Costs Hit Caché Q2 Profits

Pre-fall style at Cache

New York—Caché Inc. saw its second quarter profit narrow as cost of sales increased and it had a lesser income tax benefit from last year.

For the quarter ended June 30, the women’s specialty retailer posted a 63% decline in its net profit to $1.03 million, or 8 cents a share, from $2.8 million, or 22 cents a share a year ago. Contributing to the decline was an increased cost of sales to $35.25 million from $32.75 million last year. The results also include an income tax benefit of $670,000, but lower than $1.37 million a year ago. Operating income totaled $1.7 million, down from $4.2 million a year earlier.

Total sales rose 2.3% to $61.63 million with comparable store sales growing 4.7% compared to a 6.0% increase a year ago.

Analysts’ average estimate expected earnings of 22 cents a share on sales of $61.64 million.

“Our second quarter results included positive comparable store sales, ongoing strength in dresses, and a more than doubling of e-commerce sales,” said Thomas Reinckens, chairman/ceo. “However, earnings were disappointing, driven by a weak response to our sportswear offerings. We have taken the appropriate actions necessary to clear seasonal inventory, which is expected to negatively impact margins in the third quarter.”

He noted that the company expects improvement in dresses, sportswear sales etc. “as we infuse a better balance of color and neutrals” to assortments. Sales increase, along with expense discipline will result in some $1.8 million for the year.

During the company’s first half, gross margin narrowed to 41.3% from 44% a year earlier “primarily driven by an increase in markdowns, internet fulfillment and delivery expenses, partially offset by an increase in initial mark-up and a decline in occupancy costs.”

Looking ahead to its third quarter, Caché expects a loss per share in the range of 22 to 25 cents a share, and comparable store sales increases in the low- to mid-single digit range.

Analysts’ consensus expects a loss of 11 cents a share for the quarter.


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