10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ____________________________________________________________

Form 10-Q

 ____________________________________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 27, 2012

OR

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-21915

 ____________________________________________________________

COLDWATER CREEK INC.

(Exact name of registrant as specified in its charter)

DELAWARE	82-0419266
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

ONE COLDWATER CREEK DRIVE, SANDPOINT, IDAHO 83864

(Address of principal executive offices)

(208) 263-2266

(Registrant’s telephone number, including area code)

 ____________________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  x  NO  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data file required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES  x NO  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer  o	Accelerated filer  x
Non-accelerated filer  o	Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  YES o NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Shares outstanding as of November 27, 2012
Common Stock ($0.01 par value)	30,519,607

Coldwater Creek Inc.

Form 10-Q

For the Fiscal Quarter Ended October 27, 2012

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		3
Item 1. Financial Statements (unaudited)		3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to the Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		25
Item 4. Controls and Procedures		25
PART II. OTHER INFORMATION		26
Item 1. Legal Proceedings		26
Item 1A. Risk Factors		26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3. Defaults Upon Senior Securities		28
Item 4. Mine Safety Disclosures		28
Item 5. Other Information		28
Item 6. Exhibits		29
Signatures		30
Exhibit Index		31

“We,” “us,” “our,” “Company” and “Coldwater,” unless the context otherwise requires, means Coldwater Creek Inc. and its wholly-owned subsidiaries.

2

PART 1.     FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except for per share data)

	October 27, 2012			January 28, 2012			October 29, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	31,294		$	51,365		$	37,881
Receivables	8,554			8,199			10,871
Inventories	161,715			131,975			171,970
Prepaid and other current assets	7,339			6,137			6,438
Prepaid and deferred marketing costs	6,570			3,273			6,639
Deferred income taxes	2,819			2,313			6,536
Total current assets	218,291			203,262			240,335
Property and equipment, net	180,640			206,079			219,521
Deferred income taxes	2,207			1,891			2,054
Other assets	4,568			1,883			1,860
Total assets	$	405,706		$	413,115		$	463,770
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	91,430		$	55,130		$	85,420
Accrued liabilities	89,820			74,915			75,506
Income taxes payable	240			3,260			3,305
Current maturities of debt and capital lease obligations	560			15,735			15,819
Total current liabilities	182,050			149,040			180,050
Deferred rents	86,900			101,384			104,648
Long-term debt and capital lease obligations	61,797			26,575			26,755
Supplemental Executive Retirement Plan	12,431			12,142			10,305
Deferred marketing fees and revenue sharing	3,257			4,402			4,791
Deferred income taxes	2,512			1,716			5,524
Other liabilities	1,018			1,443			1,515
Total liabilities	349,965			296,702			333,588
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 1,000 shares authorized; 1, 0 and 0 shares issued, respectively	—			—			—
Common stock, $0.01 par value, 75,000 shares authorized; 30,520, 30,417 and 30,402 shares issued, respectively	305			304			304
Additional paid-in capital	152,397			151,254			150,454
Accumulated other comprehensive loss	(2,176		)	(2,204		)	(464		)
Accumulated deficit	(94,785		)	(32,941		)	(20,112		)
Total stockholders’ equity	55,741			116,413			130,182
Total liabilities and stockholders’ equity	$	405,706		$	413,115		$	463,770

The accompanying notes are an integral part of these interim financial statements.

3

COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS

(Unaudited)

(in thousands, except for per share data) 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
Net sales	$	188,124		$	187,465		$	521,698		$	548,669
Cost of sales	122,059			131,200			352,722			392,470
Gross profit	66,065			56,265			168,976			156,199
Selling, general and administrative expenses	76,106			84,519			219,299			238,008
Loss on asset impairments	—			—			—			2,875
Loss from operations	(10,041		)	(28,254		)	(50,323		)	(84,684		)
Other loss, net	6,797			—			5,519			—
Interest expense, net	3,573			599			5,859			1,520
Loss before income taxes	(20,411		)	(28,853		)	(61,701		)	(86,204		)
Income tax provision	115			305			143			661
Net loss	$	(20,526	)	$	(29,158	)	$	(61,844	)	$	(86,865	)
Other comprehensive income:
Supplemental Executive Retirement Plan liability adjustment, net of tax	(10		)	—			(28		)	—
Total comprehensive loss	$	(20,516	)	$	(29,158	)	$	(61,816	)	$	(86,865	)
Net loss per share — Basic and Diluted	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)
Weighted average shares outstanding — Basic and Diluted	30,504			23,573			30,460			23,284

The accompanying notes are an integral part of these interim financial statements.

4

COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands) 

	Nine Months Ended
	October 27, 2012			October 29, 2011
Operating activities:
Net loss	$	(61,844	)	$	(86,865	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	39,037			43,527
Non-cash interest expense	3,001			—
Stock-based compensation expense	1,335			1,635
Supplemental Executive Retirement Plan expense	441			416
Deferred income taxes	(26		)	(646		)
Valuation allowance adjustments	(343		)	(840		)
Deferred marketing fees and revenue sharing	(702		)	(1,150		)
Deferred rents	(15,569		)	(12,356		)
Loss on derivative liability	4,434			—
Series A Preferred Stock issuance costs	1,086			—
Net loss on asset dispositions and other termination charges	2,249			119
Loss on asset impairments	—			2,875
Other	207			316
Net change in operating assets and liabilities:
Receivables	(1,064		)	(459		)
Inventories	(29,740		)	(15,489		)
Prepaid and other current assets	(4,781		)	7,531
Accounts payable	34,965			8,064
Accrued liabilities	(4,592		)	(9,542		)
Income taxes payable	(3,020		)	3,305
Net cash used in operating activities	(34,926		)	(59,559		)
Investing activities:
Purchase of property and equipment	(14,234		)	(6,963		)
Proceeds from asset dispositions	141			795
Net cash used in investing activities	(14,093		)	(6,168		)
Financing activities:
Net proceeds from stock offering	—			22,979
Borrowings on revolving line of credit	10,000			15,000
Payments on revolving line of credit	(25,000		)	—
Proceeds from the issuance of long-term debt	65,000			15,000
Payments of long-term debt and capital lease obligations	(15,309		)	(553		)
Payment of debt and Series A Preferred Stock issuance costs	(5,895		)	(695		)
Other	152			264
Net cash provided by financing activities	28,948			51,995
Net decrease in cash and cash equivalents	(20,071		)	(13,732		)
Cash and cash equivalents, beginning	51,365			51,613
Cash and cash equivalents, ending	$	31,294		$	37,881
Supplemental Cash Flow Data:
Interest paid, net of amount capitalized	$	2,863		$	1,463
Income taxes paid (refunded), net	$	3,396		$	(2,627	)

The accompanying notes are an integral part of these interim financial statements.

5

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Organizational Structure

Coldwater Creek Inc., a Delaware corporation, together with its wholly-owned subsidiaries, headquartered in Sandpoint, Idaho, is a multi-channel specialty retailer of women’s apparel, gifts, jewelry, and accessories. We conduct business in two operating segments: retail and direct. The retail segment consists of our premium retail stores, factory outlet stores, and day spas. The direct segment consists of sales generated through our e-commerce website and from orders taken from customers over the phone and through the mail. Intercompany balances and transactions have been eliminated.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of January 28, 2012 was derived from the audited consolidated balance sheet as of that date. The condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented and should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

On October 4, 2012, we effected a one-for-four reverse split of our common stock (the "Reverse Stock Split"). All share and per share information in this Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the financial position, results of operations or cash flows to be realized in future periods.

References to a fiscal year are to the calendar year in which the fiscal year begins.

2. Significant Accounting Policies

Accounting Policies

The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are embodied in our sales returns accrual, gift card breakage, inventory adjustments, derivative liability, stock-based compensation, impairment of long-lived assets, contingencies, and income taxes. These estimates and assumptions are based on historical results as well as management’s future expectations. Actual results may vary from these estimates and assumptions.

Derivative Liability

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock in conjunction with a new senior secured term loan. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. During the nine months endedOctober 27, 2012, we recorded $1.1 million of issuance costs related to the Series A Preferred Stock.

6

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and

• Level 3 — Unobservable inputs in which little or no market activity exists.

The derivative liability, representing shares of Series A Preferred Stock, is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs (retroactively adjusted to reflect the Reverse Stock Split):

	October 27, 2012
Closing price of Company's common stock	$3.99
Exercise price	$3.40
Risk-free interest rate	1.7	%
Expected volatility	82.2	%
Expected life	9.7 years

The valuation model and the assumptions used in the model were determined based on the Series A Preferred Stock features and Company specific historical experience, taking into consideration expected future activity. The risk-free interest rate is based on the U.S. Treasury strip rates in effect at the time of measurement with an equivalent remaining term. The expected volatility of our stock prices is based on a combination of historical volatility and the implied volatility of our exchange traded options. Expected life is based on the remaining term of the Series A Preferred Stock. Significant increases (decreases) in any of those assumptions in isolation would result in a significantly higher (lower) fair value measurement of the derivative liability. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Activity for the derivative liability was as follows:

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Balance at beginning of period	$	13,395	$	—	$	—	$	—
Issuance of Series A Preferred Stock	—		—		15,744		—
Loss on change in fair value	6,783		—		4,434		—
Balance at end of period	$	20,178	$	—	$	20,178	$	—

During the nine months endedOctober 29, 2011, certain long-lived assets, primarily premium store leasehold improvements, with a net carrying amount of $3.6 million were written down to their fair value of $0.7 million, resulting in an impairment charge of $2.9 million. This impairment charge was measured at fair value using Level 3 inputs (discounted cash flows).

We have financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, receivables, payables, and debt.  The carrying value of cash, receivables, payables and borrowing on our revolving line of credit materially approximate their fair values due to their short-term nature. As of October 27, 2012, the fair value of our senior secured term loan was $54.4 million compared to the carrying value of $50.3 million, which includes accrued PIK interest and net of the loan discount. The fair value of the senior secured term loan was estimated using Level 3 inputs by discounting the cash flows with an assumed interest rate that considers credit and liquidity risk. The carrying value of our previous term loan materially approximated fair value at January 28, 2012 and October 29, 2011.

7

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Advertising Costs

Direct response advertising includes catalogs, national magazine advertisements and other mailings that contain an identifying code which allows us to track related sales. All direct costs associated with the development, production and circulation of direct response advertisements are accumulated as prepaid marketing costs. Once the related catalog, national magazine advertisement, or other mailings is either mailed or first appears in print, these costs are reclassified to deferred marketing costs. These costs are then amortized to selling, general and administrative expenses over the expected sales realization cycle, typically several weeks. Direct response advertising expense was $10.9 million and $9.5 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $25.6 million and $31.1 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively.

Advertising costs other than direct response advertising, including television, store and event promotions, signage expenses and other general customer acquisition activities, are expensed as incurred or when the advertising event first takes place. Advertising expenses other than those related to direct response advertising of $6.6 million and $17.4 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $17.4 million and $29.7 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively, are included in selling, general and administrative expense.

Income Taxes

In assessing the realizability of deferred tax assets, we consider all available evidence to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than projected future performance. Consequently, based on all available evidence, in particular our historical cumulative losses and recent operating losses, we have a valuation allowance against a significant portion of our net deferred tax assets. In order to fully realize the deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and restricted stock units (“RSUs”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Stock options	$	270	$	345	$	815	$	1,157
RSUs	196		128		520		478
	$	466	$	473	$	1,335	$	1,635

All share and per share information has been retroactively adjusted to reflect the Reverse Stock Split.

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 291,075 and 263,125 stock options, respectively.  The fair value of stock option awards was estimated at the grant date using the Black-Scholes option valuation model with the following weighted average assumptions: 

8

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

	Nine Months Ended
	October 27, 2012			October 29, 2011
Risk-free interest rate	0.71		%	1.93		%
Expected volatility	90		%	88		%
Expected life	4.9 years			5.2 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	3.01		$	4.16

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 262,024 and 141,598 RSUs, respectively, at a weighted average fair value of $3.98 and $6.04, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, employees were also granted 123,500 and 130,000 performance RSUs, respectively, at a weighted average grant date fair value of $4.64 and $5.72, respectively.  For the performance RSUs granted in fiscal 2012, half of the RSUs are subject to the achievement of earnings before interest expense and taxes (“EBIT”) targets for fiscal years 2012, 2013 and 2014, and half of the RSUs are subject to the achievement of sales targets for fiscal years 2012, 2013 and 2014. For performance RSUs granted in fiscal 2011, half of the RSUs are subject to the achievement of EBIT targets for the second half of fiscal 2011 combined with fiscal 2012, and half of the RSUs are subject to the achievement of sales targets for the second half of fiscal 2011 combined with fiscal 2012.  For performance RSUs granted in fiscal 2010, the RSUs are subject to the achievement of combined EBIT targets for fiscal years 2010, 2011 and 2012. No compensation expense has been recognized for the fiscal 2011 and 2010 performance RSUs as it was determined to be not probable that the performance conditions would be met. The number of shares actually awarded under performance RSUs will range from 0% to 200% of the base award amount, depending on the results during the performance period.

Interest Expense, net

Interest expense, net, consisted of the following: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest expense	$	3,574		$	631		$	5,864		$	1,556
Interest income	(1		)	(32		)	(5		)	(36		)
	$	3,573		$	599		$	5,859		$	1,520

In fiscal 2012, we corrected the classification of other income, other expense and selling, general and administrative expenses. In previous years, other income and other expense was included with interest expense, net. For comparative purposes, other income, net, of $0.4 million for the nine months endedOctober 29, 2011 has been classified as selling, general and administrative expenses.

3. Receivables

Receivables consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Credit card receivables	$	5,174	$	2,960	$	5,208
Tenant allowances	501		2,112		2,140
Other	2,879		3,127		3,523
	$	8,554	$	8,199	$	10,871

9

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Credit card receivables do not bear interest and are generally converted to cash in two to three days. We evaluate the credit risk associated with our receivables to determine if an allowance for doubtful accounts is necessary. As of October 27, 2012, January 28, 2012, and October 29, 2011, no allowance for doubtful accounts was deemed necessary. 

4. Property and Equipment, net

Property and equipment, net, consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,656			29,646			29,646
Leasehold improvements	262,605			273,039			277,617
Furniture and fixtures	116,202			119,656			121,262
Technology hardware and software	89,866			90,063			90,444
Machinery and equipment and other	34,547			35,129			35,564
Capital leases	12,805			12,780			12,781
Construction in progress	16,341			13,137			13,316
	562,264			573,692			580,872
Less — Accumulated depreciation and amortization	(381,624		)	(367,613		)	(361,351		)
	$	180,640		$	206,079		$	219,521

5. Accrued Liabilities

Accrued liabilities consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Accrued payroll and benefits	$	12,932	$	14,134	$	10,278
Gift cards and certificates	14,023		21,560		25,908
Derivative liability	20,178		—		—
Current portion of deferred rents	21,469		20,384		20,971
Current portion of deferred marketing fees and revenue sharing	4,841		4,398		4,368
Deferred sales royalty	3,310		3,511		3,250
Accrued sales returns	4,647		3,535		3,923
Accrued taxes	5,026		4,486		4,646
Other	3,394		2,907		2,162
	$	89,820	$	74,915	$	75,506

10

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	66,508		$	—		$	—
Term loan	—			14,900			14,950
Revolving line of credit	—			15,000			15,000
Capital lease obligations	12,033			12,410			12,624
Total debt and capital lease obligations	78,541			42,310			42,574
Less:
Secured term loan discount	(16,184		)	—			—
Current maturities of debt	—			(15,200		)	(15,200		)
Current maturities of capital lease obligations	(560		)	(535		)	(619		)
Long-term debt and capital lease obligations	$	61,797		$	26,575		$	26,755

On July 9, 2012, we obtained a five-year, $65.0 million senior secured term loan (the "Secured Term Loan") provided by an affiliate of Golden Gate Capital. The Secured Term Loan bears interest at a rate of 5.5% to be paid in cash quarterly and 7.5%due and payable in kind ("PIK") upon maturity. The Secured Term Loan is collateralized by a second lien on our inventory and credit card receivables, and a first lien on our remaining assets. The Secured Term Loan is scheduled to mature upon the earlier of July 9, 2017 or the date that the obligations under the Amended and Restated Credit Agreement with Wells Fargo Bank dated May 16, 2011 (the "Credit Agreement") mature or are accelerated. Upon maturity of the Secured Term Loan, the principal balance and any unpaid interest, including$29.8 millionof PIK interest, will become due and payable. As of October 27, 2012, $1.5 millionof PIK interest has been accrued. Also on July 9, 2012 in conjunction with the Secured Term Loan, we issued 1,000 shares of Series A Preferred Stock and the initial fair value was recorded as a discount to the Secured Term Loan. This discount is being amortized to interest expense based on the effective interest rate method.

