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 May 4, 2013

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 June 4, 2013
Common Stock ($0.01 par value)	30,547,474

Coldwater Creek Inc.

Form 10-Q

For the Fiscal Quarter Ended May 4, 2013

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		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		22
Item 4. Controls and Procedures		22
PART II. OTHER INFORMATION		23
Item 1. Legal Proceedings		23
Item 1A. Risk Factors		23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 3. Defaults Upon Senior Securities		25
Item 4. Mine Safety Disclosures		25
Item 5. Other Information		25
Item 6. Exhibits		25
Signatures		26
Exhibit Index		27

"We," "us," "our," "Company," "Coldwater," and "Coldwater Creek," 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)

	May 4, 2013			February 2, 2013			April 28, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	10,915		$	21,734		$	22,989
Receivables	7,265			5,150			11,539
Inventories	126,540			125,207			127,684
Prepaid and other current assets	17,403			17,072			11,625
Deferred income taxes	1,184			1,252			2,313
Total current assets	163,307			170,415			176,150
Property and equipment, net	160,351			169,007			196,523
Deferred income taxes	2,117			2,112			1,887
Other assets	4,152			4,374			1,795
Total assets	$	329,927		$	345,908		$	376,355
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	51,275		$	57,891		$	52,487
Accrued liabilities	86,258			87,915			72,843
Current maturities of debt and capital lease obligations	15,594			577			15,728
Total current liabilities	153,127			146,383			141,058
Deferred rents	77,243			82,726			96,723
Long-term debt and capital lease obligations	65,655			63,784			26,407
Supplemental executive retirement plan	10,939			10,994			12,248
Deferred income taxes	636			699			1,716
Other liabilities	3,862			4,186			5,174
Total liabilities	311,462			308,772			283,326
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000 shares authorized; 1, 1 and 0 shares issued, respectively	—			—			—
Common stock, $0.01 par value, 75,000 shares authorized; 30,547, 30,531 and 30,439 shares issued, respectively	305			305			304
Additional paid-in capital	153,830			153,146			151,630
Accumulated other comprehensive loss	(1,532		)	(1,532		)	(2,204		)
Accumulated deficit	(134,138		)	(114,783		)	(56,701		)
Total stockholders' equity	18,465			37,136			93,029
Total liabilities and stockholders' equity	$	329,927		$	345,908		$	376,355

The accompanying notes are an integral part of these consolidated 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
	May 4, 2013			April 28, 2012
Net sales	$	155,729		$	169,884
Cost of sales	104,765			115,493
Gross profit	50,964			54,391
Selling, general and administrative expenses	68,362			77,519
Loss from operations	(17,398		)	(23,128		)
Other gain, net	(926		)	—
Interest expense, net	3,573			561
Loss before income taxes	(20,045		)	(23,689		)
Income tax provision (benefit)	(690		)	71
Net loss	$	(19,355	)	$	(23,760	)
Total comprehensive loss	$	(19,355	)	$	(23,760	)
Net loss per share — Basic and Diluted	$	(0.63	)	$	(0.78	)
Weighted average shares outstanding — Basic and Diluted	30,538			30,428

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

4

COLDWATER CREEK INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands) 

	Three Months Ended
	May 4, 2013			April 28, 2012
Operating activities:
Net loss	$	(19,355	)	$	(23,760	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10,818			13,752
Non-cash interest expense	2,289			—
Stock-based compensation expense	632			348
Supplemental executive retirement plan expense	113			147
Deferred marketing fees and revenue sharing	(689		)	(652		)
Deferred rents	(5,574		)	(5,095		)
Gain on derivative liability	(926		)	—
Net loss on asset dispositions and other termination charges	781			1,226
Other	(137		)	(86		)
Net change in operating assets and liabilities:
Receivables	(2,130		)	(3,330		)
Inventories	(1,333		)	4,291
Prepaid and other current assets	(404		)	(2,215		)
Accounts payable	(7,669		)	(4,292		)
Accrued liabilities	(294		)	(4,868		)
Net cash used in operating activities	(23,878		)	(24,534		)
Investing activities:
Purchase of property and equipment	(1,865		)	(3,699		)
Proceeds from asset dispositions	15			—
Net cash used in investing activities	(1,850		)	(3,699		)
Financing activities:
Borrowings on revolving line of credit	18,000			10,000
Payments on revolving line of credit	(3,000		)	(10,000		)
Payments of long-term debt and capital lease obligations	(137		)	(201		)
Other	46			58
Net cash provided by (used in) financing activities	14,909			(143		)
Net decrease in cash and cash equivalents	(10,819		)	(28,376		)
Cash and cash equivalents, beginning	21,734			51,365
Cash and cash equivalents, ending	$	10,915		$	22,989
Supplemental Cash Flow Data:
Interest paid, net of amount capitalized	$	1,284		$	418
Income taxes paid (refunded), net	$	(676	)	$	2,125

The accompanying notes are an integral part of these consolidated 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, jewelry and accessories. We conduct business in two operating segments: retail and direct. The retail segment consists of our premium retail stores, factory stores and day spas. The direct segment consists of sales generated through our e-commerce website and mobile applications as well as orders taken from customers over the phone and through the mail.

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 February 2, 2013 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 February 2, 2013.

On October 4, 2012, we effected a reverse stock split of the Company's common stock following stockholder approval (the "Reverse Stock Split"). As a result of the split, every four shares of common stock outstanding were consolidated into one share. 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.

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 February 2, 2013.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Fiscal Periods

References to a fiscal year refer to the calendar year in which the fiscal year begins. Our fiscal year ends on the Saturday nearest January 31st.

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, contingent liabilities 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.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is made up entirely of unrecognized net actuarial loss, net of tax, for the Supplemental Executive Retirement Plan (the "SERP"). See Note 10. Supplemental Executive Retirement Plan, for amounts reclassified from accumulated other comprehensive loss to net periodic benefit costs due to the amortization of net actuarial loss.

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.

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. The derivative liability is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs:

	May 4, 2013			February 2, 2013
Closing price of Company's common stock	$	3.70		$	3.69
Exercise price	$	3.40		$	3.40
Risk-free interest rate	1.6		%	1.9		%
Expected volatility	77.8		%	84.9		%
Expected life	9.2			9.4
Expected dividends	$	—		$	—

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. To the extent any of these assumptions increases or decreases in isolation, the fair value of the derivative liability increases or decreases accordingly. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. Activity for the derivative liability was as follows:

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	18,683		$	—
Issuance of Series A Preferred Stock	—			—
Gain on change in fair value	(926		)	—
Balance at end of period	$	17,757		$	—

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 approximate their fair values due to their short-term nature. As of May 4, 2013, the fair value of our senior secured term loan was $64.3 million compared to the carrying value of $54.5 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 approximated fair value at April 28, 2012.

7

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Income Taxes

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulated loss incurred over the last three years. Such objective evidence limits the ability to consider other subjective evidence. We have a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence.

3. Receivables

Receivables consisted of the following: 

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Credit card receivables	$	5,437	$	2,928	$	6,790
Tenant allowances	525		484		1,465
Other	1,303		1,738		3,284
	$	7,265	$	5,150	$	11,539

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 May 4, 2013, February 2, 2013 and April 28, 2012, no allowance for doubtful accounts was deemed necessary.

4. Property and Equipment, net

Property and equipment, net, consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,675			29,655			29,650
Leasehold improvements	257,222			258,765			265,473
Furniture and fixtures	114,444			114,709			117,989
Technology hardware and software	90,764			89,992			90,492
Machinery and equipment and other	33,760			34,341			34,978
Capital leases	12,805			12,805			12,805
Construction in progress	16,574			16,480			13,397
	555,486			556,989			565,026
Less — Accumulated depreciation and amortization	(395,135		)	(387,982		)	(368,503		)
	$	160,351		$	169,007		$	196,523

8

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. Accrued Liabilities

Accrued liabilities consisted of the following:

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Accrued payroll and benefits	$	13,838	$	12,356	$	12,553
Gift cards and certificates	15,532		18,427		17,203
Derivative liability	17,757		18,683		—
Current portion of deferred rents	20,846		20,756		20,818
Current portion of deferred marketing fees and revenue sharing	3,988		4,484		4,367
Deferred sales royalty	2,748		3,106		3,287
Accrued sales returns	4,431		3,738		4,461
Accrued taxes	4,062		4,200		6,210
Other	3,056		2,165		3,944
	$	86,258	$	87,915	$	72,843

6. Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	69,153		$	67,866		$	—
Term loan	—			—			14,850
Revolving line of credit	15,000			—			15,000
Capital lease obligations	11,766			11,901			12,285
Total debt and capital lease obligations	95,919			79,767			42,135
Less:
Secured term loan discount	(14,670		)	(15,406		)	—
Current maturities of debt	(15,000		)	—			(15,200		)
Current maturities of capital lease obligations	(594		)	(577		)	(528		)
Long-term debt and capital lease obligations	$	65,655		$	63,784		$	26,407

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 May 4, 2013, $4.2 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 of $15.7 million 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 amount of credit that is available under the revolving line of credit is limited to a borrowing base that is determined according to, among other things, a percentage of the value of eligible inventory and credit card receivables, as reduced by certain reserve amounts required by Wells Fargo Bank. The actual amount that is available under our revolving line

9

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

of credit fluctuates from time to time, due to factors including, but not limited to, eligible inventory and credit card receivables, reserve amounts, outstanding letters of credit, and borrowing under our revolving line of credit. 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 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 liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity. In connection 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 May 4, 2013, the revolving line of credit was limited to a borrowing base of $70.0 million with $15.0 million in borrowings and $6.3 million in letters of credit issued, resulting in $48.7 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") with an interest rate of 2.25% as of May 4, 2013. 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 May 4, 2013. 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 based on our approved annual plan, maintaining a minimum of $95.0 million of inventory, and maintaining a minimum of $15.0 million of liquidity and a minimum excess availability of 15 percent of our borrowing base, as defined in the Credit Agreement. 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 is 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, restricted stock units ("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.

10

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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
	May 4, 2013			April 28, 2012
	(in thousands, except per share amounts)
Net loss	$	(19,355	)	$	(23,760	)
Weighted average common shares outstanding during the period (for basic calculation)	30,538			30,428
Dilutive effect of other potential common shares	—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,538			30,428
Net loss per common share—Basic	$	(0.63	)	$	(0.78	)
Net loss per common share—Diluted	$	(0.63	)	$	(0.78	)

During the three months endedMay 4, 2013 and April 28, 2012, 2.1 million and 1.6 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. 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

Reverse Stock Split

On October 4, 2012, we effected a reverse stock split of the Company's common stock following stockholder approval. As a result of the split, every four shares of common stock outstanding were consolidated into one share, reducing the number of common shares outstanding on the effective date 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.

Series A Preferred Stock

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 July 9, 2022. Shares of Series A Preferred Stock have an initial exercise price of $3.40 per share of underlying common stock.

9. Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and RSUs consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Stock options	$	213	$	230
RSUs	419		118
	$	632	$	348

11

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

During the three months endedMay 4, 2013 and April 28, 2012, employees were granted 97,000 and 245,325 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: 

	Three Months Ended
	May 4, 2013			April 28, 2012
Risk-free interest rate	0.8		%	0.7		%
Expected volatility	91.4		%	89.6		%
Expected life	5.0 years			5.0 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	2.46		$	3.20

During the three months endedMay 4, 2013 and April 28, 2012, employees were granted 410,200 and 106,375 RSUs, respectively, at a weighted average fair value of $3.49 and $4.64, respectively. During the three months endedApril 28, 2012, employees were also granted 123,500 performance RSUs at a weighted average grant date fair value of $4.64. For the performance RSUs granted during the three months endedApril 28, 2012, half of the RSUs are subject to the achievement of combined operating income 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. 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.

10. Supplemental Executive Retirement Plan

Net periodic benefit cost of the SERP consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Interest cost	$	113	$	138
Amortization of net actuarial loss	—		9
	$	113	$	147

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2013 and 2012. During the three months endedMay 4, 2013 and April 28, 2012, we made benefit payments of $41,500 and $41,500, respectively.

11. Commitments and Contingencies

Operating Leases

As of May 4, 2013, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, common area maintenance costs ("CAM"), real estate taxes, and the amortization of lease incentives for our operating leases, totaled $398.4 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.

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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 May 4, 2013, we had non-cancelable inventory purchase commitments of $89.2 million.

12. 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
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	7,752		$	8,800
Marketing fees received	866			863
Marketing fees recognized to revenue	(1,117		)	(1,075		)
Revenue sharing recognized to revenue	(438		)	(440		)
Balance at end of period	7,063			8,148
Less — Current deferred marketing fees and revenue sharing	(3,988		)	(4,367		)
Long-term deferred marketing fees and revenue sharing	$	3,075		$	3,781

Sales Royalty

The amount of sales royalty recognized as revenue during the three months endedMay 4, 2013 and April 28, 2012 was $2.1 million and $1.9 million, respectively.

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COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

13. 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
	May 4, 2013			April 28, 2012
	(in thousands)
Net sales (a):
Retail	$	117,754		$	131,202
Direct	37,975			38,682
Net sales	$	155,729		$	169,884
Segment operating income (loss):
Retail	$	387		$	923
Direct	7,686			4,789
Total segment operating income	8,073			5,712
Corporate and other	(25,471		)	(28,840		)
Loss from operations	$	(17,398	)	$	(23,128	)

 ____________________________________________________________

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

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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. Refer to our 1A. Risk Factors, in this Form 10-Q and other reports we file with the SEC. We assume no obligation to update our forward-looking statements to conform these statements to actual results or revised 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 reverse stock split of the Company's common stock following stockholder approval (the "Reverse Stock Split"). As a result of the split, every four shares of common stock outstanding were consolidated into one share. 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 decreased to $155.7 million for the three months endedMay 4, 2013, compared to $169.9 million for the three months endedApril 28, 2012. This decrease in net sales was primarily driven by a decrease in comparable premium retail store sales⁽¹⁾ of 10.5 percent, the impact of store closures and a decrease of 1.8 percent in our direct sales, partially offset by the impact of the shift in weeks as a result of the 53rd week in fiscal 2012. 

Gross profit was $51.0 million, or 32.7 percent of net sales, for the three months endedMay 4, 2013, compared to $54.4 million, or 32.0 percent of net sales, for the three months endedApril 28, 2012. This increase in gross profit margin was primarily due to increased leverage of buying and occupancy costs. 

Selling, general and administrative expenses ("SG&A") were $68.4 million, or 43.9 percent of net sales, for the three months endedMay 4, 2013, compared to $77.5 million, or 45.6 percent of net sales, for the three months endedApril 28, 2012. The decrease of $9.2 million in SG&A was primarily due to lower expenses across all categories.

Net loss for the three months endedMay 4, 2013 was $19.4 million, or $0.63 per share, on 30.5 million weighted average shares outstanding, and included other gain, net, of $0.9 million, or $(0.03) 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. This compares to a net loss of $23.8 million, or $0.78 per share, on 30.4 million weighted average shares outstanding, for the three months endedApril 28, 2012.

We ended the first quarter of fiscal 2013 with $10.9 million in cash and cash equivalents compared to $23.0 million at the end of the first quarter of fiscal 2012.  As of May 4, 2013, we had $15.0 million outstanding under our revolving line of credit, compared to $15.0 million at the end of the first quarter of fiscal 2012. At the end of the first quarter of fiscal 2013, working capital was $10.2 million compared to $35.1 million at the end of the first quarter of fiscal 2012. The reduction in working capital reflects the impact of the $17.8 million derivative liability, which is included in accrued liabilities. Retail inventory per square foot, which includes inventory in our premium retail stores, factory stores, and in our distribution center, increased 6.7 percent compared to the first quarter of fiscal 2012. Total inventory decreased 0.9 percent to $126.5 million at the end of the first quarter of fiscal 2013 from $127.7 million at the end of the first quarter of fiscal 2012. 

____________________________________________________________

(1)  Change in comparable store sales is calculated based on the net sales for stores that have been open for at least 16 consecutive months. Stores where square footage has been changed by more than 20 percent and stores relocated are treated as a new store upon reopening. Net sales for stores closed during the year are included in the change in comparable store sales up until the store closes. In a fiscal year with 53 weeks, the change in comparable store sales excludes the additional week. 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. Due to the extensive promotions that occur as part of a store opening or reopening, we believe waiting 16 months to consider a store to be comparable provides a better view of the change in store sales.

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Company Initiatives

For fiscal 2013, we are focused on the following strategic initiatives:

Our first initiative is to strengthen the Coldwater Creek brand by continuing to reposition Coldwater Creek as a leader in the marketplace, providing our customers with trend-right, age-appropriate fashion, and a consistent multi-channel experience. We have recently completed a comprehensive study of our target customer, which will guide our decision making and is expected to enable our organization to execute more consistently.

