Cache Inc., (NASDAQ: CACH), a specialty chain of women’s apparel stores, reported results for the thirteen (“second quarter”) and twenty-six week periods (“first six months”) ended July 3, 2010.

For the 13-week period ended July 3, 2010:
  • Net sales decreased 0.5% to $56.6 million from $56.9 million in the second quarter of fiscal 2009. Comparable store sales increased 5.1%, as compared to a decrease of 23.0% in the second quarter of fiscal 2009;
  • Net income totaled $897,000 or $0.07 per diluted share, as compared to net income of $845,000 or $0.07 per diluted share in the second quarter of fiscal 2009.

Thomas Reinckens, Chairman and Chief Executive Officer, commented: “We are pleased to report positive comparable store sales and positive earnings in the second quarter. During the quarter, we saw particular strength in sportswear and dresses, which led to a 5.1% comparable store sales increase. We continued to maintain control of expenses during the quarter and ended the period with a strong balance sheet. Operating expenses declined by 60 basis points as a percentage of net sales. Cash and cash equivalents were $30.9 million and inventory was below the second quarter last year, down $2.0 million or 9.0%.”

“As we begin the second half of the year, we feel very good about the direction of our business. Our comparable store sales are up positive mid-single digits in the first five weeks of our third quarter, providing further evidence that our design and merchandise initiatives are working and generating intended results,” Mr. Reinckens continued. “To showcase our great new fall and holiday assortments, we have broadened our marketing investment to include national magazine advertising. We also expect to see improvements in our merchandise margin, as we increase full-price selling and reduce our future reliance on air freight. While we typically report a loss in the third quarter given the seasonality of our business, we expect to report solid profitability in the fourth quarter, with our heightened discipline and strong assortments allowing us to begin fiscal 2011 with leaner and more current inventory. We remain confident that our strategies will lead to increased long-term sales and profit potential, as well as maximized value for all Cache stakeholders.”

For the 26-week period ended July 3, 2010:

  • Net sales decreased 4.3% to $105.1 million from $109.9 million in the first six months of fiscal 2009. Comparable store sales decreased 0.8%, as compared to a decrease of 21.9% in the first six months of fiscal 2009;
  • Net loss was $3.2 million or ($0.25) per diluted share, as compared to net loss of $751,000 or ($0.06) per diluted share in the first six months of fiscal 2009.

Gross profit for the second quarter of fiscal 2010 was $24.9 million, or 44.1% of net sales, compared to $25.2 million, or 44.4% of net sales, in the second quarter of fiscal 2009. For the first six months of fiscal 2010, gross profit was $41.6 million, or 39.6% of net sales, compared to $47.0 million, or 42.8% of net sales, in the first six months of fiscal 2009. The decline in gross profit margin for the first six months of fiscal 2010 was primarily driven by an increase in markdowns and in-house design team and sourcing costs.

In total, operating expenses were $23.5 million, or 41.5% of net sales, as compared to $23.9 million, or 42.1% of net sales, in the second quarter of fiscal 2009. For the first six months of fiscal 2010, total operating expenses were $46.8 million, or 44.5% of net sales, compared to $48.2 million, or 43.9% of net sales, in the first six months of fiscal 2009.

At July 3, 2010, cash and marketable securities totaled $30.9 million compared to $34.8 million in cash and marketable securities at June 27, 2009. Prepaid rent increased $3.1 million at quarter end from the prior year period, due to the payment of July 2010 rents prior to the end of the quarter. In fiscal 2009, July rents were paid after quarter end. Total inventory at cost decreased 9.0% at quarter end from the prior-year period. Working capital decreased by $5.7 million to $40.1 million from $45.7 million at June 27, 2009, primarily due to operating losses.

A table summarizing financial results follows:

 

Twenty-Six Weeks Ended
   

Thirteen Weeks Ended
July 3, June 27, July 3, June 27,

2010

2009

2010

2009

($ thousands, except for per share data, share numbers and store count)
 
Net sales $ 105,125 $ 109,872 $ 56,575 $ 56,866
Operating income (loss) (5,174 ) (1,212 ) 1,444 1,318
Net income (loss) (3,184 ) (751 ) 897 845
 
Basic earnings (loss) per share $ (0.25 ) $ (0.06 ) $ 0.07 $ 0.07
Diluted earnings (loss) per share $ (0.25 ) $ (0.06 ) 0.07 $ 0.07
 
Basic weighted average shares
outstanding 12,771,000 12,841,000 12,771,000 12,728,000
Diluted weighted average shares
outstanding 12,771,000 12,841,000 12,809,000 12,728,000
 
Number of stores open at end of period 284 291 284 291

Store Opening Plans

During the second quarter, the Company opened one new store and closed two stores, ending the period with 284 stores in operation. For the remainder of fiscal 2010, the Company plans to open approximately two additional new stores and close approximately two additional stores, ending the year with approximately 284 locations and approximately 570,000 square feet in operation.

