UPDATE 3-Coldwater Q4 loss wider than expected, sees strong FY

Wed Mar 3, 2010 6:06pm EST

* Q4 loss $0.10 vs est loss $0.09

* Q4 sales $318.4 mln vs est $312.0 mln

* Sees FY10 $0.08 to $0.12 vs est breakeven/shr

* Shares up 5 pct after market (Adds analyst comments)

By Nivedita Bhattacharjee

BANGALORE, March 3 (Reuters) - Women's apparel retailer Coldwater Creek Inc CWTR.O posted a smaller quarterly loss that missed estimates by a penny, but said it expects to improve merchandise margins this year as the company looks to revamp its offerings and adjust price points.

Shares of the company were up 5 percent at $5.70 in extended trade. They closed at $5.41 Wednesday on Nasdaq.

The Sandpoint, Idaho-based company has lagged behind rivals Chico's FAS Inc (CHS.N) and Anntaylor Stores Corp (ANN.N) in the fight against falling sales and weak consumer spending, but forecast full-year earnings well above estimates.

Sterne, Agee & Leach analyst Margaret Whitfield said the company needs to focus on its product offerings to better its performance.

"I was in their store today and it does not blow me away, whereas if I'm in a Chico's, the product there is truly innovative," she said, adding that with unemployment rates still high, customers won't spend at stores unless they find compelling merchandise.

Of late, Coldwater, which has been trying to turn around its business that has also been hurt by lackluster fashions, had resorted to aggressive discounting to boost traffic.

"Based on favorable customer response to our price point testing, we have begun to increase our prices in selected categories, such as jackets (and) pants," a company executive said on a conference call with analysts.

The company, which plans to open about 20 new retail stores this year, also said it will focus more on its core expertise area of jackets and look more toward high-margin items such as jewelry.

"They certainly seem to be on the right track trying to reduce the basics and improve novelty items," analyst Whitfield said.

Coldwater had moved away from its core merchandise offerings to focus more on basics like T-shirts and denims, but that had not resonated well with shoppers.

For the fourth quarter, the company, which caters to mature women, posted a loss of $10 million, or 11 cents a share, compared with a loss of $18.6 million, or 20 cents a share, last year.

Excluding certain non cash charges, the company posted a loss of 10 cents a share, while analysts were looking at a loss of 9 cents a share, according to Thomson Reuters I/B/E/S.

Revenue came in at $318.4 million, a rise of 12 percent. (Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Ratul Ray Chaudhuri, Unnikrishnan Nair)

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