- Published: 04 March 2010
- Written by Editor
Coldwater Creek Announces Fourth Quarter and Fiscal 2009 Results
Coldwater Creek Inc. (Nasdaq: CWTR) today reported financial results for the three-month and twelve-month periods ended January 30, 2010.
Fourth Quarter 2009 Operating Results
-- Net sales were $318.4 million, compared with $283.2 million in the fiscal 2008 fourth quarter. Sales from the retail segment, which includes the Company's premium retail stores, outlet stores, and day spa locations, were $221.0 million versus $199.7 million in the fiscal 2008 fourth quarter. Comparable premium store sales increased 8.9 percent in the fourth quarter versus the fourth quarter of fiscal 2008. Direct sales (phone and internet) were $97.3 million, compared with $83.5 million in the same period last year.
-- Gross profit for the fiscal 2009 fourth quarter was $90.3 million, or
28.4 percent of net sales, compared with $76.0 million, or 26.8 percent
of net sales, for the fiscal 2008 fourth quarter. The increase in gross
profit was primarily due to an increase in merchandise margin and
leverage of occupancy expenses resulting from higher sales.
-- Selling, general and administrative expenses for the fiscal 2009 fourth
quarter were $105.2 million, or 33.0 percent of net sales, compared with
$110.3 million, or 38.9 percent of net sales, for the fiscal 2008 fourth
quarter. The decrease in selling, general and administrative expenses of
approximately $5.1 million was driven by lower employee costs, partially
offset by higher marketing expense as compared with the fourth quarter
last year.
-- Operating loss for the fourth quarter was $15.5 million, reflecting an
improvement of $18.8 million from an operating loss of $34.3 million for
the fiscal 2008 fourth quarter.
-- Net loss for the fourth quarter was $9.7 million, or $0.11 per share,
compared with net loss of $18.6 million, or $0.20 per share, for the
fiscal 2008 fourth quarter. Net loss for fourth quarter 2009 included a
$0.6 million non-cash charge related to certain premium retail store
asset impairments, or approximately $0.01 per share.
Dennis Pence, Chairman and Chief Executive Officer of Coldwater Creek, commented, "Our fourth quarter results were significantly ahead of the prior year as we began to see an improvement in our comparable store sales and direct revenue, as well as a modest expansion in merchandise margin. In addition, we continued to focus on expense discipline and ended the quarter with a strong balance sheet. While we are disappointed to report a loss in fiscal 2009, we are confident that we are taking the right steps to position the company for profitability and growth."
"For fiscal 2010, we expect to improve merchandise margin as we re-balance our assortments, align our pricing with the high quality and fashion inherent in our product lines, and continue to modify our quarterly sale events," Mr. Pence continued. "In addition, we have a renewed discipline towards inventory management that is focused on ensuring that our inventory investments are aligned with the current economic conditions. At the same time, we will continue to tightly manage expense and capital investments. We expect these efforts to result in a consistent improvement in our operating results in fiscal year 2010."
Fiscal Year 2009 Operating Results
-- Net sales were $1,038.6 million, compared with $1,024.2 million in the
twelve months ended January 31, 2009. Sales from the retail segment,
which includes the Company's premium retail stores, outlet stores, and
day spa locations, were $782.4 million versus $751.4 million last year.
Direct sales (phone and internet) were $256.2 million, compared with
$272.9 million in the same period last year.
-- Gross profit for fiscal 2009 was $334.3 million, or 32.2 percent of net
sales, compared with $350.6 million, or 34.2 percent of net sales, in
fiscal 2008. The decline in gross profit was primarily due to lower
merchandise margins resulting from increased promotional activity and
lower initial markups.
-- Selling, general and administrative expenses for fiscal 2009 were $378.9
million, or 36.5 percent of net sales, compared with $395.3 million, or
38.6 percent of net sales, for fiscal 2008. The decrease in selling,
general and administrative expenses of approximately $16.5 million was
primarily related to lower employee costs and reduced marketing expenses
as well as other related costs, partially offset by $6.0 million in
expenses related to the separation from the Company's former CEO.
