Even though Coldwater Creek Inc. delivered a gift bag full of higher profits, stronger sales, and other financial goodies just before Thanksgiving, the Sandpoint-based retailer isnt enjoying much good will from Wall Street this holiday season.


The fashion retailers stock price plunged 10 percent Nov. 21the same day it announced that its net income had soared 52 percent and its net sales had shot up 48 percent in the third quarter.


Im not sure I quite understand what has caused the fire sale on Coldwater Creeks shares, one writer said on the Fool.com financial Web site. The writer noted that the companys inventory growth had outpaced its sales growth, but the quarter still was very impressive.


On Thursday, Nov. 30, the stock prices of several womens clothing retailers, including Coldwater Creek, slipped after same-store sales at Bebe Stores Inc. and Ann Taylor Stores Corp. declined more than expected.


Yet, when Coldwater Creek had released its third-quarter results earlier and also in a conference call with financial analysts the same day, the company displayed signs that it cant necessarily be lumped in with other national womens fashion retailers.


Through the nine months ended Oct. 28, the companys net income climbed to $39.5 million, and it increased its cash horde to $108 million, up from $104.7 million a year earlier. The company has no debt, and it opened 29 retail stores in the third quarter, giving it a total of 225 stores, up from 163 a year earlier. Since Oct. 28, it has opened 13 more stores, and it is opening another store this week, reaching its goal of having 239 stores by year-end.


This larger store base, supported by our effective brand-building initiatives, has a proven ability to increase our market share and establish Coldwater Creek as one of the premiere specialty retailers, Chairman and CEO Dennis Pence said in the conference call.


The company spent $8 million in the third quarter for national magazine advertising, up from $3.1 million in the year-earlier quarter, President and COO Georgia Shonk-Simmons said. For the full year, its budgeted to spend $24 million on advertising, up from $12.5 million the year earlier.


Even though retailers felt pressure to discount their prices in the third quarter, Coldwater Creek competed effectively by starting its fall clearance sales as planned, while other brands broke price and put their goods on sale earlier than planned, Shonk-Simmons said.


In the quarter, the company added 45,000 new credit-card holders, giving it about 285,000 card holders, and for the first time in its history, its active customer file includes 4 million names, up by about 1 million names from a year earlier.


Mel Dick, Coldwaters executive vice president and CFO, told the analysts the companys store growth had reached the point at which it could spread its fixed costs across its network more efficiently. David Gunter, the companys spokesman, says that when it comes to central office personnel, Ive heard it said that you have to have as many people to run 150 stores as you do to run 500 stores. It takes the same number of inventory, planning, and operations people to run the smaller number of stores as it does to run the larger network, and when a company opens additional stores, he says.


We really feel like 2007 is a year when that leverage is going to begin to be felt, Gunter says.


Gunter says its not unusual for a company such as Coldwater Creek to be punished by the stock market when other companies in the same industry falter.


Theres often a pack mentality, he says. There are a lot of investors that are sector investors, and such investors sometimes will sell a number of holdings in a particular industry when something happens or even on a whim, Gunter says.


Also, he says, Coldwater Creek reported its quarterly results around the time when one of the markets biggest downdrafts of 2006 occurred, and its stock had enjoyed an aggressive run in the period going into that time.


Pence told the analysts hes optimistic about the fourth quarter.


Even though holiday traffic seems to be getting off to a somewhat slow start, we believe that Coldwater Creek is seeing more than its fair share of the traffic up to this point, he said.


For the fourth quarter, the company anticipates net sales of between $335 million and $345 million, he said, which would be up from $287.9 million in the year-earlier quarter. For the full year, it expects net sales to hit $1.03 billion.


Contact Richard Ripley at (509) 344-1261 or via e-mail at [email protected].