Management at Cost Plus (Nasdaq: CPWM) remains oblivious once again.
Losses continue to grow by the quarter, with more projected next quarter. Margins fell further, and the company's CFO up and quit. Yet the CEO says, "Progress was made on the turnaround during the quarter." This reminds me of the knight in Monty Python and the Holy Grail who, after having both arms cut off, insisted it was just a flesh wound. Of course, the CEO has the luxury of claiming the benefits of the turnaround won't be seen until 2008. In the meantime, the company continues to lose its -- and its investors' -- dollars.
For its second quarter, Cost Plus lost $18 million, or $0.81 per share. Excluding inventory expenses, the company still suffered a loss of $0.66 per share, which is more than the $0.65 per-share loss projected by analysts. Sales were flat versus a year ago, but comps fell 7.6% on top of last year's 3.2% decrease.
Unfortunately, the bloodbath will continue into the third quarter -- and likely further. Cost Plus expects to lose $16 million to $18 million, or $0.73-$0.80 per share next quarter. Analysts expect a more modest loss of $0.45 per share, although they'll likely adjust their estimates lower. And even though sales in the first few weeks of August have been higher than a year ago, comps are expected to fall 3% to 6% lower.
With retailers struggling, particularly those in home furnishings, I certainly wouldn't put my money in one that's enduring a prolonged turnaround with mounting losses. If you insist on investing in this segment, please look to alternatives such as Bed Bath & Beyond (Nasdaq: BBBY), which has been discounted the past few months, or even a large discount retailer such as Target (NYSE: TGT). Sure, these companies are also negatively affected based on the short term economic downturn, but they are positioned to weather the harsh conditions. To me, waiting on Cost Plus to turn positive just isn't cost effective.
For more on the negative run at Cost Plus, check out:
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article. The Fool has a disclosure policy.
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