Coldwater aims to reinforce its strengths
Company plans to double store openings this year, renew direct-sales emphasisApril 8th, 2010
Sandpoint-based specialty women's retailer Coldwater Creek Inc. says it plans to refocus its efforts this year to emphasize direct sales of higher-end women's clothing while also opening twice as many retail stores as it did in its last fiscal year.
Coldwater Creek says in its fiscal 2009 annual report, released at the end of March, that it will be conservative in the coming year, opening fewer stores than it once did, but still plans to double its store openings from 2009 and sharpen its focus on direct catalog and Internet sales, which historically have been strengths. It also plans to raise the price point on its merchandise mix, after experimenting earlier with more basic items, it says.
Coldwater Creek was founded as a catalog company in 1984 and now operates about 400 stores and nine day spas, as well as its catalog and retail Web site channels to sell its line of women's clothing. The company says its target market is women who are 35 years and older and have an annual income of more than $75,000 a year.
Coldwater Creek reduced its losses in its fiscal fourth quarter, which ended Jan. 30, for which it reported a net loss of $9.7 million, or 11 cents a share, compared with a net loss of $18.6 million, or 20 cents a share, for the fiscal 2008 fourth quarter. For all of fiscal 2009, the company reported a net loss of $56.1 million, or 61 cents a share, compared with a net loss of $26 million, or 29 cents a share, in fiscal 2008.
"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," said Dennis Pence, the company's chairman and chief executive officer, in Coldwater Creek's fourth-quarter earnings release.
"We continue to believe that our retail expansion will be a key driver for our long-term growth. However, we intend to pursue a scaled-back store rollout program compared to the years prior to 2009, until the economic outlook improves," the company said in its annual report.
During fiscal 2009, the company opened 10 new stores, and ended the year with 356 premium retail stores and 36 merchandise clearance outlet stores. Coldwater Creek added eight premium stores and two merchandise clearance outlets during the year, but also closed one other clearance outlet in the second quarter of 2009.
Coldwater Creek says its net sales increased in fiscal 2009 to $1.039 billion, up from $1.024 billion in fiscal 2008. Direct sales through its catalog and Internet channels, however, were down to $256.2 million, from $272.9 million in 2008.
Coldwater Creek says it hopes to rejuvenate its direct sales by increasing circulation of its catalogs, saying direct sales have suffered over the past two years.
In the second half of fiscal 2009, the company increased its catalog circulation by 37 percent, to 60.6 million copies, compared with 44.2 million copies in the year-earlier period, and as a result "saw meaningful growth among reactivated customers."
In addition to catalog circulation, the company has reconsidered its recent merchandise mix.
"Over the last two years, we shifted our merchandise assortment to more basic items in a broad range of colors and styles, and away from our core strength of a diverse assortment across a variety of categories," negatively affecting gross margins and operational results, it says in the report.
Coldwater Creek says it plans to raise its price points, after experimenting with offering more basic items, which it said also hurt its margins and ability to differentiate its product line. It says it also plans to expand and upgrade its home and jewelry categories and already has begun raising some of those price points.
"Because we recognize that our customers are focused on fashion and differentiation, we have refocused our efforts to deliver unique and differentiated offerings creating a better balance of novelty items together with basic items in an effort to increase our average unit retail price, average transaction dollars, and gross margins. These adjustments will begin to be reflected in our spring and summer collections, with the full impact of this initiative in place by September 2010," the company says in its report.
Still, Coldwater Creek says it recognizes that in the current economic environment, discounts are an effective driver of customer traffic, and it will continue to offer targeted promotions through its e-mail and catalog campaigns, although it will adjust the timing and magnitude of the campaigns.
The company added that to date, its day spas have had a negative impact on its earnings, and its day spa concept ultimately might prove to be unsuccessful and be discontinued at any time. It said that in 2008, it recorded an impairment charge of $1.5 million related to that concept.
"Selling, general, and administrative expenses, or SG&A, decreased $16.5 million during fiscal 2009 as compared with fiscal 2008, primarily driven by decreased employee, marketing, and certain overhead expenses related to our cost-savings initiatives," the company says in its report.
In September, Coldwater Creek announced that co-founder and Chairman Dennis Pence had once again become its CEO, replacing Daniel Griesemer. Pence, who also served as Coldwater Creek's CEO from 1984 through December 2000 and from September 2002 to October 2007, said the company's board had asked him to take over in an effort to accelerate Coldwater Creek's growth and return it to long-term profitability.