Is Coldwater Creek's Management Blind or Savvy?

Listening to Coldwater Creek's (CWTR) latest conference call with analysts left me wondering, "what are they thinking?" As recently as today, one can draw similar comparisons with Thornburg Mortgage's (TMA) woes. Management at Thornburg was extremely bullish for months in spite of the credit freeze that was closing in around them. So much so that they sunk millions of dollars of their own money into the business in the form of stock purchases.

Dan Griesemer, Coldwater's current CEO who took the place of Dennis Pence due to health issues, is a MEGA-BULL when it comes to the company's business model, which serves the frugal "Missy" category.

As I see it, the Street has several issues with Coldwater:

1) They continue to open stores, albeit at a slower pace, in the face of a darkening macro picture. And let's be real: the first to pull back the reigns are Coldwater's customers, who remember the Great Depression as a time of hardship, not like an Ambercrombie (ANF) customer who thinks that a pill will fix it. To Dan's credit, his rationale is not without merit, citing improved leasing terms and the availability of prime locations. However, don't think the terms would not be so enticing unless the commercial property owners didn't see something they didn't like. Buyer beware. Time will tell if Dan and his team were right to expand when others are running for cover.

My Opinion: They should stop and weather the storm.

2) Georgia Shonk-Simmons' lack of focus on the brand and fashion risks have been major misses. The company has downplayed this, but I believe the brand needs a fresh set of eyes. Her comments and tone border on being obtuse. This leads me to question the bench strength with the company.

My Opinion: She should have been gone long before the "rebuilding effort".

3) Where is Missy? Niche retails fair far worse in such dark economic times and, based on the latest retail numbers, you can seen how the Missy Sector has suffered to the tune of a 70%+ haircut in the pps. This business model is yet to be proven as something that is "sustainable and consistent". Dan seems to miss this point.

My Opinion: Expanding the demographic may help improve consistency.

4) I question the brand's "national" appeal. The merchandise, store experience and hertitage speak to a mid-west crowd, where the fashion is more stable and less trendy.

My Opinion: Focus on areas that fit the lifestyle and heritage of the brand.

As a shareholder of Coldwater Creek, I hope they can reignite the brand and weather the current macro environment to the benefit of shareholders. Otherwise, the company will serve as nothing more than a personal ATM for executives that failed to deliver.

Disclosure: Author has a long position in CWTR

Comments

[ballsschweaty]

I know some of these buffoons from Sandpoint, Idaho and I wouldn't touch this stock with a 10 foot pole. I think they will run this into the ground. I predict bankrtupcy by early 2010.

[Chica]

I really think that they expanded way to fast. Plus the fact that they have stores that are with in a 3-8 mile radius from each other. If they are a specialty store they need that customer to travel those extra miles to get to what she likes. Having them close is not smart. Your giving that one customer who lives in the middle of 4 stores the choice to spend her money where ever she wants. Pulling her away from the first store she's ever shopped. So in my eyes I don't see this as a profitable company in the missy sector of retail.
Also I agree with the comment about Georgia. If you have ever seen her you would know why her fashion ideas are so far fetched. Her sense of style is that of someone who has to much time and money on her hands and buys all of these little trinkets. Then says lets put this on a jacket, blouse or pants. Just because someone has a degree in fashion doesn't make them an expert in today's fashion world.

[User 163496]

I am a (very small) shareholder, too. I bought because I loved the brand and styles and I was a huge customer. Now - I only buy a few things when the online 'outlet' has a +50% off sale. The prices are high and the styles and fabrics aren't keeping up with the trends. Seems I mostly buy 'black travel fabrics' as they never go out of fashion. For a customer - I'm tired of hunting down the $25-off coupons - and therefore - I would never pay full price - and would rather wait for the coupon (since there ALWAYS is one somewhere). I hope the company makes it. Customer Service - wise - Coldwater is the BEST!

[KATHY]

I LOVE Coldwater Creek. I have a Coldwater Creek Visa Card. I also have 1,000 shares of Coldwater Creek.

