Not the finest quarter

Reflecting the weak national economy, the third quarter wasn’t so kind to the publicly traded consumer merchants tracked by Multichannel Merchant. Despite eight of 11 companies boosting their revenue lines, most showed single-digit gains. And the bottom lines mirrored the slumping economy as well, except for Gaiam, Jos. A. Bank Clothiers, and Sport Supply Group.

Stuart Rose, managing director for Wellesley Hills, MA-based investment bank Tully & Holland, which tracks the companies for Multichannel Merchant, says the third quarter was difficult for most business-to-consumer marketers.

“Gone were the double digit sales and earnings gains of recent memory,” Rose says. “Only Jos. A. Bank and Gaiam managed significant sales and earnings gains. Sport Supply also saw strong earnings, but flat sales, and 1-800-Flowers also trimmed its usual third-quarter loss.”

These numbers reflect the weakness in the retail spending that followed into the fourth quarter, he adds. “The housing/mortgage crisis, high oil prices, and weak consumer confidence all contributed to these anemic results.”

Big bank for Jos. A.

Quarter ended: Nov. 3 The facts: Third-quarter net income for Hampstead, MD-based Jos. A. Bank Clothiers rose 29%, to $7.1 million, compared with $5.5 million for the same period last year. Sales rose nearly 10%, to $131.3 million, up from $119.5 million in the third quarter of 2006. But direct sales for the menswear cataloger/retailer increased just 1.8%, while same-store sales rose 3.1%. The skinny: Approximately 75% of the sales growth is attributable to new stores, which are also driving an increase in inventory and selling expenses.

Bottom Falls Out At Delia’s

Quarter ended: Nov. 3 The facts: Third-quarter sales at New York-based cataloger/retailer Delia’s increased 5.5%, to $71.2 million, compared with $67.5 million for the same period last year. But net income nearly evaporated, checking in at a mere $12,000, compared to last year’s third-quarter net income of $3.3 million. What happened? Company officials attributed the massive drop in net income to increased markdowns, higher retail occupancy costs as a percentage of sales, and reduced catalog circulation. Sales for the direct segment — the catalogs and Websites of teen girls apparel brands Delia’s and Alloy and extreme-sports gear merchant CCS — rose 5.3%, to $43.9 million, from $41.7 million for the same quarter last year. Retail sales increased 5.8%, to $27.3 million from $25.8 million a year ago. “Gross profit from the retail segment, which is about 38% of total sales, plummeted to 27% of sales from 33% as markdowns and promotions were used to fight poor mall traffic in September and October,” Rose says. The skinny: Many retailers, including Delia’s, blamed the warm fall weather for their comp-store losses (Delia’s was down 2%), Rose says. “Its direct business did a bit better, as sales were up despite a circulation cut, but again gross profit margin declined due to clearance. Selling teenagers can be a tough business — no matter what the weather.”

Sport Supply Group Connects

Quarter ended: Sept. 30 The facts: Dallas-based sports equipment merchant Sport Supply Group saw its revenue rise 3%, to $70.4 million, for the three-month period. Net income rose 24%, to $4.1 million, compared with $3.3 million. The company saw strong growth in its bottom line as operating profit grew nearly 6% on gross profit gains and sales increases, Rose says. Sport Supply Group’s operating income before minority interest grew by 10% as net interest expense improved but, more significantly, the elimination of minority interest expense saved $500,000 and magnified net income to a 24% gain. The skinny: Sport Supply’s results prove once again that “sales, gross profit, and operations are only half the battle,” Rose says.

Company REVENUE NET INCOME (LOSS)
12 months prior Current quarter Increase (decrease) 12 months prior Current quarter Increase (decrease)
($000) ($000)
1-800-Flowers.com 137,132 145,810 6% (7,419) (5,790) NM
Coldwater Creek 256,371 271,161 6% 15,879 (6,195) NM
Sport Supply Group 68,163 70,374 3% 3,295 4,096 24%
Delia’s 67,533 71,234 5% 3,269 12 (100%)
Gaiam 51,786 70,318 36% 1,653 2,918 77%
J.C. Penney Co. 4,781,000 4,729,000 (1%) 287,000 261,000 (9%)
Jos. A. Bank 119,511 131,304 10% 5,508 7,096 29%
Red Envelope 15,531 15,872 2% (3,688) (10,331) NM
Sharper Image 106,206 69,451 (35%) (22,091) (22,738) NM
Talbots 568,640 556,012 (2%) 8,061 (9,387) NM
Williams-Sonoma 852,758 895,132 5% 29,142 27,077 (7%)
Source: Tully & Holland

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