared with $34.2 million, or 46.2 percent of net sales, a year ago.

“Our second-quarter results met the high end of our expectations, driven by the success of our expense and inventory management,” said chairman and chief executive officer Thomas Reinckens on the company earnings call.

Second-quarter inventory declined 36 percent, according to Reinckens, but the “highly promotional and challenging environment for consumer spending,” coupled with the company’s move from prom offerings, “held back sales during the quarter.”

Nonetheless, the retailer’s new focus on expanding its casual lifestyle assortment, sharpening its value price point offering and improving its marketing, will pay dividends in the long term, he said.

For the six months ended June 27, Caché posted a net loss of $751,000, or 6 cents a share, versus a profit of $52,000, or breakeven on a per share basis, for the same period last year.

Pointing out that the third quarter is “typically not a profitable period for the company,” Reinckens forecast a quarterly net loss of between 17 and 22 cents a share on sales of between $48 million and $50 million.

Comps are expected to fall in the mid-to-high teen percentage range, according to the company, which said it plans to open one or two additional stores and close about two or three locations by year’s end.

Analysts are looking for a third-quarter loss of 8 cents on revenue of $51.5 million.

The results were reported after the markets closed Monday. Earlier in the day, Caché’s shares rose 34 cents, or 9.2 percent, to close at $4.05, the fourth strongest performance among issues tracked by WWD.