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 2, 2011.

For the 13-week period ended July 2, 2011:
  • Net sales increased 6.5% to $60.3 million from $56.6 million in the second quarter of fiscal 2010. Comparable store sales increased 6.0%, which compares to an increase of 5.1% in the second quarter of fiscal 2010;
  • Gross profit increased 10.4% to $27.5 million, or 45.7% of net sales from $24.9 million, or 44.1% of net sales in the second quarter of fiscal 2010;
  • Operating income totaled $4.2 million, as compared to $1.4 million in the second quarter of fiscal 2010; and
  • Net income totaled $2.8 million, or $0.22 per diluted share, as compared to net income of $897,000, or $0.07 per diluted share in the second quarter of fiscal 2010.

Thomas Reinckens, Chairman and Chief Executive Officer, commented: “We are pleased to report better-than-expected second quarter results continuing our favorable momentum from the first quarter. We believe our strong performance validates the success of the design, merchandising and sourcing process changes implemented last year and the focused execution of our team. This led to a 6% increase in comparable store sales following a 5% comparable store sales increase in last year’s second quarter and a threefold increase in diluted earnings per share. Our comparable store sales increase was fueled by regular price selling, as we presented distinctive collections that resonated with our core customers and attracted new consumers to our brand. We ended the quarter with a strong balance sheet with $27 million in cash and marketable securities, with inventory below the prior year.”

“As we look ahead, we are optimistic about our ability to continue our positive performance,” Mr. Reinckens continued. “We see additional opportunity to further increase sales and margins, and utilize our improved tools to create stronger selling assortments. We also expect to benefit from increased conversion rates by optimizing customer service levels and our in-stock position. In total, we continue to expect fiscal 2011 to represent a strong year for Cache and deliver increased value for our stakeholders.”

For the 26-week period ended July 2, 2011:

  • Net sales increased 6.9% to $112.4 million from $105.1 million in the first six months of fiscal 2010. Comparable store sales increased 6.8%, as compared to a decrease of 0.8% in the first six months of fiscal 2010;
  • Gross profit increased 18.7% to $49.4 million, or 44.0% of net sales from $41.6 million, or 39.6% of net sales in the first six months of fiscal 2010;
  • Operating income totaled $2.9 million, as compared to an operating loss of $5.2 million in the first six months of fiscal 2010; and
  • Net income was $2.0 million or $0.16 per diluted share, as compared to a net loss of $3.2 million or ($0.25) per diluted share in the first six months of fiscal 2010.

Gross profit for the second quarter of fiscal 2011 was $27.5 million, or 45.7% of net sales, compared to $24.9 million, or 44.1% of net sales, in the second quarter of fiscal 2010. For the six months of fiscal 2011, gross profit was $49.4 million or 44.0% of net sales, compared to $41.6 million or 39.6% of net sales in the first six months of fiscal 2010. The increase in gross margin for the first six months of fiscal 2011 was primarily driven by an increase in full-price sales, an increase in initial mark-up and a decrease in markdowns as a percent of sales, as well as the leverage of fixed occupancy and operational costs, as compared to the prior year.

In total, operating expenses for the second quarter of fiscal 2011 were $23.4 million, or 38.8% of net sales, as compared to $23.5 million, or 41.5% of net sales, in the second quarter of fiscal 2010. For the first six months of fiscal 2011 operating expenses were $46.5 million, or 41.4% of net sales, compared to $46.8 million, or 44.6% of net sales, in the first six months of fiscal 2010.

At July 2, 2011, cash and marketable securities totaled $27.3 million, as compared to $30.9 million in cash and marketable securities at July 3, 2010. Total inventory at cost decreased 10.1% at quarter end from the prior year period.

A table summarizing financial results follows:
               

Twenty-Six Weeks Ended

Thirteen Weeks Ended

July 2,

July 3,
July 2,

July 3,

2011

2010

2011

2010

($ thousands, except for per share data, share numbers and store count)
 
Net sales $ 112,365 $ 105,125 $ 60,266 $ 56,575
Operating income (loss) 2,899 (5,174 ) 4,159 1,444
Net income (loss) 2,027 (3,184 ) 2,799 897
 
Basic earnings (loss) per share $ 0.16 $ (0.25 ) $ 0.22 $ 0.07
Diluted earnings (loss) per share $ 0.16 $ (0.25 ) $ 0.22 $ 0.07
 
Basic weighted average shares
outstanding 12,822,000 12,771,000 12,827,000 12,771,000
Diluted weighted average shares
outstanding 12,861,000 12,771,000 12,873,000 12,809,000
 
Number of stores open at end of period 280 284 280 284
 

Store Opening Plans

During the second quarter, the Company did not open or close any locations, ending the quarter with 280 stores in operation. For fiscal 2011, the Company expects to open no new additional stores and close two additional existing locations, ending the year with 278 locations and approximately 565,000 square feet in operation.

Second Half Fiscal 2011 Outlook

For the second half of fiscal 2011, the Company currently expects comparable store sales to increase in the mid-to-high single digit range following a decline of 3.7% in the second half of fiscal 2010. The Company currently expects to report second half net income per diluted share in the range of $0.18 to $0.22, which compares to a net loss per diluted share of $1.50 last year, inclusive of $1.04 in charges, relating to non-cash impairment of fixed assets and intangible assets, a non-cash valuation allowance against deferred tax assets, as well as one-time legal costs.