I have a radical suggestion on the colors you offer. Women have ONE of four different colorings: Winter, Spring, Summer, Fall. I am a Fall. And for three seasons of the year I can find NOTHING to buy at Coldwater Creek. I have to buy all of my clothes in the Fall at your stores because you only have "Winter" color clothes, or only "Spring" color clothes, or only "Summer" color clothes ... then, mercifully "Fall." color clothes.

Obviously, then, each season you are not offering any clothes to approximately 3/4 of your potential customers. I understand that you want beautiful displays of the seasons. But, at the back of the stores, could you possibly make clothes in the colors for the rest of us. I was in the store near me yesterday. I wanted to use some of the coupons I have before they expire. But I could find only one sweater that had somewhat Fall coloring.

If I were your buyer, I would make sure that there is something in your store at all times to tempt all people to purchase, regardless of the season. There are just too many months of the year where I can't find ANYTHING, and that's a shame because I really love your clothes (when they are in my coloring.) Please, please listen to this comment and do something about it.

[moneyg]

These folks are clueless. Their arrogance and incompetence will surely result in further deterioration of both profitability and stock value.

[Foccused]

Customer service and quality items are the keys to success. Limited access to stores can be a very compelling sales stratagy for success. Fashion is a trend, good taste however, is always a winner.

[spry0255]

You forgot to mention that the clothes are ugly and dowdy.

[marys1man]

I agree with User...It was a great store and company...my late wife suggested the stock about 6 years ago and the splits have added value but I should have shed some at $30...oh well...I'll hang in there...styles have been lousey so I think Georgia should get some help...the demographic may be older women but the still want to look young....they need to get with it...prices are very high also...need more traffic in the store so diversify please!!

[CWCinsider]

Close, but not enough focus on operational leadership issues. CWC has a young CIO with no experience managing a technology department. In a recent "forced staff reduction" the CIO let the most experienced IT leadership go, effectively reversing recent successes in technology operational process improvement initiatives at a time when technology investment efficiency should be the primary focus.

Your advice "weather the current macro environment to the benefit of shareholders" has fallen on deaf, immature leadership ears. As for your "personal ATM for executives that failed to deliver" comment, check the CWC CIO's current compensation package.

[Flyboy1]

I've been at the "side-lines" bar & grill watching CWTR for quite some time now. I've watched the stock plummet, and after reading the comments of R Constantine, I think Dan G. needs to hire him as an adivsor. Because of my interest in the company, just today, I went into a new Coldwater Store in Freehold NJ. The store was beautiful, the people working there were totally pleasant, and I said to my wife, Wadaya think. She said, nice store but she said almost everything they have is crap, and she wouldn't touch it, and I can tell you she wastes more money than George Bush. With that kind of input from the boss, I will still hold off on going long CWTR. They need to S T O P opening new stores and start concentrating on job one. Making money.

[kidstocks]

Just got chance to read this articleand its comments. I'm a substancial shareholder, with that said, i see two vidal assesments. 1-Georgia, this is your final chance to redeem yourself, once fall product hits the stores. if not spot on, you should go. 2-Stop the opening of new stores, concentrate at job at hand, and preserve cash flow, i think the announcment of stock buyback at this time is a mistake. What does it justify at this time, no benefit to shareholders right now. And yes #3 listen more to Kathy.

[schwfordtr]

I am a (very) recent ex-employee, and I can tell you that this company is going to hell in a hand-basket. I think the bankruptcy by 2010 is right on, although somewhat optimistic - 2009 would be more likely. Not only is Georgia totally out of touch, but the rest of the hierarchy including store management is clearly not equipped to handle the current economic situation. Things were already slow back before the holidays, yet my store manager and her ass(t)s. decided that the best strategy was to keep almost all seasonal employees on permanently, which did nothing but make us "regular" employees feel like absolute garbage and create a great deal of tension and feeling of animosity. They also cut our hours down to sometimes 4, most times 0 per week, even as we were being told that we would be given priority over the newbies. Good riddance to them all, they deserve everything they have coming to them.