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Coldwater Creek (CWTR) |
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WIKI ANALYSIS
Coldwater Creek (Nasdaq: CWTR), with its casual to dressy skirts, pantsuits, and dresses, targets over-35 middle to upper-middle class women with annual household incomes of over $75,000.[1] The clothing retailer originally sold its products solely through catalogs. Since 1999, however the company has opened a growing number of retail and outlet stores. Since Coldwater's first retail store opened in 1999, new store openings have been the primary source of revenue growth. At the end of fiscal 2010 (CWTR's fiscal year ends at the end of January each year), the company had 356 stores in the United States.[2]
Unlike other clothing companies that will distribute clothing through department stores, Coldwater Creek is the sole retailer of its products. As a result, Coldwater controls its pricing and brand, but its expansion has been slow in comparison to other brands that sell their wares through a ready network of department stores. As a result, the company's future growth relies on the continued expansion of its store base and further increases in its marketing budget.
Company Overview
Business Financials
Total revenues for CWTR in 2010 were $1.04 billion, virtually the same as the previous year's revenues of $1.02 billion. Despite CWTR's revenues remaining the same, its net income declined. Its net loss in 2010 was $56 million in 2010 compared to its $36 million net loss in 2009.
Business Segments
Coldwater's revenue comes from to main sources: retail sales and direct sales.
Direct sales
For most of the company's history direct-to-consumer sales via mailed catalogs formed the core of Coldwater's business. However, in 1999 the company launched a website where customers can place orders for merchandise. Since then, internet sales have grown much more rapidly than catalog sales.
Retail sales
Retail sales constituted the bulk of Coldwater's growth in recent years. Since the opening of the first Coldwater store in 1999, the company has expanded to 356. The success of these stores has altered the company's business model, with retail sales accounting for more than half of total revenues.
Trends and Forces
New store openings expose Coldwater to declines in mall traffic
Many of Coldwater's retail stores are located in malls and shopping centers across the United States. But in recent years, traffic at the nation's malls has been declining--Customers shop less at malls and shopping more at specialty stores and online.
Although the company's thus far has had impressive growth via its new retail stores, it is clear that the company is susceptible to the troubles plaguing shopping centers nationwide. While some of weakness was certainly due to a soft U.S. economy, it shows that Coldwater's retail development renders the company more vulnerable to the fluctuations that come with operating physical stores.
CWTR and competitors seek higher margins in a global market
Historically, Coldwater has purchased its merchandise from domestic importers who served as intermediaries between manufacturers and Coldwater. However, as a means of increasing profit margins, Coldwater began in 2004 to deal directly with the companies that produce the apparel as a means of gaining "improved control over the production, quality and transportation" of the merchandise[3]. In 2006, Coldwater directly sourced 30 percent of its merchandise, with plans to more than double that figure to 70% by the end of 2008[4]. This strategy has the potential to increase profit margins on the company's products, but at the same time renders the company more directly vulnerable to fluctuations in the value of the U.S. dollar, as well as the instability (financial, political, and otherwise) in developing markets like India and Central America.
CWTR positioned to benefit from increased Baby Boomer spending
The Baby Boomer generation has grown much faster than the general population, with a commensurate increase in spending power. Boomers are retiring later and accumulating more wealth over the course of their lifetimes than their predecessors. Companies like Coldwater may benefit by targeting these working woman who have greater discretionary income than previous generations. Coldwater also has a edge in that it that it fills a particular fashion niche by providing dressy casual apparel for the middle-aged woman at a moderate price point.
Competition
Coldwater competes with companies like J.C. Penney, Chico's FAS, and Talbots that target middle-aged female customers seeking to purchase casual and dressy apparel.
References
- ↑ CWTR 10-K 2010 Item 1 Pg. 3
- ↑
- ↑ [Coldwater 2006 10-K http://www.secfilings.com] (filed April 7, 2007) p, 6.
- ↑ [Coldwater 2006 10-K http://www.secfilings.com] (filed April 7, 2007) p, 6.
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