8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report: November 20, 2008

(Date of Earliest Event Reported)

Cost Plus, Inc.

(Exact name of Registrant as specified in its charter)

California	0-14970	94-1067973
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

200 4^th Street

Oakland, California 94607

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (510) 893-7300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On November 20, 2008, Cost Plus, Inc. (the “Company”) issued a press release regarding its third quarter sales and earnings data in which it also provided guidance for the fourth quarter of fiscal 2008. A copy of the press release is attached as Exhibit 99.1 hereto.

Pursuant to General Instruction B.2 of Form 8-K, the press release attached as Exhibit 99.1 is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, but is instead furnished for purposes of that instruction.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

Exhibit Number	Description
99.1	Press Release of Cost Plus, Inc. dated November 20, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COST PLUS, INC.
By:	/s/ Jane L. Baughman
	Jane L. Baughman,
	Executive Vice President and Chief Financial Officer

Dated: November 20, 2008

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of Cost Plus, Inc. dated November 20, 2008.

EX-99.1

Exhibit 99.1

COST PLUS, INC., REPORTS POSITIVE CUSTOMER COUNT AND CONVERSION, LOWER INVENTORY LEVELS AND AMPLE LIQUIDITY WITH THIRD QUARTER 2008 RESULTS

Oakland, CA – November 20, 2008 — Cost Plus, Inc. (NASDAQ: CPWM) today announced financial results for its third quarter ended November 1, 2008 and provided financial guidance for the fourth quarter of fiscal year 2008.

Third Quarter Results from Continuing Operations

Net sales for the third quarter of fiscal 2008 were $213.0 million, a 0.8% decrease from the $214.6 million for the third quarter ended November 3, 2007. Customer count and conversion continued to increase for the third consecutive quarter although same store sales decreased 3.4% due to a reduction in the average ticket. The Company reported a third quarter 2008 loss of $22.6 million from continuing operations before interest and taxes which was in the mid-range of its guidance and which compares to a $19.2 million loss for the third quarter of last year. Included in the third quarter of fiscal 2008 results was a $1.1 million asset impairment charge for five underperforming stores.

Barry Feld, President and CEO, commented, “Our intense liquidity management and value driven merchandise assortments that include gourmet food and wine have positioned the company to weather this challenging economic environment. We have continued to reduce per store inventory and peak on our borrowings at a level well below our available credit limit. At the same time, we have increased customer count levels, while managing costs in the face of a reduced ticket in order to achieve our bottom line earnings guidance. We anticipate that our everyday low pricing strategy combined with a unique assortment of affordable gifts and consumables for holiday entertaining will attract increasingly cost-conscious consumers.”

Gross profit as a percentage of sales was 26.3% for the third quarter of 2008 versus 28.2% for the same period last year. This margin decline was primarily caused by the lagging impact of high energy prices and a weak dollar on cost of goods, and a shift in mix away from home products toward consumables. SG&A expense as a percentage of net sales was 36.9% for the third quarter of 2008 and flat to last year, reflecting the impact of on-going cost reduction initiatives. The Company’s third quarter 2008 store pre-opening spend was $618,000 less than last year as no new stores were opened during the quarter compared to three new store openings in the prior year.

Net loss from continuing operations for the third quarter of fiscal 2008 was $25.7 million compared to a net loss of $13.3 million for the third quarter of fiscal 2007, an increase in the net loss of $12.3 million. Included in the results for third quarter of fiscal 2007 is an income tax benefit of $9.2 million. In the third quarter of fiscal 2008, no such benefit was recorded as the Company has applied a full tax valuation allowance against any potential benefit generated by the net loss.

Year-to-date net sales were $645.6 million, a 3.1% increase compared to the same period last year. Same store sales declined 0.6%, which was entirely the result of a reduction in the average ticket. Year-to-date, the loss from continuing operations before interest and taxes of $64.3 million was $4.1 million higher than the same period last year, which includes $2.8 million for the expense incurred in the second quarter related to the unsolicited offer from Pier 1. Year-to-date net loss from continuing operations was $72.9 million compared to $41.0 million in fiscal 2007, which included a $27.4 million income tax benefit.

