Coldwater Creek Hot Streak Appears Likely To Continue Strong Sales Gains Reinforce Wall Street’s High Expectations
If Coldwater Creek is a snapshot of the strong national economy, then Dennis Pence may be his own Alan Greenspan.
While the Fed chairman cautiously warns against “excessive optimism” and “irrational exuberance” in the face of a high-performance economic machine, Pence, the chairman and CEO of Coldwater Creek, the Sandpoint-based retailer, preaches restrained expectations, despite sales that increased almost 90 percent in fiscal 1996 and 122 percent in the first half of this fiscal year.
“We still remain conservative; it’s the nature of who we are,” said Pence, who co-founded the mail-order catalog company with his wife, Ann, in 1984.
But unlike Greenspan, who can furrow his brow and strike fear into financial markets, Pence’s conservatism hasn’t tempered company growth. Coldwater Creek has been a fixture on the Inc. magazine list of 500 fastest-growing companies for the past four years. Since 1992, the catalog firm has chalked up average annual sales growth of more than 66 percent.
Last fiscal year, Coldwater Creek’s net sales topped $143 million, placing it on the roster of America’s 200 Best Small Companies in the latest edition of Forbes magazine.
“The analysts are predicting us to be in excess of $200 million in sales by the end of this year,” Pence said. “Now that we’re a public company, the growth expectations no longer come from us, they come from Wall Street analysts.”
One of those analysts - Piper Jaffray’s Alan Rifkin - gave the stock a “buy” rating on Monday.
“If you look at what this company has done in its short history, it’s amazing,” Rifkin said. “Their growth in revenue is four times higher than the next-largest revenue-producer in catalogers.”
Rifkin based his investment recommendation on a strong balance sheet and what he called an equally strong management team.
“Namely Dennis and Ann Pence,” the analyst said. “But when you have a company that’s doing north of $200 million in sales, it’s not a two-person show anymore.”
Coldwater began trading on the Nasdaq Jan. 29, with an initial offering of 2.5 million shares. The stock opened at $15.88 and closed up a dollar after the first day of trading. The stock dropped to $10 a share in April, then soared to $35 last month. It closed Thursday at $26.
Rifkin expects the stock to close its first year on the Nasdaq up 23 percent from this week’s mark at about $32. Over the long term, sales should march upward at 30 percent with earnings maintaining a 25 percent pace, he said.
Growth is pushing at company boundaries. On Sept. 30, the mail-order firm announced plans to build an East Coast distribution center in Parkersburg, W.V. Slated to open in January 1999, the 400,000-square-foot facility will mirror the company warehouse and shipping plant just east of Sandpoint.
“Our East Coast base of customers has grown to represent about 70 percent of our business,” said Karen Reed, vice president of catalog marketing. “Having a warehouse there will allow us to ship to those customers more quickly.”
Jim Kinnett, president and CEO of the Parkersburg/Wood County Area Development Corp., said Coldwater Creek’s addition of 400 new jobs to his region will put the company among the top 15 employers in his two-county territory.
On hand for Pence’s announcement of the $30 million distribution center were West Virginia Gov. Cecil Underwood, a host of local officials, economic development experts and two high school marching bands.
“We felt Coldwater Creek deserved some high-profile recognition,” Kinnett said. “The geographic areas around us have welcomed them with open arms.”
The Parkersburg project won’t result in lost jobs in North Idaho, but the corporate campus near Sandpoint will become “stagnant in size,” Reed said.
“We won’t continue to grow by the hundreds of people the way we’ve done in the past,” she said.
Don’t look for stagnation any time soon, though.
As the company ramps up for the hectic holiday season, the payroll could grow to 1,700 full-time and part-time workers, making Coldwater Creek the largest employer in North Idaho, according to Kathryn Tacke, labor market analyst for the Job Service office in Coeur d’Alene.
By year’s end, the payroll is expected to top $18.9 million.
The problem Pence faces now is finding enough workers.
“In Bonner County, there are only so many available people in the pool,” he said. “That means additional jobs would occur somewhere else - we just can’t keep growing at this rate here.”
That bodes well for Kootenai County, where the firm’s call center has grown from 120 service representatives when it opened in July 1996, to more than 275 this month.
“And we’re headed to about 450 in Coeur d’Alene,” said Karen Clark, employment and recruitment manager for the mail-order firm.
Wages in the call operations and distribution center start at $6.50 per hour and top out at $9.75. Once a full-time employee passes the six-month threshold and becomes a “creeker,” they are eligible for what Pence called “world-class benefits.”
“We offer the kind of package that competes with any urban area,” he said, citing a list of benefits that includes full medical, dental and vision coverage for employees and their dependents, a 401(k) plan, profit sharing, prenatal care, life insurance, long-term disability, maternity/ paternity leave, bereavement leave, legal consultation, crisis counseling and merchandise discounts.
“The issue now is that we’re just not finding people with the skills to take advantage of those benefits.”
Coldwater Creek accepted fewer than 20 percent of job seekers from the 2,800 applications reviewed in its most recent hiring blitz.
To broaden the field, Randy Long, director of human resources, has set up “hiring kiosks” at both the Silver Lake Mall and the Spokane Valley Mall.
“We’re taking some extraordinary means to recruit folks,” said Long. “If you look at the market in North Idaho and Eastern Washington, it’s pretty tight because unemployment is low.”
To ensure that quality employees stay put, Coldwater Creek has shifted its focus to keeping workers for the long haul, as opposed to the former practice of staffing the holidays with “seasonals.”
“You can throw that term out the door,” Clark said. “Of our current managers, 67 percent have come up through the ranks.”
Several of those people went on to management positions at the company’s new retail outlets that opened earlier this year in Jackson Hole, Wyo., and Seaside, Ore. Others have been tapped for supervisory roles at the 18,000-square-foot Coldwater Creek bridge mall in downtown Sandpoint.
Due to the newness of most retail properties, no year-to-date comparisons are available for that side of the business. But traditionally, retail activity has represented only about 3 percent of total sales.
“I see that doubling as a percentage of revenue going forward because of the new retail outlets and the possibility of more clearance stores,” Rifkin predicted.
European business also claims a small slice of the profit pie.
In Japan, however, Coldwater Creek is taking steps to groom what is expected to be a primary international growth market. The firm now employs six Japanese-speaking service representatives and steps are being taken to make catalog transactions easier for customers in the island nation.
“We’re translating our Spirit of the West catalog into Japanese and offering merchandise in yen,” Reed said. “These are things we feel will help us expand in the Japanese market.”
Pence has had only one rollback during his 13-year history of marketing apparel, gifts and household accessories to a clientele of mostly affluent, 35- to 55-year-old urban dwellers. An environmental gift catalog was dropped in 1997 and replaced by a new bed and bath offering. Like the Coldwater Creek chairman, the tastes of catalog customers have become more conservative with time.
“We had a book called EcoSong where we saw not only ourselves but our competitors not doing well,” Pence said. “The market changed as the baby boomers lost interest in environmental gifts and started spending more time at home.
“When the market moves, you move with it or risk losing it.”
, DataTimes ILLUSTRATION: Color Photo; Graphic: Coldwater Creek profile