Young women's apparel retailer Charlotte Russe registered a second-quarter profit versus a year-ago loss resulting from the closure of its Rampage division.

However, earnings from continuing operations declined slightly during the period.

The San Diego, California-based specialty retailer reported Thursday (26 April) that net income for the three months ended 31 March totalled US$3.8m, or $0.15 a diluted share, versus a net loss of $12.1m, or $0.49, during the year-ago period. The 2007 quarter EPS exceeded analysts' expectations of $0.12.

Excluding the Rampage loss, year-ago EPS, including a $0.05 benefit from a change in gift card accounting, would have been $0.22.

Net sales rose 4.8% to $161.1m, versus $114.1m in last year's quarter, and were also up 4.8% on a same-store basis. Gross margin fell to 25% of sales from 25.7% in last year's quarter.

"During the second quarter, our fashion and trend-right spring assortments presented coordinated colours across apparel and accessory categories," said Mark Hoffman, chief executive officer.

"The strong customer response builds our confidence in the spring season selling. With our fashion content on target and new receipts arriving at stores, I believe we are positioned for the balance of the third quarter."

He cautioned that, because of the shift in the calendar, which allowed Charlotte Russe the benefit of a week of post-Christmas selling last year but not in fiscal 2007, results for the six months were a better indicator of business conditions than quarterly figures.

For the six months to date, net income was $17.7m, or $0.70 a diluted share, against a net loss of $5.0m, or $0.20, in the first half of 2006. Net income for continuing operations rose 18.5% to $17.7m, or $0.70, from $15m, or $0.61.

Net sales were up 11.5% to $370.3m from $332.2m. Gross margin grew to 27% of sales from 26.7% a year ago. Comparable-store sales, after adjustment for the calendar shift, were up 3.1%.

Hoffman indicated that Charlotte Russe expects a low-single digit increase in same-store sales during the third quarter, with diluted EPS ending the quarter at $0.41 to $0.44, including a $0.02 charge for the implementation of a point-of-sale system.

The company operates 395 specialty stores in the US and Puerto Rico. At least 50 store openings are expected during the current fiscal year.
By Arnold J Karr.