ONE COLDWATER CREEK DRIVE, SANDPOINT, IDAHO 83864
(Address of principal executive offices)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO ý

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 ý 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 ý NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

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 (Check one):

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on July 30, 2011, the last business day of the registrant's most recently completed second fiscal quarter, based on the last reported trading price of the registrant's common stock on the NASDAQ was approximately $116,787,636.

There were 121,693,553 shares of the registrant's $0.01 par value common stock outstanding on March 12, 2012.

Portions of the registrant's proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Form are incorporated by reference into Part III of this Form 10-K.

Coldwater Creek Inc.
Annual Report on Form 10-K
For the Fiscal Year Ended January 28, 2012
Table of Contents

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

The following discussion contains various statements regarding our current strategies, 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 "Risk Factors" in this Annual Report on Form 10-K. We assume no future obligation to update our forward-looking statements or to provide periodic updates or guidance.

Coldwater Creek Inc. is a specialty retailer of women's apparel, accessories, jewelry, and gift items. Founded in 1984 as a catalog company, today we are a multi-channel specialty retailer. Our proprietary merchandise assortment reflects a sophisticated yet relaxed and casual lifestyle. A commitment to providing superior customer service is manifest in all aspects of our business. Our mission is to become one of the premier specialty retailers for women 35 years of age and older by offering our customers a compelling merchandise assortment with superior customer service through all of our sales channels.

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. This reporting schedule is followed by many national retail companies and typically results in 13-week fiscal quarters and a 52-week fiscal year, but occasionally will contain an additional week resulting in a 14-week fiscal fourth quarter and a 53-week fiscal year.

Since the opening of our first premium retail store in November 1999, we have evolved from a direct marketer to a multi-channel specialty retailer. Our merchandise is offered through two distinct operating segments: retail and direct. The retail segment consists of our premium retail stores, outlet stores and day spas. The direct segment consists of sales generated through our e-commerce website and from orders taken from customers over the phone and through the mail. Our catalogs are prominently displayed in each premium retail store to encourage customers to continue shopping with us even after they have left our stores. This multi-channel approach also allows us to cross-promote our brand and provides customers with convenient access to our merchandise, regardless of their preferred shopping method. As part of our commitment to superior customer service, we accept returns virtually at any time and for any reason through any channel regardless of the initial point of purchase.

Information regarding segment performance is included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in this Annual Report on Form 10-K. Additionally, selected financial data for our segments is presented in Note 15, Segment Reporting, to our consolidated financial statements.

As of January 28, 2012, we operated 363 premium retail stores throughout the United States at an average size of approximately 5,900 square feet per store. We conduct periodic seasonal sales events in our premium retail stores and, beginning in October 2010, we dedicated a full-time sales section within our premium retail stores to clear excess merchandise. Approximately 40 percent of these stores are located in traditional malls, 55 percent in lifestyle centers and 5 percent in street locations. During

fiscal 2011 we opened five new stores and closed 15 stores. Approval of new store locations or changes in existing store leases is conducted upon presentation of a collaborative analysis involving our real estate, business intelligence and finance departments. Our real estate department uses its experience and current market knowledge to identify potential locations based upon an overall market plan. Our business intelligence department then analyzes each location by extracting data and information from our own extensive customer database and combining it with external demographic information. Our finance department analyzes, among other things, a store's historical and projected performance trends such as store earnings and cash flows. This comprehensive analysis includes such information as projected sales, average consumer age and income level, buying habits and the retail location of competitors within the same trade area.

As of January 28, 2012, we operated 38 outlet stores at an average size of approximately 6,800 square feet per store. We use outlets to manage excess merchandise transferred from our premium retail stores and to sell products made solely for this channel.

We also operate our Coldwater Creek ~ The Spa concept in nine locations. These day spas offer a complete menu of spa treatments, including massages, facials, body treatments, manicures and pedicures. In addition to spa treatments, the day spas carry an assortment of relevant apparel as well as lines of personal care products. Our day spas are staffed with experienced professionals in all treatment areas.

Our direct segment began with the mailing of our first catalog in 1985 and was expanded in 1999 to include our e-commerce business. We use our e-commerce website, www.coldwatercreek.com, to cost-effectively expand our customer base and provide another convenient shopping alternative for customers. The website features the entire full-price merchandise offering found in our catalogs and also serves as an efficient promotional vehicle for the clearance of excess inventory. We continue to take orders from customers over the phone and through the mail using our customer contact center located in Coeur d'Alene, Idaho.

Customers are driven to all channels primarily by catalogs, television advertising, e-mail campaigns, online advertising, and loyalty programs. We have an extensive proprietary database of customer information, including customer demographics, purchasing history, and geographic proximity to an existing or planned premium retail store. We believe our ability to effectively design and manage our marketing and promotional programs is enhanced by this source of information, allowing us to adjust the frequency, timing and content of each marketing program to maximize its benefits.

We seek to present a consistent brand image throughout all of our marketing and promotion activities. Our merchandise is offered through one core catalog title: Coldwater Creek. We continue to evaluate our marketing programs to ensure that we are reaching the greatest number of customers in the most effective and efficient manner possible. We also use national magazine advertising and postcards targeting specific markets to drive traffic while promoting overall brand awareness. In addition, we participate in cost-per-click search and revenue share-based affiliate programs whereby numerous popular Internet search engines and consumer websites provide direct access to our website.

We offer customer loyalty programs such as onecreek and our co-branded credit card program. The onecreek program benefits include sneak peeks at upcoming trends and new merchandise, onecreek customer service specialists, exclusive onecreek savings and promotions, free shipping on returns, and a special birthday gift. The co-branded credit card program is operated through a third party. Customers who participate in our credit card reward program earn points on purchases made with the credit card at Coldwater Creek and at other businesses where the card is accepted. Cardholders who accumulate

the requisite number of points are issued a coupon that is valid towards the purchase of our merchandise. In addition to earning points, all participants in the co-branded credit card program receive exclusive offers throughout the year. These offers have included special discounts, invitations to our shopping events, and periodic opportunities to earn double and triple points.

We design and develop the majority of our apparel either in-house or through collaboration with independent designers. To ensure our designers stay abreast of trends in styles and fabrics, we operate a design center in New York City. Our New York design team merges the latest fashion trends with our customers' preferences to build an overall vision that guides the design and development of our seasonal merchandise assortment.

Our product development team translates the overall vision for each season into various product designs, fabrics and prints, indicating the construction and exact specifications for each item. Our team seeks inspiration from their extensive travels, fashion shows, and our direct sourcing team, which provides new fabrics and novelty prints along with product samples from various manufacturers. Our direct sourcing team assists in identifying the appropriate manufacturers to supply each item and in negotiating price and delivery terms.

Once our merchandise assortment is selected, our inventory planning team determines the quantities of each item to purchase in order to meet anticipated demand. This determination is made through the analysis of information such as historical sales, planned merchandise presentation, scheduled store openings, and sales and margin projections. This process culminates in the issuance of various purchase orders. Coordinating with the direct sourcing department, quality assurance and quality compliance personnel monitor the production process to verify the merchandise is produced to exact specifications and within the designated timeline.

We alter the composition, magnitude and timing of merchandise offerings based upon an understanding of prevailing consumer demand, preferences and trends. The timing of merchandise offerings may be further impacted by, among other factors, the performance of various third parties on which we are dependent. Additionally, the net sales we realize from a particular merchandise offering may impact more than one fiscal quarter and year and the amount and pattern of the sales realization may differ from that realized by a similar merchandise offering in a prior fiscal quarter or year. We continually review inventory to identify excess and slow moving merchandise and clear this merchandise through markdown and other promotional offerings. We also dispose of excess and slow moving inventory internally through our full-time sales section within our premium retail stores, outlets and website, and we have on occasion used a third party liquidator.

Our apparel is purchased through both domestic importers who procure the merchandise on our behalf and international manufacturers through our direct sourcing program. During fiscal 2011, we had approximately 240 active vendors and our largest individual vendor represented less than 10 percent of our merchandise purchases. We have sourcing offices in Hong Kong and India to assist with product development and production management, as well as monitoring compliance with our code of conduct and monitoring program.

For fiscal 2011, we were the importer of record for approximately 65 percent of our total units of apparel purchased. We believe direct sourcing provides us with more control over the production, quality and transportation logistics of our apparel and results in faster speed to market and lower merchandise costs. Domestic importers will remain, however, a crucial component of our overall sourcing strategy, providing unique industry and marketplace knowledge along with product design and development capabilities.

We are committed to sourcing our products in a responsible manner, respecting both the countries in which we have a business presence and the business partners that manufacture our products. We have a code of conduct and monitoring program that applies to all factories contracted in the production of merchandise for Coldwater Creek. Within this code, we recognize that local customs and laws vary from one region of the world to another; however, we strongly believe the issues of business ethics, human rights, health, safety and environmental stewardship transcend geographical boundaries. The intention of this code is to communicate our expectations to each of our business partners.

We lease a 960,000 square-foot distribution center in Mineral Wells, West Virginia, which fulfills merchandise needs for our retail locations and merchandise sold through our direct channel. We believe that our distribution facility is adequate to provide the capacity required for the foreseeable future.

Our quarterly results and cash flows can fluctuate significantly depending on a number of factors including the particular seasonal fashion lines and customer response to our merchandise offerings, shifts in the timing of certain holidays, including Valentine's Day, Easter, Mother's Day, Thanksgiving and Christmas, and weather related influences.

The women's retail apparel market is highly competitive. Competitors range from specialty apparel retail companies such as Chico's FAS, Inc. ("Chico's"), The Talbots, Inc. ("Talbots"), Christopher & Banks Corporation ("Christopher & Banks") and ANN INC., to small single channel catalog, e-commerce and retail store companies. We also compete with national department store chains such as Macy's, Inc., Nordstrom, Inc., Dillard's, Inc. and J.C. Penney Company, Inc., along with discount retailers that offer women's apparel and accessories, such as Kohl's Corporation and Target Corporation.

We believe that we compete principally on the basis of our high-quality, distinctive merchandise selection and exceptional customer service. We also believe that an integrated, multi-channel sales strategy enhances our ability to compete in the marketplace by providing convenient access to our merchandise, regardless of our customers' preferred shopping method.

As of January 28, 2012, we had approximately 2,600 full-time employees and 4,300 part-time employees. During our peak selling season, which includes the months of November and December, we utilize a substantial number of temporary employees. None of our employees are covered by collective bargaining agreements.

Our registered trademarks include Coldwater Creek®, Coldwater Creek The Spa® and the stylized Coldwater Creek logo. We believe that our registered and common law trademarks have significant value and are instrumental to our ability to market and sustain demand for our merchandise and brand.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and therefore file periodic reports and other information with the Securities and

Exchange Commission ("SEC"). These reports may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549, or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at www.sec.gov that contains reports, proxy information statements and other information regarding issuers that file electronically.

Our filings under the Exchange Act, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, are also available free of charge on the investor relations portion of our website at www.coldwatercreek.com. These reports are available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

The table below sets forth the name, age and position of our executive officers as of March 12, 2012:

Dennis C. Pence co-founded Coldwater Creek in 1984 and has served as a Director since our incorporation in 1988, serving as the Board of Director's Chairman since July 1999 and as its Vice-Chairman prior to that. Mr. Pence has served as our Chief Executive Officer since September 2009, and previously from September 2002 through October 2007 and from 1984 through December 2000. Mr. Pence has also served as our President since September 2009 and from 1984 through 2000. From June 2002 to September 2002, he provided us with his executive management services. From January 2002 to June 2002, Mr. Pence served as our interim Chief Financial Officer and Treasurer. From January 2001 to January 2002, Mr. Pence was semi-retired. Mr. Pence has also served as Chairman of the Board of Director's Executive Committee since its formation in May 2000, a member of the Succession Planning and Management Development committee since November 2007, and as Secretary from July 1998 to February 2009. From April 1999 to December 2000, he was also the President of our Internet Commerce Division. Prior to co-founding Coldwater Creek, Mr. Pence was employed by Sony Corp. of America, a subsidiary of Sony Corporation, a publicly held manufacturer of audio, video, communication, and information technology products, from 1975 to 1983, where his final position was National Marketing Manager—Consumer Video Products.

Jill Brown Dean has served as President and Chief Merchandising Officer since February 2011. Prior to joining Coldwater Creek, Ms. Dean served as President of the Limited Too division of Tween Brands from October 2006 to April 2008. Prior to that, Ms. Dean spent 18 years with Limited Brands, serving as Executive Vice President, General Manager for Victoria's Secret flagship stores from July 2003 to October 2006, as well as President and Chief Executive Officer of Lane Bryant from June 1994 to October 2001. Ms. Dean began her career at Limited Brands in merchandising for the Express division.

Jerome Jessup has served as President and Chief Creative Officer since February 2011, having joined the Company in August 2009 as Executive Vice President, Creative Director. Prior to joining Coldwater Creek, Mr. Jessup ran his own fashion collection and consulting practice for four years. Prior to that, he was the Senior Executive Vice President of Design and Merchandising for ANN INC. Mr. Jessup also spent ten years with The Gap, Inc. ("The Gap"), leading the design and product development functions for Banana Republic, as well as for The Gap, GapKids, babyGap and GapBody divisions.

James A. Bell was appointed Executive Vice President and Chief Operating Officer in January 2012 and continues to serve as Chief Financial Officer. Upon joining the Company, Mr. Bell served as Divisional Vice President of Financial Planning from September 2009 until December 2009. From December 2009 to April 2010, Mr. Bell served as Vice President of Financial Planning. From April 2010 to January 2012, Mr. Bell served as Senior Vice President and Chief Financial Officer. Prior to joining Coldwater Creek, Mr. Bell served from April 2007 to June 2009 as Senior Vice President, Finance and Planning for Harry and David Holdings, Inc. From October 2002 to April 2007, Mr. Bell was Senior Director, Finance at The Gap. Prior to his role at The Gap, Mr. Bell served in various senior finance roles at SmartPipes, Inc., a software company, and in Piper Jaffray's Investment Banking group. Prior to his role at Piper Jaffray, Mr. Bell served in the U.S. Navy for nine years on active duty as a Naval Flight Officer.

John E. Hayes III has served as Senior Vice President, Human Resources and General Counsel since April 2010, having joined the Company in February 2009 as Senior Vice President, General Counsel. In addition, Mr. Hayes served as the Company's interim Chief Financial Officer from November 2009 to April 2010. Prior to joining Coldwater Creek, Mr. Hayes was engaged for 17 years in private law practice, most recently as a partner with Hogan & Hartson, LLP, from March 2003 to February 2009. While in private practice, Mr. Hayes served as our outside corporate and securities law counsel from 1999 until joining us. Prior to his legal career, Mr. Hayes practiced as an accountant with KPMG LLP.

Mark A. Haley has served as Vice President and Chief Accounting Officer since October 2011. Upon joining the Company, Mr. Haley served as Vice President and Controller from September 2010 until October 2011. Prior to joining the Company, Mr. Haley served from December 2007 to September 2010 as Senior Director of Financial Reporting for SUPERVALU Inc. From July 1991 through December 2007, Mr. Haley was with Deloitte & Touche LLP, where he served in various roles, including Director, Assurance Services beginning in September 2006.

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 of operations. The risks described below are not the only risks we face. Additional risks and uncertainties not currently known or deemed immaterial may also adversely affect our business, financial condition, or future results of operations.

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

Forecasting consumer demand for our merchandise is difficult given the nature of changing fashion trends and consumer preferences. The specialty retail business fluctuates according to changes in consumer preferences dictated, in part, by fashion and season. In addition, our merchandise assortment differs in each seasonal flow and at any given time our assortment may not resonate with our customers. On average, we begin the design process for apparel nine to ten months before merchandise is available to consumers, and we typically begin to make purchase commitments four to eight months in advance. These lead times make it difficult for us to respond quickly to changes in demand for our products. To the extent we misjudge the market for our merchandise or the products suitable for local

markets, our sales will be adversely affected and the markdowns required to move the resulting excess inventory will adversely affect our results of operations.

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

Our inventory levels and merchandise assortments fluctuate seasonally, and at certain times of the year, such as during the holiday season, we maintain higher inventory levels and are particularly susceptible to risks related to demand for our merchandise. If the demand for our merchandise were to be lower than expected, causing us to hold excess inventory, we could be forced to further discount merchandise, which reduces our gross margins and negatively impacts results of operations and operating cash flows. If we were to carry low levels of inventory and demand is stronger than we anticipate, we may not be able to reorder merchandise on a timely basis to meet demand, which may adversely affect sales and customer satisfaction.

