NEW YORK — Last year was great for Charming Shoppes Inc., and this year may even be better. That was the message to shareholders during last week’s annual meeting.

“We made great progress during 2004, with a 70 percent increase in net income,” Dorrit J. Bern, chief executive officer, president and chairman of the Bensalem, Pa.-based company, said in a statement. “We also saw solid improvement in our gross margin of 160 basis points.”

Charming Shoppes’ success in 2004 is attributed to the company’s focused merchandise offerings at Lane Bryant, strong increases in its e-commerce business and improved performance of its credit portfolio, Bern told shareholders at the meeting, which was held at the company’s Catherines Plus Sizes headquarters in Memphis.

Meanwhile, Bern said bottom-line results for the first quarter of 2005 were robust, signaling a strong start to the year. And at least one analyst is bullish on the retailer’s second-half prospects. In the first quarter, the company posted net income of $30 million, which is a 14 percent year-over-year increase.

“We began 2005 strongly, reporting record earnings in our first quarter,” Bern said. “We also announced the strategic acquisition of Crosstown Traders Inc., which accelerates our growth as a multichannel retailer.”

In a research note last week, Mark Montagna, Wells Fargo Securities LLC equity analyst, said he expects Charming Shoppes to outperform expectations for the second and third quarters of 2005. Earlier this month, Montagna reiterated a “buy” rating on shares of Charming Shoppes. He raised his 12-month price target to $11 from $10. Shares are now trading around $9, which is near the top of its 52-week high of $9.64.

The analyst’s report followed the retailer’s May same-store sales report that showed a 2 percent decline.

“On the surface, the May comp decline of 2 percent would appear disappointing,” the analyst wrote. “Below the surface, it was highly encouraging.”

Montagna explained that Lane Bryant delivered gross margin growth in the first quarter while inventories at Catherines were down 15 percent. “The spring and summer assortment [at Catherines] comped up 15 percent, which is good for margins,” he added.

This story first appeared in the June 27, 2005 issue of WWD. Subscribe Today.

Regarding Crosstown Traders, the retailer reminded shareholders that the acquisition was recently completed. Crosstown Traders is a catalogue retailer of women’s apparel, footwear and accessories. Earlier this month, the retailer said the deal “is a major step in the company’s long-term growth strategy and is expected to be accretive to earnings per share beginning in the current fiscal year.”

Charming Shoppes paid about $218 million in cash for Crosstown Traders as well as assuming $40 million of debt.

Also at the meeting, shareholders approved the reelection of Alan Rosskamm and Bern for a three-year term, while Kenneth S. Olshan announced his retirement as a director, having reached the company’s mandatory retirement age of 72. Rosskamm and Bern have been on the board since 1992 and 1995, respectively. Olshan served as director since 1999.

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