Coldwater Creek Announces Results for Second Quarter of Fiscal 2013

Coldwater Creek Announces Results for Second Quarter of Fiscal 2013

SANDPOINT, Idaho, Sept. 10, 2013 (GLOBE NEWSWIRE) -- Coldwater Creek Inc.
(Nasdaq:CWTR) today reported financial results for the three-month period
ended August 3, 2013.

Second Quarter of Fiscal 2013 Operating Results

  *Consolidated net sales were $149.7 million, compared with $163.7 million
    in second quarter 2012. Net sales from the retail segment were $118.6
    million, compared with $129.9 million in the same period last year.
    Comparable premium retail sales declined 7.3 percent for the quarter. Net
    sales from the direct segment were $31.1 million, compared with $33.8
    million in the same period last year.
    
  *Consolidated gross profit was $44.0 million, or 29.4 percent of net sales,
    compared with $48.5 million, or 29.6 percent of net sales, for second
    quarter 2012. The 20 basis point decline in gross profit margin was a
    result of improved occupancy leverage, offset by lower merchandise margins
    reflecting increased promotional activity.
    
  *Selling, general and administrative expenses (SG&A) were $62.6 million, or
    41.8 percent of net sales, compared with $65.7 million, or 40.1 percent of
    net sales, for second quarter 2012. The improvement in SG&A was driven by
    lower marketing and employee-related expenses.
    
  *Net loss was $16.4 million, or $0.54 per share, and included other gain,
    net, of $5.6 million, or $0.18 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 second quarter 2012 net loss of
    $17.6 million, or $0.58 per share, which included other gain, net, of $1.3
    million, or $0.04 per share, due to the change in the fair value of the
    derivative liability net of related issuance costs.
    
  *On an adjusted basis, excluding the gain on the derivative liability, net
    loss was $22.1 million, or $0.72 per share, compared with $18.8 million or
    $0.62 per share for second quarter 2012. (Please see the table of GAAP to
    Non-GAAP Reconciliation of Selected Measures at the end of this press
    release.) As compared to previous guidance, second quarter 2013 net loss
    was negatively impacted by a change in the timing of revenue recognition
    related to the extension of the term under our current credit card
    agreement.The extension was put in place to better facilitate the
    upcoming transition of the Company's credit card program from Chase to
    Alliance Data Systems.The result was $1.7 million, or $0.06 per share, of
    revenue shifted out of the quarter and will instead be recognized over the
    next four quarters.

"Sales were lower than planned in the second quarter, largely due to a
deceleration in traffic during the month of July.Despite a challenging
environment, we delivered bottom-line results that were in line with our
guidance," said Jill Dean, President and Chief Executive Officer of Coldwater
Creek."Our return to more consistent comparable store sales has been slower
than expected; however, we know that customer engagement and driving traffic
are critical to our long-term success and two recent announcements represent
progress against these objectives.First, we have further strengthened our
management team with the addition of Deb Cavanagh as Chief Marketing
Officer.In addition, our partnership with Alliance Data Systems provides us
with an enhanced platform to drive sales and customer loyalty.We believe that
these steps, combined with the extensive work we are continuing to do to align
our merchandise assortment with our brand strategy, as well as our disciplined
management of expenses and inventory, remain the right focus for our
business."

Balance Sheet

At August 3, 2013, cash totaled $17.3 million, as compared with $45.5 million
at July 28, 2012. There were $15.0 million borrowings outstanding under the
Company's revolving line of credit as of August 3, 2013. Total inventory
decreased 7.3 percent to $123.9 million from $133.6 million at the end of the
second quarter last year. Inventory per square foot, which includes inventory
in our retail stores and retail inventory in the distribution center,
decreased approximately 7.5 percent as compared to the end of the second
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 three premium retail stores and one factory store during
the second quarter 2013, ending the fiscal quarter with 344 premium retail
stores, 36 factory stores, and 8 spas. As part of the Company's ongoing store
optimization plan, the Company's plan calls for the closure of up to six
additional retail stores in fiscal 2013 for a total of 45 stores since fiscal
2011.

