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NEW YORK CITY-On a positive first-quarter report, the 304-unit Cache women’s apparel chain raises its 2006 guidance and steps up expansion. “Dresses are on fire,” said Brian Woolf, chairman, during a conference call. “This is one of the strongest dress seasons I’ve seen ever.”

This May, the company acquired five store leases from April Cornell, which is operating under bankruptcy protection, and will open the units under the Cache brand later this month. “They’re in premiere locations,” Woolf said, “and they fell into our lap.” Among the locations are Pasadena, CA, Scottsdale, AZ and Woodbury Commons in New York, a destination Woolf says Cache has wanted to enter.

In all, it will open 11 new stores in second quarter and is on track to open between 15 and 20 a year for the next few years. “We don’t want to be overly aggressive,” Woolf said, “but if an opportunity arises, we can go up to 25 a year.” During the first quarter, Cache opened two stores and closed six. It also remodeled six units, which puts 64% of the Cache store base in the new store format.

While the Cache brand picked up momentum, performance at the 30-some Lillie Rubin stores within the company continued to flounder. Of Lillie Rubin, Woolf said, “it’s been challenging, and the turnaround is a work in progress.” The design team is working on re-merchandising the assortment, and Woolf declined to comment further, but said improvements should be realized in the third and fourth quarters.

Net sales for the company reached $63.8 million for the 13-week period ended April 1, which represented a rise of 1.6% over the same period a year ago. Operating income was $2.3 million or 3.6% of net sales. This compares with $2.8 million or 4.4% of net sales in first-quarter 2005.

Gross profits rose 7.6% in first quarter this year to $29.2 million. This represented 45.7% of net sales. It compares with $27.1 million, or 43.2% of net sales in first-quarter 2005. The increase in gross profit margin is attributed to strong full-price selling and improved sourcing.

The company anticipates net sales in the range of $70 million to $72 million in second quarter, and full-year net sales of between $280 million and $286 million. This raises the chain’s previous full-year 2006 guidance of between $278 million and $284 million and compares with actual net sales of $266.4 million in fiscal 2005.

“The Cache customer is responding well to new fashion trends in bottoms, such as cropped pants, skinny pants and shorts, as well as short and long dresses,” Woolf said. Regarding denim, “it continues to grow, but not at the same rate as in the past. There’s a lot of talk about skinny legs, and we’re testing them now. The casual pants business has been exceptionally strong.”

Asked if the company was behind use of Cache dresses on a number of popular TV shows, including Desperate Housewives, Woolf said, “we have not actively sought out any of this. It came on its own. It’s an edgy, sexy brand with wanted merchandise. Magazines and TV shows are sourcing us, and we’re looking at how to maximize that in our marketing.”

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