In May 2011, we entered into the Credit Agreement with a maturity date of May 16, 2016, which is secured primarily by our inventory, credit card receivables, and certain other assets. The Credit Agreement provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to$70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts required by Wells Fargo Bank.  In conjunction with the closing of the Secured Term Loan, we amended the Credit Agreement and repaid the separate term loan previously provided by Wells Fargo Bank. The amendment did not materially change the terms of the Credit Agreement.As of October 27, 2012, the revolving line of credit was limited to a borrowing base of $70.0 million with no borrowings and $18.5 million in letters of credit issued, resulting in $51.5 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings issued under the revolving line of credit will generally accrue interest at a rate ranging from 1.00% to 2.50% (determined according to the average unused availability under the credit facility (the “Availability”)) over a reference rate of, at our election, either LIBOR or a base rate (the “Reference Rate”).Letters of credit issued under the revolving line of credit will accrue interest at a rate ranging from 1.50% to 2.50% (determined according to the Availability) with an interest rate of 2.00% as of October 27, 2012. Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. 

Both the Secured Term Loan and Credit Agreement have restrictive covenants that subject us to capital expenditure limitations, minimum amount of inventory to be held, minimum amount of liquidity and minimum excess availability over the borrowing base that must be maintained. The Secured Term Loan and Credit Agreement also contain various covenants relating to customary matters, such as indebtedness, liens, investments, acquisitions, mergers, dispositions, dividends, and other various

11

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

conditions. Our current plan to close up to 45 stores under our store optimization program and the related transfer or disposition of store assets are not limited by our Secured Term Loan or Credit Agreement.  We were in compliance with all covenants for all periods presented.

Both the Secured Term Loan and Credit Agreement contain customary events of default. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

7.NetIncome(Loss)Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the combination of other potentially dilutive common shares and the weighted average number of common shares outstanding during the period. Other potentially dilutive weighted average common shares include the dilutive effect of shares of Series A Preferred Stock, stock options, RSUs and shares to be purchased under our Employee Stock Purchase Plan ("ESPP") for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation expense, if any, for future service that has not yet been recognized, and the amount of excess tax benefits, if any, that would be recorded in additional paid-in-capital when the share is exercised are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted net loss per common share (retroactively adjusted to reflect the Reverse Stock Split): 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands, except per share amounts)
Net loss	$	(20,526	)	$	(29,158	)	$	(61,844	)	$	(86,865	)
Weighted average common shares outstanding during the period (for basic calculation)	30,504			23,573			30,460			23,284
Dilutive effect of other potential common shares	—			—			—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,504			23,573			30,460			23,284
Net loss per common share—Basic	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)
Net loss per common share—Diluted	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)

During the three months endedOctober 27, 2012 and October 29, 2011, 1.3 million and 1.0 million, respectively, of stock options, RSUs, and shares to be purchased under our ESPP were outstanding but were excluded from the computation of diluted net loss per share because the effect would be antidilutive. During the nine months endedOctober 27, 2012 and October 29, 2011, 1.3 million and 0.9 million, respectively, of stock options, RSUs, and shares to be purchased under our ESPP were outstanding but was excluded from the computation of diluted net loss per share because the effect would be antidilutive. The conversion rights available to outstanding shares of Series A Preferred Stock were also excluded from the computation of diluted net loss per share because the effect would be antidilutive.

8. Stockholders' Equity

On October 4, 2012, we effected the Reverse Stock Split at a ratio equal to one-for four. The Reverse Stock Split was approved at a special meeting of our stockholders on September 21, 2012. As a result of the Reverse Stock Split, every four shares of common stock issued prior to the opening of trading on October 4, 2012 was consolidated into one issued share reducing the total number of issued shares of common stock from 122.0 million shares to 30.5 million shares. The shares of Series A Preferred Stock outstanding remains the same. However, the number of shares of common stock each share of Series A Preferred Stock is convertible into and the related exercise price has been adjusted proportionally. The Reverse Stock Split did

12

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

not affect the registration of our common stock under the Securities Exchange Act of 1934, as amended, or the listing of our common stock under the symbol "CWTR." Our stockholders' equity has been retroactively adjusted to reflect the Reverse Stock Split for all periods presented by reducing common stock and increasing additional paid-in capital, with no change to stockholders' equity in the aggregate. All share and per share information in this Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

On July 9, 2012 in conjunction with the Secured Term Loan, we issued 1,000 shares of Series A Preferred Stock to an affiliate of Golden Gate Capital which gives that affiliate the right to purchase up to 6.1 million shares of our common stock through the maturity date of July 9, 2022. Shares of Series A Preferred Stock have an initial exercise price of $3.40 per share of underlying common stock.

On October 24, 2011, we completed an underwritten public offering of 7.2 million shares of our common stock.  We received net proceeds from the offering of $23.0 million after deducting underwriting discounts and commissions and offering expenses. 

9. Supplemental Executive Retirement Plan

Net periodic benefit cost of the Supplemental Executive Retirement Plan (“SERP”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Interest cost	$	137	$	138	413		416
Amortization of unrecognized net actuarial loss	10		—		28		—
	$	147	$	138	$	441	$	416

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2012 and 2011. During the nine months endedOctober 27, 2012 and October 29, 2011, we made benefit payments of $124,501 and $124,500, respectively.

10. Commitments and Contingencies

Operating Leases

During the three months endedOctober 27, 2012 and October 29, 2011, we incurred aggregate rent expense under operating leases of $15.4 million and $19.0 million, respectively, including common area maintenance costs (“CAM”) of $3.2 million and $3.6 million, respectively, and excluding related real estate taxes of $2.4 million and $2.8 million, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, we incurred aggregate rent expense under operating leases of $50.0 million and $57.0 million, respectively, including CAM of $10.1 million and $11.1 million, respectively, and excluding related real estate taxes of $7.6 million and $8.4 million, respectively.

As of October 27, 2012, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, CAM, real estate taxes, and the amortization of lease incentives for our operating leases totaled $436.0 million.

Legal Proceedings

We are, from time to time, involved in various legal proceedings incidental to the conduct of business. Actions filed against us from time to time include commercial, intellectual property infringement, customer and employment claims, including class action lawsuits alleging that we violated federal and state wage and hour and other laws. We believe that we have meritorious defenses to all lawsuits and legal proceedings currently pending against us. Though we will continue to vigorously defend such lawsuits and legal proceedings, we are unable to predict with certainty whether or not we will ultimately be successful. However, based on management’s evaluation, we believe that the resolution of these matters, taking into account existing contingency accruals and the availability of insurance and other indemnifications, will not materially impact our consolidated financial position, results of operations or cash flows.

13

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Tax Contingencies

Our multi-channel business model subjects us to state and local taxes in numerous jurisdictions, including franchise, and sales and use tax. We collect these taxes in jurisdictions in which we have a physical presence. While we believe we have paid or accrued for all taxes based on our interpretation of applicable law, tax laws are complex and interpretations differ from state to state. In the past, we have been assessed additional taxes and penalties by various taxing jurisdictions, asserting either an error in our calculation or an interpretation of the law that differed from our own. It is possible that taxing authorities may make additional assessments in the future. In addition to taxes, penalties and interest, these assessments could cause us to incur legal fees associated with resolving disputes with taxing authorities.

Additionally, changes in state and local tax laws, such as temporary changes associated with “tax holidays” and other programs, require us to make continual changes to our collection and reporting systems that may relate to only one taxing jurisdiction. If we fail to update our collection and reporting systems in response to these changes, any over collection or under collection of sales taxes could subject us to interest and penalties, as well as private lawsuits and damage to our reputation. In the opinion of management, resolutions of these matters will not have a material impact on our consolidated financial position, results of operations or cash flows.

Other

As of October 27, 2012, we had non-cancelable inventory purchase commitments of $130.9 million. 

11. Co-Branded Credit Card Program

Deferred marketing fees and revenue sharing

The deferred marketing fees and revenue sharing activity was as follows:

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Balance at beginning of period	$	8,884		$	9,502		$	8,800		$	10,309
Marketing fees received	1,199			1,175			3,058			3,528
Revenue sharing received	—			—			2,946			—
Marketing fees recognized to revenue	(1,191		)	(1,078		)	(3,383		)	(3,358		)
Revenue sharing recognized to revenue	(794		)	(440		)	(3,323		)	(1,320		)
Balance at end of period	8,098			9,159			8,098			9,159
Less — Current deferred marketing fees and revenue sharing	(4,841		)	(4,368		)	(4,841		)	(4,368		)
Long-term deferred marketing fees and revenue sharing	$	3,257		$	4,791		$	3,257		$	4,791

Sales Royalty

The amount of sales royalty recognized as revenue during the three months endedOctober 27, 2012 and October 29, 2011 was $1.8 million and $1.8 million, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, sales royalty revenue was approximately $5.5 million and $5.2 million, respectively.

14

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

12. Segment Reporting

The following table provides certain financial data for the retail and direct segments as well as reconciliations to the condensed consolidated financial statements: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Net sales (a):
Retail	$	147,245		$	144,138		$	408,386		$	421,644
Direct	40,879			43,327			113,312			127,025
Net sales	$	188,124		$	187,465		$	521,698		$	548,669
Segment operating income (loss):
Retail	$	10,127		$	1,757		$	15,536		$	(11,744	)
Direct	6,938			6,328			15,437			18,427
Total segment operating income	17,065			8,085			30,973			6,683
Corporate and other	(27,106		)	(36,339		)	(81,296		)	(91,367		)
Loss from operations	$	(10,041	)	$	(28,254	)	$	(50,323	)	$	(84,684	)

 ____________________________________________________________

(a) There were no sales between the retail and direct segments during the reported periods. 

15

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains various statements regarding our current initiatives, financial position, results of operations, cash flows, operating and financial trends and uncertainties, as well as certain forward-looking statements regarding our future expectations. When used in this discussion, words such as “anticipate,” “believe,” “estimate,” “expect,” “could,” “may,” “will,” “should,” “plan,” “predict,” “potential,” and similar expressions are intended to identify such forward-looking statements. Our forward-looking statements are based on our current expectations and are subject to numerous risks and uncertainties. As such, our actual future results, performance or achievements may differ materially from the results expressed in, or implied by, our forward-looking statements. Please refer to our Risk Factors in this Quarterly Report on Form 10-Q and other reports we file with the SEC. The forward-looking statements in this Quarterly Report are as of the date such report is filed with the SEC, and we assume no obligation to update our forward-looking statements or to provide periodic updates or guidance.

Overview

We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying condensed consolidated financial statements and related notes.  References to a fiscal year are to the calendar year in which the fiscal year begins.

On October 4, 2012, we effected a one-for-four reverse split of our common stock (the "Reverse Stock Split"). All share and per share information in this Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

Executive Summary

Net sales increased to $188.1 million for the three months endedOctober 27, 2012, compared to $187.5 million for the three months endedOctober 29, 2011. This increase in net sales was primarily driven by an increase in comparable premium retail store sales⁽¹⁾ of 7.3 percent, partially offset by the impact of store closures and a decrease of 5.7 percent in our direct sales.

Gross profit was $66.1 million, or 35.1 percent of net sales, for the three months endedOctober 27, 2012, compared to $56.3 million, or 30.0 percent of net sales, for the three months endedOctober 29, 2011. This increase in gross profit margin was primarily due to increased leverage of buying and occupancy costs, and improvements in merchandise margins reflecting improved product performance.

Selling, general and administrative expenses (“SG&A”) were $76.1 million, or 40.5 percent of net sales, for the three months endedOctober 27, 2012, compared to $84.5 million, or 45.1 percent of net sales, for the three months endedOctober 29, 2011. The decrease of $8.4 million in SG&A was primarily due to lower marketing expenses.

Net loss for the three months endedOctober 27, 2012 was $20.5 million, or $0.67 per share, on 30.5 million weighted average shares outstanding, and included other loss, net, of $6.8 million, or $0.22 per share, due to the change in the fair value of the derivative liability related to the Series A Preferred Stock that we issued in July 2012 (refer to the derivative liability section in the Critical Accounting Policies and Estimates below for additional discussion of the accounting treatment). This compares to a net loss of $29.2 million, or $1.24 per share, on 23.6 million weighted average shares outstanding, for the three months endedOctober 29, 2011.

We ended the third quarter of fiscal 2012 with $31.3 million in cash and cash equivalents compared to $37.9 million at the end of the third quarter of fiscal 2011.  As of October 27, 2012, we had no outstanding borrowings under our revolving line of credit, compared to $15.0 million at the end of the third quarter of fiscal 2011. At the end of the third quarter of fiscal 2012, working capital was $36.2 million compared to $60.3 million at the end of the third quarter of fiscal 2011. The reduction in working capital reflects the impact of the $20.2 million derivative liability. Premium retail store inventory per square foot, including retail inventory in our distribution center, declined 9.3 percent compared to the third quarter of fiscal 2011. Total inventory decreased 6.0 percent to $161.7 million at the end of the third quarter of fiscal 2012 from $172.0 million at the end of the third quarter of fiscal 2011. 

____________________________________________________________

(1)  We define comparable premium retail stores as those stores in which the gross square footage has not changed by more than 20 percent in the previous 16 months and which have been open for at least 16 consecutive months without closure for seven consecutive days or moving to a different temporary or permanent location. Due to the extensive promotions that occur as part of the opening of a premium store, we believe waiting 16 months rather than 12 months to consider a store to be comparable provides a better view of the growth pattern of the premium retail store base. The calculation of comparable store sales varies across the retail industry and, as a result, the calculations of other retail companies may not be consistent with our calculation.

16

Company Initiatives

For fiscal 2012, we are focused on completing the initiatives that we believe are necessary to move the business beyond the turnaround phase and return to growth. We expect to demonstrate steady improvements in sales productivity and operating results for fiscal 2012 as we emphasize three strategic priorities, including 1) continuing to evolve and elevate our merchandise, 2) strengthening our brand messaging, and 3) improving our marketing effectiveness to drive increased traffic to all channels.

The first priority is to continue to evolve our product assortment to offer more compelling, unique fashions by offering a lifestyle focused collection that will enable us to broaden product appeal, improve inventory productivity, and strengthen our supply chain capabilities.

The second priority is to refine the Coldwater Creek brand messaging to enable us to expand our customer base. The brand messaging will highlight what makes Coldwater Creek unique, such as our distinctive looks, expressive colors, and fashion-right offerings. The catalog will continue to evolve to reflect a more appealing look and layout. In the retail stores, the focus is on creating stronger key item and fashion story messages that are impactful, drive traffic, and elevate the brand perception. In the direct channel, our website will provide enhanced content and functionality.

The third priority is to improve overall traffic levels in all channels. In fiscal 2012, we plan to extend the reach and quality of our advertising platforms by developing differentiated, creative campaigns designed to extend the brand to new customers by using a combination of print and online advertising. In fiscal 2012, we also plan to expand our location-based marketing programs. As part of this initiative, in February we launched the next generation Coldwater Creek loyalty program, which as of the end of November 2012, has added over 1.3 million members. Over the course of fiscal 2012, we are enhancing functionality to our e-commerce platform, continue to develop and evolve tablet and mobile applications, and improve the integration of our on-line and in-store shopping experience by providing customers with a view to product availability in stores.

