Apparel maker reports 1st loss
Coldwater Creek Inc. Wednesday reported a loss for 2007, its first ever, and anticipated a 2008 with break-even results the best likely outcome.
The news cut the price of Coldwater shares more than 15 percent, to $4.25, in after-hours trading. The stock closed down 25 cents per share, at $5.04, during regular trading.
Net loss for the year that ended Feb. 2 was $2.5 million, or three cents per share, based on net sales of $1.15 billion. In 2006, Coldwater earned $55.4 million, or 59 cents per share, based on sales of $1.05 billion.
For the fourth quarter, the company reported a net loss of $17 million, or 19 cents per share, based on sales of $345.5 million. The company earned $15.9 million, or 17 cents per share, during the 2006 period, when sales were $366.6 million.
President and Chief Executive Officer Dan Griesemer said management strategy to return Coldwater to profitability will include better inventory control, fewer catalog mailings and sharp cutbacks in magazine advertising. There will be fewer sales, and more products will be purchased directly from the makers, he said.
The company had already announced 65 layoffs in December – 51 in Sandpoint – projecting a $6 million savings in 2008 as a result.
Griesemer said Coldwater will slow but not stop the pace of new-store openings, from 72 last year to 50 in 2008.
Several analysts participating in a conference call conducted after the earnings release questioned even the scaled-down expansion plans in an economic environment that so far has not been kind to mid-market retailers like Coldwater.
Competitor Chico’s FAS also fell Wednesday after reporting a loss for 2007 and declining to give a per-share outlook for 2008.
Coldwater Creek Senior Vice President and Chief Financial Officer Tim Martin said the company expects the economic slowdown to be brief, and beyond the company’s control in any event.
The “prudent” expansion can be funded internally, he said, noting landlords are offering attractive lease terms. The women’s apparel retailer has already signed leases for about half of the new locations.
Coldwater’s same-store sales – a common indicator of a retailer’s financial health – plunged 19.2 percent during the fourth quarter. Catalog and Internet sales fell 16 percent.
Georgia Shonk-Simmons, president and chief merchandizing officer, said Coldwater suffered because it compromised a brand that customers identified with the West, and a casual look stressing natural fibers and fit.
“We became part of what I call the ‘Circle of Sameness,’ ” she said.
To get back to its roots, Shonk-Simmons said, Coldwater was dropping its dressier, higher-priced Spirit Quest line. Denim was a bright spot last fall, she said, and the company will rely more heavily on that look this year.
She and the other executives predicted a rededication to customer desires will begin to turn Coldwater results around later this year and markedly by the holiday season.