Coldwater Creek remains cautious with inventory levels

By Andrea Lillo -- Home Textiles Today, 12/24/2001 12:00:00 AM

SANDPOINT, ID —

Showing the effects of the economy, Coldwater Creek, the catalog, Internet and bricks-and-mortar retailer of women's apparel and home merchandise, continues to maintain tight inventories and replace some underperforming merchandise in apparel as it waits for the market to bounce back.

"We are not immune to the affects of the recession," said Georgia Shonk-Simmons, president and ceo, during a third quarter conference call last week. As it has been doing all year, the retailer kept inventories tight during the third quarter, and cautious inventory investments have helped maintain a strong balance sheet and cash flow flexibility, she said.

Customers right now want to spend more time with families, while spending less money, Shonk-Simmons said. "We must continue to keep a tight lid on inventory. Our vertical resourcing means we are prepared for rapid response, ready to service orders when business does improve."

She also believes that Christmas will be softer than expected, and that mall traffic has been inconsistent at best.

Though its pure catalog business was below expectations as indicated, said Donald Robson, executive vp and cfo, the Internet did very well, with sales climbing 26.5 percent in the third quarter, totaling 32 percent of the net sales for the company. The company's goal for the Internet to represent one-third of the business was virtually achieved this quarter, Shonk-Simmons said. In addition, the channel continues to be a means to clear out overstock and discontinued merchandise.

The company also opened 15 stores in the third quarter, as previously announced, she said, for a total of 29 stores in "key markets coast to coast," and on course for a total of 80 stores in 29 states. Twelve more openings are planned for fiscal 2002, a number Shonk-Simmons is comfortable with. "We have to take the beat of the economy before we become overly aggressive."

She added, "It's our strong belief that retail stores — where the customer spends 90 percent of dollars nationally — continue to act as a vehicle for increasing brand awareness across all of our selling channels." She said that the response to the stores from both existing catalog and Internet customers and new customers is that "they enjoy and appreciate the Coldwater Creek experience in a bricks-and-mortar setting."

In addition, Robson saw the real estate community having an "absolute positive recognition of the brand and the quality of store execution."

Average sales were down within the company by 3 percent, though transactions were up 3.7 percent. "The transaction increases were driven by an increase in the share of retail store sales," he said, "which were in the $90 to $100 range vs. higher average sales experienced in our direct channel of approximately $127."