Investors Flee Cache

Shares of Cache(CACH Quote - Cramer on CACH - Stock Picks) tumbled Tuesday after the retailer slashed its earnings forecast amid a drop in sales.

The stock was sliding $1.64, or 10%, to $14.60 in recent trading.

Cache, an operator of mall-based women's clothing chains, said Tuesday that it expects second-quarter earnings of 6 cents to 8 cents a share. That's down sharply from its prior forecast of 20 cents to 24 cents a share, and it's also below the 10 cents a share the company earned a year ago.

Analysts polled by Thomson Financial projected earnings of 20 cents a share.

The guidance cut came after a 2% drop in May same-store sales, or sales at stores open at least a year. Total sales for the four weeks ended May 26 fell 3.5% to $21.9 million.

"We are disappointed in our May sales results, which reflected continued softness in our spring/summer knit top assortments partially offset by strength in dresses," Brian Woolf, chairman and CEO, said in a statement. "We are currently taking the markdowns necessary to end the quarter in a healthy inventory position and are re-balancing our assortments to be in a better position for the fall/holiday season. Based on this, we have reduced expectations for the second quarter and full fiscal year."

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