Coldwater Creek Inc. (Nasdaq: CWTR) today reported financial results for the three-month period ended May 1, 2010.

First Quarter 2010 Operating Results
Net sales were $243.1 million, compared with $228.4 million in the fiscal 2009 first quarter. Sales from the retail segment, which includes the Company’s premium retail stores, outlet stores and day spa locations, were $176.0 million versus $170.7 million in the fiscal 2009 first quarter. Comparable premium store sales increased 1.0 percent in the first quarter versus the first quarter of fiscal 2009. Direct sales (phone and internet) increased 16.3% to $67.1 million from $57.7 million in the same period last year.

Gross profit was $90.9 million, or 37.4 percent of net sales, compared with $71.1 million, or 31.1 percent of net sales, for the fiscal 2009 first quarter. The 630 basis point increase in gross profit margin was primarily due to an increase in merchandise margin and to a lesser extent leverage of occupancy expenses resulting from higher sales.

Selling, general and administrative expenses (“SG&A”) were $86.5 million, or 35.6 percent of net sales, compared with $82.7 million, or 36.2 percent of net sales, for the fiscal 2009 first quarter. The increase in SG&A was driven by higher marketing expense and employee related costs as compared with the first quarter last year. SG&A as a percent of sales improved by 60 basis points year-over-year.
Net income for the three-month period was $2.3 million, or $0.03 per diluted share, compared with a net loss of $7.6 million, or $0.08 per share, for the three-month period ended May 2, 2009.

“We are pleased with the improvement in our first quarter results, which began to benefit from the steps we are taking to reposition the company for profitable growth,” stated Dennis Pence, President and Chief Executive Officer of Coldwater Creek. “During the quarter, our realigned price points and improved sale strategy led to increases in average unit retail and merchandise margin. In addition, we experienced strong sales growth in our Ecommerce business as a result of favorable customer response to our website enhancements. This, combined with our continued focus on expense controls, contributed to a meaningful expansion in our operating margin during the quarter.”

“As we look ahead, we plan to build upon the strategies that led to our improved first quarter results; however, we remain intently focused on aligning our inventory with our expected sales trends,” Mr. Pence continued. “As planned, during the second quarter, we will aggressively work to reduce our inventory levels, which will pressure realized margins. In addition, we remain cautious as the early response to our summer collection has been softer than expected and will likely put additional pressure on our second quarter margins. However, we continue to believe we are on track to achieve our original earnings expectations for the year.”
Balance Sheet
At May 1, 2010, cash totaled $61.2 million, as compared with $74.9 million in cash at May 2, 2009. Premium retail store inventory per square foot, including retail inventory in the distribution center, increased by approximately 16 percent over historically low inventory levels at the end of the first quarter of fiscal 2009, representing a 1% decrease on a two-year basis. Working capital increased by $21.2 million to $109.9 million at May 1, 2010, from $88.7 million at May 2, 2009.

Store Openings
The Company opened four new premium retail stores and closed one premium retail store and one outlet store during the three-month period ended May 1, 2010, ending the quarter with 359 premium retail stores. The Company plans to open approximately 20 new retail stores in fiscal 2010.

Outlook
The Company expects to report a loss in the second quarter of fiscal 2010; however, it expects an improvement over the $0.05 loss per share in the second quarter of fiscal 2009. This assumes a mid-single digit year-over-year percentage increase in total net sales. For fiscal 2010, the company continues to expect that it will report earnings per share of between $0.08 and $0.12, with the majority of the earnings growth coming in the second half of the year. This compares to a fiscal 2009 loss per share of $0.61, which included charges of approximately $0.33 per share related to the income tax valuation allowance, separation agreement expenses, and non-cash asset impairment charges.