Exhibit 99.1
COST PLUS, INC. ANNOUNCES FIRST QUARTER RESULTS AND PROVIDES GUIDANCE FOR
SECOND QUARTER
Oakland, CA – May 19, 2005 – Cost Plus, Inc. (NASDAQ: CPWM) announced today financial results for its fiscal first quarter ended April 30, 2005.
The Company reported a net loss of $138,000 or $0.01 per diluted share for the first quarter of fiscal 2005. The net loss includes pre-tax charges totaling $3.1 million, or $0.09 per diluted common share, related to the departure of the Company’s former CEO and the closure of four stores. The Company earned $3.2 million, or $0.14 per diluted share, in the prior year first quarter.
Net sales for the first quarter of 2005 were $200.0 million, a 7.7% increase over first quarter 2004 net sales of $185.7 million. Comparable store sales decreased 1.9%, compared to a 3.4% increase for the first quarter of 2004.
The Company indicated that weaker than expected customer traffic surrounding the Easter Holiday was the primary reason for the comparable store sales decrease. For the quarter, sales of consumable products outperformed the home side of the business. Despite this shift, net merchandise margin rates were up 50 basis points quarter-over-quarter, reflecting a more disciplined approach to markdown activity and stronger than average sales performance from higher margin categories including bedding, home collectibles, floor coverings, jewelry and accessories, pillows and frames. The Company indicated that recent efforts to reinvigorate these higher margin businesses appear to have met with initial success.
During the quarter, the Company opened five stores and closed four stores, as planned.
Earnings guidance for the second quarter of fiscal 2005 is estimated to be in the range of $0.06 to $0.11 per diluted share vs. $0.15 per diluted share for the prior year second quarter. The Company’s guidance is predicated on the following major assumptions:
| | • | | Ten new stores opened vs. nine stores opened in the second quarter last year. One store is anticipated to close this year vs. one store closed in the second quarter last year. |
| | • | | Comparable store sales from a decrease of 1% to an increase of 1% vs. a 3.2% increase in the prior year second quarter. The comparable store sales guidance includes lower sales of outdoor dining furniture from cooler weather in certain key markets and from an oversupply of outdoor wooden dining products in the marketplace. Other outdoor living categories have performed better thus far in the quarter, including such items as acrylic drink and dinnerware, umbrellas and outdoor furniture pillows. |
| | • | | Total sales between $202 million and $206 million vs. $190 million in the prior year. |
| | • | | Gross profit rate between 33.5% and 33.9% vs. 33.9% in the prior year. Added occupancy costs and reduced leverage from these costs offset an anticipated 30 basis point increase in merchandise margin rates between the two quarterly periods. |
| | • | | SG&A rate between 30.3% and 30.7% vs. 29.6% in the prior year. Included in second quarter 2005 SG&A expense is an additional $0.8 million in advertising production costs for media expected to run primarily in the last half of the year. These costs are expensed as incurred. |
| | • | | Pre-tax income between $2.0 million and $3.8 million vs. $5.4 million in the prior year. |
| | • | | An effective income tax rate of 38.5% in the current year vs. 38.0% in the prior year. |
| | • | | Net income between $1.2 million and $2.3 million vs. $3.3 million in the prior year. |
| | • | | Estimated earnings per diluted share between $0.06 and $0.11 vs. $0.15 last year, with weighted average shares outstanding estimated at 22.3 million for the quarter vs. 22.3 million last year. |
The Company now estimates earnings per share for fiscal 2005 between $1.26 to $1.36 per diluted share based upon an estimated comparable store sales increase of approximately 1.5% in the last half of the year.
The Company’s first quarter earnings conference call will be today at 8:00 a.m. PT. It will be held in a “listen-only” mode for all participants other than the sell-side and buy-side investment professionals who regularly follow the Company. Phone numbers for the call are (415) 908-6247 or (212) 346-6540. Callers are advised to dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at (402) 977-9140, Access Code: 21246289, from 10:00 a.m. PT Thursday to 10:00 a.m. PT on Friday, May 20. Investors may also access the live call or the replay over the internet atwww.streetevents.com;www.fulldisclosure.com andwww.worldmarket.com. The replay will be available approximately one hour after the live call concludes.
Cost Plus, Inc. is a leading specialty retailer of casual home furnishings and entertaining products. As of May 19, 2005, the Company operated 240 stores in 30 states compared to 218 stores in 26 states at the same time last year.
