Original Source: FD (FAIR DISCLOSURE) WIRE
. Jane Baughman, Cost Plus, Inc., VP of Financial Planning & Treasurer
. Murray Dashe, Cost Plus, Inc., Chairman, CEO, and President . Theresa Strickland, Cost Plus, Inc., EVP, Merchandising and Marketing
. John Luttrell, Cost Plus, Inc., SVP and CFO
CPWM reported 3Q04 net income of $369,000 or $0.02 per diluted share. CPWM expects 4Q04 diluted EPS of $1.32. Q&A focus: full-price/promotional price mix, product mix, factors in 4Q guidance, increased inventory, new products for Jan., radio vs. newspaper advertising.
A. Key Data From Call 1. 3Q04 Earnings = $400,000. 2. 3Q04 Diluted EPS = $0.02. 3. 3Q04 Total Sales = $190.4m. 4. 4Q04 Diluted EPS Guidance = $1.32. 5. 3Q04 Stock Repurchase = 150,000 shares at a total cost of $4.8m. 6. YTD Total Sales = $565.6m. 7. 3Q04 Gross Profit Rate = 32.6%. 8. 3Q04 Operating Income = $1.3m. 9. 3Q04 Net Income = $369,000. 10. YTD Net Income = $7m. 11. YTD Diluted EPS = $0.31. 12. YTD Capex = $63.9m.
S1. 3Q04 Overview (M.D.) 1. 3Q04 Financial Results: 1. Recently reported 12% sales increase for 3Q04. 1. 0.5% same-store sales increase. 2. Same store sales were negatively impacted: 1. About $1m due to hurricanes throughout the southeastern U.S. 2. About $3m due to low inventory levels in the non-beverage consumable categories during Sept. and early Oct. 3. Reported 3Q04 earnings of $400,000. 4. Approx. $0.02 per share. 5. Net sales for the quarter were $190.4m. 2. 3Q04 Categories and Regions: 1. The strongest sales increases during the quarter were in: 1. Furniture.
2. Floor coverings. 3. Baskets. 4. Bedding. 5. Toys. 2. Sales were relatively balanced across the country except for weakness noted in the portions of the Southeastern U.S. at least partially due to poor weather. 3. New Stores and Promotions: 1. As planned, the Company opened nine new stores during 3Q04. 2. As of today, the eight new stores planned for 4Q have been opened. 3. This completes all store openings for the fiscal year. 4. Now operate 237 stores in 30 states. 5. Themed promotion, Casbah, successfully surpassed the sales results of last year's Luxe Bazaar campaign and shows further promise for the future. 4. Inventory and ROIC: 1. Ended 3Q04 with about 13.1% more inventory than a year ago. 2. Project fiscal year end inventories will be about 18-20% above last year's levels.
3. ROIC was 11.9%. 1. Up from 11.7% in 3Q03. 5. 4Q04 Outlook:
1. Initial sell-through indicators on holiday merchandise are
promising. 2. Strong balanced inventory positions with consumables inventory problem now fixed. 3. Optimistic that 4Q should achieve the current earnings consensus of $1.32 per share if customer traffic remains at the same rates noted in the last several weeks of 3Q. 1. Traffic was inconsistent for much of 3Q. 6. Stock Repurchase: 1. Repurchased 150,000 shares of common stock in 3Q04. 2. Total cost $4.8m. 1. Under 500,000 share repurchase program authorized by the Board last year. 3. Today announced the Board's authorization to repurchase up to 1m additional shares.
S2. 3Q04 Merchandising and Holiday Program (T.S.) 1. 3Q04 Departments:
1. 3Q sales were driven by: 1. Furniture. 2. Baskets.
3. Bath. 4. Toys. 5. Kitchen. 6. Textiles.
2. Consumables: 1. Beverages 2. Candy. 2. Furniture and Accents: 1. Customers respond particularly well to Hatton collection.
1. Demonstrated the strength of black accent furniture. 2. Also tremendous growth in merchandise for the bedroom. 3. Have expanded: 1. Bedroom furniture. 2. Bed coverings. 3. Bedroom accent decor. 4. Found particularly strong response to tassel bed featured in the Casbah Couture advertising. 3. Consumables: 1. Consumables division experienced a significant increase in the sales in late Oct. as inventory levels improved.
2. Well-developed beverage area continues to drive traffic into
the store. 1. Once there, our customers extended their consumables purchases to coffee, tea and chocolate. 3. Have been further developing these business lines by introducing Valrhona.
1. Premium dark chocolate line which lends to the low-carb craze. 4. Emphasis is on stronger penetration in core chocolate.
1. Continue to enjoy a great relationship with: 1. Lindt. 2. Ghiradelli. 3. Cadbury. 4. Regular Price vs. Promotions: 1. Carefully tested the balance between regular-priced merchandise and promotional goods in 3Q04. 2. Early in 3Q introductions of new fall home furnishing items were accomplished at full retail with only moderate consumer response. 3. Late in 3Q, shifting to a more promotional posture, saw significant improvement in consumer responsiveness. 4. Will continue to carefully adjust this balance to changes in consumer demand and economic conditions.
5. Inventory: 1. During 3Q, determined inventory levels in certain consumable departments were too low due to: 1. Excessive focus on turnover statistics. 2. Not enough focus on sales.
2. The consumables area is the easiest to replenish. 3. Were able to react quickly because of the short lead times. 1. Will have a positive effect on ability to drive traffic in 4Q04 and going into the …