Coldwater Creek's Stock Price Is Running Hot

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The recent rise of Coldwater Creek Inc.'s stock may not be over.

According to RBC Capital Markets, which initiated coverage of the company last week, the 17.82 percent increase in its stock price from April 27 to June 1 may be setting the stage for a new plateau. The research note issued by RBC's Carole Buyers on June 2 mentions a price target of $30. It reached $26.51 on June 1.

Recent highlights for the Sandpoint, ID, multichannel marketer of women's apparel, accessories, jewelry and gifts include net income for the three months ended May 1 of $5.5 million, up 185 percent from $1.9 million in the year-ago period. Also, net sales in the fiscal 2004 first quarter rose 8 percent to $124.5 million from $115.2 million last year.

Gross profit for the quarter was $54.4 million, or 43.7 percent of net sales, compared with last year's $45.1 million, or 39.2 percent. The company competes in the $89 billion women's apparel market, which includes retail, catalog and Internet channels.

In its latest earnings report, Georgia Shonk-Simmons, president and chief merchandising officer at Coldwater Creek, said customers responded well "to our full-price spring merchandise and we saw margin improvement across all three selling channels. We were particularly pleased with the performance of our retail stores, as well as the positive reception to our redesigned Spirit catalog title."

The direct marketing segment is changing amid the upswing as chairman/CEO Dennis Pence cited a "strategic shift from catalogs to a retail store model."

Buyers has noticed the shift.

"As a result of the planned slowdown of catalog mailings, management has concentrated on improving the productivity of the direct channel," she wrote in her research note. "As mailings and sales have decreased, productivity (defined as direct sales per catalog mailed) has improved dramatically."

Buyers attributed the improvement to several factors.

"The company has leveraged its customer knowledge base to mail catalogs to more profitable customers," she wrote. "The company is steering more of its customers towards its Internet division, which has lowered its overall costs. While the catalog mailings have become more productive, they also promote sales to the retail sector."

The company's direct channel -- Internet and catalog -- represented 62 percent of sales in fiscal year 2003. The catalog business generated $176 million, or 34 percent of sales, while the Internet operation produced $148 million, or 28 percent.

As Coldwater Creek continues to roll out retail stores, "management expects the company's direct segment to decrease as a percentage of net sales over time," Buyers wrote. "Management expects the direct channel to represent 50 percent of total sales in [fiscal year] 2004 and 40 percent of total sales in [fiscal year] 2005."

In other news, Mail-Well Inc. changed its name and ticker symbol to Cenveo Inc. (CVO).


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