Cost Plus Calls Cotton "Largest Nemesis" in Textiles Business

OAKLAND, CALIF. - Some textiles product categories in Cost Plus' home assortment are being hit by inflation costs, forcing the retailer to work harder to re-develop them to meet price points that are palatable to shoppers.
     While the majority of product costs "are really coming in the forms of freight and increased field charges," the retailer's "largest nemesis in certain textile categories continues to be cotton, and so we have had to go back and look at value engineering or revalue engineering in some of our cotton products to ensure the integrity of our everyday value pricing strategy," explained president and ceo Barry Feld during the retailer's first quarter earnings call late last month.
     On the whole, the 259-unit chain has been able to "mitigate and offset a significant amount of commodity pressure as a result of the vendor supply chain that we have established....So we are monitoring and watching and acting accordingly as we see the commodity pressures crop up around the globe, but we're well organized, particularly with our deep experience with our vendor community, to really deal with this. The main one that puts short-term pressure on the supply chain is the live fluctuations in diesel and bunker fuel."
     Cost Plus reported a net loss for the first quarter of of $3.4 million or 15 cents per share, an improvement over a net loss of $10.3 million or 47 cents per share for last year's 1Q.
     Sales rose 5.9% to $199.7 million, and comps were up 5.5%. Customer count climbed 6.5% offset by a 1.0% reduction in the average ticket.
     Analysts asked Feld during the call for an update on Cost Plus' partnership with Bed Bath & Beyond in three stores, to which he replied, "All I can say is, we have a continued ongoing test with Bed Bath. We're pleased as the test continues to perform and really don't have any new news, other than the fact that the test is continuing, and we are pleased at the results thus far." The retailer's second quarter guidance calls for sales in the range of $195 million to $199 million, based on a same store sales increase in the range of 2% to 4% compared to a same store sales increase of 6.5% for the second quarter of fiscal 2010.
     For fiscal 2011, the company expects sales in the range of $946 million to $956 million, based on a same store sales increase in the range of 4% to 5% compared to a same store sales increase of 7.2% for fiscal 2010.

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