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Linens 'n Things Hails Fashion Bedding

Home textiles hit a milestone almost two years into the Linens 'n Things self-described "nine-inning" (nine-year) turnaround plan, the 585-unit specialty retailer said during its third-quarter earnings call.

For the first time "in a number of years, as a matter of fact," said cfo Frank Rowan, fashion top-of-bed goods posted positive comp-store sales.

"This bodes well for us as we reposition our brand as a destination shopping center for not just commodity-type products but also fashion-type products," Rowan continued.

Another related milestone during the quarter was the contribution home textiles made to LNT's back-to-school assortment "for the first time in a number of years," said Robert DiNicola, chairman and ceo. "The piece that we've yet to have to add to the mix is the home décor piece, [which is] also a significant part of back to school … and it could be a wonderful opportunity for back-to-school next year."

Year-to-year quarterly comparisons were a bit tricky, colored by non-cash impairment charges and shifting tax benefits, but LNT is clearly having a tougher 2007 than 2006, reporting a third-quarter net loss of $79.9 million today versus a net loss of $27.4 million one year ago.

The year-to-date picture was not much brighter, with a 39-week net loss of $180.1 million in 2007, against a net loss of $132.0 million for the same period last year.

Still, sales have at least flattened, with third-quarter volume of $666.8 million up 1.3%, while comps were off 1.4%. Seen against the 39-week sales volume of $1.8 billion, down 1.6%, the positive trend is that while comps are down 4.6% year-to-date, that negative 1.4% for the third quarter is inching closer to actual comp growth.

With both home textiles and housewares "moving in the right direction simultaneously" in what the company calls the first phase of its turnaround project, LNT's focus in the new year will be the home décor segment. Already, improvements are visible in the soft window treatments and furniture categories, "two very large, important, big-ticket areas that are really the hub of the home décor world," DiNicola said. "With those two moving in the right direction [it] helps us to get footing we need to get the other home businesses moving."

Soft window, he said, is "an important destination business for us and not that many players are in this business. Now we're starting to see some good headway in curtains and draperies and expect 2008 to prove to be a solid year in terms of recapturing lost market share in that category."

LNT is also seeing "nice results" in its furniture business. The soft floor covering segment is another home décor category that is picking up the pace, albeit in smaller strides, DiNicola said: "Our floor coverings have had highs and lows, and now we're starting to have more hits than misses starting to come our way."

Come January and beyond, other home décor categories poised for improvement include lighting and wall art.

On the fate of its program with designer Nate Berkus, LNT has opted to "move away" from the brand," DiNicola said. "Both Nate and Nate's team and ours have decided to pursue other avenues by which to grow our respective brands," he added. "We'll be moving away from the programs and will develop other programs and categories."

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