Cache's Investment Costs Set Up For Long-Term Dividends

Cache, Inc.

is having its "overweight" rating and $8 price target reiterated by PiperJaffray, as they believe Cache is positioned for out-performance, thanks to strategic reduction in pricing points, a practice that began in 3Q 2009. Cache reported a gross margin up 44.1% in 2Q, below PiperJaffray's 45.0% estimate, while merchandise margins were down 30 bps y/y, thanks to Cache's costs associated with production, design, and merchant organization, investments that will pay dividends for years to come, according to PiperJaffray. PiperJaffray has raised EPS estimates for 3Q 2010 to $0.09 (from $0.02), to $0.27 (from $0.28) in 4Q, to $0.07 (from $0.04) for FY2010, and from $0.55 to $0.53 in FY2011. Cache, Inc. closed yesterday at $5.07.