Financial Update: Bottom Line, a Mixed Fourth Quarter

For the 11 publicly traded business-to-consumer merchants tracked by Multichannel Merchant, fourth-quarter results were mixed. Sales rose for all but two of the companies. But five of the 11 suffered bottom-line erosion.

Sharper Image Corp. and Blair Corp. saw declines on both sides of the ledger. Sales at electronic gifts cataloger/retailer Sharper Image fell 14%, as the San Francisco-based company continued its two-year-long decline. And its fourth-quarter loss more than doubled, from $10.6 million in fiscal 2005 to $22.1 million.

Revenue at Warren, PA-based Blair, meanwhile, dropped 10%, contributing to a 75% decline in fourth-quarter income for the cataloger of apparel and home decor.

Nonetheless, “it was a strong quarter for most in the direct marketing industry, as revenue continued to grow,” says Stuart Rose, managing director of Wellesley, MA-based investment bank of Tully & Holland, which tracks the companies for Multichannel Merchant. “Holiday was strong. Sharper Image’s troubles were largely attributable to a decrease in sales of its branded products. The company has scaled back advertising and direct marketing expenditures. This combined with increasing price-related competition resulted in a 27.5% decline in average revenue per transaction.”

Coldwater runs smoothly

Quarter ended: Feb. 3 The facts: Fourth-quarter sales at women’s apparel merchant Coldwater Creek jumped 29%, to $366.6 million from $283.9 million the previous year. Internet sales rose 35%, to $98.4 million, while retail sales were up 37.5%, to $224.3 million. All that sales growth, however, couldn’t prevent a 3% dip in net income, to $15.9 million from $16.4 million, as the company continued its retail expansion. The skinny: Sandpoint, ID-based Coldwater Creek opened 65 stores in 2006 and hopes to open an additional 210-260 stores within the next three to five years. To build brand recognition, the company increased its advertising expenditures from $13.6 million in 2005 to $24.2 million in 2006.

Rosy quarter for RedEnvelope

Quarter ended: Dec. 31 The facts: The San Francisco-based gifts merchant posted net revenue of $57.0 million for its fiscal third quarter, up 7.5% from the previous year. Net income for the quarter rose 29%, to $5.3 million from $4.1 million. Despite this solid fiscal success, CEO Ken Constable resigned last month “to pursue other business opportunities.” Previous chairman John Pound was named executive chairman and assumed day-to-day leadership duties, and chief operating officer Frank Buettner has added president to his title. The skinny: By shifting its advertising focus toward the Internet and e-mail, RedEnvelope found a cost-effective method to attract new customers. The company has also put a greater emphasis on upscale gifts and continues to make progress operationally.

Talbots disappoints

Quarter ended: Feb. 3 The facts: Thanks to its May 2006 purchase of women’s apparel cataloger/retailer J. Jill Group, fourth-quarter direct sales for The Talbots climbed 58%, to $114.2 million. And total sales for the quarter rose 31%, to $638.0 million. But overall same-store sales declined nearly 2%, though same-store sales for the smaller J. Jill brand did increase 1.5%. As for net income, the Hingham, MA-based apparel merchant earned just $17,000, compared with net income of $19.8 million for the fourth quarter of 2005, as it continued to absorb the cost of the J. Jill acquisition and integration. For the fiscal year, net income dropped 66%, to $31.6 million from $93.2 million in fiscal 2005. The skinny: “We did not achieve our overall sales expectations for the period due to weaker-than-anticipated performance across all channels,” CEO Arnold Zetcher said in a statement. “This also resulted in heavier markdowns during the period, which impacted the bottom line.” Talbots hopes to fully realize the J. Jill synergies this year.

Partner Content

The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.