CPWM » Topics » The three months ended May 2, 2009 as compared to the three months ended May 3, 2008

This excerpt taken from the CPWM 10-Q filed Jun 11, 2009.

The three months ended May 2, 2009 as compared to the three months ended May 3, 2008

Net Sales Net sales consists almost entirely of retail sales, but also includes direct-to-consumer sales and shipping revenue. Net sales decreased $17.6 million, or 8.7%, to $184.3 million for the first quarter of fiscal 2009 from $201.9 million for the first quarter of fiscal 2008. Net sales for the first quarter decreased primarily due to lower comparable store sales, partially offset by higher non-comparable store sales. Comparable store sales decreased 8.9%, or $17.3 million, in the first quarter of fiscal 2009, compared to an increase of 0.6%, or $1.1 million, in the first quarter of fiscal 2008. Comparable store sales decreased during the first quarter primarily as the result of a reduction in the average ticket and a slight reduction in customer count. As of May 2, 2009, the calculation of comparable store sales included a base of 258 stores. A store is generally included as comparable at the beginning of the fourteenth month after its grand opening. At the end of the first quarter of fiscal 2009, the Company operated 270 stores in 30 states versus 274 stores (after adjusting for the 18 stores now classified as discontinued operations) in 30 states at the end of the first quarter of fiscal 2008.

The Company classifies its sales into home and consumables product lines. For the first quarter of fiscal 2009, home accounted for 62% of total sales versus 63% last year, and consumables accounted for 38% of total sales versus 37% last year.

Cost of Sales and Occupancy Cost of sales and occupancy, which consists of costs to acquire merchandise inventory and costs of freight and distribution, as well as certain facilities costs, decreased $9.6 million, or 6.6%, to $136.3 million in the first quarter of fiscal 2009. As a percentage of net sales, total cost of sales and occupancy increased 170 basis points to 74.0% in the first quarter of fiscal 2009 compared to 72.3% in the first quarter of fiscal 2008. Occupancy as a percentage of net sales for the quarter increased as a result of the deleveraging of the costs on lower comparable store sales. Cost of sales as a percentage of sales, was essentially flat compared to last year.

Selling, General and Administrative (“SG&A”) Expenses SG&A expenses decreased $7.7 million, or 10.7%, to $64.5 million in the first quarter of fiscal 2009 compared to $72.2 million in the first quarter of fiscal 2008. As a percentage of net sales, SG&A expenses were 35.0% in the first quarter of fiscal 2009 compared to 35.8% in the first quarter of fiscal 2008. The decrease was due to savings achieved from ongoing corporate cost reduction initiatives.

Store Closure Costs During the first quarter of fiscal 2009, the costs related to closing the eight stores classified within continuing operations totaled $5.7 million. There were no store closure costs in the first quarter of fiscal 2008 relating to closed stores that were classified within continuing operations.

Store Preopening Expenses Store preopening expenses typically include rent expense incurred prior to opening as well as grand opening advertising and preopening merchandise setup expenses. There were no preopening expenses for the first quarter of fiscal 2009 compared to $1.9 million for the first quarter of fiscal 2008. The Company did not open any new stores in the first quarter of fiscal 2009 compared to eight new stores in the same period last year. Store preopening expenses vary depending on the amount of time between the possession date and the store opening, the particular store site and whether it is located in a new or existing market.

Net interest expense Net interest expense, which includes interest on capital leases and debt, net of interest earned on investments, was $2.8 million for the first quarter of fiscal 2009 compared to $3.0 million for the first quarter of fiscal 2008. The slight decrease in interest expense is due to a lower interest rate on relatively flat borrowings.

 

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Income Taxes The Company’s effective tax rate was a provision of 0.8% in the first quarter of fiscal 2009 compared to a benefit of 2.6% in the first quarter of fiscal 2008. Because the Company has recorded a full valuation allowance on its deferred tax asset, the net operating loss for continuing operations does not reflect any federal or state tax benefit in the first quarter of fiscal 2009.

"The three months ended May 2, 2009 as compared to the three months ended May 3, 2008" elsewhere:

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