CWC analysts see both good, bad

SANDPOINT — Analysts are seeing both good and bad signs in Coldwater Creek’s financial situation.

Company officials recently announced the apparel chain would likely fall below guidance goals for the third quarter. In addition, a company committee working with Perella Weinberg Partners is exploring strategic alternatives for the company’s future, including partnerships, joint ventures or a sale or merger. Company representatives are not commenting on the likelihood they will act on any of those alternatives.

In light of those developments, Jeff Van Sinderen, a financial analyst for B. Riley and Co., LCC, evaluates the company’s stock potential at a neutral rating without a recommendation to buy or sell. He believes the company should perform in line with stock market index benchmarks without any huge dips or boosts in value.

“Although we believe there is potential to drive margin recovery in some form, (Coldwater Creek) remains a speculative turnaround,” he stated in his latest report.

While summer revenue fell within Coldwater Creek’s second quarter guidance goals, the numbers were still somewhat disappointing, according to company president and CEO Jill Dean. During a conference call held in September, she said the company’s efforts in brand development and other long-term goals have produced promising results. However, second quarter sales were down 7.3 percent from previous years, indicating the company still has ground to regain.

“Our return to more consistent sales results has been slower than expected, and we are clearly not satisfied with our performance,” she told teleconference participants.

A recently-struck partnership with Alliance Data Systems, a consumer data analytics  and marketing services firm, is encouraging to analysts and company officials alike. During the conference call, Coldwater Creek executive vice president Jim Bell said the deal includes $25 million in incentive payments as the company achieves certain milestones. In addition, the partnership should prove valuable as Coldwater Creek develops its own credit card and loyalty programs.

However, Van Sinderen says the company may need to speed up downsizing its chain retail outlets for improved stability. While he believes the company’s recent drive in store closures was the right move from a financial perspective, downsizing progress will nevertheless be slow.

“In our opinion, there is value in the brand and direct business and an opportunity to improve retail with smaller stores,” he writes. “However, comps and margins need to run substantially better and the company may need to accelerate unit downsizing to hit (our estimates).”