Dramatic improvement in Cache's bottom line results

18 May '11

4 min read

Cache Inc, a specialty chain of women's apparel stores, reported results for the thirteen week period ended April 2, 2011.

For the 13-week period ended April 2, 2011:

• Net sales increased 7.3% to $52.1 million from $48.6 million in the first quarter of fiscal 2010. Comparable store sales increased 7.7%, which compares to a decline of 6.8% in the first quarter of fiscal 2010;
• Gross profit increased 31.1% to $21.9 million, or 42.1% of net sales from $16.7 million, or 34.4% of net sales in the first quarter of fiscal 2010;
• Operating loss totaled $1.3 million, as compared to $6.6 million in the first quarter of fiscal 2010; and
• Net loss totaled $772,000, or $0.06 per share, as compared to a net loss of $4.1 million or $0.32 per share in the first quarter of fiscal 2010.

Thomas Reinckens, Chairman and Chief Executive Officer, commented: “The first quarter marked a pivotal period for our Company, whereby we saw the initial benefits of our 2010 initiatives that strengthened our design and merchandising leadership and enhanced our business processes. During the quarter, we reported a 7.7% increase in comparable stores sales, a 770 basis point increase in gross profit margin and a dramatic improvement in our bottom line results, despite the shift of Easter to our second quarter.

“Importantly, our customers are responding favorably to our assortments across categories, our marketing has elevated our brand with consumers and we have an improved operating platform, which we believe will sustain our positive momentum in 2011 and beyond. For the first five weeks of our second quarter, our comparable store sales are slightly ahead of our plan, which is a further testament to the successful implementation and progress of our initiatives. We now expect second quarter fiscal 2011 earnings at the high end of our previous guidance range and continue to expect to achieve solid profitability in the first half of fiscal 2011.”

First Quarter Operating Results

Gross profit for the first quarter of fiscal 2011 was $21.9 million, or 42.1% of net sales, compared to $16.7 million, or 34.4% of net sales, in the first quarter of fiscal 2010. The 770 basis point improvement in gross profit margin was primarily driven by lower markdowns, as well as the leverage impact from higher sales as it relates to operational costs in our design, production and sourcing departments, as compared to the prior year.

In total, operating expenses were $23.2 million, or 44.5% of net sales, as compared to $23.3 million, or 48.1% of net sales, in the first quarter of fiscal 2010. The slight decrease in operating expenses was primarily due to reductions in advertising, depreciation and other store operating expenses, partially offset by an increase in corporate payroll expenses and professional/legal fees.

At April 2, 2011, cash and marketable securities totaled $21.2 million, as compared to $27.6 million in cash and marketable securities at April 3, 2010. Total inventory at cost increased 18.9% and compares to a decline of 25.8% at the end of the first quarter of fiscal 2010. The Company noted it is comfortable with the content and level of inventory at quarter end, with growth supporting its improved design and production calendar.

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