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

Continued material operating losses may require that we obtain additional financing from the capital markets to execute our business plan.

We believe we have sufficient cash and liquidity, including our revolving line of credit that we may continue to draw on from time to time, to fund our operations through the next 12 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 cash and liquidity could be adversely impacted. Constraints on liquidity make us vulnerable to further downturns in our business or the general economy and a shortfall would have serious consequences for our business, such as forcing us to curtail our operations. Additionally, lack of capital could restrict our ability to react to changes in our business or to take advantage of opportunities as they arise, including opportunities designed to accelerate our turnaround. For these reasons we may access the capital markets for additional debt or equity financing. If we borrow additional amounts under our revolving line of credit or incur other debt, our interest expense will increase and we may be subject to additional covenants that could restrict our operations. The sale of additional equity securities or convertible debt securities could result in significant dilution to our current stockholders, particularly given our low stock price in recent periods. Newly issued securities may have rights, preferences and privileges that are senior or otherwise superior to those of our common stock. There is no assurance that debt or equity financing will be available in amounts or on terms acceptable to us.

Our revolving line of credit contains borrowing base and other provisions that may restrict our ability to access it, which could impact our ability to access capital when needed.

Historically, we have relied on our cash resources and cash flows from operations to fund our operations. We have also used our revolving line of credit to secure trade letters of credit and from time to time for borrowings, both of which reduce the amount available for borrowing. The actual amount of credit that is available from time to time under our revolving line of credit fluctuates greatly and is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be determined at the discretion of the lender. Consequently, it is possible that, should we need to access any additional funds from our revolving line of credit, the amount needed may not be available in full. Additionally, our revolving line of credit contains covenants related to capital expenditure levels and minimum inventory book value, and other customary matters. Our failure to comply with the covenants, terms and conditions could cause the revolving line of credit not to be available to us. As of January 28, 2012, the revolving line of credit was limited to a borrowing base of $68.8 million and we had $21.9 million in letters of credit issued and $15.0 million borrowed on our revolving line of credit, resulting in $31.9 million available for borrowing under our revolving line of credit.

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

We continue to believe that retail expansion will be a key driver for our long term growth. However, due to our business performance and our focus on improving financial results, we are executing a store optimization program based on an ongoing review of the performance of our premium stores. As a result, we closed 15 premium stores in fiscal 2011 and expect to close approximately 20 to 30 additional underperforming stores prior to the end of fiscal 2013. The optimization program will be 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 $15 to $20 million in annualized expense reductions and approximately $8 to $12 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.

Economic conditions have impacted consumer spending and may adversely affect our financial position and results of operations.

Consumer spending patterns are highly sensitive to the economic climate and consumer spending continues to be impacted by the high levels of unemployment, foreclosures and declines in home values, stock market volatility, restrictions on the availability of credit, volatile energy and food costs, and other negative economic conditions, nationally and regionally. We continue to be affected by challenging macroeconomic conditions which are evidenced in our business by a highly competitive retail selling environment and low retail store traffic. We believe these conditions will continue for the foreseeable future. If consumer spending on apparel and accessories continues to decline and demand for our products decreases further, we may be forced to further discount our merchandise or sell it at a loss, which would adversely affect our results of operations. In addition, higher costs for transportation, raw materials, labor, insurance and healthcare, and other negative economic factors may adversely affect our results of operations.

We have incurred substantial financial commitments and fixed costs related to our retail stores that we will not be able to recover if our stores are not successful.

The success of an individual store location is dependent on the success of the lifestyle center, shopping mall or outlet center where the store is located, and may be influenced by changing customer demographic and consumer spending patterns. These factors cannot be predicted with accuracy. Because we enter into long-term financial commitments when leasing retail store locations and incur substantial fixed costs for each store's design, leasehold improvements, fixtures and management information systems, it would be costly for us to close a store that does not prove successful.

The testing of our retail stores' long-lived assets for impairment requires us to make significant estimates about our future performance and cash flows that are inherently uncertain. These estimates can be affected by numerous factors, including changes in economic conditions, our results of operations, and competitive conditions in the industry. These factors, along with fluctuations and changes from estimates in sales, gross margins, operating cash flows and earnings, may affect the timing and the fair value estimates used in our testing of long-lived assets, which may result in impairment charges.

We are subject to potentially adverse outcomes in litigation matters, which could adversely affect our business.

We are, from time to time, involved in various legal proceedings incidental to the conduct of our business. Actions which may be filed against us include commercial, intellectual property infringement, customer and employment claims, including class action lawsuits alleging that we have violated federal and state wage and hour and other laws. These issues arise primarily in the ordinary course of business but could raise complex factual and legal issues, which are subject to multiple risks and uncertainties and could require significant management time and costs to defend. We believe that our current litigation issues will not have a material adverse effect on our results of operations or financial condition. However, our assessment of current litigation could change in light of the discovery of facts not presently known to us with respect to pending legal actions, or adverse determinations by judges, juries or other finders of fact. Moreover, additional litigation that is not currently pending may adversely affect our results of operations or financial condition.

Our results of operations fluctuate and may be negatively impacted by seasonal influences, particularly during the holiday season.

Our net sales, results of operations, liquidity 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:

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 a substantial number of temporary employees to supplement the existing workforce. If, for any reason, we were to realize lower-than-expected sales or profits during the November and December holiday selling season, our financial condition, results of operations, including related gross margins, and cash flows for the entire fiscal year may be adversely affected.

We may be unable to manage the complexities of our multi-channel business model, which could adversely affect our results of operations.

The complexity of our multi-channel business model requires a level of expertise to successfully manage operations. As we continue to tightly control expenses, we may experience an increase in demands on our managerial, operational and administrative resources, as well as our control environment. If we do not manage these demands, we may not realize the full benefits of our multi-channel business model, which may adversely affect our results of operations.

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. Installing new systems or maintaining and upgrading existing systems carries substantial risk, including potential loss of data or information, cost overruns, implementation delays, disruption of operations, lower customer satisfaction resulting in lost customers, inability to deliver merchandise to our stores or our customers and our potential inability to meet SEC reporting requirements, any of which would harm our business and may adversely affect our results of operations.

Compromises of our data security could adversely affect our results of operations.

In the ordinary course of our business, we collect and store certain personal information from our customers, employees and vendors, and we process customer payments using payment information. In addition, business is primarily conducted over the Internet for our direct segment. In order to reduce our vulnerability to computer viruses, physical and electronic break-ins, and similar disruptions, we have taken steps designed to secure our computer systems, which include network firewalls, two-factor authentication and access technology, encryption, and intrusion detection and prevention devices to provide security for processing, transmission and storage of confidential information. Nevertheless, there can be no assurance that we will not suffer a data compromise. Attempts to penetrate our computer system could result in misappropriation of personal information, payment information or confidential business information. In addition, an employee, contractor or other third party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and may purposefully or inadvertently cause a breach involving such information. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Risks of attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third party specialists. Any compromise of our data security and loss of personal or business information could disrupt our operations, damage our reputation and customer confidence, and subject us to additional costs and liabilities, which could adversely affect our business and results of operations.

We are required to maintain compliance with Payment Card Industry Data Security Standards ("PCI Standards"), which are common standards for protecting cardholder data. As part of an overall security program and to meet PCI Standards, we undergo frequent external vulnerability scans and we are reviewed by a third party security assessor. As PCI Standards change, we may be required to implement additional security measures. Failure to maintain compliance could violate agreements with major credit card companies and result in significant fines or a loss of credit processing capabilities.

We depend on key vendors for timely and effective sourcing and delivery of our merchandise. If these vendors are unable to timely fill orders or meet quality standards, we may lose customer sales and our reputation may suffer.

We may experience difficulties in obtaining sufficient manufacturing capacity from our vendors. We generally maintain non-exclusive relationships with multiple vendors that manufacture our merchandise. However, we have no contractual assurances of continued supply, pricing or access to new products, and any vendor could discontinue selling to us at any time. Moreover, a key vendor may not be able to supply our inventory needs due to capacity constraints, financial instability, or other factors beyond our control, or we could decide to stop using a vendor due to quality or other issues. If we were required to change vendors or if a key vendor were unable to supply desired merchandise in sufficient quantities on acceptable terms, particularly in light of current global economic conditions, we could experience delays in filling customer orders or delivering inventory to stores until alternative supply arrangements are secured. These delays could result in lost sales and a decline in customer satisfaction. The inability of key vendors to access credit and liquidity, or the insolvency of key vendors, could lead to their failure to deliver our merchandise, which could result in lost sales and lower customer satisfaction. It is also possible that the inability of our vendors to access credit or concerns vendors or their lenders may have with our creditworthiness may cause them to extend less favorable terms to us, which could adversely affect our cash flows, margins and financial condition, as well as limit the availability under our revolving line of credit. Additionally, delays by our vendors in supplying our inventory needs could cause us to incur more expensive air freight charges, which may adversely affect our margins.

Our reliance on foreign vendors subjects us to uncertainties that could impact our costs to source merchandise, delay or prevent merchandise shipments, which could adversely affect our business.

We continue to source apparel directly from foreign vendors, particularly those located in Asia, India and Central America. We were the importer of record for approximately 65 percent of the total apparel units purchased during fiscal 2011. 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. These risks include, among other things:

We face substantial competition from other retailers in the women's apparel industry and if we are unable to compete effectively, our business could be adversely affected.

We face substantial competition from other specialty retailers in the women's apparel industry and our net sales may decline or grow more slowly if we are unable to differentiate our merchandise and shopping experience from those of other retailers. In addition, the retail apparel industry has experienced significant price deflation over the past several years largely due to the downward pressure on retail prices caused by discount retailers and, more recently, by declining consumer spending, resulting in increased promotional and competitive activity. This competitive environment may make it more difficult to pass on product cost increases to our customers and to compete with retailers that have greater purchasing power, which may result in lower gross margins.

We may be unable to efficiently fill customer orders in our direct segment, which could adversely affect customer satisfaction, our reputation and our business.

If we are unable to efficiently process and fill customer orders, customers may cancel or refuse to accept orders, and customer satisfaction could be harmed. We are subject to, among other things:

We have a liberal merchandise return policy and if we experience a greater number of returns than anticipated, our results of operations could be adversely affected.

As part of our commitment to superior customer service, we accept returns virtually at any time and for any reason through any channel regardless of initial point of purchase. We make allowances in our financial statements for anticipated merchandise returns based on historical return rates and future expectations. These allowances may be exceeded, however, by actual merchandise returns as a result of many factors, including changes in the merchandise mix, size and fit, actual or perceived quality, differences between the actual product and its presentation in catalogs or on the website, timeliness of delivery, competitive offerings and consumer preferences or confidence. Any significant increase in merchandise returns that exceed our estimates would result in adjustments to revenue and to cost of sales and may adversely affect our financial condition, results of operations and cash flows.

We may be unable to manage significant increases in the costs associated with our catalog business, which could adversely impact our business.

We incur substantial costs associated with catalog mailings, including paper, postage, merchandise acquisition and human resource costs associated with catalog layout and design, production and

circulation and increased inventories. Significant increases in U.S. Postal Service rates and the cost of telecommunications services, paper and catalog production could significantly increase catalog production costs and result in lower profits for the catalog business. Most of our catalog-related costs are incurred prior to mailing, and as such we are not able to adjust the costs of a particular catalog mailing to reflect the actual subsequent performance of the catalog. Moreover, customer response rates have been volatile in recent years, particularly for mailings to prospective customers. Any performance shortcomings experienced by the catalog business may adversely affect our overall business, financial condition, results of operations and cash flows.

Our success is dependent upon key personnel and our ability to attract and retain qualified employees.

Our future success depends largely on the contributions and abilities of key executives and other employees. The loss of any of our key employees may adversely affect our business. Furthermore, the current economic conditions or the location of our corporate headquarters in Sandpoint, Idaho, may make it more difficult or costly to attract qualified employees for key positions.

Our multi-channel business model may expose us to assessments for unpaid taxes, penalties and interest, which could be substantial.

Our multi-channel business model subjects us to taxes in numerous jurisdictions, including state and local income, franchise, payroll, and sales and use tax. We collect and remit these taxes in any jurisdiction in which we have a physical presence. While we believe we have appropriately 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, some taxing jurisdictions have assessed additional taxes and penalties on us, 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 taxes could subject us to interest and penalties, as well as private lawsuits and damage to our reputation.

The day spa concept may not be successful and may be abandoned at any time, which could adversely affect our operating results.

We operate the Coldwater Creek ~ The Spa concept in nine locations. To date, our day spas have had a negative impact on our earnings, as we experiment with marketing approaches and gather data regarding the spa business and, in particular, our spa customer. We have no plans to build additional day spas. There is no assurance that the day spa concept will ever be successful.

If we were to abandon the day spa concept, we would be required to write off any remaining net capitalized costs and may incur lease termination costs, which may adversely affect results of operations. Additionally, we may incur impairment charges related to our day spas if there were a continued deterioration in the spas' results of operations.

If we are unable to protect our trademarks from infringement, our business may be adversely affected.

Our registered trademarks, which include Coldwater Creek® and the stylized Coldwater Creek logo, are important to our success. Even though we register and protect our trademarks and other intellectual property rights, there is no assurance that our actions will protect us from others infringing upon our trademarks and proprietary rights or seeking to block sales of our products as infringements of their

trademarks and proprietary rights. If we cannot adequately protect our trademarks or prevent infringement of them, our business and results of operations may be adversely affected.

Because the majority of our cash and cash equivalents are concentrated with one financial institution, we may experience losses on our deposits.

We maintain the majority of our cash and cash equivalents with one major financial institution in the United States, in the form of demand deposits, money market accounts and other short-term investments. Deposits in this institution may exceed the amounts of insurance provided on such deposits. With the current financial environment and the instability of financial institutions, we cannot be assured that we will not experience losses on our deposits.

The market price for our common stock has fluctuated and will continue to be significantly affected by, among other factors, quarterly operating results, changes in any earnings estimates publicly announced by us or by analysts, customer response to merchandise offerings, and timing of retail store openings and closings. In addition, stock markets generally have experienced a high level of price and volume volatility and market prices for the stock of many companies, including ours, have experienced wide price fluctuations not necessarily related to their operating performance. The reported high and low closing prices of our common stock during fiscal 2011 were $3.07 per share and $0.82 per share, respectively. The current price of our common stock may not be indicative of future market prices. The fluctuation of the market price of our common stock may have a negative impact on our liquidity and access to capital. In addition, price volatility of our common stock may expose us to stockholder litigation which may adversely affect our financial condition, results of operations and cash flows.

We may not be able to maintain our listing on the NASDAQ, which may limit the ability of our stockholders to sell shares of our common stock.

Our common stock is currently listed on the NASDAQ Global Select Market and we are required to meet specified financial requirements to maintain this listing, one of which is that we maintain a minimum closing price of at least $1.00 per share for our common stock. Our common stock has recently traded below $1.00 per share. If we fail to maintain the $1.00 minimum closing price for 30 consecutive business days, we may be at risk of delisting. We cannot be assured that we can maintain or would be successful in regaining compliance with the minimum price requirements in the future. Delisting, or even the issuance of a notice of potential delisting, could have a material adverse effect on the price of our shares and our ability to issue additional securities or secure financing. In the event of delisting, trading of our common stock would most likely be conducted in the over the counter market on an electronic bulletin board established for unlisted securities, which would adversely affect the market liquidity of our common stock, security analysts' coverage of us could be reduced and customer, investor, supplier and employee confidence may be diminished.

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

Dennis Pence, our Chairman of the Board of Directors, CEO and co-founder, beneficially owns, directly and indirectly, 18.6% of our outstanding common stock. Ann Pence, our co-founder, beneficially owns, directly and indirectly, 14.9% of our outstanding common stock. Either Dennis Pence or Ann Pence acting independently would have significant influence over, and should they act together, could effectively control the outcome of, any matters submitted to stockholders, including the election of directors and approval of business combinations, and could delay, deter or prevent a change of control of the Company, which may adversely affect the market price of our common stock. The interests of these stockholders may not always coincide with the interests of other stockholders.

Provisions in our charter documents and Delaware law may inhibit a takeover and discourage, delay or prevent stockholders from replacing or removing current directors or management.

