Cost Plus to ramp up home, contract consumables
Michael J. Knell -- Furniture Today, March 26, 2010
Oakland, Calif. – At Cost Plus/World Market, home lost some of its dominance over the consumables business as a percentage of total net sales last year, but that’s expected to change going forward.
“The penetration of consumables was by design in 2009 because of the economic environment. We felt that, given our core competency in the whole array of consumable and the lower price point activity related to that, a lot of our marketing efforts and in-store initiatives were more weighted towards the consumables side of the business than otherwise would be the case in a more normalized environment,” Barry Feld, president and ceo, told analysts during the company’s quarterly conference call yesterday afternoon.
For the fourth quarter, home generated 54% of sales and consumables 46%. A year earlier, the ratio was 56% and 44%, respectively. For the fiscal year, home accounted for 59% of sales compared to 61% in the prior year.
“But now that we’re seeing improved activity on the non-consumable side of our business, I think one can speculate that our emphasis on that side of the business would be downplayed to a modest degree as we move into the holiday season later in the year, given the economic climate strengthening,” said Feld.
For the fourth quarter, ended January 30, net income for the 13 weeks was $21 million vs. a loss of $18.3 million.
Sales fell 4.6% to $320.0 million, with comps down 2.5%. Same-store sales for the nine-week holiday period increased 0.3%. Fourth quarter customer at the 263-unit home specialty chain grew 2.7%, offset by a 5.1% reduction in the average ticket per customer.
For the full fiscal year, net loss narrowed to $63.3 million compared to a net loss of $102.7 million.
Sales dropped 8.6% to $869.5 million, and comps declined 7.1% driven by a reduction in the average ticket. Customer count for fiscal 2009 was flat compared to last year.
“Despite a 7% decline in same -tore sales for the fiscal year, we reduced our loss from continuing operations for the year by 32% from fiscal 2008 during one of the toughest retail periods on record,” Feld said. “Fourth quarter EBITDA of $17 million compared to an EBITDA loss of $2.7 million last year clearly demonstrates that the recent changes to our merchandising and marketing strategies are the right ones to deliver positive cash flow in fiscal 2010.”
Feld added that consistently throughout last year, the company experienced strong sales and margin in seasonal merchandise areas, including Easter, Halloween, fall/harvest and holiday. However, business was soft in higher price point categories, primarily dining and living furniture.
“However, we did achieve positive comps in gourmet food and several home businesses, such as kitchen, textiles and outdoor furniture, which have lower price points than our indoor furniture,” he added.
Cost Plus’ outlook for the first quarter calls for sales in the range of $185 million to $188 million, based on a same store sales increase in the range of 3% to 5%. Gross profit margin for the first quarter is expected to be 200 to 240 basis points higher than the first quarter of fiscal 2009.
Also for the first quarter, the company is projecting a loss from continuing operations before interest and taxes in the range of $11 million to $13 million versus a loss of $22.3 million for the first quarter of fiscal 2009.
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