"The strong customer response builds our confidence in the spring selling season," CEO Mark Hoffman said yesterday in delivering the mid-year results of the mall-based specialty retailer, a chain whose clothing and accessories cater to teens and young women in their 20's. "With our fashion content on target and new receipts arriving at stores, I believe we are well-positioned for the balance of the third quarter," Hoffman said. That should translate to a "low single-digit" comp store increase, he relayed, "assuming no significant change in the overall retailing environment."
Even in preparing to launch an e-commerce platform by July, a medium that the retailer is admittedly coming into "late in the game," Charlotte Russe plans 50 new brick-and-mortar locations in FY 2007, says Hoffman. The count as of mid-year was just 11, although a total of 41 have opened during the past 12 months.
The chain is spread out from Maine to Hawaii, operating in 43 states and Puerto Rico. With a store at the Oaks opening in Oakdale this September, Charlotte Russe will have 60 stores in its home state, the most anywhere, followed by 42 in Florida and 28 in Texas.
Florida has two opening next month, one in Lake Wales and a second on the Tamiami Trail in Naples. Tempe Marketplace in Tempe, AZ, will feature a Charlotte Russe when it begins greeting shoppers in July, adding to 11 locations already in the state.
With 395 stores at the end of the second quarter, Hoffman says the company's geographic strategy now is "filling in existing markets," citing Massachusetts as one state offering a handful of opportunities "not yet flushed out." Charlotte Russe has five units in Massachusetts.
An untapped market is Washington, and Hoffman says Seattle could support at least a half-dozen stores. According to CFO Daniel Carter, space occupied by Charlotte Russe at the mid-year point was 2.80 million sf, up from 2.53 million sf halfway through FY 2006. Capital expenditures to date have been $30 million, says Carter.
Revenue and comp sales both rose 4.8% in the second quarter versus 2006, with the revenue total up to $161.1 million. "I am very proud of the 4.8% comp sales," Hoffman said, "especially since it was up against a 21% comp sales increase last year." Still, Hoffman only characterized the quarterly and mid-year results as "slightly better than expectations," and pledged the company is toiling to improve the operating margin via better initial pricing and more efficient markdowns.
"Management will continue its focus on expense controls as we seek to achieve a 10% operating margin," explained Hoffman, reporting a 2.2% decline in that regard compared to the first half of 2006.
New software coupled with deft maneuvering by the firm's retailing professionals helped Charlotte Russe price markdowns "efficiently" in the quarter, said Hoffman, whose firm hopes to be at the 10% rate within 12 months. The fast start was also due to store managers smoothly replacing merchandise in January, says Hoffman, even in the face of "weather challenges" that dampened outcomes for many other retailers. Listed on Nasdaq under the CHIC symbol, Charlotte Russe is at $29.37 upon the start of trading this morning.
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