In merchandising and design, we will continue to build on the base that we established in 2012. We will broaden our core product offering by introducing new categories, and we are committed to executing our assortment architecture to ensure that our merchandise consistently offers the appropriate balance of color, print, and pattern and fit to flatter outfits in each and every product flow.

We will refine our marketing platform to drive traffic to all channels by leveraging our loyalty program, which was rolled out in fiscal 2012. We are combining our legacy One Creek loyalty program with our new Rewards program into one comprehensive tiered loyalty platform with benefits and incentives associated with different levels of spend. In addition, we are focused on adding new loyalty members and increasing the shopping frequency of our current members.

We remain focused on improving our inventory productivity through tighter inventory commitments by adjusting the depth, while maintaining the breadth of styles and color choices, in our assortments. In the first quarter of fiscal 2013, we implemented a new inventory planning system, which is expected to enable us to improve our budgeting and forecasting, make better buying decisions and react more quickly to a product's demand.

We will continue to execute our real estate optimization program, which we began in fiscal 2011. Through May 4, 2013, we have closed a total of 34 under-performing stores and expect to close an additional 11 stores, which would bring the total number of closures to 45 stores by the end of fiscal 2013. As part of our strategy to reduce the average store size over time, we will continue to opportunistically downsize and relocate stores in certain markets.

We will also focus on optimizing our supply chain capabilities, which should enable us to reduce our cycle time and lower our cost of goods. We plan to reduce our cycle time by streamlining our product development processes, improving our forecasting and planning of capacity and raw materials, and enhancing our overall logistics model.

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 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 household incomes and high unemployment. We believe these conditions could continue to have a negative impact on our sales, gross margin and operating performance.

We remain committed to disciplined management of expenses and inventory and expect to reduce SG&A year-over-year by $12.0 million to $14.0 million in fiscal 2013. Also, for fiscal 2013, we expect capital expenditures to be $15.0 million to $18.0 million and depreciation and amortization expense to be approximately $40.0 million to $45.0 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.

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Results of Operations

Comparison of the Three Months EndedMay 4, 2013with the Three Months EndedApril 28, 2012:

	Three Months Ended
	May 4, 2013			% of  net sales		April 28, 2012			% of  net sales		$ change			% change
	(dollars in thousands, except per share data)
Net sales:
Retail	$	117,754		75.6	%	$	131,202		77.2	%	$	(13,448	)	(10.2	)%
Direct	37,975			24.4		38,682			22.8		(707		)	(1.8	)
	155,729			100.0		169,884			100.0		(14,155		)	(8.3	)
Cost of sales	104,765			67.3		115,493			68.0		(10,728		)	(9.3	)
Gross profit	50,964			32.7		54,391			32.0		(3,427		)	(6.3	)
Selling, general and administrative expenses	68,362			43.9		77,519			45.6		(9,157		)	(11.8	)
Loss from operations	(17,398		)	(11.2	)	(23,128		)	(13.6	)	5,730			(24.8	)
Other gain, net	(926		)	(0.6	)	—			—		(926		)	*
Interest expense, net	3,573			2.3		561			0.3		3,012			536.9
Loss before income taxes	(20,045		)	(12.9	)	(23,689		)	(13.9	)	3,644			(15.4	)
Income tax provision (benefit)	(690		)	(0.4	)	71			—		(761		)	*
Net loss	$	(19,355	)	(12.4	)%	$	(23,760	)	(14.0	)%	$	4,405		(18.5	)%
Net loss per share — Basic and Diluted	$	(0.63	)			$	(0.78	)			$	0.15		(19.2	)%
Premium Retail Store Count:
Beginning of the period	349					363
Opened	—					—
Closed	2					4
End of the period	347					359

____________________________________________________________

*     Percentage comparisons for changes are not considered meaningful.

Net Sales

The $13.4 million decrease in retail segment net sales for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012 is primarily the result of a 10.5 percent decrease in comparable premium retail store sales and the impact of 12 net store closures since the end of the first quarter of fiscal 2012 as part of our store optimization program, partially offset by the impact of the shift in weeks as a result of the 53rd week in fiscal 2012. The decrease in comparable premium retail store sales was primarily driven by a 10.0 percent decrease in traffic and a 7.6 percent decrease in comparable average transaction value, partially offset by an 8.2 percent increase in conversion.  

The $0.7 million decrease in direct segment net sales for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012 is primarily the result of a 12.8 percent decrease in order volume, partially offset by a 9.1 percent increase in average transaction value and an increase in shipping revenue during the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012.

Gross Profit

Gross profit margin increased by 0.7 percentage points during the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012.  Gross profit margin was favorably impacted by a 0.7 percentage point improvement due to increased leverage of buying and occupancy costs. Merchandise margins were relatively flat for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012. 

Selling, General and Administrative Expenses

SG&A decreased$9.2 million during the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012, primarily due to lower expenses across all categories with the largest declines from marketing and employee-related expenses.

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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
	May 4, 2013			% of Segment Sales		April 28, 2012			% of Segment Sales		%  Change
	(dollars in thousands)
Segment operating income:
Retail	$	387		0.3	%	$	923		0.7	%	(58.1	)%
Direct	7,686			20.2		4,789			12.4		60.5
Total segment operating income	8,073					5,712					41.3
Unallocated corporate and other	(25,471		)			(28,840		)			(11.7	)
Loss from operations	$	(17,398	)			$	(23,128	)			(24.8	)%

Retail segment operating income rate expressed as a percent of retail segment sales for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012 decreased by 0.4 percentage points. The retail segment operating income rate was negatively impacted by 1.7 percentage points due to lower margins, partially offset by the favorable impact of store closures since the end of the first quarter of fiscal 2012 as part of our store optimization program and lower marketing expenses.   

Direct segment operating income rate expressed as a percent of direct segment sales for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012 increased by 7.8 percentage points.  The direct segment operating income rate was favorably impacted by 6.1 percentage points due to higher margins, as well as lower marketing and employee-related expenses.

Unallocated corporate and other expenses decreased $3.4 million for the three months endedMay 4, 2013 as compared to the three months endedApril 28, 2012, primarily due to lower expenses in all categories with the largest declines from marketing and employee-related expenses.

Other Gain, net

During the three months endedMay 4, 2013, we recorded a $0.9 million gain from a fair value adjustment related to the derivative liability.

Interest Expense, net

The increase in interest expense, net, for the three months endedMay 4, 2013 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. Interest expense includes non-cash interest expense of $2.3 million, which primarily includes accrued PIK interest expense and amortization of loan discounts and deferred debt issuance costs.

Provision for Income Taxes

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

Seasonality

Our results of operations and cash flows have fluctuated, and will continue to fluctuate, on a quarterly basis, as well as on an annual basis, as a result of a number of factors, including, but not limited to, 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;

•     the ability to accurately estimate and accrue for merchandise returns and the costs of inventory disposition;

• 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

18

• 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, and the day of the week on which certain important holidays fall.

Our results continue to depend materially on sales and profits from 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 temporary employees to supplement the existing workforce.

Liquidity and Capital Resources

Overview

Key measurements of liquidity and capital resources were as follows:

	May 4, 2013		February 2, 2013		April 28, 2012
	(dollars in thousands)
Cash and cash equivalents	$	10,915	$	21,734	$	22,989
Working capital (a)	$	10,180	$	24,032	$	35,092
Current ratio (a)	1.07		1.16		1.25
Borrowings under revolving line of credit	$	15,000	$	—	$	15,000
Revolving line of credit availability	$	48,664	$	48,348	$	38,111

____________________________________________________________

(a) The working capital and current ratios as of May 4, 2013 and February 2, 2013 reflect the impact of the $17.8 million and $18.7 million derivative liability, which is included in accrued liabilities, respectively.

We rely on our cash resources to fund our operations and 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 of available borrowings. The actual amount that is available under our revolving line of credit fluctuates from time to time, due to factors including, but not limited to, eligible inventory and credit card receivables, reserve amounts, outstanding letters of credit, and borrowing under our revolving line of credit. 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 liquidity, including cash and availability under our revolving line of credit that we may continue to draw on from time to time, to fund our operations for the next twelve months. 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 liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity, which may include further reducing our expenditures or curtailing our operations. 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.

Net cash flow activities were as follows:

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Net cash used in operating activities	$	(23,878	)	$	(24,534	)
Net cash used in investing activities	$	(1,850	)	$	(3,699	)
Net cash provided by (used in) financing activities	$	14,909		$	(143	)

Operating Cash Flows

Net cash used in operating activities decreased $0.7 million during the three months endedMay 4, 2013 as compared with the three months endedApril 28, 2012, primarily as a result of the decrease in net loss, net of non-cash activity, partially offset by higher use of cash from operating assets and liabilities.

