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Coldwater Creek sees its refocusing pay off

Clothing retailer hit hard by recession

After two tough years of losses and management reshuffling, Sandpoint’s Coldwater Creek can point to progress as it pushes its way back to profitability.

Some of the changes have been forced upon Coldwater Creek because of internal factors, including a surplus of retail stores and a history of primarily selling to women older than 55.

But industrywide factors also are forcing Coldwater Creek and competitors like Chico’s FAS and Talbots to adjust to the recession with smaller stores, slimmer inventories and shorter times between production and delivery of new items to stores.

“I think we’re encouraged by the progress we’re making,” said Lyn Walther, the publicly traded company’s director of investor relations and communications.

Walther said Coldwater Creek is predicting a loss of 15 to 20 cents a share in its next fiscal quarter, compared to losing 30 cents per share in the second quarter of 2011.

The company is not willing to look further ahead and speculate when it could return to sustained profitability.

But the first quarter showed that progress is happening: It shrank its quarterly loss to $23.8 million, or 20 cents per share, compared with a loss of $30 million, or 32 cents per share, in the first quarter of 2011.

Walther added that Coldwater Creek is operating more efficiently and with lower expenses than in 2010.

“From fiscal 2007 to fiscal 2011 we have (reduced) our costs of business by over $140 million,” she said.

CEO Dennis Pence, who started the company in 1984, left and then came back as CEO in 2009, noted in May’s earnings report that plans to cut costs and improve sales margins have moved the company in the right direction.

He said also that the company is refocusing its marketing, trying to reach younger consumers. It’s now defining its customer sweet spot as women in their early 50s. While pitching fashions toward a younger market, Pence said he’s convinced the company will continue appealing to its older customers.

It’s also revamping its collections, putting more emphasis on colors, prints and patterns, Pence noted.

Walther added that the company will close 15 retail or outlet stores this year, part of the companywide goal of cutting 35 to 45 stores between 2011 and 2013. And some of the stores it will continue operating will be reduced in size to increase productivity, according to the company’s 2011 end of fiscal year earnings report.

The company has no plans to shut the nine spas opened in the past several years.

The company continues to operate direct-sales efforts via online and catalogs. It has 6,900 employees companywide. Of those, 590 are in Idaho.

Walther said the company is also undertaking other efforts to rebalance the source of the apparel being made offshore. Like many specialty retailers, Coldwater Creek relies heavily on Chinese factories. The plan is to shift some production to other sources, she added.

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