Coldwater Creek (CWTRQ) 8-K Coldwater Creek Announces Fiscal 2005 Third Quarter Results

Exhibit 99.1

Coldwater Creek Announces Fiscal 2005 Third Quarter Results

Sandpoint, Idaho, November 22, 2005 – Coldwater Creek Inc. (Nasdaq: CWTR) today reported financial results for the three and nine-month periods ended October 29, 2005.

Consolidated Results

Net income for the three-month period ended October 29, 2005, increased $3.4 million, or 37 percent, to $12.4 million, or $0.20 per diluted share, compared with net income of $9.1 million, or $0.15 per diluted share, for the three-month period ended October 30, 2004. Net sales in the fiscal 2005 third quarter increased 26 percent to $190.1 million from $150.5 million in the fiscal 2004 third quarter.

Net income for the nine-month period ended October 29, 2005, increased $10.2 million, or 57 percent, to $27.9 million, or $0.44 per diluted share, compared with net income of $17.7 million, or $0.30 per diluted share, for the nine-month period ended October 30, 2004. Net sales in the first nine months of fiscal 2005 increased 30 percent to $500.3 million from $386.2 million in the same period a year ago.

“Better than anticipated sales activity in August and October resulted in solid increases for both net sales and net income in the third quarter,” said Dennis Pence, chairman and chief executive officer for Coldwater Creek. “Although the macroeconomic events surrounding Hurricane Katrina and its aftermath negatively affected all of our selling channels in early September, the impact was limited to the first three weeks of the month as sales activity recovered by the fourth week of the month.”

Gross profit for the fiscal 2005 third quarter was $90.8 million, or 47.8 percent of net sales, compared with $68.6 million, or 45.6 percent of net sales, for the fiscal 2004 third quarter. The increase in the gross profit rate was primarily due to improved merchandise margins on sales in our direct segment and, to a lesser extent, improved leveraging of the company’s full-line retail store occupancy costs.

Selling, general and administrative expenses for the fiscal 2005 third quarter were $71.1 million, or 37.4 percent of net sales, compared with $53.4 million, or 35.5 percent of net sales, for the fiscal 2004 third quarter. The increase in the selling, general and administrative expenses expressed as a percentage of net sales was primarily due to increased personnel costs associated with the company’s retail expansion and, to a lesser extent, increased national magazine advertising.

Income from operations for the fiscal 2005 third quarter increased $4.5 million, or 30 percent, to $19.7 million, or 10.3 percent of net sales, compared with $15.2 million, or 10.1 percent of net sales, for the fiscal 2004 third quarter.

Retail Segment

Net sales from the Retail Segment, which includes the company’s full-line retail stores, resort stores and outlet stores, increased 44 percent to $115.2 million in the fiscal 2005 third quarter, from $80.1 million in the fiscal 2004 third quarter. Retail Segment net sales represented 60.6 percent of the company’s total net sales in the fiscal 2005 third quarter, compared with 53.2 percent in the fiscal 2004 third quarter.

Net sales from the Retail Segment increased 49 percent to $294.2 million in the first nine months of fiscal 2005, from $197.9 million in the comparable period last year. Retail Segment net sales represented 58.8 percent of the company’s total net sales in the first nine months of fiscal 2005, compared with 51.2 percent in the same period a year ago.

The company opened 27 full-line retail stores during the fiscal 2005 third quarter for a total of 163 full-line retail stores in operation at the end of the fiscal 2005 third quarter, compared with 107 full-line retail stores at the end of the fiscal 2004 third quarter.

Direct Segment

Direct Segment net sales increased 7 percent to $74.9 million in the fiscal 2005 third quarter from $70.4 million in the fiscal 2004 third quarter. Direct Segment net sales represented 39.4 percent of the company’s total net sales in the fiscal 2005 third quarter, compared with 46.8 percent in the fiscal 2004 third quarter.

Direct Segment net sales increased 10 percent to $206.2 million in the first nine months of fiscal 2005 from $188.3 million in the comparable period last year. Direct Segment net sales represented 41.2 percent of the company’s total net sales in the first nine months of fiscal 2005, compared with 48.8 percent in the same period a year ago.

“The increase in Direct segment net sales was due to the continued growth of our Internet channel,” Pence said. “Our e-mail database now includes almost 2.6 million active addresses, which provides us with increased opportunity to market to these customers in a targeted and affordable manner. In addition, our e-mail campaigns and catalog mailings now provide a compelling way to drive retail store traffic.”

Internet

Internet net sales increased 21 percent to $47.0 million in the fiscal 2005 third quarter from $39.0 million in the fiscal 2004 third quarter. Internet net sales represented 62.7 percent of the Direct Segment’s net sales in the fiscal 2005 third quarter, compared with 55.4 percent in the fiscal 2004 third quarter. Internet net sales represented 24.7 percent of the company’s total net sales in the fiscal 2005 third quarter, compared with 25.9 percent in the fiscal 2004 third quarter.

