Red Ink Redux for Consumer Catalogers

Third-quarter profits were elusive for eight of the 18 publicly traded consumer mailers and cataloger/retailers tracked by Catalog Age. In all, 56% of the companies tracked suffered a decline in earnings or an outright loss. Still, this is slightly better than third-quarter ’99, when 63% reported a decline in profits or a loss.

“The third quarter was pretty much a mixed bag for most marketers,” says Jim Adams, managing director of Boston-based investment bank Ulin & Holland. “But there were a few winners, such as [women’s apparel cataloger/retailer] Talbots, because of strong product demand despite concerns of a slowing economy.”

In fact, for all but two of the companies – J.C. Penney and Geerlings & Wade – third-quarter sales were up from the previous year. At Plano, TX-based general merchandiser Penney, catalog sales fell more than 5%, while total revenue dipped 1%, to $7.74 billion. The weak sales led to an operating loss of $23 million for the quarter and a net loss of $30 million. In comparison, for the third quarter of 1999 Penney posted net income of $142 million.

Lower response rates at Canton, MA-based wine merchant Geerlings & Wade led to its 6% decrease in third-quarter sales, to $6.9 million from $7.4 million last year. The company nonetheless managed to shave 20% off its net loss, bringing it to $210,000 from $262,000 a year ago. The leap in Internet-based orders, which are typically cheaper to process than telephone orders, no doubt helped. Geerlings & Wade president David Pearce says the Web accounted for $1.2 million in sales for the quarter, a 223% increase over e-commerce sales of $365,000 during the previous third quarter.

Sales growth not always enough Like Geerlings & Wade, multititle mailer Lillian Vernon reduced its third-quarter net loss 20%, bringing it down to $1.4 million from $1.7 million the previous year. A 17% sales increase, to $41.6 million from $35.5 million, helped. The sales growth resulted from higher catalog circulation and average order size, as well as from the steady success of upscale lace cataloger Rue de France, which Rye, NY-based Lillian Vernon acquired in April 2000. Revenue from the cataloger’s third-party telemarketing services division also contributed to both the top and bottom lines.

On the flip side, Nashua, NH-based Brookstone saw its net loss for the quarter increase 7%. The cataloger/retailer, which mails Brookstone Gift Collection, Hard-to-Find Tools, and Gardeners Eden, reported a net loss of $4.8 million for the quarter ended Oct. 28. This came despite an 18% climb in third-quarter net sales, from $53.2 million last year to $62.9 million.

Nor did double-digit sales growth prevent Williams-Sonoma from posting a 75% tumble in net income. The San Francisco-based cataloger/retailer, which mails the Williams-Sonoma, Pottery Barn, Hold Everything, and Chambers housewares and decor catalogs, blamed its weak showing of $2.3 million in income (compared to $9.2 million a year prior) on a slowing economy that produced weaker-than-expected sales and rising costs.

Even with “weaker” sales, however, Williams-Sonoma managed a 23% growth in net revenue, to $398.7 million from $324.1 million a year ago. Direct-to-customer sales for the quarter, which includes catalogs and the Websites, were $174.9 million – a 30% increase from the same period last year.

The sales gain at Dodgeville, WI-based apparel mailer Lands’ End was a more modest 3%, to $336.4 million. And its third-quarter earnings were sliced in half, to $4.4 million from $8.8 million a year ago.

J. JILL GROUP The Hingham, MA-based women’s apparel marketer shook off a $4.2 million loss in the third quarter of 1999 to post a profit of $3.6 million. This time around third-quarter sales were $58.2 million, up 26% from $46.3 million last year. One caveat: The turnaround may be somewhat exaggerated because the company took a one-time $5.3 million charge last year when it shut its Nicole apparel book. Nonetheless, selling, general, and administrative (SGA) expenses shrunk to 25.5% from 33% last year, thanks to better productivity per catalog mailed.

DELIA’S Oh, that pesky iTurf! In 1999, teen apparel marketer Delia’s decided to spin off its online business, iTurf. Then, this past August, Delia’s opted to recombine with iTurf. Although the remerger gives Delia’s greater economies of scale while eliminating duplicate positions, it helped neither investors nor Delia’s balance sheet during the third quarter. Costs from the remerger drove the quarterly loss to nearly $43 million from a loss of $6 million in the third quarter of 1999. Looking ahead, the company says it will discontinue operations of the community site. Twenty-five staffers have been laid off, and Delia’s is taking a one-time charge of approximately $100,000 in the fourth quarter.

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
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.