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Cost Plus plans upswing as losses widen

Oakland, Calif. – This month marks the one-year anniversary since Cost Plus World Market implemented its “comprehensive turnaround” plan, and the company said that there are “tangibly” visible differences at the store level – even if not yet in the numbers.

“While our numbers have not yet reflected the progress we have made, many of you who have visited our stores and our website over the past year can tangibly see the differences from a year ago,” said Barry Feld, president and ceo, during the 294-unit chain’s first-quarter earnings call yesterday afternoon.

Indeed, the financial results were dim: Net loss for the first quarter of fiscal 2007 was $12.0 million, or $0.54 per diluted share, compared to a net loss of $3.5 million, or $0.16 per diluted share, for the same period last year. Total revenue was $207.9 million, down 2.4% from $213.0 million a year ago. Same-store sales fell 8.1%.

Feld outlined improvements, starting with shopper experience. “Our stores are operationally stronger,” he said. Store productivity is being aided by Cost Plus’ repositioning from thematic shops to merchandise-centric sets, “which free up store labor to help customers and ensure well-stocked shelves,” he continued.

Cost Plus is getting sharper on price points “particularly in areas like glassware, outdoor furniture, floor coverings, toys and bath products.”

Feld said new “value” prices in the rug category are already showing results. “Going back 24 months, you couldn’t find a rug in our stores for under $300 or $400,” Feld pointed out. “When you look at all of the value-priced floor coverings we’re bringing in now, you’re seeing very positive results as a result of that.”

In the first quarter, Cost Plus’ home furnishings sales fell below projections, primarily as a result of poor sell-throughs in furniture. But on the upside, strong sales were spurred in “certain higher velocity categories,” including bath, jewelry, and accessories.

On the marketing side, Cost Plus recently signed on a new marketing firm to help it build its name “market by market, state by state” and revamp its advertising approach, said Feld, who added that the retailer spends 5.5% to 6% of sales on advertising.

The new firm will help Cost Plus achieve, among many other things, a name change to “World Market” in newer markets, away ultimately from its original Cost Plus brand. Only in San Francisco , where it was established in 1958, will the retailer maintain its Cost Plus name more visibly.

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