In fiscal 2011, we announced a store optimization program, which is based on a three-part strategy. In the first part of the strategy, we expect to close up to 45 stores through fiscal 2013, which include the majority of our under performing stores. To date, we have closed 25 total stores. The second part of our strategy is to opportunistically utilize lease expirations and kick out rights to relocate or downsize stores with the goal of reducing the average store size to 4,500 square feet from 5,700 square feet. The third part of our strategy is to renegotiate lease terms. We believe that the combined impact of this program will lead to improvements in our store productivity over time.

We are also focused on improving the profitability of our factory outlet stores, and we have been growing the penetration of made-for-outlet product as part of our strategy to shift the focus of our factory outlet stores from one that utilizes the channel for clearance of excess product, to one that primarily sells made-for-outlet product. We have been very pleased with the results thus far, and believe that this initiative will contribute to a meaningful improvement in our overall profitability over time.

Outlook

We have made significant changes to both people and processes over the past few years to enable us to evolve the Coldwater Creek brand to what customers are looking for today. We are continuing to see the benefits of these investments in the form of significantly higher margins and meaningful reductions in our year-over-year losses, which gives us confidence that we are moving in the right direction.

We expect that a competitive promotional environment will continue. In addition, weakness in consumer spending persists as a result of continued uncertain macroeconomic conditions reflected in reduced incomes and asset values, high unemployment and deterioration in the housing market. We believe these conditions continue to have a negative impact on our sales, gross margin and operating performance. Our results were also negatively impacted by significant weather events on the East Coast in early November.

We remain committed to disciplined management of expenses and inventory and continue to expect to reduce SG&A year-over-year by $13.0 million to $15.0 million in fiscal 2012, taking into account that fiscal 2012 has 53 weeks. Also for fiscal 2012, we expect capital expenditures to be $15.0 million to $17.0 million and depreciation and amortization expense to be approximately $52.0 million.

If we are in a loss position for a quarter or the year, we do not expect to generate any significant federal income tax benefit due to our valuation allowance and we may incur a small expense as a result of various state taxation requirements.

17

Results of Operations

Comparison of the Three Months EndedOctober 27, 2012with the Three Months EndedOctober 29, 2011:

	Three Months Ended
	October 27, 2012			% of  net sales		October 29, 2011			% of  net sales		$ change			% change
	(dollars in thousands, except per share data)
Net sales:
Retail	$	147,245		78.3	%	$	144,138		76.9	%	$	3,107		2.2	%
Direct	40,879			21.7		43,327			23.1		(2,448		)	(5.7	)
	188,124			100.0		187,465			100.0		659			0.4
Cost of sales	122,059			64.9		131,200			70.0		(9,141		)	(7.0	)
Gross profit	66,065			35.1		56,265			30.0		9,800			17.4
Selling, general and administrative expenses	76,106			40.5		84,519			45.1		(8,413		)	(10.0	)
Loss from operations	(10,041		)	(5.3	)	(28,254		)	(15.1	)	18,213			(64.5	)
Other loss, net	6,797			3.6		—			—		6,797			*
Interest expense, net	3,573			1.9		599			0.3		2,974			496.5
Loss before income taxes	(20,411		)	(10.8	)	(28,853		)	(15.4	)	8,442			(29.3	)
Income tax provision	115			0.1		305			0.2		(190		)	(62.3	)
Net loss	$	(20,526	)	(10.9	)%	$	(29,158	)	(15.6	)%	$	8,632		(29.6	)
Net loss per share — Basic and Diluted	$	(0.67	)			$	(1.24	)			$	0.57		(46.0	)
Premium Retail Store Count:
Beginning of the period	355					366
Opened	1					1
Closed	2					1
End of the period	354					366

____________________________________________________________

*     Percentage comparisons for changes between positive and zero values are not considered meaningful.

Net Sales

The $3.1 million increase in retail segment net sales for the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011 is primarily the result of a 7.3 percent increase in comparable premium retail store sales, partially offset by the impact of 12 net store closures since the end of the third quarter of fiscal 2011 as part of our store optimization program. The increase in comparable premium retail store sales was primarily driven by a 15.9 percent increase in conversion on relatively flat comparable traffic, partially offset by a 6.8 percent decrease in comparable average transaction value.

The $2.4 million decrease in direct segment net sales for the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011 is primarily the result of a 2.2 percent decrease in average transaction value, partially offset by a 1.3 percent increase in order volume. Direct segment net sales were also negatively impacted by a decrease of $1.3 million in shipping revenue during the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011.

Gross Profit

Gross profit margin increased by 5.1 percentage points during the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011.  Gross profit margin was favorably impacted by a 3.4 percentage point improvement due to increased leverage of buying and occupancy costs and a 1.7 percentage point increase in merchandise margins, reflecting improved product performance and significantly lower markdowns as a result of overall lower inventory levels.

18

Selling, General and Administrative Expenses

SG&A decreased$8.4 million during the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011, primarily due to declines in marketing expenses.

Loss from Operations

We evaluate the performance of our operating segments based upon segment operating income, as shown below, along with segment net sales:

	Three Months Ended
	October 27, 2012			% of Segment Sales		October 29, 2011			% of Segment Sales		%  Change
	(dollars in thousands)
Segment operating income:
Retail	$	10,127		6.9	%	$	1,757		1.2	%	476.4	%
Direct	6,938			17.0		6,328			14.6		9.6
Total segment operating income	17,065					8,085					111.1
Unallocated corporate and other	(27,106		)			(36,339		)			(25.4	)
Loss from operations	$	(10,041	)			$	(28,254	)			(64.5	)

Retail segment operating income rate expressed as a percent of retail segment sales for the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011 increased by 5.7 percentage points. The retail segment operating income rate was favorably impacted by 2.5 and 1.3 percentage points due to lower occupancy expenses and employee-related expenses, respectively, and the favorable impact of store closures since the end of the third quarter of fiscal 2011 as part of our store optimization program. 

Direct segment operating income rate expressed as a percent of direct segment sales for the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011 increased by 2.4 percentage points.  Higher margins contributed a 7.0 percentage point increase to the operating rate, partially offset by a 4.5 percentage point decrease primarily due to higher marketing expenses associated with our catalogs and online advertising.

Unallocated corporate and other expenses decreased $9.2 million for the three months endedOctober 27, 2012 as compared to the three months endedOctober 29, 2011, primarily due to a decrease in other marketing expenses as we did not anniversary our national television campaign, partially offset by an increase in employee-related expenses.

Other Loss, net

During the three months endedOctober 27, 2012, we recorded a $6.8 million loss from a fair value adjustment related to the derivative liability.

Interest Expense, net

The increase in interest expense, net, for the three months endedOctober 27, 2012 as compared to the same period in the prior year is primarily the result of interest on borrowings under the Secured Term Loan that closed in the second quarter of fiscal 2012.

Provision for Income Taxes

The income tax provision primarily reflects the continuing impact of the valuation allowance against our deferred tax assets and various state taxation requirements.  

19

Comparison of the Nine Months EndedOctober 27, 2012with the Nine Months EndedOctober 29, 2011:

	Nine Months Ended
	October 27, 2012			% of  net sales		October 29, 2011			% of  net sales		$ change			% change
	(dollars in thousands, except per share data)
Net sales:
Retail	$	408,386		78.3	%	$	421,644		76.8	%	$	(13,258	)	(3.1	)%
Direct	113,312			21.7		127,025			23.2		(13,713		)	(10.8	)
	521,698			100.0		548,669			100.0		(26,971		)	(4.9	)
Cost of sales	352,722			67.6		392,470			71.5		(39,748		)	(10.1	)
Gross profit	168,976			32.4		156,199			28.5		12,777			8.2
Selling, general and administrative expenses	219,299			42.0		238,008			43.4		(18,709		)	(7.9	)
Loss on asset impairments	—			—		2,875			0.5		(2,875		)	*
Loss from operations	(50,323		)	(9.6	)	(84,684		)	(15.4	)	34,361			(40.6	)
Other loss, net	5,519			1.1		—			—		5,519			*
Interest expense, net	5,859			1.1		1,520			0.3		4,339			285.5
Loss before income taxes	(61,701		)	(11.8	)	(86,204		)	(15.7	)	24,503			(28.4	)
Income tax provision	143			—		661			0.1		(518		)	(78.4	)
Net loss	$	(61,844	)	(11.9	)%	$	(86,865	)	(15.8	)%	$	25,021		(28.8	)
Net loss per share — Basic and Diluted	$	(2.03	)			$	(3.73	)			$	1.70		(45.6	)
Premium Retail Store Count:
Beginning of the period	363					373
Opened	1					3
Closed	10					10
End of the period	354					366

____________________________________________________________

*     Percentage comparisons for changes between positive and zero values are not considered meaningful.

Net Sales

The $13.3 million decrease in retail segment net sales for the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011 reflects the impact of 12 net store closures since the end of the third quarter of fiscal 2011 as part of our store optimization program, partially offset by the favorable impact of slightly positive comparable premium retail store sales. The increase in comparable premium retail store sales was primarily driven by a 7.4 percent increase in conversion and a 1.3 percent increase in comparable average transaction value, partially offset by a 8.0 percent decrease in comparable traffic.

The $13.7 million decrease in direct segment net sales for the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011 is primarily the result of an 8.6 percent decrease in order volume. Direct segment net sales were also negatively impacted by a decrease of $3.9 million in shipping revenue during the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011.

Gross Profit

Gross profit margin increased by 3.9 percentage points during the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011.  Gross profit margin was favorably impacted by a 2.4 percentage point increase in merchandise margins, reflecting improved product performance and significantly lower markdowns as a result of overall lower inventory levels, and 1.5 percentage point improvement due to increased leverage of buying and occupancy costs.

Selling, General and Administrative Expenses

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SG&A decreased $18.7 million during the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011, primarily due to declines in marketing expenses. 

Loss on Asset Impairments

We did not have any impairment charges during the nine months endedOctober 27, 2012. During the nine months endedOctober 29, 2011, we recorded impairment charges of $2.9 million related to certain long-lived assets, primarily premium store leasehold improvements.

Loss from Operations

We evaluate the performance of our operating segments based upon segment operating income (loss), as shown below, along with segment net sales:

	Nine Months Ended
	October 27, 2012			% of Segment Sales		October 29, 2011			% of Segment Sales		%  Change
	(dollars in thousands)
Segment operating income:
Retail	$	15,536		3.8	%	$	(11,744	)	(2.8	)%	*
Direct	15,437			13.6		18,427			14.5		(16.2	)%
Total segment operating income	30,973					6,683					363.5
Unallocated corporate and other	(81,296		)			(91,367		)			(11.0	)
Loss from operations	$	(50,323	)			$	(84,684	)			(40.6	)

____________________________________________________________

*     Percentage comparisons for changes between positive and negative values are not considered meaningful.

Retail segment operating income rate expressed as a percent of retail segment sales for the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011 increased by 6.6 percentage points. Higher margins contributed a 2.6 percentage point increase to the retail segment operating rate.  The retail segment operating income rate was also favorably impacted by 1.8 percentage points due to lower occupancy expenses and the favorable impact of store closures since the end of the third quarter of fiscal 2011 as part of our store optimization program.

Direct segment operating income rate expressed as a percent of direct segment sales for the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011 decreased by 0.9 percentage points.  The direct segment operating income rate was negatively impacted by 1.8 percentage points due to the deleveraging impact of lower sales, partially offset by higher margins.

Unallocated corporate and other expenses decreased $10.1 million for the nine months endedOctober 27, 2012 as compared to the nine months endedOctober 29, 2011, primarily due to decreases in marketing and occupancy expenses partially offset by an increase in employee-related expenses.

Other Loss, net

During the nine months endedOctober 27, 2012, we recorded a $4.4 million loss from a fair value adjustment related to the derivative liability in addition to $1.1 million of issuance costs related to the Series A Preferred Stock.

Interest Expense, net

The increase in interest expense, net, for the nine months endedOctober 27, 2012 as compared to the same period in the prior year is primarily the result of borrowings under the Secured Term Loan that closed in the second quarter of fiscal 2012.

Provision for Income Taxes

The income tax provision primarily reflects the continuing impact of the valuation allowance against our deferred tax assets and various state taxation requirements. 

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Seasonality

Our results continue to depend materially on the November and December holiday shopping season. In anticipation of traditionally increased holiday sales activity, we incur certain significant incremental expenses, including the hiring of a substantial number of temporary employees to supplement our existing workforce. Additionally, as gift items and accessories are more prominently represented in the November and December holiday season merchandise offerings, we typically expect, absent offsetting factors, to realize higher consolidated gross margins and earnings in the second half of our fiscal year.

As with many apparel retailers, our net sales, results of operations, liquidity and cash flows have fluctuated, and will continue to fluctuate, as a result of a number of other factors, including the following:

• the composition, size and timing of various merchandise offerings;

• the timing and number of premium retail store openings and closings;

• the timing and number of promotions;

• the timing and number of catalog mailings;

• customer response to merchandise offerings, including the impact of economic and weather-related influences, the actions of competitors and similar factors;

• the ability to accurately estimate our recorded sales returns accrual and inventory adjustments;

• market price fluctuations in critical materials and services, including paper, production, postage and telecommunications costs;

• the timing of merchandise shipping and receiving, including any delays resulting from labor strikes or slowdowns, adverse weather conditions, health epidemics or national security measures; and

• shifts in the timing of important holiday selling seasons relative to our fiscal quarters, including Valentine’s Day, Easter, Mother’s Day, Thanksgiving and Christmas.

Liquidity and Capital Resources

On July 9, 2012, we obtained a five-year, $65.0 million senior secured term loan (the "Secured Term Loan") provided by an affiliate of Golden Gate Capital. The Secured Term Loan bears interest at a rate of 5.5% to be paid in cash quarterly and 7.5%due and payable in kind ("PIK") upon maturity. The Secured Term Loan is collateralized by a second lien on our inventory and credit card receivables, and a first lien on our remaining assets. The Secured Term Loan is scheduled to mature upon the earlier of July 9, 2017 or the date that the obligations under the Amended and Restated Credit Agreement with Wells Fargo Bank dated May 16, 2011 (the "Credit Agreement") mature or are accelerated. Upon maturity of the Secured Term Loan, the principal balance and any unpaid interest, including$29.8 millionof PIK interest, will become due and payable. As of October 27, 2012, $1.5 millionof PIK interest has been accrued. Also on July 9, 2012 in conjunction with the Secured Term Loan, we issued 1,000 shares of Series A Preferred Stock and the initial fair value was recorded as a discount to the Secured Term Loan. This discount is being amortized to interest expense based on the effective interest rate method.

In May 2011, we entered into the Credit Agreement with a maturity date of May 16, 2016, which is secured primarily by our inventory, credit card receivables, and certain other assets. The Credit Agreement provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to$70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts required by Wells Fargo Bank.  In conjunction with the closing of the Secured Term Loan, we amended the Credit Agreement and repaid the separate term loan previously provided by Wells Fargo Bank. The amendment did not materially change the terms of the Credit Agreement.As of October 27, 2012, the revolving line of credit was limited to a borrowing base of $70.0 million with no borrowings and $18.5 million in letters of credit issued, resulting in $51.5 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings issued under the revolving line of credit will generally accrue interest at a rate ranging from 1.00% to 2.50% (determined according to the average unused availability under the credit facility (the

22

“Availability”)) over a reference rate of, at our election, either LIBOR or a base rate (the “Reference Rate”).Letters of credit issued under the revolving line of credit will accrue interest at a rate ranging from 1.50% to 2.50% (determined according to the Availability) with an interest rate of 2.00% as of October 27, 2012. Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. 

Both the Secured Term Loan and Credit Agreement have restrictive covenants that subject us to capital expenditure limitations, minimum amount of inventory to be held, minimum amount of liquidity and minimum excess availability over the borrowing base that must be maintained. The Secured Term Loan and Credit Agreement also contain various covenants relating to customary matters, such as indebtedness, liens, investments, acquisitions, mergers, dispositions, dividends, and other various conditions. Our current plan to close up to 45 stores under our store optimization program and the related transfer or disposition of store assets are not limited by our Secured Term Loan or Credit Agreement.  We were in compliance with all covenants for all periods presented.

