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    Stock Report for Coldwater Creek Inc. (CWTR)

    Coldwater Creek Inc. (CWTR) is a specialty retailer of women’s apparel, gift items, jewelry and accessories. It sells its merchandise through a growing number of premium retail stores throughout the country, its own direct-mail catalogs and its e-commerce Web site at www.coldwatercreek.com. The Company’s headquarters are located in Sandpoint, Idaho, with a customer contact and tech center in nearby Coeur d’Alene, Idaho and a state-of-the-art distribution and customer contact center located in Parkersburg, West Virginia.

    Share Statistics (08-Sept-11)   FY

    2010

    FY

    2011

    %

    Chg

    Q3

    2010

    Q3

    2011

    %

    Chg

    Symbol CWTR Revenue, $Mn 1.04B 981.10 -5.7% 253.50 181.41 -28.4%
    Current price $1.15 Gross marg. 32.2% 31.3% -2.8% 33.5% 25.0% -25.4%
    52wk Range: $0.80-$5.89 Oper. margin -4.5% -15.0%
    Avg Vol (3m): 772,918 Net margin -5.4% -4.5% -16.7% 0.6% -15.3% -2650.0%
    Market Cap. 106.59M              
    Shares Outstanding 92.69M EPS, $ -0.61 -0.45 -26.2% 0.02 -0.28 -1500.0%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    Shares of CWTR traded as much as 35% higher on Thursday on volume of over 4 million shares.  Over the last 52 weeks, the stock has ranged from a low of $0.80 to a high of $5.89.  CWTR is currently trading above its 50-day moving average of $1.05 and below its 200-day moving average $1.92.

    Shares of the Sandpoint, Idaho-based specialty retailer gained 30.3% in the last five trading days and 33.3% in the last month.  Year-to-date, the stock is down 75.9%.

    After seeing disappointing results for its third quarter, CWTR recently announced a long-term strategic operating plan to return to sales growth and increase profitability.  According to the Company, this would include a merchandising revitalization plan, a comprehensive brand marketing campaign, and a retail store optimization program.

    Over the past 12 months, CWTR has made significant changes to its merchandising and design organizations adding key talent and implementing process changes to improve its product offering. With this foundation in place, the Company is now implementing the second phase of its turnaround.

    CWTR intends to continue to execute the merchandise revitalization initiatives by creating collections with a modern fashion sensibility in vibrant colors, prints, and pattern, offering enhanced versatility and addressing more aspects of its customers’ lifestyle needs. The Company is focusing on balancing its category investments and improving inventory productivity.

    The Company will initiate a comprehensive brand marketing campaign to restore CWTR’s brand image, which includes television, national magazine advertising, and online media. The campaign, which will be introduced this fall and holiday, is designed to increase brand engagement, traffic, and conversion with a focus on expanding the reach to a broader segment of the Company’s target demographic.

    The Company plans to improve overall financial performance, which includes a continued focus on expense and inventory management, as well as a store optimization program. This program involves the closure of approximately 35 to 45 underperforming stores over the next two years, including approximately 15 stores in fiscal 2011, and will be achieved through a staged approach based primarily on early termination rights and natural lease expirations.

    Dennis Pence, CWTR chairman and CEO, commented in the release: “As we look to the back half of 2011, we will begin to see the collective efforts of our new design and merchandising teams reflected in our fall and holiday offerings, which will be supported by a comprehensive marketing campaign focused on driving traffic and conversion. We believe these actions, combined with our plan to close 35-45 underperforming stores, will allow us to more rapidly return our business to profitability.”

    Source:

    http://phx.corporate-ir.net/phoenix.zhtml?c=92631&p=irol-newsArticle&ID=1602143&highlight=

    Financial Summary

    CWTR reported consolidated net sales of $181.4 million for the three-month period ended July 30, 2011, compared with $253.5 million in the fiscal 2010 second quarter. Net sales from the retail segment, which includes the Company’s premium retail stores, outlet stores and day spa locations, were $142.2 million versus $195.4 million in the same period last year, primarily reflecting a decrease in comparable premium store sales of 30.6%. Second quarter net sales from the direct segment, which includes Internet, phone and mail orders, decreased 32.6% to $39.2 million from $58.1 million in the same period last year.