Internet net sales increased 27 percent to $126.8 million in the first nine months of fiscal 2005 from $99.9 million in the comparable period last year. Internet net sales represented 61.5 percent of the Direct Segment’s net sales in the first nine months of fiscal 2005, compared with 53.1 percent in the same period last year. Internet net sales represented 25.4 percent of the company’s total net sales in the first nine months of fiscal 2005, compared with 25.9 percent in the comparable period last year.

Catalog

Catalog net sales decreased 11 percent to $27.9 million in the fiscal 2005 third quarter from $31.4 million in the fiscal 2004 third quarter. Catalog net sales represented 37.3 percent of the Direct Segment’s net sales in the fiscal 2005 third quarter, compared with 44.6 percent in the fiscal 2004 third quarter. Catalog net sales represented 14.7 percent of the company’s total net sales in the fiscal 2005 third quarter, compared with 20.8 percent in the fiscal 2004 third quarter.

Catalog net sales decreased 10 percent to $79.3 million in the first nine months of fiscal 2005 from $88.4 million in the comparable period last year. Catalog net sales represented 38.5 percent of the Direct Segment’s net sales in the first nine months of fiscal 2005, compared with 46.9 percent in the same period last year. Catalog net sales represented 15.9 percent of the company’s total net sales in the first nine months of fiscal 2005, compared with 22.9 percent in the comparable period last year.

Liquidity and Inventory

At the end of the fiscal 2005 third quarter, the company had no short or long-term debt and a cash position of $104.7 million compared with a cash position of $113.1 million at the end of the fiscal 2004 third quarter. The company’s working capital increased to $125.6 million at the end of the fiscal 2005 third quarter from $111.2 million at the end of the fiscal 2004 third quarter. Inventory increased $21.9 million, or 24 percent, to $113.0 million at the end of the fiscal 2005 third quarter from $91.2 million at the end of the fiscal 2004 third quarter. This increase is primarily attributable to the addition of 56 full-line retail stores since the end of the fiscal 2004 third quarter.

Conference Call Information

As previously announced, Coldwater Creek will host a conference call on Tuesday, November 22, 2005 at 4:45 p.m. (Eastern) to discuss fiscal 2005 third quarter results. To listen to the live Web cast, log on to http://phx.corporate-ir.net/playerlink.zhtml?c=92631&s=wm&e=1156163. Also, a link to the live Web cast of the call is provided in the company’s Web site at www.coldwatercreek.com. The call will be archived from approximately one hour after the conference call until midnight on Tuesday, November 29, 2005. The replay can be accessed by dialing (719) 457-0820 and giving the passcode “9614479”. A replay or transcript of the call will also be available in the investor relations section of the company’s Web site. Any additional information provided during the call will be available by accessing the replay of the call.

Coldwater Creek is an integrated multi-sales channel retailer of women’s apparel, jewelry, footwear, gift items and accessories through a growing number of full-line retail stores located across the country, an Internet site at www.coldwatercreek.com and direct-mail catalogs.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION:

This news release contains “forward-looking statements” within the meaning of the securities laws, including statements regarding our planned retail expansion, sales and revenue growth and financial performance. These statements are based on management’s current expectations and are subject to a number of uncertainties and risks. Actual results may differ materially. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to, our inability to realize the full value of merchandise currently in inventory as a result of sluggish sales, ever-changing customer tastes and buying trends; unanticipated increases in mailing and printing costs; the cost of additional overhead that may be required to expand our brand; unexpected or increased costs or delays in the development and expansion of our retail chain and our potential inability to recover these costs due to sluggish sales; the inherent difficulty in forecasting consumer buying patterns and trends and the possibility that any recent improvements in our product margins, or in customer response to our merchandise, may not be sustained; our inability to continue to fund our retail expansion with operating cash as a result of either lower sales or higher than anticipated costs, or both; uncertainties related to our shift to a triple-channel model, in particular, the effects of shifting patterns of e-commerce or retail purchases versus catalog purchases; and such other factors as are discussed in our Form 10-Q Quarterly Reports and in our most recent Form 10-K Annual Report filed with the U.S. Securities and Exchange Commission (“SEC”). We believe that these forward-looking statements are reasonable; however, you should not place undue reliance on forward-looking statements, which are based on current expectations and speak only as of the date of this release. We are not obligated to publicly release any revisions to forward-looking statements to reflect events after the date of this release. We provide a detailed discussion of risk factors in periodic SEC filings, and you are encouraged to review these filings in connection with this release.

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Contact:

COLDWATER CREEK INC.

