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OAKLAND, CA-Cost Plus Inc., suffering continued losses, foresees no increase in store count next year. The company, which lost $18 million in the latest quarter amid slipping sales and a decline in comparable store sales, said in a conference call with financial analysts Thursday that it expects no new net increase in stores for next year.

That’s after cutting its store growth significantly, according to remarks by CEO and president Barry Feld during the Cost Plus conference call. “We went from opening 35 stores a year ago to a net 11 this year, all in existing states, and next year we are positioned to open no new net stores,” Feld said.

The Cost Plus chief added that the company has signed no new lease commitments for 2009 and has delayed other growth plans as part of its turnaround strategy.

Cost Plus opened four new stores and closed none during the second quarter. It ended the period with 296 stores in 34 states versus 274 stores in 34 states at the end of the second quarter of fiscal 2006.

For example, the company has put its expansion to the Northeast on hold and is also delaying a planned expansion into Hawaii. It has also shelved plans for a World Market Kids and a new catalog. In commenting on the company’s more modest growth plans and its turnaround strategy, Feld noted that several Cost Plus competitors have announced cost-cutting initiatives recently to reduce excess layers of management, close retail venues and reduce or eliminate expensive advertising vehicles such as TV and catalogs.

Feld said that Cost Plus by comparison is a highly efficient firm with direct corporate expenses that are in line for a company with $1 billion in sales. Nonetheless, he said, cost-cutting remains a key component of the company’s turnaround.

Feld’s remarks came as Cost Plus reported the $18 million quarterly loss for the period ended Aug. 4, which amounted to 81 cents per diluted share and compared with a loss of $14.2 million and 64 cents per share in the like quarter last year. Sales dipped to $215.2 million for the quarter against $215.3 million in last year’s second quarter as same-store sales for the quarter decreased 7.6% compared to a 3.2% decrease last year.

The company said that its gross profit was affected negatively by greater than anticipated inventory shrink expense following the completion of a chain-wide physical inventory. The loss, validated by a physical inventory completed in all locations during the second fiscal quarter, was 15 cents per share higher than Cost Plus had previously estimated in its guidance.

Despite the loss and the slide in sales, Feld said that Cost Plus has made progress on its turnaround during the quarter including improvements in its supply chain and “migrating customers away from high-low promotional pricing to an every-day value pricing strategy.” Additionally, since undertaking the turnaround initiatives, the company “has absorbed significant expense associated with inventory adjustments that are now behind us,” Feld said.

He attributed the same-store sales decline in the quarter primarily to declining customer traffic. However, he said that the decline in same-store sales is stabilizing, commenting that “We are seeing signs that our turnaround is gaining traction. In fact,” Feld added, “I have never been more confident that the turnaround strategy is working,” although he cautioned that the third quarter “is likely to be tough on the bottom line.” He suggested the chain will endure “less negative sales comps” despite “macroeconomic head-winds. We have enough financial flexibility to accomplish the turnaround,” he concluded.

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