Coldwater Creek Lowers Forecast After Q2 Miss

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Fall at Coldwater Creek

Sandpoint, ID—Shares of Coldwater Creek Inc. slid as much as 20% after hours Tuesday following the specialty retailer’s second quarter report listing lower sales and a lowered full year forecast.

For the quarter ended August 3, Coldwater Creek posted a net loss of $16.4 million, or 54 cents a share, compared with a loss of $17.6 million, or 58 cents a share, a year ago. The second quarter earnings included $5.6 million due to the change in their fair value of a derivative liability. Excluding that gain, the adjusted loss widened to 72 cents, exceeding analysts’ estimate for a 63 cent a share loss.

Net revenue was down 8.5% to 149.7 million, missing analysts’ estimate for $162.8 million in sales. Comparable store sales fell 7.3%. The sales decline marked the 12th consecutive quarter of decline although the company has narrowed losses by trimming expenses.

Gross margin narrowed slightly to 29.4%, from 29.6% from a year ago, while overhead costs were down 4.7%.

Headed to Chapter 11?

“Sales were lower than planned in the second quarter, largely due to a deceleration in traffic during the month of July,” said CEO Jill Brown Dean. “Despite a challenging environment, we delivered bottom-line results that were in line with our guidance.”

As part of its consolidation program, Coldwater Creek closed three retail stores and one factory outlet during the second quarter, ending with 344 stores, 36 outlets and eight spas. An addition six stores are scheduled to close before the end of its fiscal year.

For its third quarter, Coldwater Creek forecast a per-share adjusted loss of between 55 cents to 75 cents a share. Analysts’ consensus expects a loss of 37 cents a share.

The company told analysts on a conference call that comp sales in the third quarter would be down in the “high-single digits” compared with a 7.3% increase in third quarter 2012.

That forecast caused Piper Jaffray to downgrade Coldwater to a neutral. Comparable store sales “were down were down 7.3% driven primarily by a decline in traffic. Management discussed cautious guidance for third quarter in view of the unspectacular second quarter results and a lack of turnaround in traffic.”

In another report to investors today, analysts at Seeking Alpha warned that Coldwater Creek’s business is deteriorating.

“We don’t see anything on the horizon to right this sinking ship. We advise investors owning shares to exit their positions because the next stop for Coldwater Creek is bankruptcy and a delisting.”


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