Christopher & Banks (CBK) Issues Q3 Warning

Christopher & Banks (NYSE: CBK) announced its updated financial outlook for the fiscal 2014 third quarter, based on sales trends to date for the quarter. The Company believes sales have been negatively impacted by continued softness in mall traffic and lower than expected sales from its September fashion show, as the demand for fashion merchandise exceeded planned inventory levels, as well as due to late receipts associated with the West Coast port disruptions.

For the third quarter of fiscal 2014, the Company now expects:

• total net sales to be in the range of $114 million to $118 million, as compared to its prior guidance of between $122 million to $124 million in net sales and $118.1 million of net sales in last year’s third quarter;
• approximately 75 to 100 bps of gross margin improvement, as compared to the comparable prior year period and its prior guidance of 75 to 125 bps;
• SG&A dollars to be between approximately $33.5 million and $34.0 million, as compared to its prior guidance of $34.0 million to $34.5 million and the $33.2 million of SG&A expense reported in the third quarter last year; and
• consistent with its prior guidance, that its inventory at the end of the quarter will remain higher than the comparable prior year period on a dollar per square foot basis, the result of planned higher levels of core inventory, but at a level lower than at the end of the second quarter.

*** The Street consensus was looking for Q3 revenue of $124 million and EPS of $0.26.

LuAnn Via, President and Chief Executive Officer, commented: “We believe that the continued softness in traffic trends, coupled with the difficult overall retail environment, have adversely affected our sales as compared to our initial expectations for the quarter. We are operating our business with the assumption that the current environment will remain challenging and promotional activity will continue to be aggressive, creating continued pressure on sales and margins. That said, we have seen recent improvements in the sell-through of fashion merchandise and continued strong margins in our core offerings. We continue to be highly focused on carefully managing inventory and SG&A expenses. We remain committed to our key initiatives of enhancing our merchandise assortments and presentation, improving our store environment and customer experience, and increasing our sales per store with our conversions to the MPW format. With a number of these initiatives gaining traction, we remain confident that we are on the right path to achieve long-term growth and profitability.”

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