David Gunter

Divisional Vice President of Corporate Communications & Investor Relations

208-263-2266

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND SUPPLEMENTAL DATA

(unaudited, in thousands except for per share data and store counts)

	Three Months Ended					Nine Months Ended
	October 29, 2005		October 30, 2004 (a)			October 29, 2005		October 30, 2004 (a)
Statements of Operations:
Net sales	$	190,115	$	150,504		$	500,320	$	386,179
Cost of sales		99,325		81,942			269,020		216,676
Gross profit		90,790		68,562			231,300		169,503
Selling, general and administrative expenses		71,118		53,403			187,605		140,248
Income from operations		19,672		15,159			43,695		29,255
Interest, net, and other		1,015		(168	)		2,736		84
Income before income taxes		20,687		14,991			46,431		29,339
Income tax provision		8,254		5,921			18,525		11,610
Net income	$	12,433	$	9,070		$	27,906	$	17,729
Net income per share - Basic	$	0.20	$	0.15		$	0.46	$	0.31
Weighted average shares outstanding - Basic		61,104		60,330			60,902		57,743
Net income per share - Diluted	$	0.20	$	0.15		$	0.44	$	0.30
Weighted average shares outstanding - Diluted		63,007		62,290			62,845		59,771
Supplemental Data:
	Three Months Ended					Nine Months Ended
	October 29, 2005		October 30, 2004			October 29, 2005		October 30, 2004
Operating Statistics:
Catalogs mailed		23,801		26,412			67,593		65,512
Full-line retail store count							163		107
Resort store count							2		2
Outlet store count							21		19
Full-line retail store square footage							894		616
	Three Months Ended					Nine Months Ended
	October 29, 2005		October 30, 2004			October 29, 2005		October 30, 2004
Channel Net Sales:
Retail	$	115,180	$	80,114		$	294,162	$	197,889
Internet		47,006		39,022			126,833		99,911
Catalog		27,929		31,368			79,325		88,379
Total	$	190,115	$	150,504		$	500,320	$	386,179

Note (a): The amounts for the three and nine-month periods ended October 30, 2004, reflect adjustments relating to a revison in the method of accounting for rental expense during the retail store construction period.

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except for share data)

ASSETS
	October 29, 2005			January 29, 2005		October 30, 2004 (a)
CURRENT ASSETS:
Cash and cash equivalents	$	104,677		$	111,204	$	113,128
Receivables		32,089			12,708		19,165
Inventories		113,019			63,752		91,151
Prepaid and other		8,057			6,628		6,547
Prepaid and deferred marketing costs		18,333			6,905		9,583
Deferred income taxes		434			1,079		—
Total current assets		276,609			202,276		239,574
Property and equipment, net		162,336			120,689		116,667
Deferred income taxes		2,788			1,233		—
Escrow and restricted cash		1,012			—		—
Other		306			388		425
Total assets	$	443,051		$	324,586	$	356,666
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	111,329		$	49,406	$	94,934
Accrued liabilities		35,889			31,646		30,979
Income taxes payable		3,748			4,736		2,365
Deferred income taxes		—			—		115
Total current liabilities		150,966			85,788		128,393
Deferred rents		59,862			40,319		39,929
Deferred income taxes		—			—		2,043
Other		195			200		200
Total liabilities		211,023			126,307		170,565
Commitments and contingencies
STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued and outstanding		—			—		—
Common stock, $.01 par value, 150,000,000 shares authorized, 61,160,755, 60,652,538 and 60,548,985 shares issued, respectively		612			607		605
Additional paid-in capital		105,773			98,861		98,086
Deferred compensation on restricted stock		(1,074	)		—		—
Retained earnings		126,717			98,811		87,410
Total stockholders’ equity		232,028			198,279		186,101
Total liabilities and stockholders’ equity	$	443,051		$	324,586	$	356,666

Note (a): The amounts as of October 30, 2004, reflect adjustments relating to a revison in the method of accounting for rental expense during the retail store construction period.

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Nine Months Ended
	October 29, 2005			October 30, 2004 (a)
OPERATING ACTIVITIES:
Net income	$	27,906		$	17,729
Non cash items:
Depreciation and amortization		18,411			14,432
Amortization of deferred compensation		252			—
Deferred rent amortization		(1,494	)		(772	)
Deferred income taxes		(910	)		(647	)
Tax benefit from exercises of stock options		3,224			3,558
(Gain) loss on asset disposition		(112	)		128
Other		19			200
Net change in current assets and liabilities:
Receivables		(19,381	)		(8,482	)
Inventories		(49,267	)		(38,450	)
Prepaid and other		(1,493	)		(1,578	)
Prepaid and deferred marketing costs		(11,428	)		(5,364	)
Accounts payable		60,393			54,923
Accrued liabilities		2,248			5,400
Income taxes payable		(988	)		(1,724	)
Deferred rents		23,539			19,049
Net cash provided by operating activities		50,919			58,402
INVESTING ACTIVITIES:
Purchase of property and equipment		(58,270	)		(37,648	)
Escrows and restricted cash		(1,012	)		—
Repayments of executive loans		—			191
Net cash used in investing activities		(59,282	)		(37,457	)
FINANCING ACTIVITIES:
Net proceeds from stock offering		—			42,616
Net proceeds from exercises of stock options		1,836			3,813
Net cash provided by financing activities		1,836			46,429
Net (decrease) increase in cash and cash equivalents		(6,527	)		67,374
Cash and cash equivalents, beginning		111,204			45,754
Cash and cash equivalents, ending	$	104,677		$	113,128

Note (a): The amounts for the nine-month period ended October 30, 2004, reflect adjustments relating to a revison in the method of accounting for rental expense during the retail store construction period.