Women's specialty apparel company Coldwater Creek Inc. (NASDAQ: CWTR) is drowning in bad numbers for its recent 2Q 2007 report. CEO Dennis Pence tried to spin the news by focusing on the fact that net sales were up 17% to $253.5 million. But always remember, it's not how much you sell, it's what you make on what you sell that is more important. By that measure, Coldwater Creek is floundering. Net income declined 27.6%. The company had to discount heavily in order to push sales. Comparable store sales were down 6% and stores reported overall lower count foot traffic. Fewer women are venturing into Coldwater Creek stores but internet sales were up almost 10%. In what seems like a counter-intuitive strategy, Coldwater Creek continues to open new store locations rather than improve the shopping experience for web customers.

In an effort to increase foot traffic and combine the physical store and the catalog marketing channels, Coldwater Creek will pay the shipping charges on any item a customer wants from the catalog but cannot find in a store location if she has the store order the item on her behalf. Once the item arrives at the store, the customer can choose to accept or reject. Again, the company will pay any return shipping charges. In addition to driving foot traffic, this program also helps with inventory control, leading to a 14% inventory decrease in retail locations. In addition to controlling inventory expenses, the company is also keeping a lid on administrative expenses, which increased a mere 1% since 2Q 2006. The increase was driven primarily by expenses related to opening new retail locations.

Coldwater Creek has no short or long-term borrowings. But investors have taken a beating since the beginning of the year when the stock traded at $24.39, reaching a high of $25.67 in June, only to lose 50% of its value so that it is now trading at $12.83. Coldwater Creek offers attractive stores staffed with knowledgeable saleswomen. The clothes are stylish, acceptable in all but very formal offices, reasonably priced and include a range of sizes to fit real women. And yet the stock continues to tank. CEO Pence offered no indication what Coldwater Creek will do to turn numbers around.