Women’s apparel retailer Cache, Inc. (CACH) reported first-quarter financials that broadly missed expectations as reduced online promotions and an income tax provision contributed to sinking earnings. Severance packages, including the exit of former chief executive and chairman Thomas Reinckens who resigned in February, also stung profits.
Reinckens was replaced by industry veteran Jay Margolis, the former president and CEO of Limited Brands (LTD), one-time president and COO at Reebok, president and vice chairman at Tommy Hilfiger and chairman and CEO of Esprit de Corp. USA.
For the quarter ended March 30, New York-based Cache reported a 4.5-percent decline in net sales to $53.5 million, from $56.0 million in the year prior quarter. Net loss for the quarter totaled $18.5 million, or $1.38 per share, compared to a net loss of $1.2 million, or 9 cents per share in Q1 2012. The latest quarter included a $10.2 million charge, or 76 cents per share, related to an increased tax valuation against net deferred tax assets and a $1.5 million charge, or 11 cents per share, in employee separation expenses. Adjusted net loss was $6.8 million, or 51 cents per share, versus a net loss of $1.2 million, or 9 cents per share, in last year’s quarter.
Wall Street was expecting Cache to report a net loss, but only of 12 cents per share, 39 cents less that what was reported on an adjusted basis, which excludes one-time items. Revenue was also short of the $54.0 million that was anticipated.
Same-store-sales decreased 1.5 percent compared to the first quarter of 2012.
Gross profits slid to $16.4 million, or 30.6 percent of net sales, compared to $22.2 million, or 39.6 percent of net sales last year. Operating expenses increased from $43.3 percent of net sales to 46.1 percent of net sales, mostly because of the employee separation charge.
“Our first quarter results reflect our actions to intensify markdown activity on prior season assortments, primarily in sportswear and to reduce promotions on the web. This activity held back our performance in the quarter, yet was an important step as we prepare to introduce our marketing and merchandising strategies that engage our consumer demographic with brand right trends,” said Cache chief Margolis.
Margolis added that he is pleased with the process towards returning the company to profitability, including additions to its senior management team and $13.4 million in gross proceeds from a recent rights offering.
The quarter ended with Cache operating 249 stores, all in mall locations. For the rest of 2013, the company intends to close two more stores in addition to the 11 that it closed in the first quarter and plans to open one new location.
Shares of CACH are trading about 5 percent lower at $3.75 in early action on Tuesday following the dismal report, although they have pulled-up from lows of $3.50 hit at the opening bell. The retailer has actually been a strong performer so far in 2013 as investors appear to be focused on the shiny side of the penny with the executive change and rebuilding efforts. Shares are ahead more than 50 percent this year, even with the drop in value today.