Byline: Arnold J. Karr

NEW YORK — Elevated by improved margins and the rapid growth of Internet sales, Coldwater Creek Inc. posted sharply higher earnings for the fourth quarter and year ended Feb. 26.
Net income for the fourth quarter rose 21.3 percent to $6.0 million, or 56 cents per diluted share, versus $4.9 million, or 48 cents, in the prior year’s quarter. Sales for the quarter rose 18.9 percent, to $102.1 million from $85.9 million (less sales of the Milepost Four catalog, which was sold last July).
The company said its Internet sales were $13.1 million during the fourth quarter, 12.8 percent of company revenues and more than 65 times those of the prior year’s quarter. During the third quarter, Internet sales accounted for 9.9 percent of sales, or $10 million. Dennis Pence, chief executive of the company and president of its Internet Sales unit, said in a statement that the firm expected to double its Web site’s share of company sales during the current fiscal year, to 25 percent of revenues. He pointed out that the site “is already profitable, with operating profit margins, on a pro forma basis, in the high single digits.”
Pence also noted that the site had proved such an effective vehicle for dealing with closeouts that the company had terminated three leases for outlet stores in 1999 and would terminate three more outlet leases this year.
The company’s Direct Channel, which includes the Internet unit as well as its numerous catalogs, generated sales of $98.2 million during the quarter, up 16.4 percent from the $84.4 million in catalog and Web sales during the final quarter of 1998.
Karen Reed, vice president and director of Internet for Coldwater Creek, told WWD that the company’s Web site, which has featured all its products since last summer, “is generating new traffic that isn’t necessarily linked to our catalog. It’s a combination of [customer] retention and acquisition.”
She noted that many of those purchasing from the company’s Web site, which carries only the Coldwater Creek brand, were making Web purchases for the first time. “As a result, we’re doing a lot of hand-holding,” she said. “During a given week, between 10 and 20 percent of those making purchases are calling us up.”
Reed noted that while bestsellers on the Web tend to be the same as those in the company’s catalogs, the approach to shopping is different. “We like to tell a story in our catalogs, but creating the same romantic feeling on the Internet isn’t easy,” she said. “The Internet tends to lend itself to a more surgical, purposeful type of shopping. Our furniture and hard goods are a tougher sell on the Web, and a $50 dress may fare better if the customer is only looking at thumbnails.”
With the opening of its third and fourth retail stores, in Kansas City and Seattle, Retail Channel sales more than doubled in the quarter, to $3.9 million from $1.5 million.