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Coldwater Creek Stock in Hot Water

NEW YORK ( TheStreet) -- Coldwater Creek (CWTR) is up a creek without a paddle, as the women's apparel retailer said on Tuesday it expects to report a loss in its third quarter. But what exactly led to this massive earnings revision?

Coldwater Creek now foresees same-store sales tanking 20%, and slashed its guidance to a loss of 14 cents to 19 cents a share, from prior outlook of a profit in the range of 1 cents to 4 cents.

"The fall merchandise lacked appeal and failed to resonate with customers resulting in lower sales than anticipated," Stifel Nicolaus analyst Richard Jaffe, wrote in a note. He calls out important fall categories, like jackets, pants and woven shirts, as most likely holding back sales.

Coldwater Creek also did not invest enough in key categories, Jaffe said, instead relying on last year's best sellers to generate sales this year.

"We anticipate margins will be pressured as management will take aggressive steps to clear the less appealing offerings in advance of holiday," Jaffe wrote.

Coldwater Creek now expects to end the quarter with total inventory up in the mid-single-digit range versus previous expectation of flat.

Shares of Coldwater Creek are plunging 35.1% to $3.48 in morning trading.

--Written by Jeanine Poggi in New York.

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