Structural changes and merchandising improvements helped Cache Inc. increase its second-quarter profits 6.2 percent.
The New York-based apparel firm posted net income of $897,000, or 7 cents a diluted share for the period ended July 3, compared with income of $845,000, or 7 cents, a year earlier. Net sales slid 0.5 percent to $56.6 million from $56.9 million, in the year-ago period. Analysts surveyed by Yahoo were looking for EPS of 7 cents on revenue of $60.2 million.
Comparable-store sales for the quarter were up 5.1 percent, as gross margin improved to 44.1 percent of sales, versus 44.4 percent in 2009.
“The changes we have made in our business process, including the flow of our goods, the numbers of styles for each delivery, our markdown cadence and early planning calendar are expected to result in a sustained improvement in merchandise margins,” chairman and chief executive officer Thomas Reinckens said on the company call. “While we continue to plan conservatively given the continuation of a difficult economy, we believe firmly that we’re on the right track to record a sustained improvement in sales and profitability and more importantly increase value for our shareholders.”
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Despite the cautious words, the ceo reported that comps are “up positive mid-single digits in the first five weeks of our third quarter, providing further evidence that our design and merchandise initiatives are working and generating intended results.”
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Still, the company said it expected to report a loss in the third quarter due to the “seasonality” of its business and move to “solid profitability in the fourth quarter.”
“Significant progress has been made by Cache in overhauling its processes and merchandise offerings but the macro economic challenges remain a concern,” said Sterne Agee analyst Margaret Whitfield, who rates the retailer’s stock “neutral.”
Eric Beder, a specialty retail analyst at Brean Murray Carret & Co., echoed Whitfield, but added that the company’s plan to “increase its focus on elevation of visual and marketing through national print ads for the fall and holiday collections in the second half of 2010,” should “drive traffic and more full-price selling.”
During the first half, the company’s net loss expanded to $3.2 million, or 25 cents a diluted share, versus a loss of $751,000, or 6 cents a share, the prior year. Revenue contracted 4.3 percent to $105.1 million, from $109.9 million.