NEW YORK — Charlotte Russe Holding Inc. said Thursday that it was “evaluating strategic alternatives” for its troubled Rampage chain as the specialty retailer posted a wider second-quarter loss on a sales gain of 34.7 percent.
Although management did not reveal what the strategic alternatives for Rampage would be, financial sources said it could include a sale of all or part of the 66-store chain, or conversions of the brand into Charlotte Russe.
The retailer said that, due to the strong performance of its core Charlotte Russe brand, it was expanding that store base by 35 to 40 units this year. The company currently operates 354 Charlotte Russe stores.
The San Diego-based retailer said its net loss for the quarter ended March 25 deepened to $11.6 million, or 52 cents a diluted share, from a loss of $762,000, or 3 cents, in the same period last year. Sales for the quarter rose to $171.1 million from $126.8 million. Same-store sales for the quarter showed a gain of 16.6 percent.
Results include a 60 cent noncash impairment charge relating to a write-down of long-lived assets of its Rampage brand, which was offset by gift card income of 5 cents a share. Excluding the charge, earnings per share were 3 cents. Analysts had the retailer pegged to earn 2 cents, according to Thomson Financial. On a conference call with analysts, management of the retailer said the Rampage-related charge “represents an acceleration of [Rampage’s] future depreciation expense into a current period.”
Mark Hoffman, chief executive officer, said in a statement that the “Rampage chain continued to struggle with its brand repositioning during the recent quarter.” On the conference call, Hoffman said that, as the company moves “forward, we are evaluating strategic alternatives for this business, but I would note, it’s premature to speculate where that process may lead.”
Hoffman said Rampage “represents about 16 percent of our store count; however, its contribution to overall revenues during the second quarter declined to about 10 percent.” The ceo added that store-level operating losses at Rampage ran about $9 million during the first half, “with almost 65 percent of that loss occurring in the second quarter ended March 2006.”
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Hoffman added the retailer would continue “efforts to successfully reposition the brand.”
By way of guidance, Hoffman said the company expects to post “low-double-digit positive comparable-store sales in the third quarter,” with EPS coming in between 20 cents and 24 cents. This compares with an EPS in the third quarter of last year of 14 cents.
Shares of the retailer closed Thursday down 3.6 percent at $20.25.