Investing Cash Flows

Net cash used in investing activities principally consisted of cash outflows for capital expenditures which totaled $1.9 million and $3.7 million during the three months endedMay 4, 2013 and April 28, 2012, respectively. Capital expenditures during the three months endedMay 4, 2013 and April 28, 2012 primarily related to the relocation and remodeling of certain existing stores and the additional investment in our technology infrastructure.

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Financing Cash Flows

Net cash provided by financing activities during the three months endedMay 4, 2013 primarily reflects net borrowings on our revolving line of credit. Net cash used in financing activities during the three months endedApril 28, 2012 primarily reflects payments on our capital lease obligations.

Secured Term Loan

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 May 4, 2013, $4.2 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 of $15.7 million 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.

Credit Agreement

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 amount of credit that is available under the revolving line of credit is limited to a borrowing base that is determined according to, among other things, a percentage of the value of eligible inventory and 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 May 4, 2013, the revolving line of credit was limited to a borrowing base of $70.0 million with $15.0 million in borrowings and $6.3 million in letters of credit issued, resulting in $48.7 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") with an interest rate of 2.25% as of May 4, 2013. 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 May 4, 2013. 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.

Debt Covenants

Both the Secured Term Loan and Credit Agreement have restrictive covenants that subject us to capital expenditure limitations based on our approved annual plan, maintaining a minimum of $95.0 million of inventory, and maintaining a minimum of $15.0 million of liquidity and a minimum excess availability of 15 percent of our borrowing base, as defined in the Credit Agreement. 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 is 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.

Capital and Real Estate Plans

Capital expenditures for fiscal 2013 are expected to be between $15.0 million and $18.0 million. We currently plan to limit new store openings to one factory stores in fiscal 2013 and will continue to take advantage of real estate opportunities to improve the efficiency of our store base, including relocating stores to more favorable locations and reducing overall store size.

In fiscal 2011, we announced a store optimization program where we expect to close up to 45 stores through fiscal 2013. Through May 4, 2013, we have closed 34 under-performing 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 million to $12.0 million in annualized improvement in

20

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.

Contractual Obligations

The following table summarizes our minimum contractual commitments and commercial obligations as of May 4, 2013:

	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in thousands)
Operating leases (a) (d)	$	398,402	$	68,831	$	123,288	$	82,667	$	123,616
Contractual commitments (b)	89,998		89,998		—		—		—
Debt, including estimated interest payments (c)	128,563		18,956		8,863		100,744		—
Capital leases (d)	21,784		1,495		2,417		2,346		15,526
Benefit obligations (e)	12,794		1,846		1,276		1,334		8,338
	$	651,541	$	181,126	$	135,844	$	187,091	$	147,480

____________________________________________________________

(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 May 4, 2013 of $53.0 million. All other operating leases primarily pertain to premium and factory 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 $89.2 million and capital expenditures of $0.8 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 May 4, 2013 of $17.7 million, and as an operating lease from August 2028 through July 2038, with a remaining operating lease commitment as of May 4, 2013 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 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 February 2, 2013.

21

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.

As of May 4, 2013, we had outstanding borrowings of $15.0 million under our revolving line of credit. The impact of a hypothetical 10 percent adverse change in interest rates for our revolving line of credit would have resulted in an immaterial amount of additional expense for the three months endedMay 4, 2013. Our Secured Term Loan bears interest at a fixed rate and would not 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 May 4, 2013, in isolation of the impact to the volatility assumption, would have increased (decreased) the fair value of the derivative liability by approximately $2.0 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 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 May 4, 2013. Based on that evaluation, our 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 May 4, 2013.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the first quarter of fiscal 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

PART II.     OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

See Note 11. 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 three months endedMay 4, 2013 we believe to be material to the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended February 2, 2013 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 can be challenging given the nature of changing fashion trends and consumer preferences. 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 and results of operations will be adversely affected. If the demand for our merchandise is 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 the demand for merchandise is stronger than expected, 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 in order to 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, which is largely dependent on the success of our product design, merchandise assortment, and marketing efforts and our ability to provide a consistent, high quality customer experience. Our marketing programs, which include loyalty programs, e-commerce platforms and programs, and print media, is designed to improve Coldwater Creek's brand value and to increase traffic to all channels. 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 restrictions that may limit our ability to fund operations, which could adversely affect our business.

Both our 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.

We use the revolving line of credit provided under our Credit Agreement to secure trade letters of credit and, from time to time for borrowings, both of which reduce the amount of available borrowings. The actual amount available under our revolving line of credit fluctuates from time to time due to factors including, but not limited to, eligible inventory and credit card receivables, reserve amounts, outstanding letters of credit, and borrowing under our revolving line of credit. 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. As of May 4, 2013, the revolving line of credit was limited to a borrowing base of $70.0 million with $6.3 million in letters of credit issued and $15.0 million in borrowings on our revolving line of credit, resulting in $48.7 million available for borrowing under our revolving line of credit.

23

Continued material operating losses have adversely impacted our liquidity, including our cash, 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 liquidity, including cash and availability under our revolving line of credit that we may continue to draw on from time to time, to fund our operations for the next twelve months. 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 liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity, which may include further reducing our expenditures or curtailing our operations. 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.

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 stores. Through May 4, 2013, we have closed 34 under-performing 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.

We are subject to significant risks associated with our management information systems, which, if not working properly, could adversely affect our results of operations.

We have a number of complex management information systems that are critical to our operations, including systems such as accounting, human resources, inventory purchasing and management, financial planning, direct segment order processing, and retail segment point-of-sale systems. While we regularly evaluate the capabilities and requirements of our information systems, there can be no assurances that our existing information systems will be adequate to support the future needs of our business. We are currently undertaking certain significant information system implementations, modifications and upgrades. Installing new systems and maintaining and upgrading existing systems carries substantial risk, including potential loss of data or information, cost overruns, disruption of operations, lower customer satisfaction, inability to deliver merchandise to our stores or our customers and our potential inability to meet regulatory requirements, any of which would harm our business and may adversely affect our results of operations.

Our reliance on foreign vendors subjects us to uncertainties that could adversely affect our business.

We continue to source the majority of our apparel directly from foreign vendors, particularly those located in Asia, India and Central America. Irrespective of our direct sourcing from foreign vendors, substantially all of our merchandise, including that which we buy from domestic vendors, is manufactured overseas. This exposes us to risks and uncertainties which could substantially impact our ability to realize any perceived cost savings or could damage our reputation or disrupt the production of our merchandise. These risks include, among other things:

• burdens associated with doing business overseas, including the imposition of, or increases in, tariffs or import duties, or import/export controls or regulations, as well as credit assurances we are required to provide to foreign vendors;

•     declines in the relative value of the U.S. dollar to foreign currencies;

•     volatile labor, fuel, energy and raw material costs;

• failure of vendors to adhere to our quality assurance standards, code of conduct and other environmental, labor, health, and safety standards for the benefit of workers;

• financial instability of a vendor or vendors, including their potential inability to obtain credit to manufacture the merchandise they produce for us;

•     the potential inability of our vendors to meet our production needs due to raw material or labor shortages;

• changing, uncertain or negative economic conditions, political uncertainties or unrest, or epidemics or other health or weather-related events in foreign countries resulting in the disruption of trade from exporting countries; and

•     restrictions on the transfer of funds or transportation delays or interruptions.

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

None 

24

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.     MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

None

ITEM 6.     EXHIBITS

(A) Exhibits: 

Exhibit Number	Description of Document
31.1*	Certification by Jill Brown Dean 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 Jill Brown Dean 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

 ____________________________________________________________

*	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.

25

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 6th day of June 2013. 

COLDWATER CREEK INC.
By:	/s/ Jill Brown Dean
	Jill Brown Dean
	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)

26

EXHIBIT INDEX

Exhibit Number	Description of Document
31.1*	Certification by Jill Brown Dean 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 Jill Brown Dean 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

____________________________________________________________

*	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.