Provisions in our Certificate of Incorporation and Bylaws may have the effect of delaying or preventing a merger with or acquisition of us, even where the stockholders may consider it to be favorable. These provisions could also prevent or hinder an attempt by stockholders to replace current directors and include:

Because the Board of Directors appoints management, any inability to effect a change in the Board of Directors may also result in the entrenchment of management.

We are also subject to Section 203 of the Delaware General Corporation Law, which, subject to exceptions, prohibits a Delaware corporation from engaging in any business combination with an interested stockholder for a period of three years following the date that the stockholder became an interested stockholder. The preceding provisions of our Certificate of Incorporation and Bylaws, as well as Section 203 of the Delaware General Corporation Law, could discourage potential acquisition proposals, delay or prevent a change of control and prevent changes in our management.

The general location, use and approximate size of our principal properties as of January 28, 2012 are as follows:

Facility	Address	Owned/ Leased

Corporate Offices(a)	Sandpoint, Idaho	Owned	250,000 sq. ft.
Distribution Center	Mineral Wells, West Virginia	Leased	960,000 sq. ft.
Customer Contact Center	Coeur d'Alene, Idaho	Leased	69,000 sq. ft.
Foreign Sourcing Offices	Hong Kong and Delhi, India	Leased	17,000 sq. ft.
New York Design Studio	New York City, New York	Leased	20,000 sq. ft.
363 Premium Retail Stores(b)	Various U.S. locations	Leased	2,165,000 sq. ft.
38 Outlet Stores(c)	Various U.S. locations	Leased	259,000 sq. ft.
9 Day Spas(d)	Various U.S. locations	Leased	49,000 sq. ft.

We believe that our corporate offices, distribution center and customer contact center will meet our operational needs for the foreseeable future.

See Note 13, Commitments and Contingencies, to our consolidated financial statements.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has been quoted on the NASDAQ Stock Market under the symbol "CWTR" since our initial public offering on January 29, 1997. On March 12, 2012, we had 6,395 stockholders of record and 121,693,553 shares of common stock, $0.01 par value per share, outstanding.

The following table sets forth the high and low sales prices for our common stock for the periods indicated:

We have never paid a cash dividend on our common stock nor do we expect to declare a cash dividend in the foreseeable future. In addition, the payment of dividends is subject to certain restrictions under our Amended and Restated Credit Agreement.

The following graph compares the cumulative five-year total return to stockholders on Coldwater Creek Inc.'s common stock to the cumulative total returns of the NASDAQ Composite Index and a customized peer group of the following four companies: Chico's, Talbots, Christopher & Banks, and ANN INC. The stock price performance shown below is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Coldwater Creek Inc., the NASDAQ Composite Index, and a Peer Group

The information required by this item concerning equity compensation plans is incorporated by reference to "Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in this Annual Report on Form 10-K.

The information presented below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. Historical data is not

necessarily indicative of the Company's future results of operations or financial condition. Refer to our "Risk Factors" included elsewhere in this Annual Report on Form 10-K.

	Fiscal Year Ended

	January 28, 2012(a)(b)			January 29, 2011			January 30, 2010(c)			January 31, 2009			February 2, 2008
	(52 weeks)			(52 weeks)			(52 weeks)			(52 weeks)			(52 weeks)
	(in thousands except per share, average square feet per store and store count data)
Statement of Operations Data:
Net sales	$	773,021		$	981,101		$	1,038,581		$	1,024,221		$	1,151,472
Gross profit	$	229,328		$	307,285		$	334,281		$	350,560		$	450,183
Net loss	$	(99,694	)	$	(44,111	)	$	(56,132	)	$	(25,963	)	$	(2,488	)
Net loss per common share—Basic and diluted	$	(0.99	)	$	(0.48	)	$	(0.61	)	$	(0.29	)	$	(0.03	)
Weighted average common shares outstanding—Basic and diluted		100,261			92,316			91,597			91,037			92,801
Cash dividends declared per common share		—			—			—			—			—
Selected Segment Data:
Net sales:
Retail	$	595,192		$	732,430		$	782,429		$	751,352		$	775,082
Direct	$	177,829		$	248,671		$	256,152		$	272,869		$	376,390
Segment operating income (loss):
Retail	$	(1,797	)	$	27,083		$	37,479		$	30,396		$	76,585
Direct		24,017			40,483			41,837			42,108			55,878

Total segment operating income		22,220			67,566			79,316			72,504			132,463
Unallocated corporate and other		(118,380	)		(110,945	)		(124,494	)		(118,716	)		(143,132	)

Loss from operations	$	(96,160	)	$	(43,379	)	$	(45,178	)	$	(46,212	)	$	(10,669	)

Selected Operating Data:
Total catalogs mailed		58,757			83,125			91,365			85,950			128,551
Average premium retail store size in square feet		5,900			5,900			5,900			5,900			5,800
Balance Sheet Data:
Cash and cash equivalents	$	51,365		$	51,613		$	84,650		$	81,230		$	62,479
Inventory	$	131,975		$	156,481		$	161,546		$	135,376		$	139,993
Working capital	$	54,222		$	81,846		$	98,885		$	92,989		$	115,750
Total assets	$	413,115		$	506,723		$	583,523		$	628,627		$	624,259
Total debt and capital lease obligations	$	42,310		$	13,037		$	13,338		$	15,040		$	15,408
Stockholders' equity	$	116,413		$	193,009		$	235,561		$	282,496		$	301,863
Premium Retail Store Count:
Beginning of the fiscal year.		373			356			348			306			240
Opened during the period		5			19			8			42			66
Closed during the period		15			2			—			—			—

End of the fiscal year		363			373			356			348			306

portion of unredeemed gift cards after the filing of the corresponding escheatment to the relevant jurisdictions.

(b): On October 24, 2011, we completed an underwritten public offering of 28.9 million shares of our common stock. We received net proceeds from the offering of $22.9 million after deducting underwriting discounts and commissions and offering expenses.
(c): During fiscal 2009, we recorded a $24.4 million non-cash income tax charge, or $0.27 per share, related to a valuation allowance against net deferred tax assets. U.S. GAAP requires that we assess whether a valuation allowance should be established against our deferred tax assets based on the consideration of all available evidence using a "more-likely-than-not" standard. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than projected future performance. Consequently, based on available evidence, in particular our historical cumulative losses, we recorded a valuation allowance against our net deferred tax asset. The recording of a valuation allowance does not preclude us from utilizing the full amount of the deferred tax asset in future profitable periods.

Item 7. 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 "Risk Factors" elsewhere in this Annual Report on Form 10-K. The forward-looking statements in this Annual Report are as of the date such report is filed with the SEC, and we assume no obligation to update our forward-looking statements or to provide periodic updates or guidance.

We encourage you to read this Management's Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying consolidated financial statements and related notes. 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. This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year, but occasionally will contain an additional week resulting in a 53-week fiscal year. Fiscal 2011, fiscal 2010 and fiscal 2009 each consisted of 52 weeks.

Net sales decreased to $773.0 million for fiscal 2011 compared to $981.1 million for fiscal 2010. This 21.2 percent decrease in net sales was primarily driven by a 22.5 percent decrease in comparable premium retail store sales(1) in our retail segment and a decrease of 28.9 percent in our direct segment net sales, offset by $11.8 million of a cumulative one-time adjustment reflecting a change in our estimate of gift card breakage.

Gross profit for fiscal 2011 was $229.3 million, or 29.7 percent of net sales, compared to $307.3 million, or 31.3 percent of net sales, for fiscal 2010. The decline in gross profit margin was primarily due to the deleveraging of fixed expenses given the lower sales, partially offset by higher merchandise margins and the benefit resulting from the cumulative one-time adjustment for gift card breakage income.

Selling, general and administrative expenses ("SG&A") for fiscal 2011 were $320.3 million, or 42.1 percent of net sales, compared to $346.7 million, or 35.3 percent of net sales, for fiscal 2010. The decrease in SG&A dollars was primarily due to lower employee related expenses, occupancy expenses, and variable and fixed operating expenses, partially offset by higher marketing expenses.

Net loss for fiscal 2011 was $99.7 million, or $0.99 per share, on 100.3 million weighted average shares outstanding, compared to a net loss of $44.1 million, or $0.48 per share, on 92.3 million weighted average shares outstanding for fiscal 2010. The number of shares versus the prior year period reflects the partial impact of the sale of 28.9 million shares of our common stock on October 24, 2011. Net loss for fiscal 2011 included the impact of a cumulative one-time adjustment reflecting the change in estimate for gift card breakage income of $11.8 million, or $0.12 per share, and $5.2 million of non-cash impairment charges, or $0.05 per share, related to certain retail store assets. Results in fiscal 2010 include $3.9 million of non-cash impairment charges, or $0.04 per share, related to certain retail store assets and technology investments.

We ended fiscal 2011 with $51.4 million in cash and cash equivalents compared to $51.6 million at the end of fiscal 2010. As of January 28, 2012, we had $15.0 million of outstanding borrowings under our revolving line of credit. Working capital was $54.2 million at the end of fiscal 2011, compared to $81.8 million at the end of fiscal 2010. Premium retail store inventory per square foot, including retail inventory in our distribution center, declined 24.3 percent at the end of fiscal 2011 compared to fiscal 2010. Total inventory decreased 15.7 percent to $132.0 million at the end of fiscal 2011 from $156.5 million at the end of fiscal 2010.

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

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

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

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

As part of our ongoing store optimization plan that we announced earlier in fiscal 2011, we closed 15 premium retail stores in fiscal 2011 and we plan to close approximately 15 premium retail stores in fiscal 2012. We are on track to meet our expectations of closing between 35 and 45 stores between fiscal 2011 and fiscal 2013.

We have made significant changes to both people and processes over the past two years to enable us to evolve the Coldwater Creek brand to what customers are looking for today. During the fourth quarter of fiscal 2011, we began to see the benefits of these investments in the form of significantly higher merchandise margins and meaningful improvements in comparable premium retail store sales trends, which gives us confidence that we are moving in the right direction.

We expect that a competitive promotional environment will continue. In addition, weakness in consumer spending persists as a result of continued uncertain macroeconomic conditions reflected in reduced incomes and asset values, high unemployment and deterioration in the housing market. We believe these conditions continue to have a negative impact on our sales, gross margin and operating performance.

We remain committed to disciplined management of expenses and inventory and expect to reduce SG&A year-over-year by $8.0 million to $10.0 million in fiscal 2012, taking into account that fiscal 2012 has 53 weeks. Also for fiscal 2012, we expect capital expenditures to be $12.0 million to $16 million and depreciation and amortization expense to be approximately $52.0 million.

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

Highlights of results of operations for fiscal years ended January 28, 2012 and January 29, 2011 are as follows:

	Fiscal Year Ended

	January 28, 2012			% of net sales			January 29, 2011			% of net sales			$ change			% change
	(dollars in thousands, except per share data)
Net sales:
Retail	$	595,192			77.0	%	$	732,430			74.7	%	$	(137,238	)		(18.7	)%
Direct		177,829			23.0			248,671			25.3			(70,842	)		(28.5	)

		773,021			100.0			981,101			100.0			(208,080	)		(21.2	)
Cost of sales		543,693			70.3			673,816			68.7			(130,123	)		(19.3	)

Gross profit		229,328			29.7			307,285			31.3			(77,957	)		(25.4	)
Selling, general and administrative expenses		320,272			41.4			346,733			35.3			(26,461	)		(7.6	)
Loss on asset impairments		5,216			0.7			3,931			0.4			1,285			32.7

Loss from operations		(96,160	)		(12.4	)		(43,379	)		(4.4	)		(52,781	)		121.7
Interest expense, net, and other		1,815			0.2			830			0.1			985			118.7

Loss before income taxes		(97,975	)		(12.6	)		(44,209	)		(4.5	)		(53,766	)		121.6
Income tax provision (benefit)		1,719			(0.3	)		(98	)		(0.0	)		1,817				*

Net Loss	$	(99,694	)		(12.9	)%	$	(44,111	)		(4.5	)%	$	(55,583	)		126.0	%

Net loss per common share—Basic and Diluted	$	(0.99	)				$	(0.48	)
Effective income tax rate		(1.8	)%					0.2	%

The $137.2 million decrease in retail segment net sales for fiscal 2011 as compared to fiscal 2010 is primarily due to a decrease in comparable premium retail store sales of 22.5 percent, reflecting a 15.3 percent decline in comparable traffic, a 7.5 percent decline in units per transaction, and a 7.1 percent decline in comparable conversion, while our comparable average unit retail increased 5.1 percent. Offsetting the decrease in comparable premium retail store sales is $10.7 million of the retail segement's portion of the cumulative one-time adjustment for gift card breakage income. Retail segment net sales were also negatively impacted by a decrease of $6.8 million in net sales from outlet stores during fiscal 2011 as compared to the fiscal 2010.

The $70.8 million decrease in direct segment net sales during fiscal 2011 as compared to fiscal 2010 is primarily the result of a decrease in order volume of 29.3 percent while our average unit retail increased 6.5 percent. Contributing to the decrease in order volume is a shift in clearance sales from our direct segment to our retail segment with the introduction of our full-time sale section in our premium retail stores. Offsetting the decrease in direct segment net sales is $1.1 million of the direct segment's portion of the cumulative one-time adjustment for gift card breakage income. Direct segment net sales were also negatively impacted by a decrease of $6.8 million in shipping revenue during fiscal 2011 as compared to fiscal 2010.

Gross profit margin decreased by 1.6 percentage points during fiscal 2011 as compared to fiscal 2010, which included a 1.1 percentage point benefit resulting from the cumulative one-time adjustment for gift card breakage income. Gross profit margin was negatively impacted by the deleveraging of fixed expenses of 3.9 percentage points, primarily retail occupancy expenses, given the lower sales, offset by improvement in merchandise margins of 1.3 percentage points.

SG&A decreased $26.5 million during fiscal 2011 as compared to fiscal 2010, primarily driven by decreased employee related expenses, occupancy expenses, and variable and fixed operating expenses. These decreases were partially offset by an increase in marketing expenses primarily due to our national television campaign. As a percent of net sales, SG&A increased by 6.1 percentage points for fiscal 2011 as compared to fiscal 2010, primarily driven by lower net sales, partially offset by our continued efforts to control expenses.

During fiscal 2011, we recorded impairment charges of $5.2 million related to certain long-lived assets, primarily premium store leasehold improvements. During fiscal 2010, we recorded impairment charges of $3.9 million related to certain long-lived assets, primarily premium store leasehold improvements and certain computer software.

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

Retail segment operating income rate expressed as a percent of retail segment sales for fiscal 2011 as compared to fiscal 2010 decreased by 4.0 percentage points, which included a 2.3 percentage point benefit resulting from the cumulative one-time adjustment for gift card breakage income. The retail segment operating rate was negatively impacted by deleveraging of occupancy expenses and employee related expenses of 4.4 and 3.4 percentage points, respectively, offset by improvement in merchandise margins.

Direct segment operating income rate expressed as a percent of direct segment sales for fiscal 2011 as compared to fiscal 2010 decreased by 2.8 percentage points. The direct segment operating income rate was negatively impacted by a 1.7 percentage point decline due to the deleveraging of marketing expenses and employee related expenses, offset by improvement in merchandise margins.

Unallocated corporate and other expenses increased $7.4 million for fiscal 2011 as compared to fiscal 2010 due to an increase in marketing expenses primarily related to our national brand marketing campaign, partially offset by decreases in corporate support costs and employee related expenses.

The increase in interest expense, net, and other for fiscal 2011 as compared to fiscal 2010 is primarily the result of lower other income and higher interest expense due to higher amounts of debt outstanding.

The income tax provision (benefit) for fiscal 2011 and 2010 primarily reflects the continuing impact of the valuation allowance against our deferred tax assets and various state taxation requirements.

