A SLOW START

Nov 01, 2007 9:30 PM  By

Fall arrived late this year for much of the country, and consumers are taking their time shopping for seasonal goods. And apparel catalogers are feeling the heat — they say that the warm weather in September and October suppressed sales.

Boston Proper, for one, blames the warm weather and a decline in consumer confidence for September sales that were below expectations. The women’s apparel marketer saw revenue rise 15% on a 20% increase in circulated pages.

The merchant boosted circ by adding a fourth catalog to its fall mailings; it also increased the size of its house file after a strong spring/summer season, says senior vice president of merchandising Patty Martin. “We had an opportunity to balance out our seasons by growing the fall/holiday,” Martin says.

The warm weather may have helped Boston Proper sell more of its lightweight sweaters and knits, but Martin says sales of bottoms and outwear have been soft this season. And though she would not provide specifics, Martin noted that margins were up this fall, due to improved sourcing.

The overly warm September weather “maybe hurt us a little bit,” says Jim Klaus, president of children’s clothing catalog Children’s Wear Digest. “We were doing better through Labor Day, ahead of where we thought we’d be, and then we gave some of it back.”

Children’s Wear Digest’s fall sales are “essentially flat,” says Klaus, which was “pretty much on plan.” The merchant reduced its catalog circulation by 5%-7%. “Due to the postal increase, we had a decline in prospecting, and an increase in Internet as a percentage of our sales,” he says.

Shoppers not ready for holiday

But the slow takeoff to the season isn’t just about the weather. As much as merchants try to encourage holiday shopping earlier and earlier, consumers are getting increasingly determined to buy later in the season.

Research firm NPD Group reports that 41% of consumers surveyed don’t plan to start their holiday shopping until after Thanksgiving — 10% more than said the same last year.

It may be too early for many consumers to think about buying toys: FAO Schwarz’s catalog and Internet year-to-date sales are up 13%, but that’s below company expectations. “The fall has been tough,” says FAO’s CEO Ed Schmults, as myriad grim economic news occurred almost daily. “You had the subprime mortgage crisis and the Asian toy crisis that the media reported on almost daily.” The only toy affected at FAO by the Asian recall was the Thomas the Tank Engine truck, he says.

For the direct division, Schmults expects sales increases north of 40%. “Our biggest catalog drops are ahead of us,” he says, “as buyers are buying later and later into the holiday season.”

Accordingly, FAO has three additional in-home mail dates planned for closer to Christmas. FAO, which does 71% of its direct business on the Web, will mail 6 million catalogs, vs. 5 million books during the fall period.

Schmults says the direct sales shortfall is due to changes FAO made in its spring books. The company opted to mail smaller, 12-page books more frequently (every month from April through July) to reach customers more often.

“We are working hard to wean some of our customers off of a ‘holiday only’ mentality regarding FAO Schwarz,” Schmults says. But these smaller books “did not have the sales impact of a larger, 48-page catalog.”

Still, FAO’s overall fall has not been as robust as it hoped. While its two stores posted bigger gains — 26% in the New York store year-to-date over last year, and up 9% for the Las Vegas location — these results are also slightly below plan, Schmults says.

The Williamsburg catalog’s fall sales have so far increased from last year, but it may fall short of its plan. The cataloger of home decor, and furnishings from the historic Virginia site may have jumped the gun on Christmas goods a little too soon, says Williamsburg’s director of multichannel marketing, Tammy Kersey.

“Some of our conversations [in October] have been about when we should hit our customers with holiday product,” Kersey says. “Holiday merchandise was a strong seller in the fall, but maybe this year we should have been more transitional, and not as much red and green.”

To pick up the fall slack, Kersey says the third holiday drop will focus more on gifts. “We realize we didn’t do enough of that last year,” she says. “We’re a home brand, so we have to push gifts better. It’s what our customers are looking for, and should be our bread and butter.”

Sticking to the season at hand may have helped Yankee Candle Co: The mailer’s fall sales rose in the double-digit range, says senior vice president of brand, marketing, and innovation Richard Ruffolo.

“We added several great new scents including Pomegranate Cider, Fall Festival, and Frosted Pumpkin to our already strong lineup of fall classics such as Macintosh, Spiced Pumpkin, Harvest, and Autumn Wreath,” Ruffolo says.

Although he would not disclose circulation, Ruffolo says that Yankee Candle’s marketing strategy across channels has remained “relatively consistent from previous years with a focus on the fall seasonal fragrances, our Halloween collection, and continued use of catalog, e-mail, and CRM mailings.”

Below average growth


Fall may be light, but then nobody’s expecting a blockbuster holiday season. Trade group National Retail Federation projects an overall sales rise of 4% — the weakest in the past five years, and below the 10-year sales growth average of 4.8%.

“We’re seeing some mixed reports depending on particular clients,” says John Lenser, president of consultancy Lenser. “Some are ahead of where they need to be, and in other cases, some are significantly behind.”

The early fall results are showing that Lenser’s high-end clients are doing fine, “but the mid-price retailers are struggling,” he says. “We think it may have a lot to do with what’s going out there in the housing market. Those people who have bought homes in the $200,000 range and they’re on a shoestring budget just don’t have the disposable income and are spending cautiously.”

