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Here's a first stab at analyzing Cache's operations. Admittedly this is pretty quick. On a very bright note, the company is incredibly helpful at providing information about itself in its 10-Ks (that's all I've looked at so far). It gives information like inventory turns and other useful ratios that we are often left to calculate on our own.

Because this is based on 10-Ks, it is a bit dated. The last fiscal year covered in a 10-K ended in December 2007. Another 10-K should be in the writing.

Here's a summary (dollar amounts are in millions, margins are %):

year 2003 2004 2005 2006 2007
net sales 216 247 266 279 274
gross profit 96 112 121 133 127
SG&A 77 91 101 121 120
operating profit 18 21 20 12 7
income before taxes 18 21 21 14 10
net income 11 13 13 8 7

gross margin 44 45 46 48 46
SG&A 36 37 38 44 44
net margin 5.1 5.4 5.0 3.0 2.4

2006 was a special year, because Cache closed down Lillie Rubin, one of its chains. That ate into profits and was added to SG&A for that year. 2007 seems problematic because SG&A did not drop down as much as one might expect based on the 2005 numbers. The effect on net margin is clear.

Incidentally, at least for the series shown, gross margins look pretty stable. SG&A seems to be the bad actor. It will be useful to see what happened to SG&A in 2008.

Inventory seems pretty well managed. The company reports inventory turns in its 10-K. The number ranged from 4.94 turns in 2003 to 4.51 turns in 2007. The latter number is actually an improvement over what it had been in the intervening years. Inventory dropped from $34.8 million in 2006 to $30.5 million in 2007.

Growth in the number of stores appears to be leveling off. The percentage increase in number of stores has been steadily falling from 12% in 2003 to 2% in 2007. The company may stop growing (for a while, for ever?). Another interesting point is that average store size has been falling. New stores are smaller than older ones. That might play in nicely with inventory control, although this is speculation.

Looking at sales per store, which takes annual sales and divides it by the number of stores open at the end of the year, the trend is not particularly encouraging. It increased by over 2% in 2004 and 2005, was nearly flat in 2006, and fell by 3.3% in 2007. This is a slightly different measure than year-on-year same store sales, but provides a similar estimate of how sales are doing. It will be useful to see how sales looked for 2008. Based on a quick scan of sales reports, the numbers don't look so hot.
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