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Cache, Inc. (CACH)

Q4 2007 Earnings Call

February 6, 2008 9:00 am ET


Allison C. Malkin – ICR – Senior Managing Director

Thomas E. Reinckens - Chairman of the Board, President & Chief Executive Officer

Margaret J. Feeney - Chief Financial Officer & Executive Vice President, Finance


Neely Tamminga – Piper Jaffray

Margaret Whitfield – Sterne, Agee & Leach

Jeff Van Sinderen - B. Riley

Liz Pierce – Roth Capital Partners

Eric Beder – Brean Murray, Carret & Co.

Chris Kim – JP Morgan

Robin Murchison with SunTrust Robinson Humphrey

Bill Strauss – Thomas Weisel Partners

Mark Montagna – CL King & Associates

Harry A. Ikenson – Ikenson Research & Consulting




Ladies and gentlemen thank you very much for standing by and welcome to the Cache, Inc.’s fourth quarter fiscal 2007 results conference call. During today’s presentation all parties will be in a listen-only mode and following the presentation instructions will be given for the question-and-answer session. As a reminder this conference is being recorded today February 6, 2007. I would now like to turn the call over to Allison Malkin from ICR. Please go ahead, ma’am.

Allison C. Malkin

Good morning. Today’s conference call includes comments concerning Cache’s business outlook and contains forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call that are not based on historical fact are subject to risks and uncertainties. Actual results may differ materially. Additional information concerning a number of factors that could cause actual results to differ material from the information that will be discussed is readily available in Cache’s filings with the SEC including Cache’s report on Form 10-K for the fiscal year ended December 30, 2006. And now I’d like to turn the call over to Tom Reinckens, Cache’s Chairman and CEO.

Thomas E. Reinckens

Good morning and thank you for joining us. Here with me today are Maggie Feeney. I will begin today’s call by providing an overview of our fourth quarter results and fiscal year accomplishments as well as outline the priorities for the business as ewe begin fiscal 2008, then Maggie will review our financial highlights and I will provide closing comments and then turn the call over to the Operator to conduct the question-and-answer portion of the call.

The fourth quarter was difficult for our company driven largely by the effects of a sluggish economy which led to a highly promotional environment in retail. While we were prepared for this planning a reduction in expenses and managing our inventories very tightly which enabled us to report earnings above a year ago, the holiday season did not develop as we expected. Total fourth quarter net sales declined by 6% to $78.5 million and comparable store sales decreased 7%. Net income for the fourth quarter totaled $4.9 million or $0.32 per diluted share which compared to net income of $4.2 million or $0.26 per diluted share last year. For fiscal 2007 net sales declined by 2% to $274.5 million and comparable store sales declined 1%. Net income totaled $6.5 million or $0.04 per diluted share which compares to net income of $8.3 million or $0.51 per diluted share last year.

The quarter and year did include several noteworthy accomplishments. The end of the year with a very strong balance sheet cash totaled $50.1 million even as we utilized $24.2 million during the year to fund the repurchase of our stock and inventory was below last year period at $30.5 million as compared to $34.8 million last year representing a decline of 12%. More importantly when you include the 2007 piece goods inventory and you really just look at finished goods only on a per-store basis inventories were down almost 20% year-over-year. In addition during 2007 we made significant progress on our strategic goals executing to our initiatives of vertical integration, expansion of our product offering and intensifying our marketing. We believe these initiatives will lead to improved results in the future at Cache. To this end through vertical integration we have reduced product costs while improving consumer acceptance of our offerings through the creation of cohesive assortments. We now control all aspects of the process from designing, resourcing and merchandising following our July acquisition of Adrienne Victoria Designs. We are certainly pleased with the performance of the acquisition. Adrienne and her team have made tremendous progress and we expect this effort to continue to reduce product costs and improve consumer acceptance of our assortment this year.

Expansion of our product offerings is also an integral to our strategy of improving our sales productivity. In September we introduced our Cache Contour Line to all doors which is allowing us to address more of our customers’ lifestyle needs. With Contour we also expect to reach new customers. As many of you are aware, Contour’s appropriate for work settings while continuing to appeal to our customers’ needs for sophistication in our Missy fit. We have also added a casual offering such as our spring assortment of Cache Tee’z and selling has started off very well. In addition we are focused on optimizing our marketing strategy which is currently centered on our direct mail pieces that include prominent offers. This strategy combined with our loyalty program which was launched in the second quarter last year is working to generate increased traffic and transactions at our store.

Furthermore we are pleased to return value to our shareholders through our chair repurchase program. During the year we repurchased 1.7 million shares for $24.2 million of cash. At year end we had 1.8 million shares remaining on our current buy back program.

As we begin fiscal year 2008 we recognize that the environment remains challenging yet we believe we are positioned for improved performance driven by our current merchandise strategies that are aimed at increasing market share and sales productivity. We also believe our efforts to contain expenses and manage inventory provide us with greater resiliency if the environment worsens. Our organization’s number one goal in 2008 is to increase sales productivity. Sales results at Cache over the last five years have been consistently around the 440 to 460 sales per square foot level well below the best of our peers.

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