Knobias Clip Report (11-26-2008) CWTR
Submitted By Knobias ClipReport
CWTR: Management Discusses Better Than Expected Q3 Results
By Fain Hughes, fhughes@knobias.com
Shares of Coldwater Creek Inc. (CWTR) were higher on Wednesday after the Ciompany reported better than expected financial results for the third quarter ended November 1, 2008.
Net sales were $228.5 million, compared with $271.2 million in the third quarter of 2007. Comparable store sales declined 20.5 percent in the third quarter versus the third quarter of fiscal 2007. Net loss for the three-month period was $1.3 million, or $0.01 per share, compared with a net loss of $6.2 million, or $0.07 per share, for the three-month period ended November 3, 2007. That beat analysts estimates for a loss of $0.08 per share.
Daniel Griesemer, President and CEO of Coldwater Creek, commented in a conference call, “While we are not satisfied with our performance, we are pleased with the continued progress in improving the controllable aspects of our business including products, customer experience, inventory position and cost structure. Our better that anticipated results can be largely attributed to lower than expected customer return items, labor savings in our store operations and continued success in extracting costs across all other line items.”
He continued, “Although the macro environment is preventing our progress from being reflected in our sales results, we continue to significantly lower our cost structure. Our SG&A in Q3 was $29 million lower than last year despite 47 more stores. We also continue to make meaningful improvements in merchandise assortment and inventory management. We ended the quarter with inventories down 19% year-over-year. We also continue to be more strategic with regards to marketing and promotion. We have reduced our marketing spend by 33% from the same period last year by being more efficient with our investments.”
Mr. Griesemer explained, “Our cash position remains strong, and we are focused on reducing capital expenditures. We have decided to significantly reduce our store growth plans to 15 new stores instead of the previously planned 40 new stores. This will result in a meaningful reduction in capital expenditures. We continue to believe strongly in our retail opportunity, and we know that we have a great deal of growth ahead of us. However, we are committed to maintaining a solid and liquid financial position. This will allow us to return to our retail rollout strategy when the economic climate improves.”
He concluded, “We are taking the right steps to revitalize our business and restore our unique brand heritage. While this holiday season is long and in the early stages, we are cautiously optimistic that our unique product, outstanding customer service, compelling price points and strategic promotions will resonate with consumers in this very challenging economic environment.”
Tim Martin, CFO of Coldwater Creek, commented on the Company’s outlook and said, “Given the economic environment we feel that it is prudent to withdraw our guidance for Q4. However, we do expect to reduce our SG&A by over $20M in Q4 from the same period last year. We will also continue to manage our cash position to provide a solid financial business for the Company going forward.”
Roth Capital maintained a Hold rating for CWTR after higher than expected Q3 EPS. The firm still believes the shares will remain range-bound until the recovery becomes more visible.
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