Cache Inc. (CACH)
Q1 2008 Earnings Call
April 30, 2008 9:00 am ET
Tom Reinckens - Chairman & CEO
Maggie Feeney - EVP & CFO
Allison Malkin - IR, ICR
Ashok Gandhi - VP of Finance
Victor Coster - Treasurer and Secretary
Neely Tamminga - Piper Jaffray & Co
Margaret Whitfield - Sterne, Agee & Leach, Inc
Liz Dunn - Thomas Weisel Partners
Liz Pierce - Roth Capital Partners
Robin Murchison - SunTrust Robinson Humphrey
Jeff Van Sinderen - B. Riley & Co
Alex Rosenfeld - Brean Murray, Carret & Co
Chris Kim - JPMorgan Chase & Co
John Pinto - Brightleaf Capital
Harry Ikenson - Berman Capital
Mark Montagna - CL King & Associates
Previous Statements by CACH
» Cache, Inc. Q4 2008 Earnings Call Transcript
» Cache Inc. F2Q08 (Qtr End 06/28/08) Earnings Call Transcript
» Cache Q4 2007 Earnings Call Transcript
Thank you, 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 materially from the information that will be discussed is available in Cache's filings with the SEC, including Cache's report on Form 10-K for the fiscal year ended December 29, 2007.
And now, I would like to turn the call over to Tom Reinckens, Cache's Chairman and CEO.
Thank you, Allison. Good morning. And thank you for joining us. Here with me today are Maggie Feeney, our Executive Vice President and Chief Financial Officer; Ashok Gandhi, our Vice President of Finance; and Victor Coster, our Treasurer and Secretary.
I will begin today's call by providing an overview of our first quarter results and provide the strategy behind our announced store closures, while updating you on the priorities we are implementing to provide for our growth in the current year. Then Maggie will review our financial highlights and I will provide closing comments and turn the call over to the operator to conduct the question-and-answer portion of the call.
As many of you are aware, Cache is known as a destination store for long special occasion dresses; dresses which are often purchased for prom, which is a business that typically builds as a percentage of our total month sales in January and February, and peaks in March and April, then significantly diminishes as a percentage of our sales in May and June.
This year were certainly uncharacteristic in that the long special occasion dress business did not develop as expected, which may have been caused by the soft consumer environment. As a result, during the first quarter, we achieved lower-than-anticipated sales and recorded higher markdowns, as we worked aggressively to maintain clean inventory levels.
Our performance in the long special occasion dress category overshadowed a particularly strong sportswear business, which we attribute to the success of our pricing strategies and our vastly improved merchandise assortments. We are confident that as we exit out of the 2008 long special occasion spring dress season, our overall sales trends will improve during the balance of our second quarter.
In April, we are reporting our comparable store sales were down 1% for the month, a similar result to our flat comps in March. While we were disappointed with our April sales results, we are excited about our prospects in May and June, with both month sales primarily driven by sportswear classifications that are performing very well. As a result, for this year, we are planning low single-digit positive comp store sales gains in both May and June.
Briefly touching on the numbers, first quarter net sales increased 5% to $67.7 million, and comp store sales increased 3%. Net loss for the quarter was $2.1 million or $0.15 per share, and included $0.14 in one-time charges.
As we announced previously, after careful evaluation, we made the decision to close approximately 14 underperforming stores. These locations were not profitable on a four wall basis, and while this was a difficult decision, we knew our time and energy would be best spent on focusing on initiatives, that are expected to advance our growth.
We also incurred $0.03 per share cost relating to a change in management we announced in January. Excluding these costs and losses, results relating to the operation of the stores slated for closure, first quarter fiscal 2008 results were $0.01 per share. And again, that does not include the $0.02 to $0.03 losses that we incurred for those stores, the 14 stores that we are closing. This compares to the first quarter diluted earnings per share of $0.01 in last year's first quarter, which includes about $0.01 loss for those stores that were going to close.
We are pleased to experience the positive results of our key strategies, which are working and driving intended results. As you may have heard me say before, Mission $500 is our company's top priority. We believe achieving $500 in sales per square foot is well within our reach and will allow us to attain our profitability goals that includes double-digit operating margins.
We believe we have tremendous potential to increase our current sales per square foot from the mid $400 level to $500 and even higher. To accomplish this, we have begun to implement a good/better/best pricing strategy, which is assisting us to increase transactions and shopping frequency. We have also expanded our sportswear assortment to include lifestyle assortments, such as those appropriate for work settings.
Our customers have responded favorably to these moves. In fact, sportswear sales in the first quarter were up double-digit on a comp store sales result basis, and this positive performance has continued in April. Again, as sportswear becomes a greater majority of our overall sales, we expect our comp store sales performance to accelerate nicely. We are also excited about our plans to relaunch Contour in August, adding new fabrics, improved quality, and fit to the line, to further enhance its appeal.
Regarding marketing, we continue to demonstrate success with our monthly catalogs, and postcards with prominent offers. We believe this is the right strategy for the current environment. To continue to generate customer loyalty, we plan to introduce a new generation catalog in June, with improved features and better quality design. As it relates to sourcing, we have begun to utilize offshore sourcing to a greater extent than in years past. Currently, we are beginning to produce goods in Central America for the very first time in the company's history, and will continue to ship more of our sourcing offshore, which is expected to offset higher labor costs we have incurred here in the domestic US production.
During the quarter, we opened three stores and closed six stores, ending the period with 294 Cache and Cache Lux store locations. For the year, we continue to expect to open between 10 and 13 new stores, while closing between 20 and 23 locations, including the 14 stores announced as part of our efforts to improve overall company profitability. At year-end, we expect to operate a total of approximately 287 stores.
Finally, we begin to return value to our shareholders by utilizing $12.6 million in cash to fund the repurchase of 1.3 million shares. This brings total shares repurchased under the $3.5 million share authorization to 3 million shares. We are comfortable with our current cash balance, which is more than adequate to fund our future growth.