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Coldwater Creek Inc. (CWTR) Announces Fourth Quarter and Fiscal 2009 Results Coldwater Creek Announces Fourth Quarter and Fiscal 2009 Results

Mar. 3, 2010 (PR Newswire) —

SANDPOINT, Idaho, March 3 /PRNewswire-FirstCall/ — 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
                                  =======      =======
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