Weighed down by costs from the termination of its merger and the departure of its CEO, Eddie Bauer weathered a wider loss in the first quarter despite improvements in sales and gross margin.

In the three months ended 31 March, the Redmond, Washington-based specialty retailer had a net loss of US$44.8m, or $1.47 a diluted share, greater than the loss of $35.6m, or $1.19, in the year-ago quarter.

The loss in the 2007 quarter included pre-tax expenses of $5m for the termination of its merger with Sun Capital Partners and Golden Gate Capital; $8.4m related to the resignation of former CEO Fabian Mansson; and a legal settlement of $1.6m.

Sales rose 10% to $214m from $194.5m in last year's quarter. Same-store sales increased 9.5% while direct channel sales were up 16.3%. Gross margin improved to 29.3% of sales from 26.9% in last year's quarter.

"During the first quarter, we were happy to see a continuation of the improved business trends we experienced during the fourth quarter of 2006," said Howard Gross, interim CEO.

"Customers have responded positively to our refocused merchandise assortment, which is more in line with the needs and preferences of our core customers and capitalises on our brand's unique outdoor heritage."

Bauer's merger with Sun and and Golden Gate was rejected on 8 February, when it failed gain approval of a majority of Bauer shareholders. Mansson resigned and Gross was appointed to succeed him on an interim basis the following day.

As of 31 March, Eddie Bauer operated 251 retail stores and 116 outlets. It also does business through an e-commerce site and catalogues.
By Arnold J Karr.