-- Net loss for fiscal 2009 was $56.1 million, or $0.61 per share, compared
with a net loss of $26.0 million, or $0.29 per share, in fiscal 2008.
Results in 2008 include a non-cash charge of $0.9 million after-tax, or
$0.01 per share, related to the impairment of certain Coldwater Creek
day spa locations.
-- Net loss for fiscal 2009 included the following: (i) a $25.3 million
non-cash income tax charge, or $0.28 per share, related to a valuation
allowance against net deferred tax assets; (ii) a $3.8 million after-tax
charge, or $0.04 per share, related to the separation from the Company's
former CEO; and (iii) a $0.6 million non-cash charge, or approximately
$0.01 per share, related to premium retail store asset impairments.
Income Tax Valuation Allowance
U.S. GAAP requires that we assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a "more likely than not" standard. In making such judgments, significant weight is given to evidence that can be objectively verified. A company's current or previous losses are given more weight than its projected future performance. Consequently, based on available evidence, in particular our three-year historical cumulative losses, we recorded a valuation allowance against our net deferred tax asset in the third quarter of fiscal 2009. The recording of a valuation allowance has no impact on cash and does not preclude the company from utilizing the full amount of the deferred tax asset in future profitable periods.
Balance Sheet Highlights:
-- Cash totaled $84.7 million, compared with $81.2 million at the end of
fiscal 2008.
-- Premium retail store inventory per square foot, including retail
inventory in the distribution center, increased approximately 20.0
percent compared to January 31, 2009.
-- Total inventory increased to $161.5 million, compared to $135.4 million
at the end of fiscal 2008.
-- Working capital was $98.7 million, compared to $93.0 million as of
January 31, 2009.
Store Openings
The Company opened no new premium retail stores during the three-month period ended January 30, 2010, ending the year with 356 premium retail stores. The Company plans to open approximately 20 new retail stores in fiscal 2010.
Outlook
The Company expects to report a loss in the first quarter of fiscal 2010, however, it expects an improvement over the $0.08 loss per share in the first quarter of fiscal 2009. This assumes a mid-single digit year-over-year increase in total net sales. For fiscal 2010, the company expects to report earnings per share of between $0.08 and $0.12, with the majority of the earnings growth coming in the second half of the year. This compares to actual fiscal 2009 loss per share of $0.61, which includes costs of $0.33 per share related to the income tax valuation allowance, separation agreement charges, and non-cash asset impairment charges.
Conference Call Information
Coldwater Creek will host a conference call on Wednesday, March 3, 2010, at 4:30 p.m. (Eastern) to discuss fiscal 2009 fourth quarter and full year results. To listen to the live Web cast, log on to http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=92631&ev
entID=2750365. Also, a link to the live Web cast of the call is provided in the Investor Relations section of the Company's Web site at http://www.coldwatercreek.com/. The call will be archived from approximately one hour after the conference call until Wednesday, March 17, 2010. The replay can be accessed by dialing (877) 660-6853 and giving account number 3055 and the passcode 344841. A replay and transcript of the call will also be available in the investor relations section of the Company's Web site.
