Coldwater Q3 operating results in line with revised outlook
Coldwater Creek Inc reported financial results for the three- and nine-month periods ended October 30, 2010.
Third Quarter 2010 Operating Results
• Net sales were $232.4 million, compared with $266.7 million in the fiscal 2009 third quarter. Net sales from the retail segment, which includes the Company's premium retail stores, outlet stores and day spa locations, decreased 15.9 percent to $174.3 million, versus $207.3 million in the same period last year, primarily reflecting a decrease in comparable premium retail store sales of 20.1 percent. Third quarter net sales from the direct segment, which includes internet, phone and mail orders, decreased 2.1 percent to $58.1 million from $59.4 million in the same period last year.
• Gross profit for the fiscal 2010 third quarter was $70.9 million, or 30.5 percent of net sales, compared with $97.1 million, or 36.4 percent of net sales, for the fiscal 2009 third quarter. The 590 basis point decline in gross profit margin was primarily due to increased promotional activity and deleveraging of occupancy expenses as compared to last year, which was partially offset by improvements in IMU.
• Selling, general and administrative expenses ("SG&A") for the fiscal 2010 third quarter were $85.4 million, or 36.8 percent of net sales, compared with $108.2 million, or 40.6 percent of net sales, for the fiscal 2009 third quarter. The decline in SG&A was driven primarily by lower employee-related expenses, marketing expenses, and other fixed and variable costs. Employee-related expenses in the fiscal 2009 third quarter included separation agreement charges of $6.0 million.
• Net loss for the three-month period was $10.9 million, or $0.12 per share, compared with a net loss of $34.0 million, or $0.37 per share, for the three-month period ended October 31, 2009. Results in the third quarter of fiscal 2010 include approximately $0.9 million after tax, or $0.01 per share, of certain discrete tax benefits primarily related to the change in valuation allowance, partially offset by impairments of certain technology and store related assets. For the third quarter 2009, net loss per share included approximately $0.33 per share in charges related to a valuation allowance against net deferred tax assets and separation agreement charges.
"Our third quarter operating results were in line with the revised outlook we provided in mid October. This was a disappointing quarter for us as our fall merchandise assortment was not well received by our customers," stated Dennis Pence, Chairman and Chief Executive Officer of Coldwater Creek. "On a positive note, we continued to tightly manage expenses with SG&A for the quarter down approximately $23 million from the third fiscal quarter last year."
Mr. Pence continued, "We expect the challenges we experienced in fall to continue during the fourth quarter. As we move forward, our highest priority is to continue to reposition the Coldwater Creek brand to better address the needs of our target demographic. We are focused on improving our collections to offer a more compelling fashion sensibility and while we recognize that the transition will take some time, our April deliveries will begin to reflect our new design aesthetic being led by Jerome Jessup and his new design team."