Cost Plus loss widens, sales hold up
November 21, 2008-- Home Textiles Today,
Oakland, Calif. – Specialty retailer Cost Plus touted its positive customer conversion rate, lowered inventories and steady store traffic for the third quarter, “despite a further weakening economy,” as it reported a net loss of $25.8 million, or $1.17 per share.
Cost Plus’ home décor-related Living Furniture and Rug Caravan seasonal events “performed well” during the period, and more importantly, the chain “did not experience a sharp fall-off in sales as the quarter progressed,” said Barry Feld, president and ceo, during the 296-unit chain’s earnings conference call yesterday afternoon.
The company attributes these achievements to “our focused turnaround initiatives,” he said.
For more than two-and-a-half years, Cost Plus has “completely retooled our merchandise assortment…and reintroduced everyday low price points,” Feld explained. “The fundamentals of our marketing and re-merchandising efforts remain the right ones to pursue, and we are achieving the necessary results by driving more traffic to our stores.”
The quarterly loss was nearly twice the net loss for the same period one year ago – but that 2007 period included an income tax benefit of $9.2 million, the company said.
In the nine-month period ended Nov. 1, Cost Plus recorded a net loss of $84.4 million or $3.82 per share, deeper in the red than the $43.0 million or $1.85 per-share loss one year ago.
Sales of $213.0 million in the quarter were off 0.8% from last year, while comps fell 3.4%.
Year-to-date sales of $645.6 million were up 3.1%, while comps declined 0.6%.
Cost Plus saw reductions in basket and average spend per shopper. “Consumers have become increasingly more cautious with their purchases,” Feld said. “They are clearly buying less, as evident in the drop in units per transaction and lower average ticket we are experiencing.”
Consumables remain a focus, especially for the holiday season; the category is expected to comprise about 45% of sales in the fourth quarter. Cost Plus is further plugging its own World Market brand deeper into food and wine to help “drive incremental sales and repeat visits” from shoppers.
Also for the holiday period, about 80% of its skus are priced at less than $20, and 60% are less than $10, “providing high-quality, low-cost gifts,” Feld said.
For the fourth quarter, Cost Plus is projecting a profit from continuing operations before interest and taxes in the range of $10-$18 million vs. a $20 million profit last year.
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