Cache Inc.’s third-quarter net loss deepened as the women’s apparel retailer saw slumping demand on top of a higher tax-related cost for the period.

This story first appeared in the November 13, 2012 issue of WWD. Subscribe Today.

For the quarter ended Sept. 29, Caché posted a net loss of $6.4 million, or 49 cents a diluted share, compared with a year-ago loss of $1.8 million, or 14 cents. According to the retailer, the most recent quarter included a 10-cent charge for an increase in the tax valuation allowance. In October, Caché forecasted a net loss of between 39 cents and 41 cents.

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The retailer said Monday that net sales for the quarter fell 5.9 percent to $45.8 million from $48.7 million.

Analysts were looking for a loss of 1 cent a share on sales of $61.5 million.

Tax-related charge aside, Caché’s chairman and chief executive officer Thomas Reinckens cited lackluster fashion as part of the problem. This materialized in the retailer’s gross margin, which fell to 32 percent of sales versus 40.6 percent, as Caché increased markdowns during the quarter in order to clear out unexciting seasonable wares.

“Third-quarter results were negatively affected by an unfavorable response to our summer and fall sportswear assortments, as well as an increase in the valuation allowance of $1.3 million against net deferred tax assets,” said Reinckens. “We have identified the actions that we believe are necessary to bring about a positive change in our business.”

Caché predicts fourth-quarter adjusted earnings per share of between 1 and 3 cents, which tops Wall Street’s outlook of a 1-cent loss.