Highlights of results of operations for fiscal years ended January 29, 2011 and January 30, 2010 are as follows:

	Fiscal Year Ended

	January 29, 2011			% of net sales			January 30, 2010			% of net sales			$ change			% change
	(dollars in thousands, except per share data)
Net sales:
Retail	$	732,430			74.7	%	$	782,429			75.3	%	$	(49,999	)		(6.4	)%
Direct		248,671			25.3			256,152			24.7			(7,481	)		(2.9	)

		981,101			100.0			1,038,581			100.0			(57,480	)		(5.5	)
Cost of sales		673,816			68.7			704,300			67.8			(30,484	)		(4.3	)

Gross profit		307,285			31.3			334,281			32.2			(26,996	)		(8.1	)
Selling, general and administrative expenses		346,733			35.3			378,852			36.5			(32,119	)		(8.5	)
Loss on asset impairments		3,931			0.4			607			0.1			3,324			547.6

Loss from operations		(43,379	)		(4.4	)		(45,178	)		(4.3	)		1,799			(4.0	)
Interest expense, net and other		830			0.1			797			0.1			33			4.1

Loss before income taxes		(44,209	)		(4.5	)		(45,975	)		(4.4	)		1,766			(3.8	)
Income tax provision (benefit)		(98	)		(0.0	)		10,157			1.0			(10,255	)			*

Net loss	$	(44,111	)		(4.5	)%	$	(56,132	)		(5.4	)%	$	12,021			(21.4	)%

Net loss per common share—Diluted	$	(0.48	)				$	(0.61	)
Effective income tax rate		0.2	%					(22.1	)%

The $50.0 million decrease in retail segment net sales for fiscal 2010 as compared with fiscal 2009 is primarily due to an 8.5 percent decrease in comparable premium retail store sales, driven by a decline in comparable premium retail store traffic of 8.7 percent and a 0.5 percentage point decrease in comparable premium retail store conversion rate, partially offset by an increase of 1.2 percent in realized average unit retail and the impact of new stores.

Also contributing to the decrease in retail segment net sales during fiscal 2010 as compared with fiscal 2009 was a $0.8 million decrease in net sales from outlet stores. These decreases were partially offset by increases of $1.1 million and $0.1 million in co-branded credit card program revenue and net sales from our day spas, respectively, during fiscal 2010 as compared with fiscal 2009.

Direct segment net sales decreased $7.5 million or 2.9 percent during fiscal 2010 as compared to fiscal 2009. The decrease is primarily the result of a 2.6 percent decrease in average order value and a 0.6 percent decrease in order volume. We believe the decrease in our direct segment order volume is attributed to a decrease in overall consumer response to our product assortment.

Direct segment net sales were also negatively impacted by decreases of $3.6 million and $1.5 million in shipping revenue and co-branded credit card program revenue, respectively, during fiscal 2010 as compared with fiscal 2009. The decrease in shipping revenue is primarily associated with decreases in realized shipping rates and order volume, as well as an increase in free shipping promotions.

The gross profit rate decreased by 0.9 percentage points during fiscal 2010 as compared to fiscal 2009. The gross profit rate was negatively impacted by deleveraging of our retail occupancy costs and higher buying and distribution costs of 0.9 percentage points and 0.7 percentage points, respectively. These decreases in gross profit rate were offset by a 0.6 percentage point increase attributable to higher initial merchandise markups, which was partially offset by increases in promotional discounts and our markdown rate. The gross margin rate was also impacted by lower shipping and handling costs of 0.1 percentage points due to lower direct sales.

SG&A decreased $32.1 million during fiscal 2010 as compared with fiscal 2009, primarily driven by decreased employee-related expenses, marketing expenses and other fixed and variable costs. As a percentage of net sales, SG&A decreased by 1.2 percentage points in fiscal 2010 as compared with fiscal 2009. This decrease in SG&A rate was primarily the result of a 0.6 percentage point decrease in employee expenses and a 0.7 percentage point decrease in other fixed and variable costs, partially offset by deleveraging of marketing costs of 0.1 percentage points. The decrease in employee-related expenses and other fixed and variable costs as a percentage of sales is primarily the result of our continued efforts to control expenses. Employee-related expenses during fiscal 2009 included separation

agreement charges of $6.0 million. The decrease in marketing expense was driven by decreased catalog circulation and magazine advertising.

During fiscal 2010, we recorded impairment charges of $3.9 million related to certain long-lived assets, primarily premium store leasehold improvements and certain computer software. During fiscal 2009, we recorded impairment charges of $0.6 million related to leasehold improvements and furniture and fixtures at certain premium retail store locations.

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

Retail segment operating income rate expressed as a percentage of retail segment sales for fiscal 2010 as compared with fiscal 2009 decreased by 1.1 percentage points. Retail segment operating income was negatively impacted by deleveraging of occupancy expenses, employee related expenses and marketing expenses of 1.4, 0.7 and 0.3 percentage points, respectively. In addition, impairment charges related to leasehold improvements at certain premium retail store locations decreased operating income by 0.4 percentage points. These decreases were offset by a 1.5 percentage point increase in merchandise margins attributable to higher merchandise markups, partially offset by increased promotional discounts. Also, reductions to other fixed and variable costs increased operating income by 0.2 percentage points.

Direct segment operating income rate expressed as a percentage of direct segment sales for fiscal 2010 as compared with fiscal 2009 remained flat. Increased clearance activity, partially offset by higher merchandise markups, resulted in a 1.5 percentage point decrease in merchandise margins. The deleveraging of marketing expenses also contributed a 0.3 percentage point decrease in operating income. These decreases in operating income were offset by a 1.2 and 0.6 percentage point decrease in employee-related expenses and other fixed and variable costs, respectively.

Unallocated corporate and other expenses decreased $13.5 million in fiscal 2010 as compared to fiscal 2009 due to a decrease in marketing expenses, primarily as a result of decreased national magazine advertising campaigns, and decreases in employee related expenses and corporate support costs.

The increase in interest expense, net and other for fiscal 2010 as compared with fiscal 2009 was primarily the result of an increase in interest expense on our capital lease and other financing obligations.

The tax benefit for fiscal 2010 primarily reflects the continuing impact of the valuation allowance against our deferred tax assets. The provision for income taxes of $10.2 million in fiscal 2009 reflects the establishment of valuation allowances for substantially all of our net deferred tax assets.

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

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 a substantial number of temporary employees to supplement our existing workforce. Additionally, as gift items and accessories are more prominently represented in the November and December holiday season merchandise offerings, we typically expect, absent offsetting factors, to realize higher consolidated gross margins and earnings in the second half of our fiscal year.

On October 24, 2011, we completed an underwritten public offering of 28.9 million shares of our common stock. We received net proceeds from the offering of $22.9 million after deducting underwriting discounts and commissions and offering expenses. The net proceeds from the offering are used for working capital and other capital expenditures, including investments in our marketing strategy and supply chain, as well as other general corporate purposes.

During fiscal 2009, we entered into a credit facility with Wells Fargo Bank, which is secured primarily by our inventory and credit card receivables and provides a revolving line of credit of up to

$70.0 million, with subfacilities for the issuance of up to $70.0 million in letters of credit and swingline advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be required by the lender. On May 16, 2011, we entered into an Amended and Restated Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, which, among other things, extended the maturity date to May 16, 2016, provided a $15.0 million term loan due on May 16, 2016, and granted the lenders a security interest in our Sandpoint, Idaho corporate offices and certain other assets. The amount available under the $70.0 million revolving line of credit remains unchanged; however, we now have a future option to request an increase in the amount of the revolving line of credit for an additional $15.0 million, which if granted would result in a total of up to $85.0 million available, exclusive of the term loan. As of January 28, 2012, the revolving line of credit was limited to a borrowing base of $68.8 million and we had $21.9 million in letters of credit issued and $15.0 million borrowed on our revolving line of credit, resulting in $31.9 million available for borrowing under our revolving line of credit.

Pursuant to the Credit Agreement, borrowings 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 2.56% as of January 28, 2012. 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 1.75% as of January 28, 2012. Commitment fees accrue at a rate ranging from 0.375% to 0.50% (determined according to the Availability), which is assessed on the average unused portion of the credit facility maximum amount. The term loan accrues interest at a rate of 6.00% over the Reference Rate, with an interest rate of 6.31% as of January 28, 2012.

The Credit Agreement has restrictive covenants with respect to capital expenditure limitations, minimum amount of inventory to be held and minimum excess availability over the borrowing base that must be maintained. The Credit Agreement also contains various covenants relating to customary matters, such as indebtedness, liens, investments, acquisitions, mergers, dispositions and other payment restriction conditions, such as limits on our ability to pay dividends when we have outstanding borrowings on our revolving line of credit. We were in compliance with all covenants for all periods presented.

The Credit Agreement contains customary events of default for credit facilities of this type. 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 under the Credit Agreement may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

Net cash used in operating activities was $44.2 million and $1.0 million during fiscal 2011 and 2010, respectively, compared to net cash provided by operating activities of $24.6 million during fiscal 2009. The $43.2 million decrease in cash flows from operating activities during fiscal 2011 as compared with fiscal 2010 resulted primarily from the increased net loss offset by changes in our operating assets and liabilities. The $25.6 million decrease in cash flows from operating activities during fiscal 2010 as compared with fiscal 2009 resulted primarily from decreased net sales and gross margins as well as a decrease in tax refunds received of $8.5 million. We also experienced decreases of $6.3 million and $3.2 million in cash collected on tenant allowances and fees collected from the co-branded credit card program, respectively. These decreases were offset by lower operating expenses.

Net cash used in investing activities principally consisted of cash outflows for capital expenditures which totaled $8.9 million, $31.1 million and $21.7 million during fiscal 2011, fiscal 2010 and fiscal 2009,

respectively. Capital expenditures during fiscal 2011 primarily related to leasehold improvements and furniture and fixtures associated with the opening of five additional premium retail stores, the remodeling of certain existing stores and the continued development of our IT infrastructure. Capital expenditures in fiscal 2010 primarily related to leasehold improvements and furniture and fixtures associated with the opening of 19 additional premium retail stores, four outlet stores and to a lesser extent the remodeling of certain existing stores and the expansion of our IT and distribution infrastructure. Capital expenditures in fiscal 2009 primarily related to leasehold improvements and furniture and fixtures associated with the opening of eight additional premium retail stores, two outlet stores, two premium retail stores under construction, the remodeling of certain existing stores, the relocation of our New York design office, and the expansion of our IT and distribution infrastructure.

Net cash provided by financing activities was $51.8 million during fiscal 2011 compared to net cash used in financing activities of $1.9 million and $0.5 million during fiscal 2010 and 2009, respectively. The cash inflows during fiscal 2011 were primarily derived from proceeds of $22.9 million from our stock offering, net of underwriting discounts and commissions and offering expenses, borrowings of $15.0 million on our revolving line of credit in the third quarter of fiscal 2011, and proceeds from our $15.0 million term loan obtained in the second quarter of fiscal 2011. Net cash outflows during fiscal 2011, 2010 and 2009 were primarily due to payments on our capital lease and other financing obligations.

As a result of the foregoing, we had $54.2 million in working capital at January 28, 2012 compared with $81.8 million in working capital at January 29, 2011. Our current ratio was 1.36 at January 28, 2012 compared with 1.50 at January 29, 2011. As of January 28, 2012, we had $15.0 million outstanding under our revolving line of credit.

We plan to limit new store openings to one premium retail store and one outlet store in fiscal 2012, and will continue to evaluate real estate opportunities to improve the efficiency of our store base, including the potential of relocating stores to more favorable locations and reducing overall store size. In line with our store optimization program announced during fiscal 2011, we expect to close approximately 15 premium retail stores in fiscal 2012. Capital expenditures for fiscal 2012 are expected to be between $12.0 million and $16.0 million.

superior to those of our common stock. There is no assurance that debt or equity financing will be available in amounts or on terms acceptable to us.

We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.

The following tables summarize our minimum contractual commitments and commercial obligations as of January 28, 2012:

(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 January 28, 2012 of $57.5 million. All other operating leases primarily pertain to retail and outlet 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 $94.5 million and capital expenditures of $1.9 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): Our Credit Agreement matures on May 16, 2016, however, the $15.0 million outstanding on our revolving line of credit as of January 28, 2012 is considered to be a current obligation as terms generally less than 90 days are used to lock in preferred interest rates. Interest payments on our term loan and revolving line of credit were estimated using the effective interest rate as of January 28, 2012 and assuming interest payments on $15.0 million outstanding on our revolving line of credit for the next 12 months.
(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 January 28, 2012 of $18.9 million, and as an operating lease from August 2028 through July 2038, with a remaining operating lease commitment as of January 29, 2012 of $16.1 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.

Unrecognized tax benefits as of January 28, 2012 are not included in the contractual obligations table presented above because the timing of the settlements cannot be fully determined.

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. Note 2, Significant Accounting Policies, to our consolidated financial statements describes the significant accounting policies used in the preparation of our consolidated financial statements. The critical accounting policies used in the preparation of our consolidated financial statements, as described below, include those that require us to make estimates about matters that are uncertain and could have a material impact to our consolidated financial statements.

We recognize sales and the related cost of sales for our direct segment at the time the merchandise is expected to be delivered to our customer and for our retail segment at the point of sale with a customer in a store. We reduce our sales and cost of sales and establish an accrual for expected sales returns based on historical experience and future expectations. The ability to reasonably estimate sales returns is made more complex by the fact that we offer our customers a return policy whereby they may return merchandise for any reason and at any time without any restrictions as to condition or time of purchase to any of our locations. The actual amount of sales returns we subsequently realize may fluctuate from estimates due to several factors, including size and fit, merchandise mix, actual or perceived quality, differences between the actual product and its presentation in the catalog or website, timeliness of delivery and competitive offerings. We continually track subsequent sales return experience, compile customer feedback to identify any pervasive issues, reassess the marketplace, compare our findings to previous estimates and adjust the accrual accordingly. Provisions for sales returns were as follows:

Proceeds from the sale of gift cards and certificates are recorded as a liability and are recognized as net sales when the cards are redeemed for merchandise. Our gift cards do not have an expiration date. Prior to the fourth quarter of fiscal 2011, we only recognized breakage income from the non-escheated portion of unredeemed gift cards after the filing of the corresponding escheatment to the relevant jurisdictions. During the fourth quarter of fiscal 2011, we identified a history of redemption patterns associated with our gift cards that support a change in our estimate of the term over which we should

recognize income on gift card breakage. Based on historical information, the likelihood of a gift card remaining unredeemed can be reasonably estimated at the time of gift card issuance. Breakage income is recognized over the estimated average redemption period of redeemed gift cards, for those gift cards for which the likelihood of redemption is deemed to be remote and for the amount for which there is no legal obligation for us to remit the value of such unredeemed gift cards to any relevant jurisdictions. Gift card breakage income is included in net sales in our consolidated statements of operations. During the fourth quarter of fiscal 2011, we recorded $11.8 million of a cumulative one-time adjustment reflecting the change in our estimate of gift card breakage.

Our inventories consist of merchandise purchased for resale and are recorded at the lower of weighted average cost or market. The nature of our business requires that we make substantially all of our merchandising and marketing decisions and corresponding inventory purchase commitments with vendors several months in advance of the time in which a particular merchandise item is intended to be included in the merchandise offerings. These decisions and commitments are based upon, among other possible considerations, historical sales with identical or similar merchandise, our understanding of then-prevailing fashion trends and influences, and an assessment of likely economic conditions and various competitive factors. We continually make assessments as to whether the carrying cost of inventory exceeds its market value, and, if so, by what dollar amount. To determine whether inventory should be written down we consider current and anticipated demand and customer preferences in addition to the current and future estimated selling price. The carrying value of the inventory is reduced to its net realizable value with a corresponding charge to cost of sales. Actual results may differ from our estimates if we are required to markdown or discount merchandise beyond our current expectations. For the inventory marked down to net realizable value, a one percentage point increase in our adjustment rate at January 28, 2012 would have affected net loss by less than $0.5 million.

We estimate and record physical inventory losses that have occurred since our last physical inventory date by applying the most recent average physical inventory loss experience. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our inventory loss estimate. However, if our estimates regarding physical inventory losses are inaccurate, we may be exposed to losses or gains that could be material.