27

EX-31.1

Exhibit 31.1

I, Jill Brown Dean, 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:	June 6, 2013
/s/ Jill Brown Dean
Jill Brown Dean
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:	June 6, 2013
/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

I, Jill Brown Dean, 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 May 4, 2013, 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/ Jill Brown Dean

Jill Brown Dean

President and Chief Executive Officer

(Principal Executive Officer)

June 6, 2013

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 May 4, 2013, 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)

June 6, 2013

XML

Co-Branded Credit Card Program

3 Months Ended

May 04, 2013

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
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	7,752		$	8,800
Marketing fees received	866			863
Marketing fees recognized to revenue	(1,117		)	(1,075		)
Revenue sharing recognized to revenue	(438		)	(440		)
Balance at end of period	7,063			8,148
Less — Current deferred marketing fees and revenue sharing	(3,988		)	(4,367		)
Long-term deferred marketing fees and revenue sharing	$	3,075		$	3,781

Sales Royalty

The amount of sales royalty recognized as revenue during the three months endedMay 4, 2013 and April 28, 2012 was $2.1 million and $1.9 million, respectively.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	May 04, 2013		Apr. 28, 2012
Income Statement [Abstract]
Net sales	$ 155,729	[1]	$ 169,884	[1]
Cost of sales	104,765		115,493
Gross profit	50,964		54,391
Selling, general and administrative expenses	68,362		77,519
Loss from operations	(17,398)		(23,128)
Other gain, net	(926)		0
Interest expense, net	3,573		561
Loss before income taxes	(20,045)		(23,689)
Income tax provision (benefit)	(690)		71
Net loss	(19,355)		(23,760)
Total comprehensive loss	$ (19,355)		$ (23,760)
Net loss per share - Basic and Diluted (in dollars per share)	$ (0.63)		$ (0.78)
Weighted average shares outstanding — Basic and Diluted (in shares)	30,538		30,428

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

XML

Accrued Liabilities

3 Months Ended

May 04, 2013

Accrued Liabilities, Current [Abstract]

Accounts payable and accrued liabilities

Accrued Liabilities

Accrued liabilities consisted of the following:

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Accrued payroll and benefits	$	13,838	$	12,356	$	12,553
Gift cards and certificates	15,532		18,427		17,203
Derivative liability	17,757		18,683		—
Current portion of deferred rents	20,846		20,756		20,818
Current portion of deferred marketing fees and revenue sharing	3,988		4,484		4,367
Deferred sales royalty	2,748		3,106		3,287
Accrued sales returns	4,431		3,738		4,461
Accrued taxes	4,062		4,200		6,210
Other	3,056		2,165		3,944
	$	86,258	$	87,915	$	72,843

XML

Debt and Capital Lease Obligations (Tables)

3 Months Ended

May 04, 2013

Debt Disclosure [Abstract]

Debt and capital lease obligations

Debt and capital lease obligations consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	69,153		$	67,866		$	—
Term loan	—			—			14,850
Revolving line of credit	15,000			—			15,000
Capital lease obligations	11,766			11,901			12,285
Total debt and capital lease obligations	95,919			79,767			42,135
Less:
Secured term loan discount	(14,670		)	(15,406		)	—
Current maturities of debt	(15,000		)	—			(15,200		)
Current maturities of capital lease obligations	(594		)	(577		)	(528		)
Long-term debt and capital lease obligations	$	65,655		$	63,784		$	26,407

XML

Segment Reporting

3 Months Ended

May 04, 2013

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
	May 4, 2013			April 28, 2012
	(in thousands)
Net sales (a):
Retail	$	117,754		$	131,202
Direct	37,975			38,682
Net sales	$	155,729		$	169,884
Segment operating income (loss):
Retail	$	387		$	923
Direct	7,686			4,789
Total segment operating income	8,073			5,712
Corporate and other	(25,471		)	(28,840		)
Loss from operations	$	(17,398	)	$	(23,128	)

 ____________________________________________________________

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

XML

Co-Branded Credit Card Program Sales Royalty (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Deferred Revenue [Abstract]
Sales royalty recognized	$ 2.1	$ 1.9

XML

Debt and Capital Lease Obligations Term Loan (Details) (USD $)					0 Months Ended
	Jul. 09, 2017	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	Jul. 09, 2012 Secured Term Loan [Member]	May 04, 2013 Cash Interest Rate [Member]	May 04, 2013 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					$ 65,000,000
Debt instrument, interest rate, stated percentage						5.50%	7.50%
Paid in kind, total interest	29,800,000
Paid in kind, future interest accrued		4,200,000
Preferred stock, shares outstanding (in shares)		1,000	1,000	0				1,000
Debt instrument, unamortized discount		$ 14,670,000	$ 15,406,000	$ 0				$ 15,700,000

XML

Supplemental Executive Retirement Plan (Tables)

3 Months Ended

May 04, 2013

Pension and Other Postretirement Benefit Expense [Abstract]

Net periodic benefit cost of the supplemental executive retirement plan (“SERP”)

Net periodic benefit cost of the SERP consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Interest cost	$	113	$	138
Amortization of net actuarial loss	—		9
	$	113	$	147

XML

Stock-Based Compensation (Tables)

3 Months Ended

May 04, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of share-based compensation arrangements by share-based payment award

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and RSUs consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Stock options	$	213	$	230
RSUs	419		118
	$	632	$	348

Schedule of share-based payment award, stock options, valuation 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: 

	Three Months Ended
	May 4, 2013			April 28, 2012
Risk-free interest rate	0.8		%	0.7		%
Expected volatility	91.4		%	89.6		%
Expected life	5.0 years			5.0 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	2.46		$	3.20

XML

Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	May 04, 2013
Commitments and Contingencies Disclosure [Abstract]
Future minimum operating lease payments remaining	$ 398.4
Non-cancelable inventory purchase commitments	$ 89.2

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Receivables (Details) (USD $) In Thousands, unless otherwise specified				3 Months Ended
	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	May 04, 2013 Minimum [Member]	May 04, 2013 Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card receivables	$ 5,437	$ 2,928	$ 6,790
Tenant allowances	525	484	1,465
Other	1,303	1,738	3,284
Accounts receivable, net	7,265	5,150	11,539
Credit card receivables, days converted to cash				2 days	3 days
Allowance for doubtful accounts receivable, current	$ 0	$ 0	$ 0

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Debt and Capital Lease Obligations Debt Covenants (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	May 04, 2013
Debt Disclosure [Abstract]
Debt covenant, inventory	$ 95.0
Debt covenant, liquidity	$ 15.0
Debt covenant, minimum excess availability	15.00%

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Segment Reporting (Details) (USD $)	3 Months Ended
	May 04, 2013		Apr. 28, 2012
Segment Reporting Information [Line Items]
Net sales	$ 155,729,000	[1]	$ 169,884,000	[1]
Income (loss) from operations	(17,398,000)		(23,128,000)
Intersegment sales	0		0
Operating Segments [Member]
Segment Reporting Information [Line Items]
Income (loss) from operations	8,073,000		5,712,000
Retail [Member]
Segment Reporting Information [Line Items]
Net sales	117,754,000	[1]	131,202,000	[1]
Income (loss) from operations	387,000		923,000
Direct [Member]
Segment Reporting Information [Line Items]
Net sales	37,975,000	[1]	38,682,000	[1]
Income (loss) from operations	7,686,000		4,789,000
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Income (loss) from operations	$ (25,471,000)		$ (28,840,000)

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

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Significant Accounting Policies Fair Value (Details) (USD $) In Millions, except Share data, unless otherwise specified	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	May 04, 2013 Fair Value, Inputs, Level 3 [Member] Recurring [Member]	Jul. 09, 2012 Series A Preferred Stock [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Preferred stock, shares outstanding (in shares)	1,000	1,000	0		1,000
Long-term debt, fair value				$ 64.3
Long-term debt	$ 54.5

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Stockholders' Equity (Details) (USD $)	0 Months Ended
	Oct. 04, 2012	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	Oct. 03, 2012 Common Stock Outstanding Before Reverse Stock Split [Member]	Oct. 04, 2012 Common Stock Outstanding After Reverse Stock Split [Member]	May 04, 2013 Series A Preferred Stock [Member]	Jul. 09, 2012 Series A Preferred Stock [Member]
Class of Stock [Line Items]
Reverse stock split ratio	0.25
Common stock, shares outstanding (in shares)		30,547,000	30,531,000	30,439,000	122,000,000	30,500,000
Preferred stock, shares outstanding (in shares)		1,000	1,000	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

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Net Income (Loss) Per Common Share (Tables)

3 Months Ended

May 04, 2013

Earnings Per Share [Abstract]

Schedule 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
	May 4, 2013			April 28, 2012
	(in thousands, except per share amounts)
Net loss	$	(19,355	)	$	(23,760	)
Weighted average common shares outstanding during the period (for basic calculation)	30,538			30,428
Dilutive effect of other potential common shares	—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,538			30,428
Net loss per common share—Basic	$	(0.63	)	$	(0.78	)
Net loss per common share—Diluted	$	(0.63	)	$	(0.78	)

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Nature of Business and Organizational Structure

3 Months Ended

May 04, 2013

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, jewelry and accessories. We conduct business in two operating segments: retail and direct. The retail segment consists of our premium retail stores, factory stores and day spas. The direct segment consists of sales generated through our e-commerce website and mobile applications as well as orders taken from customers over the phone and through the mail.

