COLDWATER WARNING HURTS SHARES

Byline: Jennifer Weitzman

NEW YORK — Shares of Coldwater Creek Inc. lost over a third of their value after the company said its third-quarter earnings could come in sharply lower than last year and that it anticipates a loss on a double-digit sales decline for the fourth quarter.
The purveyor of women’s apparel and accessories in catalogs, online and in stores, said lower earnings for the quarter just concluded were affected primarily by weak sales at its Northcountry catalog during the fall season.
The Sandpoint, Idaho-based retailer said it now expects earnings per share to range between 14 and 16 cents on sales of $139 million to $141 million for the third quarter ended Dec. 1, compared with earnings of 64 cents on sales of $136.6 million in last year’s quarter.
Coldwater shares lost $9.19, or 34.2 percent, to close at $17.71 on Nasdaq trading. Their 52-week range is $15.51 to $39.87.
“We continue to be directly impacted by the difficult sales environment in the retail industry and the overall effects of a tough economy on consumer confidence,” Georgia Shonk-Simmons, chief executive officer, said in a statement.
On a more positive note, she said inventories will be below previously announced guidance of $80 million to $85 million for the third quarter compared with last year’s inventory level of $85.5 million.
For the fourth quarter, the company expects a loss of $1.1 million to $1.5 million, or 10 to 15 cents a share, compared with earnings of $800,000, or 7 cents. In addition, sales are expected to fall at least 17 percent, ringing in between $104 million and $114 million versus $139 million in last year’s quarter. Still, Ellen Schlossberg, an analyst at Blair & Co., said she expects Coldwater Creek to decrease catalog circulation between 16 and 18 percent.
“Although the majority of our fourth-quarter business is still ahead of us, we anticipate a continued difficult retail environment through the holiday selling season,” Shonk-Simmons said. “We remain cautious about the postholiday season, given the aggressive promotional environment and ongoing clearance activity throughout the apparel industry.”
Schlossberg said catalog sales are expected to fall to 45 percent of total company sales in 2001, from 70 percent in 2000, while retail sales should grow to 15 percent of sales this year and 27 percent in 2002, up from 7 percent last year. Internet sales are expected to grow to 30 percent, up from 25 percent. The company grew this year to 29 retail stores and is expected to add another 20.
She said because Coldwater Creek is so reliant now on its fixed-cost catalog division, it was not surprising to see a huge swing in earnings per share. However, as the company diversifies with more retail stores and its Internet site, Coldwater Creek should over time see fewer swings as the business becomes less reliant on the high costs of catalog.

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