The calculation of stock-based compensation expense requires us to expense the fair value of equity awards over the requisite employee service period, which is generally the vesting period. Calculating the fair value of stock options on the date of grant requires judgment, including estimating the expected life of the award, the expected stock price volatility over the expected life and pre-vesting forfeitures. Our expected stock price volatility assumption is based upon a combination of both the implied and historical volatilities of our stock which is obtained from public data sources. The expected life represents the weighted average period of time that stock options are expected to be outstanding, giving consideration to vesting schedules and historical exercise patterns. An increase in expected volatility or expected life would result in an increase in the fair value of our stock options and higher compensation expense, while a decrease in expected volatility or expected life would result in a decrease in the fair value of our stock options and lower compensation expense. We also grant various restricted stock units which are generally less subjective in determining fair value as the fair value of these awards is based primarily upon the fair market value of our common stock on the date of grant. We estimate forfeitures for all of our equity awards based upon historical experience, and only recognize expense for those awards expected to vest. We revise our estimated forfeitures in subsequent periods, when necessary, if actual forfeitures vary from those originally estimated. We believe that our estimates are based upon outcomes that are reasonably likely to occur. If actual forfeitures vary from

our estimates, compensation expense would vary from what we record in the current and prior fiscal years. Total stock-based compensation expense during fiscal 2011, 2010 and 2009 was $2.4 million, $2.5 million and $6.7 million, respectively.

Long-lived assets are subject to a review for impairment if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future undiscounted cash flows generated by an asset or asset group is less than its carrying amount, we then determine the fair value of the asset generally by using a discounted cash flow model. A loss is recognized, if any, equal to the amount by which the carrying amount of the asset or asset group exceeds the fair value. In assessing future cash flows, management is required to make assumptions and judgments, including forecasting future sales, margins and operating expenses over the estimated remaining useful life. These assumptions and judgments can be affected by consumer spending and overall economic conditions on a localized or regional basis, as well as other factors not necessarily within our control.

During fiscal 2011, we experienced a decrease in consumer spending and low traffic levels which had a negative impact on our revenue, gross margins, operating cash flows and earnings, resulting in our need to evaluate certain asset groups for impairment. During fiscal 2011, we recorded impairment charges of $5.2 million related to certain long-lived assets, primarily premium store leasehold improvements. A decrease in our expected future cash flows of 15 percent throughout the forecast period would have increased our fiscal 2011 store impairment charges by less than $0.5 million. If consumer spending on apparel and accessories remains subdued with low demand for our product, it is possible that we could record additional impairments of certain long-lived assets in the future.

An estimated loss from a contingency is recorded if it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Gain contingencies are not recorded until realization is assured beyond a reasonable doubt.

We are involved in litigation and administrative proceedings arising in the normal course of our 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. The assessment of the outcome of litigation can be very difficult to predict as it is subject to many factors, including those not within our control, and is highly dependent on individual facts and circumstances. Litigation is subject to highly complex legal processes and the final outcome of these matters could vary significantly from the amounts that have been recorded in the financial statements.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and respective tax bases and operating loss and tax credit carryforwards, as measured using enacted tax rates expected to be in effect in the periods where temporary differences are expected to be realized or settled.

Assessing the realizability of deferred tax assets requires significant judgment. We consider all available evidence to determine whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become

realizable. In making such judgments, significant weight is given to evidence that can be objectively verified. Current or previous losses are given more weight than projected future performance. Consequently, based on all available evidence, in particular our three-year historical cumulative losses and recent operating losses, we have a valuation allowance against a significant portion of our net deferred tax assets. When the results of our operations demonstrate a sustained level of taxable income it may become more-likely-than-not that all or a part of the net deferred tax assets will be realized which could result in the reduction of the valuation allowance. The determination of when to reduce a valuation allowance requires significant judgment by management in determining the appropriate level of evidence to objectively support the realization of the net deferred tax assets.

The market risk inherent in our financial instruments represents the potential loss arising from adverse changes in interest rates. 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 purposes and have not used, and currently do not anticipate using, any derivative financial instruments.

As of January 28, 2012, we had outstanding debt of $14.9 million under our variable rate term loan and $15.0 million under our revolving line of credit. The impact of a hypothetical 10 percent adverse change in interest rates for our debt would not have resulted in a material amount of additional expense for fiscal 2011. As of January 29, 2011, we did not have borrowings under our credit facility and, consequently, did not have any material exposure to interest rate market risks for fiscal 2010.

To the Board of Directors and Stockholders of
Coldwater Creek Inc.
Sandpoint, Idaho

We have audited the accompanying consolidated balance sheets of Coldwater Creek Inc. and subsidiaries (the "Company") as of January 28, 2012 and January 29, 2011, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended January 28, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Coldwater Creek Inc. and subsidiaries as of January 28, 2012 and January 29, 2011, and the results of their operations and their cash flows for each of the three years in the period ended January 28, 2012, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of January 28, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2012 expressed an unqualified opinion on the Company's internal control over financial reporting.

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except for per share data)

	January 28, 2012			January 29, 2011

ASSETS
Current Assets:
Cash and cash equivalents	$	51,365		$	51,613
Receivables		8,199			9,561
Inventories		131,975			156,481
Prepaid and other current assets		6,137			12,217
Income taxes recoverable		—			1,489
Prepaid and deferred marketing costs		3,273			6,902
Deferred income taxes		2,313			6,029

Total current assets		203,262			244,292
Property and equipment, net		206,079			259,349
Deferred income taxes		1,891			1,915
Other assets		1,883			1,167

Total assets	$	413,115		$	506,723

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	55,130		$	76,354
Accrued liabilities		74,915			85,296
Income taxes payable		3,260			—
Current maturities of debt and capital leases		15,735			796

Total current liabilities		149,040			162,446
Deferred rents		101,384			116,875
Long-term debt and capital lease obligations		26,575			12,241
Supplemental Employee Retirement Plan		12,142			10,013
Deferred marketing fees and revenue sharing		4,402			5,822
Deferred income taxes		1,716			5,524
Other liabilities		1,443			793

Total liabilities		296,702			313,714

Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value, 1,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.01 par value, 300,000 shares authorized, 121,669 and 92,503 shares issued, respectively		1,217			925
Additional paid-in capital		150,341			125,795
Accumulated other comprehensive loss		(2,204	)		(464	)
Retained earnings (deficit)		(32,941	)		66,753

Total stockholders' equity		116,413			193,009

Total liabilities and stockholders' equity	$	413,115		$	506,723

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

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share data)

	Fiscal Year Ended

	January 28, 2012			January 29, 2011			January 30, 2010
Net sales	$	773,021		$	981,101		$	1,038,581
Cost of sales		543,693			673,816			704,300

Gross profit		229,328			307,285			334,281
Selling, general and administrative expenses		320,272			346,733			378,852
Loss on asset impairments		5,216			3,931			607

Loss from operations		(96,160	)		(43,379	)		(45,178	)
Interest expense, net, and other		1,815			830			797

Loss before income taxes		(97,975	)		(44,209	)		(45,975	)
Income tax provision (benefit)		1,719			(98	)		10,157

Net loss	$	(99,694	)	$	(44,111	)	$	(56,132	)

Net loss per share—Basic and Diluted	$	(0.99	)	$	(0.48	)	$	(0.61	)

Weighted average shares outstanding—Basic and Diluted		100,261			92,316			91,597

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

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock							Accumulated Other Comprehensive Loss

	Common Stock				Additional Paid-in Capital						Retained Earnings
	Shares		Par Value		Additional Paid-in Capital						Retained Earnings			Total
Balance at January 31, 2009		91,265	$	913	$	115,921		$	(1,334	)	$	166,996		$	282,496
Net loss		—		—		—			—			(56,132	)		(56,132	)
Supplemental Employee Retirement Plan liability adjustment, net of tax of $780		—		—		—			961			—			961

Comprehensive loss															(55,171	)

Net proceeds from exercise of stock options		553		5		1,315			—			—			1,320
Excess tax benefit from exercise of stock options		—		—		295			—			—			295
Issuance of shares under the employee stock purchase plan		151		2		676			—			—			678
Tax withholding payments		—		—		(775	)		—			—			(775	)
Stock-based compensation		195		2		6,716			—			—			6,718

Balance at January 30, 2010		92,164		922		124,148			(373	)		110,864			235,561
Net loss		—		—		—			—			(44,111	)		(44,111	)
Supplemental Employee Retirement Plan liability adjustment, net of tax of $0		—		—		—			(91	)		—			(91	)

Comprehensive loss															(44,202	)

Net proceeds from exercise of stock options		126		1		363			—			—			364
Issuance of shares under the employee stock purchase plan		142		1		563			—			—			564
Tax withholding payments		—		—		(93	)		—			—			(93	)
Reduction in valuation allowance from shortfall in stock-based compensation		—		—		(1,661	)		—			—			(1,661	)
Stock-based compensation		71		1		2,475			—			—			2,476

Balance at January 29, 2011		92,503		925		125,795			(464	)		66,753			193,009
Net loss		—		—		—			—			(99,694	)		(99,694	)
Supplemental Employee Retirement Plan liability adjustment, net of tax of $0		—		—		—			(1,740	)		—			(1,740	)

Comprehensive loss															(101,434	)

Net proceeds from stock offering		28,855		289		22,656			—			—			22,945
Issuance of shares under the employee stock purchase plan		230		2		328			—			—			330
Reduction in valuation allowance from shortfall in stock-based compensation		—		—		(841	)		—			—			(841	)
Stock-based compensation		81		1		2,403			—			—			2,404

Balance at January 28, 2012		121,669	$	1,217	$	150,341		$	(2,204	)	$	(32,941	)	$	116,413

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

COLDWATER CREEK INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Fiscal Year Ended

	January 28, 2012			January 29, 2011			January 28, 2010
Operating Activities:
Net loss	$	(99,694	)	$	(44,111	)	$	(56,132	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		56,743			63,329			63,721
Stock-based compensation expense		2,403			2,476			6,718
Supplemental Employee Retirement Plan expense		555			886			3,011
Deferred income taxes		(68	)		(1,200	)		22,169
Valuation allowance adjustments		(839	)		(2,564	)		—
Deferred marketing fees and revenue sharing		(1,509	)		(2,055	)		1,623
Deferred rents		(15,948	)		(7,249	)		(11,285	)
Excess tax benefit from exercises of stock options		—			—			(650	)
Net loss on asset dispositions		197			447			1,120
Loss on asset impairments		5,216			3,931			607
Other		148			(516	)		(588	)
Net change in operating assets and liabilities:
Receivables		2,212			(3,584	)		10,014
Inventories		24,506			5,065			(26,170	)
Prepaid and other current assets and income taxes recoverable		7,569			8,203			5,072
Prepaid and deferred marketing costs		3,629			(1,035	)		(506	)
Accounts payable		(22,769	)		(21,776	)		6,177
Accrued liabilities		(9,835	)		(1,236	)		(276	)
Income taxes payable		3,260			—			—

Net cash provided by (used in) operating activities		(44,224	)		(989	)		24,625

Investing Activities:
Purchase of property and equipment		(8,895	)		(31,084	)		(21,681	)
Proceeds from asset dispositions		1,110			73			58
Change in restricted cash		—			890			886

Net cash used in investing activities		(7,785	)		(30,121	)		(20,737	)

Financing Activities:
Net proceeds from stock offering		22,945			—			—
Borrowings on revolving line of credit		15,000			—			—
Proceeds from the issuance of long-term debt		15,000			—			—
Payments of long-term debt, capital lease and other financing obligations		(819	)		(2,762	)		(1,723	)
Payment of credit facility financing costs		(695	)		—			(618	)
Net proceeds from exercises of stock options and ESPP purchases		330			928			1,998
Excess tax benefit from exercises of stock options		—			—			650
Tax withholding payments		—			(93	)		(775	)

Net cash provided by (used in) financing activities		51,761			(1,927	)		(468	)

Net increase (decrease) in cash and cash equivalents		(248	)		(33,037	)		3,420
Cash and cash equivalents, beginning		51,613			84,650			81,230

Cash and cash equivalents, ending	$	51,365		$	51,613		$	84,650

Non-Cash Investing and Financing Activities:
Property and equipment purchases not yet paid	$	2,085		$	540		$	1,644
Capital lease asset additions and related obligations and other asset financing	$	75		$	1,947		$	552
Supplemental Cash Flow Data:
Interest paid, net of amount capitalized	$	2,231		$	1,817		$	1,515
Income taxes refunded, net of income taxes paid	$	2,112		$	7,261		$	15,806

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

COLDWATER CREEK INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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, accessories, jewelry, and gift items. We operate two operating segments: retail and direct. The retail segment consists of our premium retail stores, outlet stores, and day spas. The direct segment consists of sales generated through our e-commerce website and from orders taken from customers over the phone and through the mail.

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

The preparation of 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, 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.

We recognize sales, including shipping and handling income and the related cost of those sales, for our direct segment at the time the merchandise is expected to be delivered to our customer, and for our retail segment at the point of sale with a customer in a store. We exclude the related sales tax from revenue as sales tax amounts are recorded on a net basis. We reduce our sales and cost of sales and establish an accrual for expected sales returns based on historical experience and future expectations.

Co-branded credit card. Under our co-branded customer credit card program, we receive from the issuing bank a non-refundable up-front marketing fee for each new credit card account that is opened and activated. The initial up-front marketing fee is deferred and recognized into revenue over the estimated customer relationship period. We are also eligible to receive an annual revenue sharing payment if certain profitability measures of the program are met. The revenue sharing payment we receive annually, if any, is deferred and recognized into revenue over the remaining expected life of the co-branded credit card program. In addition, we receive an ongoing sales royalty which is based on a percentage of purchases made by the cardholders. Cardholders receive reward coupons from their credit card purchases that can be used to purchase our merchandise. The sales royalty is deferred and subsequently recognized as revenue over the redemption period of the reward coupons, adjusted for that portion of awards that we estimate will not be redeemed by customers (breakage). We recognize the breakage for unredeemed awards in proportion to the actual awards that are redeemed by customers. We determine our breakage rate based upon our historical redemption patterns.

Onecreek. Our onecreek customer loyalty program benefits include sneak peeks at upcoming trends and new merchandise, onecreek customer service specialists, exclusive onecreek savings and promotions, free shipping on returns, and a special birthday gift. The promotions and birthday gifts are typically provided, at our discretion, in the form of customer appreciation discount coupons that can be used to purchase merchandise. We recognize these discount coupons at the time the sale is recognized.

Gift Cards and Gift Card Breakage. Proceeds from the sale of gift cards and certificates are recorded as a liability and are recognized as net sales when the cards are redeemed for merchandise. Our gift cards do not have an expiration date. Prior to the fourth quarter of fiscal 2011, we only recognized breakage income from the non-escheated portion of unredeemed gift cards after the filing of the corresponding escheatment to the relevant jurisdictions. During the fourth quarter of fiscal 2011, we identified a history of redemption patterns associated with our gift cards that support a change in our estimate of the term over which we should recognize income on gift card breakage. Based on historical information, the likelihood of a gift card remaining unredeemed can be reasonably estimated at the time of gift card issuance. Breakage income is recognized over the estimated average redemption period of redeemed gift cards, for those gift cards for which the likelihood of redemption is deemed to be remote and for the amount for which there is no legal obligation for us to remit the value of such unredeemed gift cards to any relevant jurisdictions. Gift card breakage income is included in net sales in our consolidated statements of operations. During the fourth quarter of fiscal 2011, we recorded $11.8 million of a cumulative one-time adjustment reflecting the change in our estimate of gift card

breakage. Gift card breakage income was $0.5 million and $0.6 million in fiscal 2010 and 2009, respectively.

Cash equivalents consist of highly liquid instruments with a maturity date of three months or less at the date of purchase. These instruments primarily consist of direct investments in money market funds with investments entirely in U.S. Treasury Securities. We maintain a substantial portion of our cash and cash equivalents with a well-known and stable financial institution. However, we have significant amounts of cash and cash equivalents at this financial institution that are in excess of federally insured limits. Though we have not experienced any losses on our cash and cash equivalents to date and we do not anticipate incurring any losses, given the current financial environment and the instability of financial institutions, we cannot be assured that we will not experience losses on our deposits.

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:

As of January 29, 2011, we held $39.1 million in money market funds that are measured at fair value on a recurring basis using Level 1 inputs. As of January 28, 2012, we did not have any amounts in money market funds.

During fiscal 2011, certain long-lived assets, primarily premium store leasehold improvements, with a net carrying amount of $6.3 million were written down to their fair value of $1.1 million, resulting in an impairment charge of $5.2 million including $2.3 million recorded in the fourth quarter of fiscal 2011. During fiscal 2010, certain long-lived assets, primarily premium store leasehold improvements and computer software, with a net carrying amount of $9.2 million were written down to their fair value of $5.3 million, resulting in an impairment charge of $3.9 million. During fiscal 2009, certain long-lived store assets, primarily premium store leasehold improvements and equipment, with a net carrying amount of $0.7 million were written down to their fair value of $0.1 million, resulting in a net impairment charge of $0.6 million. These impairment charges were measured at fair value using Level 3 inputs (discounted cash flows).