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 February 2, 2013 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 February 2, 2013.

On October 4, 2012, we effected a reverse stock split of the Company's common stock following stockholder approval (the "Reverse Stock Split"). As a result of the split, every four shares of common stock outstanding were consolidated into one share. 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.

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Receivables

3 Months Ended

May 04, 2013

Receivables [Abstract]

Receivables

Receivables

Receivables consisted of the following: 

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Credit card receivables	$	5,437	$	2,928	$	6,790
Tenant allowances	525		484		1,465
Other	1,303		1,738		3,284
	$	7,265	$	5,150	$	11,539

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 May 4, 2013, February 2, 2013 and April 28, 2012, no allowance for doubtful accounts was deemed necessary.

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Debt and Capital Lease Obligations

3 Months Ended

May 04, 2013

Debt Disclosure [Abstract]

Debt and capital lease obligations

Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Secured term loan, including accrued PIK interest due at maturity	$	69,153		$	67,866		$	—
Term loan	—			—			14,850
Revolving line of credit	15,000			—			15,000
Capital lease obligations	11,766			11,901			12,285
Total debt and capital lease obligations	95,919			79,767			42,135
Less:
Secured term loan discount	(14,670		)	(15,406		)	—
Current maturities of debt	(15,000		)	—			(15,200		)
Current maturities of capital lease obligations	(594		)	(577		)	(528		)
Long-term debt and capital lease obligations	$	65,655		$	63,784		$	26,407

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 May 4, 2013, $4.2 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 of $15.7 million 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 amount of credit that is available under the revolving line of credit is limited to a borrowing base that is determined according to, among other things, a percentage of the value of eligible inventory and credit card receivables, as reduced by certain reserve amounts required by Wells Fargo Bank. The actual amount that is available under our revolving line of credit fluctuates from time to time, due to factors including, but not limited to, eligible inventory and credit card receivables, reserve amounts, outstanding letters of credit, and borrowing under our revolving line of credit. 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 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 liquidity could be adversely impacted and it may be necessary to seek additional sources of liquidity. In connection 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 May 4, 2013, the revolving line of credit was limited to a borrowing base of $70.0 million with $15.0 million in borrowings and $6.3 million in letters of credit issued, resulting in $48.7 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") with an interest rate of 2.25% as of May 4, 2013. 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 May 4, 2013. 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 based on our approved annual plan, maintaining a minimum of $95.0 million of inventory, and maintaining a minimum of $15.0 million of liquidity and a minimum excess availability of 15 percent of our borrowing base, as defined in the Credit Agreement. 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 is 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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Property and Equipment, net

3 Months Ended

May 04, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Property and Equipment, net

Property and equipment, net, consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,675			29,655			29,650
Leasehold improvements	257,222			258,765			265,473
Furniture and fixtures	114,444			114,709			117,989
Technology hardware and software	90,764			89,992			90,492
Machinery and equipment and other	33,760			34,341			34,978
Capital leases	12,805			12,805			12,805
Construction in progress	16,574			16,480			13,397
	555,486			556,989			565,026
Less — Accumulated depreciation and amortization	(395,135		)	(387,982		)	(368,503		)
	$	160,351		$	169,007		$	196,523

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Debt and Capital Lease Obligations Store Optimization Program (Details)	May 04, 2013 Stores
Store Optimization Program [Abstract]
Number of planned store closures	45

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Co-Branded Credit Card Program (Tables)

3 Months Ended

May 04, 2013

Deferred Revenue [Abstract]

Deferred marketing fees and revenue sharing activity

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

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	7,752		$	8,800
Marketing fees received	866			863
Marketing fees recognized to revenue	(1,117		)	(1,075		)
Revenue sharing recognized to revenue	(438		)	(440		)
Balance at end of period	7,063			8,148
Less — Current deferred marketing fees and revenue sharing	(3,988		)	(4,367		)
Long-term deferred marketing fees and revenue sharing	$	3,075		$	3,781

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Significant Accounting Policies Derivative Liability Significant Assumptions (Details) (Series A Preferred Stock [Member], USD $)	3 Months Ended	12 Months Ended
	May 04, 2013	Feb. 02, 2013
Derivative Assumptions [Line Items]
Conversion exercise price per share (in dollars per share)	$ 3.40
Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Derivative Assumptions [Line Items]
Closing price of Company's common stock (in dollars per share)	$ 3.70	$ 3.69
Conversion exercise price per share (in dollars per share)	$ 3.40	$ 3.40
Risk free interest rate	1.60%	1.90%
Expected volatility	77.80%	84.90%
Expected life (in years)	9 years 2 months 7 days	9 years 5 months 7 days
Expected dividend payments (in dollars per share)	$ 0	$ 0

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Debt and Capital Lease Obligations Debt and capital lease obligations (Details) (USD $) In Thousands, unless otherwise specified	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012
Debt Instrument [Line Items]
Revolving line of credit	$ 15,000	$ 0	$ 15,000
Capital lease obligations	11,766	11,901	12,285
Total debt and capital lease obligations	95,919	79,767	42,135
Debt instrument, unamortized discount	(14,670)	(15,406)	0
Current maturities of debt	(15,000)	0	(15,200)
Current maturities of capital lease obligations	(594)	(577)	(528)
Long-term debt and capital lease obligations	65,655	63,784	26,407
Secured Term Loan GGC [Member]
Debt Instrument [Line Items]
Secured debt	69,153	67,866	0
Secured Term Loan WF [Member]
Debt Instrument [Line Items]
Secured debt	$ 0	$ 0	$ 14,850

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Supplemental Executive Retirement Plan (Details) (USD $)	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Pension and Other Postretirement Benefit Expense [Abstract]
Interest cost	$ 113,000	$ 138,000
Amortization of unrecognized net actuarial loss	0	9,000
Net periodic benefit cost	113,000	147,000
Payments made under benefit plan	$ 41,500	$ 41,500

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012
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	1	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)	30,547	30,531	30,439

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Stock-Based Compensation Stock-Based Compensation

3 Months Ended

May 04, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of compensation related costs, share-based payments

Stock-Based Compensation

Total stock-based compensation recognized primarily in selling, general and administrative expenses from stock options and RSUs consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Stock options	$	213	$	230
RSUs	419		118
	$	632	$	348

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

During the three months endedMay 4, 2013 and April 28, 2012, employees were granted 97,000 and 245,325 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: 

	Three Months Ended
	May 4, 2013			April 28, 2012
Risk-free interest rate	0.8		%	0.7		%
Expected volatility	91.4		%	89.6		%
Expected life	5.0 years			5.0 years
Expected dividends	$	—		$	—
Weighted average fair value per share	$	2.46		$	3.20

During the three months endedMay 4, 2013 and April 28, 2012, employees were granted 410,200 and 106,375 RSUs, respectively, at a weighted average fair value of $3.49 and $4.64, respectively. During the three months endedApril 28, 2012, employees were also granted 123,500 performance RSUs at a weighted average grant date fair value of $4.64. For the performance RSUs granted during the three months endedApril 28, 2012, half of the RSUs are subject to the achievement of combined operating income 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. 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.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Operating activities:
Net loss	$ (19,355)	$ (23,760)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	10,818	13,752
Non-cash interest expense	2,289	0
Stock-based compensation expense	632	348
Supplemental Executive Retirement Plan expense	113	147
Deferred marketing fees and revenue sharing	(689)	(652)
Deferred rents	(5,574)	(5,095)
Gain on derivative liability	(926)	0
Net loss on asset dispositions and other termination charges	781	1,226
Other	(137)	(86)
Net change in operating assets and liabilities:
Receivables	(2,130)	(3,330)
Inventories	(1,333)	4,291
Prepaid and other current assets	(404)	(2,215)
Accounts payable	(7,669)	(4,292)
Accrued liabilities	(294)	(4,868)
Net cash used in operating activities	(23,878)	(24,534)
Investing activities:
Purchase of property and equipment	(1,865)	(3,699)
Proceeds from asset dispositions	15	0
Net cash used in investing activities	(1,850)	(3,699)
Financing activities:
Borrowings on revolving line of credit	18,000	10,000
Payments on revolving line of credit	(3,000)	(10,000)
Payments of long-term debt and capital lease obligations	(137)	(201)
Other	46	58
Net cash provided by financing activities	14,909	(143)
Net decrease in cash and cash equivalents	(10,819)	(28,376)
Cash and cash equivalents, beginning	21,734	51,365
Cash and cash equivalents, ending	10,915	22,989
Supplemental Cash Flow Data:
Interest paid, net of amount capitalized	1,284	418
Income taxes paid (refunded), net	$ (676)	$ 2,125