Both the Secured Term Loan and Credit Agreement contain customary events of default. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

Net cash used in operating activities was $34.9 million during the nine months endedOctober 27, 2012 compared to $59.6 million during the nine months endedOctober 29, 2011. The $24.6 million decrease in net cash used in operating activities resulted primarily from a decrease in net loss, net of non-cash activity, partially offset by higher use of cash from operating assets and liabilities.

Cash outflows from investing activities principally consisted of capital expenditures, which totaled $14.2 million during the nine months endedOctober 27, 2012 compared to $7.0 million during the nine months endedOctober 29, 2011. Capital expenditures during the nine months endedOctober 27, 2012 and October 29, 2011 were primarily related to premium retail leasehold improvements.

Cash inflows from financing activities were $28.9 million during the nine months endedOctober 27, 2012 compared to $52.0 million during the same period last year. The cash inflows during the nine months endedOctober 27, 2012 primarily reflect the new Secured Term Loan with a portion of the proceeds used to pay down our revolving line of credit, the repayment of the separate term loan previously provided during the nine months endedOctober 29, 2011 by Wells Fargo Bank, and related debt issuance costs. The cash inflows during the nine months endedOctober 29, 2011 were primarily derived from proceeds of $23.0 million from our stock offering, net of underwriting discounts and commissions and offering expenses, borrowings of $15.0 million on our revolving line of credit and proceeds from our $15.0 million term loan.

As a result of the foregoing, at October 27, 2012 we had $36.2 million in working capital compared with $54.2 million at January 28, 2012 and $60.3 million at October 29, 2011. At October 27, 2012, our current ratio was 1.20 compared with 1.36 at January 28, 2012 and 1.33 at October 29, 2011. The reduction in working capital and current ratios are both reflect the impact of the $20.2 million derivative liability.

We plan to limit new store openings to one premium retail store in fiscal 2012 and will continue to evaluate real estate opportunities to improve the efficiency of our store base, including the potential of relocating stores to more favorable locations and reducing overall store size. Capital expenditures for fiscal 2012 are expected to be between $15.0 million and $17.0 million.

In fiscal 2011, we announced a store optimization program where we expect to close up to 45 stores through fiscal 2013. To date, we have closed 25 total stores. The optimization program is being achieved through a staged approach based primarily on natural lease expirations and early termination rights. In total, when the program is completed, we expect these actions to generate approximately $8.0 to $12.0 million in annualized improvement in pretax operating results. We typically do not incur significant termination costs or disposal charges as a result of store closures. Early termination clauses generally relieve us of any future obligation under a lease if specified sales levels or certain occupancy targets are not achieved by a specified date.

Historically, we have relied on our cash resources and cash flows from operations to fund our operations. We have also used our revolving line of credit to securitize trade letters of credit and, from time to time for borrowings, both of which reduce the amount of available borrowings. The actual amount of credit that is available from time to time under our revolving line of credit fluctuates greatly and is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by

23

certain reserve amounts that may be determined at the discretion of the lender. Consequently, it is possible that, should we need to access any additional funds from our revolving line of credit, it may not be available in full. 

We believe we have sufficient cash and liquidity, including our revolving line of credit that we may continue to draw on from time to time, to fund our operations for the foreseeable future. However, we have had recurring operating losses and if our future operating performance is below our expectations or our revolving line of credit is not fully available to us, our cash and liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity. Our current level of debt could adversely affect our ability to raise additional capital to fund our operations, which could limit our ability to react to changes in our business.

Contractual Obligations

The following tables summarize our minimum contractual commitments and commercial obligations as of October 27, 2012:

	Payments Due in Fiscal Year
	Total		2012		2013 - 2014		2015 - 2016		Thereafter
	(in thousands)
Operating leases (a) (d)	$	435,978	$	18,116	$	138,550	$	111,863	$	167,449
Contractual commitments (b)	131,173		73,840		57,333		—		—
Debt, including estimated interest payments (c)	115,503		996		8,069		9,377		97,061
Capital leases (d)	22,523		369		2,885		2,262		17,007
Benefit obligations (e)	13,888		322		1,814		1,651		10,101
	$	719,065	$	93,643	$	208,651	$	125,153	$	291,618

____________________________________________________________

(a) We have a significant operating lease for our 960,000 square foot distribution center located in Mineral Wells, West Virginia, with a remaining lease commitment as of October 27, 2012 of $54.9 million. All other operating leases primarily pertain to premium and factory outlet retail stores, day spas and various equipment. Certain store leases have provisions to adjust the payment based on certain criteria, for example additional rent for our store sales above a specified minimum or less rent based on landlord vacancy rates below a specified minimum. The operating lease obligations noted above do not include any of these adjustments or payments made for maintenance, insurance and real estate taxes. Several lease agreements provide renewal options or allow for termination rights under certain circumstances. Future operating lease obligations would change if these renewal options or termination rights were exercised.

(b) Contractual commitments include commitments to purchase inventory of $130.9 million and capital expenditures of $0.3 million. The timing of the payments is subject to change based upon actual receipt of the inventory or capital asset and the terms of payment with the vendor.

(c) Upon maturity of the Secured Term Loan, $29.8 million of PIK interest will become due and payable.

(d) The primary capital lease is for our 69,000 square foot facility located in Coeur d'Alene, Idaho, which functions as a customer contact center, IT data center, and office space. This lease was amended on April 22, 2009 resulting in the lease classified as a capital lease through July 2028, with a remaining capital lease commitment as of October 27, 2012 of $10.0 million, and as an operating lease from August 2028 through July 2038, with a remaining operating lease commitment as of October 27, 2012 of $16.5 million. All other capital leases pertain to various technology equipment and other real estate. The capital lease obligations represent the minimum payments including principal and interest, and excluding maintenance, insurance and real estate taxes.

(e) Benefit obligations include the cash payments expected to be made related to the Supplemental Executive Retirement Plan and other compensation arrangements.

Critical Accounting Policies and Estimates

Preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities.  We base our estimates on historical experience and on other assumptions that we believe are reasonable. As a result, actual results could differ because of the use of estimates.  The critical accounting policies used in the preparation of our consolidated financial statements include those that require us to make estimates about

24

matters that are uncertain and could have a material impact to our consolidated financial statements.  The description of critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012, and is updated for the following:

Derivative Liability

On July 9, 2012, we issued 1,000 shares of Series A Preferred Stock in conjunction with the Secured Term Loan, which is convertible up to 6.1 million shares of our common stock at an initial exercise price of $3.40 per share of underlying common stock. The fair value of the Series A Preferred Stock at issuance was $15.7 million, which was recorded as a derivative liability and is measured at fair value on a recurring basis using the Black-Scholes option valuation model, which is significantly dependent on the market price of our common stock. Changes in the fair value are recorded as gain or loss, net, in the consolidated statements of operations and comprehensive operations. As of October 27, 2012, the derivative liability was $20.2 million, resulting in a $4.4 million loss on the derivative liability during the nine months endedOctober 27, 2012. A 10 percent increase (decrease) in the closing price of our common stock at October 27, 2012, in isolation of the impact to the volatility assumption, would have increased (decreased) the fair value of the derivative liability by approximately $2.2 million.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates and the market price of our common stock.  We have not been materially impacted by fluctuations in foreign currency exchange rates as substantially all of our business is transacted in, and is expected to continue to be transacted in, U.S. dollars or U.S. dollar-based currencies. We do not enter into financial instruments for trading or other speculative purposes.

Our Secured Term Loan bears interest at a fixed rate and would not be affected by interest rate changes. Future borrowings under our revolving line of credit would be affected by interest rate changes.

The derivative liability, representing shares of Series A Preferred Stock, is measured at fair value using the Black-Scholes option valuation model, which is significantly dependent on the market price of our common stock. Changes in the fair value are recorded as gain or loss, net, in our consolidated statements of operations and comprehensive operations. A 10 percent increase (decrease) in the closing price of our common stock at October 27, 2012, in isolation of the impact to the volatility assumption, would have increased (decreased) the fair value of the derivative liability by approximately $2.2 million.

ITEM 4.CONTROLSANDPROCEDURES

Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chairman, President and Chief Executive Officer and our Executive Vice President, Chief Operating Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of October 27, 2012. Based on that evaluation, our Chairman, President and Chief Executive Officer and our Executive Vice President, Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of October 27, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the third quarter of fiscal 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25

PART II.     OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 10, Commitments and Contingencies, to our condensed consolidated financial statements.

ITEM 1A.RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the following risk factors which could materially affect our business, financial condition or future results. We have updated the following risk factors to reflect changes during the nine months ended October 27, 2012 we believe to be material to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012 filed with the Securities and Exchange Commission. Other risks that we face are more fully described in our Annual Report on Form 10-K and in other reports we file with the Securities and Exchange Commission. Additional risks and uncertainties that are not currently known or currently deemed immaterial may also adversely affect the business, financial condition, or future results of the Company.

We must successfully gauge fashion trends and changing consumer preferences or our sales and results of operations will be adversely affected.

Forecasting consumer demand for our merchandise is difficult given the nature of changing fashion trends and consumer preferences. The specialty retail business fluctuates according to changes in consumer preferences dictated, in part, by fashion and season. In addition, our merchandise assortment differs in each seasonal flow and at any given time our assortment may not resonate with our customers. On average, we begin the design process for apparel nine to ten months before merchandise is available to consumers, and we typically begin to make purchase commitments four to eight months in advance. These lead times make it difficult for us to respond quickly to changes in demand for our merchandise. To the extent we misjudge the market for our merchandise or the products suitable for local markets, our sales will be adversely affected. If the demand for our merchandise were to be lower than expected, causing us to hold excess inventory, we would be forced to further discount merchandise, which reduces our gross margins and negatively impacts results of operations and operating cash flows. If we were to carry low levels of inventory and demand is stronger than we anticipate, we may not be able to reorder merchandise on a timely basis to meet demand, which may adversely affect sales and customer satisfaction.

We continue to update our style orientation and reinvigorate our brand, which includes improving the balance of our assortment to address more aspects of our customers' lifestyle and rebuilding our under performing categories. If these changes do not resonate with our customers, our sales, gross margins and results of operations will be adversely affected.

We may be unable to improve the value of our brand and our failure to do so may adversely affect our business.

Our success is driven by the value of the Coldwater Creek brand. Our comprehensive marketing campaign, which includes catalog, national magazine advertising, and online media initiatives, is designed to restore Coldwater Creek's brand value and to increase traffic to all channels. This campaign is designed to increase brand engagement and brand trial with a focus on expanding the reach to a broader segment of our target demographic. The value of our brand is largely dependent on the success of our design, merchandise assortment, and marketing efforts and our ability to provide a consistent, high quality customer experience. If we are not able to improve our brand perception, we may not fully realize the benefits of improvements to our merchandise assortment and our business and results of operations may be adversely affected.

Our Secured Term Loan and Credit Agreement have restrictive covenants that may limit our ability to fund operations, which could adversely affect our business.

Both the Secured Term Loan and Credit Agreement have covenants that may restrict the manner in which we operate our business. These covenants, among other things, subject us to capital expenditure limitations, minimum amount of inventory to be held, minimum amount of liquidity and minimum excess availability over the borrowing base that must be maintained, along with various other conditions. Should we fail to comply with the covenants and conditions, we may be unable to fund our operations without a significant restructuring of our business.

Our revolving line of credit contains borrowing base and other provisions that may limit our ability to access it, which could adversely affect our business.

We use our revolving line of credit to secure trade letters of credit and from time to time for borrowings, both of which reduce the amount available for borrowing. The actual amount of credit that is available under our revolving line of credit fluctuates

26

and is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that are required by the lender. Consequently, it is possible that, should we need to access additional funds from our revolving line of credit, the amount needed may not be available. As of October 27, 2012, the revolving line of credit was limited to a borrowing base of $70.0 million with $18.5 million in letters of credit issued and no borrowings on our revolving line of credit, resulting in $51.5 million available for borrowing under our revolving line of credit.

Continued material operating losses could adversely impact our cash and liquidity and it may be necessary to seek additional sources of financing, which may not be available to us in amounts or on terms acceptable to us.

We believe we have sufficient cash and liquidity, including our revolving line of credit that we may continue to draw on from time to time, to fund our operations for the foreseeable future. However, we have had recurring operating losses and if our future operating performance is below our expectations or our revolving line of credit is not fully available to us, our cash and liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity. Our current level of debt could adversely affect our ability to raise additional capital to fund our operations, which could limit our ability to react to changes in our business. There is no assurance that debt or equity financing will be available in amounts or on terms acceptable to us.

We may be unable to successfully realize the benefits of our store optimization program.

We continue to believe that retail expansion will be a key driver for our long term growth. However, due to our business performance and our focus on improving financial results, in 2011 we announced a store optimization program where we expect to close up to 45 stores through fiscal 2013 based on an ongoing review of the performance of our premium retail stores. To date, we have closed 25 total stores. The optimization program is being achieved through a staged approach based primarily on natural lease expirations and early termination rights. In total, when the program is completed, we expect these actions to generate approximately $8.0 to $12.0 million in annualized improvement in pretax operating results. However, there can be no assurance that the store optimization program will realize the expected benefits and we may incur delays and unexpected costs in its execution. Any miscalculations or shortcomings we may make in the planning and implementation of the store optimization program may adversely affect our financial position, results of operations and cash flows.

Our stock price has fluctuated and may continue to fluctuate widely.

The market price for our common stock has fluctuated and will continue to be significantly affected by, among other factors, quarterly operating results, changes in any earnings estimates publicly announced by us or by analysts, customer response to merchandise offerings, timing of retail store openings and closings, and other Company announcements. In addition, stock markets generally have experienced a high level of price and volume volatility and market prices for the stock of many companies, including ours, have experienced wide price fluctuations not necessarily related to their operating performance. On October 4, 2012 we effected a one-for-four Reverse Stock Split and our common stock began trading on a post-Reverse Stock Split adjusted basis. The reported high and low closing prices (as adjusted for the Reverse Stock Split) of our common stock during the nine months endedOctober 27, 2012 were $5.08 per share and $1.84 per share, respectively. The current price of our common stock may not be indicative of future market prices. The fluctuation of the market price of our common stock may have a negative impact on our results of operations and liquidity. Changes in the market price of our common stock could considerably affect the valuation of our derivative liability resulting in significant non-cash fluctuations in earnings. In addition, price volatility of our common stock may expose us to stockholder litigation which may adversely affect our financial condition, results of operations and cash flows.

Failure to comply with applicable laws and regulations may adversely affect our business and results of operations.

We have policies and procedures that are designed to help us comply with applicable laws and regulations, including those imposed by the SEC, Nasdaq, and other foreign, federal, state and local authorities. Any new or changes to laws and regulations that affects employment and labor, trade, product labeling and safety, transportation and logistics, health care, tax, privacy, environmental, or other areas applicable to us, may increase the complexity and the related cost of compliance. Failure to comply with applicable laws and regulations may adversely affect our business and results of operations.

Our largest stockholders may exert influence over our business regardless of the opposition of other stockholders or the desire of other stockholders to pursue an alternate course of action.

Golden Gate Capital beneficially owns 16.6% of our common stock through its holding of Series A Preferred Stock. Dennis Pence, our Chairman of the Board of Directors, CEO and co-founder, beneficially owns 15.5% of our common stock. Ann

27

Pence, our co-founder, beneficially owns 12.4% of our common stock. Either Golden Gate Capital, Dennis Pence or Ann Pence acting independently would have significant influence over, and should they act together, could effectively control the outcome of, any matters submitted to stockholders, including the election of directors and approval of business combinations, and could delay, deter or prevent a change of control of the Company, which may adversely affect the market price of our common stock. The interests of these stockholders may not always coincide with the interests of other stockholders.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.     MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None

28

ITEM 6.     EXHIBITS

(A) Exhibits: 

Exhibit Number	Description of Document
3.1‡	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company effective on October 4, 2012.
3.2*	Amended and Restated Bylaws of Coldwater Creek Inc. dated September 11, 2012 (filed as exhibit 3.2 to the Company's 8-K filed on September 13, 2012)
31.1‡	Certification by Dennis C. Pence of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2‡	Certification by James A. Bell of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32.1°	Certification by Dennis C. Pence and James A. Bell pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS^	XBRL Instance
101.SCH^	XBRL Taxonomy Extension Schema
101.CAL^	XBRL Taxonomy Extension Calculation
101.DEF^	XBRL Taxonomy Extension Definition
101.LAB^	XBRL Taxonomy Extension Label
101.PRE^	XBRL Taxonomy Extension Presentation

 ____________________________________________________________

*	Previously filed.
‡	Filed electronically herewith.
°	Furnished electronically herewith.
^	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability under these sections.