Founded in 1984, and headquartered in Sandpoint, Idaho, Coldwater Creek is a leading specialty retailer of women's apparel, gifts, jewelry, and accessories. The company sells its merchandise through premium retail stores across the country, online at coldwatercreek.com and through its catalogs.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:
This news release contains "forward-looking statements" within the meaning of the securities laws, including statements relating to our expected financial results for the first fiscal quarter and fiscal year of 2010. These statements are based on management's current expectations and are subject to a number of uncertainties, risks and assumptions that may not fully materialize or may prove incorrect. As a result, our actual results may differ materially from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to:
-- the inherent difficulty predicting the effectiveness of promotional
discounting, as well as the difficulty in forecasting consumer buying
and retail traffic patterns and trends, which continue to be erratic and
are affected by factors beyond our control, such as severe weather, the
current macroeconomic conditions, high unemployment, continuing heavy
promotional activity in the specialty retail marketplace, and
competitive conditions and the possibility that because of lower than
expected customer response, or because of competitive pricing pressures,
we may be required to sell merchandise at lower than expected margins,
or at a loss;
-- the possibility that our sales and earnings projections will not be
realized, due to changing business and economic conditions;
-- our potential inability to recover the substantial fixed costs of our
retail store base due to sluggish sales;
-- our potential inability to continue to fund our operations solely with
operating cash as a result of either lower sales or higher than
anticipated costs, or both;
-- delays we may encounter in sourcing merchandise from our foreign and
domestic vendors, including the potential inability of our vendors to
finance production of the goods we order; risks related to our foreign
sourcing strategy; and the possibility that foreign sourcing may not
lead to any reduction of our sourcing costs or improvement in our
margins;
-- the effect of volatile energy costs on various aspects of our business,
including shipping, transportation, merchandise acquisition and consumer
spending;
-- increasing competition from discount retailers and companies that have
introduced concepts or products similar to ours;
-- difficulties encountered in anticipating and managing customer returns
and the possibility that customer returns will be greater than expected;
-- the inherent difficulties in catalog management, for which we incur
substantial costs prior to mailing that we may not be able to recover,
and the possibility of unanticipated increases in mailing and printing
costs;
-- unexpected costs or problems associated with our efforts to manage our
expanding and increasingly complex business, including our current
efforts to improve key management information systems and controls;
-- the risk that the benefits expected from our strategic initiatives will
not be achieved or may take longer to achieve than we expect;
and such other factors as are discussed in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission ("SEC"). We believe that these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. We do not assume any obligation to publicly release any revisions to forward-looking statements to reflect events or changes in our expectations occurring after the date of this release.
COLDWATER CREEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND SUPPLEMENTAL DATA
(unaudited, in thousands except for per share data and store counts)
Three Months Ended Fiscal Year Ended
------------------ -----------------
January 30, January 31, January 30, January 31,
Statements of
Operations: 2010 2009 2010 2009
---- ---- ---- ----
Net sales $318,364 $283,229 $1,038,581 $1,024,221
Cost of sales 228,040 207,231 704,300 673,661
------- ------- ------- -------
Gross profit 90,324 75,998 334,281 350,560
Selling, general and
administrative
expenses 105,187 110,299 378,852 395,320
Loss on asset
impairments 607 - 607 1,452
--- --- --- -----
Loss from
operations (15,470) (34,301) (45,178) (46,212)
Interest, net, and
other (239) 65 (797) 1,508
---- -- ---- -----
Loss before
income taxes (15,709) (34,236) (45,975) (44,704)
Income tax provision
(benefit) (6,031) (15,683) 10,157 (18,741)
------ ------- ------ -------
Net loss $(9,678) $(18,553) $(56,132) $(25,963)
======= ======== ======== ========
