CACHE GETTING IT RIGHT
Byline: David Moin / Jennifer Weitzman
NEW YORK — Cache’s new cachet seems to be catching on.
On Thursday, the Cache Inc. specialty chain reported that for the first quarter ended March 30, income rose 54.9 percent to $1.9 million, or 20 cents a diluted share. And Wall Street rewarded the company by ratcheting up the share price $2.85, or about 40 percent, to close at $10 on the Nasdaq, shattering the previous 52-week high of $7.94 attained last month.
It was Cache’s third consecutive quarter of profit increase, after years of marginal profitability and a flawed fashion philosophy. Over the past year, however, Cache has implemented a narrower presentation focused on contemporary and dressy casual styles, cocktail dresses and day-into-evening looks. The company has recently been selling more items in depth. It also has brought down prices to the better range, and has been differentiating from such competitors as Bebe or Rampage with a wider size and age appeal.
“Everybody cross-shops, but we really don’t have that duplicated kind of merchandise that you find elsewhere,” said Brian Woolf, chairman and chief executive officer, who joined Cache in October 2000 and previously ran The Limited Stores division of The Limited Inc.
“We’ve changed from an upscale boutique to a mall-based specialty-store operator with the disciplines associated with specialty-store operators,” added Thomas Reinckens, president and chief operating officer.
Sales in the last quarter rose 7.8 percent to $47.6 million, from $44.2 million. Same-store sales rose 5 percent and gross margins improved 660 basis points. A year ago, the company earned $1.2 million, or 13 cents, but that included $964,000 from a favorable litigation settlement.
Feeling more confident, Cache has decided to expand again, planning 15 to 20 openings this year. Executives envision the Cache chain adding 100 stores to the current 199 to cap at around 300 units. The company also operates 25 Lillie Rubin stores, which appeal to older customers seeking more sophisticated and forward looks, and says there’s the potential to add another 75 Lillie Rubins in three to five years. Of the 15 to 20 openings for this year, four or five will be Lillie Rubin. In addition, Cache this year has stepped up marketing, tripling the budget for outdoor and magazine advertising and direct mail to $4 million.
Woolf said he would be disappointed if Cache’s full-year earnings did not reach 75 cents, compared with 36 cents last year, based on current trends. In addition, he said he expects full-year sales to reach between $190 million and $200 million, and between $275 million and $300 million by 2004, based on a 15 percent compounded annual growth rate.
Cache stores average 2,000 square feet, with about 60 percent of the volume in sportswear, 30 percent dresses and 10 percent accessories. The merchandise is 75 percent sourced from domestic suppliers that provide exclusives and quicker deliveries — four to five weeks from the time Cache makes its selection.