By Caitlin Nish
Shares of Charming Shoppes Inc. surged Thursday as the company posted a narrower-than-expected fiscal fourth-quarter loss, with increased promotional activity driving holiday sales but hurting gross margin.
Same-store sales for the women's plus-size apparel retailer grew 9% in the period, after falling in the double digits in the previous two holiday seasons.
Shares were recently up 20% to $3.55, but are still down 46% in the past year.
The operator of the Lane Bryant, Fashion Bug and Catherines Plus Sizes chains has posted only two quarterly profits in about three years, and its sales have lagged behind some other apparel retailers that have gotten a boost from higher consumer spending. Due to the sales weakness, Charming Shoppes has cut jobs and closed stores, as well as reshuffled management.
The retailer Thursday named Chief Operating Officer Anthony M. Romano permanent chief executive and president. Romano assumed the position on an interim basis in October when James Fogarty stepped down from the chief executive post and resigned from the board, leaving the company after serving in that role for just a year and a half.
Romano Thursday outlined his plans for returning the overall business to profitability, including improving inventory management and upgrading the company's merchandise offerings. "We were far too basic and not responsive to our customers' fashion preferences," he said.
Charming Shoppes also said it will close about 240 unprofitable stores in 2011, with more than half at the Fashion Bug chain. The company will also close all 30 Catherines Plus Sizes outlet locations over a two-year period.
Romano warned that the sharp increase in cotton prices will become a bigger challenge for the company in the fall and holiday seasons, and each of its brands will selectively increase prices across product lines. He said on the company's conference call Thursday that Charming Shoppes has been testing higher prices in some areas, and hasn't seen resistance from customers. He added that the company will continue its efforts to value-engineer its products to reduce costs and to seek lower-cost sourcing alternatives.
Charming Shoppes reported a loss of $30.4 million, or 26 cents a share, for the quarter ended Jan. 29, compared with a loss of $28 million, or 24 cents a share, a year earlier. Excluding items such as restructuring and store-impairment charges, the loss narrowed to 8 cents a share from 36 cents.
Sales jumped 6.8% to $575.8 million.
The two analysts polled by Thomson Reuters forecast a loss of 19 cents a share on $553.1 million in revenue.
Same-store sales climbed 9%, including an 11% increase at Lane Bryant and a 41% surge in e-commerce sales.
Gross margin fell to 43% from 43.7%, hurt by the company's more aggressive marketing and promotional activity.
