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Cost Plus' home division still dominates over growing consumables in Q4, 2011

Oakland, Calif. - Even though its growing gourmet consumables offerings continued to take the credit as the key traffic driver into its stores, Cost Plus' home division boasted strong performances across textiles and bath as well as other home decor categories during the fourth quarter and fiscal 2011.

In the fourth quarter, the mix between home and consumables as a percentage of net sales was 57% and 43%, respectively, versus 56% and 44% last year.

For the full year, the mix was 61% home and 29% consumables, compared to 2010's mix of 60%/40%, respectively. Cost Plus explained that the increase in the home sales mix is the result of higher furniture sales as a percentage of total sales year-over-year.

Net sales for the fourth quarter, ended Jan. 28th, were up 6.7% to $364.3 million, from $341.6 million last year, and same store sales increased 7.6%, due to a 3.4% gain in customer count and 4.1% in the average ticket per customer.

Net sales for fiscal 2011 were $963.8 million, a 5.2% increase over fiscal 2010's $916.6 million, and same store sales were up 5.4%.

Net income for the quarter of fiscal 2011 was up 28% to $36.5 million, or $1.55 per diluted share, compared to $28.5 million, or $1.23 per diluted share, in the year-ago quarter. For the year, net income for fiscal 2011 swelled by 469% to $16.5 million, or $0.71 per diluted share, versus 2010's net income of $2.9 million, or $0.13 per diluted share.

"Fiscal 2011 marked another year of significant progress for Cost Plus World Market," said Barry Feld, ceo and president, during the regional home furnishings chain's earning call Thursday afternoon. "We met or exceeded our sales and earnings guidance in all four quarters and have now delivered eight consecutive quarters of same-store sales increases. The strategic pillars of the brand: home decorating, home entertaining and gift-giving, overlaid with our strong core competency and seasonal merchandise continue to provide our customers with unique, authentic and affordable solutions for all of their shopping needs."

With "only" 258 stores in 30 states, Feld said, Cost Plus sees plenty of room to grow "over time to 500 stores nationally." The company plans to open five to 10 new stores in fiscal 2012, moving towards 15 to 20 new store openings annually.

This year's first new store, Mount Prospect, opens in Chicago this week.

"In the near term, we have identified 100-plus new locations within our existing markets which will allow us to leverage our marketing and distribution cost structure," Feld continued. "We believe our two, state-of-the-art distribution centers, 1 million square feet on each coast, can support the next 100 stores without additional fixed cost. Longer term, we see significant opportunity in new markets."

E-commerce is also in Cost Plus' sights for this year, and beyond. Feld said the company has the ability to increase online business to $100-plus million during the next three to five years. In fiscal 2011, e-commerce generated revenue of $26 million, up 54% from the prior year.

"Our e-commerce model is profitable and is accretive to the bricks-and-mortar business on the operating margin line," he noted. "During 2012, investment in our e-commerce business will provide for new platform technology and upgrading search functionality. The redesigning of the website and online assortment will more closely mirror the look and feel of our stores, creating a seamless customer experience across all customer touch points."

Cost Plus will soon begin testing site-to-store, in-store pickup and shipping to home door in this year and expects to rollout the effort chain-wide in 2013.

And another key initiative for Cost Plus in 2012 is the continued testing wholesale and store-within-a-store concepts. The company is currently conducting a such-pilot in four Bed Bath & Beyond locations "that showcases our entire consumables assortment, excluding alcohol, in a World Market branded shop. We are optimistic about the prospects of this pilot, which will continue in 2012, and both companies are in the process of evaluating the results in next steps," Feld added.

Looking to the first QUARTER, cost Plus is expecting net sales in the range of $210 million to $214 million, based on a same store sales increase in the range of 6% to 8%, compared to a same store sales increase of 5.5% for the first quarter of fiscal 2011.

For the full fiscal 2012, the company expects net sales in the range of $1.0 billion to $1.1 billion, based on a same store sales increase in the range of 5% to 6% compared to a same store sales increase of 5.4% for fiscal 2011. Comparable store sales for fiscal 2012 were measured on a 53 to 53 week basis, while comparable store sales for fiscal 2011 were measured on a 52 to 52 week basis, the company noted.

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