Third Quarter of Fiscal 2013 Financial Guidance

For third quarter 2013, the Company expects:

  *Comparable premium retail store sales to be down high-single digits as
    compared with a 7.3% increase in the third quarter of fiscal 2012.
  *Gross margins to be flat to slightly down as compared with a gross margin
    rate of 35.1% in the third quarter of fiscal 2012.
  *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.
  *Total inventory at the end of the quarter to be down mid to high-single
    digits as compared to the third quarter of fiscal 2012.

Conference Call Information

Coldwater Creek will host a conference call on Tuesday, September10, 2013, at
4:30 p.m. (Eastern) to discuss fiscal 2013 second 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 419936. 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 third 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:

  *our inability to improve our brand perception and increase traffic;
  *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;
  *the benefits expected from aligning merchandise assortment to our brand
    strategy may not lead to improvements in our financial performance, may
    take longer to achieve than we expect, or may not resonate with our
    customers;
  *our potential inability to continue to fund our operations without
    additional sources of financing and maintain compliance with debt
    covenants if we do not generate sufficient net sales and improve our
    results of operations;
  *potential inability to attract and retain key personnel;
  *our partnership with Alliance Data Systems may not drive additional sales
    and create customer loyalty;
  *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 revolving line of credit may not be fully available due to borrowing
    base and other limitations;
  *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 initiatives to optimize our supply chain capabilities 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
    including anticipating the effects of the change to our return policy 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;
  *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
Form10-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      Six Months Ended
                              August3,   July28,    August3,   July28,
                               2013        2012        2013        2012
Net sales:                                                      
Retail                         $118,644  $129,939  $236,398  $261,141
Direct                         31,058      33,751      69,033      72,433
                              149,702     163,690     305,431     333,574
Cost of sales                  105,662     115,170     210,427     230,663
Gross profit                   44,040      48,520      95,004      102,911
Selling, general and           62,562      65,674      130,924     143,193
administrative expenses
Loss from operations           (18,522)    (17,154)    (35,920)    (40,282)
Other gain, net                (5,632)     (1,278)     (6,558)     (1,278)
Interest expense, net          3,633       1,725       7,206       2,286
Loss before income taxes       (16,523)    (17,601)    (36,568)    (41,290)
Income tax provision (benefit) (80)        (43)        (770)       28
Net loss                       $ (16,443) $ (17,558) $ (35,798) $ (41,318)
Net loss per share — Basic and $(0.54)   $(0.58)   $(1.17)   $(1.36)
Diluted
Weighted average shares
outstanding — Basic and        30,583      30,452      30,560      30,440
Diluted
Supplemental Data:                                              
Catalogs mailed                2,825       5,109       14,131      23,848
Premium retail stores:                                          
Opened                         —           —           —           —
Closed                         3           4           5           8
Count at end of the fiscal     344         355         344         355
period
Square footage                 1,960       2,038       1,960       2,038
Factory stores:                                                 
Opened                         —           —           —           —
Closed                         1           —           2           —
Count at end of the fiscal     36          38          36          38
period
Square footage                 240         257         240         257
Spas:                                                           
Count at end of the fiscal     8           9           8           9
period
Square footage                 42          49          42          49


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except for per share data)
                                                                 