Net loss per share -
Basic and
Diluted $(0.11) $(0.20) $(0.61) $(0.29)
====== ====== ====== ======
Weighted average
shares outstanding -
Basic and Diluted 92,081 91,213 91,597 91,037
Supplemental Data:
Three Months Ended Fiscal Year Ended
------------------ -----------------
January 30, January 31, January 30, January 31,
Operating 2010 2009 2010 2009
Statistics: ---- ---- ---- ----
Catalogs mailed 33,989 27,083 91,365 85,950
Premium retail
store count 356 348
Spa store count 9 9
Outlet store count 36 35
Premium retail store
square footage 2,108 2,055
Three Months Ended Fiscal Year Ended
------------------ -----------------
January 30, January 31, January 30, January 31,
Segment Net Sales: 2010 2009 2010 2009
---- ---- ---- ----
Retail $221,026 $199,702 $782,429 $751,352
Direct 97,338 83,527 256,152 272,869
------ ------ ------- -------
Total $318,364 $283,229 $1,038,581 $1,024,221
======== ======== ========== ==========
COLDWATER CREEK INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except for share data)
ASSETS
January 30, January 31,
2010 2009
---- ----
CURRENT ASSETS:
Cash and cash equivalents $84,650 $81,230
Receivables 5,977 15,991
Inventories 161,546 135,376
Prepaid and other 9,385 11,086
Income taxes recoverable 12,074 14,895
Prepaid and deferred marketing
costs 5,867 5,361
Deferred income taxes 6,797 9,792
----- -----
Total current assets 286,296 273,731
Property and equipment, net 295,012 337,766
Deferred income taxes - 14,147
Restricted cash 890 1,776
Other 1,184 1,207
----- -----
Total assets $583,382 $628,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $99,786 $93,355
Accrued liabilities 82,551 82,469
Current deferred marketing fees and
revenue sharing 5,215 4,918
----- -----
Total current liabilities 187,552 180,742
Deferred rents 125,337 137,216
Capital lease and other financing
obligations 11,454 13,316
Supplemental Employee Retirement
Plan 9,202 7,807
Deferred marketing fees and revenue
sharing 7,149 5,823
Deferred income taxes 6,480 -
Other 647 1,227
--- -----
Total liabilities 347,821 346,131
------- -------
Commitments and
contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value,
1,000,000 shares
authorized,
none issued and outstanding - -
Common stock, $.01 par value,
300,000,000 shares
authorized,
92,163,597 and 91,264,527 shares
issued, respectively 922 913
Additional paid-in capital 124,148 115,921
Accumulated other comprehensive
loss (373) (1,334)
Retained earnings 110,864 166,996
------- -------
Total stockholders' equity 235,561 282,496
------- -------
Total liabilities and
stockholders' equity $583,382 $628,627
======== ========
COLDWATER CREEK INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Fiscal Year Ended
-----------------
January 30, January 31,
2010 2009
---- ----
OPERATING ACTIVITIES:
Net loss $(56,132) $(25,963)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization 63,721 61,811
Stock-based compensation
expense 6,718 4,779
Supplemental Employee
Retirement Plan
expense 3,011 1,293
Deferred income taxes 22,842 (8,930)
Excess tax benefit from
exercises of stock
options (650) (82)
Net loss on asset
dispositions 1,120 405
Loss on asset
impairments 607 1,452
Other 211 318
Net change in current assets
and liabilities:
Receivables 10,014 12,529
Inventories (26,170) 4,617
Prepaid and other and
income taxes
recoverable 3,847 6,199
Prepaid and deferred
marketing costs (506) 8,301
Accounts payable 6,729 23,126
Accrued liabilities (276) (7,472)
Income taxes payable - -
Change in deferred
marketing fees and
revenue sharing 1,623 (1,575)
Change in deferred rents (11,285) 16,353
Other changes in non-
current assets and
liabilities (799) (1,628)
---- ------
Net cash provided by
operating
activities 24,625 95,533
------ ------
INVESTING ACTIVITIES:
Purchase of property and
equipment (21,681) (81,215)
Proceeds from asset
dispositions 58 3,086
Change in restricted
cash 886 888
--- ---
Net cash used in
investing
activities (20,737) (77,241)
------- -------
FINANCING ACTIVITIES:
Proceeds from exercises
of stock options and
ESPP purchases 1,223 1,318
Excess tax benefit from
exercises of stock
options 650 82
Payments on capital
lease and other
financing
obligations (1,723) (941)
Credit facility
financing costs (618) -
Purchase and retirement
of treasury stock - -
---- ----
Net cash provided by
(used in) financing
activities (468) 459
---- ---
Net increase in cash
and cash equivalents 3,420 18,751
Cash and cash
equivalents,
beginning 81,230 62,479
------ ------
Cash and cash
equivalents,
ending $84,650 $81,230
======= =======
Contact:
Lyn Walther, Divisional Vice President, Investor
Relations
Phone: 208-265-7005
Web site: www.coldwatercreek.com