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012
Current assets:
Cash and cash equivalents	$ 10,915	$ 21,734	$ 22,989
Receivables	7,265	5,150	11,539
Inventories	126,540	125,207	127,684
Prepaid and other current assets	17,403	17,072	11,625
Deferred income taxes	1,184	1,252	2,313
Total current assets	163,307	170,415	176,150
Property and equipment, net	160,351	169,007	196,523
Deferred income taxes	2,117	2,112	1,887
Other assets	4,152	4,374	1,795
Total assets	329,927	345,908	376,355
Current liabilities:
Accounts payable	51,275	57,891	52,487
Accrued liabilities	86,258	87,915	72,843
Current maturities of debt and capital lease obligations	15,594	577	15,728
Total current liabilities	153,127	146,383	141,058
Deferred rents	77,243	82,726	96,723
Long-term debt and capital lease obligations	65,655	63,784	26,407
Supplemental executive retirement plan	10,939	10,994	12,248
Deferred income taxes	636	699	1,716
Other liabilities	3,862	4,186	5,174
Total liabilities	311,462	308,772	283,326
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000 shares authorized; 1, 1 and 0 shares issued, respectively	0	0	0
Common stock, $0.01 par value, 75,000 shares authorized; 30,547, 30,531 and 30,439 shares issued, respectively	305	305	304
Additional paid-in capital	153,830	153,146	151,630
Accumulated other comprehensive loss	(1,532)	(1,532)	(2,204)
Retained earnings (accumulated deficit)	(134,138)	(114,783)	(56,701)
Total stockholders' equity	18,465	37,136	93,029
Total liabilities and stockholders' equity	$ 329,927	$ 345,908	$ 376,355

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Segment Reporting (Tables)

3 Months Ended

May 04, 2013

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
	May 4, 2013			April 28, 2012
	(in thousands)
Net sales (a):
Retail	$	117,754		$	131,202
Direct	37,975			38,682
Net sales	$	155,729		$	169,884
Segment operating income (loss):
Retail	$	387		$	923
Direct	7,686			4,789
Total segment operating income	8,073			5,712
Corporate and other	(25,471		)	(28,840		)
Loss from operations	$	(17,398	)	$	(23,128	)

 ____________________________________________________________

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

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Accrued Liabilities (Tables)

3 Months Ended

May 04, 2013

Accrued Liabilities, Current [Abstract]

Schedule of accrued liabilities

Accrued liabilities consisted of the following:

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Accrued payroll and benefits	$	13,838	$	12,356	$	12,553
Gift cards and certificates	15,532		18,427		17,203
Derivative liability	17,757		18,683		—
Current portion of deferred rents	20,846		20,756		20,818
Current portion of deferred marketing fees and revenue sharing	3,988		4,484		4,367
Deferred sales royalty	2,748		3,106		3,287
Accrued sales returns	4,431		3,738		4,461
Accrued taxes	4,062		4,200		6,210
Other	3,056		2,165		3,944
	$	86,258	$	87,915	$	72,843

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Stock-Based Compensation (Details) (USD $)	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 632,000	$ 348,000
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares awarded as a percentage of base award amount	0.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares awarded as a percentage of base award amount	200.00%
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	213,000	230,000
Options granted in period (in shares)	97,000	245,325
Risk free interest rate	0.80%	0.70%
Expected volatility	91.40%	89.60%
Expected life (in years)	5 years	5 years
Expected dividend payments	0	0
Weighted average fair value per option (in dollars per share)	$ 2.46	$ 3.20
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 419,000	$ 118,000
Awards granted in period (in shares)	410,200	106,375
Weighted average fair value per award (in dollars per share)	$ 3.49	$ 4.64
PSUs with performance period of FYs 2012-2014 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted in period (in shares)		123,500
Weighted average fair value per award (in dollars per share)		$ 4.64

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Debt and Capital Lease Obligations Credit Agreement (Details) (USD $)						3 Months Ended
	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	May 04, 2013 Line of Credit [Member]	May 04, 2013 Letter of Credit [Member]	May 04, 2013 Minimum [Member]	May 04, 2013 Maximum [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	15,000,000	0	15,000,000
Letters of credit outstanding, amount	6,300,000
Remaining borrowing capacity	$ 48,700,000
Additional interest rate above LIBOR or reference rate range						1.00%	2.50%
Letters of credit interest rate range						1.50%	2.50%
Letters of credit, interest rate at the end of the period				2.25%	2.00%
Line of credit, commitment fee percentage range						0.375%	0.50%

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Property and Equipment, net (Details) (USD $) In Thousands, unless otherwise specified	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 555,486	$ 556,989	$ 565,026
Less - Accumulated depreciation and amortization	(395,135)	(387,982)	(368,503)
Property and equipment, net	160,351	169,007	196,523
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	29,675	29,655	29,650
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	257,222	258,765	265,473
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	114,444	114,709	117,989
Technology Hardware and Software [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	90,764	89,992	90,492
Machinery and Equipment and Other [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	33,760	34,341	34,978
Capital Leases [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	12,805	12,805	12,805
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 16,574	$ 16,480	$ 13,397

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Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012
Accrued payroll and benefits	$ 13,838	$ 12,356	$ 12,553
Gift cards and certificates	15,532	18,427	17,203
Derivative liability	17,757	18,683	0
Current portion of deferred rents	20,846	20,756	20,818
Deferred Revenue, Current	3,988		4,367
Accrued sales returns	4,431	3,738	4,461
Accrued taxes	4,062	4,200	6,210
Other	3,056	2,165	3,944
Accrued liabilities	86,258	87,915	72,843
Deferred Marketing Fees and Revenue Sharing [Member]
Deferred Revenue, Current	3,988	4,484	4,367
Deferred Sales Royalty [Member]
Deferred Revenue, Current	$ 2,748	$ 3,106	$ 3,287

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Stockholders' Equity

3 Months Ended

May 04, 2013

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' equity

Stockholders' Equity

Reverse Stock Split

On October 4, 2012, we effected a reverse stock split of the Company's common stock following stockholder approval. As a result of the split, every four shares of common stock outstanding were consolidated into one share, reducing the number of common shares outstanding on the effective date 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.

Series A Preferred Stock

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 July 9, 2022. Shares of Series A Preferred Stock have an initial exercise price of $3.40 per share of underlying common stock.

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Nature of Business and Organizational Structure (Details)	0 Months Ended	3 Months Ended
	Oct. 04, 2012	May 04, 2013 Segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of Operating Segments		2
Reverse stock split ratio	0.25

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Net Income (Loss) Per Common Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Earnings Per Share [Abstract]
Net loss	$ (19,355)	$ (23,760)
Weighted average common shares outstanding during the period (for basic calculation) (in shares)	30,538,000	30,428,000
Dilutive effect of other potential common shares (in shares)	0	0
Weighted average common shares and potential common shares (for diluted calculation) (in shares)	30,538,000	30,428,000
Net loss per share - Basic (in dollars per share)	$ (0.63)	$ (0.78)
Net loss per share - Diluted (in dollars per share)	$ (0.63)	$ (0.78)
Stock options, RSUs and shares to be purchased under our ESPP excluded from computation of earnings per share, amount (in shares)	2,100,000	1,600,000

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Commitments and Contingencies

3 Months Ended

May 04, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and contingencies

Commitments and Contingencies

Operating Leases

As of May 4, 2013, our minimum operating lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, common area maintenance costs ("CAM"), real estate taxes, and the amortization of lease incentives for our operating leases, totaled $398.4 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 May 4, 2013, we had non-cancelable inventory purchase commitments of $89.2 million.

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Net Income (Loss) Per Common Share

3 Months Ended

May 04, 2013

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, restricted stock units ("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
	May 4, 2013			April 28, 2012
	(in thousands, except per share amounts)
Net loss	$	(19,355	)	$	(23,760	)
Weighted average common shares outstanding during the period (for basic calculation)	30,538			30,428
Dilutive effect of other potential common shares	—			—
Weighted average common shares and potential common shares (for diluted calculation)	30,538			30,428
Net loss per common share—Basic	$	(0.63	)	$	(0.78	)
Net loss per common share—Diluted	$	(0.63	)	$	(0.78	)

During the three months endedMay 4, 2013 and April 28, 2012, 2.1 million and 1.6 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. 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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Significant Accounting Policies

3 Months Ended

May 04, 2013

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 February 2, 2013.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Fiscal Periods

References to a fiscal year refer to the calendar year in which the fiscal year begins. Our fiscal year ends on the Saturday nearest January 31st.