Liquidity

Credit line borrowings peak at $125 million in November, well under the limit of the $200 million credit facility, versus a peak last year of $120 million. Inventory levels declined $14 million at the end of the third quarter compared to a year ago and are estimated to decline by a total of $25 million year-over-year at fiscal year end. Fiscal 2008 capital spending is forecast to be $12-13 million for the full year and will complete all of the Company’s contractual capital commitments since beginning the turnaround. The Company currently expects fiscal 2009 capital spending to be in the range of $3-5 million, which will further improve its liquidity position.

Mr. Feld concluded, “We remain firmly committed to our strategic turnaround initiatives while recognizing that we have yet to see the full benefits of the turnaround in our financial statement results. However, we are seeing meaningful improvements in customer traffic and supply chain efficiencies. Absent year-to-date non-recurring charges and the full tax valuation allowance, the Company has been able to stem its losses year-over-year despite the severe economic slowdown. We plan to closely examine all aspects of the business after the holiday season and will make the necessary adjustments needed to maintain our liquidity and restore acceptable margins and long-term profitability.”

Fourth Quarter of Fiscal 2008 Outlook

The Company expects same store sales to decline in the range of negative 1% to negative 6% for the fourth quarter of fiscal 2008. This is expected to result in net sales in the range of $356 million to $374 million. While the Company remains confident in its ability to maintain positive trends in customer count and conversion, it also anticipates increasing pressure on the average ticket as consumers are impacted by today’s economic realities. Buyer margin for the fourth quarter is expected to decrease compared to last year as the competitive price pressures are expected to be intense. For the fourth quarter of fiscal 2008, the Company is projecting a profit from continuing operations before interest and taxes in the range of $10 million to $18 million versus a $20 million profit last year. The Company projects fourth quarter depreciation and amortization will be $8 million which will result in an EBITDA in the range of $18 million to $26 million. The Company will open no new stores during the fourth quarter. Last year the Company opened one net new store in the fourth quarter.

Cost Plus, Inc. is a leading specialty retailer of casual home living and entertaining products. At the end of the third quarter of fiscal 2008, the Company operated 296 stores in 33 states versus 284 stores (after adjusting for the 13 stores now included in discontinued operations) in 33 states at the end of third quarter of fiscal 2007.

The Company’s third quarter earnings conference call will be today, November 20, 2008, at 1:30 p.m. PT. The conference call will be in a “listen-only” mode for all participants other than the sell-side and buy-side investment professionals who regularly follow the Company. The toll-free phone number for the call is 800-291-5365 and the access code is 60755901. Callers should dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at 888-286-8010, Access Code: 42198747, from 3:30 p.m. PT Thursday, November 20, 2008 to 3:30 p.m. PT on Thursday, November 27, 2008. Investors may also access the live call or the replay over the internet at www.streetevents.com; www.fulldisclosure.com and www.worldmarket.com. The replay will be available approximately three hours after the live call concludes.

This release references estimated EBITDA, which is a non-GAAP measure that represents earnings before interest, taxes, depreciation and amortization expense. The Company presents EBITDA as a surrogate for cash flow to provide a better understanding of future performance and potential risk. This non-GAAP measure should be considered supplemental and not a substitute for the Company’s financial results that are recorded in accordance with generally accepted accounting principles for the periods presented.

The above statements relating to ample liquidity, being positioned for the challenging environment, projected year end inventory levels, projected fiscal 2008 and 2009 capital spending, further improved liquidity position and anticipated fiscal 2008 fourth quarter trends and results are “forward-looking statements” that are based on current expectations and are subject to various risks and uncertainties, which could cause actual results to differ materially from those forecasted. Such risk factors include, but are not limited to: continued deterioration in economic conditions that affect consumer spending; changes in the competitive environment; interruptions in the flow of merchandise; changes in the cost of goods and services purchased including fuel, transportation and insurance; a material unfavorable outcome with respect to litigation, claims or assessments; the effects associated with terrorist acts; and changes in accounting rules and regulations. Please refer to documents on file with the Securities and Exchange Commission for a more detailed discussion of the Company’s risk factors. The Company does not undertake any obligation to update its forward-looking statements.

