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Coldwater Creek Announces Results for First Quarter of Fiscal 2013



Coldwater Creek Announces Results for First Quarter of Fiscal 2013

Adjusted Net Loss Per Share Improves to $0.66, From Net Loss Per Share of
$0.78 Last Year

SANDPOINT, Idaho, June 5, 2013 (GLOBE NEWSWIRE) -- Coldwater Creek Inc.
(Nasdaq:CWTR) today reported financial results for the three-month period
ended May 4, 2013.

First Quarter of Fiscal 2013 Operating Results

  * Consolidated net sales were $155.7 million, compared with $169.9 million
    in first quarter 2012. Net sales from the retail segment were $117.8
    million, compared with $131.2 million in the same period last year.
    Comparable premium retail sales declined 10.5 percent for the quarter. Net
    sales were also impacted by store closures as a result of our store
    optimization program. Net sales from the direct segment were $38.0
    million, compared with $38.7 million in the same period last year.
  * Consolidated gross profit decreased $3.4 million to $51.0 million, or 32.7
    percent of net sales, compared with $54.4 million, or 32.0 percent of net
    sales, for first quarter 2012. The 70 basis point increase in gross profit
    margin was primarily due to increased leverage of buying and occupancy
    expenses.
  * Selling, general and administrative expenses (SG&A) were $68.4 million, or
    43.9 percent of net sales, compared with $77.5 million, or 45.6 percent of
    net sales, for first quarter 2012. The $9.2 million decline in SG&A was
    due primarily to lower expenses across all categories, with the largest
    declines from marketing and employee-related expenses.
  * Net loss was $19.4 million, or $0.63 per share, and included other gain,
    net, of $0.9 million, or $0.03 per share, due to the change in the fair
    value of the derivative liability related to the Series A Preferred Stock
    issued in July 2012. This compares to a net loss of $23.8 million, or
    $0.78 per share, for first quarter 2012.
  * On an adjusted basis, excluding the gain on the derivative liability, net
    loss was $20.3 million, or $0.66 per share. (Please see the table of GAAP
    to Non-GAAP Reconciliation of Selected Measures at the end of this press
    release.)

"Our first quarter results were impacted by unseasonable weather throughout
the quarter; however, we were able to more than offset softer-than-expected
sales through gross margin rate expansion and disciplined expense management,
delivering results consistent with the higher end of our expectations," said
Jill Dean, President and Chief Executive Officer of Coldwater Creek. "The
extensive work we have done to clearly define our brand strategy and target
customer has influenced our merchandise direction and assortment architecture
primarily in the back half of the year, which we believe will enable us to
continue to generate improvements in our operating performance in fiscal
2013."

Balance Sheet

At May 4, 2013, cash totaled $10.9 million, as compared with $23.0 million at
April 28, 2012. There were $15 million borrowings outstanding under the
Company's revolving line of credit as of May 4, 2013, similar to last year.
Total inventory decreased 0.9 percent to $126.5 million from $127.7 million at
the end of the first quarter last year. Inventory per square foot, which
includes inventory in our retail stores and retail inventory in the
distribution center, increased approximately 6.7 percent as compared to the
end of the first quarter last year.

Reverse Stock Split

On October 4, 2012, the Company effected a reverse stock split of its common
stock following stockholder approval. As a result of the split, every four
shares of common stock outstanding were consolidated into one share, reducing
the number of common shares outstanding on the effective date from 122.0
million to 30.5 million.

Store Optimization Program

The Company closed two premium retail stores and one factory store during the
first quarter 2013, ending the fiscal quarter with 347 premium retail stores,
37 factory stores, and eight spas. As part of the Company's ongoing store
optimization plan, the Company's plan calls for the closure of up to 11
additional retail stores in fiscal 2013 for a total of 45 stores since fiscal
2011.

Second Quarter of Fiscal 2013 Financial Guidance

For second quarter 2013, the Company expects:

  * Comparable premium retail store sales to be flat to down low-single
    digits.
  * Gross margins to be flat to up 100 basis points.
  * Adjusted net loss per share in the range of $0.55-$0.75, excluding the
    impact of any change in the fair value of the derivative liability as
    described below.
  * Total inventory at the end of the quarter to be down mid-single digits as
    compared to the second quarter of fiscal 2012.

Derivative Liability

During the second quarter of fiscal 2012, in connection with the $65.0 million
term loan received from an affiliate of Golden Gate Capital, the Company
issued 1,000 shares of Series A Preferred Stock, which are convertible into an
aggregate of 6.1 million shares of common stock at a purchase price of $3.40
per share. The Series A Preferred Stock is recorded as a derivative liability
and is measured at fair value on a recurring basis with changes recorded as
other gain or loss, net.

