Coldwater Creek hits milestone

Coldwater Creek Inc. sold more than $1 billion worth of women’s apparel last year – marking a major milestone for Sandpoint’s homegrown retailer.

The company, founded in 1984 as a small mail-order retailer, has grown into a national brand with 239 stores.

Chairman and CEO Dennis Pence has been angling towards the $1 billion sales mark ever since 2003, when Coldwater Creek announced aggressive plans to open 400 to 500 stores within the decade. But even as Pence heralded the achievement this week, he announced new looks for the company’s Web site, catalog and store appearance, all aimed at bolstering sales.

The changes should result in stronger revenue during the second half of the year, Pence told analysts during a conference call.

Coldwater Creek failed to meet sales expectations during the fourth quarter, which included the all-important Christmas shopping season. Though the company outperformed many of its peers, more clothing sold at clearance prices, reducing the company’s profitability, according to Pence.

Coldwater Creek’s net income declined by 3 percent during the fourth quarter to $15.9 million, compared with last year’s fourth-quarter results. Gross profit was down 4 percent. Coldwater Creek’s fiscal year ended on Feb. 3.

“One theory is that it was an electronic Christmas, that she (the customer) was more focused on the color of her iPod than the color of her apparel,” Pence said.

In general, the women’s clothing industry suffered from “a lack of excitement” on the part of shoppers, he said. Customers didn’t see enough on the racks that they liked to trigger purchases, Pence said.

New designs for the company’s Web site and catalogs should appear within 90 days, Pence told analysts. Stores will get their new look before the fall merchandise appears on the racks. In addition, Coldwater Creek will spend $32 million this year promoting its brand through national advertising.

The changes should help lift shoppers’ malaise, according to Pence.

“I think it’s a question of how do we display the merchandise, how do we make it look? Can we make it more attractive, can we make it more compelling?” he said.

One bright spot for Coldwater Creek has been its new Spirit line – a “trendy, yet traditional” test line of clothing that recently debuted in 49 stores, officials said. Garments in the Spirit line sell in the $70 to $300 range, which is higher than the average sale prices in other company clothing lines.

Pence said that Coldwater Creek still plans to open 65 new stores this year, but it will hold off on hiring that was previously planned at the company’s corporate offices in Sandpoint. Raises are also on hold until the firm’s financial performance improves, Pence said.

Coldwater Creek will also continue testing the spa market in 2007, but it’s looking for ways to make the spas profitable faster, Pence said. The company will open three day spas adjacent to existing stores, with walk-through passages encouraging spa-goers to shop before their appointments, and shoppers to book spa appointments.

The six spas that opened last year didn’t have that connectivity, and sales have been slower than expected, Pence said.

If the walk-throughs don’t solve the problem, “obviously, to open a lot more spas is not a good idea,” he said.