29

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Sandpoint, State of Idaho, on this 30th day of November 2012.

COLDWATER CREEK INC.
By:	/s/ Dennis C. Pence
	Dennis C. Pence
	Chairman of the Board of Directors, President and
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ James A. Bell
	James A. Bell
	Executive Vice President, Chief Operating Officer and
	Chief Financial Officer
	(Principal Financial Officer)
By:	/s/ Mark A. Haley
	Mark A. Haley
	Vice President and Chief Accounting Officer
	(Principal Accounting Officer)

30

EXHIBIT INDEX

Exhibit Number	Description of Document
3.1‡	Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the Company effective on October 4, 2012.
3.2*	Amended and Restated Bylaws of Coldwater Creek Inc. dated September 11, 2012 (filed as exhibit 3.2 to the Company's 8-K filed on September 13, 2012)
31.1‡	Certification by Dennis C. Pence of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2‡	Certification by James A. Bell of periodic report pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32.1°	Certification by Dennis C. Pence and James A. Bell pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS^	XBRL Instance
101.SCH^	XBRL Taxonomy Extension Schema
101.CAL^	XBRL Taxonomy Extension Calculation
101.DEF^	XBRL Taxonomy Extension Definition
101.LAB^	XBRL Taxonomy Extension Label
101.PRE^	XBRL Taxonomy Extension Presentation

____________________________________________________________

*	Previously filed.
‡	Filed electronically herewith.
°	Furnished electronically herewith.
^	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Act of 1934 and otherwise are not subject to liability under these sections.

31

EX-3.1

EXHIBIT 3.1

DelawarePAGE 1

The First State

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "COLDWATER CREEK INC.", FILED IN THIS OFFICE ON THE THIRD DAY OF OCTOBER, A.D. 2012, AT 6:17 O'CLOCK P.M.

A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS.

AND I DO HEREBY FURTHER CERTIFY THAT THE EFFECTIVE DATE OF THE AFORESAID CERTIFICATE OF AMENDMENT IS THE FOURTH DAY OF OCTOBER, A.D. 2012, AT 8 O'CLOCK A.M.

CERTIFICATE OF AMENDMENT OF THE AMENDED AND

RESTATED CERTIFICATE OF INCORPORATION OF

COLDWATER CREEK INC.

Coldwater Creek Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

FIRST: The name of the corporation is Coldwater Creek Inc.

SECOND: At a meeting of the Board of Directors of Coldwater Creek Inc., resolutions were duly adopted declaring the advisability of an amendment to the Amended and Restated Certificate of Incorporation, as follows, and providing that:

Article IV. (a) of the Amended and Restated Certificate of Incorporation of Coldwater Creek Inc. shall be hereby amended and restated to read as follows:

(a)      The Corporation is authorized to issue 76,000,000 shares of capital stock, $0.01 par value. The shares shall be divided into two classes, designated as follows:

Designation of Class	Number of Shares	Par Value
Common Stock	75,000,000	$0.01
Preferred Stock	1,000,000	$0.01
TOTAL:	76,000,000

Upon this Certificate of Amendment of the Amended and Restated Certificate of Incorporation becoming effective pursuant to the General Corporation Law of the State of Delaware (the “Effective Date”), each share of Common Stock, par value $0.01 per share (the “Old Common Stock”), issued and outstanding immediately prior to the Effective Date, shall be, and hereby is, reclassified as and changed into one-fourth (1/4th) of a share of Common Stock, par value $0.01 per share (the “New Common Stock”). Each outstanding stock certificate which immediately prior to the Effective Date represented one or more shares of Old Common Stock shall thereafter, automatically and without the necessity of surrendering the same for exchange, represent the number of whole shares of New Common Stock determined by multiplying the number of shares of Old Common Stock represented by such certificate immediately prior to the Effective Date by one-fourth (1/4^th) and rounding such number down to the nearest whole integer, and shares of Old Common Stock held in uncertificated form shall be treated in the same manner. The corporation shall not be required to issue or deliver any fractional shares of New Common Stock. Each holder of such New Common Stock shall be entitled to receive for such fractional interest, and at the Effective Date any such fractional interest in such shares of New Common Stock shall be converted into the right to receive, an amount in cash, without interest, determined by multiplying (i) such fractional share interest to which the holder would otherwise be entitled by (ii) the closing sale price of the Common Stock (on a post-reverse-split basis as adjusted for the amendment

effected hereby) on the trading day immediately prior to the Effective Date on The NASDAQ Stock Market, or if the principal exchange on which the Common Stock is then traded is other than The NASDAQ Stock Market, such exchange as may be applicable. Shares of Common Stock that were outstanding prior to the Effective Date and that are not outstanding after the Effective Date shall resume the status of authorized but unissued shares of common stock.”

THIRD: That thereafter, pursuant to resolution of its Board of Directors, a meeting of the stockholders of said corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

FOURTH: This Certificate of Amendment of the Amended and Restated Certificate of Incorporation was duly adopted at said meeting of the stockholders in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

FIFTH: In accordance with Section 103(d) of the General Corporation Law of the State of Delaware, this Certificate of Amendment shall be effective at 8:00 a.m Eastern Time on October 4, 2012.

IN WITNESS WHEREOF, Coldwater Creek Inc. has caused this certificate to be signed by its Senior Vice President, General Counsel and Secretary, this 3rd day of October, 2012.

By ___/s/ John E. Hayes III

Name: John E. Hayes III

Title: Senior Vice President, General

Counsel and Secretary

EX-31.1

Exhibit 31.1

I, Dennis C. Pence, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coldwater Creek Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:	November 30, 2012
/s/ Dennis C. Pence
Dennis C. Pence
Chairman of the Board of Directors, President and
Chief Executive Officer
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

I, James A. Bell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coldwater Creek Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

Date:	November 30, 2012
/s/ James A. Bell
James A. Bell
Executive Vice President, Chief Operating Officer and
Chief Financial Officer
(Principal Financial Officer)

EX-32.1

Exhibit 32.1

PERIODIC REPORT CERTIFICATION

of the Chief Executive Officer and Chief Financial Officer

I, Dennis C. Pence, Chairman of the Board of Directors, President and Chief Executive Officer of Coldwater Creek Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the report of the Company on Form 10-Q for the quarterly period ended October 27, 2012, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. 

/s/ Dennis C. Pence

Dennis C. Pence

Chairman of the Board of Directors, President and

Chief Executive Officer

(Principal Executive Officer)

November 30, 2012

I, James A. Bell, Executive Vice President, Chief Operating Officer and Chief Financial Officer of Coldwater Creek Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the report of the Company on Form 10-Q for the quarterly period ended October 27, 2012, as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)  the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ James A. Bell

James A. Bell

Executive Vice-President, Chief Operating officer and 

Chief Financial Officer

(Principal Financial Officer)

November 30, 2012

XML

Debt and Capital Lease Obligations Debt and capital lease obligations (Details) (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011
Debt Instrument [Line Items]
Revolving line of credit	$ 0	$ 15,000	$ 15,000
Capital lease obligations	12,033	12,410	12,624
Total debt and capital lease obligations	78,541	42,310	42,574
Debt Instrument, Unamortized Discount	(16,184)	0	0
Current maturities of debt	0	(15,200)	(15,200)
Current maturities capital lease obligations	(560)	(535)	(619)
Long-term debt and capital lease obligations	61,797	26,575	26,755
Secured Term Loan GGC [Member]
Debt Instrument [Line Items]
Secured Debt	66,508	0	0
Secured Term Loan WF [Member]
Debt Instrument [Line Items]
Secured Debt	$ 0	$ 14,900	$ 14,950

XML

Co-Branded Credit Card Program Sales Royalty (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Deferred Revenue [Abstract]
Sales royalty recognized	$ 1.8	$ 1.8	$ 5.5	$ 5.2

XML

Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Commitments and Contingencies Disclosure [Abstract]
Aggregate rent expense under operating leases excluding real estate taxes	$ 15.4	$ 19.0	$ 50.0	$ 57.0
Common area maintenance costs	3.2	3.6	10.1	11.1
Real estate taxes	2.4	2.8	7.6	8.4
Future Minimum Operating Lease Payments Remaining	436.0		436.0
Non-cancelable inventory purchase commitments	$ 130.9		$ 130.9

XML

Significant Accounting Policies Total Stock-Based Compensation Recognized (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Stock Based Compensation Expense [Line Items]
Stock-based compensation expense	$ 466	$ 473	$ 1,335	$ 1,635
Stock Options [Member]
Stock Based Compensation Expense [Line Items]
Stock-based compensation expense	270	345	815	1,157
Restricted Stock Units (RSUs) [Member]
Stock Based Compensation Expense [Line Items]
Stock-based compensation expense	$ 196	$ 128	$ 520	$ 478

XML

Supplemental Executive Retirement Plan (Tables)

9 Months Ended

Oct. 27, 2012

Pension and Other Postretirement Benefit Expense [Abstract]

Net periodic benefit cost of the Supplemental Employee Retirement Plan (“SERP”)

Net periodic benefit cost of the Supplemental Executive Retirement Plan (“SERP”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Interest cost	$	137	$	138	413		416
Amortization of unrecognized net actuarial loss	10		—		28		—
	$	147	$	138	$	441	$	416

XML

Debt and Capital Lease Obligations (Details)	Oct. 27, 2012 Stores
Store Optimization Program [Abstract]
Number of Planned Store Closures	45

XML

Property and Equipment, net (Details) (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 562,264	$ 573,692	$ 580,872
Less - Accumulated depreciation and amortization	(381,624)	(367,613)	(361,351)
Property and equipment, net	180,640	206,079	219,521
Land [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	242	242	242
Buildings and Land Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	29,656	29,646	29,646
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	262,605	273,039	277,617
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	116,202	119,656	121,262
Technology Hardware and Software [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	89,866	90,063	90,444
Machinery and Equipment and Other [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	34,547	35,129	35,564
Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	12,805	12,780	12,781
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 16,341	$ 13,137	$ 13,316

XML

Co-Branded Credit Card Program (Details) (USD $) In Thousands, unless otherwise specified							3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Oct. 27, 2012	Jul. 28, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 30, 2011	Jan. 29, 2011	Oct. 27, 2012 Marketing Fees Received [Member]	Oct. 29, 2011 Marketing Fees Received [Member]	Oct. 27, 2012 Marketing Fees Received [Member]	Oct. 29, 2011 Marketing Fees Received [Member]	Oct. 27, 2012 Revenue Sharing Received [Member]	Oct. 29, 2011 Revenue Sharing Received [Member]	Oct. 27, 2012 Revenue Sharing Received [Member]	Oct. 29, 2011 Revenue Sharing Received [Member]	Oct. 27, 2012 Marketing Fees Recognized To Revenue [Member]	Oct. 29, 2011 Marketing Fees Recognized To Revenue [Member]	Oct. 27, 2012 Marketing Fees Recognized To Revenue [Member]	Oct. 29, 2011 Marketing Fees Recognized To Revenue [Member]	Oct. 27, 2012 Revenue Sharing Recognized To Revenue [Member]	Oct. 29, 2011 Revenue Sharing Recognized To Revenue [Member]	Oct. 27, 2012 Revenue Sharing Recognized To Revenue [Member]	Oct. 29, 2011 Revenue Sharing Recognized To Revenue [Member]
Movement in Deferred Revenue [Roll Forward]
Balance at beginning of period	$ 8,098	$ 8,884	$ 8,800	$ 9,159	$ 9,502	$ 10,309
Marketing fees and revenue sharing received							1,199	1,175	3,058	3,528	0	0	2,946	0
Marketing fees and revenue sharing recognized															(1,191)	(1,078)	(3,383)	(3,358)	(794)	(440)	(3,323)	(1,320)
Balance at end of period	8,098	8,884	8,800	9,159	9,502	10,309
Less — Current deferred marketing fees and revenue sharing	(4,841)			(4,368)
Long-term deferred marketing fees and revenue sharing	$ 3,257		$ 4,402	$ 4,791

XML

Property and Equipment, net

9 Months Ended

Oct. 27, 2012

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net, consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,656			29,646			29,646
Leasehold improvements	262,605			273,039			277,617
Furniture and fixtures	116,202			119,656			121,262
Technology hardware and software	89,866			90,063			90,444
Machinery and equipment and other	34,547			35,129			35,564
Capital leases	12,805			12,780			12,781
Construction in progress	16,341			13,137			13,316
	562,264			573,692			580,872
Less — Accumulated depreciation and amortization	(381,624		)	(367,613		)	(361,351		)
	$	180,640		$	206,079		$	219,521

XML

Net Income (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Earnings Per Share [Abstract]
Net loss	$ (20,526)	$ (29,158)	$ (61,844)	$ (86,865)
Weighted average common shares outstanding during the period (for basic calculation) (in shares)	30,504,000	23,573,000	30,460,000	23,284,000
Dilutive effect of other potential common shares (in shares)	$ 0	$ 0	$ 0	$ 0
Weighted average common shares and potential common shares (for diluted calculation) (in shares)	30,504,000	23,573,000	30,460,000	23,284,000
Net loss per share - Basic (in dollars per share)	$ (0.67)	$ (1.24)	$ (2.03)	$ (3.73)
Net loss per share - Diluted (in dollars per share)	$ (0.67)	$ (1.24)	$ (2.03)	$ (3.73)
Stock options, RSUs and shares to be purchased under our ESPP excluded from computation of earnings per share, amount (in shares)	1,300,000	1,000,000	1,300,000	900,000

XML

Significant Accounting Policies (Details) (USD $)	9 Months Ended			9 Months Ended									3 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Jan. 28, 2012	Oct. 27, 2012 Minimum [Member]	Oct. 27, 2012 Maximum [Member]	Oct. 27, 2012 Stock Options [Member]	Oct. 29, 2011 Stock Options [Member]	Oct. 27, 2012 Restricted Stock Units (RSUs) [Member]	Oct. 29, 2011 Restricted Stock Units (RSUs) [Member]	Oct. 27, 2012 Performance RSUs [Member]	Oct. 29, 2011 Performance RSUs [Member]	Jul. 09, 2012 Series A Preferred Stock [Member]	Jul. 28, 2012 Secured Debt [Member] Series A Preferred Stock [Member]	Jul. 09, 2012 Secured Debt [Member] Series A Preferred Stock [Member]
Significant Accounting Policies [Line Items]
Preferred stock, shares outstanding (in shares)	1,000	0	0									1,000		1,000
Series A Preferred Stock issuance costs	$ (1,086,000)	$ 0											$ 1,100,000
Long lived assets, net		3,600,000
Assets, Fair Value Disclosure		700,000
Loss on asset impairments		2,900,000
Long-term Debt, Fair Value	54,400,000
Long-term Debt	50,300,000
Options granted in period, in shares						291,075	263,125
Awards granted in period, in shares								262,024	141,598	123,500	130,000
Weighted average fair value per option granted, in dollars per share						$ 3.01	$ 4.16
Weighted average fair value per award granted, in dollars per share								$ 3.98	$ 6.04	$ 4.64	$ 5.72
Shares awarded as a percentage of base award amount				0.00%	200.00%
Other income, net		$ 400,000

XML

Nature of Business and Organizational Structure (Details)	0 Months Ended	9 Months Ended
	Oct. 04, 2012	Oct. 27, 2012 Segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of Operating Segments		2
Reverse Stock Split Ratio	0.25

