COLDWATER CREEK SEES PROFITS DIVE
Byline: Jennifer Weitzman
NEW YORK — Higher expenses for Coldwater Creek’s catalogs, coupled with lower customer response to them, drove down Coldwater Creek’s first-quarter profits 62 percent.
The Sandpoint, Idaho-based multi-channel women’s apparel retailer reported profits fell to $1.4 million, or 13 cents a diluted share, for the three months ended June 2, beating internal estimates of 8 to 10 cents. However, the company reported profits of $3.6 million, or 34 cents, in the year-ago period.
Sales rose 16.9 percent to $112.9 million from $96.5 million.
On a conference call, Georgia Shonk-Simmons, president and chief executive, said Coldwater learned that, in difficult economic times, a multichannel retail strategy can be leveraged to increase traffic, balance sales and cut downside risks.
“Our emphasis on developing a seamless triple-retail channel model was a big contributor to our better than expected quarter,” Shonk-Simmons said. “When the catalog did not perform [in the quarter], we responded by driving Internet and retail sales.”
Unlike the circumstance in last year’s final quarter, she said, “We were driving full-price sales in all channels as the quarter progressed. That helped drive gross margins and give us confidence in our wear-now strategy.”
The ceo said the company has moved to selling more separates and accessories and away from complete ensembles, a result of the different way American women shop for apparel in a sluggish economy.
Gross profit during the quarter increased 17.9 percent to $49.6 million from $42 million. The firm’s selling, general and administrative expenses increased 30.5 percent to $47.4 million, or 42 percent of net sales, compared with $36.4 million, or 37.7 percent of net sales.
Donald Robson, chief financial officer and treasurer, said Coldwater’s margins and sales results were better than those experienced by its peer group. “I think [the customer] liked our differentiated merchandise assortment, extended sizes and appealing range in price points.”
Looking ahead, Shonk-Simmons said the company has pulled back on catalog circulation between 14 percent and 18 percent for the remainder of the year due to weaker-than-anticipated economic conditions. In addition, she said Coldwater Creek has a favorable combination of balanced staffing, more current inventories, effective cost reductions across the board, no debt and an improved cash flow.
Sales from its retail division increased 121.1 percent to $8.4 million from $3.8 million. Internet sales were up 139 percent to $34.9 million from $14.6 million and represented 30.9 percent of total sales in the quarter, from 15.1 percent.
The company said it expects second-quarter sales in the range of $85 to $90 million and EPS in the range of 10 to 12 cents, while third and fourth quarter results are expected to reach $150 to $155 million, with earnings of 64 to 67 cents, and $127 to $130 million, with EPS of 45 to 48 cents, respectively.
Last month, Matthew Dillon, a 20-year retail apparel veteran, joined Coldwater Creek’s executive team as vice president and director of merchandising. Dillon, who will be responsible for developing and selecting merchandise for the company’s multichannel retailing strategy, most recently served as senior vice president of merchandising and marketing for The Mark Group.