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Linens ’n Things loss widens as transition begins

Clifton , N.J. – Linens ’n Things reported second quarter sales of $611.6 million, a gain of 6.7% over the same period a year ago, while comp store sales were up slightly, by 0.2%. The 555-store specialty chain generated a net loss of $39.1 million, much bigger than the quarterly loss of $5.9 million one year ago.

In a conference call with analysts this morning, chairman and ceo Robert DiNicola noted that overall the Linens ’n Things stores generate about $150 per sq. ft., while key competitors are producing “well over $200 per square foot. We need to raise productivity dramatically.”

Toward that end, DiNicola said the company has been flushing “old and distressed product” in favor of “much more productive inventory,” notably its Best Bets program of fast-moving products that has grown from “14% of inventory in February to 22% of inventory today,” which he said was a $100 million inventory swing. Best Bets will increase as the company narrows the selection of key items and boosts targeted marketing, with a particular focus on the upcoming holiday season.

“We’re in the heat of the battle right now,” said DiNicola, noting LNT is “starting to see some life in the textiles side of the business” which in the past has suffered from the greater emphasis on the merchandising presentation of housewares. He said the retailer will reverse customer disappointment on finding sizes and colors, noting that the basics must be well stocked in order to support higher-margin fashion coordinates and accessories. DiNicola added that “basic and predictable” items such as comforters and twin sheets are currently showing good sell-throughs.

Gross margin in the quarter, said cfo Frank Rowan, dropped to 39% of net sales vs. 41% last year, while SG&A expenses rose to 46% of net sales up from 43% last year.

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