Furniture drags home during Q1 at Cost Plus
May 22, 2009,
Oakland, Calif. – At the hands of a slowed furniture business, the home segment dipped 100 basis points as a percentage of total sales at Cost Plus Inc. stores during the first quarter.
“Furniture accounts for the 100 basis point decrease in the home sales mix, as consumers are still hesitant to spend money on larger-ticket items,” said Jane Baughman, cfo.
Even so, the 270-unit home furnishings chain – which operates stores in 30 states – is adding summer seasonal outdoor living items, anchored by furniture, to its assortment in the second quarter.
“Essentially 18% to 20% of Cost Plus’ volume still comes from furniture, explained Barry Feld, who admitted that the category “has been quite a challenging part of our business, and I believe it will remain so.”
Furniture has been primary driver in truncating the chain’s average ticket per customer, “and as we roll over furniture-related events it puts some additional pressure on our traffic. So that is one that we have to continue to work on to crack the code on.”
Net sales for Cost Plus’ first quarter were $184.3 million -- an 8.7% decrease from $201.9 million for the same period last year.
Same-store sales for the first quarter decreased 8.9% compared to a 0.6% increase in 2008. The company's same store sales guidance range for the quarter was a decrease of 9% to 12%.
“Our first-quarter results reflect the anticipated impact of prolonged stress on the economy, with further pressure on the average ticket per customer related to our furniture business and a modest softening in customer traffic,” said Feld.
The decrease in same-store sales was largely driven by an 8.0% reduction in the average ticket per customer resulting from lower furniture sales and a customer count decline of 1.1%.
Gross profit rate was 26.0% for the first quarter of 2009 versus 27.7% last year – a 170 basis point decline due mainly to decreased leverage of fixed occupancy expenses on lower same store sales.
Merchandise margins were essentially flat to last year, “and have begun to stabilize,” Feld said.
“The company was able to successfully sell through its Easter seasonal merchandise with no residual inventory remaining,” he continued. “Our merchant and marketing teams are maintaining a constant flow of fresh, brand-right products and delivering more cost-effective, market-specific advertising.”
Also consistent with last year is the chain’s promotional activity.
For the first quarter of fiscal 2009, Cost Plus reported an EBIT loss of $22.3 million – just below the company's guidance of $23 million to $25 million.