XML

Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended	9 Months Ended
	Oct. 04, 2012	Oct. 27, 2012	Oct. 24, 2011	Oct. 29, 2011	Jul. 09, 2012	Jan. 28, 2012	Oct. 03, 2012 Common Stock Outstanding Before Reverse Stock Split [Member]	Oct. 04, 2012 Common Stock Outstanding After Reverse Stock Split [Member]	Jul. 09, 2012 Series A Preferred Stock [Member]
Class of Stock [Line Items]
Common stock, shares outstanding (in shares)		30,520,000		30,402,000		30,417,000	122,000,000	30,500,000
Preferred stock, shares outstanding (in shares)		1,000		0		0			1,000
Class of warrant or right, outstanding (in shares)					6,100,000
Conversion exercise price per share (in dollars per share)									$ 3.40
Common stock, shares issued			7,200,000
Net proceeds from stock offering		$ 0		$ 22,979
Reverse Stock Split Ratio	0.25

XML

Significant Accounting Policies Derivative Liability Significant Assumptions (Details) (Series A Preferred Stock [Member], USD $)		9 Months Ended
	Jul. 09, 2012	Oct. 27, 2012 Recurring [Member] Fair Value, Inputs, Level 3 [Member]
Derivative Assumptions [Line Items]
Closing price of Company's common stock (in dollars per share)		$ 3.99
Conversion exercise price per share (in dollars per share)	$ 3.40	$ 3.40
Risk free interest rate		1.70%
Expected volatility		82.20%
Expected life (in years)		9 years 8 months

XML

Significant Accounting Policies Derivative Liability Activity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Derivative Activity [Line Items]
Balance at beginning of period	$ 13,395	$ 0	$ 0	$ 0
Loss on derivative liability	6,783	0	4,434	0
Balance at end of period	20,178	0	20,178	0
Series A Preferred Stock [Member]
Derivative Activity [Line Items]
Issuance of Series A Preferred Stock	$ 0	$ 0	$ 15,744	$ 0

XML

Receivables

9 Months Ended

Oct. 27, 2012

Receivables [Abstract]

Receivables

Receivables

Receivables consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Credit card receivables	$	5,174	$	2,960	$	5,208
Tenant allowances	501		2,112		2,140
Other	2,879		3,127		3,523
	$	8,554	$	8,199	$	10,871

Credit card receivables do not bear interest and are generally converted to cash in two to three days. We evaluate the credit risk associated with our receivables to determine if an allowance for doubtful accounts is necessary. As of October 27, 2012, January 28, 2012, and October 29, 2011, no allowance for doubtful accounts was deemed necessary.

XML

Significant Accounting Policies Advertising Costs (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Direct Response Advertising [Member]
Advertising Expenses [Line Items]
Advertising Expense	$ 10.9	$ 9.5	$ 25.6	$ 31.1
Advertising Expense Other Than Direct [Member]
Advertising Expenses [Line Items]
Advertising Expense	$ 6.6	$ 17.4	$ 17.4	$ 29.7

XML

Debt and Capital Lease Obligations Term Loan (Details) (USD $) In Millions, except Share data, unless otherwise specified					0 Months Ended
	Jul. 09, 2017	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011	Jul. 09, 2012 Secured Term Loan [Member]	Oct. 27, 2012 Cash Interest Rate [Member]	Oct. 27, 2012 PIK Interest Rate [Member]	Jul. 09, 2012 Series A Preferred Stock [Member]
Debt Instrument [Line Items]
Debt Instrument, Term (in years)					5 years
Debt Instrument, Face Amount					$ 65.0
Debt Instrument, Interest Rate, Stated Percentage						5.50%	7.50%
Paid In Kind Total Interest	29.8
Paid In Kind Future Interest Accrued		$ 1.5
Preferred stock, shares outstanding (in shares)		1,000	0	0				1,000

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011
Current assets:
Cash and cash equivalents	$ 31,294	$ 51,365	$ 37,881
Receivables	8,554	8,199	10,871
Inventories	161,715	131,975	171,970
Prepaid and other current assets	7,339	6,137	6,438
Prepaid and deferred marketing costs	6,570	3,273	6,639
Deferred income taxes	2,819	2,313	6,536
Total current assets	218,291	203,262	240,335
Property and equipment, net	180,640	206,079	219,521
Deferred income taxes	2,207	1,891	2,054
Other assets	4,568	1,883	1,860
Total assets	405,706	413,115	463,770
Current liabilities:
Accounts payable	91,430	55,130	85,420
Accrued liabilities	89,820	74,915	75,506
Income taxes payable	240	3,260	3,305
Current maturities of debt and capital lease obligations	560	15,735	15,819
Total current liabilities	182,050	149,040	180,050
Deferred rents	86,900	101,384	104,648
Long-term debt and capital lease obligations	61,797	26,575	26,755
Supplemental Executive Retirement Plan	12,431	12,142	10,305
Deferred marketing fees and revenue sharing	3,257	4,402	4,791
Deferred income taxes	2,512	1,716	5,524
Other liabilities	1,018	1,443	1,515
Total liabilities	349,965	296,702	333,588
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000 shares authorized; 1, 0 and 0 shares issued, respectively	0	0	0
Common stock, $0.01 par value, 75,000 shares authorized; 30,520, 30,417 and 30,402 shares issued, respectively	305	304	304
Additional paid-in capital	152,397	151,254	150,454
Accumulated other comprehensive loss	(2,176)	(2,204)	(464)
Retained earnings (accumulated deficit)	(94,785)	(32,941)	(20,112)
Total stockholders' equity	55,741	116,413	130,182
Total liabilities and stockholders' equity	$ 405,706	$ 413,115	$ 463,770

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Supplemental Executive Retirement Plan (Details) (USD $)	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Pension and Other Postretirement Benefit Expense [Abstract]
Interest cost	$ 137,000	$ 138,000	$ 413,000	$ 416,000
Amortization of unrecognized net actuarial loss	10,000	0	28,000	0
Net periodic benefit cost	147,000	138,000	441,000	416,000
Payments made under benefit plan			$ 124,501	$ 124,500

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Nature of Business and Organizational Structure

9 Months Ended

Oct. 27, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Organizational Structure

Nature of Business and Organizational Structure

Coldwater Creek Inc., a Delaware corporation, together with its wholly-owned subsidiaries, headquartered in Sandpoint, Idaho, is a multi-channel specialty retailer of women’s apparel, gifts, jewelry, and accessories. We conduct business in two operating segments: retail and direct. The retail segment consists of our premium retail stores, factory outlet stores, and day spas. The direct segment consists of sales generated through our e-commerce website and from orders taken from customers over the phone and through the mail. Intercompany balances and transactions have been eliminated.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The condensed consolidated balance sheet as of January 28, 2012 was derived from the audited consolidated balance sheet as of that date. The condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented and should be read in conjunction with the consolidated financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

On October 4, 2012, we effected a one-for-four reverse split of our common stock (the "Reverse Stock Split"). All share and per share information in this Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

The condensed consolidated financial position, results of operations and cash flows for these interim periods are not necessarily indicative of the financial position, results of operations or cash flows to be realized in future periods.

References to a fiscal year are to the calendar year in which the fiscal year begins.

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Significant Accounting Policies Interest expense, net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011	Oct. 27, 2012	Oct. 29, 2011
Accounting Policies [Abstract]
Interest expense	$ 3,574	$ 631	$ 5,864	$ 1,556
Interest income	(1)	(32)	(5)	(36)
Interest income (expense), net	$ 3,573	$ 599	$ 5,859	$ 1,520

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Accrued Liabilities (Tables)

9 Months Ended

Oct. 27, 2012

Accrued Liabilities, Current [Abstract]

Schedule of accrued liabilities

Accrued liabilities consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Accrued payroll and benefits	$	12,932	$	14,134	$	10,278
Gift cards and certificates	14,023		21,560		25,908
Derivative liability	20,178		—		—
Current portion of deferred rents	21,469		20,384		20,971
Current portion of deferred marketing fees and revenue sharing	4,841		4,398		4,368
Deferred sales royalty	3,310		3,511		3,250
Accrued sales returns	4,647		3,535		3,923
Accrued taxes	5,026		4,486		4,646
Other	3,394		2,907		2,162
	$	89,820	$	74,915	$	75,506

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Receivables (Details) (USD $) In Thousands, unless otherwise specified				9 Months Ended
	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011	Oct. 27, 2012 Minimum [Member]	Oct. 27, 2012 Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card receivables	$ 5,174	$ 2,960	$ 5,208
Tenant allowances	501	2,112	2,140
Other	2,879	3,127	3,523
Accounts receivable, net	$ 8,554	$ 8,199	$ 10,871
Credit Card Receivables Days Converted to Cash				2 days	3 days

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Net Income (Loss) Per Common Share (Tables)

9 Months Ended

Oct. 27, 2012

Earnings Per Share [Abstract]

Schedule of the computation of basic and diluted net loss per common share

The following table sets forth the computation of basic and diluted net loss per common share (retroactively adjusted to reflect the Reverse Stock Split): 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands, except per share amounts)
Net loss	$	(20,526	)	$	(29,158	)	$	(61,844	)	$	(86,865	)
Weighted average common shares outstanding during the period (for basic calculation)	30,504			23,573			30,460			23,284
Dilutive effect of other potential common shares	—			—			—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,504			23,573			30,460			23,284
Net loss per common share—Basic	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)
Net loss per common share—Diluted	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)

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Significant Accounting Policies (Notes)

9 Months Ended

Oct. 27, 2012

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Accounting Policies

The complete summary of significant accounting policies is included in the notes to the consolidated financial statements as presented in our Annual Report on Form 10-K for the fiscal year ended January 28, 2012.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are embodied in our sales returns accrual, gift card breakage, inventory adjustments, derivative liability, stock-based compensation, impairment of long-lived assets, contingencies, and income taxes. These estimates and assumptions are based on historical results as well as management’s future expectations. Actual results may vary from these estimates and assumptions.

Derivative Liability

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock in conjunction with a new senior secured term loan. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. During the nine months endedOctober 27, 2012, we recorded $1.1 million of issuance costs related to the Series A Preferred Stock.

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and

• Level 3 — Unobservable inputs in which little or no market activity exists.

The derivative liability, representing shares of Series A Preferred Stock, is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs (retroactively adjusted to reflect the Reverse Stock Split):

	October 27, 2012
Closing price of Company's common stock	$3.99
Exercise price	$3.40
Risk-free interest rate	1.7	%
Expected volatility	82.2	%
Expected life	9.7 years

The valuation model and the assumptions used in the model were determined based on the Series A Preferred Stock features and Company specific historical experience, taking into consideration expected future activity. The risk-free interest rate is based on the U.S. Treasury strip rates in effect at the time of measurement with an equivalent remaining term. The expected volatility of our stock prices is based on a combination of historical volatility and the implied volatility of our exchange traded options. Expected life is based on the remaining term of the Series A Preferred Stock. Significant increases (decreases) in any of those assumptions in isolation would result in a significantly higher (lower) fair value measurement of the derivative liability. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Activity for the derivative liability was as follows:

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Balance at beginning of period	$	13,395	$	—	$	—	$	—
Issuance of Series A Preferred Stock	—		—		15,744		—
Loss on change in fair value	6,783		—		4,434		—
Balance at end of period	$	20,178	$	—	$	20,178	$	—

During the nine months endedOctober 29, 2011, certain long-lived assets, primarily premium store leasehold improvements, with a net carrying amount of $3.6 million were written down to their fair value of $0.7 million, resulting in an impairment charge of $2.9 million. This impairment charge was measured at fair value using Level 3 inputs (discounted cash flows).

We have financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, receivables, payables, and debt.  The carrying value of cash, receivables, payables and borrowing on our revolving line of credit materially approximate their fair values due to their short-term nature. As of October 27, 2012, the fair value of our senior secured term loan was $54.4 million compared to the carrying value of $50.3 million, which includes accrued PIK interest and net of the loan discount. The fair value of the senior secured term loan was estimated using Level 3 inputs by discounting the cash flows with an assumed interest rate that considers credit and liquidity risk. The carrying value of our previous term loan materially approximated fair value at January 28, 2012 and October 29, 2011.

Advertising Costs

Direct response advertising includes catalogs, national magazine advertisements and other mailings that contain an identifying code which allows us to track related sales. All direct costs associated with the development, production and circulation of direct response advertisements are accumulated as prepaid marketing costs. Once the related catalog, national magazine advertisement, or other mailings is either mailed or first appears in print, these costs are reclassified to deferred marketing costs. These costs are then amortized to selling, general and administrative expenses over the expected sales realization cycle, typically several weeks. Direct response advertising expense was $10.9 million and $9.5 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $25.6 million and $31.1 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively.

Advertising costs other than direct response advertising, including television, store and event promotions, signage expenses and other general customer acquisition activities, are expensed as incurred or when the advertising event first takes place. Advertising expenses other than those related to direct response advertising of $6.6 million and $17.4 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $17.4 million and $29.7 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively, are included in selling, general and administrative expense.

Income Taxes

In assessing the realizability of deferred tax assets, we consider all available evidence to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than projected future performance. Consequently, based on all available evidence, in particular our historical cumulative losses and recent operating losses, we have a valuation allowance against a significant portion of our net deferred tax assets. In order to fully realize the deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and restricted stock units (“RSUs”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Stock options	$	270	$	345	$	815	$	1,157
RSUs	196		128		520		478
	$	466	$	473	$	1,335	$	1,635

All share and per share information has been retroactively adjusted to reflect the Reverse Stock Split.

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 291,075 and 263,125 stock options, respectively.  The fair value of stock option awards was estimated at the grant date using the Black-Scholes option valuation model with the following weighted average assumptions: 

	Nine Months Ended
	October 27, 2012			October 29, 2011
Risk-free interest rate	0.71		%	1.93		%
Expected volatility	90		%	88		%
Expected life	4.9 years			5.2 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	3.01		$	4.16

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 262,024 and 141,598 RSUs, respectively, at a weighted average fair value of $3.98 and $6.04, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, employees were also granted 123,500 and 130,000 performance RSUs, respectively, at a weighted average grant date fair value of $4.64 and $5.72, respectively.  For the performance RSUs granted in fiscal 2012, half of the RSUs are subject to the achievement of earnings before interest expense and taxes (“EBIT”) targets for fiscal years 2012, 2013 and 2014, and half of the RSUs are subject to the achievement of sales targets for fiscal years 2012, 2013 and 2014. For performance RSUs granted in fiscal 2011, half of the RSUs are subject to the achievement of EBIT targets for the second half of fiscal 2011 combined with fiscal 2012, and half of the RSUs are subject to the achievement of sales targets for the second half of fiscal 2011 combined with fiscal 2012.  For performance RSUs granted in fiscal 2010, the RSUs are subject to the achievement of combined EBIT targets for fiscal years 2010, 2011 and 2012. No compensation expense has been recognized for the fiscal 2011 and 2010 performance RSUs as it was determined to be not probable that the performance conditions would be met. The number of shares actually awarded under performance RSUs will range from 0% to 200% of the base award amount, depending on the results during the performance period.

Interest Expense, net

Interest expense, net, consisted of the following: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest expense	$	3,574		$	631		$	5,864		$	1,556
Interest income	(1		)	(32		)	(5		)	(36		)
	$	3,573		$	599		$	5,859		$	1,520

In fiscal 2012, we corrected the classification of other income, other expense and selling, general and administrative expenses. In previous years, other income and other expense was included with interest expense, net. For comparative purposes, other income, net, of $0.4 million for the nine months endedOctober 29, 2011 has been classified as selling, general and administrative expenses.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011
Statement of Financial Position [Abstract]
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	1,000	1,000	1,000
Preferred stock, shares outstanding (in shares)	1	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	75,000	75,000	75,000
Common stock, shares outstanding (in shares)	30,520	30,417	30,402

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Segment Reporting

9 Months Ended

Oct. 27, 2012

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The following table provides certain financial data for the retail and direct segments as well as reconciliations to the condensed consolidated financial statements: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Net sales (a):
Retail	$	147,245		$	144,138		$	408,386		$	421,644
Direct	40,879			43,327			113,312			127,025
Net sales	$	188,124		$	187,465		$	521,698		$	548,669
Segment operating income (loss):
Retail	$	10,127		$	1,757		$	15,536		$	(11,744	)
Direct	6,938			6,328			15,437			18,427
Total segment operating income	17,065			8,085			30,973			6,683
Corporate and other	(27,106		)	(36,339		)	(81,296		)	(91,367		)
Loss from operations	$	(10,041	)	$	(28,254	)	$	(50,323	)	$	(84,684	)

 ____________________________________________________________

(a) There were no sales between the retail and direct segments during the reported periods.

