A steep decline in markdowns allowed Caché Inc. to increase its average price and gross margin rate and trim its first-quarter loss to less than 20 percent of its year-ago size.


In the three months ended April 2, the New York-based specialty store chain registered a net loss of $772,000, or 6 cents a diluted share, versus red ink of $4.1 million, or 32 cents, in the year-ago quarter. Analysts, on average, expected a slightly deeper loss of 7 cents.


Sales expanded 7.3 percent, to $52.1 million from $48.6 million, and grew 7.7 percent on a comparable-store basis. Gross margin expanded 765 basis points to 42.1 percent of sales from 34.4 percent in the 2010 quarter.


Thomas Reinckens, chairman, president and chief executive officer, said on a Thursday morning conference call that the quarter was highlighted by a 20.3 percent increase in average dollars per transaction, “primarily as a result of fewer markdowns,” which was offset in part by a 10.5 percent decrease in the number of transactions.


“During the quarter, we continued to adjust the flow and quantity of each style to create a greater sense of urgency for our customers to shop as she sees more limited quantities,” he added. “We’re also flowing deliveries more frequently and, at the same time, taking markdowns on slower-moving styles sooner for our customer is more likely to see something new each time she shops.”


The ceo pointed out that e-commerce grew 74 percent during the quarter and represented 5.5 percent of the total business, or about $2.9 million.


“We continue to believe that this channel can grow to represent 10 percent or more of our business longterm,” he said.


Caché currently is testing a new e-commerce platform with “enhanced navigation and search capabilities,” Reinckens said. No date has been set for the rollout of the new site. A new e-commerce fulfillment center is expected to go into operation “during the next few months,” he added.


In the current second quarter, the company now expects earnings to be at the high end of its previous guidance of 16 cents to 18 cents a diluted share. Comps are expected to post a single-digit increase.

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