The above statements and assumptions relating to anticipated second quarter and fiscal 2005 financial results are “forward-looking statements” that are based on current expectations and are subject to various risks and uncertainties that could cause actual results to differ materially from those forecasted. Such risk factors include, but are not limited to: changes in economic conditions that effect consumer spending; international conflicts; changes in the competitive environment; interruptions in the flow of merchandise; changes in the cost of goods and services purchased including fuel, transportation and insurance; a material unfavorable outcome with respect to litigation, claims and assessments; further terrorist attacks and changes in accounting rules, regulations and interpretations. Please refer to documents on file with the Securities and Exchange Commission for a more detailed discussion of the Company’s risk factors. The Company does not undertake any obligation to update its forward-looking statements.
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COST PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts, unaudited)
| | | | | | | | | | | | | |
| | | First Quarter
| |
| | | April 30, 2005
| | | May 1, 2004 (As Restated)
| |
Net sales | | $ | 200,023 | | | 100.0 | % | | $ | 185,703 | | 100.0 | % |
Cost of sales and occupancy | | | 133,304 | | | 66.6 | | | | 122,771 | | 66.1 | |
Gross profit | | | 66,719 | | | 33.4 | | | | 62,932 | | 33.9 | |
| | | | |
Selling, general and administrative expenses | | | 65,157 | | | 32.6 | | | | 55,156 | | 29.7 | |
Store preopening expenses | | | 1,061 | | | 0.5 | | | | 1,841 | | 1.0 | |
| | | | |
Income from operations | | | 501 | | | 0.3 | | | | 5,935 | | 3.2 | |
Net interest expense | | | 726 | | | 0.4 | | | | 822 | | 0.4 | |
| | | | |
Income (loss) before income taxes | | | (225 | ) | | -0.1 | | | | 5,113 | | 2.8 | |
Income tax expense (benefit) | | | (87 | ) | | 0.0 | | | | 1,940 | | 1.1 | |
| | | | |
Net income (loss) | | $ | (138 | ) | | -0.1 | % | | $ | 3,173 | | 1.7 | % |
| | | | |
Net income (loss) per share - diluted | | $ | (0.01 | ) | | | | | $ | 0.14 | | | |
| | | | |
Weighted average shares outstanding- diluted | | | 21,914 | | | | | | | 22,556 | | | |
| | | | |
New stores opened | | | 5 | | | | | | | 8 | | | |
See Notes 2 and 12 to the Company’s consolidated financial statements filed on Form 10-K
for the year ended January 29, 2005 for information regarding the restatement.
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COST PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
| | | | | | | |
| | | April 30, 2005
| | | May 1, 2004
(As Restated)
|
ASSETS | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 3,759 | | | $ | 14,668 |
Short-term investments | | | — | | | | 1,004 |
Merchandise inventories | | | 268,492 | | | | 220,210 |
Other current assets | | | 14,498 | | | | 17,768 |
| | |
Total current assets | | | 286,749 | | | | 253,650 |
| | |
Property and equipment, net | | | 188,134 | | | | 131,567 |
Goodwill | | | 4,178 | | | | 4,178 |
Other assets | | | 12,937 | | | | 8,897 |
| | |
Total assets | | $ | 491,998 | | | $ | 398,292 |
| | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 50,377 | | | $ | 36,945 |
Income taxes payable | | | — | | | | 236 |
Accrued compensation | | | 9,700 | | | | 7,717 |
Short-term borrowings | | | 10,830 | | | | — |
Other current liabilities | | | 23,738 | | | | 19,124 |
| | |
Total current liabilities | | | 94,645 | | | | 64,022 |
| | |
Capital lease obligations | | | 13,471 | | | | 35,695 |
Long-term debt | | | 54,121 | | | | — |
Other long-term obligations | | | 35,328 | | | | 31,355 |
| | |
Shareholders’ equity: | | | | | | | |
Common stock | | | 220 | | | | 219 |
Additional paid-in capital | | | 163,128 | | | | 156,066 |
Retained earnings | | | 132,071 | | | | 110,935 |
Other comprehensive income | | | (986 | ) | | | — |
| | |
Total shareholders’ equity | | | 294,433 | | | | 267,220 |
| | |
Total liabilities and shareholders’ equity | | $ | 491,998 | | | $ | 398,292 |
See Notes 2 and 12 to the Company’s consolidated financial statements filed on Form 10-K
for the year ended January 29, 2005 for information regarding the restatement.
Contact:
John Luttrell
(510) 808-9119
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