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Coldwater Gets Splashed

Shares fall after the company speaks of a promotional environment.

Updated from Nov. 21

Coldwater Creek


slid 10% early Wednesday after the apparel company called the fall retail environment "highly promotional."

The Sandpoint, Idaho, retailer made $16 million, or 17 cents a share, for the quarter ended Oct. 28, up from the year-ago $10.5 million, or 11 cents a share. Sales rose to $256 million from $187 million a year earlier.

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"Our triple-channel business strategy once again delivered a positive performance for the recent quarter, resulting in net income growth of more than 51%, net sales growth of more than 37% and a solid increase in same-store sales," said CEO Dennis Pence. "At the same time, we had increases of approximately 80 and 70 basis points in gross margin and operating margin, respectively, compared with the same period last year.

"The third quarter was notable because of strong net sales increases in all three channels - retail stores, Internet and catalogs - as we successfully navigated what proved to be a highly promotional marketplace during the fall season," Pence added.

Gross margin rose to 47.7% from 46.8%, due to higher merchandise margins associated with direct sourcing and improved leveraging of retail occupancy costs, partially offset by increased promotional activity.

Net sales from the retail segment rose 48% to $167.5 million. Direct segment net sales added 20.6% to $88.8 million. Internet net sales increased 28.6% to $59.5 million. Catalog net sales increased 7.1% to $29.4 million.

Shares fell $3.03 early Wednesday to $27.91.