    Consolidated gross profit was $45.3 million, or 25.0 % of net sales, compared with $84.7 million, or 33.4% of net sales, for the fiscal 2010 second quarter. The decline in gross profit margin was primarily due to the deleveraging of fixed retail occupancy costs given the lower sales, and to a lesser extent, lower merchandise margins as a result of higher promotional activity.

    Selling, general and administrative expenses (SG&A) were $70.0 million, or 38.6% of net sales, compared with $82.5 million, or 32.6% of net sales, for the fiscal 2010 second quarter. The $12.5 million decline in SG&A was due primarily to lower variable and fixed operating expenses, lower employee related costs and lower marketing spend compared to the same period last year.

    Net loss was $27.7 million, or $0.30 per share, compared with net income of $1.5 million, or $0.02 per diluted share, for the fiscal 2010 second quarter. Net loss for the second quarter 2011 included a non-cash asset impairment charge of $2.4 million, or $0.03 per share, related primarily to eighteen underperforming stores.

    At July 30, 2011, cash totaled $31.5 million, as compared with $72.3 million at July 31, 2010. Premium retail store inventory per square foot, including retail inventory in the distribution center, declined approximately 16.0% as compared to the end of the second quarter last year. Total inventory decreased 8.5% to $152.2 million from $166.4 million at the end of the second quarter last year.

    Source:

    http://phx.corporate-ir.net/phoenix.zhtml?c=92631&p=irol-newsArticle&ID=1602143&highlight=

    Financial Strength (08-Sept-2011)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 0.40 1.31 1.10 0.76
    Current Ratio (MRQ) 1.37 1.83 1.33 1.11
    LT Debt to Equity (MRQ) 19.76 17.87 53.47 111.59
    Total Debt to Equity (MRQ) 20.41 30.88 90.85 150.47
    Interest Coverage (TTM) -10.81 9.25 0.33 23.18

    Source: Reuters.com, SEC Filings.

    Analyst Consensus

    Analyst Recommendations and Revisions

    -5 Linear Scale

    Current

    1 Month
    Ago

    2 Month
    Ago

    3 Month
    Ago

    (1) BUY 0 0 0 0
    (2) OUTPERFORM 0 0 0 0
    (3) HOLD 4 4 5 7
    (4) UNDERPERFORM 0 0 0 0
    (5) SELL 0 0 0 0
    No Opinion 0 0 0 0
     
    Mean Rating 3.00 3.00 3.00 3.00

    Source: http://www.reuters.com/finance/stocks/analyst?symbol=CWTR.O

    Consensus Estimates Analysis

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Oct-11 3 193.30 202.00 181.93 296.59
    Quarter Ending Jan-12 3 234.19 245.00 218.86 366.25
    Year Ending Jan-11 7 1,011.74 1,039.63 990.60
    Year Ending Jan-12 3 788.69 808.20 761.99 1,183.94
    Year Ending Jan-13 3 783.88 800.00 767.99 1,225.22
    EARNINGS (per share)
    Quarter Ending Oct-11 4 -0.25 -0.18 -0.29 0.08
    Quarter Ending Jan-12 4 -0.24 -0.22 -0.26 0.11
    Year Ending Jan-11 8 -0.33 -0.24 -0.40
    Year Ending Jan-12 3 -1.07 -1.00 -1.11 0.21
    Year Ending Jan-13 4 -0.62 -0.50 -0.90 0.24
    LT Growth Rate (%) 2 2.50 5.00 0.00 22.50

    Technical Analysis

    Source: http://stockcharts.com

    CWTR is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    CWTR’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept08-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Christopher & Banks Corp. CBK 4.35 155.73M n/a n/a 0.34 0.33
    The Talbots Inc. TLB 2.88 203.26M n/a n/a 0.18 0.18
    Chico’s FAS Inc. CHS 13.13 2.26B 14.75 12.50 1.14 0.95
     AnnTaylor Stores Corp. ANN 23.00 1.20B 12.37 10.45 0.54 0.50
    Textile – Apparel Footwear $ Accessories Median       15.04 n/a 0.58 n/a
    Coldwater Creek Inc. CWTR 1.15 106.59M n/a n/a 0.14 0.14

    Source: Thomson Financial

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