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, contingent liabilities 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.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is made up entirely of unrecognized net actuarial loss, net of tax, for the Supplemental Executive Retirement Plan (the "SERP"). See Note 10. Supplemental Executive Retirement Plan, for amounts reclassified from accumulated other comprehensive loss to net periodic benefit costs due to the amortization of net actuarial loss.

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.

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. The derivative liability is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs:

	May 4, 2013			February 2, 2013
Closing price of Company's common stock	$	3.70		$	3.69
Exercise price	$	3.40		$	3.40
Risk-free interest rate	1.6		%	1.9		%
Expected volatility	77.8		%	84.9		%
Expected life	9.2			9.4
Expected dividends	$	—		$	—

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. To the extent any of these assumptions increases or decreases in isolation, the fair value of the derivative liability increases or decreases accordingly. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. Activity for the derivative liability was as follows:

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	18,683		$	—
Issuance of Series A Preferred Stock	—			—
Gain on change in fair value	(926		)	—
Balance at end of period	$	17,757		$	—

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 approximate their fair values due to their short-term nature. As of May 4, 2013, the fair value of our senior secured term loan was $64.3 million compared to the carrying value of $54.5 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 approximated fair value at April 28, 2012.

Income Taxes

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulated loss incurred over the last three years. Such objective evidence limits the ability to consider other subjective evidence. We have a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence.

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Co-Branded Credit Card Program (Details) (USD $) In Thousands, unless otherwise specified					3 Months Ended
	May 04, 2013	Feb. 02, 2013	Apr. 28, 2012	Jan. 28, 2012	May 04, 2013 Marketing Fees Received [Member]	Apr. 28, 2012 Marketing Fees Received [Member]	May 04, 2013 Marketing Fees Recognized To Revenue [Member]	Apr. 28, 2012 Marketing Fees Recognized To Revenue [Member]	May 04, 2013 Revenue Sharing Recognized To Revenue [Member]	Apr. 28, 2012 Revenue Sharing Recognized To Revenue [Member]
Movement in Deferred Revenue [Roll Forward]
Balance at beginning of period	$ 7,063	$ 7,752	$ 8,148	$ 8,800
Marketing fees received					866	863
Marketing fees and revenue sharing recognized							(1,117)	(1,075)	(438)	(440)
Balance at end of period	7,063	7,752	8,148	8,800
Less — Current deferred marketing fees and revenue sharing	(3,988)		(4,367)
Long-term deferred marketing fees and revenue sharing	$ 3,075		$ 3,781

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Significant Accounting Policies Derivative Liability Activity (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	May 04, 2013	Apr. 28, 2012
Derivative Activity [Line Items]
Balance at beginning of period	$ 18,683	$ 0
Gain on derivative liability	(926)	0
Balance at end of period	17,757	0
Series A Preferred Stock [Member]
Derivative Activity [Line Items]
Issuance of Series A Preferred Stock	$ 0	$ 0

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Significant Accounting Policies (Policies)

3 Months Ended

May 04, 2013

Accounting Policies [Abstract]

Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

Fiscal Periods

Fiscal Periods

References to a fiscal year refer to the calendar year in which the fiscal year begins. Our fiscal year ends on the Saturday nearest January 31st.

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, contingent liabilities 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.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss is made up entirely of unrecognized net actuarial loss, net of tax, for the Supplemental Executive Retirement Plan (the "SERP"). See Note 10. Supplemental Executive Retirement Plan, for amounts reclassified from accumulated other comprehensive loss to net periodic benefit costs due to the amortization of net actuarial loss.

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.

On July 9, 2012, as disclosed in Note 8, we issued 1,000 shares of Series A Preferred Stock. The fair value of the Series A Preferred Stock is recorded as a derivative liability and is included in accrued liabilities. The derivative liability is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs:

	May 4, 2013			February 2, 2013
Closing price of Company's common stock	$	3.70		$	3.69
Exercise price	$	3.40		$	3.40
Risk-free interest rate	1.6		%	1.9		%
Expected volatility	77.8		%	84.9		%
Expected life	9.2			9.4
Expected dividends	$	—		$	—

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. To the extent any of these assumptions increases or decreases in isolation, the fair value of the derivative liability increases or decreases accordingly. Other assumptions based on the Series A Preferred Stock features, including anti-dilution provisions, were considered and determined to be insignificant to the valuation.

Changes in the fair value are recorded as other gain or loss, net, in our consolidated statements of operations and comprehensive operations. Activity for the derivative liability was as follows:

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	18,683		$	—
Issuance of Series A Preferred Stock	—			—
Gain on change in fair value	(926		)	—
Balance at end of period	$	17,757		$	—

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 approximate their fair values due to their short-term nature. As of May 4, 2013, the fair value of our senior secured term loan was $64.3 million compared to the carrying value of $54.5 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 approximated fair value at April 28, 2012.

Income Taxes

Income Taxes

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulated loss incurred over the last three years. Such objective evidence limits the ability to consider other subjective evidence. We have a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence.

Reclassifications

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Supplemental Executive Retirement Plan

3 Months Ended

May 04, 2013

Pension and Other Postretirement Benefit Expense [Abstract]

Supplemental executive retirement plan

Supplemental Executive Retirement Plan

Net periodic benefit cost of the SERP consisted of the following: 

	Three Months Ended
	May 4, 2013		April 28, 2012
	(in thousands)
Interest cost	$	113	$	138
Amortization of net actuarial loss	—		9
	$	113	$	147

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2013 and 2012. During the three months endedMay 4, 2013 and April 28, 2012, we made benefit payments of $41,500 and $41,500, respectively.

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Property and Equipment, net (Tables)

3 Months Ended

May 04, 2013

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

Property and equipment, net, consisted of the following: 

	May 4, 2013			February 2, 2013			April 28, 2012
	(in thousands)
Land	$	242		$	242		$	242
Building and land improvements	29,675			29,655			29,650
Leasehold improvements	257,222			258,765			265,473
Furniture and fixtures	114,444			114,709			117,989
Technology hardware and software	90,764			89,992			90,492
Machinery and equipment and other	33,760			34,341			34,978
Capital leases	12,805			12,805			12,805
Construction in progress	16,574			16,480			13,397
	555,486			556,989			565,026
Less — Accumulated depreciation and amortization	(395,135		)	(387,982		)	(368,503		)
	$	160,351		$	169,007		$	196,523

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Significant Accounting Policies (Tables)

3 Months Ended

May 04, 2013

Accounting Policies [Abstract]

Derivative liability significant assumptions

The derivative liability is measured on a recurring basis at fair value with Level 3 inputs using the Black-Scholes option valuation model with the following inputs:

	May 4, 2013			February 2, 2013
Closing price of Company's common stock	$	3.70		$	3.69
Exercise price	$	3.40		$	3.40
Risk-free interest rate	1.6		%	1.9		%
Expected volatility	77.8		%	84.9		%
Expected life	9.2			9.4
Expected dividends	$	—		$	—

Derivative liability activity

Activity for the derivative liability was as follows:

	Three Months Ended
	May 4, 2013			April 28, 2012
	(in thousands)
Balance at beginning of period	$	18,683		$	—
Issuance of Series A Preferred Stock	—			—
Gain on change in fair value	(926		)	—
Balance at end of period	$	17,757		$	—

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Document and Entity Information	3 Months Ended
	May 04, 2013	Jun. 04, 2013
Document And Entity Information [Abstract]
Entity Registrant Name	COLDWATER CREEK INC
Entity Central Index Key	0001018005
Document Type	10-Q
Document Period End Date	May 04, 2013
Amendment Flag	false
Current Fiscal Year End Date	--02-01
Entity Filer Category	Accelerated Filer
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		30,547,474

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Receivables (Tables)

3 Months Ended

May 04, 2013

Receivables [Abstract]

Receivables

Receivables consisted of the following: 

	May 4, 2013		February 2, 2013		April 28, 2012
	(in thousands)
Credit card receivables	$	5,437	$	2,928	$	6,790
Tenant allowances	525		484		1,465
Other	1,303		1,738		3,284
	$	7,265	$	5,150	$	11,539