This summary is based on the first quarter fiscal 2008 earnings call conducted by Coldwater Creek Inc. (CWTR) on May 28, 2008.
Management:
President and CEO: Daniel Driesemer
SVP and CFO: Tim Martin
President and CMO: Georgia Shon-Simmons
Director, IR: Marie Hirsch
Key Investor Issues
- The Q1 net loss was 10 cents versus EPS of 13 cents in Q1 of 2007.
- Q1 consolidated net sales decreased from $281.3 million to $271.1 million.
- Full year 2008 sales are forecast to be in the range of $1.085 billion to $1.150 billion.
First-Quarter Financial Highlights
The company posted a net loss of $9.2 million or 10 cents per share.
- This is in comparison with net income of $12 million or 13 cents per share for the same period last year.
The consolidated net sales for the quarter dipped 3.6% to $271.1 million from $281.3 million in the first quarter of 2007.
- The net sales from the retail segment were down 1.2% at $182.7 million compared with $184.9 million in Q1 of 2007.
- The retail segment net sales represented 67.4% of the company’s total net sales versus 65.7% in the same period last year.
- The company opened nine retail stores during the quarter.
- With comparable store sales down, the comparable store traffic weakened 9.4% while the comparable store conversion rate firmed by about 150 basis points.
- The direct segment net sales decreased 8.3% to $88.4 million during the quarter from $96.4 million in Q1 of 2007.
- The Q1 direct segment net sales represented about 32.6% of the company’s total net sales compared with 34.3% in Q1 of 2007.
Despite the losses, the company delivered results that are ahead of expectations.
- Q1 sales of $271 million with a net loss of 10 cents per share were superior to the guidance of a loss of 14 cents to 17 cents range.
- In line with expectations, the company is experiencing traffic declines, with customer traffic down 9.4% during the quarter.
- Together with the lower average retail and transaction values, the traffic declines resulted in a same-store sales dip of 19% during the quarter. This was marginally better than the previous issued guidance of down in the low 20s.
- On a year-over-year comparison, Q1 of 2007 was the best quarter in the history of the company and comparisons are forecast to be easier going forward.
The gross profit for the quarter was $92.8 million or 34.2% of net sales compared with $128.5 million or 45.7% of net sales in Q1 of 2007.
The dip in gross profit was due to markdowns related to inventory clearance activity.
The SG&A expenses for the quarter were $107.8 million or 39.8% of net sales versus $110.7 million or 39.4% of net sales in the year ago quarter.
The reduction in SG&A expense was due to leveraging the existing SG&A, improved operating efficiencies, reduced marketing spend and various cost saving initiatives.
- The company incurred a Q1 loss from operations of $15 million versus income from operations of $17.8 million in the same period last year.
The effectiveness of the triple channel business model allowed the company to end the quarter with premium retail inventory.
- The distribution center was down 16% per square foot from the first quarter of last year.
- The decrease is significant given the addition of 63 premium retail stores or 29% retail square footage over the same period.
- The management reduced inventory by $13.4 million since year end from $140 million to $126.6 million or 12% per square foot.
