Charlotte Russe Disappoints

In view of the weak financial performance, the company has scaled down its growth goals for this year, saying it will now open about 50 new locations instead of the 60 it had previously planned. The chain, which opened eight stores during the first quarter, had expected to spend $30 million to $34 million on capital expenditures for fiscal 2005 but now puts that figure at $25 million to $29 million.

Speaking during the company's quarterly conference call, Hoffman blamed the poor financial performance in large part on "merchandise misses" that "resulted when we came off of a good fall but failed to transition from fall to holiday assortments." The holiday merchandise was "too similar to what our customers had shopped in the fall," Hoffman said, adding that "This very disappointing performance has resulted in an aggressive challenge and review of our processes and strategies by brand, with a focus on getting back on track by spring."

Hoffman cited some bright signs, saying that the poor performance was partially offset by the company's private label brands and its accessories, especially jewelry and shoes. However, the upshot of the poor quarter is that "During the last eight weeks, we've taken apart our apparel business and set in motion the acceleration of color and style changes, particularly in our knit tops category. We are adjusting our pricing strategy with more emphasis on value or promotional pricing," he said.

Charlotte Russe at the end of the quarter operated a total of 368 stores in 39 states and Puerto Rico, 301 of them Charlotte Russe stores and 67 Rampage stores. Net sales for the first quarter increased half a percentage point to $150 million from $149.3 million for the first quarter last year. The 9.9% drop in comparable store sales compared with a drop of 7.6% for the first quarter of fiscal 2004.