Conference Call Information

Coldwater Creek will host a conference call on Wednesday, June 5, 2013, at
4:30 p.m. (Eastern) to discuss fiscal 2013 first quarter results. The dial in
number for the call is 877-705-6003. The call will be simultaneously broadcast
on the Investor Relations section of the Company's Web site at
www.coldwatercreek.com. A recording of the call can be accessed for one week
following the reporting date by calling 877-870-5176 and providing conference
ID 415253. A transcript of the call will also be available in the Investor
Relations section of the Company's Web site.

Coldwater Creek is a leading specialty retailer of women's apparel, jewelry,
and accessories. The Company was founded in 1984 in Sandpoint, Idaho, and
sells its merchandise through premium retail stores across the country,
online, and through its mobile applications.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

This news release contains "forward-looking statements" within the meaning of
the securities laws, including statements about the effect of our strategic
initiatives on our future financial results, the Company's expectations about
future store closures and, with respect to the second quarter of fiscal 2013
expectations about comparable premium retail store sales, margin rate,
adjusted net loss per share and inventory. 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 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 significant weather events, 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;
  * potential inability to attract and retain key personnel;
  * our new design aesthetic may take longer to implement than expected or may
    not resonate with our customers;
  * difficulties in forecasting consumer demand for our merchandise as a
    result of changing fashion trends and consumer preferences;
  * changing business and economic conditions resulting in our inability to
    realize our sales and earnings expectations;
  * our potential inability to recover the substantial fixed costs of our
    retail store base due to sluggish sales, which may result in impairment
    charges;
  * our potential inability to maintain compliance with debt covenants;
  * delays we may encounter in sourcing merchandise from our foreign and
    domestic vendors, including the possibility our vendors may not extend us
    credit on acceptable terms, and the potential inability of our vendors to
    finance production of the goods we order or meet our production needs due
    to raw material or labor shortages;
  * our foreign sourcing strategy may not lead to reduction of our sourcing
    costs or improvement in our margins;
  * increasing competition from discount retailers and companies that have
    introduced concepts or products similar to ours;
  * marketing initiatives may not be successful in improving the breadth of
    our customer base, or increasing traffic in the near term, or at all;
  * difficulties encountered in anticipating and managing customer returns and
    the possibility that customer returns may 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 the
    complexities of our multi-channel business model, including our efforts to
    maintain our information systems;
  * our revolving line of credit may not be fully available due to borrowing
    base and other limitations;
  * the benefits expected from our merchandising and design initiatives may
    not be achieved or may take longer to achieve than we expect;
  * the actual number and timing of planned store closures depends on a number
    of factors that cannot be predicted, including among other things the
    future performance of our individual stores and negotiations with our
    landlords;

and such other factors as are discussed in our most recent Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
filed with the U.S. Securities and Exchange Commission. 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 after the date of this
release.

COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND SUPPLEMENTAL DATA
(unaudited)
(in thousands, except for per share data and store counts)
                                                                    
                                                       Three Months Ended
                                                       May 4,      April 28,
                                                       2013        2012
Net sales:                                                          
Retail                                                  $ 117,754   $ 131,202
Direct                                                 37,975      38,682
                                                       155,729     169,884
Cost of sales                                          104,765     115,493
Gross profit                                           50,964      54,391
Selling, general and administrative expenses           68,362      77,519
Loss from operations                                   (17,398)    (23,128)
Other gain, net                                        (926)       —
Interest expense, net                                  3,573       561
Loss before income taxes                               (20,045)    (23,689)
Income tax provision (benefit)                         (690)       71
Net loss                                                $ (19,355)  $ (23,760)
Net loss per share — Basic and Diluted                  $ (0.63)    $ (0.78)
Weighted average shares outstanding — Basic and        30,538      30,428
Diluted
Supplemental Data:                                                  
Catalogs mailed                                        11,306      18,739
Premium retail stores:                                              
Opened                                                 —           —
Closed                                                 2           4
Count at end of the fiscal period                      347         359
Square footage                                         1,985       2,064
Factory stores:                                                     
Opened                                                 —           —
Closed                                                 1           —
Count at end of the fiscal period                      37          38
Square footage                                         249         257
Spas:                                                               
Count at end of the fiscal period                      8           9
Square footage                                         42          49

 
COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except for per share data)
                                                                     