Conference call information

The Company announced that it will conduct a conference call to discuss its second quarter fiscal 2010 results today, August 12, 2010 at 9:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-4018 approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.cache.com. A replay of this call will be available until August 19, 2010 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference code 354673.

About Cache, Inc.

Cache is a nationwide, mall-based specialty retailer of sophisticated sportswear and social occasion dresses targeting style-conscious women who have a youthful attitude and are self-confident. We currently operate 284 stores, primarily situated in central locations in high traffic, upscale malls in 43 states, the Virgin Islands and Puerto Rico.
 
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
       
 
 
July 3, January 2, June 27,
ASSETS   2010     2010   2009  
 
Current assets:
Cash and equivalents $ 3,742,000 $ 5,516,000 $ 2,815,000
Marketable securities 24,665,000 29,999,000 30,513,000
Certificate of deposits - restricted 2,500,000 1,500,000 1,500,000
Receivables, net 2,614,000 3,411,000 2,653,000
Income tax receivable, net 81,000 3,438,000 534,000
Inventories, net 20,408,000 16,599,000 22,420,000
Prepaid expenses and other current assets   6,370,000     4,943,000   2,109,000  

Total current assets
60,380,000 65,406,000 62,544,000
 
 
Equipment and leasehold improvements, net 28,204,000 31,713,000 38,415,000
Goodwill 9,092,000 9,092,000 9,092,000
Intangible assets, net 102,000 102,000 1,245,000
Other assets   5,249,000     4,684,000   2,399,000  
 
Total assets $ 103,027,000   $ 110,997,000   $ 113,695,000  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 7,547,000 $ 7,624,000 $ 5,559,000
Note payable 1,569,000 1,408,000 1,282,000
Accrued compensation 2,354,000 2,668,000 1,316,000
Accrued liabilities   8,848,000     11,783,000   8,647,000  
Total current liabilities 20,318,000 23,483,000 16,804,000
 
 
Note payable 630,000 1,425,000 2,518,000
Other liabilities 14,736,000 15,806,000 16,430,000
 
 
Commitments and contingencies
 
 
STOCKHOLDERS' EQUITY
 
 
Common stock 164,000 164,000 164,000
Additional paid-in capital 47,799,000 47,555,000 47,272,000
Retained earnings 59,175,000 62,359,000 70,302,000
Treasury stock, at cost   (39,795,000 )   (39,795,000 ) (39,795,000 )
Total stockholders' equity   67,343,000     70,283,000   77,943,000  
 
Total liabilities and stockholders' equity $ 103,027,000   $ 110,997,000   $ 113,695,000  
 
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
     
 
 
26 Weeks Ended 26 Weeks Ended
July 3, June 27,
  2010     2009  
 
Net sales $ 105,125,000 $ 109,872,000
 
Cost of sales, including buying and occupancy   63,477,000     62,848,000  
 
Gross profit   41,648,000     47,024,000  
 
Expenses
Store operating expenses 37,807,000 39,251,000
General and administrative expenses   9,015,000     8,985,000  
Total expenses   46,822,000     48,236,000  
 
Operating loss (5,174,000 ) (1,212,000 )
 
 
Other income (expense):
Interest expense (67,000 ) (98,000 )
Interest income   85,000     127,000  
 
Loss before income taxes (5,156,000 ) (1,183,000 )
 
Income tax benefit   (1,972,000 )   (432,000 )
 
 
Net loss $ (3,184,000 ) $ (751,000 )
 
 
 
Basic loss per share $ (0.25 ) $ (0.06 )
 
Diluted loss per share $ (0.25 ) $ (0.06 )
 
 
 
Basic weighted average shares outstanding 12,771,000   12,841,000  
 
Diluted weighted average shares outstanding 12,771,000   12,841,000  
 
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
     
 
 
13 Weeks Ended 13 Weeks Ended
July 3, June 27,
  2010     2009  
 
Net sales $ 56,575,000 $ 56,866,000
 
Cost of sales, including buying and occupancy   31,642,000     31,636,000  
 
Gross profit   24,933,000     25,230,000  
 
Expenses
Store operating expenses 19,148,000 19,663,000
General and administrative expenses   4,341,000     4,249,000  
Total expenses   23,489,000     23,912,000  
 
Operating income   1,444,000     1,318,000  
 
 
Other income (expense):
Interest expense (32,000 ) (47,000 )
Interest income   41,000     60,000  
 
Income before income taxes 1,453,000 1,331,000
 
Income tax provision   556,000     486,000  
 
 
Net income $ 897,000   $ 845,000  
 
 
 
Basic earnings per share $ 0.07   $ 0.07  
 
Diluted earnings per share $ 0.07   $ 0.07  
 
 
 
Basic weighted average shares outstanding 12,771,000   12,728,000  
 
Diluted weighted average shares outstanding 12,809,000   12,728,000  

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