Cache Inc., a specialty chain of women’s apparel stores, reported results for the thirteen (third quarter) and thirty-nine week periods (first nine months) ended September 29, 2012.
For the 13-week period ended September 29, 2012:
- Net sales decreased 5.9% to $45.8 million from $48.7 million in the third quarter of fiscal 2011. Comparable store sales declined 2.9%, following a 5.7% increase in comparable store sales in the third quarter of fiscal 2011;
- Gross profit decreased 25.8% to $14.7 million, or 32.0% of net sales, compared to $19.8 million, or 40.6% of net sales, in the third quarter of fiscal 2011;
- Operating loss totaled $8.1 million, as compared to an operating loss of $3.0 million in the third quarter of fiscal 2011; and
- Net loss totaled $6.4 million or ($0.49) per share, which included a $1.3 million charge or $0.10 per share for an increase in the tax valuation allowance against net deferred tax assets. This compares to a net loss of $1.8 million or ($0.14) per share last year
Thomas Reinckens, Chairman and Chief Executive Officer, commented: “Our third quarter results were at the better end of our revised expectations, prior to an increase in the tax valuation allowance. Third quarter results were negatively affected by an unfavorable response to our summer and fall sportswear assortments, as well as an increase in the valuation allowance of $1.3 million against net deferred tax assets.
“We have identified the actions that we believe are necessary to bring about a positive change in our business. We are working expeditiously to intensify our offerings of sophisticated fashions which our customers look for in our brand. At the same time, we continue to maximize strong selling categories such as dresses and generate solid increases in our e-commerce sales.
“Our search to identify a new President is well underway and we believe that we are on track to achieve our targeted savings of $3 million in fiscal 2013. While we remain cautious as we enter the final quarter of the year, we are confident in our strategies, which we expect to enable us to improve our sales and margin trends as we enter 2013.”
For the 39-week period ended September 29, 2012:
- Net sales increased 1.5% to $163.4 million from $161.0 million in the first nine months of fiscal 2011. Comparable store sales increased 4.0%, as compared to an increase of 6.4% in the first nine months of fiscal 2011;
- Gross profit decreased 8.6% to $63.2 million, or 38.7% of net sales compared to $69.2 million, or 43.0% of net sales, in the first nine months of fiscal 2011;
- Operating loss totaled $8.5 million, as compared to an operating loss of $143,000 million in the first nine months of fiscal 2011; and
- Net loss was $6.6 million or ($0.51) per share, which included a $1.3 million charge or $0.10 per share for an increase in the tax valuation allowance against net deferred tax assets, compared to net income of $205,000 or $0.02 per diluted share in the first nine months of fiscal 2011.
Gross profit for the third quarter of fiscal 2012 was $14.7 million, or 32.0% of net sales, compared to $19.8 million, or 40.6% of net sales, in the third quarter of fiscal 2011. For the first nine months of fiscal 2012, gross profit was $63.2 million, or 38.7% of net sales, compared to $69.2 million, or 43.0% of net sales, in the first nine months of fiscal 2011. The decrease in gross margin in the third quarter and first nine months of fiscal 2012 was primarily driven by increased markdowns, as compared to the same periods in fiscal 2011.
In total, operating expenses for the third quarter of fiscal 2012 were $22.8 million, unchanged from the prior year quarter. As a percentage of net sales operating expenses increased to 49.7% compared to 46.9% of net sales, in the third quarter of fiscal 2011. For the first nine months of fiscal 2012, total operating expenses were $71.7 million, or 43.9% of net sales, compared to $69.3 million, or 43.1% of net sales, in the first nine months of fiscal 2011. The increase in total operating expenses for the first nine months of fiscal 2012 primarily reflected increased marketing expenses and e-commerce related costs, which were partially offset by lower depreciation expense, as compared to the same period in fiscal 2011.
Store Information
During the third quarter, the Company closed two locations, ending the period with 262 stores in operation. For fiscal 2012, the Company expects to open no new additional stores and since September 29, 2012 the Company has closed one additional location. Accordingly, the Company expects to end fiscal 2012 with approximately 261 locations and 525,000 square feet in operation.
2012 Outlook
For the fourth quarter of fiscal 2012, the Company currently expects comparable store sales to be flat or to increase in the low-to-mid single-digit range. This follows a 12.4% increase in comparable store sales in the fourth quarter of fiscal 2011. The Company currently expects fourth quarter fiscal 2012 net earnings per diluted share in the range of $0.01 to $0.03, exclusive of any potential asset impairment costs and potential tax valuation allowance. In the fourth quarter of fiscal 2011, the Company reported net income of $0.15 per diluted share, or $0.12 per diluted share excluding tax valuation allowance reversal, store impairment charges and gain on note payable settlement.
Cache is a nationwide, mall-based specialty retailer of sophisticated sportswear and social occasion dresses targeting style-conscious women who have a youthful attitude and are self-confident.