We have financial assets and liabilities, not required to be measured at fair value on a recurring basis, which primarily consist of cash, receivables, payables, and debt. The carrying value of cash, receivables, payables and borrowing on our revolving line of credit materially approximate their fair values due to their short-term nature. The carrying value of our term loan materially approximates fair value at January 28, 2012, as the interest rate is primarily a market-based variable rate.

Inventories primarily consist of merchandise purchased for resale. Inventory in our distribution center and in our premium retail stores, outlet stores and day spas is stated at the lower of weighted average cost or market.

Direct response advertising includes catalogs, national magazine advertisements and other mailings that contain an identifying code which allows us to track related sales. All direct costs associated with the development, production and circulation of direct response advertisements are accumulated as prepaid marketing costs. Once the related catalog, national magazine advertisement, or other mailings is either mailed or first appears in print, these costs are reclassified to deferred marketing costs. These costs are then amortized to selling, general and administrative expenses over the expected sales realization cycle, typically several weeks. During fiscal 2011, 2010 and 2009, direct response advertising expense was $40.2 million, $47.7 million and $54.5 million, respectively.

Advertising costs other than direct response advertising, including television, store and event promotions, signage expenses and other general customer acquisition activities, are expensed as incurred or when the advertising event first takes place. During fiscal 2011, 2010 and 2009, advertising expenses other than those related to direct response advertising was $40.0 million, $25.9 million and $22.3 million, respectively, and are included in selling, general and administrative expenses.

Property and equipment, including any major additions and improvements made to property and equipment, are recorded at cost. Minor additions and improvements, as well as maintenance and repairs that do not materially extend the useful life of property or equipment, are charged to operations as incurred. The net book value of property or equipment sold or retired is removed from the asset and related accumulated depreciation accounts with any resulting net gain or loss included in results of operations.

Depreciation and amortization expense is computed using the straight-line method over the following estimated useful lives:

including forecasting future sales, margins and operating expenses over the estimated remaining useful life. These assumptions and judgments can be affected by consumer spending and overall economic conditions on a localized or regional basis, as well as other factors not necessarily within our control.

Costs related to software developed or obtained for internal use are expensed as incurred until the application development stage has been reached. Once the application development stage has been reached, certain qualifying costs are capitalized until the software is ready for its intended use.

We lease our distribution center, customer contact center and all of our premium retail stores, outlet stores and day spas, as well as certain other property and equipment. Nearly all of our leases are accounted for as operating leases, except for four capital leases with fixed, non-cancelable terms ranging from approximately four to 30 years. The fixed, non-cancelable terms of our operating leases are generally five to 10 years. Most of our leases include renewal options that allow us to extend the term beyond the initial non-cancelable term. Several of our leases require additional rent based on sales, which is recorded as rent expense when the additional rent payments become probable. Also, most of the leases require payment of real estate taxes, insurance and certain common area maintenance costs in addition to future minimum lease payments.

Certain of our operating leases contain predetermined fixed escalations of the minimum rental payments over the lease. For these leases, we recognize the related rental expense on a straight-line basis over the term of the lease, which commences for accounting purposes on the date we have access and control over the leased store (possession). Possession occurs prior to the making of any lease payments and approximately 60 to 90 days prior to the opening of a store. In the early years of a lease with rent escalations, the recorded rent expense will exceed the actual cash payments. The amount of rent expense that exceeds the cash payments is recorded as deferred rent in the consolidated balance sheet. In the later years of a lease with rent escalations, the recorded rent expense will be less than the actual cash payments. The amount of cash payments that exceed the rent expense is then recorded as a reduction to deferred rent. Deferred rent related to lease agreements with escalating rent payments was $35.7 million and $36.1 million at January 28, 2012 and January 29, 2011, respectively.

Additionally, certain operating leases contain terms which obligate the landlord to remit cash to us as an incentive to enter into the lease agreement (tenant allowances). We record the amount to be remitted by the landlord as a tenant allowance receivable as we earn it under the terms of the contract. At the same time, we record deferred rent in an equal amount in the consolidated balance sheet. The tenant allowance receivable is reduced as cash is received from the landlord, while the deferred rent is amortized as a reduction to rent expense over the lease term. Deferred rent related to tenant allowances, including both the current and long-term portions, was $86.0 million and $101.6 million at January 28, 2012 and January 29, 2011, respectively.

rates expected to be in effect in the periods where temporary differences are expected to be realized or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided when it is more-likely-than-not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.

We review and update our tax positions as necessary to add any new uncertain tax positions taken, or to remove previously identified uncertain positions that have been adequately resolved. Additionally, uncertain positions may be remeasured as warranted by changes in facts or law. Accounting for uncertain tax positions requires estimating the amount, timing and likelihood of ultimate settlement. Although we believe that these estimates are reasonable, actual results could differ from these estimates.

The following table illustrates the primary costs classified in each major expense category:

Cost of Sales

Selling, General and Administrative Expenses

•

Design costs;

•

Buying costs incurred to acquire inventory;

•

Duty, commission and other fees related to goods;

•

Freight costs associated with moving merchandise from suppliers to the Company's distribution center and from the distribution center to stores;

•

Costs associated with receiving and warehousing;

•

Costs associated with shipping and handling;

•

Payroll, bonus and benefit costs related to employees involved in design, buying, receiving and shipping and handling;

•

Depreciation, rent expense and other occupancy costs not related to corporate facilities; and

•

Amounts paid directly to vendors for the purchase of inventory.

•

Payroll, bonus and benefit costs for retail and corporate associates;

•

Occupancy costs for corporate facilities;

•

Depreciation related to corporate assets;

•

Advertising and marketing costs; and

•

Legal, finance, information systems and other corporate overhead costs.

We provide equity awards to employees in the form of stock options and restricted stock units ("RSUs"). We expense the estimated fair value of these awards over the requisite employee service period, which is generally the vesting period. Stock-based compensation is primarily included in selling, general and administrative expenses.

We provide a Supplemental Employee Retirement Plan ("SERP") to certain of our current and former executive officers. The SERP is an unfunded, non-qualified benefit plan that provides eligible participants with monthly benefits upon retirement, termination of employment, death or disability, subject to certain conditions.

We fully recognize a liability for the unfunded projected benefit obligation of the SERP in our financial statements. Actuarial gains and losses, prior service costs, and any remaining transition obligations are recognized as a component of accumulated other comprehensive income (loss), net of tax, until they are amortized as a component of net periodic pension cost. Any changes to the funded status are

recognized through accumulated other comprehensive income (loss) and then amortized as a component of net periodic pension cost. We use our fiscal year end as our measurement date.

Non-capital pre-opening costs, such as rent, preparation and training costs incurred prior to the opening of a retail store or day spa, are expensed as incurred and are included in selling, general and administrative expenses.

During fiscal 2011, 2010 and 2009, the amount of interest capitalized was not material.

Allowances received from merchandise vendors are recorded as a reduction of the carrying amount of inventory and, when sold, as a reduction to cost of sales. The terms of the vendor allowance arrangements are generally one year in length and settle semi-annually. During fiscal 2011, 2010 and 2009, we earned allowances from merchandise vendors of $1.8 million, $5.9 million, and $6.0 million, respectively.

We have a self-insurance plan for health and welfare benefits and provide an accrual to cover our obligation. The accrual for our self-insurance liability is based on claims filed and an estimate of claims incurred but not yet reported, and is not discounted. We consider a number of factors, including historical claims information, when determining the amount of the accrual. We maintain third-party stop-loss insurance policies to cover certain liability costs in excess of predetermined retained amounts. Costs related to the administration of the plan and related claims are expensed as incurred.

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 January 28, 2012 and January 29, 2011, no allowance for doubtful accounts was deemed necessary.

	January 28, 2012			January 29, 2011

	(in thousands)
Land	$	242		$	242
Buildings and land improvements		29,646			29,646
Leasehold improvements		273,039			290,447
Furniture and fixtures		119,656			124,837
Technology hardware and software		90,063			93,495
Machinery and equipment and other		35,129			37,863
Capital lease assets		12,780			11,816
Construction in progress		13,137			14,207

		573,692			602,553
Less—Accumulated depreciation and amortization		(367,613	)		(343,204	)

	$	206,079		$	259,349

Construction in progress is comprised primarily of the construction of a new office building, leashold improvements and furniture and fixtures related to unopened premium retail stores, and internal-use software under development. Capital lease assets primarily include real estate and technology equipment.

As of January 28, 2012 and January 29, 2011, internal-use software capitalized within property and equipment, net of accumulated amortization, was $14.9 million and $20.5 million, respectively. Amortization of internal-use software was $4.8 million, $6.2 million and $6.6 million in fiscal 2011, fiscal 2010 and fiscal 2009, respectively.

Future maturities of debt, excluding capital lease obligations, as of January 28, 2012 consist of the following:

During fiscal 2009, we entered into a credit facility with Wells Fargo Bank, which is secured primarily by our inventory and credit card receivables and provides a revolving line of credit of up to $70.0 million, with subfacilities for the issuance of up to $70.0 million in letters of credit and swingline

advances of up to $10.0 million. The actual amount of credit that is available from time to time under the revolving line of credit is limited to a borrowing base amount that is determined according to, among other things, a percentage of the value of eligible inventory plus a percentage of the value of eligible credit card receivables, as reduced by certain reserve amounts that may be required by the lender. On May 16, 2011, we entered into an Amended and Restated Credit Agreement (the "Credit Agreement") with Wells Fargo Bank, which, among other things, extended the maturity date to May 16, 2016, provided a $15.0 million term loan due on May 16, 2016, and granted the lenders a security interest in our Sandpoint, Idaho corporate offices and certain other assets. The amount available under the $70.0 million revolving line of credit remains unchanged; however, we now have a future option to request an increase in the amount of the revolving line of credit for an additional $15.0 million, which if granted would result in a total of $85.0 million available, exclusive of the term loan. As of January 28, 2012, the revolving line of credit was limited to a borrowing base of $68.8 million and we had $21.9 million in letters of credit issued and $15.0 million borrowed on our revolving line of credit, resulting in $31.9 million available for borrowing under our revolving line of credit.

accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

Income tax expense (benefit) attributable to income before provision for income taxes differed from the amounts computed by applying the U.S. Federal income tax rate to income before provision for income taxes as a result of the following:

Our income tax expense from fiscal year 2009 includes the recording of a valuation allowance against substantially all of our net deferred tax assets with corresponding charges of $24.4 million to tax expense and $0.1 million to other comprehensive loss during fiscal 2009.

We do not provide for deferred taxes on the excess of the financial reporting over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration. As of January 28, 2012 and January 29, 2011, that excess was $1.1 million and $0.9 million, respectively.

We received tax credits from the State of Idaho, which are reflected as state income taxes, net of federal benefit. The State of Idaho tax credits, which are available through 2019, are subject to annual limitations and are recognized in the year in which they are available to reduce taxable income. We have accumulated $0.6 million of State of Idaho tax credits as of January 28, 2012 that are carried over to be utilized in subsequent years.

As of January 28, 2012, we had $119.8 million and $7.5 million of federal and state net operating losses. We generated $89.2 million federal and $3.4 million state net operating losses during fiscal 2011. The federal net operating losses are carried forward and available to reduce taxable income through fiscal 2030 to fiscal 2031. The state net operating losses are carried forward and available to reduce taxable income in the various states through fiscal 2016 to fiscal 2031, depending upon the state.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	January 28, 2012						January 29, 2011

	Current			Noncurrent			Current			Noncurrent
	(in thousands)
Deferred tax assets:
Sales returns accrual	$	1,302		$	—		$	1,241		$	—
Accrued payroll and benefits		1,077			908			802			1,694
Supplemental Employee Retirement Plan		—			3,994			—			3,870
Tenant allowances		6,798			28,208			6,831			33,580
Deferred rents		1,385			13,038			1,361			12,885
Deferred revenue		3,708			3,108			5,542			3,553
Inventories		323			—			802			—
Charitable contribution carryover		—			2,143			—			1,994
Federal net operating loss carryover		—			41,939			—			12,358
State credit carryover		—			551			—			827
State net operating loss carryover		1			4,904			103			3,093
Other		432			88			1,273			76

		15,026			98,881			17,955			73,930
Valuation allowance		(10,288	)		(68,566	)		(7,845	)		(34,071	)

Total deferred tax assets		4,738			30,315			10,110			39,859

Deferred tax liabilities:
Prepaid and deferred marketing costs		(2,425	)		—			(4,081	)		—
Property and equipment		—			(30,140	)		—			(43,468	)
Other		—			—			—			—

Total deferred tax liabilities		(2,425	)		(30,140	)		(4,081	)		(43,468	)

Net deferred tax assets	$	2,313		$	175		$	6,029		$	3,609

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulated loss incurred over the three-year period ended

January 28, 2012. 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.

The unrecognized tax benefits represent items in which we may not prevail with certain taxing authorities, based upon varying interpretations of the applicable law. During fiscal 2011, we resolved $2.3 million in unrecognized tax benefits as a result of completing our Internal Revenue Service examinations for fiscal years 2009, 2008, 2007 and 2006. We recognize interest and penalties related to unrecognized tax benefits as a component of tax expense. Interest and penalties were not material for fiscal 2011, 2010 and 2009.

We file income tax returns in the U.S. federal jurisdiction and in various state, local and foreign jurisdictions. We are no longer subject to Internal Revenue Service examinations for fiscal years prior to fiscal 2010. With limited exceptions, we are no longer subject to state or local examinations for our fiscal years prior to fiscal 2006. Currently, several state examinations are in progress. Income tax returns filed in foreign jurisdictions are not material to our financial position, results of operations and cash flows.

Basic net earnings (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 earnings (loss) per common share is computed by dividing net income (loss) by the combination of other potentially dilutive weighted average 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 stock options, RSUs and shares to be purchased under our Employee Stock Purchase Plan ("ESPP") for each period using the treasury stock method. Under the treasury stock method, the exercise price of a share, the amount of compensation expense, if any, for future service that has not yet been recognized, and the amount of benefits that would be recorded in additional paid-in-capital, if any, 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:

Stock options, RSUs and shares to be purchased under our ESPP of 4.8 million, 2.7 million and 3.3 million were outstanding during fiscal 2011, 2010 and 2009, respectively, but were excluded from the computation of diluted net loss per share because their effect were antidilutive.

Through participation in the ESPP employees can purchase Coldwater Creek Inc. common stock at a five percent discount to the closing market price on the last trading day of each calendar quarter. Employees may not purchase more than 1,000 shares of common stock during any purchase period and may at no point in any calendar year purchase shares of common stock having an aggregate fair market value in excess of $25,000. Additionally, an employee who owns, or would own as a result of ESPP participation, five percent or more of the total combined voting power of all classes of our stock is not eligible for participation in the ESPP. The aggregate number of shares of common stock that may be made available for purchase under the ESPP is 1.8 million. As of January 28, 2012, approximately 930,000 shares of common stock remain available for purchase under the ESPP. The shares that are available for purchase may be unissued authorized shares, treasury shares, or shares purchased on the open market. We have determined that the ESPP is a non-compensatory plan and therefore no

compensation expense related to the ESPP has been recognized in the consolidated financial statements. During fiscal 2011, 2010, and 2009, employees purchased approximately 230,000, 141,000 and 162,000 shares, respectively, at an average share price of $1.43, $3.99 and $4.20, respectively.

On October 24, 2011, we completed an underwritten public offering of 28.9 million shares of our common stock. We received net proceeds from the offering of $22.9 million after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds from the offering for working capital and other capital expenditures, which may include investments in our marketing strategy and supply chain, as well as other general corporate purposes.

Our Amended and Restated Stock Option/Stock Issuance Plan (the "Plan") provides for share-based compensation for officers and key employees, directors and consultants, and other independent advisors. The Plan replaced the 1996 Stock Option/Stock Issuance Plan but did not affect awards granted under that plan, some of which remain outstanding.

