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Market Update Analysis: 
Coldwater Creek Third Quarter Earnings Call
Author: Albena Toncheva
123jump.com
Last Update: 8:10 AM EST December 03 2007


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The specialty retailer of women’s apparel and accessories reported revenue of $271 million, up 6% from $256 million in the previous year quarter. While sales from retail business grew 11% to $186 million, the sales in direct segment decreased nearly 5% to $85 million. Due to higher promotional activities during the quarter, the gross margin rate declined to 39.8% of net sales versus 47.1% in prior year. The company will provide fiscal 2008 guidance in early next year.

 
Daniel Griesemer: In spas, we have a total of 9. We ended the quarter with 8. We now have a total of 9. We are at 28 outlets right now.

Michelle Tan (UBS): The direct business came in a little shy of expectations. What are the trends that you saw there during the quarter? What was the percentage of clearance inventory relative to last year and the mix?

Daniel Griesemer: It''s about where we expected it. I don''t think there''s significant differences. The real shortfall in this business has been comparable store performance. That''s the real shortfall. That''s the story and that''s what we got to make sure we get back on track, the retail traffic and the overall promotional activities that we have suffered as a result of trying to spur business and keep our inventories clean.

Julie Bryan (Jennifer Black & Associates): Are there ways to use the Internet more effectively as all these stores open up and there are more catalogs out there? Are there other things that you can do to grow those sales faster because it seems like more people are starting to migrate to the Internet and that''s including going into stores and then using the Internet to purchase items?

Daniel Griesemer: The Internet business is up and was up on a year-over-year basis, and so relative to the overall performance for the quarter that is absolutely a highlight. We have seen also about 20% increase in the active e-mail file on a year-over-year basis. You are talking about an absolutely relevant point here that we do see that as she gets accessed to the brand, she chooses to access this in whatever most convenient channel. When talking about direct orders, the Internet continues to be her channel of preference rather than picking up the phone. We have kiosks in all of our stores. We use them actively to advance the brand that meet merchandise requestor needs for products that isn''t in the stores that she maybe looking at from the catalog that may have driven into the stores, and we e-mail our best customers quite frequently with very compelling messages. You are talking about something that is core to our triple channel strategy.

Christopher Kim (J.P. Morgan): On the spa business, any thoughts on the timeline where you reach our tip here whether or not to pursue this?

Daniel Griesemer: Yes, we have indicated that we have now 9 spas opened. We open the 3 in the back half of this year that are side by side with pass-throughs. We continue to be very pleased with the experience that those spas are creating for our customers. We see the metrics and performance metrics of that business continue to improve. The question remains is it a genuinely investible proposition and that''s what we are continuing to look at and we need these most recent 3 to be open for a while, so we can reap the post holiday business. We have indicated probably by middle of next year, we are going to give you an indication as to whether we are going to move forward with it or what we are going to do.
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