Cost Plus Suffers Loss

OAKLAND, CA-Cost Plus Inc. lost $2.7 million in the third quarter ended Oct. 29 and reported a drop of 4.7% in same-store sales despite higher total sales. Company officials, speaking during the quarterly Cost Plus conference call with financial analysts, cited weak customer traffic and vowed to reverse the decline.

The Cost Plus loss amounted to 12 cents per share and compared with net income of 300,000, or a penny per diluted share, in the third quarter last year. Net sales increased to $200.7 million from $190.4 million last year, but the same store sales loss compared to an increase of half a percentage point last year.

The company’s comp store sales were “negatively affected by weak customer traffic-and our decision not to repeat significant promotional activity of last year at this time,” Barry Feld, president and CEO, said during the conference call. Feld called the traffic shortfall “the only substantive reason for our earnings miss,” although he allowed that rising gasoline prices and “other macro economic factors” played smaller roles.

Cost Plus will now focus on establishing positive same-store sales trends, Feld said, although he added that, “This does not mean that we will need to have a program of deeply discounted products as the only means to drive traffic to our stores. What it does mean, however, is that in what Feld called “the relatively tough economic environment we find ourselves in,” Cost Plus needs to reach customers and prospective customers with the message that the company’s stores offer value.

One change for Cost Plus will be a new run of TV advertising in eastern markets. Feld said in the conference call that although Cost Plus is a household name on the West Coast, the company is less well known on the East Coast.

“We have adjusted our fourth-quarter advertising to include, for the first time, television that will be both a brand-building tool for us and will also include holiday-specific ads with product information,” Feld said. This contrasts with the company’s previous strategy of relying primarily on newspaper advertising and inserts.

“Although there is risk to this strategy, we saw from our first test of this approach this summer, that there is the potential to grow traffic and brand awareness at the same time,” Feld said. Cost Plus, which opened 11 new stores in the quarter, finished the third quarter with 262 locations in 32 states, compared with 237 stores in 30 states at the same time last year.