Struggling women's clothing retailer Christopher & Banks reported a surprise turnaround Thursday, earning $3.6 million in the third quarter and upending Wall Street predictions that it would report a loss.
"The third quarter validates the past year's strategy," said interim CEO Joel Waller. "The results exceeded our expectations at a pace that was faster than we anticipated."
The turnaround comes about four months after Christopher & Banks rebuffed a $64 million buyout offer from minority stockholder Aria Partners, saying it preferred to continue with its current strategy.
The Plymouth-based firm reported third-quarter earnings of 10 cents a share, compared with an average Wall Street prediction that the company would lose 15 cents a share. Third-quarter revenue of $117.3 million also exceeded analysts' prediction of $114.1 million.
The earnings were announced after the market closed. Christopher & Banks shares closed at $3.67, up 17 cents, or about 5 percent, at the close. But in after-hours trading, the stock jumped, ranging in price from $4.19 to $4.30 a share.
Thursday marked the first earnings conference call for new CEO LuAnn Via, who started Nov. 26, becoming Christopher & Banks' seventh CEO in as many years. But she remained mostly in the background while Waller explained the results. Waller will remain a consultant to the firm through next June.
"Much has been accomplished over the last year, and the quarterly results are evidence that the company is on the right track," said Via, who was formerly the CEO of Payless ShoeSource.
Store closings were key
Waller said the company's winning strategy has been to close stores, improve the assortment of merchandise, cut prices an average of 20 percent, do a better job of managing inventory and focus on sales promotions that yielded better profit margins than in the past.
One of the key tasks was closing underperforming stores, Waller said. During the third quarter, the firm averaged about 129 fewer stores than it had a year ago, and 12 were closed in the quarter.
After the closings, the firm operates 640 stores in 44 states, including 388 Christopher & Banks stores, 172 stores that sell women's plus-size clothing under the name CJ Banks, 55 stores operating under both names and 25 outlet stores.
Analysts were impressed.
"A fantastic job well done," said Neely Tamminga, an analyst at Minneapolis-based Piper Jaffray & Co. during Christopher & Banks' Thursday conference call with analysts.
"It happened much faster than planned," said Raghav Nayar, an analyst at Capstone Investments in San Diego, during the same conference call.
The swing to profitability, for the first time in 10 quarters, was even larger when compared with the reported numbers of last year's third quarter.
This year, the company changed the end of its third quarter to the end of October rather than the end of November. That meant this year's third-quarter profit was compared with a $13.7 million loss a year earlier. However, in last year's reported third quarter ended in November, the company lost $28.2 million.
Steve Alexander • 612-673-4553