                                            August3,  February2, July28,
                                             2013       2013        2012
ASSETS                                                            
Current assets:                                                   
Cash and cash equivalents                    $17,271  $21,734   $45,517
Receivables                                  6,264      5,150       6,576
Inventories                                  123,878    125,207     133,615
Prepaid and other current assets             17,758     17,072      13,634
Deferred income taxes                        1,184      1,252       2,313
Total current assets                         166,355    170,415     201,655
Property and equipment, net                  152,707    169,007     190,160
Deferred income taxes                        2,108      2,112       1,884
Other assets                                 3,927      4,374       4,983
Total assets                                 $ 325,097 $ 345,908  $ 398,682
LIABILITIES AND STOCKHOLDERS' EQUITY                              
Current liabilities:                                              
Accounts payable                             $62,128  $57,891   $67,992
Accrued liabilities                          78,759     87,915      83,178
Current maturities of debt and capital lease 15,710     577         544
obligations
Total current liabilities                    156,597    146,383     151,714
Deferred rents                               71,694     82,726      92,665
Long-term debt and capital lease obligations 67,468     63,784      59,998
Supplemental executive retirement plan       10,883     10,994      12,335
Deferred income taxes                        636        699         1,716
Other liabilities                            15,368     4,186       4,384
Total liabilities                            322,646    308,772     322,812
Commitments and contingencies                                     
Stockholders' equity:                                             
Preferred stock, $0.01 par value, 1,000
shares authorized; 1, 1 and 1 shares issued, —          —           —
respectively
Common stock, $0.01 par value, 75,000 shares
authorized; 30,613, 30,531 and 30,493 shares 306        305         304
issued, respectively
Additional paid-in capital                   154,258    153,146     152,011
Accumulated other comprehensive loss         (1,532)    (1,532)     (2,186)
Accumulated deficit                          (150,581)  (114,783)   (74,259)
Total stockholders' equity                   2,451      37,136      75,870
Total liabilities and stockholders' equity   $ 325,097 $ 345,908  $ 398,682


COLDWATER CREEK INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
                                                                 
                                                      Six Months Ended
                                                      August3,   July28,
                                                       2013        2012
Operating activities:                                             
Net loss                                               $(35,798) $(41,318)
Adjustments to reconcile net loss to net cash used in             
operating activities:
Depreciation and amortization                          21,794      26,580
Non-cash interest expense                              4,597       777
Stock-based compensation expense                       1,182       869
Supplemental executive retirement plan expense         227         294
Deferred credit card program revenue                   14,832      84
Deferred rents                                         (12,509)    (9,159)
Gain on derivative liability                           (6,558)     (2,349)
Series A Preferred Stock issuance costs                —           1,070
Net loss on asset dispositions and other termination   1,082       1,320
charges
Other                                                  (383)       (146)
Net change in operating assets and liabilities:                   
Receivables                                            (1,114)     1,055
Inventories                                            1,329       (1,640)
Prepaid and other current assets                       (830)       (4,444)
Accounts payable                                       2,490       10,891
Accrued liabilities                                    (4,810)     (9,067)
Net cash used in operating activities                  (14,469)    (25,183)
Investing activities:                                             
Purchase of property and equipment                     (4,789)     (9,784)
Proceeds from asset dispositions                       15          —
Net cash used in investing activities                  (4,774)     (9,784)
Financing activities:                                             
Borrowings on revolving line of credit                 18,000      10,000
Payments on revolving line of credit                   (3,000)     (25,000)
Proceeds from the issuance of long-term debt           —           65,000
Payments of long-term debt and capital lease           (273)       (15,177)
obligations
Payment of debt and Series A Preferred Stock issuance  —           (5,809)
costs
Other                                                  53          105
Net cash provided by financing activities              14,780      29,119
Net decrease in cash and cash equivalents              (4,463)     (5,848)
Cash and cash equivalents, beginning                   21,734      51,365
Cash and cash equivalents, ending                      $17,271   $45,517
Supplemental Cash Flow Data:                                      
Interest paid, net of amount capitalized               $2,611    $1,511
Income taxes paid (refunded), net                      $(450)    $3,187


COLDWATER CREEK INC. AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION OF SELECTED MEASURES
(Unaudited)
(in thousands, except for per share data)
                                                               
                              Three Months Ended      Six Months Ended
                              August3,   July28,    August3,   July28,
                               2013        2012        2013        2012
Net loss:                                                       
GAAP basis                     $(16,443) $(17,558) $(35,798) $(41,318)
Excluding — Gain on derivative (5,632)     (1,278)     (6,558)     (1,278)
liability
Non-GAAP adjusted basis        $ (22,075) $ (18,836) $ (42,356) $ (42,596)
Net loss per share — Basic and                                  
Diluted:
GAAP basis                     $(0.54)   $(0.58)   $(1.17)   $(1.36)
Excluding — Gain on derivative (0.18)      (0.04)      (0.21)      (0.04)
liability
Non-GAAP adjusted basis        $(0.72)   $(0.62)   $(1.38)   $(1.40)

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 September10, 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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