Byline: David Lipke

NEW YORK — The promotional climate at retail depressed Coldwater Creek’s second-quarter margins and earnings, but sales continued to climb on the strength of new stores and a growing e-commerce business.
For the three months ended Sept. 1, 2001, the Sandpoint, Idaho-based retailer posted net income of $1.3 million, or 12 cents a diluted share, down 28.3 percent from $1.8 million, or 17 cents, in the year-ago quarter.
Net sales increased 7.6 percent, to $92.8 million from $86.3 million in the same period last year.
The results beat the First Call/Thomson Financial consensus estimate by one cent, and president and chief executive officer Georgia Shonk-Simmons highlighted the success of the retailer’s “wear now” strategy on a conference call with analysts. The company shifted fall merchandise into the third quarter, because “customers no longer rush out to buy heavy fall merchandise in the heat of summer,” said Shonk-Simmons.
By channel, sales in Coldwater Creek’s retail stores jumped 91.8 percent, to $11.7 million. Coldwater Creek operated 14 retail doors at the end of this year’s quarter, up from five locations a year ago. New stores were opened in Boston, Charlotte, N.C., and Sherman Oaks, Calif. during the 2001 quarter.
Direct sales, encompassing catalog and Internet, grew 1.1 percent, to $81.1 million. Catalog sales in the quarter were $52.4 million, down from $59.1 million a year ago, while online sales rose to $28.7 million, from $21.1 million last year. Internet sales comprised 30.9 percent of total sales, up from 24.4 percent last year.
Gross margin in the quarter declined to 42.3 percent of sales, down from 45.8 percent in last year’s quarter, which the company attributed to clearance activity.
Selling, general and administrative costs declined to 40.1 percent of sales, from 42.7 percent, due to the company’s reduction of its catalog marketing efforts and continued cost-containment initiatives. Inventories grew 5.1 percent from March 3, to $69.5 million, but were down $10 million from a year ago.
“Inventory decreased from a year ago, despite the growth in retail stores,” noted analyst Bob Toomey of Dain Rauscher Inc. “It’s extremely important to keep a tight rein on inventory in this promotional environment, and they did a great job in the quarter. In addition, they are using technology and database management to maximize the efficiency of their catalog.”
Shonk-Simmons said total sales dropped by 34 percent in the days following the Sept. 11 terrorist attacks, but had picked up in the last two weeks. Third-quarter earnings per share are anticipated at 42 to 47 cents, on sales of $142 million to $146 million, compared with a year-ago EPS of 64 cents on sales of $123.7 million.
For the six months, income was $2.7 million, or 25 cents, down 50.5 percent from $5.4 million, or 50 cents, in the same period last year. Sales grew 12.5 percent, to $205.7 million from $182.8 million last year.

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