Shares of Coldwater Creek Inc. fell more than 14 percent Wednesday, a day after the retailer said its third-quarter loss grew under the weight of heavy promotions despite a double-digit uptick in sales.

 

For the three months ended Oct. 31, the Sandpoint, Idaho-based misses’ retailer recorded a loss of $34 million, or 37 cents a diluted share, versus a loss of $1.3 million, or 1 cent a share, in 2008.

 

The most recent quarter included charges of 4 cents a share related to the September departure of former chief executive officer Daniel Griesemer, and 29 cents a share for income tax provisions. Excluding those charges, Coldwater Creek’s loss totaled 4 cents a share. Analysts polled by Yahoo Finance had expected an adjusted loss of 3 cents a share, on average.

 

Sales in the quarter increased 16.7 percent, to $266.7 million from $228.5 million, and rose 14.4 percent at full-price stores on a same-store basis.

 

Though net sales increased, gross margin in the quarter fell 130 basis points to 36.4 percent of sales from 37.7 percent, partly because of increased promotions.

 

“While this strategy was successful at driving traffic and sales, the combination of substantial value pricing, discounting through promotions and an unsuccessful October sale led to more significant market deterioration than we had originally anticipated,” president and ceo Dennis Pence said on a conference call. “Overall, our promotional strategy was too aggressive as our product was on trend and resonated well with customers.”

 

In a research note dissecting Coldwater’s third quarter, Sterne Agee research analysts Margaret Whitfield and Jennifer Milan wrote the “reasons for [the] management change [are] now clear.”

 

In the first day of trading after the earnings announcement, shares of Coldwater dropped 76 cents to close at $4.59.

 

In the first nine months of fiscal 2009, Coldwater Creek posted a loss of $46.5 million, or 51 cents a share, versus a loss of $7.4 million, or 8 cents a share, in 2008. Net sales in the three quarters fell 2.8 percent to $720.2 million from $741 million.

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