The new boss of casual sportswear and accessories retailer Eddie Bauer Holdings Inc has outlined a five-point turnaround plan to reposition the company as a premium active lifestyle brand, including cutting costs and changing the merchandising assortment.

Speaking in a conference call on Tuesday (14 August), president and CEO Neil S Fiske, who joined the retailer just over a month ago from Limited Brands' Bath and Body Works unit, said he believes Eddie Bauer has lacked a clear, compelling merchandising strategy since it came out of bankruptcy in June 2005, but has great "comeback potential" and "a rich legacy on which we can draw." 

His comments came as the company nearly halved its second quarter net loss, benefiting from strong comparisons with a year-ago period that was hampered by $32.6m in income tax expenses.

But Fiske said results for the quarter were "were somewhat soft" with merchandise sales at its retail and outlet stores slipping 1.6% "as a result of a darker colour palette for summer products that did not resonate well with our customers and may have been more appropriate for a fall collection.

"If the company continues to refine its merchandising strategy we will adjust out colour palette to reflect seasonal preferences," he said.  

The Bellevue, Washington-based company said net loss for the second quarter was $22.2m, or $0.73 per diluted share, compared to a net loss of $42.0m, or $1.40 per diluted share in the same period in 2006.

Quarterly losses included non-recurring expenses of $9.3m tied to refinancing charges in April but were helped by an income tax benefit of $0.6m.

Revenues for the quarter rose 0.6% to $227.0m from $225.7m in last year's period. Merchandise sales from the company's retail and outlet stores slipped 1.6% to $151.4m, while direct sales including catalogues and websites rose 6.4% to $61.5m.

Same-store sales at stores open at least a year were up 0.9%, while direct sales increased by 6.4%.

Gross margin fell $4.4m to $75.3m as rising customer loyalty programme and occupancy costs were partially offset by improved merchandising margins.
Fiske said the company is now taking steps to "improve long-term shareholder value, including sharpening our brand definition, editing and focusing our merchandising assortment and looking at a number of cost reduction opportunities."

He listed five priorities that he has identified to improve sales and profitability and position the company for long-term growth.

These include:
• Enhancing and improving the company's image with current and target customers through a clear brand promise;
• Implementing a 'back to basics' merchandising strategy to ensure that product offerings are more focused and well edited. The company will also put more emphasis on its men's business and outerwear;
• Improved marketing, particularly through catalogue mailings and initiatives to capitalise on the "significant competitive advantage" of its multi-channel customers;
• Manage costs through initiatives to streamline product sourcing and the supply chain, distribution and logistics.
• Recruit the right executive team, including a new CFO.

For the six months to 30 June, Eddie Bauer's net loss narrowed to $67.0m, or $2.20 per diluted share, from a net loss of $77.6m in the first half of 2006, or $2.59 per diluted share. Losses were weighed down by non-recurring expenses of $25.7m, including costs from the termination of its merger with Sun Capital Partners and Golden Gate Capital and the departure of its former CEO.

Total revenues in the first half rose 5.0% to $441.0m from $420.2m, including merchandise sales of $392.2m, shipping revenues of $16.7m, licensing royalty revenues of $7.8m, and royalty revenues from foreign joint ventures of $3.2m.

By Leonie Barrie.