Eligible individuals may, at the discretion of the Compensation Committee of the Board of Directors, be granted stock options, shares of restricted or unrestricted stock, RSUs and stock appreciation rights. The maximum number of shares of common stock underlying awards which may be issued over the term of the Plan cannot exceed 20.3 million shares, subject to adjustment for stock splits and similar capitalization changes. We issue new shares of common stock upon exercise of stock options and vesting of RSUs. As of January 28, 2012, 3.7 million shares of common stock remain available for future grants under the Plan. The Plan is effective through March 25, 2015, subject to earlier termination by the Board of Directors.

Total stock-based compensation recognized from stock options and RSUs was as follows:

There was no related tax benefit for fiscal 2011 and 2010, compared with a tax benefit of $2.0 million for fiscal 2009. During fiscal 2009, a valuation allowance was recorded against substantially all of our net deferred tax assets, including those generated by the stock-based compensation expense related tax benefits. Stock-based compensation capitalized into inventory and fixed assets for fiscal 2011, 2010 and 2009 was not material.

As of January 28, 2012, total unrecognized compensation expense related to nonvested share-based compensation arrangements was $3.1 million. This expense is expected to be recognized over a weighted-average period of 2.6 years.

On September 12, 2009, our former director, President and Chief Executive Officer ("CEO") resigned. As a result, we recorded stock-based compensation of $2.1 million during fiscal 2009, related to the acceleration of all our former CEO's unvested equity awards, per the original terms of his employment agreement.

Options are granted with an exercise price per share equal to the fair market value of our common stock on the grant date. Options generally vest and become exercisable on a pro rata basis over a three-, four- or five-year period from the date of grant. The maximum term of each grant may not exceed ten years, subject to earlier expiration for vested options not exercised following termination of employment.

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

The risk-free interest rate is based on the U.S. Treasury strip rates in effect at the time of the grant with an equivalent remaining term. The expected volatility of our stock price is based on a combination of historical volatility and the implied volatility of our exchange traded options. Expected life is derived from historical experience, taking into consideration expected future employee behavior.

Stock-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations. The forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated.

The following table summarizes the activity for outstanding stock options for fiscal 2011:

During fiscal year 2011 no stock options were exercised. During fiscal years 2010 and 2009, the total intrinsic value of stock options exercised was $0.2 million and $2.5 million, respectively.

During fiscal 2011 and 2010, employees were granted 571,395 and 261,887 RSUs, respectively, at a weighted average grant date fair market value of $1.51 and $4.08, respectively. During fiscal 2011 and 2010, employees were also granted 520,000 and 273,000 performance RSUs, respectively, at a weighted average grant date fair value of $1.43 and $3.90, respectively. For the performance RSUs granted in fiscal 2011, half of the RSUs are subject to the achievement of earnings before interest expense and taxes ("EBIT") for the second half of fiscal 2011 combined with fiscal 2012, and half of the RSUs are subject to the achievement of sales targets for the second half of fiscal 2011 combined with fiscal 2012. For performance RSUs granted in fiscal 2010, the RSUs are subject to the achievement of combined EBIT target for fiscal years 2010, 2011 and 2012. No compensation expense has been recognized for the fiscal 2011 and 2010 performance RSUs as it was determined to be not probable that the performance conditions would be met. The number of shares actually awarded under performance RSUs will range from 0% to 200% of the base award amount, depending on the results during the performance period.

During fiscal 2009, employees were granted 156,000 performance RSUs at a weighted average grant date fair value of $5.23. The fiscal 2009 performance RSUs contained performance and market conditions, which were independent of each other and equally weighted, and are based on three metrics: operating income, comparable store growth relative to a peer group ("CSG"), and total shareholder return relative to a peer group ("TSR"). The RSUs with performance conditions that were met after the measurement period and RSUs with market conditions are measured over the vesting period and are charged to compensation expense over the requisite service period based on the number of shares expected to vest.

During the fiscal years ended 2011, 2010 and 2009, the total fair market value of RSUs vested was $0.1 million, $0.4 million and $2.3 million, respectively.

We provide a tax-qualified employee savings, retirement and profit sharing plan qualified under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Under the 401(k) Plan eligible employees may elect to defer a portion of their current compensation, up to certain statutorily prescribed annual limits, and make corresponding periodic contributions into the 401(k) Plan. We match a certain percentage of the employee's overall contribution, which we discontinued from February 2009 to May 2010. Effective May 2011, the 401(k) Plan was amended so that an employee must complete one year of service and be employed on the last day of the 401(k) Plan year in order to receive a matching contribution. In addition, we may make a discretionary profit sharing contribution based on our overall profitability. During fiscal 2011, 2010, and 2009, we recognized contribution expense of $1.5 million, $1.2 million and $0.1 million, respectively.

	January 28, 2012			January 29, 2011

	(in thousands)
Change in projected benefit obligation and unfunded status:
Projected benefit obligation at beginning of fiscal year	$	10,179		$	9,202
Service cost		—			169
Interest cost		555			529
Net actuarial loss		1,740			279
Benefits paid		(166	)		—

Projected benefit obligation and unfunded status at end of fiscal year	$	12,308		$	10,179

Amounts Recognized in the Consolidated Balance Sheet:
Current liabilities	$	166		$	166
Long-term liabilities		12,142			10,013

	$	12,308		$	10,179

The accumulated benefit obligation for the SERP was $12.3 million and $10.2 million at January 28, 2012 and January 29, 2011, respectively.

Amounts recognized in accumulated other comprehensive loss consisted of the following:

The components of net periodic benefit expense and other changes in projected benefit obligations recognized in other comprehensive loss are as follows:

	Fiscal Year Ended

	January 28, 2012		January 29, 2011			January 30, 2010
	(in thousands)
Net Periodic Benefit Expense:
Service cost	$	—	$	169		$	242
Interest cost		555		529			511
Amortization of prior service cost		—		188			344
Net curtailment loss		—		—			1,914

Net periodic benefit expense	$	555	$	886		$	3,011

Other Changes in Projected Benefit Obligations Recognized in Other Comprehensive Loss:
Amortization of unrecognized prior service cost	$	—	$	(188	)	$	(344	)
Unrecognized net actuarial loss		1,740		279			908
Effect of curtailments		—		—			(2,305	)
Tax effect		—		—			780

Total recognized in other comprehensive loss	$	1,740	$	91		$	(961	)

Total recognized in net periodic benefit expense and other comprehensive loss	$	2,295	$	977		$	2,050

We expect to amortize an immaterial amount of unrecognized net actuarial loss to net periodic benefit expense during fiscal 2012.

The following assumptions were utilized in calculating the SERP projected benefit obligation and net periodic benefit cost:

The assumed discount rate is based, in part, upon a modeling process that considers both high quality long term indices and the duration of the SERP relative to the durations implicit in the broader indices. The discount rate is utilized principally in calculating the actuarial present value of the obligation and periodic expense pursuant to the SERP. To the extent the discount rate increases or decreases, the SERP obligation is decreased or increased, accordingly. When calculating the projected benefit obligation at January 28, 2012, the rate of compensation increase is not applicable as there are no employees currently accruing benefits.

As the SERP is an unfunded plan, we were not required to make any contributions during fiscal 2011 and 2010. The following table summarizes the expected future benefit payments:

During fiscal 2011, 2010 and 2009, we incurred aggregate rent expense under operating leases of $76.1 million, $79.1 million and $78.5 million, respectively, including common area maintenance costs ("CAM") of $14.8 million, $15.7 million and $15.2 million, respectively, and an immaterial amount of contingent rent expense, and excluding real estate taxes of $11.2 million, $11.2 million and $10.6 million, respectively.

As of January 28, 2012 our future minimum lease payment requirements, which include the predetermined fixed escalations of the minimum rentals and exclude contingent rental payments, CAM, real estate taxes and the amortization of lease incentives for our operating leases, are as follows:

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 January 28, 2012 of $18.9 million, and as an operating lease from

August 2028 through July 2038, with a remaining operating lease commitment as of January 28, 2012 of $16.1 million. All other capital leases pertain to technology equipment and other real estate.

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.

On September 12, 2006, as amended on April 25, 2007, Brighton Collectibles, Inc. ("Brighton") filed a complaint against us alleging, among other things, that we violated trade dress and copyright laws. On November 21, 2008, a jury in the District Court for the Southern District of California found us liable for copyright and trade dress infringement and a judgment was subsequently entered in the total amount of $8.0 million. We appealed the judgment and the court entered a temporary stay of execution pending the appeal. On December 12, 2008, as amended on September 17, 2009, Brighton filed another complaint against us in the United States District Court for the Southern District of California. The complaint alleged copyright infringement of three different Brighton designs. We settled both of these legal proceedings in July 2011.

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.

As of January 28, 2012, we had future non-cancelable commitments to purchase inventory of $94.5 million and capital expenditures of $1.9 million.

The following table provides an estimate of when we expect to amortize the deferred marketing fees and the deferred revenue sharing into revenue:

The amount of sales royalty recognized as revenue during fiscal 2011, 2010 and 2009 was $7.1 million, $7.3 million and $6.6 million, respectively.

Our merchandise is sold through two operating segments: retail and direct. The performance of each operating segment is based on segment operating income, which is defined as net sales less the cost of merchandise and related acquisition costs and certain directly identifiable and allocable operating costs. For the retail segment, these operating costs primarily consist of store selling and occupancy costs. For the direct segment, these operating costs primarily consist of catalog development, production, and circulation costs, e-commerce advertising costs and order processing costs. Unallocated corporate and other expenses consist of unallocated shared-service costs and general and administrative expenses. Unallocated shared-service costs include merchandising, distribution, inventory planning and quality assurance costs, as well as corporate occupancy costs. General and administrative expenses include costs associated with general corporate management and shared departmental services (i.e., finance,

accounting, information technology and human resources). Operating segment depreciation and amortization is allocated to each operating segment. Corporate and other depreciation and amortization and capital expenditures are related to corporate headquarters, merchandise distribution, and technology infrastructure. We do not review total assets by segment. We have determined that the Chief Operating Decision Maker is our Chief Executive Officer.

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

	Fiscal Year Ended

	January 28, 2012			January 29, 2011			January 30, 2010
	(in thousands)
Net sales(a):
Retail	$	595,192		$	732,430		$	782,429
Direct		177,829			248,671			256,152

Net sales	$	773,021		$	981,101		$	1,038,581

Segment operating income (loss):
Retail	$	(1,797	)	$	27,083		$	37,479
Direct		24,017			40,483			41,837

Total segment operating income		22,220			67,566			79,316
Unallocated corporate and other		(118,380	)		(110,945	)		(124,494	)

Loss from operations	$	(96,160	)	$	(43,379	)	$	(45,178	)

Depreciation and amortization:
Retail	$	45,062		$	48,456		$	47,570
Direct		688			896			1,342
Corporate and other		10,993			13,977			14,809

Depreciation and amortization	$	56,743		$	63,329		$	63,721

Purchase of property and equipment:
Retail	$	6,472		$	26,306		$	12,778
Direct		—			9			—
Corporate and other		2,423			4,769			8,903

Purchase of property and equipment	$	8,895		$	31,084		$	21,681

Our products are principally marketed to individuals within the United States. Net sales realized from other geographic markets, primarily Canada and Japan, have collectively been insignificant in each reported period. No single customer accounts for ten percent or more of net sales. Apparel sales have constituted at least 85 percent of the net sales during fiscal 2011, 2010 and 2009, with sales of accessories, jewelry, and gift items constituting the respective balances. Substantially all of our long-lived assets reside within the United States.

The following tables contain selected quarterly consolidated financial data for fiscal 2011 and 2010 that have been prepared on the same basis as the accompanying audited consolidated financial statements and include all adjustments necessary for a fair statement, in all material respects, of the information set forth therein on a consistent basis:

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's 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 the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chairman, President and Chief Executive Officer and our Executive Vice President, Chief Operating Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of January 28, 2012. Based on that evaluation, our Chairman, President and Chief Executive Officer and Executive Vice President, Chief Operating Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of January 28, 2012.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Our management has assessed the effectiveness of our internal control over financial reporting as of January 28, 2012. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Our management concluded that based on its assessment, our internal control over financial reporting was effective as of January 28, 2012. The effectiveness of our internal control over financial reporting as of January 28, 2012 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears below.

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

To the Board of Directors and Stockholders of
Coldwater Creek Inc.
Sandpoint, Idaho

We have audited the internal control over financial reporting of Coldwater Creek Inc. and subsidiaries (the "Company") as of January 28, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 28, 2012, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended January 28, 2012 of the Company and our report dated March 16, 2012 expressed an unqualified opinion on those financial statements.

For information with respect to the executive officers of the Registrant, see Item 1—"Executive Officers of the Registrant" of Part I of this report.

We have a Code of Ethics applicable to our principal executive officer, principal financial officer and principal accounting officer. A copy of this Code of Ethics is available on the Investor Relations section of our website at www.coldwatercreek.com. Any future changes or amendments to this Code of Ethics, and any waiver that applies to these individuals, will also be posted on www.coldwatercreek.com.

The other information required by this Item is incorporated herein by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held on June 9, 2012 to be filed with the Commission no later than 120 days after January 28, 2012, pursuant to Regulation 14A.

The information required by this Item is incorporated herein by reference to our Proxy Statement for the Annual Meeting of Stockholders to be held on June 9, 2012, to be filed with the Commission no later than 120 days after January 28, 2012, pursuant to Regulation 14A.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

		Description of Document

3.1	‡	Amended and Restated Certificate of Incorporation

3.1.1	*	Certificate of Amendment of Amended and Restated Certificate of Incorporation (filed with Company's Fiscal 2004 Third Quarter Report on Form 10-Q)

3.2.2	*	Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated March 23, 2007)

3.2.3	*	Amendment to Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated December 8, 2007)

3.2.4	*	Second Amendment to Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated February 6, 2009)

4.1	*	Specimen of Stock Certificate (filed with the Company's S-1/A, file No. 333-16651)

10.1		Reserved

10.2	*	Amended and Restated Credit Agreement dated May 16, 2011 between the Company and Wells Fargo Bank, National Association (as successor by merger to Wells Fargo Retail Finance, LLC) and Wells Fargo Credit, Inc. (filed with the Company's Fiscal 2011 Second Quarter Report on Form 10-Q)

10.3	‡+	Amended and Restated Stock Option/Stock Issuance Plan

10.4	*	Form of Stock Option Agreement under 1996 Stock Option/Stock Issuance Plan (filed with the Company's S-1, file No. 333-16651)

10.4.1	*	Form of Stock Option Agreement under Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2005 Annual Report on Form 10-K)

10.4.2	*	Form of Incentive Stock Option Agreement under Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2006 Annual Report on Form 10-K)

10.5	*	Amended and Restated Parkersburg Distribution Center Lease Agreement, dated January 10, 2006 (filed as Exhibit 10.1 to Form 8-K dated January 10, 2006)

10.5.1	*	Sublease Agreement between the Company and Parkersburg-Wood County Area Development Corporation, dated January 12, 2006 (filed as Exhibit 10.2 to Form 8-K dated January 10, 2006)

		Description of Document

10.5.2	*	First Amendment to Amended and Restated Lease Agreement, dated October 25, 2006, between the company and Wood County Development Authority (filed as Exhibit 10.1 to Form 8-K dated October 25, 2006)

10.6.1		Reserved

10.6.2	*+	2007 Incentive Award Program for Executives (filed as Exhibit 10.1 to Form 8-K dated March 10, 2007)

10.6.3	*+	2008 Incentive Award Program for Executives (filed as Exhibit 10.1 to Form 8-K dated March 18, 2008)

10.7	*+	Form of Stock Unit Agreement under the Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2004 Annual Report on Form 10-K)

10.8	*+	Summary of Non-Management Director Compensation (filed as Exhibit 10.1 to Form 8-K dated October 1, 2005)

10.9	*+	Form of Non-Management Director Restricted Stock Unit Agreement (filed as Exhibit 10.2 to Form 8-K dated October 1, 2005)

10.10	*+	Supplemental Employee Retirement Plan (filed as Exhibit 10.3 to Form 8-K dated October 1, 2005)

10.10.1	*+	Amendment No. 1 to Supplemental Employee Retirement Plan (filed with the Company's Fiscal 2005 Third Quarter Report on Form 10-Q)

10.10.2	*+	Amendment No. 2 to Supplemental Employee Retirement Plan (filed as Exhibit 99.1 to Form 8-K dated August 28, 2006)

10.10.3	*+	Amendment No. 3 to Supplemental Employee Retirement Plan (filed with the Company's Fiscal 2009 Annual Report on Form 10-K)

10.11		Reserved

10.12		Reserved

10.13		Reserved

10.14	*+	Severance and Change of Control Agreement between the Company and Jill Brown Dean dated January 19, 2011 (filed with the Company's Fiscal 2010 Annual Report on Form 10-K)

10.15	*+	Severance and Change of Control Agreement between the Company and James A. Bell dated June 15, 2011(filed with the Company's Fiscal 2011 Second Quarter Report on Form 10-Q)

10.16	*+	Supplemental Bonus for Dennis C. Pence (filed with the Company's Fiscal 2006 Third Quarter Report on Form 10-Q)

10.16.1	*+	Supplemental Bonus for Dennis C. Pence (filed as Exhibit 10.1 to Form 8-K dated March 23, 2007)

10.17	*+	Indemnification Agreement (filed as Exhibit 10.1 to Form 8-K dated January 27, 2012)

10.18	*+	Severance and Change of Control Agreements filed with certain officers (John E. Hayes III and Jerome M. Jessup) (filed as Exhibit 10.2 to Form 8-K dated January 27, 2012)

Pursuant to the requirements of Section 13 or 15(d) 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 16^th day of March 2012.

