This summary is based on the third quarter fiscal 2008 earnings call conducted by Coldwater Creek Incorporated (CWTR) on November 25, 2008.
Management:
ICR: Andrew Greenbaum
President, Chief Executive Officer: Daniel Griesemer
President, Chief Merchandising Officer: Georgia Shonk-Simmons
Senior Vice President, Chief Financial Officer: Tim Martin
Key Investors Issues
- EPS were a loss of 1 cent per share compared to a loss of 7 cents a share last year.
- Net loss narrowed to $1.3 million from a net loss of $6.2 million in the same quarter last year.
- Revenue decreased to $228.5 million from $271.2 million a year ago.
Third Quarter Highlights
Net loss was $1.3 million or 1 cent per share compared with the net loss of $6.2 million or 7 cents per share for the same period a year ago.
Consolidated net sales decreased 15.7% to $228.5 million from $271.2 million in the third quarter of 2007. This was primarily a result of the decrease in retail store traffic and lower direct channel sales.
Net sales in the retail segment, which includes premium retail stores, outlet stores, and day spa locations, were down 5.8% to $175.4 million compared to $186.3 million in the third quarter of 2007.
- Retail segment net sales represented 76.8% of the company’s total net sales compared with 68.7% in the third quarter of 2007.
- The company opened 19 retail stores for a total of 341 premium retail stores in operation at the end of the period, which compared to 294 premium retail stores at the end of the third quarter last year.
- Full store sales decreased 20.5% compared with a 13.6% decrease in the prior year period.
- Comparable store traffic was down 20.5% while premium comparable store conversion rate was down approximately 90 basis points.
- Direct segment net sales decreased 37.5% to $53 million from $84.9 million in the third quarter of 2007.
- Direct segment net sales represented approximately 23.2% of the company’s total net sales compared with 31.3% in the third quarter of 2007.
- Gross profit was $86.1 million or 37.7% of net sales compared with $107.8 million or 39.8% of net sales for the third quarter of 2007. The decrease in gross profit rate was primarily due to de-leveraging of occupancy costs due to the lower same store sales.
- Selling, general, and administrative expenses were $88.8 million or 38.9% of net sales, compared with $117.6 million or 43.4% of net sales for the 2007 third quarter. The decrease in SG&A expense of approximately $28.8 million was driven primarily by reduced marketing expense and other cost saving initiatives. Operating loss was $2.7 million compared with an operating loss of $10.3 million in the third quarter of 2007.
- The company ended the quarter with $72 million in cash, in addition to full availability under $60 million revolving credit facility which expires in January of 2012.
- Cash is seasonally low because of inventory buildup for holiday season and the company continues to be confident that we will end the year with more than $75 million in cash, up from the $62 million it began the year with.
- The company ended the quarter with premium retail inventory, including the distribution center, down 18.6% per square foot from the third quarter of last year.
- Whole inventory decreased 11.7% to $171.4 million compared to $194 million at the end of the third quarter of 2007. This decrease is given the addition of 47 premium retail stores or 17.7% premium retail store square footage growth over that same period.
- Despite the challenging quarter, cash flow from operations was $6.2 million versus cash flow use from operations was $7 million in the third quarter of 2007.
- Capital expenditures totaled $23.2 million, primarily related to our new store construction and Information Technology initiatives.
- Depreciation and amortization was $14.5 million.
Year-to-Date Financial Highlights
- Net sales were $741 million versus $805.9 million in the same period last year.
- Net loss was $7.4 million or 8 cents per share compared with net income of $14.5 million or 15 cents per share in the first nine months of 2007.
- Results include a pre-tax, non-cash impairment charge related to Coldwater Creek Spa of $1.5 million or 1 cent per share after tax.
Fourth Quarter 2008 Outlook
- Regarding the other major components of cash flow, the company expects to further reduce inventory levels. The company expects total inventory will decrease approximately 10% from the end of fiscal 2007.
- The company expects to reduce SG&A by over $20 million versus the prior year quarter.
Fiscal 2008 Outlook
- The company expects depreciation and amortization will come in at approximately $70 million.
- The company anticipates that capital expenditures will be approximately $75 million and primarily relate to new store construction and Information Technology.
Fiscal 2008 Outlook