                                             May 4,     February 2, April 28,
                                             2013       2013        2012
ASSETS                                                               
Current assets:                                                      
Cash and cash equivalents                     $ 10,915   $ 21,734    $ 22,989
Receivables                                  7,265      5,150       11,539
Inventories                                  126,540    125,207     127,684
Prepaid and other current assets             17,403     17,072      11,625
Deferred income taxes                        1,184      1,252       2,313
Total current assets                         163,307    170,415     176,150
Property and equipment, net                  160,351    169,007     196,523
Deferred income taxes                        2,117      2,112       1,887
Other assets                                 4,152      4,374       1,795
Total assets                                  $ 329,927  $ 345,908   $ 376,355
LIABILITIES AND STOCKHOLDERS' EQUITY                                 
Current liabilities:                                                 
Accounts payable                              $ 51,275   $ 57,891    $ 52,487
Accrued liabilities                          86,258     87,915      72,843
Current maturities of debt and capital lease 15,594     577         15,728
obligations
Total current liabilities                    153,127    146,383     141,058
Deferred rents                               77,243     82,726      96,723
Long-term debt and capital lease obligations 65,655     63,784      26,407
Supplemental executive retirement plan       10,939     10,994      12,248
Deferred income taxes                        636        699         1,716
Other liabilities                            3,862      4,186       5,174
Total liabilities                            311,462    308,772     283,326
Commitments and contingencies                                        
Stockholders' equity:                                                
Preferred stock, $0.01 par value, 1,000
shares authorized; 1, 1 and 0 shares issued, —          —           —
respectively
Common stock, $0.01 par value, 75,000 shares
authorized; 30,547, 30,531 and 30,439 shares 305        305         304
issued, respectively
Additional paid-in capital                   153,830    153,146     151,630
Accumulated other comprehensive loss         (1,532)    (1,532)     (2,204)
Accumulated deficit                          (134,138)  (114,783)   (56,701)
Total stockholders' equity                   18,465     37,136      93,029
Total liabilities and stockholders' equity    $ 329,927  $ 345,908   $ 376,355

 
COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
                                                                    
                                                       Three Months Ended
                                                       May 4,      April 28,
                                                       2013        2012
Operating activities:                                               
Net loss                                                $ (19,355)  $ (23,760)
Adjustments to reconcile net loss to net cash used in               
operating activities:
Depreciation and amortization                          10,818      13,752
Non-cash interest expense                              2,289       —
Stock-based compensation expense                       632         348
Supplemental executive retirement plan expense         113         147
Deferred marketing fees and revenue sharing            (689)       (652)
Deferred rents                                         (5,574)     (5,095)
Gain on derivative liability                           (926)       —
Net loss on asset dispositions and other termination   781         1,226
charges
Other                                                  (137)       (86)
Net change in operating assets and liabilities:                     
Receivables                                            (2,130)     (3,330)
Inventories                                            (1,333)     4,291
Prepaid and other current assets                       (404)       (2,215)
Accounts payable                                       (7,669)     (4,292)
Accrued liabilities                                    (294)       (4,868)
Net cash used in operating activities                  (23,878)    (24,534)
Investing activities:                                               
Purchase of property and equipment                     (1,865)     (3,699)
Proceeds from asset dispositions                       15          —
Net cash used in investing activities                  (1,850)     (3,699)
Financing activities:                                               
Borrowings on revolving line of credit                 18,000      10,000
Payments on revolving line of credit                   (3,000)     (10,000)
Payments of long-term debt and capital lease           (137)       (201)
obligations
Other                                                  46          58
Net cash provided by (used in) financing activities    14,909      (143)
Net decrease in cash and cash equivalents              (10,819)    (28,376)
Cash and cash equivalents, beginning                   21,734      51,365
Cash and cash equivalents, ending                       $ 10,915    $ 22,989
Supplemental Cash Flow Data:                                        
Interest paid, net of amount capitalized                $ 1,284     $ 418
Income taxes paid (refunded), net                       $ (676)     $ 2,125

 
COLDWATER CREEK INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF SELECTED MEASURES
(Unaudited)
(in thousands, except for per share data)
                                                      
                                         Three Months Ended
                                         May 4,      April 28,
                                         2013        2012
Net loss:                                             
GAAP basis                                $ (19,355)  $ (23,760)
Excluding — Gain on derivative liability (926)       —
Non-GAAP adjusted basis                   $ (20,281)  $ (23,760)
Net loss per share — Basic and Diluted:               
GAAP basis                                $ (0.63)    $ (0.78)
Excluding — Gain on derivative liability (0.03)      —
Non-GAAP adjusted basis                   $ (0.66)    $ (0.78)

About Non-GAAP Selected Measures

The Company reports its consolidated financial results in conformity with
accounting principles generally accepted in the United States (GAAP). The
accompanying press release dated June 5, 2013, contains non-GAAP financial
measures. These non-GAAP financial measures include adjusted net loss and
adjusted net loss per share, which excludes the gain on the derivative
liability. Non-GAAP financial measures should not be considered as a
substitute for, or superior to, measures of financial performance prepared in
conformity with GAAP. Management believes that these non-GAAP financial
measures provide meaningful supplemental information because they exclude
activity that is not included by management when assessing the performance of
the Company. The Company may consider whether other significant items that
arise in the future should be adjusted from GAAP measures. 

CONTACT: Investor Relations Contact:
         Lyn Walther
         Phone:  208-263-2266
         E-mail: lyn.walther@thecreek.com
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