Coldwater Creek Incorporated (CWTR: chart)
Q3 2008 Earnings Call Transcript
November 25, 2008 4:45 p.m. ET

Executives

Andrew Greenbaum – Investor Relations
Daniel Griesemer – President, Chief Executive Officer
Georgia Shonk-Simmons – President, Chief Merchandising Officer
Timothy Martin – Senior Vice President, Chief Financial Officer

Analysts

Elizabeth Pierce - Roth Capital Partners, LLC
Christopher Kim – J.P. Morgan Chase & Co.
Liz Dunn - Thomas Weisel Partners LLC

Presentation

Operator

Greetings and welcome to the Coldwater Creek Incorporated third quarter fiscal year 2008 conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press “*0” on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Andrew Greenbaum of ICR. Thank you, Mr. Greenbaum. You may begin.

Andrew Greenbaum

Thank you Operator and good afternoon everyone. With me on the call today are Daniel Griesemer, President and Chief Executive Officer; Georgia Shonk-Simmons, President and Chief Merchandising Officer; and Tim Martin, Senior Vice President and Chief Financial Officer.

I would like to remind everyone that the statements contained in this conference call are non-historical facts and constitute forward-looking statements within the meaning of the securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially than those expressed or implied by such statements. These risks and uncertainties are described in the company’s filings with the Securities and Exchange Commission. No one should assume later in the quarter that the comments we provide today are still valid. Moreover, we are not undertaking any obligation to provide updates in the future. With that, I’d like to turn the call over to Daniel Griesemer, President, and Chief Executive Officer.

Daniel Griesemer

Thank you Andrew. Good afternoon everyone and thank you for joining us today as we discuss our results for the third quarter of fiscal 2008. During today’s call, I will briefly review our third quarter results and then spend a few minutes updating you on current business trends and our long term strategic initiatives.

Tim will then give you additional detail on our financial results and strong liquidity position, and Georgia will provide a more comprehensive update on our merchandise including a discussion of our fall and holiday products, and I will conclude the prepared portion of the call with a few closing remarks before we take your questions.

Our third quarter results reflect the challenging environment for both consumers and retailers. While we are not satisfied with our financial performance, we are pleased with our continued progress on improving the controllable aspects of our business, including our product and customer experience, our inventory position and our cost structure.

Our third quarter sales were $228 million for the loss of $0.01 per share, ahead of our revised guidance of sales of approximately $225 million and a loss per share of $0.07 to $0.09. Our better than anticipated financial results can largely be attributed to three areas; lower than anticipated customer returns, labor savings in our store operations, and continued success in extracting costs across all other line items.

On our last call in early November, I discussed the significant deterioration of our traffic during the third quarter as the macro environment grew increasingly challenging, starting the second weekend in October. While we started the quarter building off our relatively strong second quarter performance, we ended the quarter with a 20.5% decrease in same store sales and comp store traffic down similarly.

Although the macro environment is preventing our progress from being reflected in our sales results, we continue to significantly lower our cost structure as evidenced in our third quarter SG&A which was $29 million lower than last year, despite 47 more stores. We have also continued to make meaningful improvements in both our merchandise assortment and inventory management. We ended the quarter with inventories down per square foot 19% year-over-year.

Our performance demonstrates our management team and employees’ abilities to stay focused on strengthening our business fundamentals and improving our product and customer experience. We are very fortunate to have such a dedicated and results driven group of people at all levels of the organization. We believe that we are taking the right steps to revitalize our business and I’d now like to take a moment to discuss why we are so confident about the direction of our new merchandise and our ability to restore our brand’s unique heritage.

We believe that our holiday collection is the best assortment that we’ve featured in several years. It truly captures the essence of our casual brand and is differentiated from both our past product and our competitors. One of our key merchandise strategies has been to reduce our style and color count. We have sharpened our focus on the core categories that we know are most appropriate for our customers.