Cost Plus (CPWM)

Q2 2011 Earnings Call

August 25, 2011 4:30 pm ET

Executives

Jane Baughman - Chief Financial officer, Principal Accounting officer, Executive Vice President and Corporate Secretary

Barry Feld - Chief Executive Officer, President and Director

Anne Mirante - Vice President of Finance and Treasurer

Analysts

Joan Storms - Wedbush Securities Inc.

Anthony Chukumba - BB&T Capital Markets

TJ McConville

Presentation

Operator

Compare to:
Previous Statements by CPWM
» Cost Plus' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Cost Plus' CEO Discusses Q4 2010 Results - Earnings Call Transcript
» Cost Plus CEO Discusses Q3 2010 Results - Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 Cost Plus Inc. Earnings Conference Call. My name is Melanie, and I'll be your coordinator today. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. Barry Feld, Chief Executive Officer. Please proceed, sir.

Barry Feld

Thank you, Melanie. Good afternoon, everyone, and thank you for joining us to discuss our second quarter and first half 2011 results. Today's conference call should be considered in conjunction with the press release we issued earlier today. With me for this conference call are Jane Baughman, Executive Vice President and Chief Financial Officer; and Anne Mirante, Vice President of Finance. Following my opening remarks, Jane will discuss the financial results in more detail, after which I will make some concluding remarks, and then we'll open the call to questions.

Before beginning today's discussion, Anne will read the company's Safe Harbor statement.

Anne Mirante

Certain comments made during this call may contain forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 and can be identified by the use of words such as may, will, expect, anticipate, believe and other similar words and phrases. The company's actual results or future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the company's control. Please refer to the company's current press release and SEC filings, including our annual report on Form 10-K, for a complete discussion of the major risks and uncertainties that may affect our business. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update our forward-looking statements.

Barry Feld

Thank you, Anne. We are pleased with our second quarter results, which exceeded our best-case bottom line guidance and consensus estimates. We continue to experience strong gains in customer count, driven by increases in traffic and conversion rate. This is our sixth consecutive quarter of positive comps and seventh consecutive quarter of increases in customer counts.

As discussed on our last call, our second quarter guidance reflected a truncated outdoor selling season this year due to the late Easter holiday. Although the company achieved a modest positive comp in its Outdoor Furniture business during the quarter, fewer weeks of full-price selling put pressure on margin and ticket. While our net loss from continuing operations increased $1 million from a year ago, the business performed as we expected and as we had previously communicated. Both the Home and Consumables divisions delivered a same-store sales increase for the second quarter.

For the 6 months of fiscal 2011, the company generated a 4.2% increase in same-store sales and reduced its net loss from continuing operations by 35% versus the first half of last year. Additionally, the company generated $5 million in EBITDA from continuing operations in the first half of fiscal 2011 and expects to generate $49 million to $52 million for the full year, which it will use for working capital purposes and to pay off the revolving credit facility in its entirety at year's end.

The revolving credit facility is the only bank debt that the company has on its balance sheet. The company's marketing program remains organized around the use of layered media, including online, electronic, print and partnerships to drive traffic with both our existing customer base and for new customer acquisition.

Our World Market Explorer loyalty program, which launched just 2 years ago, now has over 5 million members and is growing each day. We continue to develop our customer segmentation analytics, allowing us to market to customers' specific needs and drive frequency.

Last August, you will recall the company had a successful partnership with Sony Entertainment for the motion picture Eat Pray Love. This year, we have developed another exciting partnership with Paramount Pictures for the movie The Adventures of Tintin, directed by Steven Spielberg, which opens on December 23. Our marketing team continues to expand its toolbox to drive traffic and increase our national brand presence.

As you visit our stores during the second half of the year, you'll see that our Fall Harvest, Halloween and holiday assortment and visual merchandising have never looked better and are priced to deliver clear and recognizable value to our customers.

Our continual flow of fresh merchandise with exclusive designs will provide our customers with creative and affordable solutions for their gift-giving and home entertaining needs, which is particularly important in today's consumer climate.

I would now like to turn the call over to Jane, after which I will make some concluding remarks.

Jane Baughman

Thank you, Barry. As a reminder, the income statements included in this afternoon's press release clearly breaks out the results from continuing and discontinued operations for both the current year and prior year period. The company's balance sheet presentation remains unchanged.

Net sales for the second quarter of fiscal 2011 were $197.9 million, a 3.2% increase from the second quarter of fiscal 2010. Same-store sales increased 2.8%, driven by a 5.5% increase in customer count, partially offset by a 2.5% decrease in the average ticket. The Eastern region and Western region both delivered positive comps during the quarter. The California market delivered a same-store sales increase of 2.5% in the second quarter, in line with the chain.

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