September sales for the public companies support this theory. J.C. Penney Co.’s direct sales for the month decreased 8.5%, to $260 million, compared with $284 million in September 2006. The results were below company guidance for a low single-digit increase. Internet sales for the Plano, TX-based general merchant rose nearly 6.4%. Total company sales slipped 2.4%, to $1.62 billion; same-store sales fell 4.6%.

Meanwhile, Dallas-based luxury merchant Neiman Marcus Group reported a 5.7% rise in September sales for Neiman Marcus Direct, which consists of the print catalog and online operations for Neiman Marcus and Horchow as well as the Bergdorf Goodman Website. Total September revenue for the cataloger/retailer increased 8.6%, to $466 million.

Then again, upscale apparel merchant Nordstrom cut its forecast for third-quarter profit, citing disappointing sales and bulging inventory.

Making the plan


Fall sales at jewelry and decor merchant Ross-Simons increased in the low single digits, which vice president of marketing Larry Davis says is “strong and on plan.” From a planning perspective, he says, “we held our promotional strategies constant to last year. We are prospecting more, but have focused our prospecting on reactivating previous buyers vs. finding all new buyers.”

Though it’s early in the season, results at Computer Gear are tracking to forecast, says Mark Mackaman, vice president of operations. Sales are 5% higher than plan, he says, attributing the increase to selling on Amazon.com as a preferred store.

It’s also due to merchandising efforts: “We have more of our own unique and proprietary products in this year’s catalogs,” says Mackaman.

What’s more, Computer Gear had trimmed catalog circulation 15% compared to last year. “We prospect with break-even profitability as our goal,” Mackaman says.

With the increased costs of postage and paper, a few prospect and house list segments that previously broke even in the past were forecasted to be not profitable so Computer Gear dropped those segments from fall/holiday mailings.

For Griot’s Garage, a cataloger of automotive tools, gifts and accessories for the do-it-yourselfer, fall results are according to plan, says Karen Ambos, circulation manager and database analyst, and better than last year. She would not divulge exact sales and circulation information, however.

Tools cataloger Garrett Wade’s sales for the fall were pretty much as expected, says its senior vice president Pete Segal, though he wouldn’t provide specifics.

For the latter part of the season — October into the holiday — Garret Wade is reducing its circulation 14%, with the decrease coming from prospecting. Segal says that part of the budget was re-allocated to increased Web marketing.

“We are betting that some, but not all of the marketing budget for the fourth quarter, will be more effectively employed on the Web than it would be in the more marginal outside lists,” Segal says. The company will also put out a 72-page book in the early fall, but the holiday books will have the same number of pages — 100 — as last year.

“While the postage increase is a factor in our circulation, a significant issue was also allocating some budget away from print and toward online efforts,” Segal says. “Early next year, we will look back to see whether that was a good call or not.”

Booming back to school


General fall sales growth may be sluggish for some, but the back-to-school season was a bonus for several mailers.

Take Lillian Vernon, for instance. The gifts, housewares, and toys cataloger dedicated a book this year to the category and increased circulation for back-to-school products by nearly 30%. Its revenue so far is up 30% over last year, says executive vice president of merchandising and planning Michelle Gershkovich.

Why the new catalog for back-to-school this year? “We had seen promise in the category the prior year, and let the data drive our decision to expand it,” Gershkovich says. She says the secret to the book’s success was low-price products. “We added many items with price points of $9.98 or less, which drove units and orders,” she explains.

The cataloger also “took a new spin on items like notebooks and offered them personalized. We also did a lot of product development and increased the number of exclusive items,” she says.

In addition to messenger bags and pilot cases, Lillian Vernon expanded its assortment in school supplies with items such as notebooks, calculators, and colored personalized pencils. The result? “We saw response soar,” Gershkovich says.

School uniforms cataloger French Toast reports that its August sales were up 10% compared to 2006, particularly in Florida and Texas. Why from those two states?

Florida and Texas opted to push back the start of their respective school openings, says French Toast president Michael Arking. This helped goose up sales later in the season. “We had a strong August, but July was kind of flat. We hoped [July] would be up 15% and it was more like 3%.”

Then again, the Dayton, NJ-based mailer had increased its catalog circulation 20%, Arking says, due in part to school marketing and promotional strategies. Next year its patterns will be different: “We’ll make more relevant offers later in the season,” he says. “We’ll postpone free shipping and discount offers and push them into August.”

Peace Frogs, a manufacturer/marketer of apparel and accessories for teens, gets the best grade for back-to-school business: Its sales rose 29% over 2006, though it reduced catalog circulation 50%.

“We were up 29% in June, July, and August,” says Peacefrogs founder/president Catesby Jones. “It’s way beyond what we expected — we expected around 10%.”

Why the big increase? Jones credits a more effective e-mailing campaign. “We built our list up over a period of time. We’re not mailing as many catalogs.” Peacefrogs is using its catalog to prospect, “but last year almost all of our orders came in over the Web,” Jones says. “Young people are on the Web.”