Wednesday, April 23, 2014

Coldwater Creek closing hits close to home...

is it because the middle class is dying?

Maybe, maybe not.

There is no doubt that the middle class is having an economically harder time.  Yet many bloggers are declaring the closing of Coldwater Creek, based in Sandpoint, Idaho, is completely the fault of the economy.

Since Sandpoint is about an hour's drive from my home, allow me to present another scenario.

Sandpoint, Idaho
Sandpoint is a lovely little touristy town in North Idaho on the banks of  the beautiful Lake Pend Oreille (pronounced Pond-er-ray.)  It is also home to Litehouse Foods who, incidentally, has just purchased the Coldwater Creek building in Sandpoint. 

Coldwater Creek was founded in 1984 and presently has over 350 brick and mortar stores.  I'm pretty sure that when the company first started it was catalog only with maybe a store in Sandpoint, but in no way quote me on that point.  I'm digging into my memory bank from when we moved to North Idaho about 27 years ago and at my age that's a risky place to tour.


Over the years, they opened more and more stores while also opening many call centers for the catalog branch of the business.  The call center in Coeur d' Alene has about 200 employees and there are about 500 jobs that will be lost in Sandpoint.  All together, Coldwater Creek employs about 6000 people.

Let's start with a few facts before I wander down the conjecture highway.
  • It is a fact that Coldwater Creek has not made a profit since 2007.
  • It is a fact that Coldwater’s Chapter 11 filings cite assets of $279 million and debts of $361 million.
I don't think we need any more facts than that.

This all brings to mind the first lesson I ever learned about business.  To be successful in business, you must know how much money is coming in, and how much money is going out, and what's coming in better be more than what's going out. Simple.

Now for some questions and some conjecture.

Who in hell runs a business in the hole for SEVEN YEARS (sorry for shouting) without changing a thing?  It wasn't until Oct. of 2013 that the company even suggested some changes.
"As a result of an increasingly challenging retail environment, we are continuing to take the necessary steps toward improving our financial position as well as our long-term prospects as a more competitive and successful company," said Coldwater Creek CEO Jill Dean in a press release. source
Who thinks racking up 361 million in debts vs 279 million in assets, thereby putting them 82 million in the hole is rational?

And question number three, who, with the increasing dominance of internet shopping, keeps opening up brick and mortar stores? 

Here's the conjecture part.

I heard from a very credible source, who was born and raised 30 minutes from Sandpoint and runs many successful stores, that Coldwater Creek is known to be very, very top heavy in management - most of whom are earning in excess of hundreds of thousands per year.

I also can only comment on the few people that I personally knew who worked at the call center in Coeur d' Alene that it was a pretty awful and low paying job.

As for the merchandise?  The only time I ever wore something from Coldwater Creek was when I purchased a dress at a garage sale held at a house that was most assuredly not middle class.

Most middle class women I know do not pay $130.00 for a sweater or $140.00 for a little daytime dress.  They also don't pay $50.00 for an ordinary T-shirt.

So there you have it.  Overpriced (and mostly in my opinion not very pretty) clothes, too many stores, over-compensated and bloated management, and a clearly incompetent CEO, is a recipe for disaster.

And, again this is just my opinion, they forgot who they were.  They started as a catalog store and should have stayed that way while only branching out into internet sales.  It reminds me of what Jim Sinegal, co-founder and former CEO of Costco, said when they split from Price Club and dumped all the real estate that Price Club brought into the deal right back in Mr. Price's lap.  "I'm in the warehouse club business, not the real estate business." 

Litehouse Foods knows who they are, too.  They make salad dressing. Period.  They're not running around opening stores.

They also are known for their Christian beliefs and favorable treatment of their employees.

Make of that what you will... 

Does this mean that the middle class is not being economically squeezed?  Of course not. But Coldwater Creek's closing is not a symptom.  It's simply the result of poor management.  

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