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Document and Entity Information	9 Months Ended
	Oct. 27, 2012	Nov. 27, 2012
Document And Entity Information [Abstract]
Entity Registrant Name	COLDWATER CREEK INC
Entity Central Index Key	0001018005
Document Type	10-Q
Document Period End Date	Oct. 27, 2012
Amendment Flag	false
Current Fiscal Year End Date	--02-02
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Entity Common Stock, Shares Outstanding		30,519,607

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Significant Accounting Policies (Policies)

9 Months Ended

Oct. 27, 2012

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and timing of revenue and expenses, the reported amounts and classification of assets and liabilities, and the disclosure of contingent assets and liabilities. These estimates and assumptions are embodied in our sales returns accrual, gift card breakage, inventory adjustments, derivative liability, stock-based compensation, impairment of long-lived assets, contingencies, and income taxes. These estimates and assumptions are based on historical results as well as management’s future expectations. Actual results may vary from these estimates and assumptions.

Derivative Liability

Derivative Liability

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock in conjunction with a new senior secured term loan. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. During the nine months endedOctober 27, 2012, we recorded $1.1 million of issuance costs related to the Series A Preferred Stock.

Fair Value

Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined hierarchical levels related to the subjectivity associated with the inputs to fair value measurements as follows:

• Level 1 — Quoted prices in active markets for identical assets or liabilities;

• Level 2 — Quoted prices for similar assets or liabilities in active markets or inputs that are observable; and

• Level 3 — Unobservable inputs in which little or no market activity exists.

The derivative liability, representing shares of Series A Preferred Stock, is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs (retroactively adjusted to reflect the Reverse Stock Split):

	October 27, 2012
Closing price of Company's common stock	$3.99
Exercise price	$3.40
Risk-free interest rate	1.7	%
Expected volatility	82.2	%
Expected life	9.7 years

The valuation model and the assumptions used in the model were determined based on the Series A Preferred Stock features and Company specific historical experience, taking into consideration expected future activity. The risk-free interest rate is based on the U.S. Treasury strip rates in effect at the time of measurement with an equivalent remaining term. The expected volatility of our stock prices is based on a combination of historical volatility and the implied volatility of our exchange traded options. Expected life is based on the remaining term of the Series A Preferred Stock. Significant increases (decreases) in any of those assumptions in isolation would result in a significantly higher (lower) fair value measurement of the derivative liability. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Activity for the derivative liability was as follows:

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Balance at beginning of period	$	13,395	$	—	$	—	$	—
Issuance of Series A Preferred Stock	—		—		15,744		—
Loss on change in fair value	6,783		—		4,434		—
Balance at end of period	$	20,178	$	—	$	20,178	$	—

During the nine months endedOctober 29, 2011, certain long-lived assets, primarily premium store leasehold improvements, with a net carrying amount of $3.6 million were written down to their fair value of $0.7 million, resulting in an impairment charge of $2.9 million. This impairment charge was measured at fair value using Level 3 inputs (discounted cash flows).

We have financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, receivables, payables, and debt.  The carrying value of cash, receivables, payables and borrowing on our revolving line of credit materially approximate their fair values due to their short-term nature. As of October 27, 2012, the fair value of our senior secured term loan was $54.4 million compared to the carrying value of $50.3 million, which includes accrued PIK interest and net of the loan discount. The fair value of the senior secured term loan was estimated using Level 3 inputs by discounting the cash flows with an assumed interest rate that considers credit and liquidity risk. The carrying value of our previous term loan materially approximated fair value at January 28, 2012 and October 29, 2011.

Advertising Costs

Advertising Costs

Direct response advertising includes catalogs, national magazine advertisements and other mailings that contain an identifying code which allows us to track related sales. All direct costs associated with the development, production and circulation of direct response advertisements are accumulated as prepaid marketing costs. Once the related catalog, national magazine advertisement, or other mailings is either mailed or first appears in print, these costs are reclassified to deferred marketing costs. These costs are then amortized to selling, general and administrative expenses over the expected sales realization cycle, typically several weeks. Direct response advertising expense was $10.9 million and $9.5 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $25.6 million and $31.1 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively.

Advertising costs other than direct response advertising, including television, store and event promotions, signage expenses and other general customer acquisition activities, are expensed as incurred or when the advertising event first takes place. Advertising expenses other than those related to direct response advertising of $6.6 million and $17.4 million for the three months endedOctober 27, 2012 and October 29, 2011, respectively, and $17.4 million and $29.7 million for the nine months endedOctober 27, 2012 and October 29, 2011, respectively, are included in selling, general and administrative expense.

Income Taxes

Income Taxes

In assessing the realizability of deferred tax assets, we consider all available evidence to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than projected future performance. Consequently, based on all available evidence, in particular our historical cumulative losses and recent operating losses, we have a valuation allowance against a significant portion of our net deferred tax assets. In order to fully realize the deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

Stock-Based Compensation

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and restricted stock units (“RSUs”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Stock options	$	270	$	345	$	815	$	1,157
RSUs	196		128		520		478
	$	466	$	473	$	1,335	$	1,635

All share and per share information has been retroactively adjusted to reflect the Reverse Stock Split.

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 291,075 and 263,125 stock options, respectively.  The fair value of stock option awards was estimated at the grant date using the Black-Scholes option valuation model with the following weighted average assumptions: 

	Nine Months Ended
	October 27, 2012			October 29, 2011
Risk-free interest rate	0.71		%	1.93		%
Expected volatility	90		%	88		%
Expected life	4.9 years			5.2 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	3.01		$	4.16

During the nine months endedOctober 27, 2012 and October 29, 2011, employees were granted 262,024 and 141,598 RSUs, respectively, at a weighted average fair value of $3.98 and $6.04, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, employees were also granted 123,500 and 130,000 performance RSUs, respectively, at a weighted average grant date fair value of $4.64 and $5.72, respectively.  For the performance RSUs granted in fiscal 2012, half of the RSUs are subject to the achievement of earnings before interest expense and taxes (“EBIT”) targets for fiscal years 2012, 2013 and 2014, and half of the RSUs are subject to the achievement of sales targets for fiscal years 2012, 2013 and 2014. For performance RSUs granted in fiscal 2011, half of the RSUs are subject to the achievement of EBIT targets for the second half of fiscal 2011 combined with fiscal 2012, and half of the RSUs are subject to the achievement of sales targets for the second half of fiscal 2011 combined with fiscal 2012.  For performance RSUs granted in fiscal 2010, the RSUs are subject to the achievement of combined EBIT targets for fiscal years 2010, 2011 and 2012. No compensation expense has been recognized for the fiscal 2011 and 2010 performance RSUs as it was determined to be not probable that the performance conditions would be met. The number of shares actually awarded under performance RSUs will range from 0% to 200% of the base award amount, depending on the results during the performance period.

Interest expense, net

Interest Expense, net

Interest expense, net, consisted of the following: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest expense	$	3,574		$	631		$	5,864		$	1,556
Interest income	(1		)	(32		)	(5		)	(36		)
	$	3,573		$	599		$	5,859		$	1,520

In fiscal 2012, we corrected the classification of other income, other expense and selling, general and administrative expenses. In previous years, other income and other expense was included with interest expense, net. For comparative purposes, other income, net, of $0.4 million for the nine months endedOctober 29, 2011 has been classified as selling, general and administrative expenses.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	Oct. 27, 2012		Oct. 29, 2011		Oct. 27, 2012		Oct. 29, 2011
Income Statement [Abstract]
Net sales	$ 188,124	[1]	$ 187,465	[1]	$ 521,698	[1]	$ 548,669	[1]
Cost of sales	122,059		131,200		352,722		392,470
Gross profit	66,065		56,265		168,976		156,199
Selling, general and administrative expenses	76,106		84,519		219,299		238,008
Loss on asset impairments	0		0		0		2,875
Loss from operations	(10,041)		(28,254)		(50,323)		(84,684)
Other loss, net	6,797		0		5,519		0
Interest expense, net	3,573		599		5,859		1,520
Loss before income taxes	(20,411)		(28,853)		(61,701)		(86,204)
Income tax provision (benefit)	115		305		143		661
Net loss	(20,526)		(29,158)		(61,844)		(86,865)
Other comprehensive income:
Supplemental Executive Retirement Plan liability adjustment, net of tax	(10)		0		(28)		0
Total comprehensive loss	$ (20,516)		$ (29,158)		$ (61,816)		$ (86,865)
Net loss per share - Basic and Diluted (in dollars per share)	$ (0.67)		$ (1.24)		$ (2.03)		$ (3.73)
Weighted average shares outstanding — Basic and Diluted (in shares)	30,504		23,573		30,460		23,284

[1] There were no sales between the retail and direct segments during the reported periods.

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Net Income (Loss) Per Common Share

9 Months Ended

Oct. 27, 2012

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

NetIncome(Loss)Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the combination of other potentially dilutive common shares and the weighted average number of common shares outstanding during the period. Other potentially dilutive weighted average common shares include the dilutive effect of shares of Series A Preferred Stock, stock options, RSUs and shares to be purchased under our Employee Stock Purchase Plan ("ESPP") for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation expense, if any, for future service that has not yet been recognized, and the amount of excess tax benefits, if any, that would be recorded in additional paid-in-capital when the share is exercised are assumed to be used to repurchase shares in the current period.

The following table sets forth the computation of basic and diluted net loss per common share (retroactively adjusted to reflect the Reverse Stock Split): 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands, except per share amounts)
Net loss	$	(20,526	)	$	(29,158	)	$	(61,844	)	$	(86,865	)
Weighted average common shares outstanding during the period (for basic calculation)	30,504			23,573			30,460			23,284
Dilutive effect of other potential common shares	—			—			—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,504			23,573			30,460			23,284
Net loss per common share—Basic	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)
Net loss per common share—Diluted	$	(0.67	)	$	(1.24	)	$	(2.03	)	$	(3.73	)

During the three months endedOctober 27, 2012 and October 29, 2011, 1.3 million and 1.0 million, respectively, of stock options, RSUs, and shares to be purchased under our ESPP were outstanding but were excluded from the computation of diluted net loss per share because the effect would be antidilutive. During the nine months endedOctober 27, 2012 and October 29, 2011, 1.3 million and 0.9 million, respectively, of stock options, RSUs, and shares to be purchased under our ESPP were outstanding but was excluded from the computation of diluted net loss per share because the effect would be antidilutive. The conversion rights available to outstanding shares of Series A Preferred Stock were also excluded from the computation of diluted net loss per share because the effect would be antidilutive.

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Debt and Capital Lease Obligations

9 Months Ended

Oct. 27, 2012

Debt Disclosure [Abstract]

Debt and Capital Lease Obligations

Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	66,508		$	—		$	—
Term loan	—			14,900			14,950
Revolving line of credit	—			15,000			15,000
Capital lease obligations	12,033			12,410			12,624
Total debt and capital lease obligations	78,541			42,310			42,574
Less:
Secured term loan discount	(16,184		)	—			—
Current maturities of debt	—			(15,200		)	(15,200		)
Current maturities of capital lease obligations	(560		)	(535		)	(619		)
Long-term debt and capital lease obligations	$	61,797		$	26,575		$	26,755

On July 9, 2012, we obtained a five-year, $65.0 million senior secured term loan (the "Secured Term Loan") provided by an affiliate of Golden Gate Capital. The Secured Term Loan bears interest at a rate of 5.5% to be paid in cash quarterly and 7.5%due and payable in kind ("PIK") upon maturity. The Secured Term Loan is collateralized by a second lien on our inventory and credit card receivables, and a first lien on our remaining assets. The Secured Term Loan is scheduled to mature upon the earlier of July 9, 2017 or the date that the obligations under the Amended and Restated Credit Agreement with Wells Fargo Bank dated May 16, 2011 (the "Credit Agreement") mature or are accelerated. Upon maturity of the Secured Term Loan, the principal balance and any unpaid interest, including$29.8 millionof PIK interest, will become due and payable. As of October 27, 2012, $1.5 millionof PIK interest has been accrued. Also on July 9, 2012 in conjunction with the Secured Term Loan, we issued 1,000 shares of Series A Preferred Stock and the initial fair value was recorded as a discount to the Secured Term Loan. This discount is being amortized to interest expense based on the effective interest rate method.

In May 2011, we entered into the Credit Agreement with a maturity date of May 16, 2016, which is secured primarily by our inventory, credit card receivables, and certain other assets. The Credit Agreement provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to$70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts required by Wells Fargo Bank.  In conjunction with the closing of the Secured Term Loan, we amended the Credit Agreement and repaid the separate term loan previously provided by Wells Fargo Bank. The amendment did not materially change the terms of the Credit Agreement.As of October 27, 2012, the revolving line of credit was limited to a borrowing base of $70.0 million with no borrowings and $18.5 million in letters of credit issued, resulting in $51.5 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings issued under the revolving line of credit will generally accrue interest at a rate ranging from 1.00% to 2.50% (determined according to the average unused availability under the credit facility (the “Availability”)) over a reference rate of, at our election, either LIBOR or a base rate (the “Reference Rate”).Letters of credit issued under the revolving line of credit will accrue interest at a rate ranging from 1.50% to 2.50% (determined according to the Availability) with an interest rate of 2.00% as of October 27, 2012. Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. 

Both the Secured Term Loan and Credit Agreement have restrictive covenants that subject us to capital expenditure limitations, minimum amount of inventory to be held, minimum amount of liquidity and minimum excess availability over the borrowing base that must be maintained. The Secured Term Loan and Credit Agreement also contain various covenants relating to customary matters, such as indebtedness, liens, investments, acquisitions, mergers, dispositions, dividends, and other various conditions. Our current plan to close up to 45 stores under our store optimization program and the related transfer or disposition of store assets are not limited by our Secured Term Loan or Credit Agreement.  We were in compliance with all covenants for all periods presented.

Both the Secured Term Loan and Credit Agreement contain customary events of default. Upon an event of default that is not cured or waived within any applicable cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

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Debt and Capital Lease Obligations (Tables)

9 Months Ended

Oct. 27, 2012

Debt Disclosure [Abstract]

Debt and capital lease obligations

Debt and capital lease obligations consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	66,508		$	—		$	—
Term loan	—			14,900			14,950
Revolving line of credit	—			15,000			15,000
Capital lease obligations	12,033			12,410			12,624
Total debt and capital lease obligations	78,541			42,310			42,574
Less:
Secured term loan discount	(16,184		)	—			—
Current maturities of debt	—			(15,200		)	(15,200		)
Current maturities of capital lease obligations	(560		)	(535		)	(619		)
Long-term debt and capital lease obligations	$	61,797		$	26,575		$	26,755

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Significant Accounting Policies (Tables)

9 Months Ended

Oct. 27, 2012

Accounting Policies [Abstract]

Derivative liability significant assumptions

The derivative liability, representing shares of Series A Preferred Stock, is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs (retroactively adjusted to reflect the Reverse Stock Split):

	October 27, 2012
Closing price of Company's common stock	$3.99
Exercise price	$3.40
Risk-free interest rate	1.7	%
Expected volatility	82.2	%
Expected life	9.7 years

Derivative liability activity

Activity for the derivative liability was as follows:

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Balance at beginning of period	$	13,395	$	—	$	—	$	—
Issuance of Series A Preferred Stock	—		—		15,744		—
Loss on change in fair value	6,783		—		4,434		—
Balance at end of period	$	20,178	$	—	$	20,178	$	—

Total stock-based compensation recognized

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and restricted stock units (“RSUs”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Stock options	$	270	$	345	$	815	$	1,157
RSUs	196		128		520		478
	$	466	$	473	$	1,335	$	1,635

Weighted average assumptions

The fair value of stock option awards was estimated at the grant date using the Black-Scholes option valuation model with the following weighted average assumptions: 

	Nine Months Ended
	October 27, 2012			October 29, 2011
Risk-free interest rate	0.71		%	1.93		%
Expected volatility	90		%	88		%
Expected life	4.9 years			5.2 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	3.01		$	4.16

Interest expense, net

Interest expense, net, consisted of the following: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Interest expense	$	3,574		$	631		$	5,864		$	1,556
Interest income	(1		)	(32		)	(5		)	(36		)
	$	3,573		$	599		$	5,859		$	1,520

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Commitments and Contingencies

9 Months Ended

Oct. 27, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases

During the three months endedOctober 27, 2012 and October 29, 2011, we incurred aggregate rent expense under operating leases of $15.4 million and $19.0 million, respectively, including common area maintenance costs (“CAM”) of $3.2 million and $3.6 million, respectively, and excluding related real estate taxes of $2.4 million and $2.8 million, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, we incurred aggregate rent expense under operating leases of $50.0 million and $57.0 million, respectively, including CAM of $10.1 million and $11.1 million, respectively, and excluding related real estate taxes of $7.6 million and $8.4 million, respectively.