Contact:

Jane Baughman

Cost Plus, Inc.

(510) 808-9119

FINANCIAL TABLES FOLLOWING

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COST PLUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars and shares in thousands, except per share amounts, unaudited)

	Third Quarter
	November 1, 2008					November 3, 2007
Net sales	$	212,973		100.0	%	$	214,588		100.0	%
Cost of sales and occupancy		156,996		73.7			153,982		71.8
Gross profit		55,977		26.3			60,606		28.2
Selling, general and administrative expenses		78,494		36.9			79,125		36.9
Store preopening expenses		84		—			702		0.3
Loss from continuing operations, before interest and taxes		(22,601	)	(10.6	)		(19,221	)	(9.0	)
Net interest expense		3,689		1.7			3,359		1.6
Loss from continuing operations before income taxes		(26,290	)	(12.3	)		(22,580	)	(10.5	)
Income tax benefit		(621	)	(0.3	)		(9,235	)	(4.3	)
Net loss from continuing operations		(25,669	)	(12.1	)		(13,345	)	(6.2	)
Loss from discontinued operations, net of tax		(98	)	—			(599	)	(0.3	)
Net loss	$	(25,767	)	(12.1	)%	$	(13,944	)	(6.5	)%
Loss per diluted share from continuing operations	$	(1.16	)			$	(0.60	)
Loss per diluted share from discontinued operations	$	(0.01	)			$	(0.03	)
Net loss per diluted share	$	(1.17	)			$	(0.63	)
Weighted average shares outstanding- diluted		22,087					22,086
New stores opened		0					3
	For the Nine Month Period Ended
	November 1, 2008					November 3, 2007
Net sales	$	645,609		100.0	%	$	626,318		100.0	%
Cost of sales and occupancy		472,759		73.2			457,399		73.0
Gross profit		172,850		26.8			168,919		27.0
Selling, general and administrative expenses		233,944		36.2			226,261		36.1
Store preopening expenses		3,228		0.5			2,893		0.5
Loss from continuing operations, before interest and taxes		(64,322	)	(10.0	)		(60,235	)	(9.6	)
Net interest expense		9,857		1.5			8,223		1.3
Loss from continuing operations before income taxes		(74,179	)	(11.5	)		(68,458	)	(10.9	)
Income tax benefit		(1,266	)	(0.2	)		(27,441	)	(4.4	)
Net loss from continuing operations		(72,913	)	(11.3	)		(41,017	)	(6.5	)
Loss from discontinued operations, net of tax		(11,488	)	(1.8	)		(2,025	)	(0.3	)
Net loss	$	(84,401	)	(13.1	)%	$	(43,042	)	(6.9	)%
Loss per diluted share from continuing operations	$	(3.30	)			$	(1.86	)
Loss per diluted share from discontinued operations	$	(0.52	)			$	(0.09	)
Net loss per diluted share	$	(3.82	)			$	(1.95	)
Weighted average shares outstanding- diluted		22,087					22,086
New stores opened		15					13
Total stores open at period end		296					284

(more)

COST PLUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

	November 1, 2008			November 3, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	3,506		$	3,479
Merchandise inventories		314,311			328,102
Other current assets		23,628			60,997
Total current assets		341,445			392,578
Property and equipment, net		203,711			226,905
Other assets		13,889			25,806
Total assets	$	559,045		$	645,289
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	82,658		$	81,085
Accrued compensation		12,211			12,798
Revolving line of credit		117,392			104,397
Current portion of long-term debt		811			764
Other current liabilities		36,484			32,489
Total current liabilities		249,556			231,533
Capital lease obligations		7,263			8,772
Long-term debt		113,798			114,610
Other long-term obligations		33,878			40,538
Shareholders’ equity:
Common stock		221			221
Additional paid-in capital		170,223			168,653
Retained earnings		(15,894	)		80,962
Total shareholders’ equity		154,550			249,836
Total liabilities and shareholders’ equity	$	559,045		$	645,289

Contact:

Jane Baughman

Cost Plus, Inc.

(510) 808-9119

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