Can Cache Accomplish the Elusive Retail Turnaround?

Meng Meng |

Women’s apparel retailer Cache, Inc. ($CACH) is on a mission to restrategize its brand to target higher-end customers. It's a high-risk bet, but the embattled company may not have many other alternatives.

For the fourth quarter, Cache posted a net loss of $4.77 million, or $0.23 a share, compared with $5.52 million, or $0.42 in the year-earlier period. The worst-than-expected earnings added pressure on the company's downtrending share price.

Newly appointed CEO Jay Margolis highlighted in a press release that the sluggish customer demands and economic slowdown have caused a meltdown across the retail sector. But Cache's struggles is magnified by the $35.2 million it lost last year as the company’s markdown strategies failed to attract price-savvy shoppers and cut deep into its bottomline. 

Margolis, a retail veteran who joined the company last February, vowed to refurbish every facet of the business by stepping up social media campaigns, switching to the event dress market and using less discount promotions. 

A top-level reshuffle brought in former J. Crew strategist Arnie Cohen, who was also behind Gucci and American Outfitter’s (URBN) Internet campaign effort. Cohen has yet to prove how he will court online shoppers. The brand has 277,000 Facebook likes, far behind competitors like Ann Taylor ($ANN) or BCBG Max Azria, who each have at least a few million. While trendsetters are increasingly using Instagram and Pinterest to cultivate loyal customer bases, Cache hasn’t explored these social media frontiers at all.

On the brick-and-mortar side, Margolis sounded upbeat about the company’s advantage in event dresses. After noticing the steady sales growth in party gowns, Cache decided to head into the niche market of special occasion dresses, placing itself against the more established brands like BCBG Max Azria. While design queen Max Azria’s dresses are made for women who earn more than $50,000 dollars a year, Cache’s strategy says fine-fabric, well-tailored dresses should be more affordable.

To maintain its high fashion reputation, Margolis folded back outlet sales and adopted full-price marketing both online and in store. Cache new pricing tweaks sounds all too familiar in an industry that is often at the mercy of shoppers’ whims. J.C. Penney’s ($JCP) pricing plans that eliminated coupons in 2012 has brought sales down by 20 percent in the first quarter under that plan. 

And for Cache, the coming quarter that ends March 14 will say much about whether new strategies click with buyers. Average analyst estimates predict a loss of $0.14 per share for the next quarter.  

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
URBN Urban Outfitters Inc. 33.11 -0.08 -0.24 1,393,036
JCP J.C. Penney Company Inc. Holding Company 9.93 0.07 0.71 10,357,961
MGNEF Magnum Energy Inc n/a n/a n/a 0

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