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Weak Economy, Charges Lead to Charming Shoppes Q2 Loss

Restructuring and severance charges weigh on bottom line.

Charming Shoppes Inc. swung to a loss in the second quarter due to a challenging economic environment and charges from the sale of its catalogue operations and the termination of former chief executive officer Dorrit Bern.

The Bensalem, Pa.-based women’s plus-size apparel retailer posted a net loss of $8.3 million, or 7 cents a diluted share, for the quarter ended Aug. 2, compared with a profit of $18.3 million, or 15 cents a share, in the same year-ago period.

Eliminating the discontinued catalogue operations, the loss from continuing operations was $3.7 million, or 3 cents a share. Included in those results were after-tax charges of $5.8 million, or 5 cents a share, related to Bern’s severance agreement and $3.5 million, or 3 cents, for consolidation and streamlining initiatives.

Net sales from continuing operations slid 6.6 percent, to $648.6 million from $694.4 million. Same-store sales were down 10 percent, with the Lane Bryant, Fashion Bug and Catherines divisions off 11, 9 and 12 percent, respectively.

The company said it will continue to manage inventories tightly. Cost cutting, the company said, produced a 6.4 percent decrease in selling, general and administrative expenses during the second quarter.

“As we manage through this challenging environment, it has been our strategy to operate with leaner inventories, execute on cost savings and streamlining opportunities, and realign our businesses in order to focus our energies on our core brands — Lane Bryant, Fashion Bug and Catherines,” said chairman and interim ceo Alan Rosskamm. “We have closed 78 of the 150 underperforming stores identified for closure during this fiscal year, which is expected to contribute to improvements in our operating performance in future periods.”

The company has agreed to sell its noncore misses’ apparel catalogues to Orchard Brands, a portfolio company of Golden Gate Capital, for $35 million.

For the first half, the company reported a net loss of $42.8 million, or 37 cents a share, versus a profit of $44.6 million, or 34 cents. Revenues fell 7.3 percent to $1.29 billion from $1.39 billion.