For the third quarter of fiscal 2011, the Company currently expects comparable store sales to increase in the mid single digit range, following flat comparable store sales performance in the third quarter of fiscal 2010. The Company currently expects third quarter fiscal 2011 net loss per diluted share in the range of $0.06 to $0.08. This compares to a net loss of $0.39 per diluted share in the third quarter of fiscal 2010, inclusive of $0.08 per diluted share in legal costs.

Conference Call Information

The Company announced that it will conduct a conference call to discuss its second quarter fiscal 2011 results today, July 28, 2011 at 8:30 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 at 11:30 a.m. ET on July 28, 2011 and remain active until 11:59 p.m. ET on August 4, 2011. The replay can be accessed by dialing (877) 870-5176 and entering confirmation code 375516.

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 280 stores, primarily situated in central locations in high traffic, upscale malls in 43 states, the Virgin Islands and Puerto Rico.

Certain matters discussed within this press release may constitute forward-looking statements within the meaning of the federal securities laws. Although Cache, Inc. believes the statements are based on reasonable assumptions, there can be no assurance that these expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, ability to successfully open new stores, dependence on management, dependence on vendors and distributors, reliance on foreign manufacturers, material weakness in our internal controls, industry trends, merchandise and fashion trends, competition, seasonality and changes in general economic conditions and consumer spending patterns, as well as other risks outlined from time to time in the filings of Cache, Inc. with the Securities and Exchange Commission.

 
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
             
 
 
July 2, January 1, July 3,
ASSETS   2011   2011 2010
 
Current assets:
Cash and equivalents $ 8,706,000 $ 4,609,000 $ 3,742,000
Marketable securities 15,613,000 20,923,000 24,665,000
Certificate of deposits - restricted 3,000,000 2,500,000 2,500,000
Receivables, net 2,426,000 2,855,000 2,614,000
Income tax receivable, net 50,000 50,000 81,000
Inventories, net 18,350,000 15,789,000 20,408,000
Prepaid expenses and other current assets   4,787,000     5,029,000     6,370,000  
Total current assets 52,932,000 51,755,000 60,380,000
 
 
Equipment and leasehold improvements, net 21,716,000 24,753,000 28,204,000
Goodwill - - 9,092,000
Intangible assets, net 102,000 102,000 102,000
Other assets   8,176,000     9,380,000     5,249,000  
 
Total assets $ 82,926,000   $ 85,990,000   $ 103,027,000  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 6,465,000 $ 8,273,000 $ 7,547,000
Note payable 1,455,000 1,518,000 1,569,000
Accrued compensation 2,414,000 2,551,000 2,354,000
Accrued liabilities   9,062,000     11,150,000     8,848,000  
Total current liabilities 19,396,000 23,492,000 20,318,000
 
 
Note payable - 319,000 630,000
Other liabilities 12,922,000 13,867,000 14,736,000
 
 
Commitments and contingencies
 
 
STOCKHOLDERS' EQUITY
 
 
Common stock 165,000 165,000 164,000
Additional paid-in capital 48,284,000 48,015,000 47,799,000
Retained earnings 41,954,000 39,927,000 59,175,000
Treasury stock, at cost   (39,795,000 )   (39,795,000 )   (39,795,000 )
Total stockholders' equity   50,608,000     48,312,000     67,343,000  
 
Total liabilities and stockholders' equity $ 82,926,000   $ 85,990,000   $ 103,027,000  
         
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
26 Weeks Ended 26 Weeks Ended
July 2, July 3,
  2011   2010
 
Net sales $ 112,365,000 $ 105,125,000
 
Cost of sales, including buying and occupancy   62,930,000     63,477,000  
 
Gross profit   49,435,000     41,648,000  
 
Expenses
Store operating expenses 37,533,000 37,807,000
General and administrative expenses   9,003,000     9,015,000  
Total expenses   46,536,000     46,822,000  
 
Operating income (loss)   2,899,000     (5,174,000 )
 
 
Other income (expense):
Interest expense (31,000 ) (67,000 )
Interest income   44,000     85,000  
 
Income (loss) before income taxes 2,912,000 (5,156,000 )
 
Income tax provision (benefit)   885,000     (1,972,000 )
 
 
Net income (loss) $ 2,027,000   $ (3,184,000 )
 
 
 
Basic income (loss) per share $ 0.16   $ (0.25 )
 
Diluted income (loss) per share $ 0.16   $ (0.25 )
 
 
 
Basic weighted average shares outstanding   12,822,000     12,771,000  
 
Diluted weighted average shares outstanding   12,861,000     12,771,000  
         
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
13 Weeks Ended 13 Weeks Ended
July 2, July 3,
  2011   2010
 
Net sales $ 60,266,000 $ 56,575,000
 
Cost of sales, including buying and occupancy   32,752,000     31,642,000  
 
Gross profit   27,514,000     24,933,000  
 
Expenses
Store operating expenses 19,396,000 19,148,000
General and administrative expenses   3,959,000     4,341,000  
Total expenses   23,355,000     23,489,000  
 
Operating income   4,159,000     1,444,000  
 
 
Other income (expense):
Interest expense (13,000 ) (32,000 )
Interest income   23,000     41,000  
 
Income before income taxes 4,169,000 1,453,000
 
Income tax provision   1,370,000     556,000  
 
 
Net income $ 2,799,000   $ 897,000  
 
 
 
Basic income per share $ 0.22   $ 0.07  
 
Diluted income per share $ 0.22   $ 0.07  
 
 
 
Basic weighted average shares outstanding   12,827,000     12,771,000  
 
Diluted weighted average shares outstanding   12,873,000     12,809,000  

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