As of October 27, 2012, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, CAM, real estate taxes, and the amortization of lease incentives for our operating leases totaled $436.0 million.

Legal Proceedings

We are, from time to time, involved in various legal proceedings incidental to the conduct of business. Actions filed against us from time to time include commercial, intellectual property infringement, customer and employment claims, including class action lawsuits alleging that we violated federal and state wage and hour and other laws. We believe that we have meritorious defenses to all lawsuits and legal proceedings currently pending against us. Though we will continue to vigorously defend such lawsuits and legal proceedings, we are unable to predict with certainty whether or not we will ultimately be successful. However, based on management’s evaluation, we believe that the resolution of these matters, taking into account existing contingency accruals and the availability of insurance and other indemnifications, will not materially impact our consolidated financial position, results of operations or cash flows.

Tax Contingencies

Our multi-channel business model subjects us to state and local taxes in numerous jurisdictions, including franchise, and sales and use tax. We collect these taxes in jurisdictions in which we have a physical presence. While we believe we have paid or accrued for all taxes based on our interpretation of applicable law, tax laws are complex and interpretations differ from state to state. In the past, we have been assessed additional taxes and penalties by various taxing jurisdictions, asserting either an error in our calculation or an interpretation of the law that differed from our own. It is possible that taxing authorities may make additional assessments in the future. In addition to taxes, penalties and interest, these assessments could cause us to incur legal fees associated with resolving disputes with taxing authorities.

Additionally, changes in state and local tax laws, such as temporary changes associated with “tax holidays” and other programs, require us to make continual changes to our collection and reporting systems that may relate to only one taxing jurisdiction. If we fail to update our collection and reporting systems in response to these changes, any over collection or under collection of sales taxes could subject us to interest and penalties, as well as private lawsuits and damage to our reputation. In the opinion of management, resolutions of these matters will not have a material impact on our consolidated financial position, results of operations or cash flows.

Other

As of October 27, 2012, we had non-cancelable inventory purchase commitments of $130.9 million.

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Stockholders' Equity

9 Months Ended

Oct. 27, 2012

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity

Stockholders' Equity

On October 4, 2012, we effected the Reverse Stock Split at a ratio equal to one-for four. The Reverse Stock Split was approved at a special meeting of our stockholders on September 21, 2012. As a result of the Reverse Stock Split, every four shares of common stock issued prior to the opening of trading on October 4, 2012 was consolidated into one issued share reducing the total number of issued shares of common stock from 122.0 million shares to 30.5 million shares. The shares of Series A Preferred Stock outstanding remains the same. However, the number of shares of common stock each share of Series A Preferred Stock is convertible into and the related exercise price has been adjusted proportionally. The Reverse Stock Split did not affect the registration of our common stock under the Securities Exchange Act of 1934, as amended, or the listing of our common stock under the symbol "CWTR." Our stockholders' equity has been retroactively adjusted to reflect the Reverse Stock Split for all periods presented by reducing common stock and increasing additional paid-in capital, with no change to stockholders' equity in the aggregate. All share and per share information in this Form 10-Q has been retroactively adjusted to reflect the Reverse Stock Split.

On July 9, 2012 in conjunction with the Secured Term Loan, we issued 1,000 shares of Series A Preferred Stock to an affiliate of Golden Gate Capital which gives that affiliate the right to purchase up to 6.1 million shares of our common stock through the maturity date of July 9, 2022. Shares of Series A Preferred Stock have an initial exercise price of $3.40 per share of underlying common stock.

On October 24, 2011, we completed an underwritten public offering of 7.2 million shares of our common stock.  We received net proceeds from the offering of $23.0 million after deducting underwriting discounts and commissions and offering expenses.

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Supplemental Executive Retirement Plan

9 Months Ended

Oct. 27, 2012

Pension and Other Postretirement Benefit Expense [Abstract]

Supplemental Executive Retirement Plan

Supplemental Executive Retirement Plan

Net periodic benefit cost of the Supplemental Executive Retirement Plan (“SERP”) consisted of the following: 

	Three Months Ended				Nine Months Ended
	October 27, 2012		October 29, 2011		October 27, 2012		October 29, 2011
	(in thousands)
Interest cost	$	137	$	138	413		416
Amortization of unrecognized net actuarial loss	10		—		28		—
	$	147	$	138	$	441	$	416

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2012 and 2011. During the nine months endedOctober 27, 2012 and October 29, 2011, we made benefit payments of $124,501 and $124,500, respectively.

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Co-Branded Credit Card Program

9 Months Ended

Oct. 27, 2012

Deferred Revenue [Abstract]

Co-Branded Credit Card Program

Co-Branded Credit Card Program

Deferred marketing fees and revenue sharing

The deferred marketing fees and revenue sharing activity was as follows:

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Balance at beginning of period	$	8,884		$	9,502		$	8,800		$	10,309
Marketing fees received	1,199			1,175			3,058			3,528
Revenue sharing received	—			—			2,946			—
Marketing fees recognized to revenue	(1,191		)	(1,078		)	(3,383		)	(3,358		)
Revenue sharing recognized to revenue	(794		)	(440		)	(3,323		)	(1,320		)
Balance at end of period	8,098			9,159			8,098			9,159
Less — Current deferred marketing fees and revenue sharing	(4,841		)	(4,368		)	(4,841		)	(4,368		)
Long-term deferred marketing fees and revenue sharing	$	3,257		$	4,791		$	3,257		$	4,791

Sales Royalty

The amount of sales royalty recognized as revenue during the three months endedOctober 27, 2012 and October 29, 2011 was $1.8 million and $1.8 million, respectively.  During the nine months endedOctober 27, 2012 and October 29, 2011, sales royalty revenue was approximately $5.5 million and $5.2 million, respectively.

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Significant Accounting Policies Stock Option Awards Weighted Average Assumptions (Details) (Stock Options [Member], USD $)	9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011
Stock Options [Member]
Stock Option Awards Weighted Average Assumptions [Line Items]
Risk free interest rate	0.71%	1.93%
Expected volatility	90.00%	88.00%
Expected life (in years)	4 years 10 months 29 days	5 years 1 month 25 days
Expected dividends (in dollars per share)	$ 0	$ 0
Weighted average fair value per share (in dollars per share)	$ 3.01	$ 4.16

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Property and Equipment, net (Tables)

9 Months Ended

Oct. 27, 2012

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

Property and equipment, net, consisted of the following: 

	October 27, 2012			January 28, 2012			October 29, 2011
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,656			29,646			29,646
Leasehold improvements	262,605			273,039			277,617
Furniture and fixtures	116,202			119,656			121,262
Technology hardware and software	89,866			90,063			90,444
Machinery and equipment and other	34,547			35,129			35,564
Capital leases	12,805			12,780			12,781
Construction in progress	16,341			13,137			13,316
	562,264			573,692			580,872
Less — Accumulated depreciation and amortization	(381,624		)	(367,613		)	(361,351		)
	$	180,640		$	206,079		$	219,521

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Co-Branded Credit Card Program (Tables)

9 Months Ended

Oct. 27, 2012

Deferred Revenue [Abstract]

Deferred marketing fees and revenue sharing activity

The deferred marketing fees and revenue sharing activity was as follows:

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Balance at beginning of period	$	8,884		$	9,502		$	8,800		$	10,309
Marketing fees received	1,199			1,175			3,058			3,528
Revenue sharing received	—			—			2,946			—
Marketing fees recognized to revenue	(1,191		)	(1,078		)	(3,383		)	(3,358		)
Revenue sharing recognized to revenue	(794		)	(440		)	(3,323		)	(1,320		)
Balance at end of period	8,098			9,159			8,098			9,159
Less — Current deferred marketing fees and revenue sharing	(4,841		)	(4,368		)	(4,841		)	(4,368		)
Long-term deferred marketing fees and revenue sharing	$	3,257		$	4,791		$	3,257		$	4,791

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Oct. 27, 2012		Oct. 29, 2011		Oct. 27, 2012		Oct. 29, 2011
Segment Reporting Information [Line Items]
Net sales	$ 188,124	[1]	$ 187,465	[1]	$ 521,698	[1]	$ 548,669	[1]
Income (loss) from operations	(10,041)		(28,254)		(50,323)		(84,684)
Operating Segments [Member]
Segment Reporting Information [Line Items]
Income (loss) from operations	17,065		8,085		30,973		6,683
Retail [Member]
Segment Reporting Information [Line Items]
Net sales	147,245	[1]	144,138	[1]	408,386	[1]	421,644	[1]
Income (loss) from operations	10,127		1,757		15,536		(11,744)
Direct [Member]
Segment Reporting Information [Line Items]
Net sales	40,879	[1]	43,327	[1]	113,312	[1]	127,025	[1]
Income (loss) from operations	6,938		6,328		15,437		18,427
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Income (loss) from operations	$ (27,106)		$ (36,339)		$ (81,296)		$ (91,367)

[1] There were no sales between the retail and direct segments during the reported periods.

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Debt and Capital Lease Obligations Credit Agreement (Details) (USD $)				3 Months Ended
	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011	Oct. 27, 2012 Minimum [Member]	Oct. 27, 2012 Maximum [Member]	Oct. 27, 2012 Letter of Credit [Member]
Line of Credit Facility [Line Items]
Maximum borrowing capacity under line of credit	$ 70,000,000
Line of Credit Facility, Swingline Advances	10,000,000
Current borrowing base	70,000,000
Revolving line of credit	0	15,000,000	15,000,000
Letters of Credit Outstanding, Amount	18,500,000
Remaining borrowing capacity	$ 51,500,000
Additional interest rate above LIBOR or reference rate range				1.00%	2.50%
Interest rates at the end of the period						2.00%
Letters of Credit Interest Rate Range				1.50%	2.50%
Line of credit, commitment fee percentage range				0.375%	0.50%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Oct. 27, 2012	Oct. 29, 2011
Operating activities:
Net loss	$ (61,844)	$ (86,865)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	39,037	43,527
Non-cash interest expense	3,001	0
Stock-based compensation expense	1,335	1,635
Supplemental Executive Retirement Plan expense	441	416
Deferred income taxes	(26)	(646)
Valuation allowance adjustments	(343)	(840)
Deferred marketing fees and revenue sharing	(702)	(1,150)
Deferred rents	(15,569)	(12,356)
Loss on derivative liability	4,434	0
Series A Preferred Stock issuance costs	1,086	0
Net loss on asset dispositions and other termination charges	2,249	119
Loss on asset impairments	0	2,875
Other	207	316
Net change in operating assets and liabilities:
Receivables	(1,064)	(459)
Inventories	(29,740)	(15,489)
Prepaid and other current assets	(4,781)	7,531
Accounts payable	34,965	8,064
Accrued liabilities	(4,592)	(9,542)
Income taxes payable	(3,020)	3,305
Net cash used in operating activities	(34,926)	(59,559)
Investing activities:
Purchase of property and equipment	(14,234)	(6,963)
Proceeds from asset dispositions	141	795
Net cash used in investing activities	(14,093)	(6,168)
Financing activities:
Net proceeds from stock offering	0	22,979
Borrowings on revolving line of credit	10,000	15,000
Payments on revolving line of credit	(25,000)	0
Proceeds from the issuance of long-term debt	65,000	15,000
Payments of long-term debt and capital lease obligations	(15,309)	(553)
Payment of debt and Series A Preferred Stock issuance costs	(5,895)	(695)
Other	152	264
Net cash provided by financing activities	28,948	51,995
Net decrease in cash and cash equivalents	(20,071)	(13,732)
Cash and cash equivalents, beginning	51,365	51,613
Cash and cash equivalents, ending	31,294	37,881
Supplemental Cash Flow Data:
Interest paid, net of amount capitalized	2,863	1,463
Income taxes paid (refunded), net	$ 3,396	$ (2,627)

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Accrued Liabilities

9 Months Ended

Oct. 27, 2012

Accrued Liabilities, Current [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Accrued Liabilities

Accrued liabilities consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Accrued payroll and benefits	$	12,932	$	14,134	$	10,278
Gift cards and certificates	14,023		21,560		25,908
Derivative liability	20,178		—		—
Current portion of deferred rents	21,469		20,384		20,971
Current portion of deferred marketing fees and revenue sharing	4,841		4,398		4,368
Deferred sales royalty	3,310		3,511		3,250
Accrued sales returns	4,647		3,535		3,923
Accrued taxes	5,026		4,486		4,646
Other	3,394		2,907		2,162
	$	89,820	$	74,915	$	75,506

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Segment Reporting (Tables)

9 Months Ended

Oct. 27, 2012

Segment Reporting [Abstract]

Financial data for the retail and direct segments

The following table provides certain financial data for the retail and direct segments as well as reconciliations to the condensed consolidated financial statements: 

	Three Months Ended						Nine Months Ended
	October 27, 2012			October 29, 2011			October 27, 2012			October 29, 2011
	(in thousands)
Net sales (a):
Retail	$	147,245		$	144,138		$	408,386		$	421,644
Direct	40,879			43,327			113,312			127,025
Net sales	$	188,124		$	187,465		$	521,698		$	548,669
Segment operating income (loss):
Retail	$	10,127		$	1,757		$	15,536		$	(11,744	)
Direct	6,938			6,328			15,437			18,427
Total segment operating income	17,065			8,085			30,973			6,683
Corporate and other	(27,106		)	(36,339		)	(81,296		)	(91,367		)
Loss from operations	$	(10,041	)	$	(28,254	)	$	(50,323	)	$	(84,684	)

 ____________________________________________________________

(a) There were no sales between the retail and direct segments during the reported periods.

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Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Oct. 27, 2012	Jan. 28, 2012	Oct. 29, 2011
Accrued payroll and benefits	$ 12,932	$ 14,134	$ 10,278
Gift cards and certificates	14,023	21,560	25,908
Derivative liability	20,178	0	0
Current portion of deferred rents	21,469	20,384	20,971
Deferred Revenue, Current	4,841		4,368
Accrued sales returns	4,647	3,535	3,923
Accrued taxes	5,026	4,486	4,646
Other	3,394	2,907	2,162
Accrued liabilities	89,820	74,915	75,506
Deferred Marketing Fees and Revenue Sharing [Member]
Deferred Revenue, Current	4,841	4,398	4,368
Deferred Sales Royalty [Member]
Deferred Revenue, Current	$ 3,310	$ 3,511	$ 3,250

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Receivables (Tables)

9 Months Ended

Oct. 27, 2012

Receivables [Abstract]

Receivables

Receivables consisted of the following: 

	October 27, 2012		January 28, 2012		October 29, 2011
	(in thousands)
Credit card receivables	$	5,174	$	2,960	$	5,208
Tenant allowances	501		2,112		2,140
Other	2,879		3,127		3,523
	$	8,554	$	8,199	$	10,871