I hereby appoint Dennis C. Pence and John E. Hayes, III my true and lawful attorneys-in-fact, each with full power to act without the other and each with full power of substitution, to sign on my behalf, as an individual and in the capacity stated below, and to file the Annual Report on Form 10-K of Coldwater Creek Inc. for its fiscal year ended January 28, 2012 and any amendment that such attorney-in-fact may deem appropriate or necessary. I further grant unto such attorneys and each of them full power and authority to perform each and every act necessary to be done in order to accomplish the foregoing as fully as I might do.

Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

		Description of Document

3.1	‡	Amended and Restated Certificate of Incorporation

3.1.1	*	Certificate of Amendment of Amended and Restated Certificate of Incorporation (filed with Company's Fiscal 2004 Third Quarter Report on Form 10-Q)

3.2.2	*	Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated March 23, 2007)

3.2.3	*	Amendment to Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated December 8, 2007)

3.2.4	*	Second Amendment to Amended and Restated Bylaws (filed as Exhibit 3.1 to Form 8-K dated February 6, 2009)

4.1	*	Specimen of Stock Certificate (filed with the Company's S-1/A, file No. 333-16651)

10.1		Reserved

10.2	*	Amended and Restated Credit Agreement dated May 16, 2011 between the Company and Wells Fargo Bank, National Association (as successor by merger to Wells Fargo Retail Finance, LLC) and Wells Fargo Credit, Inc. (filed with the Company's Fiscal 2011 Second Quarter Report on Form 10-Q)

10.3	‡+	Amended and Restated Stock Option/Stock Issuance Plan

10.4	*	Form of Stock Option Agreement under 1996 Stock Option/Stock Issuance Plan (filed with the Company's S-1, file No. 333-16651)

10.4.1	*	Form of Stock Option Agreement under Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2005 Annual Report on Form 10-K)

10.4.2	*	Form of Incentive Stock Option Agreement under Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2006 Annual Report on Form 10-K)

10.5	*	Amended and Restated Parkersburg Distribution Center Lease Agreement, dated January 10, 2006 (filed as Exhibit 10.1 to Form 8-K dated January 10, 2006)

10.5.1	*	Sublease Agreement between the Company and Parkersburg-Wood County Area Development Corporation, dated January 12, 2006 (filed as Exhibit 10.2 to Form 8-K dated January 10, 2006)

10.5.2	*	First Amendment to Amended and Restated Lease Agreement, dated October 25, 2006, between the company and Wood County Development Authority (filed as Exhibit 10.1 to Form 8-K dated October 25, 2006)

10.6.1		Reserved

10.6.2	*+	2007 Incentive Award Program for Executives (filed as Exhibit 10.1 to Form 8-K dated March 10, 2007)

10.6.3	*+	2008 Incentive Award Program for Executives (filed as Exhibit 10.1 to Form 8-K dated March 18, 2008)

10.7	*+	Form of Stock Unit Agreement under the Amended and Restated Stock Option/Stock Issuance Plan (filed with the Company's Fiscal 2004 Annual Report on Form 10-K)

10.8	*+	Summary of Non-Management Director Compensation (filed as Exhibit 10.1 to Form 8-K dated October 1, 2005)

		Description of Document

10.9	*+	Form of Non-Management Director Restricted Stock Unit Agreement (filed as Exhibit 10.2 to Form 8-K dated October 1, 2005)

10.10	*+	Supplemental Employee Retirement Plan (filed as Exhibit 10.3 to Form 8-K dated October 1, 2005)

10.10.1	*+	Amendment No. 1 to Supplemental Employee Retirement Plan (filed with the Company's Fiscal 2005 Third Quarter Report on Form 10-Q)

10.10.2	*+	Amendment No. 2 to Supplemental Employee Retirement Plan (filed as Exhibit 99.1 to Form 8-K dated August 28, 2006)

10.10.3	*+	Amendment No. 3 to Supplemental Employee Retirement Plan (filed with the Company's Fiscal 2009 Annual Report on Form 10-K)

10.11		Reserved

10.12		Reserved

10.13		Reserved

10.14	*+	Severance and Change of Control Agreement between the Company and Jill Brown Dean dated January 19, 2011 (filed with the Company's Fiscal 2010 Annual Report on Form 10-K)

10.15	*+	Severance and Change of Control Agreement between the Company and James A. Bell dated June 15, 2011(filed with the Company's Fiscal 2011 Second Quarter Report on Form 10-Q)

10.16	*+	Supplemental Bonus for Dennis C. Pence (filed with the Company's Fiscal 2006 Third Quarter Report on Form 10-Q)

10.16.1	*+	Supplemental Bonus for Dennis C. Pence (filed as Exhibit 10.1 to Form 8-K dated March 23, 2007)

10.17	*+	Indemnification Agreement (filed as Exhibit 10.1 to Form 8-K dated January 27, 2012)

10.18	*+	Severance and Change of Control Agreements filed with certain officers (John E. Hayes III and Jerome M. Jessup) (filed as Exhibit 10.2 to Form 8-K dated January 27, 2012)

21	‡	Subsidiaries of Coldwater Creek Inc.

23	‡	Consent of Deloitte and Touche LLP, Independent Registered Public Accounting Firm

24	‡	Power of attorney (included on signature page hereto)

31.1	‡	Certification by Dennis C. Pence of annual report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

31.2	‡	Certification by James A. Bell of annual report pursuant to Rule 13a-14(a) or Rule 15d-14(a)

32	°	Certification by Dennis C. Pence and James A. Bell pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS	^	XBRL Instance

101.SCH	^	XBRL Taxonomy Extension Schema

Title of Each Class		Name of Each Exchange on Which Registered

Common Stock $0.01 par value		NASDAQ Global Select Market


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o


PART I
Item 1.	Business	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	17
Item 2.	Properties	17
Item 3.	Legal Proceedings	18
Item 4.	Mine Safety Disclosures	18
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6.	Selected Financial Data	19
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	69
Item 9A.	Controls and Procedures	69
Item 9B.	Other Information	71
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	71
Item 11.	Executive Compensation	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
Item 13.	Certain Relationships and Related Transactions, and Director Independence	71
Item 14.	Principal Accounting Fees and Services	71
PART IV
Item 15.	Exhibits and Financial Statement Schedules	72

	Price Range of Common Stock

	High		Low
Fiscal 2011:
First Quarter	$	3.11	$	2.28
Second Quarter	$	3.07	$	1.21
Third Quarter	$	1.83	$	0.80
Fourth Quarter	$	1.21	$	0.81
Fiscal 2010:
First Quarter	$	8.75	$	4.22
Second Quarter	$	7.37	$	3.13
Third Quarter	$	5.89	$	3.27
Fourth Quarter	$	3.58	$	2.71

	Base Period		Indexed Returns for the Fiscal Years Ended

	February 3, 2007		February 2, 2008		January 31, 2009		January 30, 2010		January 29, 2011		January 28, 2012
Company/Index:
Coldwater Creek Inc.	$	100.00	$	36.77	$	14.75	$	23.33	$	15.32	$	4.71
NASDAQ Composite	$	100.00	$	97.07	$	60.02	$	87.95	$	111.84	$	116.36
Peer Group	$	100.00	$	56.17	$	16.13	$	50.36	$	49.68	$	48.82


ý		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 28, 2012


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

Name		Positions Held

Dennis C. Pence	62	Chairman of the Board of Directors, President and Chief Executive Officer
Jill Brown Dean	55	President, Chief Merchandising Officer
Jerome Jessup	51	President, Chief Creative Officer
James A. Bell	44	Executive Vice President, Chief Operating Officer and Chief Financial Officer
John E. Hayes III	49	Senior Vice President, Human Resources and General Counsel
Mark A. Haley	44	Vice President, Chief Accounting Officer

	Percentage increase (decrease)						Comparable Premium Retail Store Base

	Fiscal 2011			Fiscal 2010			Fiscal 2011		Fiscal 2010
First Quarter		(27.5	)%		1.0	%		349		324
Second Quarter		(30.6	)%		4.8	%		341		343
Third Quarter		(19.8	)%		(20.1	)%		342		344
Fourth Quarter		(11.4	)%		(20.5	)%		342		351

	Fiscal Year Ended

	January 28, 2012			% of segment sales			January 29, 2011			% of segment sales			% Change
	(dollars in thousands)
Segment operating income (loss):
Retail	$	(1,797	)		(0.3	)%	$	27,083			3.7	%			*%
Direct		24,017			13.5			40,483			16.3			(40.7	)

Segment operating income		22,220						67,566						(67.1	)
Unallocated corporate and other		(118,380	)					(110,945	)					6.7

Loss from operations	$	(96,160	)				$	(43,379	)					121.7

	Percentage increase (decrease)						Comparable Premium Retail Store Base

	Fiscal 2010			Fiscal 2009			Fiscal 2010		Fiscal 2009
First Quarter		1.0	%		(18.6	)%		324		273
Second Quarter		4.8	%		(10.2	)%		343		300
Third Quarter		(20.1	)%		14.4	%		344		307
Fourth Quarter		(20.5	)%		8.9	%		351		315

	Payments Due in Fiscal Year

	Total		2012		2013 - 2014		2015 - 2016		Thereafter
	(in thousands)
Operating leases(a)(d)	$	493,966	$	76,074	$	142,649	$	112,873	$	162,370
Contractual commitments(b)		96,416		96,416		—		—		—
Debt, including estimated interest payments(c)		34,166		16,523		2,227		15,416		—
Capital leases(d)		23,621		1,484		2,868		2,262		17,007
Benefit obligations(e)		13,790		993		1,031		1,651		10,115

Total	$	661,959	$	191,490	$	148,775	$	132,202	$	189,492


Report of Independent Registered Public Accounting Firm			38
Consolidated Balance Sheets as of January 28, 2012 and January 29, 2011			39
Consolidated Statements of Operations for the years ended January 28, 2012, January 29, 2011 and January 30, 2010			40
Consolidated Statements of Stockholders' Equity for the years ended January 28, 2012, January 29, 2011 and January 30, 2010			41
Consolidated Statements of Cash Flows for the years ended January 28, 2012, January 29, 2011 and January 30, 2010			42
Notes to the Consolidated Financial Statements			43


Buildings and land improvement		15 to 30 years
Leasehold improvements		3 to 20 years or term of lease, if shorter
Furniture and fixtures, equipment, technology hardware and software		3 to 12 years

	January 28, 2012		January 29, 2011

	(in thousands)
Credit card receivables	$	2,960	$	3,430
Tenant allowances		2,112		3,552
Other		3,127		2,579

	$	8,199	$	9,561

	Future Maturities

	(in thousands)
Fiscal 2012	$	15,200
Fiscal 2013		200
Fiscal 2014		200
Fiscal 2015		200
Fiscal 2016		14,100

	January 28, 2012		January 29, 2011

	(in thousands)
Accrued payroll and benefits	$	14,134	$	12,506
Gift cards and certificates		21,560		31,897
Current portion of deferred rents		20,384		20,842
Current portion of deferred marketing fees and revenue sharing		4,398		4,487
Deferred sales royalty		3,511		3,134
Accrued sales returns		3,535		3,383
Accrued taxes		4,486		4,815
Other		2,907		4,232

	$	74,915	$	85,296

	January 28, 2012			January 29, 2011

	(in thousands)
Term loan	$	14,900		$	—
Revolving line of credit		15,000			—
Capital lease obligations		12,410			13,037

Total debt and capital lease obligations		42,310			13,037
Less:
Current maturities of debt		(15,200	)		—
Current maturities capital lease obligations		(535	)		(796	)

Long-term debt and capital lease obligations	$	26,575		$	12,241

			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value

					(in years)		(in thousands)
Outstanding, January 29, 2011	3,047,702		$	7.79
Granted	1,127,500		$	1.45
Forfeited/Expired	(911,950	)	$	8.22

Outstanding, January 28, 2012	3,263,252		$	5.48		4.51	$	400

Vested and expected to vest, January 28, 2012	3,096,940		$	5.66		4.43	$	331

Exercisable, January 28, 2012	1,463,523		$	8.57		3.33	$	—

			Weighted Average Grant Date Fair Value

Unvested, January 29, 2011	690,387		$	4.44
Granted	1,091,395			1.47
Vested	(95,887	)		1.39
Forfeited	(205,500	)		2.47

Unvested, January 28, 2012	1,480,395			2.47

	January 28, 2012			January 29, 2011

	(in thousands)
Net actuarial loss	$	(2,277	)	$	(537	)

Net actuarial loss, net of tax	$	(2,204	)	$	(464	)

	January 28, 2012			January 29, 2011

	(in thousands)
Deferred marketing fees and revenue sharing—beginning of period	$	10,309		$	12,364
Marketing fees received		4,675			4,884
Marketing fees recognized to revenue		(4,425	)		(5,180	)
Revenue sharing recognized to revenue		(1,759	)		(1,759	)

Deferred marketing fees and revenue sharing—end of period		8,800			10,309
Less—Current deferred marketing fees and revenue sharing		(4,398	)		(4,487	)

Long-term deferred marketing fees and revenue sharing	$	4,402		$	5,822

	Deferred Marketing Fees		Deferred Revenue Sharing		Total

	(in thousands)
Fiscal 2012	$	2,639	$	1,759	$	4,398
Fiscal 2013		1,806		806		2,612
Fiscal 2014		1,162		—		1,162
Fiscal 2015		545		—		545
Fiscal 2016		83		—		83

	$	6,235	$	2,565	$	8,800

	Fiscal 2011

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter(a)
	(in thousands, except per share amounts)
Net sales	$	179,795		$	181,409		$	187,465		$	224,352
Gross profit	$	54,613		$	45,321		$	56,265		$	73,129
Net loss	$	(30,028	)	$	(27,679	)	$	(29,158	)		(12,829	)
Net loss per common share—Basic and Diluted(b)	$	(0.32	)	$	(0.30	)	$	(0.31	)	$	(0.11	)


		COLDWATER CREEK INC.
		By:		/s/ DENNIS C. PENCE Dennis C. Pence Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)

Signature	Title	Date


/s/ DENNIS C. PENCE Dennis C. Pence	Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)	March 16, 2012
/s/ JAMES A. BELL James A. Bell	Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer)	March 16, 2012
/s/ MARK A. HALEY Mark A. Haley	Vice President and Chief Accounting Officer (Principal Accounting Officer)	March 16, 2012
/s/ MICHAEL J. POTTER Michael J. Potter	Director	March 16, 2012
/s/ JAMES R. ALEXANDER James R. Alexander	Director	March 16, 2012

Signature	Title	Date


/s/ JERRY GRAMAGLIA Jerry Gramaglia	Director	March 16, 2012
/s/ CURT HECKER Curt Hecker	Director	March 16, 2012
/s/ KAY ISAACSON-LEIBOWITZ Kay Isaacson-Leibowitz	Director	March 16, 2012
/s/ ROBERT H. MCCALL Robert H. McCall	Director	March 16, 2012
/s/ FRANK M. LESHER Frank M. Lesher	Director	March 16, 2012

		Description of Document

101.CAL	^	XBRL Taxonomy Extension Calculation

101.DEF	^	XBRL Taxonomy Extension Definition

101.LAB	^	XBRL Taxonomy Extension Label

101.PRE	^	XBRL Taxonomy Extension Presentation