Cost Plus, Inc. (CPWM)
Q3 2010 Earnings Call
November 19, 2010 10:00 am ET
Barry Feld - President and CEO
Jane Baughman - EVP and CFO
Anne Mirante - VP, Finance
Charlie Miltner - Corporate Controller
Budd Bugatch - Raymond James
Brad Leonard - BML Capital Market Management
Good day, ladies and gentlemen, and welcome to the third quarter 2010 Cost Plus earnings conference call. (Operator Instructions)
I would now like to turn the conference over to your host for today, Mr. Barry Feld, Chief Executive Officer.
Previous Statements by CPWM
» Cost Plus CEO Discusses Q2 2010 Results - Earnings Call Transcript
» Cost Plus Inc. Q1 2010 Earnings Call Transcript
» Cost Plus, Inc. Q4 2009 Earnings Call Transcript
Good morning and thank you for joining us to discuss our third quarter results. With me today for this conference call are Jane Baughman, Executive Vice President and Chief Financial Officer; Anne Mirante, Vice President of Finance; and Charlie Miltner, our Corporate Controller.
Following my opening remarks, Jane will discuss the financial results in more detail, after which I will make some concluding remarks, and then we will open the call to questions. Before beginning today's discussion, Charlie Miltner will read the company's Safe Harbor Statement.
Certain forward-looking statements regarding the company's future performance and initiatives will be made during this conference call and will usually be preceded by words such as believes, anticipates, projects or expects. Any such forward-looking statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by these statements. Such forward-looking statements include, but are not limited to, our financial guidance for the fourth quarter and full year of fiscal 2010, our expected borrowings, our expected capital expenditures and our planned execution of the new credit facility.
The risks and uncertainties include, but are not limited to, deterioration in economic conditions that affect consumer spending, changes in the competitive environment, currency fluctuations, timely introduction and customer acceptance of merchandising offerings, foreign and domestic labor market fluctuations, interruptions in the flow of merchandise, changes in the cost of goods and services purchased including fuel, transportation and insurance, material unfavorable outcomes with respect to litigation, claims and assessments, unseasonable weather, the effects associated with terrorist attacks and changes in accounting rules and regulations.
A more complete listing of risk factors is included in the company documents on file with the Securities and Exchange Commission.
Thank you, Charlie. We are very pleased with the continuing topline sales growth and the ongoing reduction in operating losses. For the third quarter of fiscal 2010, the company delivered an 8.8% same-store sales increase and reduced its year-over-year net loss from continuing operations by 67%.
We generated high single-digit to double-digit comps in each month of the third quarter. Year-to-date, the company has reduced its year-over-year net loss from continuing operations, excluding foreclosure charges, by 65% on a same-store sales increase of 6.9%.
During the first nine months of the fiscal 2010 year, the company generated $4.6 million in EBITDA, excluding foreclosure cost, and has reached the critical milestone of positive cash flow on a trailing four-quarter basis.
Our full year fiscal 2010 forecast puts us at the threshold of net income from continuing operations and has succeeded our positive EBITDA target stated at the beginning of the year.
Strong customer response to our third quarter merchandise offering was consistent with results from the first half of the year. As the outdoor entertaining season concluded in August, our customers' focus moved back indoors. During September and October, we launched several campaigns that showcased dining furniture and occasional living furniture along with our Rug Caravan event.
In conjunction, we featured many non-furniture home categories such as ceramics, tabletop textiles, kitchen and framed art. The merchants worked diligently with suppliers to offer more exclusive designs and fashion-forward products at lower retail price points while improving margins.
These changes drove significant gains in customer count and conversion, which more than offset the modest pressure on the average ticket. We have successfully retooled merchandising assortments to meet our customers' value expectation and are continuously rebuilding indoor furniture business.
Throughout the quarter, our core competency in seasonal merchandise complemented the transition from summer to fall. Our Halloween and Fall Harvest shops continued to deliver impressive results by offering customers a one-stop solution for decorating and entertaining. Not to mention that (inaudible) worked very well this year for our San Francisco Giants.
Halloween décor and consumables generated a 37% sales increase on top of an 18% increase last year and delivered a higher margin rate. We sold through the Halloween and Fall Harvest merchandise and our stores are now fully transitioned for holiday decorating, entertaining and get giving.
The company has maintained its discipline of testing and scaling new marketing strategies in conjunction with targeted customer acquisition which is resulting in continued positive momentum in store traffic.
September marked the one-year anniversary of the World Market Explorer loyalty program. Since launching the program, World Market Explorer shopped with greater frequency and spent approximately two times more than our average customer. We now have 4 million World Market Explorers as part of our overall 6 million customer database.
I will now turn the call over to Jane to review the third quarter financial highlights, after which I will make some concluding remarks before opening up the call for our question-and-answer portion.
Thank you, Barry. As a reminder, the income statement included in this morning's press release clearly breaks out the results from continuing and discontinued operations for both the current year and prior-year periods. The company's balance sheet presentation remains unchanged.